To prevent the recurrence of evils of this character not only was the

clause inserted in the constitution prohibiting the states from issuing

bills of credit and making anything but gold and silver a tender in

payment of debts, but also the more general prohibition, from passing

any law impairing the obligation of contracts. "To restore public

confidence completely," says Chief Justice Marshall, "it was necessary

not only to prohibit the use of particular means by which it might be

effected, but to prohibit the use of any means by which the same

mischief might be produced. The convention appears to have intended to

establish a great principle, that contracts should be inviolable."

It would require very clear evidence, one would suppose, to induce a

belief that with the evils resulting from what Marshall terms the system

of lax legislation following the Revolution, deeply impressed on their

minds, the framers of the constitution intended to vest in the new

government created by them this dangerous and despotic power, which they

were unwilling should remain with the states, and thus widen the

possible sphere of its exercise.

When the possession of this power has been asserted in argument (for

until now it has never been asserted in any decision of this court), it

has been in cases where a supposed public benefit resulted from the

legislation, or where the interference with the obligation of the

contract was very slight. Whenever a clear case of injustice, in the

absence of such supposed public good, is stated, the exercise of the

power by the government is not only denounced but the existence of the

power is denied. No one, indeed, is found bold enough to contend that if

A has a contract for one hundred acres of land, or one hundred pounds of

fruit, or one hundred yards of cloth, congress can pass a law compelling

him to accept one-half of the quantity in satisfaction of the contract.

But congress has the same power to establish a standard of weights and

measures as it has to establish a standard of value, and can, from time

to time, alter such standard. It can declare that the acre shall consist

of eighty square rods instead of one hundred and sixty, the pound of

eight ounces instead of sixteen, and the foot of six inches instead of

twelve, and if it could compel the acceptance of the same _number_ of

acres, pounds, or yards, after such alteration, instead of the actual

_quantity_ stipulated, then the acceptance of one-half of the quantity

originally designated could be directly required without going through

the form of altering the standard. No just man could be imposed upon by

this use of words in a double sense, where the same names were applied

to denote different quantities of the same thing, nor would his

condemnation of the wrong committed in such case be withheld, because

the attempt was made to conceal it by this jugglery of words.

The power of congress to interfere with contracts for the payment of

money is not greater or in any particular different from its power with

respect to contracts for lands or goods. The contract is not fulfilled

any more in one case than in the other by the delivery of a thing which

is not stipulated, because by legislative action it is called by the

same name. Words in contracts are to be construed in both cases in the

sense in which they were understood by the parties at the time of the

contract.

Let us for a moment see where the doctrine of the power asserted will

lead. Congress has the undoubted right to give such denominations as it

chooses to the coins struck by its authority, and to change them. It can

declare that the dime shall hereafter be called a dollar, or, what is

the same thing, it may declare that the dollar shall hereafter be

composed of the grains of silver which now compose the dime. But would

anybody pretend that a contract for dollars, composed as at present,

could be satisfied by the delivery of an equal number of dollars of the

new issue? I have never met any one who would go to that extent. The

answer always has been that would be too flagrantly unjust to be

tolerated. Yet enforcing the acceptance of paper promises or paper

dollars, if the promises can be so called, in place of gold or silver

dollars, is equally enforcing a departure from the terms of the

contract, the injustice of the measure depending entirely upon the

actual value at the time of the promises in the market. Now reverse the

case. Suppose congress should declare that hereafter the eagle should be

called a dollar, or that the dollar should be composed of as many grains

of gold as the eagle, would anybody for a moment contend that a contract

for dollars, composed as now of silver, should be satisfied by dollars

composed of gold? I am confident that no judge sitting on this bench,

and, indeed, that no judge in Christendom could be found who would

sanction the monstrous wrong by decreeing that the debtor could only

satisfy his contract in such case by paying ten times the value

originally stipulated. The natural sense of right which is implanted in

every mind would revolt from such supreme injustice. Yet there cannot

be one law for debtors and another law for creditors. If the contract

can at one time be changed by congressional legislation for the benefit

of the debtor it may at another time be changed for the benefit of the

creditor.

