Opening…

Chapter I

"THERE ARE NONE"--"THEY ARE LEGION"

Nature is rich; but everywhere man, the heir of nature, is poor. Never in this happy country or elsewhere--except in the Land of Miracle, where "they did all eat and were filled"--has there been enough of anything for the people. Never since time began have all the sons and daughters of men been all warm, and all filled, and all shod and roofed. Never yet have all the virgins, wise or foolish, been able to fill their lamps with oil.

The world, enriched by thousands of generations of toilers and thinkers, has reached a fertility which can give every human being a plenty undreamed of even in the Utopias. But between this plenty ripening on the boughs of our civilization and the people hungering for it step the "cornerers," the syndicates, trusts, combinations, with the cry of "over-production"--too much of everything. Holding back the riches of earth, sea, and sky from their fellows who famish and freeze in the dark, they declare to them that there is too much light and warmth and food. They assert the right, for their private profit, to regulate the consumption by the people of the necessaries of life, and to control production, not by the needs of humanity, but by the desires of a few for dividends. The coal syndicate thinks there is too much coal. There is too much iron, too much lumber, too much flour--for this or that syndicate.

The majority have never been able to buy enough of anything; but this minority have too much of everything to sell.

Liberty produces wealth, and wealth destroys liberty. "The splendid empire of Charles V.," says Motley, "was erected upon the grave of liberty." Our bignesses, cities, factories, monopolies, fortunes, which are our empires, are the obesities of an age gluttonous beyond its powers of digestion. Mankind are crowding upon each other in the centres, and struggling to keep each other out of the feast set by the new sciences and the new fellowships. Our size has got beyond both our science and our conscience. The vision of the railroad stockholder is not far-sighted enough to see into the office of the General Manager; the people cannot reach across even a ward of a city to rule their rulers; Captains of Industry "do not know" whether the men in the ranks are dying from lack of food and shelter; we cannot clean our cities nor our politics; the locomotive has more man-power than all the ballot-boxes, and mill-wheels wear out the hearts of workers unable to keep up beating time to their whirl. If mankind had gone on pursuing the ideals of the fighter, the time would necessarily have come when there would have been only a few, then only one, and then none left. This is what we are witnessing in the world of livelihoods. Our ideals of livelihood are ideals of mutual deglutition. We are rapidly reaching the stage where in each province only a few are left; that is the key to our times. Beyond the deep is another deep. This era is but a passing phase in the evolution of industrial Cæsars, and these Cæsars will be of a new type--corporate Cæsars.

For those who like the perpetual motion of a debate in which neither of the disputants is looking at the same side of the shield, there are infinite satisfactions in the current controversy as to whether there is any such thing as "monopoly." "There are none," says one side. "They are legion," says the other. "The idea that there can be such a thing is absurd," says one, who with half a dozen associates controls the source, the price, the quality, the quantity of nine-tenths of a great necessary of life. But "There will soon be a trust for every production, and a master to fix the price for every necessity of life," said the Senator who framed the United States Anti-Trust Law. This difference as to facts is due to a difference in the definitions through which the facts are regarded. Those who say "there are none" hold with the Attorney-General of the United States and the decision he quotes from the highest Federal court which has yet passed on this question[1] that no one has a monopoly unless there is a "disability" or "restriction" imposed by law on all who would compete. A syndicate that had succeeded in bottling for sale all the air of the earth would not have a monopoly in this view, unless there were on the statute-books a law forbidding every one else from selling air. No others could get air to sell; the people could not get air to breathe, but there would be no monopoly because there is no "legal restriction" on breathing or selling the atmosphere.

Excepting in the manufacture of postage-stamps, gold dollars, and a few other such cases of a "legal restriction," there are no monopolies according to this definition. It excludes the whole body of facts which the people include in their definition, and dismisses a great public question by a mere play on words. The other side of the shield was described by Judge Barrett, of the Supreme Court of New York. A monopoly he declared to be "any combination the tendency of which is to prevent competition in its broad and general sense, and to control and thus at will enhance prices to the detriment of the public.... Nor need it be permanent or complete. It is enough that it may be even temporarily and partially successful. The question in the end is, Does it inevitably tend to public injury?"[2]

Those who insist that "there are none" are the fortunate ones who came up to the shield on its golden side. But common usage agrees with the language of Judge Barrett, because it exactly fits a fact which presses on common people heavily, and will grow heavier before it grows lighter.

The committee of Congress investigating trusts in 1889 did not report any list of these combinations to control markets, "for the reason that new ones are constantly forming, and that old ones are constantly extending their relations so as to cover new branches of the business and invade new territories."

It is true that such a list, like a dictionary, would begin to be wrong the moment it began to appear. But though only an instantaneous photograph of the whirlwind, it would give an idea, to be gained in no other way, of a movement shadowing two hemispheres. In an incredible number of the necessaries and luxuries of life, from meat to tombstones, some inner circle of the "fittest" has sought, and very often obtained, the sweet power which Judge Barrett found the sugar trust had: It "can close every refinery at will, close some and open others, limit the purchases of raw material (thus jeopardizing, and in a considerable degree controlling, its production), artificially limit the production of refined sugar, enhance the price to enrich themselves and their associates at the public expense, and depress the price when necessary to crush out and impoverish a foolhardy rival."

Corners are "acute" attacks of that which combinations exhibit as chronic. First a corner, then a pool, then a trust, has often been the genesis. The last stage, when the trust throws off the forms of combination and returns to the simpler dress of corporations, is already well along. Some of the "sympathetical co-operations" on record have no doubt ceased to exist. But that they should have been attempted is one of the signs of the time, and these attempts are repeated again and again until success is reached.

The line of development is from local to national, and from national to international. The amount of capital changes continually with the recrystallizations in progress. Not less than five hundred million dollars is in the coal combination, which our evidence shows to have flourished twenty-two years; that in oil has nearly if not quite two hundred millions; and the other combinations in which its members are leaders foot up hundreds of millions more. Hundreds of millions of dollars are united in the railroads and elevators of the Northwest against the wheat-growers. In cattle and meat there are not less than one hundred millions; in whiskey, thirty-five millions; and in beer a great deal more than that; in sugar, seventy-five millions; in leather, over a hundred millions; in gas, hundreds of millions. At this writing a union is being negotiated of all the piano-makers in the United States, to have a capital of fifty millions. Quite beyond ordinary comprehension is the magnitude of the syndicates, if there is more than one, which are going from city to city, consolidating all the gas-works, electric-lighting companies, street-railways in each into single properties, and consolidating these into vast estates for central corporations of capitalists, controlling from metropolitan offices the transportation of the people of scores of cities. Such a syndicate negotiating in December, 1892, for the control of the street-railways of Brooklyn, was said by the New York Times, "on absolute authority, to have subscribed $23,000,000 towards that end, before a single move had been made or a price set on a single share of stock." It was in the same hands as those busy later in gathering together the coal-mines of Nova Scotia and putting them under American control. There are in round numbers ten thousand millions of dollars claiming dividends and interest in the railroads of the United States. Every year they are more closely pooled. The public saw them marshalled, as by one hand, in the maintenance of the high passenger rates to the World's Fair in the summer of 1893.

Many thousands of millions of dollars are represented in these centralizations. It is a vast sum, and yet is but a minority of our wealth.

Laws against these combinations have been passed by Congress and by many of the States. There have been prosecutions under them by the State and Federal governments. The laws and the lawsuits have alike been futile.

In a few cases names and form of organization have been changed, in consequence of legal pursuit. The whiskey, sugar, and oil trusts had to hang out new signs. But the thing itself, the will and the power to control markets, livelihoods, and liberties, and the toleration of this by the public--this remains unimpaired; in truth, facilitated by the greater secrecy and compactness which have been the only results of the appeal to law.

The Attorney-General of the national government gives a large part of his annual report for 1893 to showing "what small basis there is for the popular impression" "that the aim and effect of this statute" (the Anti-Trust Law) "are to prohibit and prevent those aggregations of capital which are so common at the present day, and which sometimes are on so large a scale as to practically control all the branches of an extensive industry." This executive says of the action of the "co-ordinate" Legislature: "It would not be useful, even if it were possible, to ascertain the precise purposes of the framers of the statute." He is the officer charged with the duty of directing the prosecutions to enforce the law; but he declares that since, among other reasons, "all ownership of property is a monopoly, ... any literal application of the provisions of the statute is out of the question." Nothing has been accomplished by all these appeals to the legislatures and the courts, except to prove that the evil lies deeper than any public sentiment or public intelligence yet existent, and is stronger than any public power yet at call.

What we call Monopoly is Business at the end of its journey. The concentration of wealth, the wiping out of the middle classes, are other names for it. To get it is, in the world of affairs, the chief end of man.

There are no solitary truths, Goethe says, and monopoly--as the greatest business fact of our civilization, which gives to business what other ages gave to war and religion--is our greatest social, political, and moral fact.

The men and women who do the work of the world have the right to the floor. Everywhere they are rising to "a point of information." They want to know how our labor and the gifts of nature are being ordered by those whom our ideals and consent have made Captains of Industry over us; how it is that we, who profess the religion of the Golden Rule and the political economy of service for service, come to divide our produce into incalculable power and pleasure for a few, and partial existence for the many who are the fountains of these powers and pleasures. This book is an attempt to help the people answer these questions. It has been quarried out of official records, and it is a venture in realism in the world of realities. Decisions of courts and of special tribunals like the Interstate Commerce Commission, verdicts of juries in civil and criminal cases, reports of committees of the State Legislatures and of Congress, oath-sworn testimony given in legal proceedings and in official inquiries, corrected by rebutting testimony and by cross-examination--such are the sources of information.

One important exception is in the description of the operations of a great international combination in England, Germany, Holland, and elsewhere in Europe; this has had to be made from unofficial material. The people there are neither economically nor politically developed to the point we have reached in America, of using the legislative investigation and the powers of the courts to defend livelihoods and market rights, and enforce the social responsibilities of industrial power. Full and exact references are given throughout for the guidance of the investigator. The language of witnesses, judges, and official reports has been repeated verbatim, except for the avoidance of the surplusage and reduplication usual in such literature, and that, to permit the use of the dialogue form, the construction has been changed from the third person to the first in quotations from evidence. With these qualifications, wherever quotation marks have been used, the transcription is word for word. Evidence from such sources is more exact, circumstantial, and accurate than that upon which the mass of historical literature is founded.

To give the full and official history of numbers of these combinations, which are nearly identical in inspiration, method, and result, would be repetition. Only one of them, therefore, has been treated in full--the oil trust. It is the most successful of all the attempts to put gifts of nature, entire industries, and world markets under one hat. Its originators claim this precedence. It was, one of its spokesmen says, "the parent of the trust system."[3] It is the best illustration of a movement which is itself but an illustration of the spirit of the age.

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II. CUT OFF FROM FIRE

Rome banished those who had been found to be public enemies by forbidding every one to give them fire and water. That was done by all to a few. In America it is done by a few to all. A small number of men are obtaining the power to forbid any but themselves to supply the people with fire in nearly every form known to modern life and industry, from matches to locomotives and electricity. They control our hard coal and much of the soft,[4] and stoves, furnaces, and steam and hot-water heaters; the governors on steam-boilers and the boilers; gas and gas-fixtures; natural gas and gas-pipes; electric lighting, and all the appurtenances. You cannot free yourself by changing from electricity to gas, or from the gas of the city to the gas of the fields. If you fly from kerosene to candles, you are still under the ban.

The report adopted by the National Association of Stove Manufacturers, at the Thirteenth Annual Convention, 1884, said: "While it is true that iron is a dollar or two lower than last year, and that the cost of labor has also been reduced, your committee is confident that there is not a manufacturer present who can truthfully say he can afford to reduce the price of his goods." "It is a chronic case," the President said in 1888, "of too many stoves, and not enough people to buy them."

The match company, by whose consent all the fires in the United States and Canada are lighted, was organized, as stated, by the Supreme Court of Michigan, for the purpose of controlling the manufacture and trade. Thirty-one manufacturers, owning substantially all the factories where matches were made in the United States, either went into the combination, or were purchased by the match company, and out of this number all were closed except about thirteen.

One of the company, who has been a conspicuous candidate for a nomination to the presidency of the United States, testified that the price of matches was kept up to pay the large sums of money expended to exclude others from the match business, remove competition, buy up machinery and patents, and purchase other match factories. This was told in a suit between two stockholders on a question of their relative rights; but the court, of its own motion, declared the combination illegal, and took notice of the public interests involved.[5]

"Such a vast combination is a menace to the public," said the court. "It is no answer to say that this monopoly has, in fact, reduced the price of friction-matches. That policy may have been necessary to crush competition. The fact exists that it rests in the discretion of this company at any time to raise the price to an exorbitant degree." "Indeed, it is doubtful if free government can long exist in a country where such enormous amounts of money are allowed to be accumulated in the vaults of corporations, to be used at discretion in controlling the property and business of the country against the interest of the public and that of the people, for the personal gain and aggrandizement of a few individuals."

Within the last thirty years, 95 per cent. of the anthracite coal of America--practically the entire supply, it was reported by Congress in 1893--has passed from the ownership of private citizens, many thousands in number, into the possession of the railroads controlling the highways of the coal-fields.

These railroads have been undergoing a similar process of consolidation, and are now the property of eight great corporations. This surrender of their property by the individual coal-mine owners is a continuing process, in operation at this moment, for the complete extinction of the "individual" and the independents in this field. It is destined, according to the report of Congress of 1893,[6] to end "in the entire absorption ... of the entire anthracite coal-fields and collieries by ... the common carriers."

Anthracite coal is geographically a natural monopoly contained in three contiguous fields which, if laid close together, would not cover more than eight miles by sixty. But bituminous coal, although scattered in exhaustless measures all over the continent, is being similarly appropriated by the railroads, and its area is being similarly limited artificially by their interference.

"Railroad syndicates," says the investigation of 1888,[7] "are buying all the best bituminous coal lands along their lines in Missouri, Kansas, Colorado, Arkansas, Tennessee, Alabama, and other Western States and Territories, no doubt with a view of levying tribute upon the people's fuel and the industrial fires of the country."

Canada remains unannexed politically, but its best coal deposits have become a part of the United States. In 1892 a syndicate of American capitalists obtained the control of the principal bituminous coal-mines of Nova Scotia. Among them were men connected both with the anthracite pool and with the combination which seeks control of the oil market of Canada and of the United States.

The process of consolidation is shown by official and judicial investigations to have been in progress in the bituminous fields at least as far back as 1871, with the same purposes, methods, and results as in the anthracite fields, though more slowly, on account of the greater number and vastness of the deposits. From Pennsylvania to the Pacific coast these are narrowed to the territory along the railroads, and narrowed there again to the mines owned or favored by the railroad managers.

The investigations by Congress in 1888 and 1893 both state that the railroads of the country are similarly becoming the owners of our iron and timber lands, and both call upon the people to save themselves. A new law of industry is rising into view. Ownership of the highways ends in ownership of everything and everybody that must use the highways.

The railroads compel private owners to sell them their mines or all the product by refusing to supply cars for their business, and by charging rates for the transportation of coal so high that every one but themselves loses money on every ton sent to market. When the railroads elect to have the output large, they furnish many cars; when they elect to have the output small, they furnish few cars; and when they elect that there shall be no output whatever, they furnish no cars.

One of the few surviving independent coal producers, who is losing heavily on every ton he sends to market, but keeps on in the hope that the law will give him redress, was asked by a committee of Congress why he did not sell out and give up the business? He was willing, he said, to abide the time when his rights on the railroad could be judicially determined. There was another reason. "It might be considered a very sentimental one. I have spent, sir, considerable time and a large amount of energy and skill in building up my business, and I rather like to continue it."

"In other words, you don't want to be forced to sell out?"

"No, sir; I don't want to be forced to sell my product, any more than I want to be forced to sell my collieries."[8]

Though coal is an article of commerce greater in volume than any other natural product in the United States carried on railroads, amounting to not less than 130,000,000 tons a year; and though the appliances for its transportation have been improved, and the cost cheapened every year, so that it can be handled with less cost and risk than almost any other class of freight, the startling fact appears in the litigations before the Interstate Commerce Commission and the investigations by Congress, that anthracite freight rates have been advanced instead of being decreased, are higher now than they were in 1879, and that coal is made by these confederated railroads to pay rates vastly higher than the average of all other high and low class freight, nearly double the rate on wheat or cotton. These high freight rates serve the double purpose of seeming to justify the high price of coal, and of killing off year by year the independent coal-producers. What the railroad coal-miner pays for freight returns to its other self, the railroad. What the independent coal-producer pays goes also to the railroad, his competitor. "This excess over just and reasonable rates of transportation constitutes an available fund by which they (the railroads) are enabled to crush out the competition of independent coal-producers."[9]

By these means, as Congress found in 1888,[10] the railroad managers have forced the independent miners to sell to them or their friends at the price they chose to pay. They were the only possible buyers, because only they were sure of a supply of cars, and of freight rates at which they could live.

The private operators thus being frozen out are able, as the investigation by the New York Legislature in 1878 showed, to produce coal more economically than the great companies, because not burdened with extravagant salaries, royalties, and leases, interest on fictitious bonded debts, and dividends on false capitalization of watered stock. By the laws of supply and demand they would compete out the unwieldy corporations, but these administer a superior political economy in their supply and demand of cars and freight rates. The unfittest, economically, survives.

"The railroad companies engaged in mining and transporting coal are practically in a combination to control the output and fix the price.... They have a practical monopoly of the production, the transportation, and sale of anthracite coal."[11] This has been the finding in all the investigations for twenty years. "More than one, if not all, of the anthracite monopolies," Congress reported in 1888, "run several of their mines in the name of private operators to quiet the general clamor against carrying companies having a monopoly of mining also."

The anthracite collieries of Pennsylvania could now produce 50,000,000 tons a year. The railroads restrict them to 40,000,000 or 41,000,000 tons,[12] nine or ten million tons less than they could furnish to ward off the frosts of winter and to speed the wheels of the world, and this creation of artificial winter has been in progress from the beginning of the combination.

In the ten months between February and November, 1892, the price of coal in the East, as investigated by Congress in 1893,[13] was advanced by the coal railroads as much as $1.25 and $1.35 a ton on the kinds used by house-keepers, and the combinations, the report of Congress says, "exercise even a more baleful influence on the production and transportation of coal for the Western market." The extortion in the price fixed by the coal railroads was found by Congress, in 1888, to be an average of one dollar a ton--"considerably more than a dollar a ton"--on all consumed in the United States, or $39,000,000 in that year, and now $40,000,000 to $41,000,000 a year. The same investigation found that between 1873 and 1886 $200,000,000 more than a fair market price was taken from the public by this combination.[14]

This in anthracite alone. How many hundreds, perhaps thousands, of millions more have been taken by the railroads which control the bituminous coal-fields from Pennsylvania to the Pacific, there are no adjudicated means of estimating.

By the same power which has crushed out the independent coal-miner, the retailer in the cities has been reduced from a free man to an instrument to despoil his neighbors--with whom he is often a fellow-victim--for the benefit of absentee capitalists; he is hounded by detectives; by threats of cutting off his supply, is made a compulsory member of a secret oath-bound society to "maintain prices." "Combinations exist," says the Canadian report, "among coal-dealers in Toronto, Ottawa, Montreal, and London. Detectives are employed and the dealers placed under surveillance.... Oaths of fidelity to the constitution and rules are required not only of the members, but also of their salesmen, and the oaths in the cases of these employés are made in some instances retroactive as well as prospective. All violations of oaths are adjudicated upon by the executive committee referred to, the penalties being heavy fines or expulsion.... In accordance with arrangements made with the American coal-dealers, those who were in default in membership, either from inability to pay fines or from other causes, were prevented from purchasing coal in the United States."[15]

The retailer dare not tell his wrongs even in the committee-rooms of Congress. "Your committee," says the report of 1893 to Congress, "experienced great difficulty in obtaining testimony from retail coal-dealers, who apparently labor under fears of injury to their business in case they should appear and give evidence."

