That the existing evils, and the causes conspiring to produce them, may be better understood, it will be needful to glance at the mode in which the system of extensions grew up. Earliest among the incentives to it was a feeling of rivalry. Even while yet their main lines were unfinished, a contest for supremacy arose between our two greatest companies. This presently generated a confirmed antagonism; and the same impulse which in election contests has sometimes entailed the squandering of a fortune to gain a victory, has largely aided to make each of these great rivals submit to repeated sacrifices rather than be beaten. Feuds of like nature are in other cases perpetually prompting boards to make aggressions on each other’s territories—every attack on the one side leading to a reprisal on the other; and so violent is the hostility occasionally produced, that directors might be pointed out whose votes are wholly determined by the desire to be revenged on their opponents. {59} Among the first methods used by leading companies to strengthen themselves and weaken their competitors, was the leasing or purchase of subordinate neighbouring lines. Of course those to whom overtures were made, obtained bids from both sides; and it naturally resulted that the first sales thus effected, being at prices far above the real values, brought great profits to the sellers. What resulted? A few recurrences of this proceeding, made it clear to quick-witted speculators, that constructing lines so circumstanced as to be bid for by competing companies, would be a lucrative policy. Shareholders who had once pocketed these large and easily-made gains, were eager to repeat the process; and cast about for districts in which it might be done. Even the directors of the companies by whom these high prices were given, were under the temptation to aid in this; for it was manifest to them that by obtaining a larger interest in any such new undertaking than they possessed in the purchasing company, and by using their influence in the purchasing company to obtain a good price or guarantee for the new undertaking, a great advantage would be gained. That this motive has been largely operative, railway history abundantly proves. Once commenced, sundry other influences conspired to stimulate this making of feeders and extensions. The non-closure of capital-accounts rendered possible the “cooking” of dividends, which was at one period carried to a great extent. Expenditure that should have been charged against revenue was charged against capital; works and rolling stock were allowed to go unrepaired, or insufficient additions made to them, by which means the current expenses were rendered delusively small; long-credit agreements with contractors permitted sundry disbursements that had virtually been made, to be kept out of the accounts; and thus the net returns were made to appear greater than they really were. Naturally new undertakings put before the moneyed world by companies whose stock and dividends had been thus artificially raised, {60} were received with proportionate favour. Under the prestige of their parentage their shares came out at high premiums, bringing large profits to the projectors. The hint was soon taken; and it presently became an established policy, under the auspices of a prosperity either real or mock, to get up these subsidiary lines—“calves,” as they were called in the slang of the initiated—and to traffic in the premiums their shares commanded. Meanwhile had been developing, a secondary set of influences which also contributed to foster unwise enterprises; namely, the business interests of the lawyers, engineers, contractors, and others directly or indirectly employed in railway construction. The ways of getting up and carrying new schemes, could not fail, in the course of years, to become familiar to all concerned; and there could not fail to grow up among them a system of concerted tactics for achieving their common end. Thus, partly from the jealousy of rival boards, partly from the greediness of shareholders in purchased lines, partly from the dishonest schemings of directors, partly from the manœuvres of those whose occupation it is to carry out the projects legally authorized, partly, and perhaps mainly, from the delusive appearance of prosperity maintained by many established companies, there came the wild speculations of 1844 and 1845. The consequent disasters, while they pretty well destroyed the last of these incentives, left the rest much as they were. Though the painfully-undeceived public have ceased to aid as they once did, the various private interests that had grown up have since been working together as before—have developed their methods of co-operation into still more complex and subtle forms; and are even now daily thrusting unfortunate shareholders into losing undertakings.
