MONOPOLY IN TRANSPORTATION.
From time immemorial efforts have been made by designing men to control
either commerce or its avenues, the highways on the land and on the sea,
by a power which law, custom, ingenuity, artifice or some other agency
had placed into their hands.
The ancient Phoenicians early aimed at and finally obtained the empire
of the sea by making themselves masters of the most commodious harbors
of the Mediterranean Sea and the Arabian Gulf. They established a
regular intercourse with the countries bordering on the Mediterranean as
well as with India and the eastern coast of Africa. From these latter
countries they imported many valuable commodities which were not known
to the people of other parts of the world, and during a long period they
held this lucrative branch of commerce without a rival. The character
and the situation of the Phoenicians aided them greatly in acquiring
this mastery of commerce. Neither their manners and customs nor their
institutions showed any marked national peculiarity; they had no
unsocial prejudices and they mingled with the people of other countries
without the least scruple or repugnance. As their native country was
small and quite barren, they early learned to rely upon commerce as the
best source of riches and power. Like the other Semitic tribes, the
Phoenicians were noted for their energy and acumen, and while they
were not a literary people in the strict sense of the word, ancient
civilization received probably a more powerful impetus through their
commercial supremacy than through any other agency.
During the reign of King Solomon the Jews made an attempt to wrest from
the Phoenicians at least a part of the world's trade. Solomon built
ships and imported Phoenician sailors for his fleet. For a time it
seemed as if the Israelites might become the rivals of their teachers in
the art of navigation and in the mysteries of trade; but their peculiar
religious customs in that early day proved a serious impediment to
commercial ascendancy, as it rendered them incapable of that unreserved
intercourse with strangers so essential in commerce.
The monopoly of the sea, at least of the Mediterranean, passed to the
Carthaginians, their descendants. The latter extended their navigation
toward the west and north. They planted colonies and opened new harbors,
and up to the time of the Punic wars kept almost the entire trade of the
countries bordering on the Mediterranean in their hands.
After the downfall of Carthage the control of the commerce of Southern
Europe and Northern Africa descended to the Romans. When Rome became the
capital of the world, it gathered the wealth and valuable productions of
all its provinces. Under the consuls and the earlier emperors the
vigilance of the Roman magistrates and the spirit of the Roman
government gave every possible security to commerce and prevented for a
time the rise of monopoly. Nowhere was national union so complete or
commercial intercourse so perfect as in the Roman empire. The
intelligence and the power of Rome stimulated and regulated the industry
of her people and permitted them to enjoy the fruits of their efforts
without public or private restrictions.
We have seen that the intercourse of Rome and her provinces was
facilitated by the construction of roads and the establishment of
imperial posts. During the decline of the empire the maintenance of
these posts led, however, to a grave abuse. We are informed by Gibbon in
his "Decline and Fall of the Roman Empire":
"But these beneficial establishments were accidentally connected with a
pernicious and intolerable abuse. Two or three hundred agents or
messengers were employed, under the jurisdiction of the master of the
offices, to announce the names of the annual consuls and the edicts or
victories of the emperors. They insensibly assumed the license of
reporting whatever they could observe of the conduct either of the
magistrates or private citizens, and were soon considered as the eyes of
the monarch and the scourge of the people. Under the warm influence of a
feeble reign they multiplied to the incredible number of ten thousand,
disdained the mild though frequent admonitions of the laws, and
exercised in the profitable management of the posts a rapacious and
insolent oppression. These official spies, who regularly corresponded
with the palace, were encouraged by favor and reward anxiously to watch
the progress of every treasonable design, from the faint and latent
symptoms of disaffection to the actual preparation of an open revolt.
Their careless or criminal violation of truth was covered by the
consecrated mask of zeal; and they might securely aim their poisoned
arrows at the breast either of the guilty or the innocent, who had
provoked their resentment."
After the downfall of the Romans, commerce remained paralyzed during the
period of Gothic ignorance and barbarism. The crusades for the recovery
of the Holy Land from the Saracens, in the eleventh and following
centuries, opened again communication between the east and the west by
leading multitudes from every European country into Asia; and though the
object of these expeditions was conquest, and not commerce, their
commercial effects were both beneficial and permanent. The crusades were
especially favorable to the commercial pursuits of the Italian states.
The vast armies which marched from all parts of Europe toward Asia gave
encouragement to the shipping of Venice, Genoa, and Pisa, which
sometimes transported them, and always supplied them with provisions and
military stores. Besides the immense sums which these states received on
this account, they obtained commercial privileges of great consequence
in the settlements which the crusaders made in the East. All the
commodities which they imported or exported were exempted from every
imposition, the property of entire suburbs in some of the maritime
towns, and of large streets in others, was vested in them, and all
questions arising among persons residing within their precincts, or who
traded under their protection, were decided by their own laws and by
judges of their own appointment. When the crusaders took Constantinople,
the Venetians did not neglect to secure to themselves many advantages
from that event. Nearly all the branches of commerce were in time
transferred from Constantinople to their city. At the end of the crusade
period Venice had monopolized nearly all the foreign trade of Europe.
She supplied the people of Italy, France and Germany with those
commodities with which the crusaders by their intercourse with more
refined nations had become acquainted. The possession of many Eastern
ports and the maintenance of a powerful navy made it possible for the
Venetians to retain their monopoly for several centuries.
The growth of commerce in Central Europe was but slow, owing to the
dangers to which it was exposed in those days of feudalism. The mountain
fastnesses of robber knights, which controlled every road and navigable
river, were so many toll-gates at which the wayfaring merchant was
stopped to pay tribute. In time this system of plunder grew to such an
extent that hundreds of feudal lords relied upon it for their support.
Such a tax upon commerce greatly enhanced the value of all commodities,
and this deplorable state of things lasted until the cities made their
power felt by forming alliances for mutual protection. One of these
alliances, the Rhenish League, comprised in time seventy towns, and the
ruins of the strong castles destroyed by its forces still exist along
the Rhine, picturesque memorials of these lawless times.
