October 13. 1866. N. 1207.

The Economist, 13. Oktober 1866. S. 1189–1191.
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The History of the London, Chatham and Dover Railway.

The law has been systematically evaded; published accounts have been totally misleading; many persons – some probably of small means – have been altogether deceived; a property of great natural value has become of no value at all. Daher Lond., Ch., Dov. Railway „is not a single railway“, sondern „a group“ connected by a personal union. The several sections have a common board of directors, but in other respects they are always independent, and sometimes hostile to each other. The largest davon is „the General Undertaking“, has 116 miles out of 136, und the next largest are the Metropolitan extensions“ (14 miles). Und the „General Undertaking“ has taken off many small lines, and has subsidiary agreements peculiar to itself. Besides which there is a „common fund“, a sort of general contribution from all the units, and regulated by laws of its own.

The Lond., Chat., and Dover is a „contractor’s railway“, … was made by borrowing money, not by subscribing capital. „Since 1860“, say the investigators, „Messrs. Peto et Co. have subscribed for the whole share capital of the Co. of every kind, and such capital was subsequently placed upon the market by Messrs. Peto et Co., either on their own account, or in some instances, as they allege, on behalf of the Co.“ These loans were often secured by Peto et Co’s acceptances, and have been floating about Lombardstreet these 6 years, growing each year larger and larger.

Nominal receipts on capital Account: £.5,425,000 (Ordinary Stock) £5,533,290 (Preference) 4,295,230 (Debentures) = 15,253,520
Real Capital expended and received 10,625,498
so that the Co, although dividend to be paid upon it, never  The Economist: reached

In one case „2,207,300l. stock was publicly sold, in respect of which Messrs. Peto et Co claim to give the Co. credit for only 27l. 10.s. % of its nominal amount, less 38,500l. further deducted as the expense of placing it“.

Such was the mode of dealing with share capital upon which advanced advances could be procured upon the market, but there were parts of the line, the shares in which were an unmanageable security, and would yield nothing. There was especially a certain unfortunate „Eastern Section“ out by Greenwich peculiarly intractable. But though no money could be obtained on shares on that line, „debentures“ being a first charge on it might be more useful. A legal impediment certainly existed. Parliament required that debentures should not be issued until one-half the amount of the capital was actually paid up, and „certified to be so by a justice of the peace“. But in the year 1864 financial ingenuity was exceedingly sharp. Receipts were given by the contractors as if for work done „in respect of the contract“; and on the same day the Co. gave receipts as if for money paid „in anticipation of calls“ on subscribed capital. These receipts were as follows:

(Copy.) London, Chatham, and Dover Railway. Secretary’s Office, Victoria Station, Pimlico, S. W.
Metropolitan Extension (Eastern Section).
“B” Shares.
Received from Messrs Peto, Betts, and Co, the sum of Two hundred and fifteen thousand four hundred pounds, for deposit, and in anticipation of Calls on 42,500 Metropolitan Extension (Eastern Section) “B” Shares.
£215,400 (Signed) W. E. Johnson, Secretary.

“Copy.” 9, Great George Street, Westminster, S. W.
April 22, 1864.
Received of the London, Chatham, and Dover Railway Co. the sum of Four hundred and twenty nine thousand seven hundred pounds in respect of our Contract for the construction of the above named Section.
Per pro. Peto, Betts, and Crampton.
£429,700. 0. 0. C. Christian.

„These feigned payments (heißt es im Bericht des Investigation Committee) were then entered in the books of the Co., the only authority for the entries being the receipts above-mentioned. Upon this the statutory declaration was made, and a certificate of a justice of the peace obtained in order to bring the borrowing powers into operation, |103 whereupon the full amount of debentures authorised (356,300l.) were issued and are still outstanding.“

These documents are in fact, two mutually destructive fictions. The contractor acknowledges the receipt of money never paid on account of work ever never done; the co. acknowledge the receipt of capital subscribed by the contractors which never was subscribed. Debentures were then issued, and their produce is the only real money ever actually expended on the Eastern Section. We doubt the legal effect of this „balance entry“ of two deceits; but its financial effect is certain, the Co. got 356,000l. by it which they still owe on debenture.