"During the first forty years," Congress reported in 1888, "the mines were worked by individuals, just as are farms. The hundreds of employers were in active competition with each other for labor. The fundamental law of supply and demand alike governed all parties. As to engagement, employer and employé stood upon a common level of equality and manhood. Skill and industry upon the part of the miner assured to him steady work, fair wages, honest measurement, and humane treatment. Should these be denied by one employer many other employers were ready to give them. The miner had the same freedom as to engagement, the same reward for faithful service, and protection against injustice that the farm-hand possesses because of the competition between farmers employing hands.... This virtual combination of all employers into one syndicate has practically abolished competition between them as to wages; and gradually, but inexorably, the workmen have found themselves encoiled as by an anaconda until now they are powerless."[16]

There was an investigation of the coal combination by the Pennsylvania Legislature in 1871, the testimony taken in which showed that when, after a thirty days' strike by the men, a number of private coal-mine owners acceded to their terms, and wished to reopen their mines and send coal again to market, the railroads, by which alone they could get to market, raised their freights, as their men were still on strike, to three times the previous figures. These great corporations had determined not to yield to their men, and as they were mine-owners and coal-sellers as well as carriers, they refused to take coal for their competitors.... The result was that the price of coal was doubled, rising to $12 a ton; the resumption by the private mine-owners was stopped; and they, the workmen, and the consumer were all delivered over to the tender mercies of the six great companies.[17]

The coal companies in the anthracite regions keep thousands of surplus laborers on hand to underbid each other for employment and for submission to all exactions; hold them purposely ignorant when the mines are to be worked and when closed, so that they cannot seek employment elsewhere; bind them as tenants by compulsion in the companies' houses, so that rent shall run against them, whether wages run on or not, and under leases by which they can be turned out with their wives and children on the mountain-side in midwinter if they strike; compel them to fill cars of larger capacity than agreed upon; make them buy their powder and other working outfit of the companies at an enormous advance on the cost; compel them to buy coal of the company at the company's price, and in many cases to buy a fixed quantity, more than they need; compel them to employ the doctor named by the company, and to pay him whether sick or well; "pluck" them at the company's stores, so that when pay-day comes around the company owes the men nothing, there being authentic cases where "sober, hard-working miners toiled for years or even a lifetime without having been able to draw a single dollar, or but a few dollars, in actual cash," in "debt until the day they died;" refuse to fix the wages in advance, but pay them upon some hocus-pocus sliding scale, varying with the selling price in New York, which the railroad slides to suit itself; and, most extraordinary of all, refuse to let the miners know the prices on which their living slides--a fraud, says the report of Congress, "on its face."[18]

The companies dock the miners' output arbitrarily for slate and other impurities, and so can take from their men five to fifty tons more in every hundred than they pay for.[19]

In order to keep the miners disciplined and the coal-market under-supplied, the railroads restrict work so that the miners often have to live for a month on what they can earn in six or eight days; and these restrictions are enforced upon their miners by withholding cars from them to fill, as upon competitors by withholding cars to go to market.[20]

Labor organizations are forbidden, and the men intentionally provoked to strike, to affect the coal-market.

The laboring population of the coal regions, finally, is kept "down" by special policemen enrolled under special laws, and often in violation of law, by the railroads and coal and iron companies practically when and in what numbers these companies choose. These coal and iron policemen are practically without responsibility to any one but their employers, are armed as the corporations see fit with army revolvers, or Winchester rifles, or both, are made detectives by statute, and not required to wear their shields. They provoke the people to riot, and then shoot them legally.[21]

"By the percentage of wages," says the report of Congress, "by false measurements, by rents, stores, and other methods, the workman is virtually a chattel of the operator." It says, to summarize: "The carrier drives out both operator and owner, obtains the property, works the mine, 'disciplines' the miner, lowers wages by the importation of Huns and Italians, restricts the output, and advances the price of coal to the public. It is enabled to commit such wrongs upon individuals and the public by virtue of exercising absolute control of a public highway."[22]

The people of Pennsylvania, in 1873, adopted a new Constitution. To put an end to the consolidation of all the anthracite coal lands into the hands of the railroads, this Constitution forbade common carriers to mine or manufacture articles for transportation over their lines, or to buy land except for carrying purposes. These provisions of the Constitution have been disobeyed "defiantly." "The railroads have defiantly gone on acquiring title to hundreds of thousands of acres of coal, as well as of neighboring agricultural lands." They have been "aggressively pursuing the joint business of carrying and mining coal." So far from quitting it, they "have increased their mining operations by extracting bituminous as well as anthracite."[23]

Instead of enacting "appropriate legislation," as commanded by the new Constitution, to effectuate its prohibitions, the Legislature has passed laws to nullify the Constitution by preventing forever any escheat to the State of the immense area of lands unlawfully held by the railroads. Every effort breaking down to meet the evil by State action, failure was finally confessed by the passage in 1878, by the Pennsylvania Legislature, of a joint resolution asking Congress to legislate "for equity in the rates of freight."

In 1887 Congress passed the Interstate Commerce Law, and established the Interstate Commerce Commission to enforce justice on the railway highways. The independent mine-owners of Pennsylvania appealed to it. Two years and a half were consumed in the proceedings. The Commission decided that the rates the railroad charged were unjust and unreasonable, and ordered them reduced.[24] But the decision has remained unenforced, and cannot be enforced. The railroads treat the Commission with the same contumely they visit on the Constitution of Pennsylvania, and two years after the decision Congress in 1893 found their rates to be 50 cents a ton higher than what the Commission had declared to be just and equitable.[25] The Interstate Commerce Law provides for the imprisonment in the penitentiary of those guilty of the crimes it covers. But the only conviction had under it has been of a shipper for discriminating against a railroad.

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III. PROHIBITION THAT PROHIBITS

That which governments have not yet been equal to has been accomplished by the private co-operation of a few citizens. They decree at their pleasure that in this town or that State no one shall manufacture alcohol, and they enforce the decree. Theirs is the only prohibition that prohibits.

From the famous whiskey ring of 1874 to the pool of 1881 and the trust of 1887, and from the abandonment of that "trust" dress and the reorganization into one corporation in 1890 down to the present, this private regulation of the liquor traffic has gone on. It is a regulation of a good deal more than the liquor traffic. Through its control of alcohol it is a power over the arts and sciences, the manufacture and the preparation of medicines, and a power over politics. More than one chapter of our history exhibits the government itself holding to these rectifiers relations suggestive of anything but rectification. The report of the investigation by Congress in 1893 notes the fact that on the strength of a rumor that the internal-revenue tax was to be increased by Congress, the Trust raised its prices 25 cents a gallon. This would amount to a profit of $12,500,000 on its yearly output.

By February, 1888, all the important distilleries in the Northern States--nearly eighty--were in the Trust, excepting two, the larger of which was in Chicago. The cases of these irreconcilable competitors were set for consideration, according to the Chicago Tribune's report, at a private meeting of the trustees February 3d. In April the Chicago distillery firm published the fact that they had caught a spy of the Trust in their works. He had given them a confession in writing. In September it was discovered that the valve of a vat in this distillery had been tampered with in such a way as to have caused an explosion had it not been found out in time. The next month its owners made known that they had been offered and refused $1,000,000 from the Trust for their works. In December the country was startled by the news that this distillery had been the scene of an awful explosion of dynamite. All the buildings in the neighborhood were shaken and many panes of glass were broken. A jagged hole about three feet square was torn in the roof. There were 15,000 barrels of whiskey stored under the roof that was torn open, and if these had been ignited a terrible fire would have been added to the effect of the explosion. A package of dynamite which had failed to explode, though the fuse had been lighted, was found on the premises by the Chicago police.

The Chicago representative of the whiskey combination ridiculed the idea that the Trust had had anything to do with this. "Such a thing," he said, "is contrary to the genius of a trust."

The wholesale liquor-dealers threatened, at a conference in 1890 with the president of the Trust, to manufacture for themselves, to escape the advance which had been made in the price of high-wines. The president said, as reported in the Wine and Spirit Gazette:

"I do not believe there is a spirits distillery in the country that you can buy. We own nearly all of them, and have at present seventy-eight idle distilleries."

February 11, 1891, the explosion of December, 1888, was recalled by the unexpected arrest of the secretary of the combination in Chicago by the United States authorities. The Grand Jury of Cook County found an indictment, February 17th, against the prisoner. April 20th he was indicted by the Federal Grand Jury. The crime of which he was charged was attempting to bribe a government gauger to blow up the troublesome distillery. The gauger whom the secretary endeavored to enlist had been loyal to his trust, the government, and had made known to his superiors the offer and purpose of the bribe.

If the explosion had been carried out 150 men at work in the distillery would have been destroyed. The evidence given Congress afterwards tended to show that part of the plan was that the bribed gauger who was to set and explode the infernal-machine was not to be allowed to survive to claim his reward and perhaps repent and tell. The fuse was fixed so that the explosion would be instantaneous instead of giving the time promised him to get out of the way.

In a statement to the press, February 15th, the president of the Trust said, as the result of a conference of the trustees:

"We have unanimously agreed to stand by the secretary."

Early in June rumors were in circulation in New York that the Chicago independent had sold out; and soon after the confirmation of the report, with full details, was authoritatively published.

June 8th the judge of the United States Court in Chicago quashed the Federal indictment, on the ground that it is not a crime under any of the United States laws for an internal-revenue officer to set fire to a distillery of his own volition and impulse, and that it is not a crime against the United States for another person to bribe him to do such an act. He held that the offender could be punished only through the State courts. The United States had property in the distillery to the extent of $800,000 due for taxes, which was a legal lien on the property; but the United States District Attorney and the judge could find no Federal law under which, for the gauger to destroy this property of the United States, or for the Whiskey Trust to bribe him to do so, it was a crime. When the indictments framed by the State Attorney of Chicago came before the State courts, three of the four were found defective and were quashed. The Chicago correspondent of the New York World telegraphed that he had been told by the State Attorney, at the time the Federal proceedings were quashed, that of his four indictments he relied most upon that for conspiracy; "but in court yesterday the State Attorney let the charge of conspiracy fall to the ground because, as he said, there was not evidence enough to secure a conviction."

"We haven't the evidence of the gauger; I don't know where he is," the State Attorney said.

But this witness declared in a public letter in February, 1893, "Myself and others with positive evidence were always ready to testify, and I have the facts to-day."

The judge of the State court held the motion to quash until July, and then announced that he would make no decision until August. He withheld his ruling until October. Then he held the secretary for trial on two counts, charging conspiracy to bribe the gauger and destroy the independent distillery; but remarked "informally," the newspapers said, that conviction would be difficult.

When the case was called March 22, 1892, a delay was granted "until next Monday," to enable the prisoner's counsel to read the "bill of particulars" to find out what he was charged with. The secretary did not trouble himself to attend court. His case was not heard of again until June 24th, when he was released on a nolle prosequi entered by the State Attorney because the evidence was insufficient, and became a free man. That was the end.

Owing to this success of State and United States attorneys in being unsuccessful, the people have never had an opportunity of hearing in court the evidence on which the Government acted in making the arrest, and on which the grand juries found the indictments. But the gauger through whom the secretary of the Trust had attempted to execute his plans was called as a witness before the Committee of Congress which investigated the Trust in 1893, and he told again the story of the infernal-machine. It was as follows, in his own words, omitting names and unnecessary details:

"I was United States internal-revenue gauger from 1879 until after Mr. Cleveland's election, and I was reappointed in 1889, and have been continuously since that time. Late in December, 1890, I received a letter from the secretary of the whiskey combination at Peoria, telling me that he would like to meet me at the Grand Pacific Hotel on New-year's Day. I met him. He said, 'You may be able to do considerable good here; not only for us, but of considerable advantage to yourself. Your $1500 a year is nothing to what you would get by helping us. You can get $10,000 by assisting us in this thing; in fact, to make matters right, you could get in three months $25,000.'" The gauger reported this to his superiors, who told him to go on. "Be particular, and after every interview with him make a note of everything that passes between you while it is fresh in your mind." "I did that," the witness continued, "and I have the original notes in my pocket. There are the original notes," exhibiting them to the committee. "They have never left my possession. I have kept them on my person right along." After some correspondence and another interview, he met the secretary again January 25th. "Now," said the latter, "I can give you something which, if put under a cistern, will in three or four hours go off, and no person know what it was or who did it, and all the trouble that has been caused us will be stopped at once, the sufferings of many people stopped, and no loss to those folks, as they are well insured." "When I recovered from my surprise I asked if it was an explosive. He replied, 'No; a simple but effective thing which would shoot a ball into a tub through the bottom. You will have $10,000 for your work of placing this under a cistern of high-proof, either alcohol or spirits, or what is better than cash, 200 shares of stock.' I asked at what they sold. He said, 'Forty-seven, but it would be up ten points at once,' and I could profit by the raise. 'This will raise a big row.' 'Yes,' he said, 'one cistern well caught, all would go, and it would be right into the warehouse and stop everything at once. It is the most effective way to help us and make a clean job, and you having access to all parts of the distillery and unsuspected is why you could do it so easily.' He had then, in room 35, powder and four steel elongated balls, solid, turned, and with long points. The principal article, however, was a kind of yellowish liquid, which when exposed to sixty-five degrees temperature would produce a flame caused by evaporation. I remarked that there was probably no hurry about this thing, and he said, 'The sooner the better; you may be ordered away from here, and I am come all prepared; everything is ready to load, and that can be done quickly.'"

The gauger reported all this to his superior and told him that "I proposed to take the infernal apparatus." His superior said, "Of course." "I then returned to Grand Pacific, room 35; found loading just completed and much material scattered about, oakum in can saturated slightly with kerosene and alcohol to give good start. The secretary said that three fuses were attached to the gun, one of which would go off under water. He had one steel shell which had been shot through three inches of wood in experimenting. He showed me particularly how to place can; to feel underneath for timbers; put it where ball will enter tub. Also, that in stopping over to meet the president of the combination to-morrow he would have a chance to buy up stock reasonably before our work caused the raise. He expected to buy 1000 shares. Friday, the 30th of January, I rather anticipated a visit from the secretary at my hotel, but I received a letter from him instead of a visit, and Judge Hart, the solicitor of the Internal-Revenue Department, who was there in Chicago, when he read the letter thought that the evidence was certainly conclusive." On Sunday, the 8th, the gauger surrendered the box containing the infernal-machine, which was sealed, to a high official who had come on from New York. "The reason why he came on is that the authorities would not believe my testimony. They did not think it was possible a gentleman in the secretary's position would undertake so heinous a crime, and they did not know but what I was a crank. On Monday, the 9th, I was instructed to write a letter. The thing was to arrest in a proper way. The next day I received a despatch: 'Will be at Pacific to-morrow (Wednesday) morning.'

"Wednesday morning the secretary was arrested, as he was about to enter the hotel, by a deputy marshal, and conducted to the Marshal's office in the Government building. There was a bottle of this composition found in his grip. He had told me it would go off in three or four hours. I was in the anteroom of the city grand jury after the chemist had given his testimony. The chemist said that it was his opinion it would have or might have gone off in three seconds. Fire would cause the shooting of the ball, and the ball making a hole in the tub--alcohol or high-proof spirits--coming down, of course all would have gone up. It could not have helped it, and the explosion would have followed at once, not from the machine, but from the contents of the cistern. They are very explosive indeed, alcohol and high-proof spirits."[26]

What the Government authorities thought of all this is shown in a letter which is spread upon the records of the Treasury Department. It is addressed by the Commissioner of Internal-Revenue to the gauger. After thanking him for his "highly commendable" conduct in relation to the bribe the Commissioner says to Mr. Thomas S. Dewar:

"While your rejection of the offer was just what was expected from you, considering your official and personal standing, yet I realize that you have done more than simply reject the offer. You so conducted the affair as to place the guilty party, it is hoped, in a position in which he will be punished for this violation of law. The proposition was not only to attempt to corrupt an honest officer of the Government, but was to induce you, by the offer of a large sum of money, to commit a most heinous and inhuman act."

No attempt was made by the representatives of the Trust before the committee to deny this testimony. They simply disclaimed any responsibility for what their associate and employé had done. "Whatever there was in that," testified the president of the Whiskey Trust, "was with the former secretary of this company, if there be anything of it."[27]

The Trust increased the number of plants under its control from "nearly eighty" to eighty-one or eighty-two, the number reported by the investigation of Congress in 1893. Its annual production was then 50,000,000 gallons; about 7,500,000 gallons of it alcohol, 42,500,000 spirits. It is evident, says the report, that the company will soon have within its grasp the entire trade, and be able to dictate prices to consumers at pleasure.

"How do you account for spirits going up and corn going down at the same time in two or three instances?" the treasurer was asked.

"Simply because the distillers were getting in a position whereby they ran less than their capacity."[28]

The experience of mankind has always found, as Lord Coke pointed out, that monopoly adulterates.

The report of Congress states that unquestionably the largest part of the product of the combination finds its way into the open markets in the form of "compounded"--or artificial--bourbon and rye whiskeys, brandies, rums, gins, cordials. The testimony establishes the fact that about one half of the whiskey consumed in the country is of this compound product. These compounded liquors are supplied from the drug-stores to the sick as medicine. One of the expert witnesses summoned to explain the process of this adulteration appeared before the committee with two demijohns, one containing pure alcohol and the other spirits, and a number of bottles containing essential oils, essences, etc., with which he proposed to make some experiments. "The basis here, this white product, is what is known as 'spirits' in the trade. With the use of these essential oils and essences now before you any kind of imitation liquor can be produced at almost a moment's notice. My first experiment will be with Jamaica rum. I put a drop of Jamaica-rum essence into this white spirits, a few drops of coloring matter, and some sugar syrup. Try of it and smell of it. Does it smell like rum and taste like it? If they want to make it cheaper, they reduce it with water. I will reduce it with water, and you will now notice that the bead has disappeared from it. I will reproduce the bead by the use of bead oil. I put one drop in, and here is the result. Now, using rye-whiskey essence instead of Jamaica-rum essence, I will flavor this spirits. I will now put some prune juice into it to tone it. I will put some raisin oil in it to age it, and I will now commence to color it. This first exhibit" (holding it up before the committee) "is about the color of one-year-old whiskey that has been properly bonded. I will now color it so it will imitate a two-year-old whiskey. This is about the three-year-old now" (exhibiting it). "I will now give this the color of 'velvet whiskey,' which is sold as high as $4 a gallon" (exhibiting it). "The present price of spirits, to-day, I think, is $1.30 a gallon. The utilization of any of these essential oils and essences and coloring matter to make the transfer does not exceed a cost of one and a half cents a gallon. I am prepared to make imitations of any of these liquors at any time with this spirits basis--all the different whiskeys, Scotch and Irish whiskeys, the foreign gins and rums and brandies, after-dinner cordials and liqueurs. These materials as you have them exhibited before you of essential oils and essences are part and parcel of the stock in trade of every man in the United States of America who has got a rectifying license as a wholesale liquor dealer.... They are very generally and extensively in use throughout our entire country, in every hamlet and village, in all the branches of trade, the wholesale liquor dealer, the grocer having a liquor dealer's license, and retail druggists.... When a doctor prescribes French brandy, he expects to get a production which is a distillation of wine made from the grape. In that imitation brandy made from spirits and cognac oil he gets a crude product of corn, defeating entirely his purpose in the prescription. The same applies to gin, rum, and other articles wherever the imitations are found."[29]

Some of the substances named by witnesses as occurring in the oils and essences used for this adulteration are sulphuric acid, prussic acid, fusel oil, creosote, nitro-benzol--all poisons, and some of them so virulent that a teaspoonful would kill.

"I have been warned when in the employ of these people not to take the crude material into my mouth," said one of the witnesses. Another witness denied that there was any danger in the infinitesimal portions used of the flavoring matter.

"The only result," said one of the members of the committee, "of the testimony and hearing of the committee will be to educate the public to the Trust methods. It will have no effect on the Trust."

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Chapter IV

"SQUARE EATERS"

"By Heaven, square eaters, more meat I say!"

--Beaumont and Fletcher.

A delegate to one of the millers' national conventions said, "We want cheaper wheat and dearer flour."

The Canadian Parliament reports that "the Biscuit Association," which had been in existence six years, had kept up the prices of its products, "although the prices of the ingredients used have in that time very materially decreased."

An Associated Press despatch from Chicago announced that at "a joint meeting of all the cracker bakers between Pittsburg and the Rocky Mountains, held this morning, it was unanimously agreed to advance the price of crackers."

A "Bread Union" has been formed in London for the amalgamation of concerns controlling hundreds of shops. Its chairman instructed the stockholders that by concentrating a large number of shops under one management in any district it could "quickly stifle the opposition of any small unprincipled trader bent on reducing prices for competition purposes." The Dominion Parliament, in condemning the Grocers' Guild as "obnoxious to the public interest in limiting competition, in enhancing prices," pointed out that "no reasonable excuse exists for many of its arbitrary acts and agreements. The wholesale grocery trade had been for many years in a flourishing condition; failures were almost unknown."

