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amount of wheat exported rose from 81,000 bushels to 3,500,000; of ham, from 2,000,000 lbs. to 100,000,000 lbs.; of Indian corn, from 6607 bushels to 8,000,000 bushels; while other items increased by enormous strides. Meanwhile, with cheap freights, many lines of railway had become profitable properties in place of being sources of loss. The East Indian lines supply another example. Amongst their number there are two extensive companies which have different scales of passenger rates, and for the lowest class the charge per mile is 3 pie or 2 pie,* according to the line. Between the years 1874 and 1878, it was found that where the 3 pie rate was enforced the increase in the number of passengers carried, was only 21, while on the 2 pie line it was 30, and while the amount of the fares received on the 3 pie line increased 19, that on the other increased 50. So that the cheaper rate not only led persons to travel oftener, but to travel further, and it is a well-ascertained fact that journeys become increasingly profitable to the carriers, in proportion to their length. To look nearer home we find that the New South Wales railway department reduced its rates in 1877, and within a year the traffic had so increased as to give promise of a speedy compensation for the reduction in charges. Their fares had grown by £35,000, and their freights by £52,000. At the same time, our neighbours reduced their parcel rates by 25 per cent., and the result, within one year, was a handsome increase in their profits on this item of income.

It is quite unnecessary for us to illustrate the beneficial operation of low freights at greater length. We will, therefore, at once proceed to consider what obstacles exist to prevent us from taking advantage of the great good they offer.

The first and the greatest obstacle consists in the large amount of capital which has been sunk in connection with our railways, namely, £20,000,000. This sum includes moneys received from the consolidated revenue to make up the annual deficit. A sum of £13,500,000 is still owing by the colony on this account, and this debt bears interest at the high rate of £5 8s. per cent. As we have already shown, our railways do not earn sufficient to pay this great rate, and there is in consequence an annual deficit, which has to be made good out of the general revenue. This deficit amounted to £166,223 in 1879. Thus we are burdened with a heavy loan, and a heavy interest. The older lines

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were built in a style of costliness that would be embarrassing, were they fed by a rich and thickly-populated country, and that amounted to extravagance in one that ran through a colony so new and so scantily settled. The original roads cost on an average over £30,000 a mile, while the latest built cost only £2181, and yet amply suffice. Were we not encumbered with our present dear railway system, one equal in length, and offering every facility which the existing service can, could be constructed at a cost of £5,500,000. This would allow £8000 per mile for the double, and £4000 for the single lines, and £710,000 for terminal and other accommodation. And even this estimate could be reduced. As our system has cost about £16,000,000 to construct, a sum of over ten millions has been wasted by the colony over its State railways, and is as effectually lost to us as if it were lying at the bottom of Bass' Straits. A banker, a merchant, or a tradesman would write such an item off his books. It is a bad asset; the money has gone; it can never more benefit the business, and its presence in the capital account is a dead weight on the undertaking. Why should such a burden be allowed to encumber and embarrass it? Whenever we clamour for reductions in freights, this financial ogre-this ghost of a departed capital, is conjured up to frighten Parliament lest it should grant them. Ought not we, too, to write it off?

Could we do so, we should debit our Railway Department with £5,500,000, and with interest at the current rate. If we allowed 4 per cent., this would represent an annual charge of £220,000, which we should require our railways to return, after paying working expenses, before we could afford to reduce freights. Now, our present net profit largely exceeds that sum, amounting to £580,000 at the time of the last return. So that, in this way, an annual sum of say £360,000 would be immediately available for concessions to the public.

Unfortunately for us, it is easier to write off losses than to wipe out liabilities. However, the financial position of our railways teaches us a lesson from which we may learn how to save money in the future, if we cannot reclaim what we have lost in the past. For we may now see that, had our finances been managed with forethought, the different railway loans would have been adjusted so as to have terminated simultaneously. If during this year-1881we could have entered the money-market as the money-market as borrowers of £13,500,000, for the purpose of discharging expiring obligations, we should have found that mere magnitude in an operation of this

kind, so greatly increases the marketableness of a security, that while the interest could have been fixed at, at least, one per cent. under the rate of a £5,000,000 loan, a better price could be commanded. We could have offered 3 per cent. for the money, and then have got par for the stock. In this simple way, we could have accomplished an annual saving of no less than £275,200. This yearly sum is now paid without real necessity, and would then have been available for the much needed purpose of reducing freights. Why the larger sum would be the more marketable, is a matter upon which we cannot afford space to enter, but good reasons could be easily adduced. Now we might at once commence to save a large annual sum by the conversion and consolidation of our debenture stock. If, at the same time, we were to make it registerable, the investment would be rendered legally available to trustees, just as the remunerative outlet for English trust moneys is about to become narrowed by the reduction of the interest on Consols from 3 to 24. Immense quantities of capital will be set free in this process, out of which it is certain that our 3 per cent. loan would be subscribed many times over. Again, by making the minimum issue £10 instead of £100, the stock would suit the Savings Banks, and so would command a still wider market, and a still better price.