But this legal impediment thus adroitly encountered, was not the only one which the Lond., Chath., and Dover met with. After the right to issue debentures had been obtained, the amount of debentures so to be issued is limited; it must not exceed 1/3 of the paid up capital. There are 2 ways in which debentures may be used. First, they may be issued to the lender in the usual way, to be held by him or his assigns till they run out; or they may be pledged in the money market to bankers and others for temporary loans, to be repaid when the time fixed for such short loans is expired. But there is a difficulty about using both modes. If a Co. pledges all its debentures to bankers and money dealers, it has none to give to the ordinary investor who wants one, and yet it is on the ordinary investor that at last everything depends. The Lond. Ch., and Dover did, through Peto et Co., pledge all its debentures, and when common investors wanted some, issued new ones, and trusted to Peto et Co’s redeeming the old ones, which they did not always do. New and old ran on together, and a large amount of illegal debentures is outstanding still.

The investigators report that the accounts are very faulty; for the year ending 20. June 1866:

£ s. d.
The Investigators say the loss was 274,165 17 6
The directors formerly said the loss was 78,485 2 4
Difference between the 2 statements 195,680 15 2 Wilful misstatement Zusatz von Marx.

Peto et Co. were at the same time contractors to the Co. subject to no competition, and financial agents subject to no control. Accordingly, the Co. claims 186,000l. from Peto et Co, and Peto  Kommentar von Marx.
(wie sich herausgestellt hat, mere imprudence)
claims 384,000l. from the Co. Das übrige frißt ein Court of Chancery.

Das Capital von 1,000,000 der railway created on 12 August 1864. Von dem share Capital 300,000l. contributed by the Great Northern Co., 700,000l. nominally by Peto. „Immediately after the publication of the  Zusatz von Marx.
accounts (half year Dec. 1864  Zusatz von Marx.
(nämlich Peto figurirt hier als having paid)
) in February 1865, the Co. began to take money from the public on mortgage of these lines, placing the sums to credit of separate accounts with the banker, to be drawn against by the Secretary of the Co. jointly with Mr. Christian, the Financial Manager of Peto et Co., and the arrangement was, that the money received from the public should be paid over to Peto et Co. for the express purpose of ‚retiring‘ the pledged debentures, that they might be returned to the Co. and cancelled.[“] Von 303,905l. so paid to Peto and Co, they applied 180,000l. in retiring an equivalent amount of the pledged debentures, which were delivered to the Co, and cancelled, leaving a balance of 123,900l. in the hands of Peto et Co. …

Debentures now outstanding: 460,678l.
Parliamentary limit is 333,300
Excess: 127,378.

 Kommentar von Marx.
Die als reich verschrienen Citykerls etc, die als directors der co’s cos gewählt, heissen: „guinea pigs.“

The Economist, 13. Oktober 1866. S. 1192/1193.
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Mr. Fawcett in the North.

Everywhere, Mr. Fawcett pointed out, the class of labourers is combined together in large masses, and weighing itself against the class of the capitalists, who wish to dictate the terms of labour … All over the country we hear of these combinations and counter-combination counter-combinations. The masters are distrusted, the men are defied; time, which is all important to the rate of profit, is lost. Capital locked up in valuable machinery is lying barren while these articles of war |104 are discussed. … So long as every great adjustment of terms between capital and labour has to be fought out, a great part of the natural advantages of this country for productive purposes must be lost in paying for the great waste of time, savings, and profits involved in fighting it out. … The only certain way of palliating this evil, is, the growth of such associations such as Messrs. Brigg’s Coal Co., in which the interest of the capitalist and the labourer are so completely identified, that, instead of higgling for terms, the workmen will be glad enough to take whatever rate of wages seems most reasonable, in the full certainty that if they are being underpaid, they will receive the difference at the end of the half-year in a bonus from surplus profits. The plan at Messrs. Brigg’s is to pay, first, the regular rate of wages in the district, then 10% on all the capital of the co, and finally to divide the surplus between the capital and the labour, so that mere labourers, even without a share in the Co., receive a bonus at the end of the half-year if the profits exceeded 10%. This plan has been found to conduce to economy of time and material to a degree scarcely credible to those who have not tried it. … Mr. Briggs explained that the result had been not only to put a good bonus into the pocket of the labourers – a bonus of 5% on their wages – but to yield to himself, as a capitalist, a larger profit than he had ever before received, even in the most prosperous years of the colliery’s existence.

… Free contract between independent persons is the natural and healthy system, but to give ignorant parents an absolute right to contract for their children’s labour … leads to shortsighted bargains in which the future of whole generations of men is mortgaged to secure a few extra shillings a week in the present.

