cost, are to be avoided. For the railway it is also essential to keep facilities abreast of needs that public antagonism, grounded upon an inadequate service, may be avoided. The best guide as to what this rate of expansion should be seems to be the actual rate at which the demand for service has grown. In the case of freight traffic, experience indicates that tonnage tends to double approximately every 12 years while the volume of passenger business doubles in approximately 15 years. To assume that the capacity of the railway plant, considered both extensively and intensively, must double within each such period or prove inadequate, is an error since many lines, large and small, operating in Southern and Western territory, have not as yet reached, by a considerable margin, the maximum efficient capacity of the plant to serve. Nevertheless, if expansion falls below an approximate 8% per annum for any extended period of time, the industrial and commercial life of the country must suffer the crippling effects of progressively inadequate facilities.

The most obvious type of expansion, though perhaps at the present time the least important, is that of line mileage. So thoroughly were the more productive areas gridironed during the period of linear growth that the saturation point in that particular has been reached in many large sections. A second type of expansion, however, which may be regarded as intensive rather than extensive, has increased in importance as the other has declined. Intensive development takes various forms. It involves, in part, the construction of multiple trackage; in part the addition of switching facilities, both yards and sidings; in part, equipment-locomotives and cars, both passenger and freight. That the actual rate of expansion of the railways, both intensively and extensively, has fallen far short of the indicated traffic needs of the country, not only within recent years, but for many years past, is shown clearly by an examination of statistics which show the extent of progress along each line.

PROGRESSIVE DECLINE IN RAILWAY GROWTH

Attention has already been directed to the declining rate of expansion in railway mileage, but perhaps that condition may be better realized when the percentage rate of increase from period to period is given. In the 51⁄2 years prior to the close of the fourth period in 1919, the total increase in line mileage was but .07%; during the preceding 5-year period the total percentage of expansion was 10.4%, with a percentage of 11.6% for the period from 1905 to 1909 inclusive. From these figures it is clearly evident that the extensive development of the railway plant has, in no sense, kept pace with traffic growth. However, it is of greater significance that the railway plant has failed to keep pace with industrial needs by intensive development. This failure is evident in every phase of intensive growth. Although from 1905 to 1909 multiple trackage increased by something less than 7% per year and from 1910 to 1914 by almost 6.5%, even those figures fall short of the traffic base and an increase of less than 13% for the last 5 years of the period, an average of less than 2.5% a year, gives clear proof of inadequacy. The same conclusion holds true for switching facilities. During the first 5-year period this item increased at the rate of about 5% a year, during the second period, of approximately 4% per year, but during the last period mentioned it grew by less than 1% per year. And if increase at any point is essential to the avoidance of congestion and consequent delays, it is in the case of switching facilities; yards and sidings, particularly in terminals and important centers, represent the "neck of the bottle" in the handling of business.

In the provision of additional equipment the railways of the United States have failed to meet growing traffic demands as signally, on the whole, as in the case of mileage and trackage. From 1905 to 1909 inclusive, the number of locomotives in service increased by less than 4.5% annually, while during the succeeding 5 years the annual

increase dropped to less than 3%. For the remaining 51⁄2 years, closing with 1919, the annual rate of increase was but little more than 1%. This same decline is evident, though not to the same degree, happily, when measured in terms of locomotive tractive capacity, the annual averages for the three periods mentioned being 8.5%, 5.6%, and 4%, approximately. In the matter of freight-cars in service, the percentages run closely parallel to those of the number of locomotives, though the increase in tonnage capacity of freight equipment has diminished more rapidly, those figures being, for the three periods discussed, approximately 9%, 5%, and 1.4%. An examination of the rate of increase in passenger equipment shows an even less favorable situation when stated in percentages, though perhaps this condition is the least serious of those discussed because maximum utilization has been far from attained by the railways from passenger equipment. In the 5 years beginning with 1905, the annual rate of increase of such equipment in service was less than 3%, for the next 5-year period approximately 3.5%, but for the period closing with 1919 an annual rate of growth of less than 1% is shown.

DECLINE REFLECTED BY RAILWAY CAPITALIZATION

From the foregoing facts it is clear that, even though considerable "slack" in the capacity of American railways to serve had existed as a result of overexpansion, extensive and intensive, during earlier years, the railway plant now lags behind traffic growth. It cannot be regarded as abreast of present-day needs. As further evidence of this failure to meet the growing traffic needs of the United States the movement of railway capitalization during the past 15 years may be cited. It is impossible to secure the net amount of railway securities outstanding and not held by railway companies prior to 1910, but a comparison of the total amounts outstanding at the beginning and at the close of the 5-year periods 1905-1909 and 1910-1914, together

with a comparison of the net amount outstanding at the beginning and at the close of the period 1915-1919 is significant. During the first 5-year period in question, total outstanding securities increased by almost $4,275,000,000, an average of almost 6.5% per annum, but during the next 5year period the increase was little more than $2,760,000,000, or slightly above 3%, showing thus a decline in the rate of increase to slightly less than one-half for the second period. And the third period shows an increase in the net outstanding of slightly less than $316,000,000, an almost negligible .3% annually. An analysis of the comparatively satisfactory situation during the first 5-year period for which data are given shows that bonds increased at almost double the rate of stock. This fact is doubly significant: it indicates the growing difficulty experienced by the carriers in marketing stock because of its secondary claim to inadequate revenues, and shows a willingness to market bonds when existing issues were already pressing the margin of safety all too closely. Although during the last 5-year period the bond total diminished slightly and outstanding stock increased by 4%, practically the entire increase in the latter came during the first 2 years of the period; after that time there was no market for railway stock. These facts alone show the precarious condition of railway credit, for no enterprise can long remain upon a sound basis when forced to depend wholly or even largely upon the issuance of bonds for the funds requisite to expansion.

REASONS FOR DECLINE IN RAILWAY CREDIT

The reasons for this decline in railway credit are too numerous and too involved to permit of a complete portrayal here. A brief sketch, however, of some of the more important causes is desirable. Among these causes, one of the more important was the loss of confidence in railway securities by the investment public because of numerous past failures as well as the threat so generally made to "squeeze