Perhaps the most powerful commercial union of the middle ages was the
Hanseatic League. To protect their commerce, the cities of Hamburg and
Lubeck formed about the middle of the thirteenth century an alliance for
mutual defense. The advantages derived from this union attracted other
towns to the confederacy. In a short time about eighty of the largest
cities lying between the Baltic and the Rhine joined this famous league,
which in time became so formidable that its alliance was courted and its
enmity was dreaded by the greatest monarchs. The League divided its
territory into several districts. Its members, like railway associations
of the present day, made their own laws, and met for this purpose at
regular intervals in the city of Lubeck. The original object of the
League, mutual assistance against outside attacks, was soon lost sight
of, and its constantly growing power was used to obtain still greater
commercial privileges in the adjoining countries, and even to force
their rulers to concede to its members a commercial monopoly. In 1361 a
controversy arose between the League and the King of Denmark, which led
to a long and bitter war between them. This war was participated in by
no less than seventy-seven cities on the part of the League. It
terminated in 1370, leaving the Hansa master of the situation. For many
years after this the League exerted its power in Denmark, Sweden and
Norway, and the rulers of these countries were compelled to respect the
wishes and even submit to the orders of these proud merchants. The
countries bordering on the Baltic Sea remained the domain of the League
for several centuries. They gathered there immense quantities of raw
material, which they sold in the various ports of Europe. The influence
of the League even reached as far as Novgorod in the east and London in
the west. In both cities the League had its quarters, and within them it
virtually exercised the right of sovereignty. Its main market was at
Bruges in Flanders, which was then a bee-hive of industry and thrift.
There the Italian traders came with the products of the east, such as
spices, perfumes, oil, sugar, cotton and silk, to exchange them for the
raw materials of the north. While taxes and imposts everywhere else
harassed merchants, commerce was free in the cities of Flanders, owing
to the liberality, or rather shrewdness, of her rulers. In Bruges the
members of the Hansa met the merchants of Venice on equal terms, and the
exchange of the products of the north for those of the east and south
could be effected there to the greatest advantage of both.
While it must be admitted that the Hanseatic League developed the
resources of Northern Europe, and that, even at the time of its greatest
power, there was always competition among its own members, the fact
remains that it abused its power by the suppression of all outside
competition, and that it usurped rights which belong only to the state,
thus often producing abuses as great as those which it was organized to
remedy. Its final downfall was caused by the development of national
power in the northern kingdoms and the growth of commerce and
navigation in Great Britain. A stubborn assertion of antiquated
privileges on the part of the Hansa involved it in a feud with the
illustrious and lion-hearted Queen Elizabeth of England. In 1589 the
Queen caused sixty of their vessels to be captured on the Tagus, and
later even took possession of their hall and wharves in London. After
this the League's decline was very rapid, though its organization was
kept up till 1669, when its delegates held their last session.
Contemporary with the decline of the Hanseatic commerce in the north was
that of the Italian cities, especially Venice, in the south. They had
prospered by their commerce with the Levant until Vasco de Gama
discovered the sea route to East India in 1497. His countrymen, the
Portuguese, soon utilized this discovery. They took possession of the
coast of India and of the islands to the south of it. They also
succeeded in excluding the Arabs from the commerce with that country, of
which up to that time they had had exclusive control. For this purpose
they built fortresses and factories on the west coast of Hindostan, took
possession of the island of Socotra in the Arabian, and of Ormus in the
Persian Gulf, and forced the Indian princes to grant them the exclusive
privilege of trading with their subjects. They also captured the city of
Malacca, where the trade between China, Japan, the Philippine Islands,
the Moluccas and India had concentrated itself. In this way they got in
a comparatively short time control of the commerce of India, Arabia, and
even Egypt. By forcing the Venetians and their commercial allies out of
those markets, they secured for themselves a monopoly of the commerce
between Europe and the east. The political ascendancy of the Turks in
the islands situated in, and in the countries bordering on, the Eastern
Mediterranean, caused the loss of Cyprus, Crete (Candia) and Morea to
the Venetians and greatly aided the Portuguese in establishing their
commercial supremacy. Less profitable for the latter was the possession
of their American colonies. They, as well as the Spaniards, adopted here
a policy which ultimately brought commercial and industrial ruin upon
both. Entirely neglecting agriculture and relying on the mineral
resources of their transatlantic colonies, which were believed to be
inexhaustible, they strove to amass riches by reserving for themselves
the exclusive privilege of supplying them with the manufactures of
Europe in exchange for American gold. Neglecting home industries, they
bought their supplies as well as those of their colonies in France,
Holland and England. A spirit of speculation and adventure enervated
their people, and led in time to commercial bankruptcy and political
disaster.
Spain also drained her treasury by her wars with her Dutch dependencies,
and the loss of her northern provinces was a serious blow to her
commerce. Antwerp, which had become the successor of Bruges as the
commercial emporium of the north, began to decline, and Amsterdam, the
metropolis of the new Dutch republic, became heir to its glory and its
riches. The young republic at once commenced to compete in the carrying
trade with Spain and Portugal, and to make inroads into the eastern
commerce of the latter.
The Dutch East India Company, which was organized in 1602, sent a fleet
of fourteen vessels into the Indian Archipelago to found colonies in
Java, Sumatra and the Moluccas. In a short time they had monopolized the
entire spice trade, which immediately became a source of great wealth.
