RAILROADS.
The railroad problem is one of the most complicated and vital questions
of the day. Nothing, perhaps, is so typical of the ingenuity, skill and
colossal power of our modern civilization as the railroad train--a
solitary man holding the lever which controls this tremendous mass of
wood and metal, with its freight of goods and passengers rushing past us
at the rate of a mile a minute.
The growth of the railroad is one of the greatest marvels of this
wonderful century. England got her first road from the Romans in 415
A.D. To move the Roman armies it was necessary to have the “Roman Way,”
and the remains of those wonderful works still excite the admiration of
all beholders. The dangers and delays of roads in the middle ages, and
even in the stage-coaching days of our fathers, beset as they were with
difficulties and terrorized by highwaymen, all seem to us to belong to
some remote past.
It is a new tribute to the genius of that imperial people who swayed
the world in the earlier ages of Christianity that even now, with all
our facilities of modern travel, our people are beginning to realize the
necessity of roadways approximating those which they constructed. The
farmer often has to haul the products of his fields many miles to reach
the railway station, and the time and the effort needed to get his wheat
or corn over tortuous and defective roadways entails a very serious
loss. In many parts of the country the roads in fact are so impassable
in certain months that the farmer is unable to transport his grain to
the railway at a time, perhaps, when the markets are high, and is forced
to hold it until the season opens, and to dispose of it at a much lower
price. There is a general awakening of public sentiment to the necessity
for improvement in this direction, and for some years to come there will
probably be quite as much effort expended in the bettering of country
roads as in the further improvement and extension of our already
colossal railroad system.
Until the opening of the railway era, commerce and travel followed the
natural lines of transportation--the water-ways. There were, it is true,
a few exceptional instances like those of the ancient caravan routes
which crossed the lines of the great rivers and built up inland cities,
but the operation of natural laws in time
[Illustration: HORTICULTURAL HALL.]
prevailed, and these cities fell into ruins, while others sprang up
along the coasts and water-ways. Even after the introduction of
railways, the cost of transportation thereby was so heavy that the
water-ways still commanded the general direction of commerce, and it is
only since the wonderful cheapening of railway rates--due to the
enormous growth of the traffic and the introduction of more heavily
loaded cars and other economies--that the iron way has dominated the
water-way and subverted what had been one of the maxims of commercial
development from the earliest times.
At the present time, where the question of time is not important, the
carriage of passengers and goods by water is so much cheaper than by
rail as to survive in competition. Where the passenger’s time is of
value, or perishable goods are carried, or the merchant is in a hurry to
receive his consignment, the railway, following virtually the shortest
distance between the two points--piercing mountains, spanning ravines
and crossing the rivers, is, of course, the necessary means of
communication. Most of the great cities that have sprung up within the
memory of people still living, like those of old, are reared on the
sea-coasts or the shores of great lakes, or on the banks of navigable
streams, the facilities of transportation by water conspiring to create
these centres of activity and industry. Where a number of railroad
lines concentrate, a great city may spring up--like Indianapolis; or
where great manufacturing facilities exist, as in the juxtaposition of
the coal, ore and flux--as at Birmingham, Alabama. But these are
comparatively few in number, and have not such limits of expansion as
cities which may be reached by water. Aside from their commercial
disadvantages, the inland cities present difficult problems, among the
most important being that of successful sewage and sanitation.
In this country, indeed, most of the earlier railroads were projected
merely to connect navigable streams with one another, or with the coast,
their founders evidently regarding rail transportation as an auxiliary
of the natural ways, and not as a great rival which was in a very few
years to dominate them. In other instances, railways in the early days
were simply built along the banks of the rivers, because the people
found that when the latter were frozen in the winter, they needed some
other means of transportation. These scattered bits of road here and
there were, in after years, as the possibilities of railroad development
began to dawn upon the minds of far-seeing men, united by connecting
links and reorganized into roads of much greater length. In fact some of
the most difficult features of the railroad problem of the present day
grew out of the failure of projectors of railroads in the early days to
grasp the meaning of the system which they were instituting. France,
Germany, Belgium and other European cities have had no serious railway
problem. The English people, however, have passed through very nearly
the same experience as ours, and we are now solving the same questions
which puzzled their heads nearly a generation ago.