Before proceeding to analyze the existing state of things, however, we would have it clearly understood that we do not suppose those implicated to be on the average morally lower than the community at large. Men taken at random {61} from any class, would, in all probability, behave much in the same way when placed in like positions. There are unquestionably directors grossly dishonest. Unquestionably also there are others whose standard of honour is far higher than that of most persons. And for the remainder, they are, doubtless, as good as the mass. Of the engineers, parliamentary agents, lawyers, contractors, and others concerned, it may be admitted that though custom has induced laxity of principle, yet they would be harshly judged were the transactions which may be recorded against them, used as tests. Those who do not see how in these involved affairs, bad deeds may be wrought out by men not correspondingly bad, will readily do so on considering all the conditions. In the first place, there is the familiar fact that the corporate conscience is inferior to the individual conscience—that a body of men will commit as a joint act, that which each one of them would shrink from, did he feel personally responsible. And it may be remarked that not only is the conduct of a corporate body thus comparatively lax, but also the conduct towards one. There is ever a more or less distinct perception, that a broad-backed company scarcely feels what would be ruinous to a private person; and this perception is in constant operation on all railway-boards and their employés, as well as on all contractors, landowners, and others concerned: leading them to show a want of principle foreign to their general behaviour. Again, the indirectness and remoteness of the evils produced, greatly weaken the restraints on wrongdoing. Men’s actions are proximately caused by mental representations of the results to be anticipated; and the decisions come to, largely depend on the vividness with which these results can be imagined. A consequence, good or bad, that is immediate and clearly apprehended, influences conduct far more potently than a consequence that has to be traced through a long chain of actions or influences, and, as eventually reached, is not a particular and {62} readily conceivable one, but a general and vaguely conceivable one. Hence, in railway affairs, a questionable share-transaction, an exorbitant charge, a proceeding which brings great individual advantage without apparently injuring any one, and which, even if traced to its ultimate results, can but very circuitously affect unknown persons living no one knows where, may be brought home to men who, could the results be embodied before them, would be shocked at the cruel injustices they had committed—men who in their private business, where the results can be thus embodied, are sufficiently equitable. Further, it requires to be noted that most of these great delinquencies are ascribable not to the extreme dishonesty of any one man or group of men, but to the combined self-interest of many men and groups of men, whose minor delinquencies are cumulative. Much as a story which, passing from mouth to mouth, and receiving a slight exaggeration at each repetition, comes round to the original narrator in a form scarcely to be recognised; so, by a little improper influence on the part of landowners, a little favouritism on the part of members of Parliament, a little intriguing of lawyers, a little manœuvring by contractors and engineers, a little self-seeking on the part of directors, a little under-statement of estimates and over-statement of traffic, a little magnifying of the evils to be avoided and the benefits to be gained—it happens that shareholders are betrayed into ruinous undertakings by grossly untrue representations, without any one being guilty of more than a small portion of the fraud. Bearing in mind then, the comparative laxity of the corporate conscience; the diffusion and remoteness of the evils which malpractices produce; and the composite origin of these malpractices; it becomes possible to understand how, in railway affairs, gigantic dishonesties can be perpetrated by men who, on the average, are little if at all below the generality in moral character.
With this preliminary mitigation we proceed to detail the {63} various illegitimate influences by which these seemingly insane extensions and this continual squandering of shareholders’ property are brought about.
Conspicuous among these is the self-interest of landowners. Once the greatest obstacles to railway enterprise, owners of estates have of late years been among its chief promoters. Since the Liverpool and Manchester line was first defeated by landed opposition, and succeeded with its second bill only by keeping out of sight of all mansions, and avoiding game preserves—since the time when the London and Birmingham Company, after seeing their project thrown out by a committee of peers who ignored the evidence, had to “conciliate” opponents by raising the estimate for land from £250,000 to £750,000—since the time when Parliamentary counsel justified resistance by the flimsiest excuses, even to reproaching engineers with having “trodden down the corn of widows” and “destroyed the strawberry-beds of gardeners”—since then, a marked change of policy has taken place. Nor was it in human nature that it should be otherwise. When it became known that railway-companies commonly paid for “land and compensation,” sums varying from £4000 to £8000 per mile; that men were indemnified for supposed injury to their property, by sums so inordinate that the greater part has been known to be returned by the heir as conscience-money; that in one case £120,000 was given for land said to be worth but £5000—when it was noised abroad that large bonuses in the shape of preference shares and the like, were granted to buy off opposition—when it came to be an established fact that estates are greatly enhanced in value by the proximity of railways; it is not surprising that country gentlemen should have become active friends of schemes to which they were once the bitterest enemies. On considering the many temptations, we shall see nothing wonderful in the fact that in 1845 they were zealous {64} provisional committee-men; nor in the fact that their influence as promoters enabled them to get large sums for their own acres. If we are told of squires soliciting interviews with the engineer of a projected railway; prompting him to take their side of the country; promising support if he did, and threatening opposition if he did not; dictating the course to be followed through their domains; and hinting that a good price would be expected; we are simply told of the special modes in which certain private interests show themselves. If we hear of an