The people and the railways; a popular discussion of the railway problem in the United States by way of answer to "The railways and the republic,"

Front matter

The People ^ndThe Railways

THE GIFT OF

MAY TREAT MORRISON

Preface

The animosity towards the Railway Interest, shown in a volume, "The Railways and the Republic," by Mr. James F. Hudson, has been so largely prevalent among our people ; so many honest and worthy persons have conscientiously shared in it, that it has seemed to me that a conscientious attempt to allay it would not be looked upon either as surplusage or as mere assumption. If I have, therefore, in the following pages, personified this animosity as " Mr. Hudson," it has been purely for my own convenience, not in the least because I think his book either important or dangerous on the whole. In rejoining to Mr. Hudson's book, not the least of the labor has been the reduction of his rambling and riotous charges, statements and conclusions to some sort of classification as to their subject-matter, and so to avoid the necessity of an equally ponderous volume of six hundred pages.

I have tried to point out that the viciousness of the Interstate Commerce Law lay, not so much in the changes it might or could affect in the present railway conveniences of this people (indeed, except that it has somewhat built up the Canadian Pacific Railway at the expense of our own railroads, I aiii unaware tliat it has affected any change whatever, anywhere, up to the present time), as in j^he risk of putting upon our national statute books a law under which wicked, artful or ignorant men might throwthe transportation business of this continent, and so the continent itself, into chaos inside of twenty-four hours.

Portions of this work having previously appeared in The Popular Science Monthly, The Bailway Heview, The North Western Railroader and Science, I am indebted to the proprietors of those publications for permission to use them here.

A. M

New York, July 1st, 1888.

h

Contents

PAGE.

Chapteu I. Is Combination Crime ? 9

II. Tlie American Kailroad 25

Chapter I. Is Combination Crime ?

When, once upon a time, announcement was made, in despotic opulence of mural decoration, that Mr. Barnum's and Mr. Forepaugli's circuses had pooled their attractions under a single tent, the American small boy lodged no protest, nor did he invoke the statutes of this republic against the dangers with which its institutions were threatened. But when whisky, or coal, or cottonseed oil, or prunes, or beeswax, propose to adhere in happy family compact, the occasion is not allowed to pass without jeremiad on the perils of this commonwealth and the departure of the liberties of this people.

In a papei- entitled "Modern Feudalism," in the "North American Review " for April, 1887, I understand Mr. James F. Hudson to suggest that any old-fashioned ideas as to the economy of large producers over small ones, and supposed consequential security of wages, greatest good of the greatest number, etc., which may stiil obtain in the community, are survivals of the dark ages, and without place in the enlightened civilization of this continent ; and to assert that any combination of corporations or large manufacturers or producers for manufacture or production of a single staple, which shall jnirchase the interest or business of smaller manufacturers or producers, is a menacing danger, not only to the consumer, but to the State. Mr. Hudson has nothing to submit as to any possible small competitor who might perhaps be willing or even anxious to be crushed out " for a consideration " rather than assume all the chances of himself crushing out the larger competitor. Nor do I find him discussing the question as to what interest it is to the consumer whether the product he consumes be manufactured or quarried by a small concern or a large one. His propositions, however, are sufficiently startling to the old-fashioned reader of Avhat once was the science of political economy to warrant, I think, notice in these pages.

Mr. Hudson, to begin with, is of opinion that any incorporation, combination, or "trust " organized for business purposes is a "corner" in the thing manufactured, and therefore against the written law of the land as well as the public interest. He is wrong here at the outset. Everybody who knows anything about the matter knows that to " corner " a product is to raise its price, not to the consumer, but to the operators against w'hom the "corner" is engineered. However disastrous a "corner" may be to the " shorts " who fight it : ultimately fatal to the schemers (who risk jiublic indignation if they succeed or the prospect of bankruptcy if they fail in sustaining it), I have yet to learn of any permanent injury to tlie consumer — or to the great body of the people — resvilting from the wickedest corner that ever was attempted. Without attempting any palliation of or excuse for the gamblers who stack staples instead of " chips " and shuffle values instead of cards, it is yet, perhaps, proper to suggest that even trusts, combinations, and incorporations for business purposes are of some ultimate good to the community and benefit to the bread-winner; and to j^oint out the actual fact that, so far from raising, it is to the immediate interest of a combination of small business interests into a large one to at once cheapen the prices of its product to the very minimum margin of j)rofit at which manufacture can be carried on. Otherwise the crop of new combinations to be bought out would be endless. For, surely, so long as the product in whicli the combination deals can be manufactured at a profit, just so long will there be manufacturers. Mr. Hudson, no doubt, burns gas. But any consumer of illuminating oil can tell him that he can buy from an agent of IMr. Hudson's pet grievance, the Standard Oil Company, cheaper * than he