There is another aspect presented by the subject, and we must now turn to consider it.

At this moment, our State railways are costing us £166,000 per annum more than they earn. Can we afford to lower our freights and to risk being still further out of pocket, in order to gain advantages which, though greater, are neither altogether direct, or received even largely in cash? To which we would reply that, if we can depend upon the experience of other countries, we may expect the expansion of business to follow so speedily on the reductions, that the colony would not be any further out of pocket by conceding them; or, at the worst, the loss would be so small, and so quickly extinguished by the rising traffic, that we could well afford the risk.

Another question which suggests itself is, whether a Government is justified in running its railways at a loss to secure custom, and, if so, when and on what principle? Our reply to these questions is, that our Government lines are now being worked at freights which leave a loss, because the Department could not enforce higher freights without sustaining a still greater loss. As it is clearly the duty of the Government to keep the loss as low as possible, the

present freights are warranted, and if, by a still greater reduction, the loss could be still further diminished, the course would be justified, however dangerous the proposition might appear to the timid and the ignorant. Outlay, freight, and trade, constitute the three factors in the calculation. Freight must be suited to trade, not adjusted to outlay, for if the trade be not suited it will not come, and, if the trade be lost, the outlay is lost also. Trade is the variable factor of the trio, and railway returns shrink or swell, according as it contracts or expands. To make railroads pay, expansion must be stimulated, and nothing does this so powerfully as cheap freights. If the outlay be proportioned to the trade, then the freights can be adjusted to both-to pay the one and to suit the other. But it matters not how great the outlay, or how poor the return, directly freights check trade, a further loss will follow a further rise, and gain can only be secured by remissions.

The outlay on our railways happens to be out of proportion to our commerce; nevertheless, in fixing freights, we must recollect that the claims of trade take precedence of those of outlay. This should be the guiding principle in adjusting railway tariffs.

Again, we must remember that a State railway is a State department, not an independent concern. Every attempt to isolate it, to deal with it as if its interests were completely self-contained and separable, ignores the common ownership and prejudices the owner's rights. We must not confound the property with the proprietor, or the means with the end. The members exist for the body, not the body for the members; and the common interest must be the dominant interest, or the consequences will be evil. A limited isolation for purely administrative purposes is clearly quite consistent with our contention. Now it is questionable if this view is acted upon, in its entirety, in any State department. Doubtless, our officials would concede the argument with the greatest readiness; but it is incontrovertible that the department has, by insensible degrees, acquired an autonomous position. In other words, our State railways have been worked too much as if they were the property of a private railway company.

A railway company will generally manage its affairs with greater advantage to its interests than a State will; but it does not follow that the public will reap all the benefits that it ought to do, if the Government manages its roads in the same way that a private owner does. The positions differ. The standpoint of the one is not, and ought not to be, that of the other. Their interests lie in different

directions. A private railway is constructed for the sole benefit of its owners; that is, for their pecuniary profit. Whatever benefit the public reaps, the public pays for; and those indirect advantages which sometimes accrue to the community, in spite of every precaution, would be charged for could the claim be enforced.

On the other hand, a State railway exists for the benefit of every member of the community, because every member of the community is a part-owner of such a railway. A railway company draws all its profits from its fares and freights. What it earns it requires in hard cash, and it has no other source of income. A State railway ought to find in its fares and freights the smallest and the least justifiable part of its profits. The State finds its true, and its only legitimate profits, in the extended area which its railways render available for tillage, suitable for commerce, and amenable to civilisation. Their profitableness should consist in the extent to which they contribute to the national development, and not in the number of pounds, shillings, and pence which they can wring from the community. Profits out of fares and freights are, in their case a fraud on the public. Now our railways are managed as a private concern, when, solely for revenue purposes, the highest obtainable price for the services they render is screwed out of the public; and as it is the latter which ultimately finds both principal and interest for their construction, it is for it to say whether it will take its returns directly in cash, or indirectly in trade and civilisation, or whether it will take a middle course.

If we could see our way to lower freights until they merely paid working expenses-interest being left as a charge on the general revenue-the stimulus which this reduction would communicate to our industries, would be such that, in a few years, the latter charge would pass unfelt. With a different adjustment of the load, that which now oppresses could be carried with ease. Agriculture might again become profitable; the great estates would "burst up" by a natural process; the lonely sheep-walk would be divided and developed into many a busy homestead; where the hamlet now struggles, a township would thrive; and districts, at present lapsing into insolvency, would recover more than their former prosperity. This is no golden dream. It is a result which has been realised frequently elsewhere. What was Chicago twenty years ago, or the State of Dakota ten years since? Since this generation was young, many drowsy English villages have grown into prosperous bustling towns through the agency of low freights. The question is whether

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