THE CHICAGO
Founded in 1898
Number s
CHICAGO, AUGUST 22,	1908
Volume xxv
How to Value Commercial Paper in Loans
rates. Railway labor is higher than ever. The railroads have been forced by public opinion and by other causes well understood to sustain and in some instances to advance wages and for the same reasons have been unable to reduce them. We all know what the effect would be if many railroads should go into the hands of receivers. The alternative, therefore, is to advance rates.
"A ten per cent horizontal increase would hardly be felt by any consumer and would nor disturb business in any respect nor the relations of one distributing center to another. The situation would remain as it is except that the railways would prosper and everybody would be benefited by their prosperity. A ten per cent horizontal increase would affect the price of a suit of clothes shipped from New York to Chicago less than two cents per suit; a pair of shoes from Boston to Chicago less than one-half a cent per pair, or a hat front New York to Chicago less than one-third of a cent per hat, but to the railroads it would mean an increase of $140,000,000 to $150,000,000 in net earnings. The credit of an individual or a corporation is only improved by an increase in its net earnings. The earnings of railroads have been diminished steadily for eight months, and this has diminished their credit all over the world. Attacks upon railroads and unfair legislation have also injured their credit.
“It is really time to stop and think, and the business men of this country should realize that the railroads, the second largest consumers in the country, the second largest purchasers of manufactured goods, cannot suffer without all being affected. The corollary is also true, that railroads cannot prosper without benefiting the entire people, because railroads do not hoard their earnings, 80 per cent being spent immediately for labor and material. The prosperity of railroads enables them to sell their bonds at fair rates and obtain money to maintain and improve their properties. Every business man should do all in his power to contribute to the prosperity of railways, and to this end work for an advance in rates. The railroads must have credit upon which to base expenditures that will bring about general revival in all lines of trade; to obtain that credit they must have the earnings to justify it.”
To this I may add, that to the unparalleled prosperity we enjoyed for ten years, beginning with 1898 and ending with the close of 1907 there was no single industrial factor which contributed so much as the purchasing power of the railways. Their earnings not only tong up labor and enabled the railways to establish and maintain a wage scale unknown heretofore, but the hundreds of millions of dollars expended in their upkeep, betterment and development created and sustained a condition of prosperity and a purchasing power on the part of the public which we shall not again witness unless and until the public demand that the railways be given a “square deal.” We have come to a parting of the ways and there is no middle course. We must concede to the railways the power to earn fixed charges, to pay just wages to labor, fair returns on the invested capital, and a margin sufficient to insure neces-sarv additions, development and upkeep. The establishment of whatever rates may be necessary to maintain these charges must be demanded and conceded or we must be content
By Joseph T. Talbert
In speaking of railroads 1 crave the privilege of a few moments' digression to repeat the substance of a letter recently received by us in investigation of trade conditions, which is of much interest in illustrating the relationship between national prosperity and that of our
JOSEPH T. TALBERT
Chicago
great railways, which constitute by far the most important single industry in our country aside from agriculture:
"Railroads in normal times are the-consumers of 50 per cent of the iron and steel manufactured in the United States. Their present purchases are only about 15 per cent. After the panic of 1893 the crops for 1894, 1895 and 1896 were good and yet business did not improve. The farmer is more prosperous to-day than ever before. He has more money in bank, owes less and is in every way better able to purchase necessities and luxuries than he has ever been, and yet business is bad.
"Railroads are poor. Their expenses are greater than ever. They have been harassed by state and Federal legislation-and by׳ attacks from commercial associations. They have been embarrassed by unwise laws passed largely״ for political effect. There has been no legislation of any kind to benefit the railroads. There has not been any one to speak a good word in their behalf. The average business man thinks if he can procure a reduction in freight rates or compel the railroad to do more work for the same money he is benefiting himself and that the railroad will get along all right somehow.
“Until railroads can resume their normal purchases for maintenance and improvement there cannot be permanent good times. There arc onlv three ways in which railroads can continue their purchases:	First, by reducing
wages ; Second, by going into the hands of receivers and suspending the payment of interest and dividends: or, Third, by increasing freight
As our country has grown and prospered wealth has accumulated and bank deposits have vastlyr increased. Within a decade or two these circumstances have wrought mighty changes, indeed they have revolutionized in some respects our banking and business methods, because they have produced new conditions and have created new problems which bankers have been obliged to meet, and others which have not yet been solved. Perhaps to those generations which come after us there mar be periods in which it may seem to them a special favor of Providence to live and enjoy the things that then exist, but it seems to me not only a privilege but a joy־ and a blessing to lice now in this golden era of invention and discovery, of progress and achievement in all lines of activity and industry, and still more is it a privilege to be a factor, however small, in helping to do the things that are uplifting and improving the methods of the commercial world and advancing and civilizing the human race. Certainly in all history there has been no period so fruitful as the present in the development and perfection of the uses of credit, which is the most potent and beneficent agent of commerce.
In proof of this we have but to turn to the marvelous work performed by־ the clearing houses of all our cities during the recent panic. Organized as voluntary associations, without capital and in most cases without the benefit even of incorporation, yet so powerful are they in their ability to grant credit, so efficient is their machinery and management, that even in severe crises they have power not only to sustain the weak, but to strengthen the strong, so that no solvent financial or business institution need fail. What a wonderful achievement is this when we realize that it is done without the actual use of a dollar in money and that every good is accomplished which could be done with money itself. This use of credit and credit instruments has become so universal and so common that like the miracle of birth it is an accepted phenomenon that excites neither wonder nor astonishment.
I11 our fair land there are hundreds of thousands of square miles of fertile soil, upon which dwell millions of toilers who are growing out of the earth annually not only their own subsistence, but the raw materials which constitute a large proportion of the food and form the raiment of other millions of mankind. No nation could have a nobler destiny, nor any class of business men a higher calling than bankers in the productive regions of this country, upon whom rests the duty and responsibility of financing the growth, harvesting and marketing of so large a share of the world's supply of food and clothing. The imperial triumvirate in the creation of our national wealth and prosperity is the laborers, including all who till the soil and work forest and mine to create the commodities, the railway's which transport and the banks which finance them. All others are middlemen. If this single fact could be impressed deeply into the conscious and subconscious mind of everv farmer, laborer and business man in this nation, there would be less hostility towards railways and banks. When viewed from this broad point of vantage our occupation assumes a dignity¡־ that should impress us with a fitting sense of its responsibility and importance.