* Tlie .Standard Oil Company has so reduced the cost of the process of refining that the price of refined oil has been lowered from seventy to less

TUE PEOPLE AXD THE RAILWAY!^. H

could before there was any such terrible '•' octopus/' and when every producer had his favorite jobber ; and if ]\[r. Hudson ever sent a telegram from New York to Chicago before the days of the Western Union Telegraph Company (which, naughty as it is, only charges twenty-five cents for ten words to Chicago), at the rate of about two dollars per ten words to Chicago, without grumbling at the positive incongruity of the price, he is a much more reasonable man than some of his readers take him to be. And to demonstrate that — whatever the immediate causes — the immediate effect of combinations is apt to be to convenience rather than to incommode the customer or client; let me allude, in passing, to (what everybody knows) the fact that the single powerful ownership of the telegraph lines of the United States has resulted in the steady improvement of the service (the sending of four messages at once upon a single wire and in opposite directions being not the greatest of these improvements). Perhaps Mr. Hudson thinks that these improvements would have been more patriotically used if the inventors had employed them to break down, instead of to aggrandize and strengthen, the " monopoly." But unless Mr. Hudson dreams of a paradise where inventors seek not to be paid, are not stimulated to activity by hope of reward (if, that is, he writes for his contemporaries and not for an ideal republic), he must be aware of the impossibility of legislating away the inducements to human industry or the instinct of men to prefer worldly prosperity and bank accounts to poverty and dependence. Had these inventions been used to break down existing companies, the result would have been finally the same. They would have been purchased by the strongest purse. But the inventor would first have been ruined. But ^Ir. Pludson, for one, still writes. Such propositions as that there is not a dollar of capital in the United States which does not represent somebody's labor and somebody's self-denial, or that every

than seven cents per gallon. The people who paid four dollars per capita for light now pay less than forty cents pe?- capita^ which is equivalent to a benefit to the people of this country (counting them at 60,000,000) of $216,000,000 per annum.—" New York Tribune," May 15, 1867.

dollar which accrues in profit to-day to the railroads or other great corporate interests of this country represents from two hundred to three hundred dollars paid directly, and in cash, to the wage- workers (the very men for whom ]\Ir. Hudson assumes to speak) — such propositions, I say, do not deter him in the least, nor do I anticipate that they ever will. If the corporations of the United States (chartered hy the people of the United States for transportation, manufacturing, and other purposes), in endeavoring to keep abreast of the commerce and trade of the jjeople of the United States, have gi-own to such enormous proportions as to attract the envy and enmity of those not holding their securities, I respectfully submit that that is no reason why those corporations should be punished, or their interests wrecked, embarrassed, or confiscated, Mr. Hudson to the contrary notwithstanding.

The fact — the truth is, that (however it may be in other countries) the accumulation of wealth and centralization of commerce in great combinations has never, in the United States, been a source of oppression or of poverty to the non-capitalist or wage-worker. The greatest oppressors of the poor, to the contrary, arc not always the largest corporations. It is quite as likely, for examijle, to be a small Chatham Street haberdasher (who himself struggles against the bottom prices of his next-door " puller-in "), as a Broadway furnishing company, who pays a starved seamstress three cents apiece for making shirts, and holds a chattel mortgage on her sewing-machine as security for the material upon wliicli she operates it. Mr. Hudson appears to infer that the snutller the manufacturer, the better off the consumer and the wage-worker ; that the smaller he is, the smaller his prices to the one and the higher his wages to the other. I do not claim that the larger the shirt-dealer, the higher the prices he pays to his seamstresses. I do not claim that the soulless individual becomes soulful the moment he finds himself incorporated (the epigram is the other way). But I do claim that the converse is not the fact. I have not had Mr. Hudson's opportunities, pei'- haps 5 but, so far as the laws of human selfishness and greed go,

I happen to know that the larger the principal the more secure the wages of the wage-worker, and the scale thereof at least not necessarily or even probably I'^wer.

The fact is (whether Mr. Hudson will ever become aware of it is another and less important consideration), that the very first thing a successful manufacturing combination does, and must do, is to put the price of its product down to a figure where it will not pay for designing speculators to form new stock companies for it to "crush " at a hundred or more cents on a dollar. For, did it keep up its prices, either one of two things would inevitably happen : either new factories would be started, or the inventive genius of this people would invent a substitute for the product they furnished, and so ruin the combination beyond resurrection.