For acts of flagrant injustice such as those mentioned there is no

authority in any legislative body, even though not restrained by any

express constitutional prohibition. For as there are unchangeable

principles of right and morality, without which society would be

impossible, and men would be but wild beasts preying upon each other, so

there are fundamental principles of eternal justice, upon the existence

of which all constitutional government is founded, and without which

government would be an intolerable and hateful tyranny. There are acts,

says Mr. Justice Chase, in _Calder_ v. _Bull_, which the federal and

state legislatures cannot do, without exceeding their authority. Among

these he mentions a law which punishes a citizen for an innocent action;

a law that destroys or impairs the lawful private contracts of citizens;

a law that makes a man a judge in his own cause; and a law that takes

the property from A and gives it to B. "It is against all reason and

right," says the learned justice, "for a people to intrust a legislature

with such powers; and therefore it cannot be presumed that they have

done it. The genius, the nature, and the spirit of our state governments

amount to a prohibition of such acts of legislation, and the general

principles of law and reason forbid them. The legislature may enjoin,

permit, forbid, and punish; they may declare new crimes, and establish

rules of conduct for all its citizens in future cases; they may command

what is right and prohibit what is wrong, but they cannot change

innocence into guilt, or punish innocence as a crime, or violate the

rights of an antecedent lawful private contract, or the right of private

property. To maintain that our federal or state legislatures possess

such powers, if they had not been expressly restrained, would, in my

opinion, be a political heresy, altogether inadmissible in our free

republican governments."

In _Ogden_ v. _Saunders_, Mr. Justice Thompson, referring to the

provisions in the constitution forbidding the states to pass any bill

of attainder, _ex post facto_ law, or law impairing the obligation of

contracts, says: "Neither provision can strictly be considered as

introducing any new principle, but only for greater security and safety

to incorporate into this charter provisions admitted by all to be among

the first principles of government. No state court would, I presume,

sanction and enforce an _ex post facto_ law if no such prohibition was

contained in the constitution of the United States; so, neither would

retrospective laws, taking away vested rights, be enforced. Such laws

are repugnant to those fundamental principles upon which every just

system of laws is founded. It is an elementary principle, adopted and

sanctioned by the courts of justice in this country and in Great

Britain, whenever such laws have come under consideration, and yet

retrospective laws are clearly within this prohibition."

In _Wilkeson_ v. _Leland_, Mr. Justice Story, whilst commenting upon the

power of the legislature of Rhode Island under the charter of Charles

II. said: "The fundamental maxims of a free government seem to require

that the rights of personal liberty and private property should be held

sacred. At least no court of justice in this country would be warranted

in assuming that the power to violate and disregard them, a power so

repugnant to the common principles of justice and civil liberty, lurked

under any general grant of legislative authority, or ought to be implied

from any general expressions of the will of the people. The people ought

not to be presumed to part with rights so vital to their security and

well-being without very strong and direct expressions of such an

intention."

Similar views to these cited from the opinions of Chase, Thompson,

Story, and Marshall, are found scattered through the opinions of the

judges who have preceded us on this bench. As against their collective

force the remark of Mr. Justice Washington, in the case of _Evans_ v.

_Eaton_, is without significance. That was made at _nisi prius_ in

answer to a motion for a nonsuit in an action brought for an

infringement of a patent right. The state of Pennsylvania had, in March

1787, which was previous to the adoption of the constitution, given to

the plaintiff the exclusive right to make, use, and vend his invention

for fourteen years. In January, 1808, the United States issued to him a

patent for the invention for fourteen years from that date. It was

contended, for the nonsuit, that after the expiration of the plaintiff's

privilege granted by the state, the right to his invention became

invested in the people of the state, by an implied contract with the

government, and, therefore, that congress could not consistently with

the constitution grant to the plaintiff an exclusive right to the

invention. The court replied that neither the premises upon which the

motion was founded, nor the conclusion, could be admitted; that it was

not true that the grant of an exclusive privilege to an invention for a

limited time implied a binding and irrevocable contract with the people

that at the expiration of the period limited the invention should become

their property; and that even if the premises were true, there was

nothing in the constitution which forbade congress to pass laws

violating the obligation of contracts.

The motion did not merit any consideration, as the federal court had no

power to grant a nonsuit against the will of the plaintiff in any case.

The expression under these circumstances of any reason why the court

would not grant the motion, if it possessed the power, was aside the

case, and is not, therefore, entitled to any weight whatever as

authority. It was true, however, as observed by the court, that no such

contract with the public, as stated, was implied, and inasmuch as

congress was expressly authorized by the constitution to secure for a

limited time to inventors the exclusive right to their discoveries, it

had the power in that way to impair the obligation of such a contract,

if any had existed. And this is perhaps, all that Mr. Justice Washington

meant. It is evident from his language in _Ogden_ v. _Saunders_, that he

repudiated the existence of any general power in congress to destroy or

impair vested private rights.