A cargo of five vessels, which returned to Amsterdam in 1603, consisted
of over two million pounds of spices. This cargo was purchased for
588,874 florins and was sold for 2,000,000 florins. It is under these
circumstances not surprising that the dividends of the company's
stockholders often amounted to 75 per cent., and never went below 12-1/2
per cent. previous to 1720. Holland's colonial trade made Amsterdam the
commercial metropolis of Europe. It became the grain market from which
Spain, Italy and other countries drew their supplies. All the products
of the world found purchasers here, and a well-developed banking system
greatly facilitated the exchange. The rapid accumulation of fortunes by
the Dutch merchants and bankers was without precedent in Europe. Besides
this, the progress which Holland made in ship-building and navigation
and the advantages which she derived from her colonial trade placed her
in a position to outstrip all other nations in the carrying trade of
Europe. During the first half of the seventeenth century the Dutch were
justly called the freighters of Europe. But the injury which their
policy did to the commercial and manufacturing interests of other
European nations led both England and France to adopt measures well
calculated to accomplish, in a short time, their commercial
emancipation. Louis XIV., in order to build up French shipping,
collected a tonnage from every foreign ship which entered a French
harbor. England went still further. In 1651 Oliver Cromwell promulgated
the Navigation Act, by which foreign ships were prohibited from
importing into England any goods except such as were produced or
manufactured in their own countries. This was a heavy blow at the Dutch,
who were thus deprived of the privilege of effecting the exchange of
commercial commodities between England and her colonies as well as the
continent. The war which the Dutch Republic waged against England, to
force her to revoke this act, resulted in favor of the latter and ended
the commercial supremacy of the Dutch in Europe.
England, which before this time had played but a secondary role as a
commercial power, rose fast to prominence after her successful struggle
with the Dutch. She commenced to strengthen her industries by the
adoption of a high tariff policy, and her merchants were encouraged to
enter into commercial relations with colonists and foreigners. The
privileges which had been given to foreign tradesmen were revoked, while
ship-building and navigation were greatly favored by the government. As
England gained greater strength as a naval power, her foreign policy
became more aggressive.
In 1600 the "Company of Merchants of London Trading to the East Indies"
obtained a charter, and, in spite of Dutch and Portuguese opposition,
soon gained a foothold on the Moluccas and the coast of Malabar, whence
it extended in time its dominion to Surat, Bombay, Madras and Calcutta.
Here they built forts and established their commerce. From these places
the company pushed into the interior, until finally, after repeated
struggles with the natives and European rivals, the whole of Hindostan
came under English dominion. As its power increased, the company
commenced to abuse shamefully the monopoly which it had been granted, by
inaugurating a system of plunder and oppression which is perhaps without
its equal in the annals of history. These growing abuses led to frequent
revolts and seriously imperiled England's dominion in these territories.
To remedy these evils, Parliament at the close of the seventeenth
century annulled the charter of the company and declared the commerce
with the East Indies open to all of the King's subjects. A number of
small companies were formed, but in 1702 they all combined and organized
the East India Company. Monopoly was again established, but the patience
of the natives was exhausted, and England's interests in Hindostan were
in a critical condition. At this juncture the East India Company adopted
a policy of moderation, and this, together with the aid which the
government gave to the company, enabled it to strengthen again its
weakened commercial relations and to further enlarge its territory. But
the temptation to abuse its power was too great for this strong
corporation to be long resisted. Abuses again crept into its management
and continued to grow until its charter was finally repealed.
The policy adopted by Great Britain for the government of her American
colonies during the eighteenth century was less rapacious, but scarcely
more just than that pursued in her eastern possessions. To retain those
colonies as commercial no less than as political dependencies,
Parliament enacted laws compelling their people to trade with the mother
country exclusively and laying restraint on their manufactures. But the
American pioneers felt that they had brought with them across the ocean
the rights of Englishmen; they objected to taxation without
representation, and the men who for opinion's sake had left comfortable
homes to brave upon a distant shore the dangers of frontier life were
prepared, if necessary, to emphasize their objection by armed
resistance. England, intent upon maintaining her barbaric system of
discriminative duties and commercial monopolies, blindly attempted
coercion, but the war which resulted wrested from the English crown its
brightest jewel, and the War of 1812 established upon American soil the
principle of industrial and commercial liberty.
It must not be supposed, however, that America and the United States in
particular have been free from monopolies growing out of the
transportation business. Nothing would be farther from the truth. There
is no law so stringent but that it will be violated; there is no
government so vigilant but that it will at times be imposed upon. It is
true, our government sanctions no monopoly, but the very liberty of
action which exists here among corporations as well as individuals
offers to organized wealth and power a wide field for abuses.
We have seen in the foregoing that almost from time immemorial efforts
have been made to monopolize transportation and trade, and that these
efforts were successful whenever either from ignorance or weakness the
masses fell into political apathy. There is a natural tendency among men
to utilize commercial advantages to the detriment of others. In modern
times the opportunities for building up large monopolies have greatly
increased and have been turned to the most profitable account by
designing men. Great and even unbearable abuses have always followed
where the greed and ambition of such men have not been checked by
governmental agencies. In this respect the people of the United States
have had about the same experience as the rest of mankind. Ever since
the introduction of railroads into this country there has been a
well-marked drift toward monopolizing the transportation business.
As long as the dangers of monopoly remained unknown to the American
people, legislation for the control of railroads and other public
carriers was both scarce and crude, and shrewd railroad men were not
slow in taking advantage of the situation. It is foreign to the design
of this treatise to give a complete history of railroad monopoly in the
United States. The author will therefore confine himself to showing that
transportation companies will, like the great commercial organizations
of the past, when left to follow their instincts, invariably use their
power to oppress the public by exacting excessive charges for their
services, or to discriminate against the many by extending special
privileges to the few. Hundreds of cases might be given to illustrate
the above rule, but a history of two of these corporations will suffice
to show to what extent corporate abuses can be carried, and to serve as
a warning against the adoption of any "_laissez faire_" policy in the
railroad legislation of the future. The corporations selected for this
purpose are the Camden and Amboy Railroad and the Standard Oil
Companies, both typical representatives of the Rob Roy policy which
organized wealth has pursued since the dawn of civilization, when not
prevented by the wisdom and strength of a good government.