But though prosperous the grocers formed this guild, admitting some, proscribing others, and established by private legislation the profits they desired. The profits were "afterwards increased, and in no instance lowered, though values generally had fallen."

At Minneapolis, the seat of the greatest flour-manufacturing industry in the world, the elevators and railroads have united against the wheat-growers in a way which does much to realize the dream of the miller, of "cheaper wheat and dearer flour." A committee of the Minnesota legislature investigated this combination in 1892. The majority stopped short of reporting that it fixed the prices of wheat, but admitted that some of the testimony tended that way, and that the evidence "would seem to establish" that one of the most powerful railroads had done so, and "had attempted to coerce compliance with its requirements in the matter of prices by threats to embarrass the business of local buyers."[30] A report from a minority of the same committee was more outspoken. It summarizes the evidence, which shows that the railroads and the elevator companies united to enforce a uniform price for wheat. This price was six and a quarter cents below what it should be. All the railroads adjusted their freight rates to the artificial "list-price," and though rivals, they all charged the same rates. The elevator companies, owning an aggregate of fifteen hundred elevators, had a common agent who sent word daily, by telegram and letter, to all wheat-buyers as to the price to be paid the farmers. The report calculates the amount thereby taken from the wheat-growers by the elevators at from four to five millions of dollars a year.

The findings of this report were ratified by the adoption of its suggestions for a remedy. "There is," it said, "no agency but the State itself adequate to protect, now, the producer of wheat in Minnesota and the Northwest from the influence of this combine." It therefore recommended the erection and operation of elevators by the State. This was approved by the Legislature and by the Governor, appropriations were made, and the officials of the State went forward with the plan until the Supreme Court of the State stopped them on the ground of "unconstitutionality."

That which we see the national associations of winter-wheat millers and spring-wheat millers, and the fish, and the egg, and the fruit, and the salt, and the preserves, and other combinations reaching out to do for a "free breakfast table," to put the "square meal" out of the reach of the "square eater," has been achieved to the last detail in sugar and meat. Every half-cent up or down in the price of sugar makes a loss or gain to the sugar combination at the rate of $20,000,000 a year. When it was capitalized for $50,000,000 it paid dividends of $5,000,000 a year. The value of the refineries in the combination was put by the New York Legislative Investigation of 1891 at $7,000,000.

The Hon. Wm. Wilson, of the committee of Congress investigating trusts in 1888, and the framer of the tariff bill of 1893, in a public communication quoted figures showing that this Trust had a surplus of $10,000,000 at the end of 1888, after paying its 10 per cent. dividend. The profits for the next five and a half months were $13,000,000. This surplus of one year and net profits of less than half a year together amount to $23,000,000, nearly half the then nominal capital, and several times more than the real value of all the concerns, as given above. These profits so conservative a paper as the New York Daily Commercial Bulletin called "plunder," and it reaffirmed that epithet when called to account. Stock was issued for this "fabulous valuation" of $50,000,000, put on this $7,000,000 of original value, and was made one of the specialties of the stock market.

"There has been an enormous and widespread speculation in the certificates of the trust," says the report of the New York Senate. "It was plainly one of the chief purposes of the trust to provide for the issue of these certificates, affording thereby an opportunity for great speculation in them, obviously to the advantage of the persons managing the trust. The issue of $50,000,000 certificates was amply sufficient for a speculation of many hundreds of millions of dollars."[31]

Since this investigation by the New York Legislature, the Sugar Trust has been reorganized into a single corporation. The capital of this is $75,000,000, all "water," since the value of the plants is fully covered by the bonds to the amount of $10,000,000. The actual value of the refineries in the Trust, excluding those which have been closed or dismantled, was investigated by the New York World, January 8, 1894, and put at $7,740,000. On this actual value of $7,740,000 in operation the Trust paid in regular and extra dividends in 1893 no less than $10,875,000, and acknowledged that there was in addition a surplus of $5,000,000 in the treasury. This was in addition to the interest on the $10,000,000 of bonds.

When a farmer sells a steer, a lamb, or a hog, and the house-keeper buys a chop or roast, they enter a market which for the whole continent, and for all kinds of cattle and meats, is controlled by the combination of packers at Chicago known as "the Big Four."[32] This had its origin in the "evening" arrangement, made in 1873 by the railroads with preferred shippers, on the ostensible ground that these shippers could equalize or even the cattle traffic of the roads. They received $15 as "a commission" on every car-load of cattle shipped from the West to New York, no matter by whom shipped, whether they shipped it or had anything to do with it or not. The commission was later reduced to $10. They soon became large shippers of cattle; and with these margins in their favor "evening" was not difficult business.[33] By 1878 the dressed-beef business had become important. As the Evener Combine had concentrated the cattle trade at Chicago, the dressed-beef interest necessarily had its home at the same place. It is a curious fact that the Evener Combine ceased about the time the dressed-beef interest began its phenomenal career.[34]

The committee appointed by the United States Senate to investigate the condition of the meat and cattle markets fixed upon St. Louis, Mo., and November 20, 1888, as the time and place of meeting, because the International Cattle Range Association and the Butchers' National Protective Association assembled at the same time and place. It was supposed that prominent members of these associations would avail themselves of the opportunity to appear before the committee. Some of them did testify frankly, but the presence of antagonistic influences, especially in the International Cattle Range Association, immediately became apparent, and industrious efforts were made to prevent the inquiries of the committee from affecting injuriously the dressed-beef interest at Chicago. The committee found that under the influence of the combination the price of cattle had gone down heavily. For instance: In January, 1884, the best grade of beef cattle sold at Chicago for $7.15 per hundred pounds, and in January, 1889, for $5.40; Northwestern range and Texas cattle sold in January, 1884, at $5.60, and in January, 1889, at $3.75; Texas and Indian cattle sold in 1884 at $4.75, the price declining to $2.50 in December, 1889. These are the highest Chicago prices for the months named.

"So far has the centralizing process continued that for all practical purposes," the report says, "the market of that city dominates absolutely the price of beef cattle in the whole country. Kansas City, St. Louis, Omaha, Cincinnati, and Pittsburg are subsidiary to the Chicago market, and their prices are regulated and fixed by the great market on the lake."[35] This great business is practically in the hands of four establishments at Chicago. The largest houses have a capacity for slaughtering 3,500 cattle, 3,000 sheep, and 12,000 hogs every ten hours. When the Senate committee visited Chicago, it was found impossible to obtain the frank and full testimony of either the commission men doing business at the Union Stock Yards, or of the employés of the packing and dressed-beef houses. The former testified reluctantly, and were unquestionably under some sort of constraint as to their public declarations. In private they stated to the members of the committee that a combination certainly existed between the "Big Four;" but when put on the stand as witnesses they shuffled and prevaricated to such a degree as, in many cases, to excite commiseration. The committee reported that the overwhelming weight of testimony from witnesses of the highest character, and from all parts of the West, is to the effect that cattle-owners going with their cattle to the Chicago and Kansas City markets find no competition among buyers, and if they refuse to take the first bid are generally forced to accept a lower one.

As to the effect upon retailers, local butchers, and consumers, it was admitted by the biggest of the Big Four "that they combined to fix the price of beef to the purchaser and consumer, so as to keep up the cost in their own interest."[36] They combined in opening shops and underselling the butchers of cattle at places all over the country, in order to force them to buy dressed meat. They combined in refusing to sell any meat to butchers at Washington, D.C., because the butchers had bid against them for contracts to supply with meats the Government institutions in the District of Columbia.

The compulsion put upon local butchers is illustrated in the S---- case. The following telegram was sent from the office of one of the combination at Chicago to an agent in Pennsylvania: "Cannot allow S---- to continue killing live cattle. If he will not stop, make other arrangements, and make prices so can get his trade."

S---- was a local butcher. He testified that he was approached by the agent with a proposition that he should sell dressed-beef. He refused, and was then informed that he would be broken up in business. Notwithstanding this threat, he continued to butcher, and made his purchases of cattle at Buffalo. From the time of his refusal to sell dressed-beef as proposed, he could not buy any meat from Chicago, and could not get any cars from the Erie Railroad to ship his cattle from Buffalo. He was boycotted for his refusal to discontinue killing cattle.[37] One of the combination, when testifying to this matter, disclaimed responsibility for the despatch, but stated that he did not think a butcher should be permitted to kill cattle and at the same time sell dressed-beef. "He could not serve both interests." "We have no hesitation in stating as our conclusion, from all the facts," says the report, "that a combination exists at Chicago between the principal dressed-beef and packing houses, which controls the market and fixes the price of beef cattle in their own interest."

When pork is cheap, less beef is eaten. Beef monopoly must therefore widen into pork monopoly. This has happened. There is a combination between the pork-packers at Chicago and the large beef-packers. It began in 1886. The existence of such an arrangement was admitted by its most important member; and it is found to have seriously affected the prices of beef cattle, both to the producer and consumer. It was shown that one of the companies of the Big Four made in 1889 profits equal to 29 per cent. on its capital stock--which may, or may not, have been paid in--and this was not the largest of the companies. As to the idea that other capitalists might enter into competition with those now in possession, the report says: "The enormous capital of the great houses now dominating the market, which each year becomes larger, enables them to buy off all rivals."

The favoritism on the highways, in which this power had its origin in 1873, has continued throughout to be its main stay. The railroads give rates to the dressed-beef men which they refuse to shippers of cattle, even though they ship by the train-load--"an unjust and indefensible discrimination by the railroads against the shipper of live cattle." The report says: "This is the spirit and controlling idea of the great monopolies which dominate the country.... No one factor has been more potent and active in effecting an entire revolution in the methods of marketing the meat supply of the United States than the railway transportation."[38] There have been discriminations by the common carriers of the ocean as well as by the railroads. The steamship companies exclude all other shippers, by selling all their capacity to the members of the beef combine, sometimes for months in advance. It is useless for any other shipper to apply.

Property is monopoly, the Attorney-General of the United States says. Those who own the bread, meat, sugar, salt, can fix the price at which they will sell. They can refuse to sell. It is to these fellow-men we must pray, "Give us this day our daily bread." And when we have broken bread for the last time, we can get entrance to our "long home" only by paying "exorbitant" toll for our shrouds and our coffins to the "Undertakers'" and the "National Burial Case" associations.[39]

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V. STRIKING OIL

It was an American idea to "strike oil." Those who knew it as the "slime" of Genesis, or used it to stick together the bricks of the Tower of Babel, or knelt to it in the fire temples, were content to take it as it rose, the easy gift of nature, oozing forth on brook or spring. But the American struck it.

The world, going into partial eclipse on account of the failing supply of whale oil, had its lamps all ready for the new light, and industries beyond number needed only an expansion of the supply.

De Witt Clinton, with the same genius that gave us the Erie Canal, suggested as early as 1814 the use of petroleum for light. Reichenbach, the great German chemist, predicted in 1830 that petroleum would yield an illuminating oil equal to the finest. Inventors and money-makers kept up close with scientific investigators in France, Great Britain, and America.

As early as 1845 the manufacture of coal-oil, both for light and other purposes, had become important in France. Selligue had made himself master of the secrets of petroleum. His name, says one of his chroniclers, "must forever remain inseparably connected with that of the manufacture of light from oil, and to his researches few have been able to add."[40]

The name of this genius and benefactor of humanity has remained almost unknown, except within a small scientific world. He was a member of the French Academy, and almost every year between 1834 and 1848 he came to it with some new discovery. On one occasion he reminds his associates that he holds a patent, granted in 1832, for making illuminating oil from coal, and declares that the business can be developed to any extent which commerce or the arts may require. By 1845 he had unlocked nearly every one of the hidden places in which this extraordinary product has stored its wonders. He found out how to make illuminating oil, illuminating gas, lubricating oil, colors, paraffine for candles, fertilizers, solvents for resin for painters, healing washes, chemicals. He had three refineries in operation in the Department Saône-et-Loire, as described in the report of a committee of the French Academy in 1840. He exhibited his oils in the London Exhibition of 1851, and twelve years before, in the Parisian Industrial Exhibition of 1839, he had crude and refined oils and paraffine to show. "Among the most important objects of the exhibition," said its German historian, Von Hermann, "if they can be prepared economically." This Selligue accomplished. Between 1837 and 1843 he refined more than 4,000,000 pounds of oil, and 50 per cent. of his product was good illuminating oil.

Before 1850, the Scotch had succeeded in getting petroleum, called shale oil, out of bituminous coal, had found how to refine it, and had perfected lamps in which it would burn. Joshua Merrill, the pioneer of oil refining in this country, with his partners, successfully refined petroleum at Waltham, Mass., where they established themselves in 1853. The American manufacturers were making kerosene as early as 1856 from Scotch coal,[41] imported at a cost of $20 to $25 a ton, and getting experts like Silliman to analyze petroleum, in the hope that somehow a supply of it might be got. By 1860 there were sixty-four of these manufactories in the United States. "A crowd of obscure inventors," says Felix Foucon, in the Revue des Deux Mondes, "with unremitting labors perfected the lamp--when it was premature to dream that illumination by mineral oil should become universal." All was ready, as the eminent English geologist, Binney, said, "for the start of the vast American petroleum trade." It was not a lack of knowledge, but a lack of petroleum, that hampered the American manufacturer before 1860.[42] The market, the capital, the consumer, the skilled labor, the inventions, and science were all waiting for "Colonel" Drake.

With Drake's success in "striking oil" came to an end the period, lasting thousands of years, of fire temples, sweep and bucket, Seneca oil; and came to an end, also, the Arcadian simplicity of the old times--old though so recent--in which Professor Silliman could say, "It is not monopolized by any one, but is carried away freely by all who care to collect it."

The oil age begins characteristically. As soon as Drake's well had made known its precious contents, horses began running, and telegrams flying, and money passing to get possession of the oil lands for the few who knew from those who did not know. The primitive days when "it was not monopolized by any one" were over. Thousands of derricks rose all over the territory, and oil scouts pushed with their compasses through the forests of the wilderness in all directions. Wells were bored all over Europe, as well as America, wherever traces of oil showed themselves, sometimes so close together that when one was pumped it would suck air from the other.

As soon as the petroleum began to flow out of the ground, refineries started up at every available place. They were built near the wells, as at Titusville and Oil City, and near the centres of transportation, such as Pittsburg and Buffalo, and near the points of export, as Philadelphia, Baltimore, New York. Numbers of little establishments appeared on the Jersey flats opposite New York.

There was plenty of oil for every one; at one time in 1862 it was only ten cents a barrel. The means of refining it had long before been found by science and were open to all; and even poor men building little stills could year by year add on to their works, increase their capital, and acquire the self-confidence and independence of successful men. The business was one of the most attractive possible to capital. "There is no handsomer business than this is," said one of the great merchants of New York. "You can buy the (crude) oil one week, and sell it the next week refined, and you can imagine the quantity of business that can be done." Men who understood the business, he said, "if they had not the capital could get all of the money they wanted."[43]

Whatever new processes and contrivances were needed the fertile American mind set about supplying. To carry the oil in bulk on the railroads tubs on flat cars were first used; but it was not long before the tub was made of iron instead of wood, and, laid on its side instead of bottom, became the tank of the cylinder car now so familiar.

The fluid which lubricates so many other things on their way through the world is easily made to slip itself along to market. General S.D. Karns was the author,[44] in 1860, of the first suggestion of a pipe line. He planned only for oil to run down hill. Then Hutchinson, the inventor of the Hutchinson rotary pump, saw that oil could be forced through by pressure, and the idea of the pipe line was complete. The first successful pipe line, put down by Samuel Van Syckel,[45] of Titusville, in 1865, from Pithole to Miller's Farm, four miles, has grown into a net-work of thousands of miles, running through the streets of towns, across fields and door-yards, under and over and beside roads, with trunk lines which extend from the oil regions to Pittsburg, Cleveland, Buffalo, Baltimore, New York, Williamsport, Chicago, and the Ohio River.

There was a free market for the oil as it came out of the wells and out of the refineries, and free competition between buyers and sellers, producers and consumers, manufacturers and traders. Industries auxiliary to the main ones flourished. Everywhere the scene was of expanding prosperity, with, of course, the inevitable percentage of ill-luck and miscalculation; but with the balance, on the whole, of such happy growth as freedom and the bounty of nature have always yielded when in partnership. The valleys of Pennsylvania changed into busy towns and oil fields. The highways were crowded, labor was well employed at good wages, new industries were starting up on all sides, and everything betokened the permanent creation of a new prosperity for the whole community, like that which came to California and the world with the discovery of gold.

But shadows of sunset began to creep over the field in its morning time, and the strange spectacle came of widespread ruin in an industry prospering by great leaps. Wherever men moved to discover oil lands, to dig wells, to build refineries or pipe lines, to buy and sell the oil, or to move it to market, a blight fell upon them.

The oil age began in 1860. As early as 1865 strange perturbations were felt, showing that some undiscovered body was pulling the others out of their regular orbits.

Before the panic of 1873--days of buoyant general prosperity, with no commercial revulsion for a cause--the citizens of this industry began to suffer a wholesale loss of property and business among the refineries in New York, Pittsburg, Cleveland, and elsewhere, the wells of the oil valleys, and the markets at home and abroad.

To the building of refineries succeeded the spectacle--a strange one for so new a business--of the abandonment and dismantling of refineries by the score. The market for oil, crude and refined, which had been a natural one, began to move erratically, by incalculable influences. It went down when it should have gone up according to all the known facts of the situation, and went up when it should have gone down. This sort of experience, defying ordinary calculations and virtues, made business men gamblers.

"We began speculating in the hope that there would be a change some time or other for the better," testified one who had gone into the business among the first, and with ample capital and expert skill.[46]

The fright among the people was proportionate to the work they had done and the value of what they were losing. Since the first well was sunk the wilderness had become a busy region, teeming with activity and endowed with wealth. In ten years the business had sprung up from nothing to a net product of 6,000,000 barrels of oil a year, using a capital of $200,000,000 and supporting a population of 60,000 people. The people were drilling one hundred new wells per month, at an average cost of $6000 each. They had devised the forms, and provided the financial institutions needed in a new business. They invented many new and ingenious mechanical contrivances. They had built up towns and cities, with schools, churches, lyceums, theatres, libraries, boards of trade. There were nine daily and eighteen weekly newspapers published in the region and supported by it. All this had been created in ten years, at a cost of untold millions in experiments and failures, and the more precious cost of sacrifice, suffering, toil, and life.

The ripe fruit of all this wonderful development the men of the oil country saw being snatched away from them.[47]

More than once during these lean years, as more than once later, the public alarm went to the verge of violent outbreak. This ruinous prosperity brought stolid Pennsylvania within sight of civil war in 1872, which was the principal subject before the Pennsylvania Legislature of that year, and forced Congress to make an official investigation.

The New York Legislature followed Congress and the Pennsylvania Legislature with an investigation in 1873.

"There was great popular excitement.... It raged like a violent fever," was the description it heard of the state of things in Pennsylvania.[48]

There were panics in oil speculation, bank failures, defalcations. Many committed suicide. Hundreds were driven into bankruptcy and insane asylums.

Where every one else failed, out of this havoc and social disorder one little group of half a dozen men were rising to the power and wealth which have become the marvel of the world. The first of them came tardily into the field about 1862. He started a little refinery in Cleveland, hundreds of miles from the oil wells. The sixty and more manufacturers who had been able to plant themselves before 1860, when they had to distil coal into petroleum before they could refine petroleum into kerosene, had been multiplied into hundreds by the arrival of petroleum ready made from below. Some of the richest and most successful business men of the country had preceded him and were flourishing.[49] He had been a book-keeper, and then a partner, in a very small country-produce store in Cleveland. As described by his counsel some years later, he was a "man of brains and energy without money." With him were his brother and an English mechanic. The mechanic was bought out later, as all the expert skill needed could be got for wages, which were cheaper than dividends.[50] Two or three years later another partner was added, who began life as "a clerk in a country store,"[51] and had been in salt and lumber in the West. A young man, who had been in the oil region only eleven years, and for two of the eleven had been errand-boy and book-keeper in a mixed oil and merchandise business,[52] a lawyer, a railroad man, a cotton broker, a farm laborer who had become refiner, were admitted at various times into the ruling coterie.

The revolution which revolved all the freemen of this industry down a vortex had no sooner begun than the public began to show its agitation through every organ. The spectacle of a few men at the centre of things, in offices rich with plate glass and velvet plush, singing a siren song which drew all their competitors to bankruptcy or insanity or other forms of "co-operation," did not progress, as it might have done a hundred years ago, unnoticed save by those who were the immediate sufferers. The new democracy began questioning the new wealth. Town meetings, organizations of trades and special interests, grand juries, committees of State legislatures and of the United States Senate and House of Representatives, the civil and criminal courts, have been in almost constant action and inquiry since and because.

