AMERICAN SECURITIES.

TEE writer of the able pamphlet entitled American Securities* has been at considerable pains to collect several facts and statisti- cal figures, in order to illustrate at once the advantages of in- vestments in America, and the remedy which he suggests for pre- venting such irregularities as have at times been detrimental to • American Securities. Practical Hints on the Tests of Stability and Profit, for the Guidance and Warning of British Investors. By an Anglo-Amencan. Published by Mann Nephews; and W. P. Metchim, London. American credit on this side of the Atlantic. The reader will keep these two points distinctly separate. It is undeniable that pro- perty in America is intrinsically more valuable than in this country. The great cause of the difference, is, that in ti.e old country there is a superfluity of capital in proportion to the ground, or to channels of profitable employment. That fact was clearly establish ed more than a quarter of a century ago, by Dr. Chalmers and Edward Gibbon Wakefield, and has been familiarly illustrated to our readers almost since the Spectator existed. On the other hand, in the United States, as in all colonial countries, the field of em- ployment is larger in proportion than the capital ; and in the United States we have also an extraordinary combination of natu- ral resources, which increases the disproportion. In the valley of the Mississippi and the basin of the St. Lawrence alone, says Anglo-American, there are natural resources.—breadstuffs, coal, iron, and other articles of prime necessity, sufficient to furnish the whole world. From this abundance it follows that capital employed judiciously in the development of those natural re- sources reproduces its own value many times over, yielding even hundreds per cent in the return. The scarcity and therefore dearness of labour are more than neutralized by the proportion of the produce. The great difficulty is accessibility of markets. Anglo- American illustrates the manner in which British capital can bene- fit both itself and the country to which it is applied with the utmost rapidity and profitableness.

"The increase in the value of property in New York was IGO per cent. for five years ; in Illinois, concomitantly with the extension of the railway sys- tem and the development of resources, previously valueless for commercial purposes, it was 200 per cent. It would have been much larger, had not Illinois been so remote from thel great seabord. markets. As the cost of con- veyance constantly raises, according to distance, the remunerative price at which goods can be delivered at market, undeveloped productive lands, and especially lands containing timber or minerals and lying near such a market as New York for example, would receive a much- greater enhancement of -value than took place in Illinois. Lands, along the New York and Erie line, have risen in value from 6s. and 12s. to 6/., 12/., and even 20/. an acre,

according to their proximity to the railway depots.' * • "In illustration of the effect of railways, in improving the value of pro- kerty in the United States, two examples are taken ; one referring to a new Mate (Illinois), the other to an old State (New York). The period is from 1850 to 1855 :—

Population. Length of Railway Mileage, Assessed Value in dollars.

New York, 1850

3,077,391 1820 715,369,028 1855 3,466,212 2749 1,402,840,304 Illinois .. 1850 851,470 200 1i1782.645 18.55 1,306,576 2285 854,399,425

Population.

Valuation

Increase per Railway Increase per cent. Increase New York per cent, per annum, 21 per annum, per cent. per annum..

10 20 Illinois i0 200 40

Another result is, that in the United States interest ranges at a rate more than double that which prevails in Europe. Thus, instead of the 3 per cent yielded by Consols, or the 3?, or 41 yielded by the best railway stock, the public stock of the United States return 6 per cent, and other securities yield 7, 8, or 9 per cent. It is partly this facility of return which induces care- lessness, although other colonial habits have to do with that cause of failure in particular instances. "It may be taken as a general rule, that, in cases where railways in the United States have failed to produce profitable results, the failure is to be ascribed to some traceable and anomalous cause; s-,me glaring error in the data and principle of calculation ; sonic monstrous series of mismanagement; or the omission to obtain some privilege or advantage which would have se- cured the position of the shareholders. Lines, at a long distance from ex- tensive markets, were in some instances constructed through territories adapted to agriculture, but which, it was not duly remembered, would re- quire some years, even with the advantage of a railway, to attract populatioa and develop cultivation, sufficient to create remunerative revenue from carrying traffic alone."

There is a good deal of truth in this, but certainly it does not make out the conclusion which Anglo-American deriv,.s from it —namely, that in order to secure the return of railways, "an important desideratum and effectual guarantee is the ownership of lands near the line, as the basis for the safety of the capital employed in making the line." Even if such lines do not pay at first, he says, still by the immense enhancement imparted to the value of the land, they ultimately pay the capitalists. The facts are truer than the relation in which they are here presented; and a very few examples will show how completely Anglo- American is misled by his theoretical idea, ingenious as it is. The most valuable lines, whether in England or America, are those that pass through districts which already supply a traffic. We are far from asserting that in the United States the most thickly peopled districts will always present the best investment for ulterior development; but they secure good investments now. In thickly settled regions, such as Ohio, land grants are simply impossible ; the lands have already a high intrinsic value from long settlement, and have already passed. from the ownership of the State into private hands. Their cultivation and population secure a profitable traffic,—more certainly, more promptly, than by grants of wild prairies, to be made valuable by the railways. We might, indeed, put it to the most inexperienced as well as the most experienced reader to tell which is the more likely to pay and which presents the more likely system:—