What I have heretofore said respecting the power of congress to make the

notes of the United States a legal tender in payment of debts contracted

previous to the act of 1862, and to interfere with contracts, has had

reference to debts and contracts between citizens. But the same power

which is asserted over these matters is also asserted with reference to

previous debts owing by the government, and must equally apply to

contracts between the government and the citizen. The act of 1862

declares that the notes issued shall be a legal tender in payment of

_all debts, public and private_, with the exception of duties on imports

and interest on the public debt. If they are a legal tender for

antecedent private debts, they are also a legal tender for such debts

owing by the United States, except in the cases mentioned. That any

exception was made was a mere matter of legislative discretion. Express

contracts for the payment of gold or silver have been maintained by this

court, and specifically enforced on the ground that, upon a proper

construction of the act of 1862, in connection with other acts, congress

intended to except these contracts from the operation of the legal

tender provision. But the power covers all cases if it exists at all.

The power to make the notes of the United States the legal equivalent to

gold and silver necessarily includes the power to cancel with them

specific contracts for gold as well as money contracts generally. Before

the passage of the act of 1862, there was no legal money except that

which consisted of metallic coins, struck or regulated by the authority

of congress. Dollars then meant, as already said, certain pieces of gold

or silver, certified to be of a prescribed weight and purity by their

form and impress received at the mint. The designation of dollars, in

previous contracts, meant gold or silver dollars as plainly as if those

metals were specifically named.

It follows, then, logically, from the doctrine advanced by the majority

of the court as to the power of congress over the subject of legal

tender, that congress may borrow gold coin upon a pledge of the public

faith to repay gold at the maturity of its obligations, and yet, in

direct disregard of its pledge, in open violation of faith, may compel

the lender to take, in place of the gold stipulated, its own promises;

and that legislation of this character would not be in violation of the

constitution, but in harmony with its letter and spirit.

The government is, at the present time, seeking in the markets of the

world a loan of several hundred millions of dollars in gold, upon

securities containing the promises of the United States to repay the

money, principal and interest, in gold; yet this court, the highest

tribunal of the country, this day declares, by its solemn decision, that

should such loan be obtained, it is entirely competent for congress to

pay it off, not in gold, but in notes of the United States themselves,

payable at such time and in such manner as congress may itself

determine, and that legislation sanctioning such gross breach of faith

would not be repugnant to the fundamental law of the land.

What is this but declaring that repudiation by the government of the

United States of its solemn obligations would be constitutional?

Whenever the fulfilment of the obligation in the manner stipulated is

refused, and the acceptance of something different from that stipulated

is enforced against the will of the creditor, a breach of faith is

committed; and to the extent of the difference of value between the

thing stipulated and the thing which the creditor is compelled to

receive, there is repudiation of the original obligation. I am not

willing to admit that the constitution, the boast and glory of our

country, would sanction or permit any such legislation. Repudiation in

any form, or to any extent, would be dishonor, and for the commission of

this public crime no warrant, in my judgment, can ever be found in that

instrument.

Some stress has been placed in argument in support of the asserted power

of congress over the subject of legal tender in the fact that congress

can regulate the alloy of the coins issued under its authority, and has

exercised its power in this respect without question, by diminishing in

some instances, the actual quantity of gold or silver they contain.

Congress, it is assumed, can thus put upon the coins issued other than

their intrinsic value; therefore, it is argued, congress may, by its

declaration, give a value to the notes of the United States, issued to

be used as money, other than that which they actually possess.

The assumption and the inference are both erroneous, and the argument

thus advanced is without force, and is only significant of the weakness

of the position which has to rest for its support on an assumed

authority of the government to debase the coin of the country.

Undoubtedly congress can alter the value of the coins issued by its

authority by increasing or diminishing, from time to time, the alloy

they contain, just as it may alter, at its pleasure, the denominations

of the several coins issued, but there its power stops. It cannot make

these altered coins the equivalent of the coins in their previous

condition; and, if the new coins should retain the same names as the

original, they would only be current at their true value. Any

declaration that they should have any other value would be inoperative

in fact, and a monstrous disregard by congress of its constitutional

duty. The power to coin money, as already declared by this court, is a

great trust devolved upon congress, carrying with it the duty of

creating and maintaining a uniform standard of value throughout the

Union, and it would be a manifest abuse of this trust to give to the

coins issued by its authority any other than their real value. By

debasing the coins, when once the standard is fixed, is meant giving to

the coins, by their form and impress, a certificate of their having a

relation to that standard different from that which, in truth, they

possess; in other words, giving to the coins a false certificate of

their value. Arbitrary and profligate governments have often resorted to

this miserable scheme of robbery, which Mill designates as a shallow and

impudent artifice, the "least covert of all modes of knavery, which

consists in calling a shilling a pound, that a debt of one hundred

pounds may be cancelled by the payment of one hundred shillings."