THE CAMDEN AND AMBOY RAILROAD COMPANY.
For almost forty years the Camden and Amboy Railroad was the only direct
route between the cities of New York and Philadelphia. It is doubtful
whether previous to the war a more important or a more remunerative road
existed in the United States, for, besides connecting the two largest
cities in the Union, it formed part of the direct land route from the
East to the South.
The efforts to open a direct through route between New York and
Philadelphia date back to the year 1812, when the construction of a
canal between the Hudson and the Delaware was proposed, but an
ill-advised jealousy of the State of Pennsylvania delayed for many years
the realization of the project. When this obstacle was finally overcome,
a change of sentiment had taken place in New Jersey. Railroads had just
made their appearance in the United States, and a large number of the
people of New Jersey preferred a railroad to a canal.
The matter was finally compromised in the legislature of New Jersey,
which on the 4th of February, 1830, simultaneously granted charters to
the Delaware and Raritan Canal Company and the Camden and Amboy
Transportation Company, fixing the capital stock of each company at
$1,000,000, with the right to increase it to $1,500,000. The charter
further stipulated what taxes should be paid to the State, and also
contained the provision that within five miles of the starting-point and
within three miles of the terminus of each line no other railroad or
canal should be built. It was believed the existence of both a water and
a land route would be sufficient to maintain competition on this
important thoroughfare of interstate traffic. The construction of the
railroad, which had been surveyed in almost a straight line between its
termini, was at once commenced. A number of well-to-do and practical men
took hold of the enterprise, among them one John Stevens, who together
with his three sons took one-half of the capital stock. The canal
project did not do so well at first. At the middle of the year 1830 only
about one-twelfth of its capital stock had been sold, and there was
great danger that the company might forfeit its charter, as the time
allowed for the subscription of its stock was nearing its end. At this
juncture Robert Field Stockton, a young man of ability, enthusiasm and
wealth, came to the rescue of the canal company. He not only bought for
himself a goodly share of the canal stock, but also prevailed on his
rich father-in-law, Mr. John Porter, to invest $400,000 in the
enterprise. The financial difficulties of the company were thus removed.
At the next session of the legislature Mr. Stockton secured an amendment
to their charter which apparently only authorized the enlargement of the
canal, but in reality empowered the canal company to construct a second
railway.
It was from the beginning Mr. Stockton's object to share with the
railroad company the advantages which their line promised to give them.
The enlargement of his company's franchise placed him in a position to
dictate terms to the Camden and Amboy Transportation Company. The latter
was given the choice, to prepare for competition with a rival railroad
line, or to consolidate with the Delaware and Raritan Canal Company. It
chose the latter alternative, and on the 15th day of February, 1831, the
two companies became one. The consolidation still required the sanction
of the legislature. This was obtained in consideration of the transfer
of 2,000 shares of the capital stock of the company to the State. It was
further stipulated that the new company should pay to the State a tax of
10 cents for each passenger and of 15 cents for each ton of freight
carried over its line through the State, as well as an annual tax of
$30,000, and that the State in return should protect the company against
any and all competition in the direct passenger and freight traffic
between the cities of New York and Philadelphia. Serious doubts were at
the time entertained by many, whether the State of New Jersey under the
Federal Constitution possessed the right to thus create a monopoly in
transportation facilities, and to regulate arbitrarily the commerce
between sister States.
Five days after it had granted this charter to the Camden and Amboy
Company, the legislature granted another charter authorizing the
construction of a railroad from Jersey City to New Brunswick on the
Raritan River. On the 23d of February of the same year a charter had
been granted by the legislature of the State of Pennsylvania to a
company which had been formed for the purpose of constructing a railroad
from Philadelphia to Trenton. This company had likewise been authorized
by its charter to buy the right of way for a railroad from Trenton to
New York, which it proceeded at once to do. It was evident that as soon
as the two new roads would meet at New Brunswick, an understanding would
be reached between them, by which another through line would be created
between New York and Philadelphia, which would have the advantage over
the Camden and Amboy road that it touched the capital of New Jersey and
could thus make itself serviceable to members of the legislature,
officers of State and influential politicians.
The Camden and Amboy Freight Company soon arrived at the conclusion that
it could not permit such rivalry. It appealed to the legislature for
protection. Resolutions were passed in its favor, but the Philadelphia
and Trenton Railroad Company paid no attention to those resolutions, but
quietly continued to lay its track. Mr. Stockton and his friends did not
dare to invoke the aid of the courts, because a judicial investigation
might have resulted in the destruction of their own charter. The
situation was critical, but Mr. Stockton was equal to the occasion. He
bought quietly a sufficient number of shares to control the management
of the Philadelphia and Trenton road, and, in April, 1836, secured the
consolidation of the Philadelphia and Trenton and the Camden and Amboy
railroad companies.
The canal of the company was not completed until 1838. It had consumed a
sum of money largely in excess of the original estimate. To connect the
two lines of the consolidated company, a branch road was constructed
from Trenton to Bordentown. Later the road from Trenton to Brunswick was
completed and an agreement entered into with the Jersey City company for
a division of the traffic of the two roads. The large cost of these
improvements suggested to the company the advisability of increasing its
revenues and of decreasing its expenditures. Its charter provided for a
payment to the State of 10 cents for each through passenger. By an
artifice the company avoided the payment of this tax. It compelled its
through passengers to walk over the bridge at Trenton and then continue
their journey by rail via Bordentown to Jersey City.
The company's charter also stipulated, that the fare between New York
and Philadelphia should not exceed $3 per passenger. Its officers
interpreted this stipulation to apply only to the intermediate traffic
and proceeded to collect $2.50 for the trip from New York to Trenton,
and $1.50 from there to Philadelphia, thus increasing the fare for the
entire journey to $4.00, one dollar above the maximum allowed by law.
