VI.

Under the contract of December 14, 1877, the Western Union pays annually to the railroad companies, parties to the contract, $100,000. The Central Pacific's share of this is $48,000, of which $30, 120 are assigned to the bond-aided portion of the road. This latter sum, therefore, goes annually to the debit side of the account, in ascertaining the net earnings which are subject to the percentage payment to the government.

The contract of the Union Pacific with the Western Union does not provide for an annual rental payment, but one-half of the cash receipts for commercial telegrams sent from Union Pacific offices goes to the Union Pacific. These receipts have been as follows: 2

The receipts for 1879 are those of the Union Pacific Railroad; for 1880 and subsequent years the figures relate to the Union Pacific Railway; the consolidation of the Union Pacific Railroad, the Kansas Pacific Railway and the Denver Pacific

1 That portion comprises 860.66 out of a total of 1,360.28 miles.

2 These figures were taken from the reports of the Union Pacific to the commissioner of railroads, whose office was not created until 1878.

Railway having taken place January 24, 1880. Of the 1,821.86 miles in the system, 1,428.43 are bond-aided. The receipts from telegrams sent over the bond-aided portion of the railway are subject to the government requirement in respect to a percentage payment of net earnings. When telegrams are sent partly over the aided and partly over the non-aided portion, each portion is assigned its pro rata share of the receipts.

The amounts in the table of earnings credited to their telegraphs by the Union Pacific and the Central Pacific are small compared with some other items of revenue. But these direct money earnings do not exhaust the benefits the roads receive from their contracts with the Western Union. What these different benefits are may be seen by reference to the contracts.1 Important among them is the free service over the Western Union wires throughout the country, which is enjoyed by the Union Pacific up to a certain amount and by the Central Pacific without limit. Aside from the gratuitous element in this service, the value in the administration of a railroad of membership in the Western Union system, with its immense facilities and its lines extending to every part of the land, must be very great and the earning power of the road must be greatly enhanced thereby. So that the relinquishment of earnings in one direction may be largely compensated by the increase of earning power in another. Indeed, it may well be doubted whether, with the Western Union competing with them and putting in offices where it had none before, the Pacific roads would derive from their telegraphs any profit whatever.

These considerations render it probable that the government, as a creditor of the bond-aided Pacific roads, loses nothing by the transference of their telegraph franchises. For, since the companies still retain their property rights in the telegraphs, the government's lien upon them is not impaired. And if, as we have seen seems likely, the contracts with the Western Union enhance the earning power and with it the value of the

1 There are of course reciprocal obligations.

railroad plants, the annual payments to the government on account of railroad earnings are increased and the government's lien upon the railroads made of greater worth.

This investigation has revealed an apparently irresistible tendency towards the absorption of the Pacific telegraphs by the Western Union; for, if not built in conjunction with the Western Union, they were soon transferred directly or indirectly to this great corporation. Adverse judicial decisions, even when based on the great legal principle of the inalienability of a public franchise, have not stopped this process of absorption. That the higher courts, in the great case1 now awaiting their consideration, will confirm the decision of the lower court, seems likely.2 But that existing arrangements will even then really be terminated, would be a rash prediction in the face of the powerful economic forces at work tending to consolidation and monopoly. For, whatever may have been the immediate occasion of the existing arrangements, they are no doubt attributable ultimately to the influence of these forces.

CORNELL UNIVERSITY,

ITHACA, N. Y.

LUCIUS S. MERRIAM.

1 United States vs. Western Union and Union Pacific is referred to.

2 [The decision of the Circuit Court of Appeals on the appeal from the judgment of Justice Brewer was rendered January 29, 1894 (U. P. Ry. Co. vs. U. S., 59 Fed. Rep., 813). The decision reversed the judgment of the lower court, holding (1) that the contract of 1881 was not beyond the power of the railway company, either as divesting it of its telegraphic franchise, or as disabling it to discharge its public duties; (2) that the privileges conferred by the contract on the Western Union exclusively were not such as the railway company was bound at that time to confer equally on all other telegraph companies, though since the Anderson Act this is probably not the case; (3) that the contract of October 1, 1866, was valid; and (4) that the duty of the Pacific Railroad Companies to afford equal telegraph facilities to all connecting lines must be enforced, not by a bill in equity, but by application to the Interstate Commerce Commission. -Eds.]