In this country no such debasement has ever been attempted, and I feel

confident that none will ever be tolerated. The changes in the quantity

of alloy in the different coins has been made from time to time, not

with any idea of debasing them, but for the purpose of preserving the

proper relative value between gold and silver. The first coinage act,

passed in 1792, provided that the coins should consist of gold, silver,

and copper--the coins of cents and half-cents consisting of copper, and

the other coins consisting of gold and silver--and that the relative

value of gold and silver should be as fifteen to one, that is, that an

ounce of gold should be taken as the equal in value of fifteen ounces of

silver.

In progress of time, owing to the increased production of silver,

particularly from the mines of Mexico and South America, this relative

value was changed. Silver declined in relative value to gold until it

bore the relation of one to sixteen instead of one to fifteen. The

result was that the gold was bought up as soon as coined, being worth

intrinsically sixteen times the value of silver, and yet passing by law

only at fifteen times such value, and was sent out of the country to be

recoined. The attention of congress was called to this change in the

relative value of the two metals and the consequent disappearance of

gold coin. This led, in 1834, to an act adjusting the rate of gold coin

to its true relation to silver coin.

The discovery of gold in California, some years afterwards, and the

great production of that metal, again changed in another direction the

relative value of the two metals. Gold declined, or in other words,

silver was at a premium, and as gold coin before 1834 was bought up, so

now silver coin was bought up, and a scarcity of small coin for change

was felt in the community. Congress again interfered, and in 1853

reduced the amount of silver in coins representing fractional parts of a

dollar, but even then these coins were restricted from being a legal

tender for sums exceeding five dollars, although the small silver coins

of previous issue continued to be a legal tender for any amount. Silver

pieces of the denomination of three cents had been previously authorized

in 1851, but were only made a tender for sums of thirty cents and under.

These coins did not express their actual value, and their issue was soon

stopped, and in 1853 their value was increased to the standard of coins

of other fractional parts of a dollar.

The whole of this subject has been fully and satisfactorily explained in

the very able and learned argument of the counsel who contended for the

maintenance of the original decision of this court in _Hepburn_ v.

_Griswold_. He showed by the debates that congress has been moved, in

all its actions under the coinage power, only by an anxious desire to

ascertain the true relative value of the two precious metals, and to fix

the coinage in accordance with it; and that in no case has any deviation

from intrinsic value been permitted except in coins for fractional parts

of a dollar, and even that has been only of so slight a character as to

prevent them from being converted into bullion, the actual depreciation

being made up by their portability and convenience.

It follows, from this statement of the action of congress in altering at

different times the alloy of certain coins, that the assumption of power

to stamp metal with an arbitrary value and give it currency, does not

rest upon any solid foundation, and that the argument built thereon goes

with it to the ground.

I have thus far spoken of the legal tender provision with particular

reference to its application to debts contracted previous to its

passage. It only remains to say a few words as to its validity when

applied to subsequent transactions.

So far as subsequent contracts are made payable in notes of the United

States, there can of course be no objection to their specific

enforcement by compelling a delivery of an equal amount of the notes, or

by a judgment in damages for their value as estimated in gold or silver

dollars, nor would there be any objection to such enforcement if the

legal tender provision had never existed. From the general use of the

notes throughout the country and the disappearance of gold and silver

coin from circulation, it may perhaps be inferred in most cases, that

notes of the United States are intended by the parties where gold or

silver dollars are not expressly designated, except in contracts made in

the Pacific states, where the constitutional currency has always

continued in uses. As to subsequent contracts, the legal tender

provision is not as unjust in its operation as when applied to past

contracts, and does not impair to the same extent private rights. But so

far as it makes the receipt of the notes, in absence of any agreement of

the parties, compulsory in payment of such contracts, it is, in my

judgment, equally unconstitutional. This seems to me to follow

necessarily from the duty already mentioned cast upon congress by the

coinage power,--to create and maintain a uniform metallic standard of

value throughout the Union. Without a standard of value of some kind,

commerce would be difficult, if not impossible, and just in proportion

to the uniformity and stability of the standard is the security and

consequent extent of commercial transactions. How is it possible for

congress to discharge its duty by making the acceptance of paper

promises compulsory in all future dealings--promises which necessarily

depend for their value upon the confidence entertained by the public in

their ultimate payment, and the consequent ability of the holder to

convert them into gold or silver--promises which can never be uniform

throughout the Union, but must have different values in different

portions of the country; one value in New York, another at New Orleans,

and still a different one at San Francisco.

Speaking of paper money issued by the states,--and the same language is

equally true of paper money issued by the United States--Chief Justice

Marshall says, in _Craig_ v. _The State of Missouri_: "Such a medium has

been always liable to considerable fluctuation. Its value is continually

changing; and these changes, often great and sudden, expose individuals

to immense loss, are the sources of ruinous speculations, and destroy

all confidence between man and man. To cut up this mischief by the

roots, a mischief which was felt by the United States, and which deeply

affected the interest and prosperity of all, the people declared in

their constitution that no state should emit bills of credit."