31 August. 1867 N. 1253.

The Economist, 31. August 1867. S. 983/984.
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The Finances of Russia.

Consul Michell’s Report of Russian finance friendly to Russia; he obtained his appointment partly through Russian influence. It shows that that Gvt. never succeeds even temporarily in avoiding a deficit. Before 1832, each Russian department spent at its own discretion; deficiencies made up by the issue of inconvertible notes, sales of property, or by leaving debts unpaid. In 1832 a slightly better system introduced, but Treasury still unable to make expenditure and revenue meet, and compelled every year either to borrow money abroad, or to take money from the State Banks of Deposit, or issue inconvertible paper.

Between 1832 and 1861 thus obtained 216,000,000l., average deficit for 30 years of 7 Mill. l. a year.

Official admitted deficit of 1862 over l.1,500,000;
1863 1,700,000;
1864 6,300,000.
1865. 2,700,000 
1866 5,700,000.

Michell shows that this is far within the truth. The State helps itself from the National Bank as it pleases, giving only inconvertible |161 paper in return; and so, in one way or other, the Russian Gvt., von 1861–1866 borrowed 75, 75 Mill. l., or at the rate of 15 Mill. l. a year, an average deficit of nearly double the old amount. Much of all this debt met by notes which bears bear no interest, and the interest bearing debt bears no proportion to the real indebtedness of the State. No one knows how much paper is afloat, total enormous, but public debt = 286 Mill. l., mit annual charge of 11 Mill. l., or average of about 41/2%. As the ordinary revenue in 1866 = 53 Mill. l. St., Russia owes, apart from her paper, nearly 6 years income, and has mortgaged nearly 1/5 of her usual receipts, not a very formidable state of affairs when compared mit English, French, or Dutch accounts, but very formidable when compared mit dem true analogue, India, which owes barely 2 years income, and has mortgaged little more than a tithe of her revenue. India, moreover, has no inconvertible paper. Yet India can borrow at 5%. Michell says, as to the unknown quantity of inconvertible notes: „The accounts between the Treasury and the State Bank are so complicated as to defy any inquiry for the purpose of making a statement beyond dispute. Practically, the State helps itself to whatever it wants from the Bank, which is thereby compelled to issue more inconvertible notes to ‚strengthen the branches‘, and thus to suspend its own charter. The Treasury has broken the State Bank, for it has long been unable meet its engagements to pay specie. Nor could it return to the public their deposits if demanded, except by a corresponding new issue of inconvertible paper.[“] „Irrespective of 45,000 men serving in the Imperial army, the 800,000 rank and file, supplied by a total population of about 55 millions, constitutes 14/10% of that portion of the population liable to conscription, while the numerical relation of the army to the population of the empire (70 mill.) exceeds that of France and Prussia by 1/3.“

„At the same time“, says Michell „the number of young men eligible in Russia for service is comparatively far smaller than in other countries of Europe, where about 1% of the population yearly reaches the age of 20 years, and of these 40[%] are fitted for military service. In Russia, owing to the mortality of the children, it takes 50 millions of the population to produce the number of young men of 20 years that France can command with a population of 38 mill. According to this calculation, the number of men of the class liable to military service, who reach the age of 20 years in Russia, about 400,000 p. an.; of these, perhaps not more than 160,000 are fitted for the army; but the actual number yearly taken is 100,000, and these only return to their families after 8 years’ service. Official Expenditure 33% of revenue; in der That immer viel mehr. Ausserdem charge to the country by the fact that the annual expense to the male taxable population of furnishing a contingent of 100,000 recruits cannot be less than 31/2 mill. roubles, while their liability to transport and quarter troops is estimated at 15 Mill. roubles, constituting a tax of 60 to 70 copecks per male; while in order to possess irregular troops, 3 mill. of a population occupying the most fertile provinces of the empire are exempted from all taxes and contributions.“


  • London. 1868.
  • 1866 „The Economist“ (Jahrgang 1866) vol. XXIV.
  • The Social Economist, 1. Oktober 1868
  • „The Economist“ (Jahrgang 1866) (Fortsetzung)
  • Jahrgang 1867.
  • Register der obigen Auszüge aus dem Economist für 1866 und 1867.
  • The „Money Market Review“. Jahrgang 1866.
  • The Money Market Review. Jahrgang 1867.
  • Register Money Market Review Jahrgänge 1866 und 1867