So rapidly have prices lowered, indeed, in the past, and so constantly are they still falling, that earnest economists have begun to wonder what the end would be ; and even the labor agitators have turned from the (to them) seemingly abstract question of hours and wages, as between the employer and the employed, to find in this the supposed greatest peril of the latter. It even appears that one Powderly, a chief of one of the so-called " labor movements," has made it the text of certain of his harangues. And, with what Dickens would call perhaps " a fatal freshness," Mr. Hudson himself (who has just left denying the right of industries to centralize themselves because the first thing they did after centralization was to put up prices), on the next page, says, "Mr. Powderly has inveighed against the sin of cheapness, and given his assent to the principle of combination to raise prices, on the assumption that such combinations involve an advance in wages." (Though to what purpose Mr. Hudson has preserved this excerpt his context fails to discover, since good faith to his own argument, if not to his readers, should have led to its suppression.)

But Mr. Hudson ratties on as follows : " It is an old truth that commerce, founded on the basis of distributing the staples of life at the least cost, is the highest practical benevolence ; while devices to rule commerce by the suspension of competition, and to exact arbitrary profits from the masses, are the extreme of selfishness and oppression. The universal nature of this truth .was perceived when the world emerged from the mediaeval system of economics, but it seems in danger of being forgotten. This is illustrated by the criticism of Mr. E. P. Alexander, the most recent writer on the railway question, that those who hold competition to be the only just measure of profits in any industry are years behind the age in comprehension of the science of the railway question."

Whatever there may be beyond platitude in the above is pure invention. The element of " the least cost " as parcel of the definition of " commerce " is certainly novel, and as interesting as it is novel. And certainly, too, the remainder of the sentence — from the words "the universal nature of this truth" (which truth ? — Mr. Hudson has alluded to several) onward — is an extremely remarkable statement to come from -the pen of a writer who assumes to deal with economical questions and matters of social science. The allusion to Mr. Alexander is equally childish, and without bearing upon the matter which we believe Mr. Hudson claims to be discussing ; unless, indeed, he thought it necessary to show, in passing, how thoroughly he had failed to comprehend the question of American railway systems, to the discussion of which Mr. Alexander has lately contributed a most admirable monograph. When Mr. Alexander used the words dragged from their context as above, he was pointing out how the question of modern industrial competition had long since ceased to involve simple problems of competition in getting business alone ; how it at present includes also the element of the cost versus the price of doing business at all — that is to say, the value of the opportunity to do business at all, as against the actual outlay in cost necessary to do the business brought to the party offering to do the business at all (which element, everybody— who knows anything of the matter at all — knows to be not only a very serious and a very practical one, but actually the paramount one, under present conditions). (As others besides Mr. Hudson may be ignorant of Mr. Alexander's meaning just here, I may explain that, to the railway, the value of doing a competing business, of keeping its trains running and so perpetuating its charter, is naturally always a larger consideration than the mere question of a profit — is, in fact, the most vital consideration that could be named. Or, should the question present itself differently : a bankrupt railroad is worse than no railroad at all. It can run recklessly and cheaply, since unable to respond in damages for lives or property injured or destroyed. And yet, were competition the only rule by which railways were operated among themselves, this very bankrupt road could force every neighboring road to regulate itself by its own tortuous procedure. For, just as a chain is no stronger than its weakest link, so the best railroad in the country can be no better than the worst, if competition and nothing but competition is to be the rule.)

But with all earthly matters Mr. Hudson will have notliing but competition. He will not hear of such a thing as a combination. He proceeds : ''But the very question at issue is whether they (^. e., these old ideas of competition) are not more in accord with the essential principles of nineteenth-century democracy than those who are turning commerce back to the era of prices fixed by combinations and the suspension of competition." If this is the very question at issue, it would seem as if Mr. Hudson has so far been artfully misleading us. He certainly has not alluded to it before. So far as careful perusal of his paper has informed us, the question at issue seemed to be whether a small manufacturer had a right to sell out-his business to a bigger one ; at what point a large manufacturer, who has used his capital in buying out his smaller neighbors, must call a halt, and submit to a redistribution all around ; and as to whether small manufacturers should be compelled to do business at a loss rather than sell out to larger ones. However, let us patiently shift our ground as often as necessary, if so be we can discover what it is that our Mr. Hudson really does mean. If it is a fact that modern civilization has really introduced new elements — and other principles besides the principle of competition — into commerce, then by all means let us abolish, let us destroy them (Mr. Hudson knows how to destroy a principle), and get back at once — to what ? Not to feudal days, certainly ; for that would be modern feudalism, and that is what Mr. Hudson will none of. Perhaps we had better, while we are about it, go back to the Deluge, to Noah the navigator, who spent one hundred and twenty years in building a ship whose quarter-deck he was himself to tread — (not having any competitors in the ark-building trade he felt safe in allowing himself a reasonable time) — to the patriarchal rather than to the feudal system.

