The people who live in cities are far more dependent on monopolies than
the resident of the country. The farmer can still, on necessity, return
to the custom of primitive times, and supply himself with food,
clothing, fuel, and shelter without aid from the outside world; but the
city dweller must supply all his wants by purchasing, and is absolutely
dependent on his fellow-men for the actual necessaries, as well as the
luxuries of life. From the peculiar circumstances of city life, many
monopolies arise in production and transportation which occur nowhere
else. One of these is the carriage of passengers on street and suburban
railways. There is no better instance, perhaps, of the great power which
is placed in the hands of railway managers than this matter of suburban
passenger traffic. One example must suffice to show this. Let us suppose
that the managers of a railway, which has hitherto not been run with a
view to the development of suburban traffic, secure control of several
choice tracts of land on the line of their road near a growing city, and
establish low rates of commutation and frequent and convenient train
service. The land which they purchased is sold out in building-lots for
many times its cost, and a number of thriving villages become
established there, inhabited chiefly by people whose business is in the
city and who are obliged to go back and forth on the trains. After a
number of years the growth of the towns becomes more sluggish, and the
managers find that the commutation traffic is not after all extremely
profitable; therefore they lessen their train service and increase the
rates of fare. Perhaps they may abolish commutation rates altogether. It
is a well known fact that the value of suburban real estate depends
almost entirely on the convenience and cheapness of access to the city.
By the removal and forced sale, which many of these people will be
obliged to make, it may easily happen that they may lose their entire
property. It is not stated that such flagrant cases of autocracy on the
part of railway managers are common. Indeed, it is a high compliment to
the uprightness and probity of these men that such occurrences are so
infrequent, and that the temptation, so constantly presented, of
enriching one's self at the expense of the owners of the road and the
public is yielded to so seldom. But there have been cases where railway
managers have secured excellent train service and low rates of fare to
benefit places where they held an interest in real estate, while other
and competing places were given poor service and high rates. And the
entire abolition of long-established commutation rates has happened more
than once.
But turning now to the city railways proper, those carrying passengers
through the streets, it is evident at first sight that we have another
case where competition is a factor of little account. The power of this
monopoly for harm is greatly intensified by the fact that its use is
largely a necessity. In all our great cities the business sections are
far removed from the residence sections, and the great mass of the
industrial population is _obliged_ to ride at least twice each day in
going to and returning from work. In nine cases out of ten there is one
route so much more convenient than any other as to overbalance any
slight difference of fare. Thus, even on the supposition that every
different line was run in competition with every other line, the amount
of really competitive business would be but a trifle. But besides this,
as is well known, in a great many cities consolidation has gone on as
rapidly among street-railway companies as among the great trunk-line
railways. The three lines of New York elevated roads were originally
projected by rival companies; but they were not long in coming together
under one management. A Philadelphia syndicate has secured control of
most of the street railways of that city, and in addition has purchased
a number of the lines in Boston, Chicago, Pittsburg, and St. Louis.
Although the benefit in economy by consolidation is much less in the
case of street railways than in the case of steam roads, yet
considerable is gained, and the competition which is killed by the
consolidation is, as we have just seen, of no great importance to the
public. The so-called street-railway trust, then, is really of no great
moment. The monopoly in street-railway traffic arises from the nature of
the business rather than from any especial effort of capitalists to kill
competition.
But the railway companies are not the only monopolies which have the use
of our city streets. Water, gas, and steam pipes beneath the pavements,
and wires, either in subways or strung overhead, carrying electricity
for street and domestic lighting, telegraph, telephone, and messenger
service, are all necessities to our modern civilization.