The immunity of the continental nations from many difficult railway
questions arises from the fact that they began building railroads after
England and our own country had undertaken them, and after we had
sufficiently developed their possibilities to show the absurdity of many
of the ideas that prevailed when they were inaugurated. It was supposed
that the first companies chartered would build a railway just as they
would build a highway, and that the iron way would be open to
competitive traffic by individuals or combinations of individuals, just
as the ordinary highway was open. In the charter of the first railway
company which built a line, the Manchester and Liverpool Railway, and in
fact in all the charters which were granted in England prior to 1829,
and the charters granted in this country in the same period, this idea
is clearly expressed. The Ithaca and Owego Railway, now a portion of the
great New York Central trunk line, was chartered in 1828, and one
section of the charter contains this provision: “All persons paying the
toll aforesaid may, with suitable and proper carriages, use and travel
upon the said railroad, subject to such rules and regulations as the
said corporators are authorized to make by the ninth section of this
act.”
It is obvious that the notion entertained by the founders of this
railway was that they would simply own a turnpike with rails upon it,
and would derive their revenue from the tolls charged upon the vehicles
that should be rolled over it by individuals. It was not until railway
building had proceeded for about a dozen years that it became evident,
from the nature of the power employed and the higher rate of
speed--unforeseen until then--that might be attained, that the railway
company must monopolize the service over the road they built. This
rendered necessary an entire revolution of the principles upon which all
future charters should be granted. But the fundamental mistake was made.
The continental peoples began to build their railways after this fact
was discovered, and therefore had the benefit of their predecessors’
mistakes, and adopted precautions which have relieved them of many
awkward complications.
Besides this, another mistake of ignorance was the belief that railways
would be used exclusively for the transportation of passengers, and it
was long after the first rails had been laid that the notion that
“light goods” might be conveyed, dawned upon their minds.
Any man who should have told these pioneers of the railway world that
the United States would possess in the year 1889 a hundred and sixty
thousand miles of railroad, enough to belt the world seven times at the
Equator, would have been regarded as a lunatic. The ownership of this
vast property is represented by stocks and bonds aggregating
$9,000,000,000. They receive yearly from the public for carrying
passengers and freights the sum of $1,000,000,000 and, after paying the
expenses of their operation, including the wages of more than 1,000,000
employés, they have left an available revenue of $415,000,000. More than
one of the larger companies has a revenue greater than that of the
United States government was thirty years ago. To earn this enormous sum
the roads work night and day, seven days a week. Through the darkest and
stormiest winter midnight, as well as through the pleasantest summer
afternoon, the locomotive fires are kept alight and the wheels revolve
unceasingly along the rails. The work they accomplish is something
startling in the aggregate. In the year 1887, the latest for which the
complete figures are at hand, the railroads of the country carried
428,000,000 passengers, travelling 10,500,000 miles, a distance equal to
450 times around the globe. The freight carried in the same year
amounted to 552,000,000 tons, and the distance traversed 62,000,000
miles.
It is a commonplace to speak of what the railroads have done in the way
of opening up the country and bringing the blessings of civilization
into the wilderness. In the Western country, where the people formerly
wore homespun or the coarsest fabrics of Eastern looms, the women now
receive weekly fashion plates still damp from the press, and every
cross-roads store has in stock the latest patterns, not only from the
great cities of our own land, but from the centres of European fashion.
The postal system follows along the iron way, the metropolitan newspaper
reaches the most obscure hamlet daily, and a chapter might be written
upon the growth of the railway postal service alone. The telegraph lines
enter new territory with the railway, putting the dweller in the
remotest regions within reach of instantaneous communication with all
parts of the world.
The effect of the railroad in thus multiplying and exchanging not only
material products, but distributing the news of the day and bringing the
inhabitants of the Pacific slope and those of the Atlantic seaboard into
daily intellectual intercourse, and thus welding all into one
homogeneous people, is a theme which has yet to be fully dealt with by
the pen of the historian. From Maine to Texas, go where you will, you
find the people read the same news, discuss the same questions, and are
subjected to the same vivifying influences, the ideas of the farmer on
the borders broadening in even pace with those of the dwellers in the
cities until such a thing as provincialism is unknown on this continent.