IN

GIFFEN'S CASE AGAINST BIMETALLISM.

I.

N the number of the POLITICAL SCIENCE QUARTERLY for September, 1893, there was published a review of Giffen's The Case against Bimetallism, signed by Charles B. Spahr. Mr. Spahr gives Mr. Giffen the credit for sincere and careful study of the question, and acknowledges his general fairness. But, according to Mr. Spahr, there is no real basis of fact to support Mr. Giffen's principal contention, which is, that the alleged bimetallism of France has never been a real bimetallism. Mr. Giffen asserts that there has been in France, during the socalled bimetallic period, no absolute interchangeable equality between gold and silver, at the legal ratio of 15 to 1; and that there have been variations in this ratio, by which the commercial world has been governed. Mr. Giffen gives tables of figures showing these variations. The tables prove Mr. Giffen's statement, and form a solid basis for his argument. The task before Mr. Spahr is to overthrow this argument. I wish to direct attention to the method by which he attempts to do this.

He quotes Mr. Giffen's argument as follows:

In 1886, in a paper read at the Bankers' Institute, I published the figures of the actual premium on gold in Paris at the first of each month for the years 1820 to 1847, -the greater portion of the period -which placed the fact beyond doubt that gold and silver did not pass in all that time at the ratio, but that gold varied in price usually between one-half per cent and two per cent premium, with not very frequent and not very lengthened lapses below the one-half per cent, and not one date being mentioned on which there was not a premium of some sort. These premiums were quite sufficient to make the practice different from the law. At anything over even one-quarter per cent premium for gold (or even one-hundredth of one per cent) no man alive would pay a debt in gold which he could pay in silver

without a premium, and consequently the demand for gold for standard and for unlimited legal tender in France was all this time in suspense. When the premium was between one and two per cent it was very serious indeed. Clearly not even for the smallest payment would any man pay in the proportion of £102 for every £100 of debt.

When I wrote the paper for the Bankers' Institute in 1886, I had no figures for the period from 1803 to 1820 before me; but I may now refer to the ratios of Soetbeer, as quoted in the last report of the director of the United States mint (page 162) which gives the following average ratios of silver to gold from 1803 to 1820 inclusive.

The sentences in italics are left out by Mr. Spahr; the remainder of the quotation is correct.

Then Mr. Spahr proceeds thus:

[Here is

Here follow portions of Soetbeer's tables, giving the ratio between the average prices of gold and silver bullion in the London market between 1803 and 1873. The French ratio is 1 to 15 and the extreme variations during each decade are as follows. given a table stating a ratio for one year in each decade.] These tables are likewise published by bimetallists to prove that the free coinage of both gold and silver in France did keep the coins of the two metals at par with each other, and thus established a bimetallic standard. The facts then are agreed upon. What about the conclusions? A moment's consideration will show how far afield Mr. Giffen has gone in maintaining that France was mistaken in believing that she had had the concurrent circulation of the two metals under her bimetallic law. The points he fails to consider are these: (1) Soetbeer's prices are London prices; (2) both Soetbeer's prices and his own are the prices of silver bullion and not of coined silver, and coinage in France, though free, was not gratuitous.

The first natural inference from this statement of Mr. Spahr's is that the table he gives is taken from Mr. Giffen's book. But this is not the fact. The table given by Mr. Giffen, in connection with the extract quoted, covers each year from 1803 to 1820. Mr. Giffen gives this table, as he states, on the authority of the director of the United States mint, and for the purpose of adding to his former argument the statistics of the period 1803 to 1820. Mr. Spahr substi