The construction of railways in In dia, which commenced in 1853, has been con ducted on three different systems: first, the em ployment of companies under a system of guar antee; secondly, by the state through its own officials; and thirdly, by assisted companies either with or without guarantee or subsidy from the state, and working with capital wholly raised by themselves or partly with capital pro vided by the state. Out of eight lines con structed on the first system, five have been pur chased by the state. Two of these are worked by companies. The more important, the East Indian line, is carried on by the same company that constructed it in the first instance, on special terms as to the sharing of profits. The second, the South India line is in the hands of a new company, whose capital was subscribed by the shareholders of the old one. The three remaining lines are worked by the state, and all five come into the category of state lines in the accounts of the government of India. The total number of miles of Indian railway open for traffic in 1915 was 34,572. Although con struction began about the middle of the last century, the system has been developed almost entirely since what English writers on railway problems speak of as "the rise and fall in Eng land of the great fever known as the rail way to which detailed reference has hereinbefore been made. The Indian railways were, therefore, planned and constructed in the light of the experience afforded by the home construction and development, and many of the cruder home blunders were thus avoided. They now fall into one or other of four classes : (a) State-owned lines, worked by companies; (b) state-owned and state-operated lines; (c) lines constructed by guaranteed companies and (d) lines constructed by assisted companies. The English government, following the French lead in that respect, provided for a system of guarantees, by which the necessary funds were cheaply found; in laying down the lines paral leling was avoided, and competition effectively prevented. Where there is no competition there is the less incentive for combination, and there seems, therefore, not to have been anygreat tendency in the Indian lines to combine. These Indian railways seem to be rather poor affairs; there is much complaint of indifferent service and high rates. How far these things may be chargeable to the inefficiency of the government or may be due to the system itself does not appear. They have up to the end of 1899.involved a yearly loss to the Indian reve nues, but the working of the year 1900 resulted for the first time in history of the Indian rail way system in a net gain to the state of Rs. 87,239, and in 1901 Rs. 1,154,119. From the commencement of railways in India, about half a century ago, to the end of the year 1899, the loss to the Indian revenues amounted to Rs. 57, 811,487. Whatever else may be true of the Indian lines, they have been constructed and are operated entirely on the principle of non competition and division of territory, and there being no competition there has been little tend ency to combine; in other words, the evil of competition not existing or not being allowed to exist, there is no call for combination. This is, as has been said, negative evidence in sup port of the contention that wherever competi tion is possible combination is inevitable.
railway situation in Mexico is fully disclosed in an exceedingly valuable re port made some years ago to the government by Senor Limantour, Secretary of Finance. It purports to have been based upon a careful in vestigation of the facts, and is on the face of it as intelligent and comprehensive a state paper as any that has emanated in recent years from any government office anywhere in the world upon the subject. The fact that Senor Liman tour, who was then virtually prime minister of Mexico, and had been nominated by President Diaz as his successor in the presidential office suggests his high standing at home and gives weight abroad to his views on these questions. This report, which seems largely to speak the voice of the secretary himself, deals at length with the problems of competition and combina tion, and discloses the fact that the policy of the Diaz administration, as now settled and de termined, is to meet and solve these problems by absolute government ownership, rather than by any further futile attempts at legislative con trol. The government, finding that the general railway law of 1898 (from which, when it was passed — as in the case of our original Inter state Commerce Law—great things seem to have been expected) was proving inadequate to the due regulation and administration of the lines, and realizing the necessity of stronger and surer governmental control, has lately come to the policy of going into the open market and of adopting the same tactics as private individuals or companies in purchasing the shares of such lines as it desires to control. Mexico is, there fore, now fully committed to the theory of gov ernmental ownership, if not to that of govern mental operation. Those portions of Senor
Limantour's report which disclose the proc esses by which the government has acquired and is acquiring such a proportion of the of the leading lines as will give it due pre ponderance in their control are very interest ing. The explanations of the causes which have moved the government to this step, as contained in the report, are of an even wider interest and significance to students of the railway problem. In brief, Senor Limantour's explanation is this: The government has until recently been in the usual elementary attitude of encouraging by concessions, subsidies and otherwise all the rail ways which either citizens or foreigners would undertake to build and operate as private enter prises, in the supposed interest of the most rapid possible development of the country. It. was only in 1898 that a general railway law was passed, which, however, soon proved, entirely inadequate. It was, therefore, in addition found necessary to prescribe new rules relative to granting concessions for competing lines be tween points already connected, and to estab lish a tariff commission — something like our Interstate Commerce Commission — which was an attempt, through the agency of a govern metal bureau, to prevent combinations in freight rates, and to regulate them in the public interest. In the light of the experience of other countries — and, as it appears, especially in the light of the experience in the United States — competition between the lines is by this report pronounced harmful, ((except where traffic is large enough to support it° — whatever that means. Govern ment ownership and regulation is declared to be the only real preventive or remedy against such disastrous competition—with its inevitable result of the consolidation of competing interests. It is further suggested that the fact that groups of foreign capitalists had undertaken to consolidate several of the principal lines, obliged the govern ment to take a definite attitude lest their great railway properties should thus be taken over and controlled by alien capital. • It was clearly seen that these contests for territory between the hitherto conflicting interests would eventu ally and inevitably result in either the forced or the voluntary consolidation of the competing systems. The law as it stood was inadequate to prevent the acquisition in the open market by any private interest of a control of the shares of any company sought to be acquired, and there was no way to prevent the consolidation of in terests through voting trusts or otherwise. Specifically, the situation in the early part of 1902, which seemed to drive the government strongly in the direction of state ownership and control, was this: The railways of the country were found already to be in the hands of no more than four groups of capitalists, namely, the Central, the National (having lately absorbed the International), the Interoceanic and the Mexican — all but the last showing great ex pansive activity. The Central especially, by the recent purchase of exclusive port concessions and the building of new lines in and out of the City of Mexico, was threatening to cripple the National line. Plainly, therefore, consolidation between it and the Central would inevitably fol low in the ordinary course. Meanwhile, through Messrs. Speyer and Company, the National was trying to acquire the control of the Interoceanic route, but this was frustrated by the govern ment. Various circumstances favored the government as against the foreign bankers in its secret move to secure control of the Inter oceanic's debentures. ((The ability and high financial standing,) says the report, cof the firm representing the interests of the Mexican National constituted a serious obstacle to the attainment of our aims, and it was necessary to act as we did with decision, rapidity and absolute A proposition for a common exploitation by the government in association with the National, the International and the Interoceanic companies followed: ((but it was soon recognized that such an arrangement could not have the necessary durability nor afford the indispensable conditions whereby the companies might secure themselves definitely against the hostility of other corporations to which they might be exposed in time.) The government thereupon, wisely declining to be drawn into any partnership arrangement with the com panies, reverted to its original plan, namely, an arrangement such as would give the state primary and absolute control of the three systems, and in such a way as to protect each of them against such future competition as would be sure to arise under the existing state of things. The report declares that the govern ment has now determined to grant no con cessions hereafter for competing parallel lines, except in territories where dividends can be earned by each such line. Several voting trusts, in some of which the government has had an interest, have existed in Mexico, but some of these have lately been dissolved upon the advice of American counsel.