extensive landowner using his influence as chairman of a board of directors, to project a branch running for many miles through his own estate, and putting his company to the cost of a parliamentary contest to carry this line; we hear only of that which was likely to occur under such circumstances. If we find now before the public, a line proposed by a large capitalist, serving among other ends to effect desirable communications with his property, and the estimates for which line, though considered by the engineering world insufficient, are alleged by him to be ample; we have but a marked case of the distorted representations which under such conditions self-interest is sure to engender. If we discover of this or that scheme, that it was got up by the local nobility and gentry—that they employed to make the survey a third-rate engineer, who was ready in anticipation of future benefit to do this for his bare expenses—that principals and agent wearied the directors of an adjacent trunk-line to take up their project; threatened that if they did not their great rival would; alarmed them into concession; asked for a contribution to their expenses; and would have gained all these points but for shareholders’ resistance—we do but discover the organized tactics which, in course of time, naturally grow up under such stimuli. It is not that these facts are particularly remarkable. From the gross instance of the landowner who asked £8000 for that which he eventually accepted £80 for, down to the {65} every-day instances of influence used to get railway accommodation for the neighbourhood, the acts of the landed class are simply manifestations of the average character acting under special conditions. All that it now behoves us to notice, is, that we have here a large and powerful body whose interests are ever pressing on railway extension, irrespective of its intrinsic propriety.
The great change in the attitude of the Legislature towards railways, from “the extreme of determined rejection or dilatory acquiescence, to the opposite extreme of unlimited concession,” was simultaneous with the change above described. It could not well fail to be so. Supplying, as the landowning community does, so large a portion of both Houses of Parliament, it necessarily follows that the play of private interests seen in the first, repeats itself in the last under modified forms, and complicated by other influences. Remembering the extent to which legislators were themselves implicated in the speculations of the mania, it is unlikely that they should since have been free from personal bias. A return proved, that in 1845 there were 157 members of Parliament whose names were on the registers of new companies for sums varying from £291,000 downwards. The supporters of new projects boasted of the numbers of votes they could command in the House. Members were personally canvassed, and peers were solicited. It was publicly complained in the upper chamber, that “it was nearly impossible to bring together a jury, some members of which were not interested in the railway they were about to assess.” Doubtless this state of things was in a great degree exceptional; and there has since been not only a diminution of the temptations, but a marked increase of equitable feeling. Still, it is not to be expected that private interests should cease to act. It is not to be expected that a landowner who, out of Parliament, exerts himself to get a railway for his district, should, when in Parliament, not employ the power his new position gives him to the same {66} end. It is not to be expected that the accumulation of such individual actions should leave the legislative policy unchanged. Hence the fact, that the influence once used to throw out railway bills is now used to carry them. Hence the fact, that railway committees no longer require a good traffic case to be made out in justification for the powers asked. Hence the fact, that railway directors having seats in the House of Commons, are induced to pledge their companies to carry out extensions. We could name a member of Parliament who, having bought an estate fitly situated, offered to an engineer, also in Parliament, the making of a railway running through it; and having obtained the Act (in doing which the influence of himself and his friend was of course useful), pitted three railway companies against each other for the purchase of it. We could name another member of Parliament who, having projected and obtained powers for an extension through his property, induced the directors of the main line, with whom he had great influence, to subscribe half the capital for his extension, to work it for fifty per cent. of the gross receipts, and to give up all traffic brought by it on to the main line until he received four per cent. on his capital; which was tantamount to a four per cent. guarantee. But it is not only, nor indeed mainly, from directly personal motives that legislators have of late years unduly fostered railway enterprises. Indirectly personal motives of various kinds have been largely operative. The wish to satisfy constituents has been one. Inhabitants of an unaccommodated district, are naturally urgent with their representatives to help them to a line. Not unfrequently such representatives are conscious that their next elections may perhaps turn upon their successful response to this appeal. Even when there is no popular pressure there is the pressure of their leading political supporters—of large landholders whom it will not do to neglect; of local lawyers, important as electioneering friends, to whom a railway always brings {67} business. Thus, without having immediately private ends, members of Parliament are often almost coerced into urging forward schemes which, from a national point of view, or from a shareholder’s point of view, are very unwise ones. Then there come the still less direct stimuli. Where neither personal nor political ends are to be gained, there are still the interests of a relative to be subserved; or, if not those of a relative, still those of a friend. And where there is no decided impulse to the contrary, these motives, of course, have their weight. Moreover, it requires in fairness to be said, that possessed as most members of Parliament are, with the belief that all railway-making is nationally beneficial, there exist in their minds few or no reasons for resisting the influences brought to bear on them. True, shareholders may be injured; but that is their own affair. The public will be better served; constituents will be satisfied; friends will be pleased; perhaps private ends gained: and under some or all of these incentives, affirmative votes are readily given. Thus, from the Legislature also, there has of late years proceeded a factitious stimulus to railway extensions.
