Page:Popular Science Monthly Volume 29.djvu/350

336 These administrative emoluments, in the case of railroads, accruing to so few, may be briefly summarized as follows:

1. The gratuitous distribution of stock to promoters and the construction of the railroad from the sale of mortgage bonds, and by defaulted bills for merchandise and labor.

2. Construction boards, corporations, committees, directors, made up of promoters who handle the cash realized from the sale of bonds and the credit which has been established for the property, and who are practically irresponsible, as they report from themselves as constructors to themselves as proprietary directors.

3. Express and other companies making use of the franchises of the original company and its road-bed, and taking to themselves the cream of the business.

4. Rebates, drawbacks, and the various devices by which favored shippers are allowed to usurp the business of the road, or the bulk of it, in certain channels, and in which the profit accruing to them from paying less freight is directly but the minimum advantage to them, as by it they may control the production, manufacture, and marketing, and real and speculative prices of an important commodity, and so, by eliminating competition and controlling speculation, draw enormous profits from the public that do not show at all in the simple handling of the articles as freight.

5. The property being corporate, and its ownership represented by negotiable stocks and bonds, and which have gone largely into the hands of the public, both by the natural and manipulated fluctuations which take place in the negotiable securities, those that are "outside" are at immense disadvantage compared to those that are "inside," and a perennial source of profit is at hand for the "few" who have reached the advantageous positions. By possessing inside knowledge of a number of leading companies, by making money in the loan market scarce or plentiful, the whole stock market can be "raided" for the benefit of one or more operators.

6. The wrecking, intentional or otherwise, of valuable property through accumulated mortgages and debts, and its re-establishment at a comparatively small cost to the new owners.

7. The consolidation of different companies: those that are continuous on the same lines; those that are parallel, and originally designed to be competitive, and those that radiate from a common center or do the business of a particular section. To make one company of two or more companies, to economize in administration, to make them probably more effective, to eliminate competition, has been generally unlooked for, and has added greatly to the economic position, and consequently to the value of the railroads as paying properties. While the consolidation may be meritorious, this has afforded the chief opportunity for "stock-watering," and is a field where Napoleons of finance have specially distinguished themselves and enhanced their wealth.