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AD the Panama Canal been constructed by private enterprise subject to rate regulation by the United States, it is safe to say that the owner would have been allowed earnings that would cover operating expenses, including the requirement of replacing all parts thereof as they go out of use, and also a reasonable return on the capital invested in the enterprise. There would have been no allowance for amortization of the capital unless in the special case of a term franchise and a purpose on the part of the United States to acquire the canal during the life of the franchise. On the assumption of perpetual ownership by private parties there would be no sense in allowing the investment to be reduced unless the United States should desire to become a partner in the enterprise to the extent of such reduction.

The American people, as owners, are accountable to the whole world for the management of this enterprise and should make themselves familiar with the fundamental principles which should control the establishment of the canal tolls.

Has the United States constructed the canal for profit?

Has the United States constructed the canal as an investment which is to yield a reasonable return on its cost?

Has the United States made the investment in the canal as a temporary investment which it will endeavor to recover from those who use the canal?

Can the United States afford to make such investments for the benefit of commerce without recovering interest on the investment?

The answers to these questions will guide the economist who fixes the tolls, and will give him his starting point.

If the net earnings of the canal, that is, earnings in excess of operating expenses, are sufficient to meet interest on a bonded debt equivalent to the cost of the canal and enough surplus to return to the United States in a fixed time, as, for example, 100 years, the cost of the canal, then, at the end of this time the United States will no longer be out of pocket anything for canal construction. The nation will be in the same position as though some one had made it a present of the canal. During this time at some regular or irregular rate those who have travelled through the canal, and those who have purchased the goods transported through it, will have returned to the treasury of the United States the entire investment. The amount of the annual profit will be the factor