However, experience has already furnished the most important clues for this. According to Lardner, the subsequent labour required during the early life of a railway for example "ought not to be denominated repairs, but should be considered as an essential part of the construction of the railway, and in the financial accounts should be debited to capital, and not to revenue, not being expenses due to wear and tear, or to the legitimate operation of the traffic, but to the original and inevitable incompleteness of the construction of the line." (Lardner, loc. cit., p. 40.) "The only sound way is to charge each year's revenue with the depreciation necessarily suffered to earn the revenue, whether the amount is actually spent or not."(Captain Fitzmaurice, "Committee of Inquiry on Caledonian Railway," published in Money Market Review , 1867.)The separation of the replacement and maintenance of fixed capital become practically impossible and purposeless in agriculture, at least when not operated by steam. According to Kirchhof ( Handbuch de landwirtschaftlichen Betriebslehre , Dresden, 1852, p. 137), "wherever there is a complete, though not excessive, supply of implements (of agricultural and other implements and farm appliances of every description) it is the custom to estimate the annual wear and tear and maintenance of the implements, according to the different existing conditions, at a general average of 15 to 25 per cent of the original stock."In the case of the rolling stock of a railway, repairs and replacement cannot be separated at all. "We maintain our stock by number. Whatever number of engines we have we maintain that. If one is destroyed by age, and it is better to build a new one, we build it at the expense of revenue, of course, taking credit for the materials of the old one as far as they go . . . there is a great deal left; there are the wheels, the axles, the boilers, and in fact a great deal of the old engine is left." (T. Gooch, Chairman of Great Western Railway Co., R. C. on Railways, p. 858, Nos.
17327-17329.) ". . .Repairing means renewing; I do not believe in the word replacement . . .; once a railway company has bought a vehicle or an engine, it ought to be repaired, and in that way admit of going on for ever." (No.
17784.) ". . .The engines are maintained for ever out of this 8 1/2 d.
We rebuild our engines. If you purchase an engine entirely it would be spending more money than is necessary . . . yet there is always a pair of wheels or an axle or some portion of the engine which comes in, and hence it cheapens the cost of producing a practically new engine." (No.
17790.) "I am at this moment turning out a new engine every week, or practically a new engine, for it has a new boiler, cylinder, or framing." (No. 17823.
Archibald Sturrock, Locomotive Superintendent of Great Northern Railway, in R. C., 1867.)The same with coaches: "In the course of time the stock of engines and vehicles is continually repaired. New wheels are put on at one time, and a new body at another. The different moving parts most subject to wear are gradually renewed; and the engines and vehicles may be conceived even to be subject to such a succession of repairs, that in many of them not a vestige of the original materials remains. . . . Even in this case, however, the old materials of coaches or engines are more or less worked up into other vehicles or engines, and never totally disappear from the road. The movable capital therefore may be considered to be in a state of continual reproduction; and that which, in the case of the permanent way, must take place altogether at a future epoch, when the entire road will have to be relaid, takes place in the rolling stock gradually from year to year. Its existence is perennial, and it is in a constant state of rejuvenescence."(Lardner, op. cit. , pp. 115-16.)
This process, which Lardner here describes relative to a railway, does not fit the case of an individual factory, but may well serve as an illustration of continuous, partial reproduction of fixed capital intermingled with repairs within an entire branch of industry or even within the aggregate production considered on a social scale.
Here is proof of the lengths to which adroit boards of directors may go in manipulating the terms repairs and replacement for the purpose of extracting dividends. According to the above-quoted paper read by R.
P. Williams, various English railway companies wrote off the following sums from the revenue account, as averages over a number of years, for repairs and maintenance of the permanent way and buildings (per English mile of track annually).
These differences arise only to a very minor degree from differences in the actual expenses; they are due almost exclusively to different methods of calculation, according to whether items of expenses are debited to the capital or the revenue account. Williams says so in so many words that a lesser charge is booked because this is necessary for a good dividend, and a higher charge is booked because there is a greater revenue which can bear it.