Mr. Justice Washington, after referring, in _Ogden_ v. _Saunders_, to

the provision of the constitution declaring that no state shall coin

money, emit bills of credit, make anything but gold and silver coin a

tender in payment of debts, says: "These prohibitions, associated with

the powers granted to congress 'to coin money and to regulate the value

thereof, and of foreign coin,' most obviously constitute members of the

same family, being upon the same subject and governed by the same

policy. This policy was to provide a fixed and uniform standard of value

throughout the United States, by which the commercial and other dealings

between the citizens thereof, or between them and foreigners, as well as

the moneyed transactions of the government, should be regulated. For it

might well be asked, Why vest in congress the power to establish a

uniform standard of value by the means pointed out, if the states might

use the same means, and thus defeat the uniformity of the standard, and

consequently the standard itself? And why establish a standard at all

for the government of the various contracts which might be entered into,

if those contracts might afterwards be discharged by a different

standard, or by that which is not money, under the authority of state

tender laws? It is obvious, therefore, that these prohibitions in the

tenth section are entirely homogeneous, and are essential to the

establishment of a uniform standard of value in the formation and

discharge of contracts."

It is plain that this policy cannot be carried out, and this fixed and

uniform metallic standard of value throughout the United States be

maintained, so long as any other standard is adopted, which of itself

has no intrinsic value and is forever fluctuating and uncertain.

For the reasons which I have endeavored to unfold, I am compelled to

dissent from the judgment of the majority of the court. I know that the

measure, the validity of which I have called in question, was passed in

the midst of a gigantic rebellion, when even the bravest hearts

sometimes doubted the safety of the republic, and that the patriotic men

who adopted it did so under the conviction that it would increase the

ability of the government to obtain funds and supplies, and thus advance

the national cause. Were I to be governed by my appreciation of the

character of those men, instead of my views of the requirements of the

constitution, I should readily assent to the views of the majority of

the court. But, sitting as a judicial officer, and bound to compare

every law enacted by congress with the greater law enacted by the

people, and being unable to reconcile the measure in question with that

fundamental law, I cannot hesitate to pronounce it as being, in my

judgment, unconstitutional and void.

In the discussions which have attended this subject of legal tender

there has been at times what seemed to me to be a covert intimation,

that opposition to the measure in question was the expression of a

spirit not altogether favorable to the cause, in the interest of which

that measure was adopted. All such intimations I repel with all the

energy I can express. I do not yield to any one in honoring and

reverencing the noble and patriotic men who were in the councils of the

nation during the terrible struggle with the rebellion. To them belong

the greatest of all glories in our history,--that of having saved the

Union, and that of having emancipated a race. For these results they

will be remembered and honored so long as the English language is spoken

or read among men. But I do not admit that a blind approval of every

measure which they may have thought essential to put down the rebellion

is any evidence of loyalty to the country. The only loyalty which I can

admit consists in obedience to the constitution and laws made in

pursuance of it. It is only by obedience that affection and reverence

can be shown to a superior having a right to command. So thought our

great Master when he said to his disciples: "If ye love me, keep my

commandments."

CHAPTER V.

GOVERNMENT CONTROL OF RAILROADS.

Since concluding what we desired to say on the subject of controlling

and regulating railroads and railroad corporations, our attention has

been directed to a circular from _The New York Nation_, of July 27th,

1873, entitled: "The Railroad Discussion, and Common Sense." This

singular article challenges attention. If it is put forth in the

interest of railroad corporations, we can readily account for the views

expressed, and the covert foreshadowing of national control of

railroads; but if it be published and circulated in the interest of the

people as _The Nation_ would have us understand, it is not calculated to

assist them in their efforts at reform, but on the contrary will tend to

divide and distract their counsels, and delay the relief sought.

We copy the circular, that the reader may judge of its merits, and to

give a more intelligent understanding of our remarks upon it:--

THE RAILROAD DISCUSSION AND COMMON SENSE--THE LATEST DEVICE FOR

FIXING RATES OF TRANSPORTATION.

(From the Nation [N. Y.] of July 17.)