One Jacob Ridgway, who was the owner of a ferry-boat at Camden, saw here
an opportunity for starting a lucrative business. He bought a steamer
and carried passengers from Philadelphia to Trenton for one-third of the
fare demanded by the railroad. After the Camden and Amboy Company had
made several unsuccessful attempts to intimidate Mr. Ridgway and his
force, one of which even brought Mr. Stockton in contact with the
criminal courts, it purchased the boat with all terminal facilities at
Philadelphia and Trenton. The attention of the legislature of New
Jersey was repeatedly called to the company's failure to comply with the
provisions of its charter, but these appeals were on the whole of no
avail. In 1842, after a long discussion, a resolution was carried
declaring the charge of $4 for the through journey illegal, but the
company entirely ignored this legislative reminder and continued its old
tariff.
The company's charter also reserved for the State the right to acquire
the Camden and Amboy road under certain conditions upon the payment of a
reasonable compensation. In 1844, through Mr. Stockton's engineering,
the constitution of New Jersey was so amended as to practically deprive
the State of the power to acquire the company's property.
During the first few years of the existence of the Camden and Amboy
Transportation Company its business was managed in the interest of its
owners, but soon a few of its leading stockholders managed to turn its
enormous profits into their own pockets. The Stevens and Stockton
families, together with two other directors of the Camden and Amboy
Company, had come into possession of a line of steamers that plied on
the Raritan, between New Brunswick and New York. The enterprise, in
spite of its largely watered capital, had been made to pay dividends
ranging from 30 to 40 per cent. Its owners saw an opportunity for a
larger field of usefulness and larger dividends. In 1834 a majority of
the board of directors of the Camden and Amboy Company proposed that the
company rid itself of the responsibility connected with the
transportation business and lease its railroad and canal. Mr. Stevens,
as representative of the Camden and Amboy Company, then negotiated with
Mr. Stevens, the representative of the Napoleon Steamer Company, and the
negotiations soon resulted in an agreement between the two companies by
which the latter leased the railroad and canal lines of the former and
agreed to pay it a fixed toll of $7.64 per ton upon all freights carried
by rail, and one-quarter of all its revenues derived from the canal.
Soon afterward the Napoleon Company entered into a similar contract with
the Camden Ferry Company and now had a complete monopoly of the
transportation business between New York and Philadelphia. It at once
commenced to develop a system of organized plunder. Instead of the
maximum charter tariff of 8 cents per ton per mile, it charged 10, 12,
and even 15 cents. The through rates charged were several times as high
as those fixed by the charter. Canal rates were raised to such an extent
as to make them prohibitory and to compel the public to ship by rail. It
is difficult even to estimate the total annual profits of the
directorial syndicate. Their accounts, if any were kept, were not
accessible, and surmises can only be based upon such data as
occasionally found their way to the public. In 1845 the share of the
canal tolls paid to the company's stockholders was $359,000. The
directors' share under the terms of their lease is thus found not to
have been less than $1,077,000. Another item of $170,000, tolls
collected for the transportation of 27,000 tons of freight, was so
divided that the Camden Ferry Company, or its other self, the
directorial syndicate, received $32,000 for one mile, while the Camden
and Amboy Railroad Company received $63,000, or less than twice as much,
for ninety-two miles. The directors under their lease were entitled to
the remaining $75,000.
The service of the company was as bad as it was expensive; its trains
were slow and irregular, and its employes arrogant. The syndicate which
controlled the company defied its stockholders, the public and the
courts alike. When one of the stockholders, a Trenton merchant by the
name of Hagar, applied to the courts for an order to compel the
directors to produce their books and render an account, the syndicate
bought Mr. Hagar's shares, for which he had paid $125 a share, at the
price of $1,456 a share. The suit was then withdrawn and the matter
hushed up.
In 1848 a number of articles appeared in a paper published at
Burlington, Pa., which were signed by "A Citizen of Burlington" and
contained much surprising information concerning the Camden and Amboy
Transportation Company. It was charged that the directors had defrauded
both the State and the company's stockholders of large sums of money,
that they had grossly violated their charter by charging illegal and
extortionate rates, oppressive to both commerce and travel. It was shown
that while the average rate per ton per mile of thirty-five neighboring
roads was 2.85 cents, that of the Camden and Amboy Company was 4.54
cents. It was also shown that neither the stockholders nor the State had
received the share of the company's revenues to which they were
entitled. These articles were extensively reprinted and caused a great
commotion wherever they appeared. After the first storm had subsided the
directors issued an address to the people of New Jersey, in which they
bitterly complained of the people's loss of confidence in their
integrity, and declared that the charges preferred against them were
founded on falsehoods.
The "Citizen of Burlington" replied by accusing the directors of
defalcation and falsifying their books. He charged that from 1840 to
1847 no account had been rendered of the receipt of no less than
$5,266,431, on which $493,066 was due to the State. As soon as the
legislature convened, a resolution was introduced that a commission be
appointed to investigate the charges preferred against the Camden and
Amboy Transportation Company. The resolution was adopted, but it was
virtually left to the accused to select the members of the commission.
That the directors had a guilty conscience appeared from the fact that
the last annual report of the company, which had just been printed, was
withdrawn and destroyed. To silence their unknown accuser, they
threatened him with criminal prosecution. He now gave his name. It was
Henry C. Carey, the noted writer and authority on political economy. Mr.
Carey did not give up the contest. He proceeded to show how the policy
of the managers of the Camden and Amboy Transportation Company depressed
commerce, manufactures and agriculture alike. He showed how the company
as a public carrier discriminated in favor of industries which they
carried on as private individuals. He claimed that the company had
forfeited its charter, and that it was the duty of the State to
authorize the construction of another road. In the meantime, early in
1849, the legislative investigation committee submitted its report. It
was perhaps as shameless a document as was ever placed before a
legislative assembly. It lauded the directors, to whose influence the
members of the commission owed their selection, and whitewashed their
past management of the company's affairs.
