tion, and a measure of this prosperity must be charged to the fidelity, enterprise, and efficiency of railway administrators. Certain things have come about which, while wise in themselves, have rendered more difficult the maintenance of railway solvency. Federal and state regulation, while essential for public protection, must not reach the point of adding unnecessary and burdensome expense to the railways. The construction of the Panama Canal, in itself a fine achievement and one which has contributed much to the economic improvement of the country, has brought in its train problems for the railways. It has changed the movement of traffic, it has placed limits on the earning power certainly of the western railways, and has generally produced an effect which merits a sympathetic consideration of the railway position.

One of the principles of the Constitution of the United States, and perhaps economically the most important, is prohibition of confiscation without due compensation. Confiscation often appears in disguise. It frequently appears in other forms than "porch climbing and second story work." If this principle of the Constitution means anything it should certainly deter the Government from such legislative enactments and economic changes as destroy or seriously affect the earning power of any enterprise created legitimately and in conformity with previously existing statutes. The opening of the Panama Canal has materially affected the earning power of international railway systems. Its construction was wise and in the interests of public welfare, but at least a moral responsibility rests upon the nation to see to it that that useful implement of commerce was not constructed in violation of the fundamentals of the Constitution and those high moral principles which should inspire every nation in all its dealings. In all of its various forms and disguises, confiscation is a luring form of sport, especially to those who benefit therefrom, but he who benefits to-day may suffer to-morrow. The acts of a nation should furnish a sound example, and a high standard of morals and tolerance on the part of the citizens cannot be expected unless the Government itself pursues equally high principles.

I have, I hope, at least led you to believe that the interests of those who produce and the interests of those who transport

are identical. It may be said that there are three cardinal principles essential to the existence of any railway as a private enterprise :

FIRST It must maintain solvency and meet its financial obligations;

SECOND-It must furnish adequate transportation to the public at such rates as will permit the development of the community;

THIRD-It must pay to its employees that wage which, under reasonable working conditions, will permit them to live in decency, comfort, and under sanitary conditions, and to educate and bring up their children as self-respecting members of society.

A material departure from any of these three principles of privately-owned railway systems will probably excite a demand for state ownership, and a departure from all three will, in time, inevitably produce that result. So far as the performance of its public responsibilities and the life of the community are concerned, solvency is perhaps the least important of the three, but in so far as the hastening of state ownership is concerned, it is probably the most important.

I am not here to argue for or against the nationalization of transport systems. We have, in Canada, two major railway companies, one of which is state-owned and the other privatelyowned. Both are getting on quite comfortably and happily in friendly relationship. Both are reasonably meeting their responsibilities to the public. The creation of a state-owned railway in Canada was due to circumstances rather than to the acceptance of a theory. Its success or failure will furnish no compass to guide the American people. It is for you to decide, from such experience as you may have had and such conditions as may confront you in the future, whether or not you wish to nationalize your railway systems. I have but this to say: that if the earning power of your railways, given an efficient and honest administration, is so depleted as to create insolvency, public ownership is inevitable, and therein is found a principle which should determine the policy of the public with respect to both rates and wages.

Such an address as this is of but small value unless it carries

with it at least the suggestion of some useful principle and some guiding policy. I have endeavored to acquaint you with some of the dangers which threaten nations, groups and individuals achieving opulence and power, and I have pointed out that the more complete these achievements become, the greater the responsibilities, lest destruction ensue. In these days when great political and social forces are working rapid changes in our habit of life and our viewpoint, nothing is so essential on the part of the individual, the community, and the nation as that poise which springs from knowledge-the knowledge of mankind, the knowledge of limitations, the recognition of humility. The more one studies, the less one finds the store of individual knowledge to be. The more tolerant one becomes the more clearly one recognizes the rights of others and the less does one fall a prey to over-reaching. As is the citizen, so is the state. The principles which determine the daily conduct of individuals and their enterprises are also the principles which will determine the policies of the state.

The people of the United States hold in their hands, to a large degree, the welfare of many other nations and the safety of civilization. Your statesmen, your bankers, your industrial executives, and the people at large are the responsible custodians of the policies of the nation. Your greatest menace is your wealth. Only by tolerance in your national and international relations, only by that poise which comes from education and a knowledge of mankind, and only by that humility which finds its source in wisdom, will you be faithful to your responsibilities and restore the march of civilization which but lately has been retarded by that greatest of all disasters, the Great War.

FRANK ARTHUR VANDERLIP

THE ALLIED DEBT TO THE UNITED STATES

AN EFFECTIVE PLAN FOR ITS PAYMENT

Frank Arthur Vanderlip was born in Aurora, Ill., in 1864. After studying at the University of Illinois and the University of Chicago, he became a newspaper reporter and editor and later private secretary to Lyman J. Gage, Secretary of the Treasury. After serving 1897-1901, as Asst. Secretary of the Treasury, he became vice-president, later president of the National City Bank of N. Y. and a director and trustee of many financial and industrial corporations. For many years Mr. Vanderlip has been greatly interested in the commercial relations between this country and the rest of the world. His volume, "The American Commercial Invasion of Europe," was published seven years before the War, and after a visit to Japan in 1920 he wrote various articles on Japanese and American relations. Few men are more thoroughly informed than he on national aspects of finance and commerce. This address was delivered before the Economic Club of New York, in October, 1921.

THE Great War increased the internal debts of the European belligerents from $17,000,000,000 to $155,000,000,000, a ninefold increase. The external debts of these countries, which before the War were insignificant, are now in excess of $25,000,000,000.

[After discussing the difficulties in the way of paying or canceling or readjusting the debts to us, Mr. Vanderlip then proposed his novel and interesting solution.]

The paradox then persists. I would have the Allies acknowledge the justice of the debt, and would insist upon its payment; and at the same time I would recognize that its payment in goods would bring about such confusion in our domestic affairs