It was before the Committee of Commerce of the National House of Representatives in 1872 that the first authentic evidence was obtained of the cause of the singular ruin which was overwhelming so fair a field. This investigation in 1872 was suppressed after it had gone a little way. Congress said, Investigate. Another power said, Don't investigate. But it was not stopped until the people had found out that they and the production, refining, and transportation of their oil--the whole oil industry, not alone of the valleys where the petroleum was found, but of the districts where it was manufactured, and the markets where it was bought and sold, and the ports from which it was shipped abroad--had been made the subject of a secret "contract"[53] between certain citizens. The high contracting parties to this treaty for the disposal of an industrial province were, on one side, all the great railroad companies, without whose services the oil, crude or refined, could not be moved to refineries, markets, or ports of shipment on river, lake, or ocean. On the other side was a body of thirteen men, "not one of whom lived in the oil regions, or was an owner of oil wells or oil lands," who had associated themselves for the control of the oil business under the winning name of the South Improvement Company.[54]

By this contract the railroads had agreed with this company of citizens as follows:

1. To double freight rates.

2. Not to charge them the increase.

3. To give them the increase collected from all competitors.

4. To make any other changes of rates necessary to guarantee their success in business.

5. To destroy their competitors by high freight rates.

6. To spy out the details of their competitors' business.

The increase in rates in some cases was to be more than double.[55] These higher rates were to be ostensibly charged to all shippers, including the thirteen members of the South Improvement Company; but that fraternity only did not have to pay them really. All, or nearly all, the increase it paid was to be paid back again--a "rebate."[56] The increase paid by every one else--"on all transported by other parties"--was not paid back. It was to be kept, but not by the railroads. These were to hand that, too, over to the South Improvement Company.

This secret arrangement made the actual rate of the South Improvement Company much lower--sometimes half, sometimes less than half, what all others paid. The railroad officials were not to collect these enhanced freight rates from the unsuspecting subjects of this "contract" to turn them into the treasury of the railroads. They were to give them over to the gentlemen who called themselves "South Improvement Company." The "principle" was that the railroad was not to get the benefit of the additional charge it made to the people. No matter how high the railroads put the rates to the community, not the railroads, but the Improvement Company, was to get the gain. The railroads bound themselves to charge every one else the highest nominal rates mentioned. "They shall not be less," was the stipulation. They might be more up to any point; but less they must not be.[57]

The rate for carrying petroleum to Cleveland to be refined was to be advanced, for instance, to 80 cents a barrel. When paid by the South Improvement Company, 40 cents of the 80 were to be refunded to it; when paid by any one else, the 40 cents were not merely not to be refunded, but to be paid over to his competitor, this aspiring self-improvement company.[58] The charge on refined oil to Boston was increased to $3.07; and, in the same way, the South Improvement Company was to get back a rebate of $1.32 on every barrel it sent to Boston, and on every barrel any one else sent. The South Improvement Company was to receive sums ranging from 40 cents to $1.32, and averaging a dollar a barrel on all shipments, whether made by itself or by others. This would give the company an income of a dollar a day on every one of the 18,000 barrels then being produced daily, whether its members drilled for it, or piped it, or stored it, or refined it, or not.

To pay money to the railroads for them to pay back was seen to be a waste of time, and it was agreed that the South Improvement Company for its members should deduct from the ostensible rate the amount to be refunded, and pay the railroads only the difference. Simplification could not go further. The South Improvement Company was not even to be put to the inconvenience of waiting for the railroads to collect and render to it the tribute exacted for its benefit from all the other shippers. It was given the right to figure out for its members what the tribute would amount to, and pay it to them out of the money they owed the railroads for freight, and then pay the railroad what was left, if there was any left.[59] The railroads agreed to supply them with all the information needed for thus figuring out the amount of this tribute, and to spy out for them besides other important details of their competitors' business. They agreed to make reports every day to the South Improvement Company of all the shipments by other persons, with full particulars as to how much was shipped, who shipped, and to whom, and so on.[60]

The detective agency thus established by the railroads to spy out the business of a whole trade was to send its reports "daily to the principal office" of the thirteen gentlemen. If the railroads, forgetting their obligations to the thirteen disciples, made any reduction in any manner to anybody else, the company, as soon as it was found out, could deduct the same amount from its secret rate.[61] If the open rate to the public went down, the secret rate was to go down as much. For the looks of things, it was stipulated that any one else who could furnish an equal amount of transportation should have the same rates;[62] but the possibility that any one should ever be able to furnish an equal amount of transportation was fully taken care of in another section clinching it all.

The railway managers, made kings of the road by the grant to them of the sovereign powers of the State, covenanted, in order to make their friends kings of light, that they would "maintain the business" of the South Improvement Company "against loss or injury by competition," so that it should be "a remunerative" and "a full and regular business," and pledged themselves to put the rates of freight up or down, as might be "necessary to overcome such competition."[63] Contracts to this effect, giving the South Improvement Company the sole right for five years to do business between the oil wells and the rest of the world, were made with it by the Erie, the New York Central, the Lake Shore and Michigan Southern, the Pennsylvania, the Atlantic and Great Western, and their connections, thus controlling the industry north, south, east, west, and abroad. The contracts in every case bound all the roads owned or leased by the railroads concerned.[64] The contracts were duly signed, sealed, and delivered. On the oil business of that year, as one of the members of the committee of Congress figured out from the testimony, the railroad managers could collect an increase of $7,500,000 in freights, of which they were to hand over to the South Improvement Company $6,000,000, and pay into the treasury of their employers--the railways--only $1,500,000.

The contract was signed for the New York Central and Hudson River Railroad by its vice-president, but this agreement to kill off a whole trade was too little or too usual to make any impression on his mind. When publicly interrogated about it he could not remember having seen or signed it.[65]

"The effect of this contract," the vice-president of the Erie Railway Company was asked, "would have been a complete monopoly in the oil-carrying trade?"

"Yes, sir; a complete monopoly."[66]

Of the thirteen members of the South Improvement Company which was to be given this "complete monopoly," ten were found later to be active members of the oil trust. They were then seeking that control of the light of the world which it has obtained. Among these ten were the president, vice-president, treasurer, secretary, and a majority of the directors of the oil trust into which the improvement company afterwards passed by transmigration. Any closer connection there could not be. One was the other.

The ablest and most painstaking investigation which has ever been had in this country into the management of the railroads found and officially reported to the same effect:

"The controlling spirits of both organizations being the same."[67]

The freight rates were raised as agreed and without notice. Rumors had been heard of what was coming. The public would not believe anything so incredible. But the oil regions were electrified by the news, February 26, that telegrams had been sent from railroad headquarters to their freight agents advising them of new rates, to take effect immediately, making the cost of shipping oil as much again as it had been. The popular excitement which broke out on the same day and "raged like a violent fever" became a national sensation. The Titusville Morning Herald of March 20, 1872, announces that "the railroads to the oil regions have already put up their New York freight from $1.25 to $2.84, an advance of over one hundred per cent." Asked what reason the railroads gave for increasing their rates, a shipper said, "They gave no reason; they telegraphed the local roads to put up the rates immediately." This advance, the superintendents of the railroads told complaining shippers, had been made under the direction of the South Improvement Company, and they had been instructed to make their monthly collections of oil freights from that concern.

The evidence even seems to show that the South Improvement Company was so anxious for the dance of death to begin that it got the freight agents by personal influence to order the increased rates before the time agreed upon with the higher officials. Strenuous efforts were made to have the public believe that the contracts, though sealed, signed, delivered, and put into effect, as the advance in rates most practically demonstrated, had really not been put into effect. The quibbles with which the president of the South Improvement Company sought to give that impossible color to the affair before the committee of Congress drew upon him more than one stinging rebuke from the chairman of the committee.

"During your whole examination there has not been a direct answer given to a question." "I wish to say to you," said the chairman, "that such equivocation is unworthy of you."

The plea needs no answer, but if it did, the language of the railroad men themselves supplies one that cannot be bettered. To the representatives of the people, who had telegraphed them for information "at once, as the excitement is intense, and we fear violence and destruction of property," General McClellan, of the Atlantic and Great Western, replied that the contract was "cancelled;" President Clark, of the Lake Shore, that it was "formally abrogated and cancelled;" Chairman Homer Ramsdell, of the Erie, that it was "abrogated;" Vice-president Thomas Scott, of the Pennsylvania Railroad, that it was "terminated officially;"[68] Vice-president Vanderbilt, of the New York Central and Hudson River Railroad, that it was "cancelled with all the railroads."

Contracts that were not complete and in force would not need to be "cancelled" and "abrogated" and "terminated." These announcements were backed up by a telegram from the future head of the oil trust then incubating, in which he said of his company: "This company holds no contracts with the railroad companies."[69] But in 1879 its secretary, called upon by the Ohio Legislature to produce the contracts the company had with the railroads, showed, among others, one covering the very date of this denial in 1872.[70]

Before Congress the South Improvement Company sought to shelter themselves behind the plea that "their calculation was to get all the refineries in the country into the company. There was no difference made, as far as we were concerned, in favor of or against any refinery; they were all to come in alike."

How they "were all to be taken in" the contract itself showed. It bound the South Improvement Company "to expend large sums of money in the purchase of works for refining," and one of the reasons given by the railroads for making the contract was "to encourage the outlay." Upon what footing buyer and seller would meet in these purchases when the buyer had a secret arrangement like this with the owners of the sole way to and from wells, refineries, and markets, one does not need to be "a business man" to see. The would-be owners had a power to pry the property of the real owners out of their hands.

One of the Cleveland manufacturers who had sold was asked why he did so by the New York Legislature. They had been very prosperous, he said; their profits had been $30,000 to $45,000 a year; but their prosperity had come to a sudden stop.[71]

"From the time that it was well understood in the trade that the South Improvement Company had ... grappled the entire transportation of oil from the West to the seaboard ... we were all kind of paralyzed, perfectly paralyzed; we could not operate.... The South Improvement Company, or some one representing them, had a drawback of a dollar, sometimes seventy cents, sometimes more, sometimes less, and we were working against that difference."[72]

It was a difference, he said, which destroyed their business.

He went to the officials of the Erie and of the New York Central to try to get freight rates that would permit him to continue in business. "I got no satisfaction at all," he said; "I am too good a friend of yours," said the representative of the New York Central, "to advise you to have anything further to do with this oil trade."

"Do you pretend that you won't carry for me at as cheap a rate as you will carry for anybody else?"

"I am but human," the freight agent replied.

He saw the man who was then busily organizing the South Improvement Company. He was non-committal. "I got no satisfaction, except 'You better sell, you better get clear.' Kind of sub rosa: 'Better sell out, no help for it.'"

His firm was outside the charmed circle, and had to choose between selling and dying. Last of all, he had an interview with the president of the all-conquering oil company, in relation to the purchase of their works. "He was the only party that would buy. He offered me fifty cents on the dollar, on the construction account, and we sold out.... He made this expression, I remember: 'I have ways of making money that you know nothing of.'"

For the works, which were producing $30,000 to $45,000 a year profit, and which they considered worth $150,000, they received $65,000.

"Did you ascertain in the trade," he was asked, "what was the average rate that was paid for refineries?"

"That was about the figure.... Fifty cents on the dollar."

"It was that or nothing, was it not?"

"That or nothing."

The freight rates had been raised in February. This sale followed in three weeks.

"I would not have sold out," he told the Legislature, "if I could have got a fair show with the railways. My business, instead of being an enterprise to buy and sell, became degraded into running after the railways and getting an equal chance with others."[73]

"The only party that would buy" gave his explanation a few years later of the centralization of this business.

"Some time in the year 1872," he swore, "when the refining business of the city of Cleveland was in the hands of a number of small refiners, and was unproductive of profit,[74] it was deemed advisable by many of the persons engaged therein, for the sake of economy, to concentrate the business, and associate their joint capital therein. The state of the business was such at that time that it could not be retained profitably at the city of Cleveland, by reason of the fact that points nearer the oil regions were enjoying privileges not shared by refiners at Cleveland, and could produce refined oil at a much less rate than could be done at this point. It was a well-understood fact at that time among refiners that some arrangement would have to be made to economize and concentrate the business, or ruinous losses would not only occur to the refiners themselves, but ultimately Cleveland, as a point of refining oil, would have to be abandoned. At that time those most prominently engaged in the business here consulted together, and as a result thereof several of the refiners conveyed" to his company, then as always the centre of the centralization, "their refineries, and had the option, in pay therefor, to take stock" in this company, "at par, or to take cash." This company, he continued, "had no agency in creating this state of things which made that change in the refining business necessary at that time, but the same was the natural result of the trade, nor did it in the negotiations which followed use any undue or unfair means, but in all cases, to the general satisfaction of those whose refineries were acquired, the full value thereof, either in stock or cash, was paid as the parties preferred."[75]

The producers were not to fare any better than the refiners. The president of the South Improvement Company said to a representative of the oil regions substantially: "We want you producers to make out a correct statement of the average production of each well, and the exact cost per barrel to produce the oil. Then we propose to allow you a fair price for the oil."

Within forty-eight hours after the freight rates were raised, according to programme, "the entire business of the oil regions," the Titusville Herald, March 20, 1872, reported, "became paralyzed. Oil went down to a point seventy cents below the cost of production. The boring of new wells is suspended, existing wells were shut down. The business in Cleveland stopped almost altogether. Thousands of men were thrown out of work."

The people rose. Their uprising and its justification were described to the Pennsylvania Constitutional Convention of 1873 by a brilliant "anti-monopolist," "a rising lawyer" of Franklin, Venango Co. The principal subject to which he called the attention of his fellow-members was the South Improvement Company, and the light it threw on the problems of livelihood and liberty. Quoting the decision of the Pennsylvania Supreme Court in the Sanford case,[76] he said:

"That is the law in Pennsylvania to-day. But in spite of this decision, and in spite of the law, we well know that almost every railroad in this State has been in the habit, and is to-day in the habit, of granting special privileges to individuals, to companies in which the directors of such railroads are interested, to particular business, and to particular localities. We well know that it is their habit to break down certain localities, and build up others, to break down certain men in business and to build up others, to monopolize certain business themselves by means of the numerous corporations which they own and control, and all this in spite of the law, in defiance of the law.

"The South Improvement Company's scheme would give that corporation the monopoly of the entire oil business of this State, amounting to $20,000,000 a year. That corporation was created by the Pennsylvania Legislature along with at least twenty others, under the name of improvement companies, within a few years past, all of which corporations contain the names as original corporators of men who may be found in and about the office of the Pennsylvania Railroad Company, in Philadelphia, when not lobbying at Harrisburg. The railroads took but one of those charters which they got from the Legislature, and by means of that struck a deadly blow at one of the greatest interests of the State. Their scheme was contrary to law, but before the legal remedy could have been applied, the oil business would have lain prostrate at their feet, had it not been prevented by an uprising of the people, by the threatenings of a mob, if you please, by threatening to destroy property, and by actually commencing to destroy the property of the railroad company, and had the companies not cancelled the contract which Scott and Vanderbilt and others had entered into, I venture to say there would not have been one mile of railroad track left in the County of Venango--the people had come to that pitch of desperation.... Unless we can give the people a remedy for this evil of discriminations in freight, they will sooner or later take the remedy into their own hands."[77]

Soon after this attorney for the people was promoted from the poor pay of patriotism to a salary equal to that of the President of the United States, and to the place of counsel for the principal members of the combination, whose inwardness he had descried with such hawk-eye powers of vision. Later, as their counsel, he drafted the famous trust agreement of 1882.

The South Improvement Company was formed January 2d. The agreement with the railroads was evidently already worked out in its principal details, for the complicated contracts were formally signed, sealed, and delivered January 18th. The agreed increase of freights went into effect February 26th. The pacific insurrection of the people began with an impromptu mass-meeting at Titusville the next day, February 27th. Influential delegations, or committees, on transportation, legislation, conference with press, pipe lines, arresting of drilling, etc., were set to work by the organization thus spontaneously formed by the people. A complete embargo was placed on sales of oil at any price to the men who had made the hateful bargain with the railroads. The oil country was divided into sixteen districts, in each of which the producers elected a local committee, and over all these was an executive committee composed of representatives from the local committees--one from each. No oil was sold to be used within any district except to those buyers whom the local committee recommended; no oil was sold to be exported or refined outside the district, except to such buyers as the executive committee permitted. One cent a barrel was paid by each producer into a general fund for the expenses of the organization.

Steps were taken to form a company with a capital of $1,000,000, subscribed by the producers, to advance money, on the security of their oil, to those producers who did not want to sell.

Able lawyers were employed and sent with the committees to all the important capitals--Harrisburg, Washington, the offices of the railway companies. The flow of oil was checked, the activities of the oil world brought near a stop.

Monday, March 15th, by the influence of the Washington committee, a resolution was introduced into the House of Representatives by Representative Scofield, ordering an investigation of the South Improvement Company. Immediately upon this the frightened participants cancelled the contracts. By the 26th of March the representatives of the people had secured a pledge in writing from the five great railroads concerned of "perfect equality," and "no rebates, drawbacks, or other arrangements," in favor of any one thereafter. March 30th, Congress began the investigation which brought to light the evidence of the contracts, and meanwhile the committees on legislation and pipe lines were securing from the Pennsylvania Legislature the repeal of the South Improvement Company charter, and the passage of a "so-called" Free Pipe Line law, discovered afterwards to be worthless on account of amendments shrewdly inserted by the enemy.

It was an uprising of the people, passionate but intelligent and irresistible, if the virtue of the members held good. Until April 9th the non-intercourse policy was stiffly and successfully maintained. But by that time one man had been found among the people who was willing to betray the movement. This man, in consideration of an extra price, violating his producer's pledge, sold to some of those concerned in the South Improvement Company a large quantity of oil, as they at once took pains to let the people know. The seller hoped to ship it quietly, but, of course, the object in buying and paying this additional price was to have it shipped openly, and the members of the South Improvement Company insisted that it should be done so.[78]

This treachery had the effect planned. Every one became suspicious that his neighbor would be the next deserter, and would get the price he would like to have for himself. To prevent a stampede, the leaders called a mass-meeting. Reports were made to it of what had been done in Congress, the Legislature, and the other railway offices; the telegrams already referred to were read affirming the cancellation of the contracts. Amid manifestations of tumultuous approbation and delight the embargo on the sale of oil was declared raised.

"We do what we must," says Emerson, "and call it by the best name possible." The people, as every day since has shown, grasped the shell of victory to find within the kernel of defeat.

The committee of Congress noticed when the contracts were afterwards shown to it, that though they had been so widely declared to be "cancelled," they had not been cancelled, but were as fresh--seals, stamps, signatures and all--as the day they were made. This little circumstance is descriptive of the whole proceeding. Both parties to this scheme to give the use of the highways as a privilege to a few, and through this privilege to make the pursuit of livelihood a privilege, theirs exclusively--the railroad officials on one side, and their beneficiaries of the South Improvement Company on the other--were resolute in their determination to carry out their purpose. All that follows of this story is but the recital of the sleuth-like tenacity with which this trail of fabulous wealth has been followed.

The chorus of cancellation from the railroads came from those who had meant never to cancel, really. In their negotiations with the representatives of the people they had contested to the last the abandonment of the scheme. "Their friendliness" to it "was so apparent," the Committee of the Producers reported, "that we could expect little consideration at their hands,"[79] and the committee became satisfied that the railroads had made a new contract among themselves like that of the South Improvement Company, and to take its place. Its head frankly avowed before the Investigating Committee of Congress their intention of going ahead with the plan. "They are all convinced that, sooner or later, it will be necessary to organize upon the basis on which the South Improvement Company was organized, including both producers and refiners."

This conviction has been faithfully lived up to. Under the name of the South Improvement Company the arrangement was ostentatiously abandoned, because to persist in it meant civil war in the oil country as the rising young anti-monopolist lawyer pointed out in the Constitutional Convention. Mark Twain, in describing the labors of the missionaries in the Sandwich Islands, says they were so successful that the vices of the natives no longer exist in name--only in reality. As every page will show, this contract no longer exists in name--only in reality. In the oil world, and in every other important department of our industrial life--in food, fuel, shelter, clothing, transportation,[80] this contract, in its various new shapes, has been kept steadily at work gerrymandering the livelihoods of the people.