Indeed, foreigners who visit our shores, who have a taste for the
picturesque, complain of this monotony, and bewail the fact that the
American town or hamlet, whether situated on the borders of the great
northern lakes or on the torrid shores of the Gulf, presents essentially
the same exterior aspect and identical social conditions.
It would be too much to expect that this great railway system, with its
unprecedented army of employés and the revenues of an empire, should be
an unadulterated blessing; that it should not carry some alloy in its
composition. Like most humane institutions, even the most beneficent, it
has wrought mischiefs as well as brought great benefits. Until now the
needs of our rapidly developing country were such that communities
everywhere were clamoring for roads which would bring to them what they
needed from the outside world and place within reach markets for their
own products. Consequently, every possible inducement was offered for
the building of railway lines, and without surrounding their
construction with such safeguards as had already been found necessary in
old and thickly populated countries. The result has been in many parts
of the country an over-building of lines which has entailed subsequent
losses and difficulties and the creation of abuses and complications
which together constitute what has come to be known as “the railway
problem.” It is clear that what might be broadly called the constructive
period in our railway system is ended, and that we have now fairly
entered upon a period of restriction and regulation. The people have now
to learn to subdue and control these great Frankensteins of their own
creation.
As Mr. Frederick Taylor, President of the Western National Bank of New
York, who has all his life been a close student of the railway question,
says: “Though the railroads have probably contributed more than all
other agencies combined to make the United States what they are, no one
will deny that the incalculable benefit which we have derived from their
growth and development has not been, and is not, wholly ‘unmixed of
evil.’ Leaving out other considerations, it is not unfair to say that
three-quarters of all the legislative corruption from which we have
suffered during the past fifty years have been directly chargeable to
the railways; and that a very large proportion, perhaps nearly as much
as half, of the litigation that has occupied our courts during the same
period has been directly connected with railway matters.”
The great panic of 1873 was directly due to the over-building of
railroads. Following it came several years of terrible business
depression throughout the country, in which time and money was spent in
trying to clear away the wreck. Hundreds of railroad companies were
bankrupted and loss and suffering were entailed upon hundreds of
thousands of persons who had invested their savings in these
enterprises. In no end of instances the stocks of the companies were
wiped out of existence entirely, the roads sold under foreclosure and
reorganized. Again, in 1877, when the country was just beginning to
recover from the shock, it was disturbed and depressed for a long time
by the trouble between the railroad companies and their workmen, which
in some cases culminated in riot and bloodshed. Another period of
artificially stimulated railroad building reached its culmination in the
panic of 1884, and two years later widespread strikes among railway
operatives again disturbed the entire business of the country. During
all this period the legislatures of the various States and the National
Congress were busy with legislation intended to modify or remedy the
evils complained of.
The question presents such difficulties that many students, including
Mr. Taylor, can find a solution of the question only in the suggestion
of national control of the railroads throughout the country. Mr.
Taylor’s idea, however, is that they should not be owned and operated by
the nation, but that the government should have the same sort of control
which it now exercises over the national banks; in other words, that the
national railway commission should supervise the railroads with the same
authority which the Treasury Department exercises over the national
banking system.
The unrestricted building of railroads under the provisions of the
general railroad acts passed in most of the States, following that
adopted in New York in 1850, has given rise to destructive competition
and brought about some of the knottiest points in the railroad problem.
It was held for many years, and is even now contended by a great many
people, that the building of railroads, like any other business, should
be left free to the unrestricted enterprise of individuals and
associations of individuals. “If a lot of fellows see fit to put their
money into building a railroad where there is not enough traffic to
sustain it, and the road goes into bankruptcy, that is their affair, not
ours; it is their money that is lost.” That is about how the average
citizen talks on this subject. There could be no greater mistake.