The absolute necessity of a public water supply, and the practical
impossibility in most cases that any competition in the furnishing
thereof can be established and maintained, have led, in the case of most
of our large cities, to the work of water supply being undertaken by the
municipal authorities. But many of our smaller cities have entrusted to
private companies the work of furnishing a water supply. While this is a
case of real monopoly, yet under the conditions which may be enforced,
most of the power for harm is taken away. According to the best plan in
vogue, the city sells the franchise for constructing the works to the
company who bids to furnish water at the lowest rates under definitely
specified conditions, the franchise being sometimes perpetual, but
oftener granting to the city at some future date an option for the
purchase of the works. It is to be particularly noticed that this is a
case in which the administration of an absolute monopoly has been
entrusted to private enterprise with excellent results; a fact which may
be of use to us in our later investigation.
While the fact was early appreciated that a water supply when once
introduced became an absolute necessity, it was not recognized when
illuminating gas was first brought into use how important it was to
become. Franchises, or more properly permits, for erecting works and
laying mains for supplying consumers were given away to hastily formed
companies; and even at the present time there are but a few cities (only
five in the United States) which own their works and mains for supplying
gas. As a matter of course the gas companies saw their advantage.
Knowing that gas once introduced was a necessity at almost any price,
they made no move toward lowering rates as new and cheaper methods came
into vogue and their output and profits increased. The stocks of our
gas companies have been swollen by enormous amounts of water, and upon
this fictitious capital they have continually paid enormous dividends.
At one time there was a great call for competition in the gas business.
The public demanded it, and as usual the demand was supplied. Rival
companies were organized, and the city authorities made haste to grant
them permits for laying their mains in the city streets. A war of rates
of course ensued, and lasted till one company gave up the fight and sold
out to its rival. The consolidated company promptly increased its stock
by at least the amount which had been spent in purchasing and laying
this extra and entirely needless set of gas mains. The public has to pay
interest on this sum, and suffer besides the damage done to the
pavements by tearing up and re-laying.
In at least twenty cities of the United States has this farce been
repeated, and in every case with the same result. It is now generally
acknowledged that the attempt to regulate the price of gas by
competition is unwise and harmful. Prof. E. J. James, of the University
of Pennsylvania, in a monograph entitled "The Relation of the Modern
Municipality to the Gas Supply," has treated this subject most fully. He
describes the experience of cities in England, France, and Germany,
where competition has been tried and abandoned, it being found by dear
experience that the gas business is necessarily a monopoly. A
Congressional Committee, who reported on the application of a rival gas
company which proposed to lay mains in the city of Washington, declared
that "it is bad policy to permit more than one gas company in the same
part of the city." One of the best informed men in the gas business
says: "The business is almost outside of the domain of rules governing
other enterprises. Competition is so deadly to it that it is impossible
for rival companies to occupy the same street without ruin to both, or
without consolidation with its attendant double investment, and cheap
light is thus rendered an impossibility."
Hon. T. M. Cooley says:
"The supply of public conveniences to a city is usually a monopoly,
and the protection of the public against excessive charges is to be
found first in the municipal power of control. Except in the very
large cities, public policy requires that for supplying light and
water there should be but one corporation, because one can perform
the service at lower rates than two or more, and in the long run
will be sure to do so. In some kinds of business competition will
keep corporations within bounds in their charges; in others it will
not. When it will not, it may become necessary to legislate upon
profits."
Considering it determined, therefore, that the gas industry is a
monopoly, let us inquire something of the manner in which this monopoly
regulates the prices for its service. According to recent statistics,
collected from 683 gas companies in the United States, 148 companies
charge $2 per thousand cubic feet, and 145 companies charge $2.50 per
thousand. It is thus seen that rates have been fixed to make "even
figures," something which does not occur when margins of profit are
reduced by competition. The complete table shows this fact more fully as
follows:
7 companies charge $1.00 per thousand cubic feet.
32 " " 1.50 " " " "
24 " " 1.75 " " " "
148 " " 2.00 " " " "
57 " " 2.25 " " " "
145 " " 2.50 " " " "
20 companies charge 2.75 per thousand cubic feet.
86 " " 3.00 " " " "
25 " " 3.50 " " " "
19 " " 4.00 " " " "
120 companies charge various other prices per thousand cubic feet.