The men who had organized the South Improvement Company paid the public revolt the deference of denial, though not of desistance. The company had got a charter, organized under it, collected twenty per cent. of the subscription for stock, made contracts with the railroads, held meetings of the directors, who approved of the contracts and had received the benefits of the increase of freights made in pursuance of the agreement. This was shown by the testimony of its own officers.[81]

But "the company never did a dollar's worth of business," the Secretary of the Light of the World told Congress,[82] and "there was never the slightest connection between the South Improvement Company and the Standard Oil Company," the president of the latter and the principal member of both said in an interview in the New York World, of March 29, 1890. "The South Improvement Company died in embryo. It was never completely organized, and never did any business. It was partly born, died, and was buried in 1872," etc.

Still later, before a committee of the Legislature of New York, in 1888, he was asked about "the Southern Improvement Company."

"There was such a company?"

"I have heard of such a company."

"Were you not in it?"

"I was not."[83]

So help me God!

At almost the moment of this denial in New York, an associate in this and all his other kindred enterprises, asked before Congress who made up the South Improvement Company, named as among them the principal members of the great oil company, and most conspicuous of them all was the name of this denier.[84]

The efficiency with which this "partly born" innocent lived his little hour, "not doing a dollar's worth of business," was told in a summary phrase by one of the managers of the Pennsylvania Railroad, describing the condition of the oil business in 1873:[85]

"All other of our largest customers had failed."

When the people of the oil regions made peace after their uprising it was, as they say, with "full assurance from the Washington committee that the throwing off the restrictions from trade will not embarrass their investigation (by Congress), but that the Sub-Committee of Commerce will, nevertheless, continue, as the principle involved, and not this particular case alone, is the object of the investigation."[86]

The Committee of Commerce did not "continue." The principal witness, who had negotiated the contracts by which the railroads gave over the business of the oil regions to a few, refused in effect, beyond producing copies of the contract, to be a witness. Permission was given by the Committee of Congress during its first zeal to the Committee of Producers from Pennsylvania to copy the testimony as it was taken, but no official record of its discoveries exists. This transcript was published by the producers, and copies are possessed by a few fortunate collectors. The committee did not report, and in the archives of the national Capitol no scrap of the evidence taken is to be found. All has vanished into the bottomless darkness in which the monopoly of light loves to dwell.

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Chapter VI

"NOT TO EXCEED HALF"

Notwithstanding the ceremonial treaty of equal rights on the railroads to all, which had been secured by the uprising of the people against the South Improvement Company in 1872, the independents, one after the other, continued to be side-tracked by an unseen power. Four years later, on the 20th of July, 1876, their only two important survivors in Cleveland, frightened by the high death-rate of the business, and by a deepening pressure on themselves, answered a summons to come to the palace of the President of the Light of the World. The contract which was then made was afterwards produced in court.[87] It was called an "Agreement for an Adventure," in something like "the merry sport" in which the good Antonio gave a bond for a pound of his flesh.

A few years after this "adventure" with his competitors and his efforts to have them closed by the courts, the President was asked if his trust had sought in any way to diminish the production of refineries in competition with it.

"Oh no, sir," he replied.

"Nothing of the kind?"

"Oh no, sir."[88]

He was asked the question again, and again the denial was repeated.

"Done nothing of the sort?"

"Not at all."

But now he said, You must bind yourselves for ten years to refine only 85,000 barrels of oil a year.[89]

They had refined 120,000 barrels the year before, and could have done 180,000, and were growing up with the country. "The prospects were much better for the future."[90]

But they agreed.

You must give me and my associates all the profits you make during this period above $35,000 a year, until we too have got $35,000 a year out of your business, and we will guarantee you $35,000 a year, if we let you run.

They had made $41,000 the year before, but they agreed.

You must divide with "us," after each has got $35,000 a year, all the additional profits.

They had to put into this "adventure" all their buildings and machinery, valued at $61,760.42, all their time and attention, and $10,000 in cash, while their conquerors put in only $10,000 cash and no plant and no time. But they agreed to this demand for "half."

You must stop refining altogether, and let us take out our $10,000 whenever we send you notice that through competition, or a decrease or change in the production of petroleum, Cleveland can "barely compete" with other places. You must sell the kerosene you manufacture, and buy the petroleum you make it of at the prices we fix.

The combination could make the business unprofitable whenever it chose, and under the previous stipulation could close them up at its own pleasure, until the ten years had rolled by. But they agreed.

You must resume again after any such suspension, and let us take half the profits whenever we give you notice. You must let us enter or withdraw, throw our $10,000 in or out, suspend or resume, again and again, as we choose! They agreed.

You must make us monthly reports of all your transactions. You must not enlarge nor contract your works without our consent. They agreed.

You must not go into the manufacture of petroleum, nor any other new business anywhere else in the world during this adventure! You must ship your products by such routes as we direct! They agreed.

You must keep this adventure secret. Our name must not appear, and even if you all die, you must agree that we may continue the business in your name, or any other name we choose.

"The firm name," as their counsel pointed out, "was to be kept up even when the members were mouldering in their graves. But the public were to understand that the business of that firm, as it had been conducted in the lifetime of those men, was still being carried on."

You are to be thus tied up for ten years, limited at the best to half the profit on half your capacity, with a right in us to close you up altogether, or to close and resume whenever we choose, with no right in you to start or stop or withdraw. But we are to be left free, in our own refineries, to refine all the oil the market will take, and keep all the profit, and enlarge our works and extend our business.

And, finally, you must put your hand and seal to a statement that you do this to "reconcile interests that have seemed to conflict" and "equalize the business," and that this agreement gives you your "due proportion thereof."

This "free contract" two of the three men who were to make it knew nothing of until their consent was demanded.

One of the partners had secretly been won over. Through him all preliminary negotiations had been conducted.

"I was not consulted," testified one of the other two, until after the contract was "all drawn and prepared," and at first he refused to sign it. The plan was concocted "secretly and unknown to me."

"I was at first opposed to the arrangement," declared the other.[91]

But this was not all the contract. The President, who, as he testified, "conducted most of the negotiations," and "had been familiar with the dealings thereunder," supplemented the written documents with oral instructions:[92]

You must not seem to be prosperous. You must not put on style,[93] he cautioned them; above all, you must not drive fast horses or have fine rigs; you must not even let your wives know of this arrangement.[94]

A false account was opened on the books to conceal the nature and origin of this transaction from their own book-keepers. In the name of that account false and fictitious checks were drawn, bills made out, balances struck. A box was taken out at the Cleveland post-office--box 125--in the name of an imaginary "Mr. G.A. Mason," and through this box the correspondence of the "adventure" was carried on. Each of the three parties to the "adventure" continued to march and fight under its own flag as before. All possible pains were taken to conceal the fact that they had ceased competition with each other. They kept up every appearance to the public of being actively engaged in competitive business. The inevitable spy appears in this scene as in every other in the play. The "reconciler," to enforce the provisions that the "reconcilees" should not engage in business elsewhere, extended a system of espionage over them, and followed their movements, and kept watch what they did with their money, and made oath to the courts of the results of these "inquiries and investigations." The espionage continued after this.

A year or two after this contract had been broken by the help of the courts, the then secretary of the great oil company, through an intermediary, approached the book-keeper of the firm which had been freed from the trust.

"Would you not like to make some money?"

"He inclined to let him believe he did want to make some money," his employer afterwards told Congress. "He came and told me about it. I requested that he continue and find out what information they wanted. He was to have had so much per year, but he was to have been paid a down payment; he got $25."

"What service was he to render for that?"

"I have a memorandum. There were so many things he was to do that I cannot carry it in my head."

"One of the questions was, 'What was the result of last year's business?' The other was, 'A transcript of the daily shipments, with net prices received from the same; what is the cost for manufacturing outside of the crude; the kind of gasoline and naphtha made, and the net prices received for the same; what they do with tar and the percentages of the same; what per cent. of water white and what per cent. of Michigan water white; how much oil exported last year?' This information, as fast as received, to be mailed to Box 164, Cleveland post-office.... He (the book-keeper) made an affidavit of it, and I took the money back myself personally."[95]

When orders came in for more oil than the limit put upon them, the "reconcilees," asserting their commercial manhood, went on refining to supply the demands of the public instead of the commands of the clique. They contended that they were not bound by the limitation, and in this were afterwards upheld by the court; but, meanwhile, they were called to account and frightened into another "reconciliation." He was present, the chief reconciler told the court, at the interview in which they "agreed to diminish their manufacture ... to bring the entire amount within the terms" of the contract.

But again they began to refine to supply the needs of the people evidenced by the market demand. Then their supply of crude was shut off. Their suzerain owned the pipe line to Cleveland. When its escaping victims got around that difficulty, it took its "contract" to the courts.

To shut these competitors down to half their capacity, and to reconcile and equalize interests by taking half of all they made on that was merely an incident, collateral to the grander plan, the vaster "adventure," of getting all the profits of that greater field out of which these competitors were barred altogether. Such contracts as these, its counsel said, were made with refiners all over the country. The chief profit of the adventure lay, not in the divided profits of the picayune business it let the vassals do, but in the undivided profits of the empire kept for itself. Why should the reconciler hurry with expensive lawyers into court for a summary injunction to prevent a "reconcilee" from making more oil, when the reconciler, who toiled not nor spun, was to get half of the gain of $2.05 on every barrel of it? Why, but that every "co-operative" barrel so made would displace in the markets a barrel, all the profits of which went to it.

The "reconcilees" were called into court. A judge was asked to issue an injunction forbidding them to depart from the strict letter of the contract.

They have been refining more than 85,000 barrels of oil a year, was the complaint.

They "threaten to distil crude petroleum without regard to quantity."[96] They are "parties in rebellion," said the lawyers. The judge said, No. This is a contract in restraint of trade, and released those who were in its toils.

The immediate effect of this "equalization" was an advance in the rates of profit. The year before the independent refiners had made a profit of only 34 cents a barrel.[97]

The first year of the "adventure" the profits jumped up to $2.52 a barrel. The dividends rose from $41,000 to $222,047, while the production fell from 120,000 to 88,085 barrels. For the four years the average profit was $2.05 a barrel, or 500 per cent. advance. The lowest profit was $1.37.

"Refined oil advanced to an average of $8 per barrel for that year" (1876), says the counsel of the trust.[98]

These great winnings were made in the depth of the depression following the panic of 1873.

While a world-compelling decline not only of prices but of profits, was in progress, the authors of this arrangement kept up kerosene to a point at which $630,691 was made in four years out of an investment of $81,000, half of which went to those who put in $10,000 and their power over freight agents.

This "adventure," as was said by the Hon. Stanley Matthews, who appeared as counsel for the victimized refiners, was better than a gold-mine. It was a mint. Without giving any personal supervision or any time, without any expenditure except the insignificant investment of $10,000, made as a mere stalking-horse, these men took a share of the profits of "the party of the second part," which is not to be calculated by ordinary percentage, but by multiplications, over and over again, every year, of the money they put in it.

By reducing the volume of business one-half, by increasing the profit from 34 cents a barrel to $2.05, the reconcilers pocketed $315,345.58 in four years, on an investment of $10,000, with no work. This was the fact. The theory with which the fact was hidden from the people is given to the New York Legislature in 1888. The principle on which the trust did business, its president said, was:

"At a limited profit; a very small profit on an extremely large volume of business."[99]

When its secretary was before Congress, he was asked about the operations of himself and his associates in these years, 1876, 1877, of wonderful profits. He had been participating during that time in not only this profit of $2.05 a barrel, but in divided profits rising to $3,000,000 in a year on $3,000,000 of capital, and in undivided profits which rolled up $3,500,000 of capital into $70,000,000 in five years. But he said:

"The business during those years was so very close as to leave scarcely any margin of profit under the most advantageous circumstances."[100]

The effect on the consumer appears from the statement in this case of one of the best-known producers and refiners in the oil regions, one intimately associated with the members of the combination. He showed that oil which was selling at twenty cents a gallon retail could be sold at a large profit at twelve cents a gallon.

As to the effect on the working-man, the demand for labor declined, wages went down, and the number of unemployed increased.

When there was competition in Cleveland the great company could not afford to have its skilled workmen idle, because they would seek employment with the other refineries; but now, having the refining business all in its own hands, when it was temporarily to its advantage to refine oil in Pittsburg, Oil City, or other points, in preference to Cleveland, it could with impunity let its hands remain idle in Cleveland, knowing that when it wanted them it could easily secure them, as there are no other refineries in Cleveland to employ them, and "that has been a very serious injury to working-men."[101]

There was no pretence that the design of this contract was not to make oil scarce--i.e., dear.

In the affidavit which was made in support of the injunction the principal reconciler showed that his company had restricted itself as much as it restricted these competitors. He urged as the reason why the contract had been made and why the courts should sustain it, that "the capacity of all the refineries in the United States is more than sufficient to supply the markets of the world, and if all the refineries were run to their full capacity they would refine at least twice as much oil as the markets of the world require; that this difference between the capacity of refineries and the demands of the market has existed for at least seven years past, and during that period the refineries" of his company "have not been run to ... exceed one-half of their capacity."

When these surviving independents of Cleveland were forced into this adventure, in 1876, the source of the power which could compel "free" citizens in this age of individualism to execute such a bond was not known. The appalling mortality among the independents showed that something was seriously wrong. There was something, however, in this "Agreement for an Adventure" which pointed straight to it. That was a clause which guaranteed those who became vassals that they should have the same freight rates and get back the same rebates as the monopoly.[102] "Had the monopoly the power," said the Hon. Stanley Matthews, "to procure freights on better and more advantageous terms than the rest of the public engaged in the same business?... And if they had such power, how did it get it?... If this or any other corporation is allowed to exalt itself in this way and by these means above competition, it is also exalted above the law."

The great lawyer, who soon afterwards became a justice of the Supreme Court of the United States, could not answer the questions he raised. The facts were hidden in secret contracts with the railroads. As regards Cleveland, they did not come out until five years later, in 1885. It then became an adjudicated fact that in 1875, the year before this "Agreement for an Adventure," the Lake Shore Railroad had made a contract with the oil combination to drive these very competitors and all others out of business, just as the same road had done for the South Improvement Company in 1872. When they escaped from their "reconciler," they brought this railroad and the contract into court. The case was fought up to the Supreme Court.

That tribunal found that the Lake Shore road had contracted with this company to carry its products ten cents per barrel cheaper than for any other customers. It showed that this made a difference to the victims of the "Adventure" equal to more than 21 per cent. a year on their capital.

"The understanding," the court said, "was to keep the price down for the favored customers, but up for all the others, and the inevitable tendency and effect of this contract was to enable the Standard Oil Company to establish and maintain an overshadowing monopoly, to ruin all other operators, and drive them out of business." The course of the railroad the court declared to be one of "active participation in the unlawful purposes" of the oil company. The Lake Shore was to have all its business out of Cleveland, but, a competing railroad being built, the Lake Shore made a contract to give this new line a part of the plum, to induce it to unite in the policy of keeping freights down for the favored customer, and up for all others. When the President of the trust was asked afterwards by the New York Legislature if there had been no arrangement by which it got its transportation cheaper than others could, he replied, "No, sir." And later he reiterated that in their arrangements for freight there was "nothing peculiar."[103]

But the Supreme Court of Ohio, in describing this arrangement, diversify the staid rhetoric of their legal deliverance with the unaffected exclamation:

"How peculiar!"

They declared the contract between the two railroads "void," and "not only contrary to a sound public policy, but to the lax demands of the commercial honesty and ordinary methods of business." They also pronounced the contract between the railroad and the oil company as "made to build up a monopoly," and as "unlawful."[104]

The great lawyer, we have said, could not answer the questions he asked. The facts, we have said, were hidden in a secret contract. And yet the answers to the questions, the facts, had been all brought to the verge of disclosure by the investigation by Congress early in the same year, 1876.

Although the investigation, in consequence of the "I object" of the Hon. Henry B. Payne, of Cleveland,[105] had been referred to the Committee of Commerce, and though the railroad and oil clique men would not answer, and the committee would not press them, there was a volunteer witness from Cleveland, who began to upset all the plans to smother. This willing witness was a Cleveland refiner, a shrewd man, as would easily be believed by those who knew that he was the brother of an organizer of the oil combination. He, too, had been a member of it, but for some reasons was now "out," and was one of the swimmers who felt themselves being drawn down. He betook himself for relief to Congress. He dodged no subpoenas, but, going before the Committee of Commerce, he began to tell more fully than any other witness had ever done, or had ever been able to do, the story of the relations between the combination and the railroads, which he knew of his personal knowledge. When he began talking in this free way to the public authorities, his former associates saw that they had underestimated his abilities as a refiner. They began to feel that it might be well to make some concessions to this particular brother, though not to the Brotherhood of Man.

The investigation was summarily suspended,[106] and his testimony was spirited away. With the only power that could have interfered thus silenced, the surviving independents were corralled as we have described. This was done two short months after the first move was made, May 16th, for the investigation which might have saved the independents at Cleveland and elsewhere from the duress which drove men to death or adventures of reconciliation.

All over the oil regions the combination has followed this policy of "not to exceed half."[107]

Nineteen pages of the testimony of a member in the suit begun by the Commonwealth of Pennsylvania are taken up with the operations of one of its constituent companies in the purchase or leasing of competing refineries, many of which were shut down or pulled down.

This witness could name only one refinery out of the score of independent concerns once flourishing in Pittsburg, which was not under its control.[108]

"Dismantled," was the monotonous refrain of many of his answers to the questions as to what had been done with the refineries thus got under control. Asked why these works had been thus dismantled or shut down, he explained it variously as due to unfavorable location or worn-out machinery or some such disadvantage.

If these works were so badly situated and so illy fitted for the business and so old, why did it purchase them? "Can you give good commercial reasons why it would buy all unprofitable junk?" he was asked.[109]

"I cannot give any reason why they bought the works," was the helpless answer.

From the beginning to the end the language used by the founders of the combination proves scarcity to have been their object. "There is a large number of refineries in the country--a great deal larger than is required for the manufacture of the oil produced in the country, or for the wants of the consumers in Europe and America," said one of the principal members in 1872.[110]

This is almost identical with the language used in 1880 in the effort to enjoin Cleveland refiners who "threatened to distil."

In 1887 we will see the same power putting its hand and seal to an agreement to enforce the doctrine that there was too much oil in the earth.

In 1872 there were more refineries than were needed for the oil; in 1887 there was too much oil. The progression is significant. And down to the present pool with the Scotch refiners we will see the same men enforcing abroad, year by year, the same gospel of want.[111]

"The producers in America are quite alive to the wisdom of not producing too much paraffine, and are already adopting measures to restrict it," said the chairman at the annual meeting of one of the principal Scotch companies.[112]

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Chapter VII

"YOU ARE NOT TO REFINE"

In the obituary column of the Cleveland Herald, of June 6, 1874, was given the news of the death of one of the pioneer manufacturers of Cleveland. He began the refining of petroleum in that city in 1860, several years before any of those who afterwards became the sovereigns of the business had left their railroad platforms, book-keeping stools, and lawyers' desks. He was married in the same year, and from that time until his death, in 1874, gave his whole life to his refinery and his family, and was successful with both. The Herald said of him editorially:

"He was well known in Cleveland and elsewhere as a business man of high character. He was a prominent member of the First Presbyterian Church, was at one time President of the Young Men's Christian Association, and was active in all enterprises of a religious and benevolent character. He was about forty years of age, and leaves a wife and three children."

His enterprise had been "very profitable," his wife said afterwards in court, in narrating how she and her children fared after the death of the husband, father, and bread-winner. "My husband devoted his entire energies and life to the business from about 1860 to the time of his death, and had acquired through his name a large patronage. My husband went into debt just before his death," she continued, "for the first time in his life. For the interest of my fatherless children, as well as myself, I thought it my duty to continue the business. I took $75,000 of the $100,000 of stock, and continued from that time, 1874, until November, 1878, making handsome profits, during perhaps the hardest business years of the time since my husband had begun."[113]

The business received from her the most thorough and faithful attention, and she maintained the prosperity her husband had founded by making a profit of about $25,000 a year.

A representative of one of the oil combination came to her, she continued, "with a proposition that I should sell to them." This agent was "a brother manufacturer," who, but a short time before in a conference with her, had agreed that in view of the dangers which seemed to threaten them, he and she should mutually watch out for each other, and that no arrangement should be made by either without letting the other know. The next she saw of her ally he pounced upon her in her office with the news that he was in the oil combination, that the head of it had told him he meant to have control of the refining business if it took him ten years, but he hoped to have it in two. He went on to warm the woman's heart by the declaration that since he had become acquainted with the secrets of the organization he wondered that he and she had been able to hold out so long. After which preliminaries he proposed that she, too, should sell to it. With sagacity and spirit she declined point-blank to have any negotiation with him.