In the first place the railroads are public highways, and as such must
be supervised by the community. When in ordinary conversation in this
country we speak of a “road,” from Chicago to St. Paul for instance, it
is always understood that a railroad is meant. In the older countries
the mention of “roads” is understood to refer to a turnpike. The reason
for the difference of usage is obvious. In old and settled countries the
highways were in existence for centuries before rails were laid, and the
word “road” therefore continues to hold its primary meaning. With us it
is the railroad line which first enters into new territory, and it may
be years before the contiguous region is sufficiently settled to render
an ordinary wagon-road necessary.
The vital fallacy in the popular argument that “competition will settle
this question of too many roads” lies in assuming that a railroad is,
like an individual, private enterprise. If a man starts a hat shop in a
neighborhood already well supplied with hatters, and he is bankrupted in
the struggle for business, that is the end of him. He has lost his money
and the shop is closed and the equilibrium of supply and demand in hats
is restored. But when a railroad becomes bankrupted it does not go out
of existence in that way. Where is there an instance in this country of
a road, once built, having been abandoned or obliterated? No; the
bankrupted road is placed under the protection of a court and in the
hands of a receiver. It conducts a fiercer warfare than ever against its
solvent rivals; for the bankrupted road is relieved from the necessity
of paying interest on its mortgage or paying its debts, and continues
to do business at lower rates than ever, for the receiver must keep it
a-going pending its reorganization or whatever disposition is to be made
of it.
The English people long ago reached a point which we are approaching
fast, in that before a railroad is built its projectors must obtain a
special charter, and in order to obtain that they must prove that there
is a public need of the new line. Any one who has read the papers for
the past few years will readily recall many instances of the destructive
effects of building lines in territory already well supplied with
transportation facilities. Take the West Shore road, which paralleled
the New York Central, and not only sunk the capital of its own builders
but forced a decline of fifty per cent. in the market price of New York
Central, which from an eight per cent, dividend-paying corporation
practically ceased to earn more than its fixed charges. The “Nickel
Plate” road, paralleling the Lake Shore from Buffalo to Toledo, is
another glaring instance in point. And still later we have the building
of an unnecessary line from Kansas City to Chicago by the Atchison,
Topeka and Santa Fé Railroad, which has resulted in the fall of the
stock of the latter company from about par to less than fifty cents on
the dollar, with a coincident cessation of dividends.
A host of mischiefs and evils have sprung from the almost unrestrained
power of railroad officials in the matter of their charges. By charging
some shippers more and others less by means of secret contracts, the
officials opened to themselves a field of unlimited profit. An awkward
fact, which there is no denying, is the large fortunes, in most cases
running into the millions, possessed by men who are or who have been
railroad officials on modest salaries, and who had nothing before
entering upon these positions. The cost of transportation being such an
important factor in the price of commodities, it was quite easy for the
railway to enrich one man and beggar or drive out of business another in
the same trade, and this was done according to the personal interests of
the man or men who could thus make rates. More than this, it was not at
all difficult for the railroad to impoverish one town or city and build
up another by discriminating in rates.
In fact, the railroad had the power to say whether a merchant should or
should not succeed in business, whether a town should or should not grow
in population and prosperity. In the Hepburn committee’s investigation
of the New York railroads in 1879 it was shown that the milling business
in certain towns of northern New York had been killed by railroads
granting rates which favored Minneapolis and other western points. In
one town all the millers but one were obliged to go out of business, and
it was elicited in the investigation that this man had a secret contract
with the railroad by which they carried his commodity for much lower
rates than any of the others. The merchants of New York at that time
complained that the discriminations of the railroads against the
metropolis were driving away its trade to Baltimore and other points.
The nefarious contracts made by the railroads with the Standard Oil
Company were discovered so recently as to be still fresh in the public
mind. It will be remembered that the railroads not only carried the
Standard’s oil for a fraction of that charged a certain individual oil
refiner, but actually paid over to the Standard Oil Company the
overcharges of which they mulcted the unfortunate individual refiner.
