nvested, but it naturally objects to being taxed for the
purpose of making dividends on watered stock. The evil referred to is a
serious one, and has contributed much to the general demand for railroad
reform. Most of the early roads of this country were built for the
accommodation of local traffic. They were constructed and managed by
business men upon business principles. The stock issued by the companies
was in most cases paid for in full and was not unfrequently sufficient
for the completion of the entire road, and no incumbrance was permitted
by the owners to be placed upon the property. These enterprises as a
rule proved very profitable. One of the first roads running west of
Chicago will serve as an illustration. The Galena and Chicago Union
Railroad Company paid a 10 per cent. dividend within a year after being
opened to traffic, and gradually increased its dividends to 15, 20 and
22 per cent. During the first two years of the road's operation its
expenses were only 38-1/2 per cent. of its earnings. During the second
year the company, after paying a 15 per cent. dividend, diminished its
debt nearly $60,000 and increased its surplus $11,700. In 1856 the road
had a length of 232 miles, on which the gross earnings amounted to
$2,315,787. This revenue exceeded the estimate made by the company's
officers the year previous by $300,000. In his annual report for 1856
the president of the company said: "This result shows an _increased
surplus_ of $65,000, after paying 22 per cent. in dividends and all
expenses and interests chargeable to income account." The report also
shows that expensive improvements, such as large permanent bridges and
stone culverts, displacing as a rule wooden ones, were charged to
current expenses.

The financial success of railroads soon attracted the cupidity of
financial adventurers--men of great energy, but small means--whose aim
was to secure the greatest possible returns with the least possible
outlay of money. With the introduction of these elements into railroad
circles the era of speculation commenced. Take the line just referred
to. In 1852 the average number of miles operated was 62, and the year
following, 90. But while the number of miles operated increased less
than 50 per cent., the capital stock of the company grew from $444,193
to $1,362,559, and its debt from $60,145 to $542,287. The capitalization
of the road was thereby increased from $8,000 to $21,000 per mile, and
this was do