We have followed, and shall continue to follow, the "farmers' movement"

with great interest, but it must be confessed that it seems at times of

no little difficulty, owing to the very heterogeneous composition of the

organizations which are carrying it on, and the wide diversity of their

character and avowed aims. When Judge Lawrence was turned out of office

in Illinois by the "Grangers," and Judge Craig put in his place, we took

it for granted that they were going to deliver themselves from the

tyranny of the railroads by putting judges on the bench pledged to

interpret the state constitution in a particular way, or in other

words, as one of the local papers put it, by showing that "the people"

were superior to both laws and judges. It has, however, since been

stoutly denied that this interference with the bench was anything more

than a local accident, and we have been assured that the farmers seek

changes of a much more legitimate character, and resting on more solid

foundations than the creation of a subservient judiciary. The recent

platforms have certainly had a much wider sweep than the earlier ones,

and, unless language has been strangely abused in making them, embrace

grave modifications in fiscal as well as in railroad legislation. But

the question how to reduce the railroads to the condition of public

highways, controllable by and existing solely or mainly for the

convenience of the community, is still apparently as far from solution

as ever. It is by no means surprising that this should be the case, but

that it is the case we are forced to conclude by the extraordinary

character of the latest plan propounded by the reformers, which has had

sufficient plausibility to command the approval of so sober-minded a

paper as the Chicago _Tribune_.

The farmers have been accused, partly in consequence of their escapade

about the judges in Illinois, of seeking to rob the railroad companies

of their lawful earnings by forcing them to carry on their business at a

loss, under the operation of cast-iron rules, drawn up without reference

to its peculiar nature. This was a charge of which the farmers soon

began to see the gravity, and they accordingly now announce that they

have no scheme of spoliation or confiscation in their minds, but that

they have at last hit upon a mode of ascertaining what are "reasonable

rates," which consists in discovering what was the amount of capital

"actually invested in constructing and operating the roads," and

treating a fair percentage of this as a proper return to the

stockholders, and all charges which bring in more than this as

"unreasonable," and therefore open to prohibition by the courts and

state legislatures. Under this theory of railroad property, all stock

which does not represent money actually invested is treated as

"fictitious," and all attempts to earn dividends on such stock as

attempts at extortion. For instance--to put a case of frequent

occurrence--a corporation obtains a charter for a road which will cost

two million dollars to build. It accordingly borrows the two millions on

mortgage bonds, and constructs the road, while the members divide among

themselves two millions of stock more, and they work the road so as to

make it pay interest on the four millions. The farmers now say that no

road shall be so worked as to pay interest on anything but the proceeds

of the bonds, or, in other words, the actual cost of construction and

equipment. This, stripped of details, is the new plan, as gravely

propounded by the Chicago _Tribune_.

Now, if anybody will get up and propose a general railroad act of this

nature, applicable to all roads hereafter to be built, we think we can

promise that he will have the hearty support of everybody who has

seriously reflected on the railroad problem. Forbid the construction of

any road except with the proceeds of paid-up stock, and forbid any

higher dividends than a certain fixed percentage on this amount, and we

shall have a rule of which nobody can complain. We do not believe that a

single mile of railroad would ever be constructed under such a rule in a

new and thinly settled country like the west or south. Safe investments

are not so scarce as to induce people to go into one of the most unsafe

of investments, and one promising in most cases no return at all for

several years, for the mere chance of seven or even ten per cent at the

outside. But we should, nevertheless, be heartily glad to see the plan

tried, and believe it would, by stopping railroad construction for the

present, bring the western farmers to a healthier comprehension of their

relations to the roads, and railroad companies to a healthier

comprehension of their relations to the community, and might tend to a

solution of the railroad problem, which would be both permanent and

satisfactory.

But the application of any such rule now to roads _already in operation_

would be spoliation pure and simple--spoliation as flagrant as any ever

proposed by Karl Marx or Ben. Butler; if any attempt were made to carry

it out, it would produce perhaps the greatest financial crash ever

witnessed. It has in the first place that leading characteristic of Ben.

Butler's greenback scheme, that it would not only violate a tacit pledge

made by the state to individuals, but it would deprive men of rewards

already earned by running great risks. When a railroad constructed for

two million dollars is made to earn interest on four millions, the case

is precisely similar to that of a government which in a time of great

danger and perplexity sells seven per cent bonds at fifty; and the

present proposal of the farmers resembles Butler's plan of paying the

bondholders in 1870 what they gave for their bonds in 1862. In fact, it

is the old-fashioned game on a great scale of "Heads I win, tails you

lose." The west has, during the past thirty years, wanted railroads,

which there was a very small chance of making profitable for a long

time. It encouraged eastern men and foreigners to make them in any way

they pleased, running whatever risk there was, and pocketing whatever

gain there might be, and they were made. The investment then was one of

great danger and difficulty; _to treat it now as one of no danger and no

difficulty would, be simply swindling_. The word is hard, but the times

demand plain speech. This was perhaps a bad mode of securing lines of

communication, but the laws allowed it and encouraged it, and the people

applauded it, and it is now a contract as binding in morals as in law.