The creation of railroad commissions in the various States, and the more
recent establishment of the Interstate Commerce Commission under the
provisions of an act prohibiting these discriminations, forbidding the
charging more for a longer than for a shorter haul, and inflicting a
severe penalty for making railroad pools, goes far to remedy many of the
most glaring evils complained of. But laws after all cannot make men
moral, and, as President Charles Francis Adams, of the Union Pacific
Railroad, said recently, “one of the chief causes of the railroad
troubles is the low standard of commercial honor among railway
officials.” The opportunities for personal profit possessed by dishonest
railroad officials, while somewhat diminished by the prohibition of
discriminating rates by which they were enabled to build up one town in
which they had an interest, or to favor certain firms in which they or
their friends were partners, have been removed; but the avenues of
unlawful gain still open to them are almost innumerable. As Herbert
Spencer remarked in dealing with this same subject in England a quarter
of a century ago, “corporations have no souls.” A combination of men
will stoop to acts which the conscience of no one of them would sanction
as an individual act. So, too, a man will deal with the rights and
property of a corporation as he would never think of dealing with those
of an individual.
Among the more frequent abuses of their official power, we find railroad
officers personally buying lands in new territory or mining lands, and
then building at the expense of the corporation branch lines to reach
these properties and enhance their value; the establishment of
manufacturing or business enterprises, in which the railway men are
often secret partners, and securing for these enterprises favorable
terms, and then contracting with the railroad to do business for less
than cost; the fast freight lines, which ply over many roads, and which
have exceptionally easy contracts with the corporations and are in many
instances the individual enterprises of railway officials. It was not
long since shown that some of these lines were actually competing with
the railroad proper for freight, and carrying it with express speed as
low as the railroad could afford to carry it in ordinary freight cars.
Many of the swindles and abuses in railroad management owe their
conception to the scandalous example of Fisk and Gould in the Erie
Railroad. One or two of the little tricks played by Gould and his
partner in that road, will give an idea of the possibilities of profit
in dishonest railway management. When Gould became president and
treasurer of the road twenty years ago, the Erie had a very favorable
and longstanding lease of the Chemung and Canandaigua roads. The rental
was exceedingly low, having been made at a time when the leased lines
were in financial trouble. By the terms of the contract, if the Erie
should at any time fail to pay the rental, the lease was to be thereby
abrogated. Under the circumstances, the securities of these roads were
naturally selling for a mere song. Gould, through his agents, quietly
bought up these securities for about their weight in waste paper, thus
becoming the sole owner of the roads. Then, in his capacity as president
and treasurer of the Erie, he deliberately failed
[Illustration: FISHERIES AND AGRICULTURAL.]
to pay the rental, thus cutting off the road from its lease and leaving
him free to dispose of it as he pleased. He thereupon sold the roads to
the Northern Central Railroad of Pennsylvania for three million dollars.
Again, the Northern Railroad of New Jersey had a stock capital of
$159,000 and $300,000 of bonds. It had never been able to earn dividends
on this small amount of stock. It was leased to the Erie on favorable
terms. Here was another example of Gould’s genius. Four million dollars
in bonds were issued on the property, and a million dollars of stock,
which was divided among the conspirators; and then, to give these
securities a market value, a new lease was made to the Erie by which the
latter guaranteed thirty-five per cent. of the road’s net
earnings--enough to pay interest on the enormous creation of new bonds
and four or five per cent. on the stock.
One more instance: The National Stock Yard Company was organized by the
conspirators. The Erie Company advanced a million dollars, taking bonds
to that amount. A million dollars of stock was then issued, representing
not one cent of money paid, and was divided among the gang.
It is well known that in nearly every large railroad company there is a
construction ring which builds all extensions and feeders on the most
extravagantly profitable terms granted by the railroad company, the
officials of the railroad being the chief parties in interest in the
ring.
Aside from all these rascalities in the actual management of the
properties, is the deplorable fact that the officials and directors
speculate in the shares of their own concerns, thus betraying the
interests of the _bona fide_ stockholders, whose trustees they are. It
is more than suspected that the chief bears who have been active in
depressing the securities of some of the Western roads during the past
winter were in partnership with the directors and other officers of
these corporations. It is easy to see that those in a position to know
the exact earnings of a company and to foresee the possibilities in the
way of dividends have the advantage of everybody else in estimating the
future market value of the securities.
While the holders of railroad bonds and shares, however, display so much
apathy with reference to the management of their properties and the
election of proper men to administer them, they deserve little sympathy.
