corporation maintaining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public. And in order to ascertain that value, the original cost of construction, the amount expended in permanent improvements, the amount and market value of its bonds and stock, the present as compared with the original cost of construction, the probable earning capacity of the property under particular rates prescribed by statute, and the sum required to meet operating expenses, are all matters for consideration, and are to be given such weight as may be just and right in each case.

This necessarily elaborate and tedious inquiry concerning the consideration for outstanding bonds and stock, which is always a subject pressed for consideration in such cases, would be entirely obviated, and the work of the Interstate Commerce Commission greatly facilitated, if before stock and bonds were issued the consideration were ascertained by the Commission to be full and adequate.

In Knoxville v. Water Company,' in determining the validity of an ordinance of a city fixing the maximum rates to be charged for water by the defendant company, counsel for the company urged "rather faintly," says Justice Moody in writing the opinion, that the capitalization of the company ought to have some influence in the case in determining the value of the property. But the '212 U. S., I.

Court said that it was a sufficient answer to the contention

that the capitalization is shown to be considerably in excess of any valuation testified to by any witness, or which can be arrived at by any process of reasoning. The cause for the large variation between the real value of the property and the capitalization in bonds and preferred common stock is apparent from the testimony. All, or substantially all, the preferred and common stock was issued to contractors for the construction of the plant, and the nominal amount of the stock issued was greatly in excess of the true value of the property furnished by the contractors.

The fact is, that while the amount of the issued stock and bonds is not controlling upon the Court in determining the effect of the establishment of rates by a body delegated with legislative power over the subject, yet it is always a factor of greater or less importance, and is always the subject of inquiry when the reasonableness of an order relating to rates is under consideration.

The enactment of a law regulating the issue of stocks and bonds by railroad companies is not nearly so radical a step as was the enactment of the permissive act of 1866, or the Interstate Commerce Act of 1887. It certainly goes no further than the acts regulating the ownership and devolution of interests in ships employed in interstate or foreign commerce, and involves no principle so new and startling as the acts regulating the hours

of labor of employees, the relations between the railroad companies and their employees, or of the act of Congress prohibiting a railroad company to carry from one State to another pursuant to power vested in it by the State of its creation, a commodity which it has produced and owns.

The growing strength of the National Government in the United States [says Mr. Bryce] is largely due to sentimental forces that were weak a century ago, and to a development of internal communications which was then undreamt of.1

In the debates in 1865 over the bill to authorize the Cleveland and Mahoning Railroad Co., an Ohio corporation, to construct its railroad from the village of Youngstown, Ohio, to and into the State of Pennsylvania to the city of Pittsburg, to establish it as a military, postal, and commercial railway of the United States, and to guarantee its rights, Representative Bland argued against the measure lest it should prove a stepping-stone to the formation of great congressional corporations, strike down the rights of the States, and be the entering wedge of centralized government. Similar opposition has been made to every progressive measure of commerce regulation. But the centralizing tendency steadily has gone on, and the control of Congress over interstate railroad companies has been exercised in an increasingly comprehensive manner. Such progress is insepThe American Commonwealth, i., p. 358, 3d ed.

arable from growth. The great arteries of communication between different parts of the country and the instrumentalities which control their operation can only be properly regulated in the public interest by the central national power; a power which is sovereign, which is exclusive when exercised; and which should be exercised to correct every evil of a public character which experience demonstrates to be susceptible of correction only by national legislation.

XII

NEW STATES AND CONSTITUTIONS

URRENT discussion in and out of Congress

concerning the admission as States of the Territories of Arizona and New Mexico has taken a wide range, and has involved much debate concerning the nature and effect of many of the provisions contained in the constitutions proposed by the new States respectively, not only as applicable to them, but as institutional features which may be applied to other communities.

That a frequent recurrence to fundamental principles is necessary to preserve the blessings of liberty and keep government free, is recognized and declared in the constitutions of more than one of the States. 2

It is a fortunate circumstance, therefore, that the nature of these proposed constitutions should have been so prominently brought before the

Address before the Law School of Yale University, June 19,

1911.

2 See, e. g., constitution of Vermont, 1777, Chap. I., par. XVI.; Virginia Bill of Rights, 1776, Sec. 15; New Hampshire constitution of 1792, Part I., Art. 38; Pennsylvania constitution of 1776, Declaration of Rights, Sec. XIV.