According to the same authority these companies in 1886 produced
23,050,706,000 cubic feet of gas, for which they received $40,744,673,
an average price per M. of $1.76-71/100. According to the statement of
good authorities, gas can be manufactured at a cost of 50 to 75 cents
per M. in this country. Prof. James, in his work before quoted, says:
"In England at the present time gas is manufactured at a net cost of 30
cents per thousand feet; some works in New England now manufacture it
for 38 cents per thousand feet to the holder." The President of the
American Gas-Light Association is quoted as stating in an address before
the Association that the cost of the gas delivered to consumers by the
South Metropolitan Company of London in 1883 was 39.65 cents per
thousand, and figuring by the relative cost of coal and labor there and
here, he stated that gas could be delivered in New York at a cost of 65
cents per thousand. In Germany the price of gas to consumers varies from
61 cents in Cologne to $1.02 in Berlin. Very recent improvements in
processes have greatly cheapened the cost of manufacture. Mr. Henry
Woodall, the engineer of the Leeds, England, gas-works, states that
coal-gas costs in the holder 22 cents per thousand. Of nineteen
companies doing business in principal English cities, the average rate
charged consumers is 52½ cents, and the average cost of manufacture
is 37-1/3 cents.
The history of the gas monopoly is repeating itself in the matter of
electric lighting. The smaller cities of the country, in their haste to
"boom," are ready to grant a liberal franchise to the first firm or
company which offers to supply an electric-lighting system, trusting to
future competition to regulate prices, a resource that must prove of no
avail. Nor are the men in power in our larger cities any wiser. The city
of New York is taking every means to encourage the operation of rival
electric-light companies, and is letting yearly contracts for
street-lighting to the lowest bidder. It is true that competition is
active just now, but it requires no far-seeing eye to discern the
inevitable combination and consolidation among the companies.
Again, not only is competition of this sort sure to fail, but the
attempt to establish it is very harmful. To say nothing of the expense
and waste of wealth which is involved when rival companies are allowed
to stretch their wires and establish their extensive central stations in
the same district, it is everywhere acknowledged that the multiplication
of wires overhead is a crying evil and danger. Are we to double and
treble it, then, by permitting rival companies to place their wires
wherever they please? It is evident that the temporary rivalry which we
obtain in this way is bought at much too great a cost. What is true of
electric street light wires is equally true of the vastly greater
multitude of wires which belong to our rapidly growing system of
domestic lighting, and the telegraph, telephone, and messenger service.
Surely no man knoweth the beginning or the end of the network which is
woven over our heads, and which, besides all the useful wires already
enumerated, is full of "dead" wires, many of them strung by defunct or
irresponsible companies, who would never have been allowed to obstruct
the streets if they had not been "competing" for the business. Can there
be any doubt that it is the height of folly to continue this work, and
that the only rational way of entrusting electric service to
incorporated companies is to permit but a single company to operate in a
district and control prices by some other means than competition?
We have the beginnings of other monopolies in our city economies which
are destined to become much more important, but to which we need only
refer.
Steam for supplying heat and power is beginning to be distributed from
great central stations, through mains laid underground, to all parts of
the surrounding district. The necessity for frequent repairs and
stoppage of leaks renders it necessary to break the pavement and dig
down to the mains much oftener than is required for any other of our
underground furniture. Nothing would seem more evident than that the
number of these pipes to be laid should be the fewest consistent with
the proper supply of the district, yet it is a fact that for a time two
competing steam companies were permitted to run riot in the streets of
lower New York, until the weaker one succumbed "to over-pressure." Yet
it is scarcely to be doubted, that if another rival company were to ask
for a permit to operate in the district now monopolized by the New York
Steam Company, public opinion would tend to favor the granting of the
permit "because it would give more competition." It is to be hoped that
before these great systems for the distribution from central stations of
various necessities reach much greater proportions, the public will
become educated enough to perceive the folly of attempting to regulate
them by competition.