But the people of New Jersey were far from being satisfied with this
report and demanded the appointment of another committee. Another
investigation was ordered, and this time the company, or rather its
directors, found it impossible to control the selection of its members.
Soon after their appointment the committee asked Mr. Carey to lend them
his assistance in their labors, and he readily consented. During the
summer of 1849 the members of the committee had occasion to go to
Bordentown, to inspect the company's books. From that time on a
wonderful change seemed to have come over the committee. They found they
could dispense with Mr. Carey's further services. What had previously
appeared to them a ring of rapacious monopolists seemed now an
association of worthy philanthropical gentlemen. In their report to the
legislature they completely exonerated the company's managers. They
admitted that the State had not been paid all that was due to it, but
they asserted that this difference in the company's accounts was due
solely to clerical errors, for which the management were in no wise
responsible. The report was accepted, although not even the annexed
testimony supported it, and thus the matter was dropped.
This was a great victory for Mr. Stockton and his friends. It
demonstrated the success of their methods of dealing with public
servants. Mr. Carey repeated his charges, but the directors failed to
prosecute him for libel as they had threatened. He asked that he be
permitted to inspect the company's books, but was met with a peremptory
refusal. Public opinion was defied, and the old methods were continued.
The extortionate and discriminating tariff of the only through route of
New Jersey affected seriously the agricultural as well as the commercial
interests of that State. The Camden and Amboy monopoly kept the State of
New Jersey for many years far behind the New England States in railroad
facilities. In 1860 New Jersey had only one mile of railroad for every
17.6 square miles of territory, while the proportion of miles of
railroad to square miles of territory for the same year was 1 to 7.9 in
Connecticut, 1 to 7.6 in Rhode Island, and 1 to 6 in Massachusetts. At
present New Jersey has one mile of railroad to every 3.79 square miles,
and therefore leads all the States in the Union in density of railroad
track.
The question may be asked how the Camden and Amboy Transportation
Company, or rather the syndicate which controlled it, contrived to
maintain its power for so many years, to the great detriment of industry
and commerce. The only answer that can be given is that the men for whom
the maintenance of the monopoly was a source of great wealth were
constantly using a part of this wealth for the corruption of those who
were in a position to influence public opinion or to direct the policy
of the State. Prominent politicians were favored with passes, attorneys
were retained by the company as local solicitors, corrupt and servile
legislators were bribed by money or the promise of lucrative positions,
and newspapers were given large subsidies. In addition to this public
men were constantly made to realize the political power of the company,
whose many employes had always been trained to do the bidding of their
masters. If the opposition, in spite of this, was ever successful at
legislative elections, the company's managers found it less expensive to
gain the good will of a few members of the legislature after election
than it would have been to gain the good will of their constituents
before election. Dissatisfied stockholders who threatened with judicial
investigation were quietly bought out or impressed with the danger of
inviting public discussion in regard to the validity of the company's
charter, as it might lead to its annihilation. The good people of New
Jersey made several attempts to rid the State of the despotism of the
company by making the question a political issue, but they were each
time defeated through the lavish and scandalous expenditure of the
company's money.
The original charter of the Camden and Amboy Railroad Company was
granted for a period of twenty years, and should have expired in 1853,
but its managers succeeded in having it extended to January 1, 1859. In
1854 another extension was asked for, and after a long and bitter debate
the company was again triumphant. An act was passed on the 16th of
March, 1854, making it illegal to build previous to the first day of
January, 1869, without the consent of the Camden and Amboy
Transportation Company, a railroad in the State of New Jersey for the
transportation of passengers and freight between New York and
Philadelphia. At the end of this period even a third extension was
granted, and the company, though after January 1, 1867, under a new
name, maintained its monopoly until it consolidated, in 1871, with the
Pennsylvania Railroad Company.
That the spirit of the past is still at work was shown by the recent act
of the legislature of New Jersey legalizing the consolidation of the
coal roads. The coal barons found the legislature as servile as the
managers of the Camden and Amboy Railroad Company had found them of
yore, and their well-planned scheme would probably have been successful
had it not been for Governor Abbot's courageous veto of the disgraceful
act, and it is more than probable that they will yet succeed. They have,
in fact, during the last year advanced the price of coal about one
dollar per ton.
THE STANDARD OIL MONOPOLY.
The Standard Oil monopoly may be said to be the crowning monument of
corporation conspiracy. It is, indeed, doubtful whether the combined
brotherhoods of mediaeval knights ever were guilty of such acts of
plunder and oppression as the Standard Oil Company and its railroad
allies stand convicted of before the American people. The facts that
have been unearthed by official investigations show a frightful
prevalence of corporate lawlessness and official corruption, and there
can be no doubt that, could certain high railroad dignitaries have been
compelled to testify, and could the truth have been fathomed, it would
have been found that not only the public, but railroad stockholders as
well, were victimized by those transactions.
The founder of the Standard Oil monopoly was some twenty years ago part
owner of a petroleum refinery at Cleveland, Ohio. His fertile brain
conceived the thought that with the cooperation of the railroad
companies a few men of means could control the petroleum business of the
United States. With this end in view he approached the managers of the
New York Central, the Erie and the Pennsylvania Central railroad
companies, and on January 18, 1872, entered with them into a secret
compact by which they agreed to cooperate with the South Improvement
Company (an organization formed by that gentleman to aid in the
accomplishment of his designs) to grant to said companies certain
rebates and to secure it against loss or injury by competition. The
South Improvement Company, in consideration of these favors, guaranteed
to the railroad companies a fair division of its freights. The existence
of this contract soon became known and caused a violent protest among
the oil-producers. An indignation meeting was held and a committee was
appointed to wait on the railroad managers and demand fair treatment for
all.