It is open to us to turn over a new leaf, and permit no more roads to be

made in that way, but it is not open to us to treat those who lent us

their money as dupes. As there has been enough of this sharp practice

already, more of it would seriously shake the foundations of social

order.

In the second place, as regards the older roads, it is not possible for

"the people" or anybody else to ascertain what is the exact amount on

which, in abstract justice, the earnings ought to pay interest. The

stock, whether "fictitious" or not, has in most cases passed out of the

hands of the original holders. It has been sold and resold, in open

market, under the most solemn guarantees known to civilized society,

with the understanding that it represented the _bona fide_ ownership of

the roads, with all their earnings, possible as well as actual. The

laws, the courts, and public opinion, assured to it this character

without reservation or qualification. In this character it has passed

into the hands of widows, orphans, and helpless people generally, of

charitable corporations, of colleges, banks, and institutions of all

kinds by which the affairs of the community are administered. To throw

any doubt on its value now would be to cause an amount of misery and

alarm which no thinking man could contemplate without a shudder. If the

state wants to make the railroads common highways, it has the right to

take them, but at their market value, paying the owners what other

people would pay them, and not enquiring curiously and knavishly into

the original cost. Between honest parties to a bargain, that, to use a

homely phrase, is "Neither here or there." The people ought,

undoubtedly, to have looked forward a little when they first began to

grant charters; but not having done so, they ought not to now throw on

others the whole damage done by their own laches.

Though last, not least, much of the outcry over the high rates charged

by railroads is due to an immense but deeply seated popular delusion as

to the value of railroad property. When one puts his newspaper aside,

and sits down calmly to examine the receipts which the farmers are so

anxious to have cut down, the proposal we are discussing assumes a

somewhat ludicrous aspect. We have before us the last issue of "Poor's

Railroad Manual," which certainly ought to be perfectly studied before

the minds of the public are filled with wild and revolutionary notions

about railroad property. There were in operation last year in the United

States, 57,323 miles of railroad, the net earnings of which bore to the

_cost_ of the roads the relation of 5.20 per cent, and to the capital

stock of 3.21. This means simply that the work of transportation in the

United States is, on the average, already done at a loss to the owners

of the lines, or, in other words, vastly more cheaply to the public than

there is the least likelihood of its being done in any other way--an

assertion which anybody may verify by examining the accounts of the New

York state canals. Now, fancy anybody seriously proposing to capitalists

to construct railroads, as most of the western railroads were

constructed, through a howling wilderness, for _the chance_ of five and

a half per cent, whenever the earnings allowed it; and fancy what

subjects for spoliation are presented by the bloated owners of railroad

property who pocket on the average less than four per cent on the face

value of their stock. Let us add, finally, that no corporation should be

restricted by law to a certain rate of earnings, unless it contracts

freely to do the work on those terms or has a minimum guaranteed to it

by the state. In short, the railroad question, we would remind the

Chicago _Tribune_, is not simply a question of dollars and cents. It is

a question of morality in its highest and most important phases, and one

the settlement of which must touch the security of all property, and

affect the value of constitutions as safeguards of individual rights.

We have gone on for thirty years treating railroads as private property,

and permitting and encouraging their construction by private enterprise.

Out of this numerous abuses have grown up which ought to be remedied.

The corporations have grown too powerful; their influence in politics is

corrupting; the power of directors in the management is too great. For

the reform of all this, careful legislation _preceded by careful

inquiry_ is necessary. The prohibition of special legislation would do

much to abate the corruption. Some means ought also to be devised for

protecting the minority of the stockholders against the despotic power,

which in some cases amounts to virtual confiscation, of those holding a

bare majority of the stock, or, in other words, of giving stockholders

the means of actually superintending the management of their own

property and defending themselves against "rings" and "raids." Moreover,

the power of directors to do anything but work the road ought to be

diminished. Their discretion as regards extensions, combinations,

consolidations, leases, and purchases, ought to be greatly reduced, if

not destroyed. This involves two things not easily supplied. One is wise

legislation, and the other honest government inspection. How far we are

from both is best shown by the Illinois attempt at reform, which

consists at present in taking the working of the roads out of the hands

of the exceedingly able body of trained business men who now have charge

of it, and compelling them to use a crazy table of "rates" drawn up by a

mob of excited and ignorant politicians. If we are not prepared for

this, the alternative, and the only one, is the purchase of the

railroads by the state, and their management by our Murphys and Caseys.

We shall not argue against this at present, for obvious reasons. But

this, whatever difficulties it may present, is the only honorable way

of escaping the necessity of such reforms in the present system as we

have indicated above. Whatever the evils of our railroad system, they

are not to be met or removed by fraud.

