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Article Index

Chapter XXIII

Canals and Rail-Roads.

§1. In carrying out the purposes of government, provision ought also to be made to secure to the people the means of obtaining a suitable reward for their industry, and to render the labor of all, as nearly as may be, equally profitable.


§2. The people of some states do not possess the same advantage as those of others; nor do all the people of the same state enjoy equal advantages. Those who reside at a great distance from market, or from navigable waters and good roads, are not so well rewarded for their labor as those who reside near them, because of the greater cost of the transportation, both of what they have to sell, and of the goods they buy. Hence the necessity of good roads, canals, or other means of facilitating trade between the different parts of the state.

§3. Among the works intended to effect this object, _canals_ are perhaps the most useful, and are to be preferred wherever their construction is practicable. Canals are sometimes constructed by incorporated companies; but generally these works, especially those of great magnitude, are made by the state, and are the property of the state. Although there are some states in which are no canals of this kind, it may be interesting to young persons generally to know how so important a state work is made.

§4. To raise the money necessary to make a canal, the legislature might levy a general tax upon the property of the citizens. But this would not be expedient or just; because, first, the payment of so large a sum by the people within the time in which it would be desirable to complete the work, would be inconvenient and burdensome; and secondly, the expense must fall alike upon the people of all parts of the state: whereas, those residing most remotely from the line of the work, would derive from it little or no benefit.

§5. When, therefore, a great enterprise of this kind is undertaken by a state, the law authorizing the work usually provides a _fund_, the income of which is to be applied to this object. This fund consists of such lands, property, and moneys as the legislature may grant for this purpose. Funds were thus constituted in some of the western states, to which funds congress made grants of the public lands of the United States lying within those states.

§6. These funds, however, furnish but a part, some of them but a small portion of the money necessary to complete the work; and some states undertaking public improvements may not have the lands or other property to constitute such a fund. The state therefore borrows the money for a long term of years, and depends upon the income of the canal fund and the tolls to be collected on the canals, for the repayment of the money borrowed. Should the revenues of the canal and of the canal fund be insufficient, the deficiency may be supplied by taxation.

§7. The business of borrowing the money is done on the part of the state, by persons duly authorized, who give for the money borrowed the bonds of the state, which are written promises to pay the money at the times specified, with interest at the rate agreed on; the interest generally to be paid semi-annually. These bonds are usually given in sums of $1,000 each, or less. The debts of a state thus contracted by issuing bonds, are called _state stocks_, as the capital, or stock required to construct a state work is obtained by the sale of its bonds. These bonds, like the certificates of stock in a rail-road or other corporate business company, are transferable, and may be bought and sold as promissory notes, and constitute an important article of trade.

§8. These stocks are taken by men who have large sums of money to lend, and who consider the state a responsible debtor; because, if it has no other sufficient means of paying its bonds, the legislature has power to raise the money by taxation. Most of the states have contracted debts in this manner for various purposes. State stocks are purchased and held not only by capitalists in this country, but by many in Europe.

§9. Officers are appointed to manage the canal fund, and others to superintend the canals. There are also officers, called _canal collectors_, at suitable distances along the canals, to collect the _tolls_, which are charges paid by the masters or owners of boats for the use of the canal.

§10. The states of New York, Pennsylvania, Ohio, and some other western states, have prosecuted the canal enterprise on a large scale. Although large debts have been contracted for the construction of canals in these states, the benefits derived from them more than compensate for the vast expense of their construction.

§11. _Rail-roads_, although they are of public utility, are not properly public works, being constructed by companies incorporated for that purpose. The necessity for an act of incorporation is readily seen. Rail-roads pass through the lands of private individuals; and without the authority of law, the land of no person can be taken for such purpose; nor can a law authorize it to be taken, unless the work is one of general advantage; nor even in such case, without compensation to the owner for his land; for it is declared by the state constitutions, that "private property shall not be taken for public use without just compensation."

§12. If, therefore, the legislature deem a proposed railroad to be of public utility, they pass an act to incorporate a company with the requisite powers to construct the road, on making compensation for the land, the value of which is to be estimated in such manner as the law prescribes. The law also prescribes the manner in which the affairs of the road are to be conducted.

§13. The amount of capital to be employed by the company, is mentioned in the act of incorporation, or charter, and is raised in this way: The amount of the capital, or stock, is divided into shares of $100, or less. Persons wishing to invest money in the road, subscribe the number of shares they will respectively take. When all the shares are thus sold and the money is paid in, the company is ready to proceed to the construction of the road. The owners of these shares are called _stockholders_, who choose from among themselves such number of _directors_ as the charter authorizes. The directors elect from their number a _president_.

§14. Persons buying shares receive certificates signed by the proper officers, stating the number of shares for which each certificate is given. The holders of these certificates, if they wish to make other use of the money they have invested in the business, may sell their stock to others, to whom they pass their certificates, which are evidence of the amount of stock purchased. Thus these certificates are bought and sold as promissory notes.

§15. Stockholders depend, for the reimbursement of their capital, upon the money to be received for the transportation of passengers and freight. Such portion of the income of the road as remains after paying all expenses of running and repairs, is divided semi-annually among the stockholders. Hence the sums thus divided are called _dividends_. The earnings of some roads are so large as to make the investment a profitable one; so that the holder of shares is enabled to sell them at an advance. When shares in the stock of any institution are sold at their nominal value, the price named in the certificates, the stock is said to be at _par_. When they are sold for more or less than their nominal value, they are said to be above or below _par_. In large commercial cities, as New York, Boston, Philadelphia, and others, the purchase and sale of state stocks, and stocks in rail-roads, banks, &c., is a regular and extensive business of capitalists.