From Parliament to Parliamentary agents, and the general body of lawyers concerned in railway enterprise, is a ready transition. With these, the getting up and carrying of new lines and branches is a matter of business. Whoever traces the process of obtaining a railway Act, or considers the number of legal transactions involved in the execution of railway works, or notes the large sums that figure in half-yearly reports under the head of “law charges;” will at once see how strong are the temptations which a new project holds out to solicitors, conveyancers, and counsel. It has been shown that in past years, parliamentary expenses have varied from £650 to £3000 per mile; of which a large proportion has gone into the pockets of the profession. In one contest, £57,000 was spent among six counsel and twenty solicitors. At a late {68} meeting of one of our companies it was pointed out, that the sum expended in legal and parliamentary expenses during nine years, had reached £480,000; or had averaged £53,500 a-year. With these and scores of like facts before them, it would be strange did not so acute a body of men as lawyers use vigorous efforts and sagacious devices to promote fresh enterprises. Indeed, if we look back at the proceedings of 1845, we shall suspect, not only that lawyers are still the active promoters of fresh enterprises, but often the originators of them. Many have heard how in those excited times the projects daily announced were not uncommonly set afloat by local solicitors—how these looked over maps to see where plausible lines could be sketched out—how they canvassed the local gentry to obtain provisional committeemen—how they agreed with engineers to make trial surveys—how, under the wild hopes of the day, they found little difficulty in forming companies—and how most of them managed to get as far as the Committee on Standing Orders, if no farther. Remembering all this, and remembering that those who were successful are not likely to have forgotten their cunning, but rather to have yearly exercised and increased it, we may expect to find railway lawyers among the most influential of the many parties conspiring to urge railway proprietaries into disastrous undertakings; and we shall not be deceived. To a great extent they are in league with engineers. From the proposal to the completion of a new line, the lawyer and the engineer work together; and their interests are throughout identical. While the one makes the survey, the other prepares the book of reference. The parish plans which the one gets ready, the other deposits. The notices to owners and occupiers which the one fills in, the other serves upon those concerned. And there are frequent consultations between them as to the dealing with local opposition and the obtainment of local support. In the getting up of {69} their case for Parliament, they necessarily act in concert. While, before committee, the one gets his ten guineas per day for attending to give evidence, the other makes profits on all the complicated transactions which carrying a bill involves. During the execution of the works they are in constant correspondence; and alike profit by any expansion of the undertaking. Thus there naturally arises in each, the perception that in aiding the other he is aiding himself; and gradually as, in course of years, the proceedings come to be often repeated, and a perfect familiarity with railway politics gained, there grows up a well-organized system of co-operation between them—a system rendered the more efficient by the wealth and influence which each has year by year accumulated.