It is notorious that the annual elections of most of our railroads are
the merest _pro forma_ affairs. The men who are in power send out blanks
every year asking for the proxies of shareholders, and the latter
forward them, and thus enable these men to continue in power and
practically own the corporations they control. Where there is a contest
for control, it usually lies, not between the shareholders, on some kind
of principle in the administration of the property, but is found to be
between two speculative Wall street factions, each of whom is anxious to
secure the pickings. Until the shareholders of American roads take an
active interest in their properties, as do English shareholders for
instance, and insist upon the publication of the annual reports in
advance of the meetings in order that they may attend the meetings and
question their officials upon all dubious points, there can be little
hope of permanent reform. In cases where there is a contest, it is not
at all uncommon for an interested faction to pay stockholders a small
sum for the proxies on their stock--a proceeding which has been aptly
compared to a merchant selling to a burglar for a dollar in cash the use
of the key of his safe every night. So much for the relations of holders
of shares and bonds to the men who manage the corporations. As to the
relations of the railroads to the public, it is clear that the recent
widespread discussion and the salutary influence of the Interstate
Commission must lead to beneficent results.
Aside from the great majority of the people, whose interests are
indirectly but surely affected by any juggling with railroad properties
and principles, is a great army of men who obtain their livelihood and
that of their families by work on or for railroads. An army? Yes; more
men than ever were seen in the largest army in the world. All of them
are “effectives,” too--none of them can be found among “the sick, lame
and lazy.” Chauncey M. Depew, President of the New York Central road,
says truly: “With those who are actually in the service, and those who
contribute by supplies, one-tenth of the working force of the United
States are in the railroad service; and that tenth includes the most
energetic men and most intelligent among the workers of this magnificent
country. There are ten million working men in this country, and six
hundred thousand are _directly_ employed in the railway service. With
their families they constitute a larger population than the largest of
the States.”
Mr. Depew further says, with equal truth: “There is no democracy like
the railway system of this land. Men are not taken out of rich men’s
parlors and placed in positions of responsibility. Men are not taken
because they are sons of such, and put into paying places in the railway
systems; but the superintendents all over the country, the men who
officer and man the passenger, the freight, and motive power and
accounting departments, all of them come up from the bottom. Are you
going to stop this thing? No! There are no men being born or to be born
who are to be by inheritance the superintendents, treasurers,
comptrollers, auditors, the freight and ticket agents, the conductors,
the yard masters, who are to be the master mechanics, the foremen of the
shops, of the future. They are not born. They have got to be made and
come from the bottom up. And in every one of these departments to-day,
in every railroad in the United States, in the humblest positions,
earning the smallest salaries, are men, who within the next twenty-five
years, are to fill all these places by promotion. Don’t tell me there is
no chance to rise in this country.”
When this army grumbles, as once in a while it does, there is good cause
for alarm; not that they, like the disaffected of other armies, may do
damage to life and property, but because their troubles are almost
always traceable to stock-juggling rascalities, from which the men have
no hope of redress. Some of the companies allow no business operations
to interfere with the rights of their employees. Mr. Cornelius
Vanderbilt is probably the most extensive owner of railway stock in the
world, but he finds time to see his own employees frequently, and has
even built and furnished a handsome club-room for them. He has also been
active in assisting the Young Men’s Christian Association in
establishing reading rooms at railway centres. President Charles Francis
Adams, of the Union Pacific Company, found time not long ago to
publish, in a magazine article, the outline of a system for retaining
and encouraging competent employees. President Roberts, of the great
Pennsylvania road, is as proud of his men as any general ever was of his
army.
These railroad magnates, and others who might be named, are setting a
good example, which it is to be hoped some other officials will have
sense enough to follow. It is bad enough for stockholders to be annoyed
and impoverished by stock-juggling operations, but when the employees
also suffer the whole country suffers with them. It is an unpardonable
crime for any company, managing a road which deserves to exist, to take
such good care of its managers that its employees must strike and even
fight to be sure of living wages. Railway strikes hurt every traveller,
every shipper, every receiver in the country. They never would begin if
managers were honest. Stick a pin here and keep your eye on it.