She declined to deal with subordinates, and said she did not want to sell. The principal then called upon her at her residence. This was in 1878, and these were dark days for "outside" refiners. One by one they were sinking out of sight, and slipping under the yoke like the victims of the "reconciliation" and "equalization" described in the last chapter.

For six years word had been passing from one frightened lip to another that they were all destined for the maw or the morgue, and the fulfilment of the word had been appalling. He knew the members of the oil combination, one of the best-known veterans of the oil region testified in this case, naming them; "I have heard some of them say, in substance, 'that they intended to wipe out all the refineries in the country except their own, and to control the entire refining business of the United States.'"

"The big fish are going to eat the little fish," one of the big fish told a neighbor and competitor. When one of the little fish said he "would not sell and was not afraid," he was told, "You may not be afraid to have your head cut off, but your body will suffer!"

The woman was brave with love and enthusiasm for the memory of her husband and the future of her children. She had had a great success, but she knew the sea she was swimming. She saw strong men going down on every side. She herself afterwards told in court of her great anxiety as she would hear of one refinery after another surrendering, feeling sure that that would eventually be the fate of her company.

All that the witnesses just quoted had reported, all that was said of the same tenor by the witnesses before Congress in 1876, and much more, had been filling the hearts of the business men of Cleveland, Pittsburg, Titusville, New York, with a reign of terror ever since 1872. It was with a full realization of all this that she went down to her parlor to receive the great man of commerce, who passes the contribution-box for widows' mites outside the church as well as within. This gentleman was in her house in pursuance, practically, of his own motion. She did not want to sell; the suggestion of a sale had come from the other side. "I told him," the widow said to the judge, "that I realized that my company was entirely in the power" of his company. "All I can do," I said to him, "is to appeal to your honor as a gentleman, and to your sympathy, to do the best with me that you can. I beg of you to consider your wife in my position, left with this business and with fatherless children, and with a large indebtedness that my husband had just contracted for the first time in his life. I felt that I could not do without the income arising from this business, and I have taken it up and gone on, and been successful in the hardest years since my husband commenced." "I am aware," he replied, "of what you have done. My wife could never have accomplished so much." She had become alarmed, the woman of business resumed, because his company was "getting control of all the refineries in the country."

He promised, with tears in his eyes, that he would stand by her. It should never be said, he cried, that he had wronged the widow of his fellow-refiner. "He agreed that I might retain whatever amount of stock I desired. He seemed to want only the control. I thought his feelings were such that I could trust him, and that he would deal honorably with me." This was the last she saw of him. He promised to come to see her during the negotiations, but did not do so. He promised to assist and advise her, but did not do so. He declined to conduct the negotiations with her in person as she requested, "stating to her," he said, in giving his version of the affair to the court, "that I knew nothing about her business or the mechanical appliances used in the same, and that I could not pursue any negotiations with her with reference to the same; but that if, after reflection, she desired to do so, some of our people familiar with the lubricating-oil business would take up the question with her.... When she responded, expressing her fears about the future of the business, stating that she could not get cars to transport sufficient oil, and other similar remarks, I stated to her that though we were using our cars, and required them in our own business, yet we would loan her any number she required, or do anything else in reason to assist her, and I saw no reason why she could not prosecute her business just as successfully in the future as in the past." This assurance to his widow-competitor that he would let her have cars was, of itself, enough to justify all her alarm, and show that there was no hope for her but in making the best surrender possible. It was proof positive that he did control the transportation, that the well-defined report that no one but he and his could get their business done by the railroad was true. Permission to go upon the highways by the favor of a competitor is too thin a plank for even a woman to be got to walk. Withdrawing from direct connection, but managing the affair to the end as he testifies, he sent back to her the agent she had refused to talk with.

Negotiations were accordingly resumed perforce with this agent. He submitted to his principals a statement in her behalf of the value of the property, but did not waste time over the form of letting her see it, or consulting with her before submitting it in her name.

This statement she never authorized, never heard of, and never read until it was produced in court against her.[114]

One interesting feature of the contract which was the subject of the "adventure" described in the chapter "Not to Exceed Half" was repeated here. The representative who "took up this matter" with the widow carried on his bargaining in great part with the minor stockholders, one of whom claimed afterwards that all he had done was under her directions, and "to her entire satisfaction." But she was entirely unaware of either her "directions" or her "satisfaction." "He never had the slightest authority from me to represent me in any way in the sale."[115]

Another of the minor stockholders also busied himself in representing her without her knowledge. On behalf of the widow agents were making figures, though she knew nothing of their agency or the figures. By these combined efforts a sale was finally concluded at figures which, though she owned seven-tenths of the property, she had never authorized, and were far below the only figures she had given as those she was willing to take.

Compelled to deal with a subordinate against her will, fearing to remain in so hazardous an occupation, and yet needing for her children the income it brought her, this woman manufacturer's position was most harassing. All through, as her cashier and treasurer told the court, she was dissatisfied, felt that she was compelled to sell though she wanted to retain her property.

"In my hearing," her confidential clerk said, "she declared she sold because she was compelled to do so."

She told her fellow-stockholders that she had been informed by the agent who was dealing with her, that if they did not sell out it would only be a question of time before they would be forced to sell out, as he intended to place oil like that made by her company in the hands of all their agents, to undersell them and close them out. This decided them to sell.

"Inasmuch as the managers of the Standard Oil Company appeared to have made up their minds to obtain this property, and not to give them the chance they had before in competition," the stockholders, as one of them testified, "concluded it better to sell the property at such price as they could then get, rather than to run the risk of a still greater loss in the future, not one of the stockholders desiring to part with the property at all, but rather choosing with fair competition to retain their interest in the property."[116]

She had made 15 per cent. in the last six months, and, aside from these threats, the business looked prosperous, for the orders were becoming more numerous every day. But the widow could refuse to sell only by braving threats which had broken more than two out of three of all the men about her. She put upon the property a price warranted by its income, $200,000, which was adopted by the directors of the company in a formal motion authorizing a sale at that figure. But in her name a proposition was made by the agent to sell for $71,000. "I never heard of the figure of $71,000," she says, "and cannot imagine where it originated. The only proposition that was ever made was that of $200,000." What the stock was worth in her estimation and that of her employés who had inside knowledge is seen in the evidence of her confidential clerk. Though he was her nephew also, he had with difficulty, he says, bought stock at par.

She had refused to sell at par to others. Now the only offer she could get was $60,000 for the works and good-will, the purchasers paying in addition the cash value of the material in stock, and at that price she had to let them go. She asked to be allowed to remain an owner to the extent of $15,000 in the business into which she and her husband had built their lives. "No outsider can have any interest in this concern," was the reply. The combination "has dallied as long as it will over this matter," its agent continued. "It must be settled up to-day or go."

The power of this business to produce a profit of $25,000 a year was worth almost $400,000, according to the valuations maintained for the stock of the oil trust on the New York Stock Exchange by the men who bought out the widow. One hundred dollars in oil trust stock producing $12 a year has sold as high as $185. If $12 a year was worth $185, $25,000 a year was worth nearly $400,000. It was part of the agreement that the oil company should go on as before. "It was particularly enjoined," testified the cashier and treasurer, "that the sale should be kept a profound secret."[117] It was intended that the company should go on as before as far as the public was concerned. The purchasers agreed to continue to employ the hands already at work, but stipulated that not a word should be said to any one of them to reveal that the company was not as independent as it had been.[118]

"And you are not to engage in the refining business," is the concluding phrase of an agreement between the oil combination and a once competitor whom it had forced to sell out in 1876.[119]

"You are not to engage in refining," the same power said in 1877 to the Pennsylvania Railroad, and now to this widow: You must sign this bond not to go into business again for ten years.

The bond is given in full in the record of the case. It put the widow under a forfeit of five thousand dollars for ten years, that--

"I will not directly, or indirectly, in any way, either alone or in company with any person, or as a share-holder in any corporation, engage in or in any way concern myself or allow knowingly any capital or moneys to be employed in the business or trade of refining, manufacturing, producing, piping, or dealing in petroleum, or any of its products, within the county of Cuyahoga, and State of Ohio, nor at any other place whatsoever."[120]

Their secret of success, the president swore in this very case, is "the very large volume" of purchases, "long continuance in the business," "experience," "knowledge of all the avenues of trade," "skill of experienced employés," and so forth. But with all this they did not dare leave this middle-aged woman free to challenge them again on the field of competition. The purchase was made in the name of three members of the great oil company, and it was paid for by the check of that concern.

Of these men one was among the "trustees" indicted and tried in 1885 for complicity in the plot to blow up a rival refinery, but let go by the judge.

At the time the sale was concluded the widow refiner declared, "The obtaining of her stock was no better than stealing." When the papers were brought to her to sign she "hesitated," and said, "It is like signing my death-warrant. I believe it will prove my death-warrant." "The promises made by the president," she testifies, "were none of them fulfilled."

Being only a woman, and not understanding "business," for all her brilliant success in stepping into her husband's place, and doing the double work of home-maker and bread-winner, the widow could not restrain herself from giving a most uncommercial piece of her mind to those who had got possession of her property for a sum which they would recover out of its profits in two or three years. She sent the following letter:

"November 11, 1878, Monday Morning.

"SIR,--When you left me at the time of our interview the other morning, after promising me so much, you said you had simply dropped the remarks you had for my thought. I can assure you I have thought much and long as I have waited and watched daily to see you fulfil those promises, and it is impossible for me to tell you how utterly astonished I am at the course you have pursued with me. Were it not for the knowledge I have that there is a God in heaven, and that you will be compelled to give an account for all the deeds done here, and there, in the presence of my husband, will have to confess whether you have wronged me and his fatherless children or not--were it not for this knowledge I could not endure it for a moment, the fact that a man, possessed of the millions that you are, will permit to be taken from a widow a business that had been the hard life work and pride of herself and husband, one that was paying the handsome profit of nearly twenty-five thousand dollars per annum, and give me in return what a paltry sum, that will net me less than three thousand dollars; and it is done in a manner that says, Take this or we will crush you out. And when, on account of the sacred associations connected with the business, and also the family name it bears, I plead that I may be permitted to retain a slight interest (you having promised the same at our interview), you then, in your cold, heartless manner, send me word that no outsider can hold a dollar's worth of stock in that concern. It seems strange to be called an outsider in a business that has been almost entirely our own and built up at the cost it has to ourselves. It is impossible for us to find language to express our perfect indignation at such proceedings. We do not envy you in the least when this is made known in all its detail to the public. One of your own number admits that it is a great moral wrong, but says as long as you can cover the points legally you think you are all right. I doubt, myself, very much the legality of all these things. But do not forget, my dear sir, that God will judge us morally, not legally, and should you offer him your entire monopoly, it will not make it any easier for you. I should not feel that I had done my entire duty unless, before I close, I drop a remark for your thoughts. In my poor way I have tried, by my life and example, with all those I have come in contact with in a business way, to persuade them to a higher, purer, and better life. I think there is no place in the world that one has such opportunities to work for good or evil as in a business life. I cannot tell you the sorrow it has caused me to have one of those in whom I have had the greatest hopes tell me, within the last few days, that it was enough to drive honest men away from the Church of God, when professing Christians do as you have done by me."

In reply to this she received a letter in which her charge that her business had been taken from her was repelled as "a most grievous wrong," and "a great injustice." She was reminded that two years before she had consulted with the writer and another member of the oil combination "as to selling out your interest, at which time you were desirous of selling at considerably less price, and upon time, than you have now received in cash, and which sale you would have been glad to have closed if you could have obtained satisfactory security for the deferred payments. As to the price paid for the property, it is certainly three times greater than the cost at which we could now construct equal or better facilities."

The letter concluded with an offer to return the works upon the return of the money, or, if she preferred, to sell her one hundred, or two hundred, or three hundred shares of the stock at the price that had been paid her. These propositions were left open to her for three days.

The "cost of the works" is not the standard of value in such transactions. Six millions of dollars, according to a member of the committee of Congress which investigated the oil trust in 1888, is the value of the "works" on which they issued $90,000,000 of stock, which sold in the stock market at a valuation of $160,000,000.

The offer to sell back the refinery was like the offer to let her have cars. To accept it was to pass openly and consciously into slavery. Two years before, when she was weak with grief, inexperience, and the fear that she might not succeed in her gallant task of paying her husband's debts and saving the livelihood of the children, she had thought of selling out at a sacrifice. They knew this because she had asked their advice, and now cheapened her down by reference to the valuation of that moment of despair. All the life energies of herself and her husband, the various advantages of position, the benefit of their pioneership since 1860, and of having established a place in so lucrative a business, all the good-will of customers, all the elements that contributed to the ability to earn the nearly $25,000 a year she was making, were brushed out of the bargain by the mere assertion of a figure at which it was alleged better works could be built. By the time the offer was made she had, moreover, put the sum she had received into such investments, she told the court, as she had been able to find, and the money to accept the offer was no longer in her hands. Indignant with these thoughts, and the massacred troop of hopes and ambitions that her brave heart had given birth to, she threw the letter into the fire, where it curled up into flames like those from which a Dives once begged for a drop of water. She never reappeared in the world of business, where she had found no chivalry to help a woman save her home, her husband's life-work, and her children. But when the men who had divided her property among them invoked the assistance of the law to complete the "equalization" told of in the previous chapter, she went into court and told her story to save her friends from ruin. There, under the gathering dust of years, this incident has remained buried in the document-room of the Court of Common Pleas of Cuyahoga County, until now brought forth to give the people a glimpse into what the real things are which our professors of market philosophy cover with their glittering generalities about the cost of production and the survival of the fittest.

This episode and that of the "Agreement for an Adventure" in the preceding chapter have been written up by the author from the original papers on file in the Court of Common Pleas at Cleveland, which he visited for that purpose in 1891. Certified copies of the documents were procured from the clerk of the court. Lately, the astounding fact was ascertained that all the documents except two or three formal pleadings were gone from the records of the court. But for these certified copies there would now be no authentic record of these cases. This disappearance bears a strong likeness to the suppression of the investigation by the Committee of Commerce of Congress in 1872, and the theft of the testimony taken by the House Committee of Commerce[121] in 1876, and the mutilation of the transcript submitted to Congress in 1888 of the evidence taken in the Buffalo Explosion Case.[122]

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Chapter VIII

"NO!"

There has never been any real break in the plans revealed, "partly born," "and buried" in 1872. From then till now, in 1893, every fact that has come to the surface has shown them in full career. If they were buried, it was as seed is--for a larger crop of the same thing.

The people had made peace, in 1872, on the pledge of "perfect equality" on the highways. Hardly had they got back to their work when they began to feel the pinch of privilege again. The Pennsylvania road alone is credited with any attempt to keep faith, and that only "for some months." "Gradually," as a committee of the people wrote to the managers of the Pennsylvania Railroad, "the persons constituting the South Improvement Company were placed by the roads in as favorable a position as to rates and facilities as had been stipulated in the original contract with that company."[123]

As soon as pipe lines were proved practicable they were built as rapidly as pipes and men to put them in the ground could be had, but there was some lubricant by which they kept constantly slipping into bankruptcy.

They were "frozen out," as one of their builders said, "summer as well as winter."

By 1874, twenty pipe lines had been laid in the oil country. Eighty per cent. of them died off in that and the following year.[124] The mere pipes did not die, they are there yet; but the ownership of the many who had built them died.

There were conservatives in the field to whom competition was as distasteful as to the socialists. To "overcome such competition," and to insure them "a full and regular" and "remunerative business" in pipe lines, in the language of the South Improvement Company contract, all that was needed was to put into operation the machinery of that contract which no longer existed--in name. The decease of the name was not an insuperable obstacle.

In exact reproduction of the plan of 1872, the railroads, in October, 1874, advanced rates to the general ruin, but to the pool of lines owned by their old friends of the South Improvement Company they paid back a large rebate. That those who had such a railroad Lord Bountiful to fill their pockets should grow rich fast was a matter of course.[125]

Getting this refund they got all the business. Oil, like other things, follows the line of least resistance, and will not flow through pipes where it has to pay when it can run free and get something to boot. Nobody could afford to buy oil except those who were in this deal. They could go into the market, and out of these bonuses could bid higher than any one else. They "could overbid in the producing regions, and undersell in the markets of the world."[126]

This was not all. In the circular which announced the bounty to the pet pipes there was another surprise. It showed that the roads had agreed to carry crude oil to their friends' refineries at Pittsburg and Cleveland without charge from the wells, and to charge them no more for carrying back refined oil to the seaboard for export than was charged to refineries next door to the wells and hundreds of miles nearer the market. "Outside" refiners who had put themselves near the wells and the seaboard were to be denied the benefit of their business sagacity. The Cleveland refiners, whose location was superior only for the Western trade, were to be forced into a position of unnatural equality in the foreign trade. In short, the railroads undertook to pay, instead of being paid, for what they carried for these friends, and force them into an equality with manufacturers who had builded better than they.

Evidently they who had contrived all this had their despondent moments, when they feared that its full beneficence would not be understood by a public unfamiliar with the "science of transportation."

To the new rules was attached an explanation which asserted the right of the railroads to prevent persons and localities from enjoying the advantage of any facility they may possess, no matter how "real."

"You will observe that under this system the rate is even and fair to all parties, preventing one locality taking advantage of its neighbor by reason of some alleged or real facility it may possess."[127]

Meanwhile good society was shuddering at its reformers, and declaring that they meant to stop competition and "divide up property."

"Do you do that in any business except oil?" the most distinguished railroad man of that day was asked. "Do you carry a raw product to a place 150 miles distant and back again to another point like that without charge, so as to put them on an equality?"

To which he replied--it was he who could not remember that he had ever seen the South Improvement Company contract he signed in 1872--"I don't know."[128]

"Could any more flagrant violation of every principle of railroad economy and natural justice be imagined than this?" the report of the New York Legislature asks.[129]

An expert introduced by the railroads defended this arrangement. He insisted that all pipe lines had a chance to enter the pool and get the same refund.[130] But a witness from the pipe-line country, who was brought to New York to testify to the relations of the railroads and the oil combination, let out the truth.

"Why didn't they go into the pool?" he was asked, in reference to one of the most important pipe lines.

"Because they were not allowed to. They wanted to freeze them out. They were shut out from the market practically."[131]

For these enterprises, as they failed one after the other, there was but one buyer--the group of gentlemen who called themselves the South Improvement Company in 1872, but now in the field of pipe-line activity had taken the name of United Pipe Line, since known as the National Transit Company, and then and now a part of the oil trust.

"The United Pipe Line bought up the pipes as they became bankrupt one after another," testified the same friendly witness.[132]

Then came a great railroad war in 1877. A fierce onslaught was made on the Pennsylvania Railroad by all the other trunk lines.

In this affair, as in all dynastic wars, the public knew really nothing about what was being done or why. The newspapers were filled with the smoke of the battles of the railroad kings; but the newspapers did not tell, for they did not then know, that the railroads were but tools of conquest in the hands of greater men.

The cause of the trouble was that the managers of the Pennsylvania Railroad had begun to reach out for the control of the oil trade. They had joined in the agreement in 1872 to give it to the oil combination, but now they wanted it for themselves. Through a mistletoe corporation--the Empire Transportation Company--they set to work building up a great business in oil cars, pipe lines, refineries.

"We like competition; we like our competitors; we are neighbors and friends, and have been all these years," the president of the oil trust testified to the New York Legislature,[133] but he served notice upon this competitor to abandon the field.[134] He and his associates determined to do more than compel the great railroad to cease its competition. They determined to possess themselves of its entire oil outfit, though it was the greatest corporation then in America. This, the boldest stroke yet attempted, could be done only with the help of the other trunk lines, and that was got.

