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the part of the European powers to extend their system to any portion of this hemisphere, and declaring that the United States would view as the manifestation of a hostile disposition towards them, the intervention of any European power for the purpose of oppressing, or in any way influencing the destiny of the governments of the American continent, whose independence has been acknowledged by the United States-is, or is not, applicable to a case in which a European power may assist, in any manner, the Emperor of Brazil to wage the war which he has declared against the United Provinces of the Rio de la Plata ?

Second, if such declaration is equally applicable in a case in which the Emperor of Brazil, as king of Portugal, may attempt to draw from that kingdom, or from any of the dominions belonging to the crown of Portugal and Algarves, any kind of aid for sustaining said war ?1

On August 31, 1826, Forbes informed Secretary Cruz that he appreciated "the transcendent importance of the views" presented in his note of August 24; 2 in the meantime the note of Cruz was on the way to Washington. Henry Clay delayed answering the queries of Rivadavia's secretary of foreign affairs because he expected a minister from Buenos Aires to appear at Washington to solicit an answer. But the minister who had been appointed to represent the United Provinces at Washington did not appear; 3 hence on January 3, 1828, Clay sent to Forbes the reply of the United States to the queries of Secretary Cruz. Clay declared that the message of Monroe was a declaration of the head of the executive department of the government of the United States.

Although there is every reason to believe that the policy which it announced was in conformity with the opinion both of the nation and of Congress, the declaration must be regarded as having been voluntarily made, and not as conveying any pledge or obligation, the performance of which foreign nations have a right to demand. When the case shall arrive, if it should ever occur, of such an European interference as the message supposes, and it becomes consequently necessary to decide whether this country will or will not engage in war, Congress alone, you well know, is competent by our Constitution, to decide that question.

'Minute of a Conference, op. cit.

2 Ibid.

On April 26, 1826, Manuel Moreno had been appointed minister to the United States, Registro Oficial de la República Argentina, ii, 124.

In the event of such an interference, there can be but little doubt that the sentiment contained in President Monroe's message would still be that of the People and Government of the United States.

It may then be confidently affirmed that there is no longer any danger whatever of the contingency happening, which is supposed by Mr. Monroe's message, of such an interference, on the part of Europe, with the concerns of America as would make it expedient for the Government of the United States to interpose.

In respect to the war which has unhappily been raging between the Argentine Republic, and the Emperor of Brazil, the President has seen it with great regret, and would be very glad to hear of its honorable conclusion. But that war cannot be conceived as presenting a state of things bearing the remotest analogy to the case which President Monroe's message deprecates. It is a war strictly American in its origin and its object. It is a war in which the Allies of Europe have taken no part. Even if Portugal and the Brazils had remained united, and the war had been carried on by their joint arms, against the Argentine Republic, that would have been far from presenting the case which the message contemplated. But, by the death of the late king of Portugal, there has been a virtual separation between the Brazils and Portugal, and during the greater part, if not the whole of the period of the war, the condition of Portugal has been such as to need succor, rather than be capable of affording it to the Brazils.

The general policy of the United States is that of strict and impartial neutrality in reference to all wars of other Powers. It would only be in an extreme case that they would deviate from that policy. Such a case is not presented by the present war.'

It is clear that the message from Washington was welcomed almost as heartily in Buenos Aires as in Bogotá. Prominent statesmen of Buenos Aires spoke with appreciation of the action taken by the United States during Monroe's administration in regard to the independence of Spanish America. The instructions of Clay to Forbes to urge the government of Buenos Aires to assert the principles of the Monroe Doctrine were probably partly responsible for the appeal of the United Provinces of the Rio de la Plata to the United States to apply that

1 State Department MSS, Bureau of Indexes and Archives, Instructions to Ministers, xii. Extracts from Clay's letter to Forbes are found in Moore, J. B., A Digest of International Law, vi, 434.

doctrine against the empire of Brazil. This appeal resembled the case which had been brought against Portugal by Brazil in 1824 in so far as it involved a question as to the policy of the United States if Portugal should take forcible measures against a South American state. The response of Clay followed to an extent the reply of Adams to Salazar, for it declared that Congress alone could decide whether the United States would enforce the Monroe Doctrine by force of arms. Clay's response is also of interest because it announced that the United States. did not consider that Monroe's message contained a pledge which foreign nations could demand that the United States should fulfill.

