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.