The necessity for this will be more, rather than less, apparent with the
use of underground instead of overhead wires. The cost of placing wires
in subways is far beyond the cost of stringing them on poles, and if we
are obliged to build our subways large enough to accommodate all the
rival wires which may be offered, we have a herculean task upon our
hands.
The great question of the monopoly of land can be merely touched in this
connection. While the fact that land is natural wealth must be freely
acknowledged, it is only where population is most dense that any great
monopoly appears in its ownership. The principle is well established,
indeed, that private ownership of land cannot stand in the way of the
public good. When a railway is to be built, any man who refuses to sell
right of way to the railway company at a reasonable price may have it
judicially condemned and taken from him. We have already noted in the
chapter on railway monopolies the injustice of permitting a single
person or corporation to control and own any especially necessary means
of communication, as a mountain pass or a long and expensive bridge, and
the same principle is apparent in connection with the railway terminals
in our large cities. The enormous expense attendant upon securing right
of way for an entrance to the heart of the city, makes it a very
difficult matter for any new company to obtain a terminus there, except
by securing running rights over the tracks of an older company. To give
to any single corporation the sole control of the entrance to a city
_and permit it to charge what toll it pleases_ for trains that pass
through it, evidently places the city at the mercy of a monopoly.
Practically the case is not so bad as this, as most large cities have
means of water communication, and the railroads are run to the heart of
the city through the public streets. But the time is fast approaching
when these city grade crossings will be done away with, and in every
city of importance the railways will enter the city on elevated viaducts
terminating in a single union depot. Evidently it is contrary to the
public welfare to sink more capital in these expensive structures than
is necessary; and in general, several companies will use a single
structure for entrance and exit. It is evident that the control of these
terminals, if vested in a single company, may give rise to just the
abuse we have set forth; and that the city itself should retain enough
control over its railway terminals and freight-transfer lines to ensure
that no single carrier or combination shall monopolize them.
In the last analysis it is evident that the monopoly of entrance to a
city is really a monopoly in land, or, we might more properly say, in
space. We are fortunate in this country in having millions of acres of
land still awaiting cultivation; and while it is not intended here to
defend the policy of _giving away_ the estate of the public which our
government has pursued, there is no danger for a long time to come that
an actual monopoly will exist in agricultural lands. The price of land
used for business purposes in a city, however, depends almost wholly
upon its location. The price at which a single block of land near Wall
Street, in New York City, was recently sold was so great that, at the
same price, the value of a square mile would be equal to half the whole
estimated wealth of every sort in the United States.
Now the question must occur to every thinking man, by what right does
the owner of this property receive this enormous wealth? To make the
case of those who advocate the public control of the gifts of Nature
more clear, let us consider a special case. Suppose a man in an Eastern
city chanced to come into possession two-score years ago of a tract of
land in what is now Kansas City. We may suppose that he got it by
inheritance, or through some chance, and that, except to pay the taxes
upon it, he has never given farther attention to it. During all the
years of the city's rapid growth he pays no attention to his land and
takes no part in furthering the growth of the city. At last, at the
height of the real-estate boom, he sells the land, and, whereas it cost
him in the first instance a merely nominal sum, perhaps $100, he sells
it now for $100,000. This value it has, not because of itself, as is the
case with farming lands, but because of its situation in reference to
the community around it. In other words, practically the whole value of
this land has been given it by the people who have come and built this
city around it. It is their labor that has given this property its
value, and, in equity, the value should be theirs. A more detailed
statement of the arguments for the public control of land incomes cannot
be given here. What we are concerned with here is the extent to which
land is subject to a monopoly. It appears too evident to require further
discussion that, as a general rule, agricultural lands in every section
of the country are competing to a greater or less extent with lands in
every other section, and that the lands used for business purposes in
the cities compete likewise, each city with others neighboring and of
similar size, while lands in the same city similarly situated compete
with each other.