The ruling officials of the New York Central, the Erie, the Baltimore and Ohio, the Lehigh Valley, the Reading, the Atlantic and Great Western, the Lake Shore railroads, and their connections, were made to believe, or pretended to believe, that it was their duty to make an attack upon the Pennsylvania Railroad to force it to surrender.[135] "A demand," says the New York Legislative Committee of 1879, "which they"--the railroads--"joined hands with the Standard Oil Company and proceeded to enforce by a war of rates, which terminated successfully in October of that year" (1877).[136]

The war was very bitter. Oil was carried at eight cents a barrel less than nothing by the Pennsylvania.[137] How low the rates were made by the railroads on the other side is not known. The Pennsylvania was the first to sue for peace. Twice its vice-president "went to Canossa," which was Cleveland. It got peace and absolution only by selling its refineries and pipe lines and mortgaging its oil cars to the oil combination. It "was left without the control of a foot of pipe line to gather, a tank to receive, or a still to refine a barrel of petroleum, and without the ability to secure the transportation of one, except at the will of men who live and whose interests lie in Ohio and New York."[138]

It was only seven years since the buyers had organized with a capital of $1,000,000. Now they were able to give their check for over $3,000,000 for this one purchase. "I was surprised," said Mr. Vanderbilt to the New York Legislative Committee of 1878, speaking of this transaction, "at the amount of ready cash they were able to provide." They secured, in addition to the valuable pipe lines, oil cars, and refineries in New York and Pennsylvania, the more valuable pledge given by the Pennsylvania Railroad that it would never again enter the field of competition in refining, and also a contract giving the oil combination one-tenth of all the oil freights received by the Pennsylvania Railroad, whether from the combination or its competitors--an arrangement it succeeded in making as well with the New York Central, Lake Shore, and other railroads.[139]

One of the earliest members of the oil combination was present at the meeting to consummate this purchase. Something over $3,000,000 of his and his associates' cash changed hands. The meeting was important enough to command the presence of a brigade of lawyers for the great corporations, and of the president, vice-president, and several directors of the Pennsylvania Railroad, and, representing the Poor Man's Light, the vice-president, the secretary, and five of the leading members of the combination, besides himself.[140]

But when asked in court about it he could not remember any such meeting. Finally, he recalled "being at a meeting," but he could not remember when it was, or who was there, or what it was for, or whether any money was paid.[141]

Three years later this transaction having been quoted against the combination in a way likely to affect the decision of a case in court,[142] the treasurer denied it likewise. "It is not true as stated ... directly or indirectly...."[143]

Eight years later, when the exigencies of this suit of 1880, in Cleveland, had passed away, and a new exigency demanded a "revised version," the secretary of the combination told Congress that it was true.[144]

"The pleasures of memory" are evidently for poets, not for such millionaires. That appears to be the only indulgence they cannot afford.

The managers of the Pennsylvania road went back with the zeal of backsliders reconverted to their yoke in the service of the men who had given them this terrific whipping. They sent word to the independent refiners, whom they had secured as shippers by the pledge of 1872 of equal treatment, that equal rates and facilities could be given no longer. The producers and refiners did not sit down dumb under the death sentence. They begged for audience of their masters, masters of them because masters of the highway.

The third vice-president, the official in charge of the freight business, was sent to meet them.

"As you know," they began by reminding him, "we have been for the past year the largest shippers of petroleum the Pennsylvania Railroad has had."

He acknowledged it.

"Shall we, after the 1st of May, have as low a rate of freight as anybody else?" they then asked.

"No," he said; "after the 1st of May we shall give the Standard Oil Company lower rates than to you."

"How much discrimination will we have to submit to?" the poor "outsiders" asked.

"I decline to tell you," was the reply.

"How much business must we bring your road to get as good rates as the combination?" they then asked, and again--

"I decline to tell you," was the only answer they got.

"If we will ship as much, will you give us as low freight rates?"

"No."

"We have been shipping over the Pennsylvania Railroad a year," they persisted, "why can we not continue?"

"It would make them mad; they are the only people who can make peace between the railroads."

"I think," said he, "you ought to fix it up with them. I am going over there this afternoon to talk with those people about this matter, and," he continued, "you will all be happy, and everything will work along very smoothly."

"We gave him very distinctly to understand that we did not propose to enter into any 'fix up' where we would lose our identity, or sell out, or be under anybody else's thumb; we are willing to pay as high a rate of freight as anybody, and we want it as low as anybody has it," they told him.

But the reply to all of it was, "You cannot have the same rate of freight."

As the magnate of the railroad seemed to be determined not to permit them to move to market along his rails, one of the independents referred to a plan for a new pipe line then under consideration by them, the Equitable, as perhaps promising them the relief he refused.

"Lay all the pipe lines you like," the vice-president retorted, with feeling, "and we will buy them up for old iron."

The independents appealed from the third vice-president to the president; they had to beg repeatedly for a hearing before they got it. They came together in the June following, the independents coming on from New York for the purpose. Since their interview with the third vice-president rates had been advanced upon them, and not only that, but when they had oil ready to ship at those high freight rates, the railroad on one pretext or another refused them cars. One of them had contracts to deliver oil from his refinery in New York to go abroad. When he ordered the cars that were needed to take the crude oil to New York to be refined they were refused him. The ships lay idle at the docks, charging him heavy damages for every day of delay; at the wells his oil was running on the ground.

"You had better go and arrange with the Standard Oil Company; I don't want to get into any trouble with them," the president said. "If you are business men, you will make an arrangement with them. I will do all in my power to bring it about."

"We will never take our freight rates from them," they replied; "we are not willing to enter into any such arrangement."

"Why don't you go to the other roads?" the president asked his suppliants.

"We have done so. It's of no use. On the New York Central the cars are owned by the combination, and the Erie is in a like position. We have been shippers on the Pennsylvania Railroad a long, long while, and you ought to take care of us and give us all the cars we need. We are suffering very greatly for the want of them. Can we have the same rate that other shippers get?"

"No."

"If we ship the same amount of oil?"

"No."

"If you have not cars enough, will you, if we build cars, haul them?"

"No. You will not have any peace or prosperity," continued the president, "until you make terms with the combination."

Like the third vice-president he offered to intercede with them to get transportation over his own road for his own customers. Like men they refused the offer.

"We were, of course, very indignant," one of them said, in relating this experience in court.[145]

A little later a rich and expert refiner, who had sold out in 1876, made up his mind to try again. The Pennsylvania road had a new president by this time, but the old "no" was still in force.

"When I was compelled to succumb I thought it was only temporarily, that the time would come when I could go into the business I was devoted to. I was in love with the business. I took a run across the water; I was tired and discouraged and used up in 1878, and was gone three or four months. I came back ready for work, and had the plan, specifications and estimates made for a refinery that would handle ten thousand barrels of oil in a day. I selected a site near three railroads and a river; I would have spent about five hundred thousand dollars, and probably a couple of hundred thousand more. I believed the time had arrived when the Pennsylvania Railroad would see their true interest as common carriers, and the interest of their stockholders, and the business interest of the City of Philadelphia. I called on the President of the Pennsylvania Railroad; I laid the plans before him, and told him I wanted to build a refinery of ten thousand barrels' capacity a day. I was almost on my knees begging him to allow me to do that.

"'What is it you want?' he said.

"'Simply to be put upon an equality with everybody else--especially the Standard Oil Company. I want you to agree with me that you will give me transportation of crude oil as low as you give it to anybody else for ten years, and then I will give you a written assurance that I will do this refining of ten thousand barrels of oil a day for ten years. Is not that an honest position for us to be in? I as a manufacturer, you the president of a railroad.'

"'I cannot go into any such agreement.'

"I saw the third vice-president. He said, in his frank way, 'That is not practicable, and you know the reason why.'"[146]

After their interviews with the President and Vice-President of the Pennsylvania Railroad, these outsiders went to the officials of the other roads, only to hear the same "No!" from all.[147]

At one time, to get oil to carry out their contracts and fill the vessels which were waiting at the docks and charging them damages for the delay, these refiners telegraphed to the oil regions offering the producers there ten cents above the market price if they could get oil to them over any of the roads to New York. They answered they could not get the cars, and none of them accepted the offer.[148]

All the roads--as in 1872--were in league to "overcome" them.

Thus, at a time when the entire movement of oil was at the rate of only 25,000 or 30,000 barrels a day, and the roads had cars enough to move 60,000 barrels a day, these independent refiners found themselves shut completely off from the highway.[149] The Pennsylvania Railroad, the New York Central, the Erie, and their branches and connections in and out of the oil regions, east and west, were as entirely closed to them as if a foreign enemy had seized the country and laid an embargo on their business--which was, indeed, just what had happened. The only difference between that kind of invasion and what had really come was, that "the dear people," as the president of the trust called them,[150] would have known they were in the hands of an enemy if he had come beating his drums loud enough, and firing off his two-thousand pounders often enough, and pricking them deep enough with his bayonets; but their wits are not yet up to knowing him when he comes among them disguised as an American citizen, although they see property destroyed and life lost and liberty thrown wherever he moves.

There was enough virtue in Pennsylvania to begin a suit in the name of the State against the men who were using its franchises for such purposes, though there was not enough to push it to a decision. The Third Vice-President of the Pennsylvania Railroad, when examined as a witness in this suit, confirmed these statements about the interviews with himself and the president of the road in every particular about which he was questioned.

"We stated to the outside refiners that we would make lower rates to the Standard Oil Company than they got; we declined to allow them to put cars of their own on the road."[151]

His evidence fills seventy-six pages, closely printed, in the report of testimony. It was clear, full, and candid; remarkably so, considering that it supplied officially from the company's own records the facts, item by item, which proved that the management of the Pennsylvania Railroad had violated the Constitution of Pennsylvania and the common law, and had taken many millions of dollars from the people and from the corporation which employed them, and secretly, and for no consideration, had given them to strangers.

This testimony is so important that it was reprinted substantially in full both by the "Hepburn" committee of the New York Legislature in 1879[152] and the Trust Investigating Committee of Congress in 1888.[153] As instances, it showed that in one case where the rate to the public was $1.15, this favored shipper was charged only 38 cents. In another case the trade generally had to pay $1.40 a barrel on crude petroleum, but the oil combination paid 88-1/2 cents.

"And then the refined rate was 80 cents?"

"80 cents net to the Standard."

"And to all others?"

"$1.44-1/2."

"But there were no other outside shippers," he pleaded--how could there be?

There was only one important member in Pennsylvania of the oil combination who could be caught with a subpoena. At his first appearance in court, on the witness stand, he took lofty ground.

"I decline to answer."[154]

Put on the stand again, he was asked:

"Were you allowed a rebate amounting to 64-1/2 cents per barrel?"

"No, sir; not to my knowledge."[155]

Put on the third time and compelled to produce his books, he had to read aloud in court the entries showing the payment he had thus denied under oath.

"There was a total allowance of 64-1/2 cents per barrel."[156]

And then he shut up again--but too late; and to all other questions about his rebates said, gloomily, "I decline to answer."

When the president of the oil trust was asked afterwards by the New York Legislature if some company or companies embraced within it had not enjoyed from railroads more favorable freight rates than outside refineries, he replied:

"I do not recall anything of that kind."

"You have heard of such things?"

"I have heard much in the papers about it."[157]

But at the time these rates were being made, one of his principal associates admitted that the president was the person who attended to the freight rates.[158] This was also put beyond a doubt in the Ohio investigation by the evidence of his first partner in the little oil refinery at Cleveland which had grown so great, he who had furnished the only mechanical and refining knowledge it had started with, and who had, until within a year, been a fellow-stockholder and director.

"Do these contracts contain anything of the nature that would discriminate against the small refiners of the State?"

"I think they did.... Up to the time I left the company the open rate was $1.40 to the seaboard. They"--the oil combination--"ship for 80 cents.... The president told me it was the rate at that time."[159]

With every known avenue to the sea thus closed to them it certainly looked as if all was up with the "outsiders." But the men, who had too much American spunk to buy peace with dishonor by consenting to a "fix-up" under compulsion, had the wit to find out a loop-hole of temporary escape. They built tank boats for the canal, and thus succeeded in getting 200,000 barrels of oil to New York that summer before the canal closed.[160]

Since then all chance of escape by the canal has been cut off. The railroads made a war of freight rates against it, and the only canal that connected the oil regions with the Erie canal route to the sea was dried up, and turned into a way for a railroad by a special act of the New York Legislature. The railroad so built has ever since been managed as one of the most diligent promoters of the policy of excluding the common people from the oil business.

According to the funeral notices given out by the railroad officials and the members of the South Improvement Company this concern was dead, but in the quaint phrase of the producers it was really alive and hard at work, but "with a new suit of clothes and no name." These interviews between the independent refiners and the railroad officials of the three trunk lines form one of the most extraordinary scenes which have taken place between a government and its subjects since the era of modern democratic liberty.

The railway officials are, in the world of the highway, the government. They hold their supreme power to tax commerce, and to open and close the highways, solely and altogether by grant of the State, and under the law of the common carrier. It is only by the exercise of the sovereign power of eminent domain to take the property of a private individual by force, without his consent, for public use--never for any other than public use--and only by the grant of the right to cross city streets and country roads that the railroads come into existence at all. This says nothing of the actual cash given to the railroad projectors by the government, which, in New York State alone, amounts to upwards of $40,000,000.[161]

The independent refiners represent the people, claiming of the highway department of their government those equal rights which all citizens have as a birthright, and the government informs these citizens that their rights on the highways have been given as a private estate to certain friends of the ruling administration, much as William the Conqueror would give this rich abbey or that fertile manor to one of his pets.

"We have no franchise that is not open to all," say the "trustees." "It is a free open market." "There is nothing peculiar to our companies." "It is as free as air."

In truth they have had no less a franchise than, as in 1872, the excluding possession of all the great trunk-lines out of the oil country, and all their connections east and west, and this franchise has since widened until, in 1893, it reaches from ocean to ocean, and from gulf to gulf.

Their franchise was meant to be as exclusive as if they had had from the government letters-patent in the old royal fashion of close monopolies in East Indian trade, or salt, or tobacco at home, giving them by name the sole right to use the roads, and forbidding all others, under pain of business death, from setting their foot on the highway. But with this difference: the exclusive franchise in the latter case would exist by law; but in this case it was created in defiance of law, exists in contempt of the law, and in its living the law dies daily.

The refiners and producers who were pleading in this way with the railroads for a chance to live after May 1, never doubted but that, as they were told, and as their arrangements with the Pennsylvania road guaranteed, they were having and were to have at worst until that date, equal and impartial rates and facilities. Under this safe-conduct they parleyed for the future. But the Pennsylvania Railroad was at that moment negotiating with the oil combination to collect from the independents, under the guise of freight, 20 to 22-1/2 cents a barrel on all they sent to market, and pay it over to the combination. The payments were made to one of the rings within the oil ring, called the American Transfer Company. "It is the same instrumentality under a different name," said the counsel of the New York Chamber of Commerce before the New York Legislature. The official of the Pennsylvania road who issued the order to take this money out of the treasury pleaded in excuse that proof had been given him that other roads were doing the same thing.[162] Receipted bills were brought to him, showing that the New York Central and the Erie had been "for many months" paying these men who called themselves American Transfer Company for having "protected" their oil business, sums ranging from 20 cents to 35 cents a barrel on all the oil those roads transported.[163] So deeply was the watch-dog of the Pennsylvania road's treasury affected by the proof that his company was doing less than the other roads, that he instructed the comptroller to give these men three months' back pay, which was done. Twenty cents a barrel was sent them out of all the oil freights collected by the Pennsylvania for the three months preceding, and thereafter the tribute was paid them monthly. Then it was increased to 22-1/2 cents a barrel. The same amount per barrel was refunded to them out of their own freight. They received this on all oil shipped by them, and also on all shipped by their competitors.[164] They who received this tribute pretended to the railroad officials that they "protected" the roads from losing business. The railroad men pretended to believe it.

The way in which this revenue was given and got shows what a simple and easy thing modern business really is--not in any way the brain-racker political economists have persuaded themselves and us. The representative of the oil combination writes a bright, cheery letter; the representative of the Pennsylvania answers it, and there you are; 22-1/2 cents a barrel on millions of barrels flows out of the cash-box of the railroad into the cash-box of the combination. In one year, 1878, this tribute, at the rate of 22-1/2 cents on the 13,750,000 barrels of oil shipped by the three trunk-lines, must have amounted to $3,093,750. The American Transfer Company had a little capital of $100,000, and its receipts from this rebate in this one year would amount to dividends of 3093 per cent. annually; the capital of the oil combination which owned this Transfer Company was at this time $3,500,000.

There are reasons to believe that some of the very railroad men who turned the money of the railroads over to the American Transfer Company were among its members. But if all the profit went to the combination, and none of it was for the railway officials through whom they got it, their revenue from that source alone would have paid in 1878 a dividend nearly equal to this capital of $3,500,000. In this device of the American Transfer Company we again see reappear in 1878, in high working vitality, the supposed corpse of the South Improvement Company of 1872. The American Transfer Company was ostensibly a pipe line, and the railroad officials met the exposure of their "nothing peculiar" dealings with it by asserting that the payment to it of 22-1/2 cents a barrel and more was for its service in collecting oil and delivering it to them; but the Third Vice-President of the Pennsylvania Railroad admits that his road paid the money on oil which the American Transfer Company never handled.

"This 22-1/2 cents (a barrel) paid the American Transfer Company is not restricted to oil that passed through their lines?"

"No, sir; it is paid on all oil received and transported by us."[165]

The American Transfer Company was not even a pipe line. By the Pennsylvania laws all incorporated pipe lines must report their operations and condition monthly to the State. But the publisher of the petroleum trade reports, and organizer of a bureau of information about petroleum, with offices in Oil City, London, and New York, issuing daily reports, testified that the American Transfer Company was not known in the oil regions at all as a pipe line. It published none of the statements required by law. "They do not," he said, "make any runs from the oil-wells." It had once been a pipe line, but "years ago it was merged in with other lines," and consolidated into the United Pipe Line, owned and operated by the combination.[166]

When this arrangement was exposed to public view by the New York legislative investigation, the "expert" who appeared to explain it away in behalf of the railroads and their beneficiaries, paraded a false map of the pipe-line system, drawn and colored to make it seem that the American Transfer Company was a very important pipe-line.[167] This was the same "expert" who, as we saw, defended the pipe-line holocaust of 1874 by asserting that "all were to be taken in alike."

There are three kinds of liars, an eminent judge of New York is fond of saying--liars, damned liars, and experts.

When the assistant secretary of the oil combination was asked about this "transfer" company, he replied, "I don't know anything about the organization."[168] He had described himself to the committee as "a clamorer for dividends"; but he declared he knew nothing about an organization which was "transferring" him dividends at the rate of $3,093,750 a year on $100,000 of capital. Almost at the very moment of this denial, receipts were being produced in court in Pennsylvania which had been given by the cashier of himself and his associates to the railroads for this money.[169]

Even if the independents succeeded in saving their oil from wasting on the ground, and got it into pipe lines, and had it refined, and were lucky enough to be given cars to carry it to the seaboard, they found that in leaving the oil regions they had not left behind the "no." Up to the very edge of the sea were the nets spread for them.

Part of the bargain of 1872 had been that the brothers of the South Improvement Company should provide the terminal facilities at the seaboard.[170] Railroad companies are usually supposed to have their own yards, storehouses, wharves, and the like, and, as a matter of fact, the railroads had these. The agreement of 1872 that the South Improvement Company should furnish the terminal facilities meant--it was discovered by the New York Legislature in 1879--that such terminals as the road already had should be turned over to that concern, and that thereafter nobody should be allowed to build or use terminals except as it permitted.

The New York Legislature found, in 1879, that the oil combination thus owned and controlled the oil terminal facilities of the four trunk-lines at New York, Philadelphia, and Baltimore.

"They can use the power here given, and have used it to crush out opposition."[171]

"Of course, there is in the Erie contract a statement that every shipper of oil over the road shall be treated with 'fairness' by the Standard Oil Company, and our attention was drawn to that," the counsel of the Chamber of Commerce said.... "In the first place, they have the exclusive shipment of oil, and therefore nobody could ship oil, and there was no oil handled for anybody else; but if the Erie Company should send some for somebody else, why, the sloop could not get to the dock, and the machinery at the dock would not and could not work by any possibility so as to get that oil out of that dock and into a ship (except at the end of a lawsuit)."[172]

Evidently the "cancellation" of 1872 had not cancelled anything of substance. Indeed, the "no" of 1878 was wider than the embargo of 1872, for the fourth great trunk-line, the Baltimore and Ohio, was not one of the signatories then; but by 1878 it had, like all the others, closed its port to the people--farming it out as the old régime farmed out the right to tax provinces.

He used to meet the president of the oil combination "frequently in the Erie office," a friend and subordinate has recalled.[173] Railroad offices are pleasant places to visit when such plums are to be gathered there as this of the sole right to the freedom of all ports and control of the commerce of three continents.