Among the manœuvres employed by railway solicitors thus established and thus helped, not the least remarkable is that of getting their own nominees elected as directors. It is a fact, which we state on good authority, that there are puppet-directors who vote for this or that at the instigation of the company’s lawyer. The obtainment of such tools is not difficult. Vacancies are about to occur in the directorate. Almost always there are men over whom a solicitor, conducting the extensive law-business of a railway, has considerable power: not only connexions and friends, but persons to whom in his legal capacity he can do great benefit or great injury. He selects the most suitable of these; giving the preference, if other things are equal, to one living in the country near the line. On opening the matter to him, he points out the sundry advantages attendant on a director’s position—the free pass and the many facilities it gives; the annual £100 or so which the office brings; the honour and influence accruing; the opportunities for profitable investment that are likely to occur; and so forth. Should ignorance of railway affairs be raised as an objection, the tempter, in whose eyes this ignorance is a chief recommendation, {70} replies that he shall always be at hand to guide his votes. Should non-possession of a due amount of the company’s stock be pleaded, the tempter meets the difficulty by offering himself to furnish the needful qualification. Thus incited and flattered, and perhaps conscious that it would be dangerous to refuse, the intended puppet allows himself to be put in nomination; and as it is the habit of half-yearly meetings, unless under great indignation, to elect any one proposed to them by those in authority, the nomination is successful. On subsequent occasions this proceeding can, of course, be repeated; and thus the company’s legal agent and those leagued with him, may command sufficient votes to turn the scale in their own favour.
Then, to the personal interest and power of the head solicitor, have to be added those of the local solicitors, with whom he is in daily intercourse. They, too, profit by new undertakings; they, therefore, are urgent in pressing them forwards. Acting in co-operation with their chief, they form a dispersed staff of great influence. They are active canvassers; they stimulate and concentrate the feeling of their districts; they encourage rivalry with other lines; they alarm local shareholders with rumours of threatened competition. When the question of extension or non-extension comes to a division, they collect proxies for the extension party. They bring pressure to bear on their shareholding clients and relatives. Nay, so deep an interest do they feel in the decision, as sometimes to create votes with the view of influencing it. We have before us the case of a local solicitor, who, before the special meeting called to adopt or reject a contemplated branch, transferred portions of his own shares into the names of sundry members of his family, and so multiplied his seventeen votes into forty-one; all of which he recorded in favour of the new scheme.
The morality of railway engineers is not much above {71} that of railway lawyers. The gossip of Great George Street is fertile in discreditable revelations. It tells how So-and-so, like others before him, testified to estimates which he well knew were insufficient. It makes jocose allusion to this man as being employed to do his senior’s “dirty work”—his hard-swearing; and narrates of the other that, when giving evidence before committee, he was told by counsel that he was not to be believed even on his knees. It explains how cheaply the projector of a certain line executed the parliamentary survey, by employing on it part of the staff in the pay of another company to which he was engineer. Now it alludes to the suspicion attaching to a certain member of the fraternity from his having let a permanent-way contract, for a term of years, at an extravagant sum per mile. Again it rumours the great profits which some of the leaders of the profession made in 1845, by charging for the use of their names at so much the prospectus: even up to a thousand guineas. And then, it enlarges on the important advantages possessed by engineers who have seats in the House of Commons.
Thus lax as is the ethical code of engineers, and greatly as they are interested in railway enterprise, it is to be expected that they should be active and not very scrupulous promoters of it. To illustrate the vigour and skill with which they further new undertakings, a few facts may be cited. Not far from London, and lying between two lines of railway, is an estate lately purchased by one of our engineers. He has since obtained Acts for branches to both of the adjacent lines. One of these branches he has leased to the company whose line it joins; and he has tried to do the like with the other, but as yet without success. Even as it is, however, he is considered to have doubled the value of his property. Again, an engineer of celebrity once nearly succeeded in smuggling through Parliament, in the bill for a proposed railway, a clause extending the limits of deviation, to several miles on each side of the line, {72} throughout a certain district—the usual limits being but five chains on each side; and the attempt is accounted for by the fact, that this engineer possessed mines in this district. To press forward extensions by the companies with which they are connected, they occasionally go to great lengths. Not long since, at a half-yearly meeting, certain projects which the proprietary had already once rejected, were again brought forward by two engineers who attended in their capacity of shareholders. Though known to be personally interested, one of them moved and the other seconded, that some new proposals from the promoters of these schemes be considered without delay by the directors. The motion was carried; the directors approved the proposals; and again, the proprietors negatived them. A third time a like effort was made; a third time a conflict arose; and within a few days of the special meeting at which the division was to take place, one of these engineers circulated among the shareholders a pamphlet denying the allegations of the dissentient party and making counter-statements which it was then too late to meet. Nay, he did more: he employed agents to canvass the shareholders for proxies in support of the new undertaking; and was obliged to confess as much when charged with it at the meeting.