The railroad companies yielded and promised to give equal rates to all
shippers and to grant to no person either rebates or any other advantage
whatever. New rates were fixed for the transportation of both crude and
refined oil, and it was agreed on the part of the railroad companies
that at least ninety days' notice should be given of any change that
might be made in the rates. Steps were also taken to have the charter of
the South Improvement Company canceled because it had been found that it
was neither the owner of a refinery nor of an oil well, and could
therefore not comply with the legal requirements concerning the
organization of stock companies. While the South Improvement Company
thus came to a sudden and rather inglorious end, its founders soon
contrived other means to carry out their ingenious plans. They bought a
refinery, reorganized by taking the prepossessing title of Standard Oil
Company, and were now prepared to resume their operations under the
guise of legal authority.
The railroad companies seemed to have relished their novel business
connections, for, without paying the least attention to the agreement
into which they had entered with the other producers and refiners of
oil, they extended the privileges of the defunct South Improvement
Company to its successors. The new company received secret rebates
ranging from 50 cents to $1.32 per barrel. The agreement also contained
the stipulation that if lower rates should ever be granted to their
competitors, an additional rebate should be given to the Standard Oil
Company. Endowed with these privileges, the favored company proceeded to
unite under its banner, by consolidation, purchase or lease, the
leading refineries of Cleveland.
The effect of the discriminations practiced against independent
refineries soon became apparent. In less than two years there were
closed in Pittsburgh twenty-one refineries, that represented an
aggregate capital of $2,000,000 and had given employment to over 3,000
people. A large number of the remaining refineries were forced to
consolidate with the Standard Oil Company.
The next step toward the entire suppression of competition was an attack
planned against the independent pipe lines. The Standard had early
secured control of the United Pipe Line. To exterminate competing lines,
they again appealed to the railroad companies, and on the 9th day of
September, 1874, J. H. Rutter, general freight agent of the New York
Central, issued a new oil tariff which discriminated greatly in favor of
the oil brought by the United Pipe Line to the refineries. Up to that
time this company had done from 25 to 30 per cent. of the total business
of the various pipe lines. Within one year after the adoption of the new
tariff it did fully 80 per cent. of the entire business. This forced the
independent lines either to sell out to the Standard or to suspend
business, for the latter's rebate was larger than their toll. The oil
tariff of the Pennsylvania Central compelled the independent Pittsburgh
refiners to ship their refined oil over that company's line, if they
would avail themselves of the rebate which it granted on the rates for
the transportation of crude oil to Pittsburgh. The evident purpose and
the effect of such a tariff was to prohibit oil shipments over the
Baltimore and Ohio. Had this road made ever so reasonable a tariff, the
combined charges for the transportation of the crude petroleum from the
oil regions to Pittsburgh by the Pennsylvania Central, and for that of
the refined oil to the sea coast by the Baltimore and Ohio, would still
have been prohibitive in competition with the special transit rates
granted to the Standard Oil Company. As a remedy it was proposed to
organize a new pipe line, it being believed that the crude oil could be
brought to Pittsburgh by that line, refined there, shipped to the
seaboard by the Baltimore and Ohio, and sold there at as good or even a
better profit than the product of the Standard, notwithstanding the
favors received by the latter from the allied trunk lines. This movement
resulted in the creation of the Columbia Conduit Company, which at once
proceeded to lay its pipes from the oil wells to Pittsburgh. Under the
laws of the State of Pennsylvania it became necessary for this company
to obtain the permission of property-holders to lay the pipes through
their lands. Consent was everywhere readily given, and the pipes were
laid without hindrance until the track of the Pennsylvania Railroad was
reached, within a few miles of the Pittsburgh refineries. This company
peremptorily refused to let the pipes be laid under its track. The pipe
line company after some delay contrived a way to obviate the difficulty.
It laid its pipes on each side of the road as close to the track as it
could without trespassing against the legal rights of the Pennsylvania
Central, and then conveyed the oil from one side of the track to the
other by means of large oil tanks on wheels, which could not be
prevented from passing over the railroad track at the public crossing.
After several months the railroad company allowed the pipes to be laid
under its track, but it soon appeared that another combination had been
effected to destroy the value of this concession. A railroad war had
given the three trunk lines an opportunity to force the Baltimore and
Ohio into the pool. A uniform rate of $1.15 was established for
shipments of refined petroleum from any point to the seaboard. While
this was in itself an unjust discrimination against Pittsburgh, which is
250 miles nearer tidewater than Cleveland, the railroads in addition
granted the Standard secret rebates which enabled it to sell its oil on
the coast for less than the sum of its first cost at the refineries and
the open rate of transportation to the points of export. The independent
refiners of Pittsburgh found themselves again cut off from the market,
but necessity soon made them discover another outlet. Shipping their oil
down the Ohio River to Huntington, W. Va., they had it taken by the
Chesapeake and Ohio Railroad to Richmond. In spite of the fact that this
route was more than twice as long as the direct line from Pittsburgh to
the seaboard, and in spite of the further fact that it necessitated an
expensive transfer, a rate equal to about two-thirds of the trunk line
rate for the direct shipment proved remunerative to the Chesapeake and
Ohio. The independent refiners kept up their competition for some time,
but the great disadvantage of river travel and the insufficient export
facilities of Richmond finally forced them to give up the contest.
Until the year 1877 the Standard Oil Company had worked hand in hand
with the railroads. It had obtained all its privileges by asking for
them and by holding out inducements to railroad managers to grant them.
It now commenced to dictate terms to refractory railroad companies.
The Pennsylvania road ventured to carry oil not the property of the
Standard on terms which that company did not approve. The latter ordered
the road to refuse to carry the product of their competitors. This the
railroad company declined to do, and the Standard at once withdrew its
custom. The Pennsylvania retaliated by carrying the oil of the
independent refineries at merely nominal rates and even went so far as
to make its rates dependent upon the profits realized by the shippers. A
fierce freight war was thus precipitated, in which the Erie and New York
Central supported the Standard Company. The Pennsylvania road was soon
forced to surrender and sign an ignominious treaty.