Down to this writing, when the little group of independents who remain masters of their own refineries along Oil Creek seek to send their oil in bulk abroad, or to transship it at any one of the principal ports for other points on the coast, the same power still says the same "no" as twenty years ago.[174]

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IX. WHO PIPED AND WHO DANCED

Thus, by 1878, the independent producers and refiners found themselves caught in a battue like rabbits driven in for the sport of a Prince of Wales.

If the richest person then in America--that artificial but very real person the Pennsylvania Railroad--could not keep its pipe lines, nobody could. The war for the union, which ended with its surrender in 1877, closed the pipe-line industry to the people. The unanimous "no" of all the railroads which followed completed the corral.

Oil, when it got to market, found that those who had become the owners of the pipe lines were also the owners of most of the refineries, and so the only large buyers.[175] "Practically to-day there is but one buyer of crude oil for us.... We take our commodity to one buyer; we take the price he chooses to give us without redress, with no right of appeal."[176]

Then the sole carrier--the pipe-line company--refused to take the oil into its pipes--the oil as it came out of the wells--unless first sold to its other self, the oil combination. This was called "immediate shipment." Forced to waste or sell his oil, the producer, under this compulsion, had to take what he could get.[177] The Hon. Lewis Emery, Jr., a member of the State Senate of Pennsylvania, gave the authorities of the State an account of the "immediate shipment" evolution of American market liberty. "We go down," he said, "to the office and stand in a line, sometimes half a day--people in a line reaching out into the street--sixty and seventy of us. When our turn comes we go in and ask them to buy, and they graciously will take it. I am an owner in six different companies, and we all suffer the same."

To educate the producer to sell "always below the market," the Pipe Line let his oil spill itself on the ground for a few days. "We lost a considerable amount of oil, probably several thousand barrels," another producer said.

"Will you state at what price as compared with the market price, whether above or below, you sold that oil?"

"It was always below."

Asked why he sold it below the market, he said:

"Because the line would not run it until it was sold."[178]

The hills of Pennsylvania began to growl and redden as in 1872.

The Secretary of Internal Affairs was hung in effigy. Mass meetings were held--some tumultuous, others quiet; processions of masked men marched the streets, and groaned and hooted in front of the newspaper offices and the business places of the combination. In the morning the streets and sidewalks were frequently found placarded with cabalistic signs and letters, and occasionally printed proclamations and warnings. Most of the lending newspapers of the region had been either absolutely purchased by the oil combination or paid to keep silence. Others occasionally broke forth in violent articles advising the use of force.[179]

In the McKean County field the people rose in rebellion. They got up a Phantom Party, in its provocation and spirit much like a phantom party which, contrary to law and order, boarded some ships in Boston harbor a century before. One thousand men, wrapped in white sheets, marched by night from Tarport to Bradford, the headquarters in that province of the sole buyer. Not a word was spoken.

It was not enough to make the people sell under compulsion. A day came when the only buyer would not buy and the only piper would not pipe. This brought the Parker district to the verge of civil war. The citizens were in a state of terrible excitement; the pipe lines would not run oil unless it was sold; the only buyers--viz., the agents of the oil combination--would not buy oil, stating that they could not get cars; hundreds of wells were stopped to their great injury. Thousands more, whose owners were afraid to stop them for fear of damage by salt water, were pumping the oil on the ground. The leaders used all the influence they had to prevent an outbreak and destruction of railroad and pipe lines. The most important of them went over to the Allegheny Valley Railroad office and telegraphed to the president: "The refusal to run oil unless sold upon immediate shipment and of the railroad to furnish cars has created such a degree of excitement here that the most conservative part of the citizens will not be able to control the peace, and I fear that the scenes of last July will be repeated on an aggravated scale."[180]

Three of the highest officials of the road sought an immediate interview with this leader of the producers. He warned them, and the Pennsylvania road which controlled their oil business, that unless immediate relief were furnished there would be an outbreak in the oil regions, because, as he told them, "The idea of a scarcity of cars on daily shipments of less than 30,000 barrels a day was such an absurd, barefaced pretence, that he could not expect men of ordinary intelligence to accept any excuses for the absence of cars, as the preceding fall, when business required, the railroads could carry day after day from 50,000 to 60,000 barrels of oil."[181] The warning was heeded. Thousands of empty cars, which the combination and its railroad allies had said couldn't be had anywhere, suddenly appeared hastening to Parker, blocking up the tracks in all directions, deranging the passenger business of the road. "They looked like mosquitoes coming out of a swamp." The sole buyer began buying again, and for the whole week, after having declared themselves unable to buy or move any, the railroads moved 50,000 barrels a day.[182] Producers under such rule saw their prices decrease and their land pass out of their possession, as was inevitable.

Ten years later in the Ohio oil-field all the substantial features of the plan we saw culminate at Parker are to be found in full play. There, also, the oil combination, Congress was told, is the only purchaser, and it fixes the price to suit itself. The production of the Ohio fields was between 18,000 and 20,000 barrels a day, but it could easily produce between 30,000 and 32,000. Because the only buyer refused to take care of the oil, wells have been shut back. Wells, which if opened up would run 1000 or 2000 or even more, were shut in four days out of the week.[183]

This culmination of 1878 made the people act. The producers were being ground to powder by the fact that an enemy had possession of their local pipes, their tankage, and their railways. "I am the unfortunate owner," said one of them, "of interests in nearly one hundred pumping wells. I have produced over half a million barrels of oil."[184] Oil was running out of the ground at the rate of 15,000,000 barrels a year, but the New York refiners who were in command of plenty of capital, said:

"We don't dare build large refineries, for we don't know where we could get the oil."[185]

At last the people organized the Tidewater Pipe Line. This was the first successful attempt to realize the idea often broached of a pipe line to the seaboard. It was the last hope of the "outsiders"--the "independents." "Nothing short of the ingenuity that is born of necessity and desperation" produced that pipe line. It was well contrived and well manned, and had plenty of money. It was organized in 1878, with a capital of $1,000,000, which increased in a few years to $5,000,000. It built a pipe from the oil regions to Williamsport--105 miles--on the Philadelphia and Reading Railroad, whence the oil was carried in cars by that company and over the Jersey Central to Philadelphia and New York.

Unlimited capital and strategy did all that could be done against the Tidewater. At one place, to head it off, a strip of land barring its progress was bought entirely across a valley. It escaped by climbing the hills. At another point it had to cross under a railroad. The railroad officers forbade. Riding around, almost in despair, its engineer saw a culvert where there was no watercourse. It was for a right of passage which a farmer, whose land was cut in two by the railroad, had reserved in perpetuity for driving his cattle in safety to pasture. It did not take long to make a bargain with the farmer for permission to lay the pipe there.

The pipe line was finished and ready to move oil about the 1st of June, 1879. On June 5th a meeting was held at Saratoga of representatives of the four trunk-line railroads and of members of the oil trust. The meeting decided that the new competitor should be fought to the death. The rate on oil, which had been $1.15 a barrel, was reduced to 80, then to 30, to 20, to 15 cents by the railroads, to make the business unprofitable enough to ruin this first attempt to pipe oil to the seaboard. Finally the roads carried a barrel, weighing 390 pounds, 400 miles for the combination for 10 cents or less.[186] The representative of the Tidewater offered to prove to Congress, in 1880, if it would order an investigation--which it would not--that "the announced and ostensible object of the conference at Saratoga was to destroy the credit of the Tidewater, and to enable the oil combination to buy up the new pipe line, and that a time was fixed by the combination within which it promised to secure the control of the pipe line--provided the trunk-lines would make the rates for carrying oil so low that all concerned in transportation would lose money.[187] There can be no doubt," he continued, "that, taking the avowed and ostensible object of the Saratoga meeting as the true one, it constituted, on the part of the willing participants, a criminal conspiracy of the most dangerous character."

One of the chief officials of the Pennsylvania Railroad testified to the competition which his road had carried on with the Tidewater. "It certainly was fought," he said; "the rates were considerably reduced."[188] Rates were put down to points so low that the railroad men would never tell what they were. I have no knowledge--I have no recollection--was all the president and general freight agent of the Pennsylvania Railroad could be got to say, when before the Interstate Commerce Commission.[189] "Not enough to pay for the wheel grease," said the general freight agent.[190] The oil trust also cut the prices of pipeage by its local lines from 20 cents to 5 cents a barrel, turning cheapness into the enemy of cheapness.

But the Tidewater was strong enough to withstand even so formidable an assault as this. As its business was small, its losses were small; but the railroads, making this war on it for the benefit of others, suffered heavily. The trunk-lines, it has been calculated, wilfully threw away profits equal to $10,000,000 a year for the sake of inflicting a loss of $100,000 on the pipe lines.[191] Enough revenue was lost to pay dividends of 2-1/2 to 5 per cent. on the total capital of the roads.

One effect that followed this reduction in rates was a corresponding decline in the price of oil at New York, in which the cost of freight is a constant element. The Committee of the New York Legislature found in the testimony it heard reason to believe that the members of the oil trust took advantage of their advance knowledge to sell at high prices, to those who did not know, all they would buy for future delivery.

The "Hepburn" report of the New York Legislature of 1879 gives special prominence to the computations that $1,500,000 were the profits of this speculative deal.[192]

The customers of the Tidewater, the independent refiners in Philadelphia, were charged by the Pennsylvania Railroad on oil that came through the Tidewater 15 cents a barrel for one mile of hauling. The utmost the law allowed them was half a cent a mile, and they were carrying oil 500 miles to New York for the same charge of 15 cents a barrel, and less. Under such pressure these independent refineries, which the Tidewater had been built to supply, sold out one after another. The Tidewater was then in the position of a great transporting company, that had spent a large amount of money to bring a great product to its Philadelphia terminus, and found that refining establishments which had been begging it to give them oil had become the cohorts of its opponent. To meet this the Tidewater built refineries of its own at Chester, and at Bayonne, New Jersey, on New York waters.

When asked for a rate to another point, the Pennsylvania gave one that was three and four times as much as they would charge the oil trust, but added, "we cannot make a rate on the empty cars returning." That is, as it was interpreted, "we will carry the oil, but we will not permit the empty cars to come over the roads to get the oil. They must be taken on a wheelbarrow, or by canal, or by balloon."[193] The war went on. Attempts were made to seduce the officials of the Tidewater. A stockholder, who had been too poor to pay for his stock, received a large sum from the oil combination and began a vexatious suit for a receivership.[194] A minority forced their way into the offices of the company, and took violent possession of it by a "farcical, fraudulent, and void" election, as the court decided in annulling it. Its financial credit was attacked in the money market and by injunctions against its bonds.

Affidavits were offered from members of the oil combination denying that they had had anything to do with these proceedings. In reference to these affidavits, the representative of the Tidewater reminded the court that that combination was a multifarious body. "One-half of them," he said, "do a thing, and the other half swear they know nothing about it. In pursuance of this Machiavelian policy, they have eight or ten gentlemen to conduct negotiations, and eight or ten to say they do not know anything about them."

Then, with no visible cause, the capacity of the pipe fell below the demands upon it. This insufficient capacity was pleaded in court as one of the reasons why the pipe should be taken out of the hands of its owners. One day the cause was discovered--a plug of wood. Some mysterious hand had been set to drive a square block of wood into the pipe so as to cut down its capacity to one-third. The representative of the Tidewater declared in court his belief that this plug had been placed by "people on the other side who have made affidavits in this case." A similar deed, but much worse, as it might have cost many lives, was done during the contest with Toledo, nine years later.[195]

The Tidewater was successful, but not successful enough. It owned 400 miles of pipe, including the 105 miles of the trunk-line, and had control of nearly 3,000,000 barrels of tankage. It did a great work for the people. "It was," the Philadelphia Press said, in 1883, "the child of war. It has been a barrier between the producers and the monopoly which would crush them if it dared." While these words of exultation were being penned, a surrender was under negotiation. The Tidewater's managers were nearly worn out. These tactics of corrupting their officers, slandering their credit, buying up their customers, stealing their elections, garroting them with lawsuits founded on falsehoods, shutting them off the railroads, and plugging up their pipe in the dark, were too much. They entered into a pool. The two companies in the summer of 1883 "recognized" each other, as the trunk lines do, and agreed to divide the business in proportions, which would net the Tidewater $500,000 a year. The announcement that this pool had been forced on the Tidewater fell like a death-blow on the people of the oil regions. "The Tidewater," the Philadelphia Press said, editorially, "will probably retain a nominal identity as a corporation, but its usefulness to the public and its claim to popular confidence and encouragement were extinguished the instant it consented to enter into alliance with the unscrupulous monopoly which resorts to that means of conciliating and bribing what it had failed to destroy." As was anticipated by the Press, the Tidewater retained its nominal identity, but that was all. Its surrender was admitted by its principal organizer, Mr. Franklin B. Gowen. The officials of the Pennsylvania Railroad have testified to it. "They made an arrangement of some kind, the conditions of which I never knew; one swallowed the other or both swallowed the other, or something, and settled up their difficulties,"[196] said the general freight agent. The president said: "The competition between these pipe lines ceased."[197]

The attorney of the Tidewater was asked if there were any negotiations which resulted in a compromise of the differences with the oil combination.

"If by differences," he replied, "you mean competition in trade, I answer the question, yes. That resulted in a written contract.... The purpose of the contract was to settle the rivalry in business between the two companies, each company to take a percentage of transportation and gathering, and each to do with the oil as it saw fit."[198]

The treasurer of the Tidewater, who had been in its service since 1880, corroborated its attorney. A contract had been made between the two; the date of it was October 9, 1883. Copies of the contracts are in the author's possession.

The Interstate Commerce Commission in 1892 judicially found the same fact. It says: "About December, 1883, the pipe lines, with the view of getting better rates, adjusted their differences, and the competition between them ceased. The pipe-line business appears then to have passed into the control of the National Transit Company."[199] All but 6 per cent. of the National Transit Company is owned by the oil trust. It formed practically one-third the imposing bulk of the $70,000,000 of the trust of 1882.[200] If anything can be made certain by human testimony this evidence proves that these pipe lines stopped competing in 1883. The witnesses are the men who negotiated the contract, and upon whose approval it depended. But when the president of the trust was asked under oath, in 1888, if there were any pipe lines to tide-water competing with it, he named, as "a competing company," "the Tidewater Pipe Line."

"The Tidewater Company? Does that compete with your company?"

"It does."

"It is in opposition to it?"

"It is in opposition to it."[201]

In the same spirit he denied, in 1883, that he had anything to do with the company which had represented the oil trust in this "swallowing or something" of the Tidewater. This, the National Transit Company, was the most important member of the trust. Under its cover, by means like those described, from New York to West Virginia and Ohio, almost all the pipes for gathering and distributing oil have been brought into one ownership. Millions yearly of the earnings of this company were pooled with all the others in the trust, and the president was receiving his share of them four times a year. He was the sole attorney[202] authorized to sign contracts for the trustees, who thus held all the combined companies in a common control. These trustees, of whom he was the chief, not only controlled but owned as their personal property more than half the stock of every company represented. But these facts were not then known to the public. It was not intended that they should be known, as the struggle to conceal them from the New York Legislature five years later--in 1888--showed.

"Have you any connection with the National Transit Company?" he was asked, after taking the oath.

"I have not."[203]

When the Tidewater passed under this alien control, Mr. Franklin B. Gowen severed all his connection with it. He did not hold himself for sale to any man who had money to pay fees. He stood at a height where the profession of law was immeasurably above prostitution in the temples of justice--the odious aspect in which the sacrifice of purity in the ancient temples of Aphrodite is reproduced in our courts. It would have been impossible for him to combine the functions of a great law reformer and procurer of judicial virtue for railroad corporation wreckers. He never forgot what some successful lawyers seem never to remember--that the lawyer is, as much as the judge, an officer of the court and of justice. While he lived he was proud to be recognized as the chief defender in the courts of the rights of those whom it was sought to crush in this industry, although he thus allied himself with the poor and heavy laden. He could have used his anti-monopoly eloquence as an advertisement of his value to monopoly; but he would not sell his soul to fill his stomach. His heart revolted against the wicked cruelty with which he saw the strong misuse the weak, and his penetrating vision saw clearly the ruin to which overgrown power and conscienceless greed were hurrying the liberties of his country. In his speech before the Pennsylvania Legislature in 1883, advocating a law to prevent the use of railway power by railway officials to redistribute the property of the people among their favorites, he said, speaking of what had been done in the oil regions of Pennsylvania: "If such a state of facts as I now call your attention to had been permitted by any government in Europe or Asia for a six months, instead of the sixteen years it has existed in this Commonwealth, the crown and sceptre of its ruler would have been ground into the dust, and yet the good, honest, patient, long-suffering people have submitted to it in this Commonwealth until the time has come that if we hold our peace the very stones will cry out.

"I for one intend to submit to it no longer. You may say it is unwise for me to attack this wrong, but I have attacked it before and I will attack it again. If I could only throw off the other burdens that rest upon my shoulders, I would feel it to be my duty to preach resistance to this great wrong, as Peter the Hermit preached the crusade. I would go through this State from Lake Erie to the Delaware; I would go into every part of this Commonwealth and endeavor, by the plain recital of the facts, to raise up such a feeling and such a power as would make itself heard and felt, and by the fair, open, honest, and proper enforcement of the law, right the wrong, and teach the guilty authors of this infamous tyranny

"'That truth remembered long: When once their slumbering passions waked, The peaceful are the strong.'"

Mr. Gowen bravely fulfilled his pledge not to submit. His principal occupation became the championship in the courts and the Interstate Commerce Commission of those who were oppressed by this crushing power. His incorruptible lance was always in place, until the morning he was found dead in his room in Washington.

The oil combination had, up to this time, sent all its oil east by rail as it had no pipe line, and its faithful fools, the railroads, therefore burned their fingers with joy to roast the Tidewater for so good a customer. But while the railroad officials were wasting their employers' property to destroy the combination's new competitor, its astute managers, seeing how good a thing pipe lines were, quietly built a system of their own to the seaboard. The railroads had helped them get hold of the pipe lines--had in repeated cases, as the Erie, the Atlantic and Great Western, the Pennsylvania, the Cleveland and Marietta did, allowed them to lay their pipes on the lands of the railroads--and were now to see the pipe lines used to replace the railroads in the transportation of oil. These oil men saw what the railroad men had not the wit to see--or else lacked the virtue to live up to--that the pipe line is an oil railway. It requires no cars and no locomotives; it moves oil without risk of fire or loss; it is very much cheaper than the ordinary railway, for this freight moves itself after being lifted up by pumps. The pipe line was the sure competitor of the railway, fated to be either its servant or master, as the railroad chose to use it or lose it. The railways sentimentally helped the trust to gather these rival transportation lines into its hands; then the trust, with the real genius of conquest, threw the railroads to one side. A system of trunk-line pipes was at once pushed vigorously to completion in all directions. While the members of the oil trust were building these pipe lines to take away the oil business of the railroads, the officials of the latter were giving them by rebates the money to do it with. At the expense of their own employers, the owners of the railroads, these freight agents and general managers presented to the monopoly, out of the freight earnings of the oil business, the money with which to build the pipe lines that would destroy that branch of the business of the roads.

It was the Tidewater that proved the feasibility of trunk pipe lines. The trunk pipe lines the combination has built were in imitation. Extraordinary pains have been taken to sophisticate public opinion with regard to all these matters--for the ignorance of the public is the real capital of monopoly--and with great success. The history we have transcribed from the public records is refined by one of the combination into the following illuminant:

"About 1879 or 1880 it was discovered that railways were inadequate to the task of getting oil to the seaboard as rapidly as needed. Combined capital and energy were equal to the emergency. No need to detail how it was done. To-day there reaches,"[204] etc., etc. It must have been on some such authority that this, from one of our leading religious journals, was founded: "Only by such union"--of the refiners--"could pipe lines have been laid from the oil wells to the tide-water, reducing to the smallest amount the cost of transportation."[205] An account of the pipe-line system in the New York Sun, of December 14, 1887, describing the operations of the great pumps that force the oil through the pipes, says: "Every time the piston of the engine passes forward and back a barrel of oil is sent seaward. A barrel of oil is forced on its way every seven seconds of every hour of the twenty-four. Every pulsation of the gigantic pumps that are throbbing ceaselessly day and night is known and numbered at headquarters in New York at the close of each day's business." This heart of a machine, beating at the headquarters in New York, and numbering its beats day and night, stands for thousands of hearts whose throbs of hope have been transmuted into this metallic substitute. This heart counts out a gold dollar for every drop of blood that used to run through the living breasts of the men who divined, projected, accomplished, and lost.

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