But, having decided where to go, how are ■ we to turn back commerce ? What is commerce ? Webster says that what we mean by that term is " the interchange or mutual change of goods, wares, productions, or property of any kind between nations, by purchase and sale, trade, traffic." Very powerful indeed, one would imagine, must be the forces or agencies which shall turn back such tendencies as these — the operations of the laws of human necessity which culminate in the rule of supply and demand as working upon the entire human race. According to Mr. Hudson, however, these tendencies, laws, and rules do not amount to so very much.- It is an easy enough matter to handle them. We have only to legislate railway companies out of existence, and then enact statutes forbidding two of the same trade to combine. Then things will run smoothly. The State will hold the trackage of the late railroad companies as a highway ; and every dealer, manufacturer, agriculturist, miner, will carry his product to and fro, and — there you are ! No more modern feudalism ; nothing but peace, plenty, and communism !

Faulconridge would only frighten boys with bugs, but a moral drawn from the middle ages, by reason of its mere remoteness, appears always to be a powerful antic with which to worry the non-capitalist imagination. Any combination of like interests for business purposes — the copartnership formed by three butterdealers or six coal-miners to continue the business of selling butter or mining coal; the corporation, or "trust," or combination formed by amalgamation of any existing companies — is a palpa-

THE PEOPLE AND THE BAIL \VA YS. 17

ble return to the days of feudalism. Thus, the present system of combinations becomes " modern feudalism." Your combinations are so large that they build up a favored and aristocratic class, like the old crown vassals. And again, these industrial combinations are hand and glove with the railways, and so form a network of capital in the meshes of which the poor man is strangled. Now, the simple facts upon which Mr. Hudson assumes to found this hue and cry are these, viz. : The normal tendency of trade to trade-centers, where it can be most conveniently handled, has its inevitable corollary in the tendency, within the trade center, to centralization of the different branches of trade. In the middle ages the principle operated to build up such imperial centers as Nuremberg, Antwerp, and London, and the corollary to organize, within those centers, the great trade-guilds. In later years the Atlantic Ocean, the Hudson River, and Long Island Sound combined to make New York city an emporium for the deposit and distribution of the products and industries of two continents, while the merely innocent convenience of traders within that city (not any aristocratic or would-be feudal motives on their part) operated to i-oot and group the leather interest into one quarter, cotton goods into another, oils, and provisions, and ironmongery into still others. And if two or more traders in an identical staple, finding themselves neighbors or united in a community of interest, saw fit to bind themselves into a single firm or trading company, it was no matter of conspiracy against the public weal, but the merest consideration of personal convenience and facility.

When the railroads came, they found themselves obliged — by the very charters which created them — to haul for anybody who chose to employ them, and to do the most extensive hauling for those who had the largest bulk of hauling for them to do. They were not authorized by their acts of incorporation to first demand certificates of good moral character, or affidavits that the would-be customer was not a combination of individuals or stockholders in a trust or a private corporation. And yet, "superfluous as this statement is, it is actually out of such familiar truisms as these (it is difficult to treat the simpleness of the situation without tautology) that Mr. Hudson raises figment after figment and chimera after chimera to disturb and alarm the non-producing and manufacturing classes of this already imperiled community ! And the purport of these figments and the portent of these chimeras is always that any use of capital in bulk is crime against this people and this republic; and that the incorporation for business purposes " stands in " with some railway company or all railway companies, because incorporations — and especially railway incorporatioiis — hate the bread-winner and the wage-worker, and desire that he be crushed and swept from the face of the earth ; in other words, are feudal, mediteval, and unpatriotic. That is the whole text and comment of Mr. Hudson's elocution. Even feudalism itself was not a curse. It was a proper and convenient institution for its day and date; considering the popular ignorance and helplessness, anything else would have been a less tolerable tyranny. It was the growth of circumstances, rather than — as Mr. Hudson thinks — the forcing of an arbitrary situation by the strong and aristocratic upon the plebeian and the weak : so, to begin with, granting Mr. Hudson's favored and capitalist class, and granting that they "force" any condition of things upon the non-capitalist class, the analogy of this state of things to the institution of feudalism is false and misleading. But feudalism was more than a situation. It was the onlj' form in wliich the society of the unlettered and formative civilization could be held together at all — the only one which could, on the 0'.>e hand, curb the despotism of thrones, while on the other conserving the safety and tranquillity of the people. It was the mother of parliamentary government and of civil liberty, to which — in the fullness of time — it yielded and disappeared.