The Baltimore and Ohio, which had again commenced to carry the product
of those Pittsburgh refineries which received their crude oil through
the Columbia Conduit Company, was in a similar manner forced to reject
their freights. The pipe line, whose value was thus almost entirely
destroyed, was soon after sold to the Standard Oil Company. This company
had now an almost complete monopoly of the oil business of the United
States, and still it was not satisfied. It appears that some of the
producers of crude oil had been in the habit of shipping a part of their
product in spite of the advantages which the Standard had through its
rebates. To prevent even these shipments, or rather to exact another
tribute from railroad stockholders, the American Transfer Company, one
of the auxiliaries of the Standard Oil Trust, in 1878, demanded and
received from the Pennsylvania road a "commission" of 20 cents a barrel
on all shipments of petroleum _made by any_ shipper. It had been shown
to the satisfaction of the Pennsylvania Railroad Company that similar
commissions, ranging from 20 to 35 cents a barrel, were being paid by
the New York Central and Erie roads.
When, in 1879, an effort was made to establish a pipe line from the oil
regions to the seaboard, nothing was left undone by the trunk lines to
thwart the enterprise. The new company finally succeeded in making
connection with a railway which had no part in the pool, and there was
some hope that under this arrangement competition might at least be
maintained at some points. The Standard Company again appealed to the
trunk lines to protect it against injury by competition and obtained
from them a special rate of 20 cents per barrel, which rate was even
reduced to 15 cents per barrel two months later. Against such a rate it
was impossible to compete, and after a short struggle the new line found
itself compelled to sell its works to the Standard.
To crown its monopoly, the Standard Oil Company finally bought of the
New York Central and Erie roads their terminal facilities for the
transportation of oil, and thereby made it virtually impossible for them
to transport oil for any of its few remaining competitors. Mr. Josiah
Lombard, part owner of the New York refinery, stated in 1879 before the
investigating committee of the legislature of New York that in 1878 he
had requested the Erie Company to transport for him 100 cars of crude
oil from Carrollton to New York; that he had called upon Mr. Vilas, the
general freight agent of the company, in person, but had never been able
to obtain the cars, though the oil had been held in Carrollton three or
four months ready to be loaded. This gentleman also testified that he
had found it impossible to obtain cars from the New York Central, and
that the company's general freight agent had informed him that the road
did not own and could not furnish any oil cars.
After the Standard Oil Company had secured control of the various pipe
lines of the oil regions, it frequently lowered the price of crude oil
to such an extent as to make its production unprofitable. It even
refused to buy oil, basing its refusal upon the ground that the railroad
companies failed to furnish cars for its transportation. When the
well-owners had their tanks filled, they had the choice to let the oil
run away or to be at the expense of closing up their wells. In one
instance, however, when their ruse threatened to cause a riot, several
hundred cars were brought to the wells within a few hours.
The Standard Oil Trust, not satisfied with the monopoly of the wholesale
trade, even tried in places to control the retail trade by peddling oil
at private houses. This method of destroying competition was chiefly
resorted to where independent dealers obtained their supply by a water
route.
That many of the deeds of the Standard are dark is evident from the fact
that its members, when summoned by the Hepburn committee, declined to
testify, lest their testimony be used to convict them of crime.
Officials of the trust have bribed or attempted to bribe employes of
rival firms, for the purpose of ruining their business. By its peculiar
methods the company has been successful in courts of justice and
legislative halls, and has enjoyed an impunity for its conspiracy
against the public that is without precedent in America. It has
accumulated a capital of more than $100,000,000, and it is even claimed
that for years its annual dividends have exceeded in amount the capital
actually invested. This is not at all strange when it is considered that
they have levied upon the producers, consumers and transporters alike.
Mr. Cassat testified before the New York investigating committee that in
eighteen months the railroads had paid the Standard in rebates no less
than $10,000,000. And the very payment of these enormous rebates
enabled the Standard to decrease the price of oil to the producer and to
increase it to the consumer.
It is claimed by the defenders of the Standard monopoly that under the
trust the price of petroleum has been constantly decreased to the
consumer. That the price of kerosene is lower now than it was fifteen
years ago is undoubtedly true, but the reductions were brought about not
by the trust, but in spite of the trust. The price now maintained is an
unnatural one. The Standard Oil Company never lowered the price of its
oil except when compelled to do so by competition. The largely increased
output of crude oil, the improved methods of refining, the greatly
lowered cost of transportation would have lowered the price of coal oil
without the philanthropy of the Standard Oil Company. Iron, steel,
calico, woolen goods and a thousand other commodities have within almost
the same period suffered much larger reductions than coal oil. But even
if the Standard monopoly had voluntarily lowered the price of its
products, the American people could never approve of its methods. They
can never be made to believe that the end sanctifies the means,
especially when those means are railroad favors, secret combinations,
bribery, intimidation and lawless arrogance.
Many other interesting cases might be given. The Southern Pacific
Railway Company, for instance, owns nearly all of the railways of
California, and enjoys at the present time almost a complete monopoly of
the transportation business of that State and much more of the Pacific
Coast. Perhaps no set of managers would be more considerate of the
people's rights in the absence of legal restraint than those in charge
of this company, yet there is not a business man on the Pacific Coast
who comes in contact with this company who does not realize and feel
the power of its iron hand, unless it be those who for various reasons
are recipients of its special favors. It has become notorious that the
legislature, Board of Railroad Commissioners and some of the judges of
the courts of that State are as servile to the demands of this railway
company as are its own employes.
The railway company is a closely organized body of shrewd, active men,
while those who furnish business for it are not organized, and they will
never be able to properly protect their own interests until they control
the machinery of their State government.