This study shows that in the third decade of the nineteenth century there emanated from certain South American leaders. significant suggestions for a concert of American powers. The cases in which certain leading states of South America for the first time made an official interpretation of the Monroe Doctrine are of peculiar interest, for they prove that, during a critical period in their history, Colombia, Brazil, and Argentina actually suggested that the United States should guard their respective national interests by enforcing the Monroe Doctrine. It is clear that a cordial reception was given to the original Monroe Doctrine by Rivadavia, Las Heras, Carvalho e Mello, Santander, and Bolívar-distinguished leaders of three Hispanic American states in the days of their weakness and fancied insecurity. In particular, the almost-forgotten case of the United States and Colombia in 1824 furnishes a starting-point in a history of the applications of the Monroe Doctrine, for it was the first case in which the government of the United States interpreted that famous doctrine. It is obvious that the publicists who guided the destinies of the states of South America during the heroic age of their national history could not justly claim that the United States showed a disposition to stretch the Doctrine of Monroe.

UNIVERSITY OF ILLINOIS.

WILLIAM SPENCE ROBERTSON.

RETURNS ON PUBLIC SERVICE PROPERTIES

T

HE chief problem in the regulation of public service corporations in the United States is how to secure reasonable or fair charges. Any standard of reasonableness obviously must give due consideration to the immediate users of the service, to the general public, and to the corporation providing the service. This paper will be concerned principally with reasonableness in reference to the corporation, although there will be incidental reference also to the other interests affected by regulation.

From the standpoint of the corporation, reasonable charges or rates are such as will furnish sufficient revenue to cover all operating expenses, fixed charges, depreciation and taxes, and to allow a fair return upon the capital cost of the business.' That public utilities are reasonably entitled to such a return and to no more, has become almost generally accepted by the public, by legislatures, courts, and the various regulating bodies. There seems to be no valid reason why more should be allowed, but so much is necessary if plant and equipment required for reasonably adequate service are to be provided under conditions of private ownership and operation.

Most economists, perhaps, agree with the view just presented. The question raised in this paper is whether we are pursuing the best way by which to regulate the returns upon public ser

1 Unfortunately even in accounting discussions the term "capital" is used in two very distinct senses; first, either as assets of the business and more especially fixed assets or plant; second, as the value of the stockholders' or owners' rights covering the assets. In this paper the term will be used in the latter sense. In a balance sheet, all the asset values of a corporation are listed on the left side (or in one column); these are covered on the other side (or in another column) by two kinds of rights, creditors' and owners'. The value of the owners' rights over the assets, not the assets themselves, will be designated by the term capital." This will include, of course, par value of stock, plus surplus; or, if stock is worth less than par, it will be the par value less the amount of the discount. And, throughout, valuations will be assumed at original cost; or, if prices have changed significantly, at cost of reproduction.

vice properties. The question is wholly one of expediency as to what is best from the standpoint of the public at large. It will be assumed throughout that such restriction of returns is desirable; for the present discussion that matter will be considered settled. The question is: how may we best effect the desired limitation?

I

The problem of method, how best to permit reasonable and only reasonable returns upon public service properties, has never been directly worked out, and the advantages and disadvantages of the possible methods have never been squarely balanced against each other. Yet a general method has come into use, which, while not definite in details, is fairly fixed in its broad outlines. It has become established gradually by piecemeal legislation, state and national, through action of various public service commissions, and through court decisions. It is followed somewhat roughly by the Interstate Commerce Commission and more definitely by the individual state commissions which have at all seriously attempted to regulate public utilities. In general, the method is to place a fair valuation upon the property of a corporation, and then to require or to fix such charges for the service as will result in a fair net return upon the capital invested. Many points in the method are still uncertain, although the broad features are as stated. Among the uncertain points is the matter of a fair valuation of the property: should it be original cost, or cost of reproduction? The tendency is clearly towards the latter, especially if original costs cannot be determined or if prices determining the cost have

For the best comprehensive discussion of valuation of public service properties, see R. H. Whitten, Valuation of Public Service Corporations; Legal and Economic Phases of Valuation for Rate Making and Public Purchase (New York, 1912). It should be added that practice tends to fix rates in reference to the valuation of the property. But if the acquisition of the more permanent assets be well controlled, and if valuation throughout be fixed upon original or reproduction cost, it seems that the procedure would be simpler if fair returns were finally allowed on "capital" and not upon the property as such. For the purpose of the present paper, at least, the discussion will be clearer if the returns are considered in relation to " capital" as defined in this paper. At bottom, of course, the two methods amount to the same thing.

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