Railway Railway

with with

Population Land Grants

and or and no

Cultivation Population

and no Or

Land Grants. Cultivation. It is true that roads made even into the wilderness of a rising

3olouy will ultimately pay. Our readers are quite familiar with our frequently cited example of New Brunswick and its land grants ; and a state which can afford to let its returns stand over for a generation may very well lay out its surplus capital in road- making,—that great part in the foundation of empires which the Romans were perhaps not the first to discover, nor the Emperor Napoleon, we trust, the last to apply. Still for immediate returns to private investors we may challenge the comparison of the two systems which we have described above.

Nor are we driven to theoretical argumentation ; we have facts before us. It is sometimes said that Mr. Cobden has "lost his fortune" in America ; but it has always appeared to us that there is some error in this statement. It is no secret that Mr. Cobden invested the larger part of his capital in the Illinois Central Railway. Now the very basis of that railway is the basis recommended by Anglo-American,—a basis of enormous land grants. So much so, that, after his recent per- sonal investigation, Mr. Cobden, if we are not mistaken, reported that the enterprise should rather be called a land scheme than a

railway scheme. In truth the greatest disappointments in enter- prises of this kind have resulted from land grants in connexion with railways, and obviously, because in many instances the very existence of the system sprang from the valueless state of the lands until they could be made available by means of the rail- way. For this reason in such cases, the plan of sale has, we believe, usually consisted in reserving, by the State, alternate sections, which were to be enhanced in value by the settlement of intermediate sections.

With this, we confess, important exception, the review of Ame- rican securities supplied by Anglo-American is really valuable, and the reader will be well able to discriminate between the theory of the writer and the facts which he has so industriously collected and so lucidly grasped. Nothing, for instance, can be more eloquent than these facts :—

"When it is considered that, notwithstanding the numerous drawbacks, the railway system of the United States, comprising upwards of 28,000 of mileage, already earns an income, relatively to cost 50 per cent higher than the railway system of the United Kingdom (610 per cent for the American lines, 4.06 per cent, for the British,) the advantages of such a position, combined with the certainty of a large and rapid augmentation of revenue, will be obvious Even where the seabord markets are too distant to leave a profit on conveyance thither, the birth and growth of new cities is gradually creating nearer markets. . . . Those lines in the United States, which not only pay their bondholders punctually, but dividends ranging from 6 to 15 per cent, with the prospect of greatly increased returns in a few years, exhibit for the most part the result of better arrangements, and of a more far-seeing policy in the minds of their originators. There are many lines earning such dividends, and likely to earn a great deal more ; but, as has already been remarked a dividend of 6 per cent is scarcely regarded in the United States, nor will it be for a long time to come, until the disproportion between the available money capital and the means of employing it is reduced. Such is the immense field of profit in America, such is the immense amount of lucrative work to be clone, before a tithe of that field is occupied, that a long series of years must elapse, and countless millions of capital be advantageously employed, befcre Bach an adjustment of the balance will be effected as would bring the Ame- rican rates of interest so low, by several items, as the English standard.

* *

"Mr. Consul Andrews (already quoted) has an interesting table of the distances from market at which wheat and Indian corn respectively lose their values. The table will be quoted a little further on, but in the first place it will be convenient to insert a few words respecting the extent of area, across which railways, as distinguished from common roads, impart marketable value— "'Upon the ordinary highways, the economical limit to transportation is confined within a comparatively few miles, depending, of course, upon the kind of freight, and the character of the roads. Upon the average of such ways, the coat of transportation is not far from 15 cents (7id) per ton per mile, which may be considered as a sufficiently correct estimate for the whole country. Estimating -at the same time the value of wheat at one and a half dollars per bushel, and the value of Indian corn at 75 cents. (three quarters of a dollar) per bushel, and that 33 bushels of each are equal to a ton the value of the former would be equal to its transportation for 330 miles, and of the latter for 165 miles. At these respective distances from market, neither of the above articles Would have any commercial value with only a common earth road as an avenue to market.

" But we find that we can move property on railroads at the rate of 1-5 cents per mile, or for one-tenth of the cost upon the ordinary roads. These works, therefore, extend the economic limit of the cost of transportation of the above articles to 3300, and 1650 miles respectively. At the limit (ter- mination) of the economical movement of these articles upon the common highway, wheat, by the use of railways, would (still) be worth 44 dollars 50 cents, and Indian corn 22 dollars 25 cents per ton, which sums respectively would represent the actual increase of value created by the interposition of such a work.'

"'In short, commodities which, at given distances from market (by cart road), are worth nothing, are rendered worth 44 dollars 50 cents, and 22 dollars 25 cents per ton respectively, by means of the railway.

'f Thus, the railway imparts money value, where otherwise would be no value."