CAPITAL AND INTEREST 
LR 
RE 
73 
The difference in interest rates between England and the United 
States became less after 1900, and had less and less effect during 
the decade preceding the Great War. It ceased entirely during 
the war itself and the years immediately following. Whatever the 
future may bring — perhaps equality in interest rates between 
the two countries, perhaps a slight difference one way or the 
other — it is tolerably certain that this factor will no longer be of 
such weight as it was in the earlier period. 
A similar contrast, and an illustration of a similar sort, can be 
found in the effects of railway transportation. The capital account 
is especially large in railways; the initial investment, the plant, 
figures to an immensely greater degree than in most industries. 
The interest charge is therefore an unusually large item in the ex- 
penses of production. As regards the labor item, the labor applied 
to the transportation of an article is as much a part of the total 
applied to producing it as is the labor of growing or of fashioning 
(manufacturing). When we envisage the total labor applied to an 
article produced in England or the United States, we must include 
the labor in the railway transport of raw materials to the places 
where they are fashioned and of the marketable goods to the 
places where they are sold. Now in the United States this labor 
has been applied with unusual effectiveness in long distance 
transportation. The United States thus has had a comparative 
advantage as regards commodities carried over great distances. 
On the other hand, as regards the interest charge entailed, the 
United States has been at a disadvantage compared to England. 
The interest charge, an unusually large item in railway expenses, 
was long at a higher rate in the United States, and hence had an 
effect in railway rates, for the same volume of capital, greater 
than in England. Hence in the United States there was an 
endeavor to get on with as small a capital-account as possible, and 
50 to lessen the interest burden. But this mitigation of the interest 
charge, thru a minimizing of capital expenditure, was not at all 
the most important factor in maintaining for the United States 
A comparative advantage as regards the item of transportation. 
The important factor was that of the construction and operation of