To give a meaning to Mr. Hudson's vision of an analogy between modern industrial centralization and feudalism, let us assume, however, that he means (he does not say so) the mediaeval trade-guilds. Now, these trade-guilds, perhaps, were an accompaniment of — certainly they were contemporary with — the institution of feudalism. Moreover, they were broken up and wiped away by the very institution which Mr. Hudson can not find words enougli to stigmatize as the root of every modern evil — viz., the growth of private capital and the combinations of capitalists. The raedipeval guild was a thing apart, and its type and character have disapj)eared forever ; and yet, peaceful and judicious as those guilds were, even the anarchist and labor unionist of to-day may dignify his district delegation by comparing it to the guilds of the middle ages, with more show of reason than can IMr. Hudson compare them to our modern corjiorations. The modern trades-union is an organization whose object is to monopolize — or at least to secure — the right to labor for wages for its own members; to prevent by force, if necessary and convenient (and it latterly has been supposed to be both necessary and convenient), the labor of anybody not one of its members ; and to bojxott any employer who claims the right to employ the labor of anybody and everybody not its members. The ancient guild was composed of the masters of a certain trade ; of men who had, by mastering its practical art, become entitled to tliat designation — men who practiced it for a livelihood. It had also the industrial and educational function of perpetuating itself by the training of its apprentices to become, in their turn, masters. In the days of feudalism, when the great crown tenants held their territory from the crown by fee of service in its wars (a service they levied on the people to perform in time of war, grinding a profit to themselves by wa}'- of reprisal from this same people in time of jieace), these guilds preserved the useful arts which ameliorate our own happier times. Each guild met and discussed the state of its particular trade; devised means of improving it (their discussions taking the place now filled by the industrial newspaper, the trade-journal, and the price-current). It passed laws also ; but these laws were for the guidance of its own members, not by any means to be supplied outside of it in an attempt by force of arms to make emjiloyment for its own members at the expense of the vested rights and liberties of the rest of mankind. So honorable were they in thought, deed, and word, that the wealthiest London merchant to-day is not above marching in procession in their memory behind their banners on Lord-Mayor's-day, arrayed, as Chaucer says they were in his ;

20 TH£: PEOPLE AND THE RAILWAYS.

"... in one livery Of a great and solemn Fraternitie."

To compare them to the unhappy organizations of which laboring-men to-day are the coerced victims — wherein the ignorance of tlie honest wage-worker is used to deplete his small earnings for the support of vile " master-workmen " and "walking delegates " who toil not, neither sj^in — and the artificer in brass or iron of mediaeval times (who kejjt his aj^prentices in his own household as a part of his family, to succeed him as a master of his trade and as a member of his guild) with the modern " knight of labor," who will not that any should toil for bread who has not first paid a tax to his " lodge," or " headquarters," or camp — is to insult the guild of the middle ages and its master. But, for all that, the guild and the trades-union are nearer in tlieory and in practice than the guild and the modern business corporation as chartered in any known quarter of the civilized world to-day. One thing, however, there was in those middle ages, of which, happily for Mr. Hudson and his kind, no analogy has survived — namely, statutes against heresy and seditious utterances, and capital punishments, such as disemboweling, the axe, fagot, etc., for the stirrer-up of discord and unreasonable public discontent. So much for feudalism and the guilds.

Mr. Hudson's next sentence is a long one, and it reads heroically : " It is the almost universal plea, in mitigation for this infraction of economic law, that the capital engaged in combination can not earn fair profits if competition is allowed free play. But what constitutes the just measure of reward for capital ? What are the fair profits for caj)ital seeking investment in bonds, mortgages, or loans on commercial paper ? The rate of interest that is fixed by free competition. What is the just measure of returns on capital invested in houses, stores, farms, small manufactures, or a thousand other forms of ordinary enterprise ? Free competition. What, indeed, is the furce which fixes the rate of wages, despite efforts of labor organizations to oppose combination to the action of that force, aifU notwithstanding the violence l)rovoked where these organizations are brought into conflict with the great combiuations of capital ? The competition of labor for wages. But the result of combination is to establish, for a favored class of capital, by means of the control of the higliways of commerce, an exemption from the force which fixes the just reward of all other human effort, so that excessive profits can be exacted from the masses, to be counted by the tens of millions annually; and if the ideal of railway pooling could be attained, this policy would impose upon the nation a burden of fictitious capital three times the amount of the national debt ! "