_First._ _The Nation_ says that it has "followed the 'farmers' movement'

with great interest, and with no little difficulty, owing to the

heterogeneous composition of the organizations which are carrying it on,

and the wide diversity of their character and avowed aims." The thought

suggested is, that because the farmers are not united in their views

relative to the best means to effect reform, because of the

heterogeniety of their composition, the author of the circular could not

understand their objects and aims. Unity of thought and action is rarely

found in any body of men, even when few in number, during the discussion

of ends sought to be obtained. Such unity cannot be expected in the

first stages of the organization, and discussions of plans for future

action. When the people living in various parts of the country, in

different states, with diverse interests, but all having in view the

accomplishment of a common end, attempt to unite their efforts, it would

be too much to expect that they would harmonize at the outset in their

views, or that they would not commit some errors. The "farmers'

movement" is in its incipiency; it maybe said to be now only preparing

for action, and it is yet too soon to look for united effort. The first

assertion of the circular is only a covert thrust at the "farmers'

movement"--an attempt to impress upon the public mind the belief that it

is the effort of an irresponsible _mob_ or _rabble_ to defy law and

override the rights of other classes, and especially of railroad

corporations. Hence _The Nation_ is desirous of talking "common sense,"

and in its opening discloses its "common sense" to be a plea in behalf

of railroad corporations.

_Second._ The circular casts odium on the efforts now being made to

correct the abuses practiced by railroad corporations, by the use of the

following language; "When Judge Lawrence was turned out of office in

Illinois by the Grangers, and Judge Craig was put in his place, we took

it for granted that they were going to deliver themselves from the

tyranny of railroads by putting judges on the bench pledged to interpret

the state constitution in a particular way, or, in other words, as a

local paper has it, by showing that 'the people were superior to both

laws and judges.'" Is it true that "Judge Lawrence was turned out of

office?" He was a candidate for re-election, but a majority of the

people voted for another man. Judge Craig was elected to office in the

constitutional method, and took the seat formerly occupied by Judge

Lawrence. The people did not "turn him out," but in the legal method,

when his term had expired, elected another man. But, says the circular,

"we took it for granted that they (the Grangers) were going to deliver

themselves," etc. There were no other judges to be elected, and there

was nothing in the election of Craig that would warrant _The Nation_ in

arriving at the conclusion that control of the state was to be taken,

and judges elected pledged to decide constitutional questions in a

particular way. The idea is put prominently forth that the people who

are attempting reform are a heterogeneous, irresponsible, body of men--a

mob, who, by the mere strength of numbers, are going to overturn all

law, pack the courts, and rule as mere caprice should dictate. This was

taken for granted, because the people had elected one judge whom they

believed was in sympathy with them. By the same rule we are warranted in

assuming that the appointment of two judges in sympathy with the

railroad interest of the county will revolutionize this whole

government, and that all judges to be hereafter appointed will be

pledged to decide all constitutional questions in favor of railroads.

The author of this circular, however, is forced to admit that he was

mistaken in his conclusions, and that the farmers "seek changes of a

more legitimate character, and resting on a more solid formation than

the creation of a subservient judiciary." While the people of the whole

country knew and fully understood that the objects the farmers were

seeking to accomplish were relief from the oppressions and extortions

practiced by railroad companies; while the agricultural, political, and

religious press of the land had been discussing the various

propositions, and conventions of farmers and mechanics were meeting, and

platforms and principles were being published, and the Patrons of

Husbandry were discussing at public meetings and in the newspapers the

best means for adoption, the author of this circular, who is now coming

to the front as the champion of railroad corporations, or of the people,

or of both, and is scattering his circular throughout the land, had

heard nothing of the movement, and took it for granted that all that was

sought by the "Grangers" was to elect "judges pledged to decide

constitutional questions in a particular way;" and it required the

"recent platforms" to admonish him that the Grangers looked to a reform

of the abuses connected with the railroads and finances of the country.

With the new light our author received from the "platforms," he hastens

to illuminate the public mind on this "vexed" railroad question. Having

now mastered the situation, the writer takes it for granted that the

all-important question is, "How to reduce railroads to the condition of

public highways, controllable and existing solely or mainly for the

convenience of the community," and concludes that the question is "as

far from solution as ever."

It matters little whether railroads are considered "public highways" or

private property. The name by which they are known will not make any

difference. The real question is, how to make them subserve the objects

for which they were intended, and at the same time afford a fair

remuneration to the persons owning them. Some of the courts have already

decided that the railroads of the country are public highways; but such

decisions afford no relief. _The Nation_ does not give us its opinion,

nor does it seem to be aware that the supreme court of the United States

has decided that railroads are public highways.

_Third._ _The Nation_ says that "The farmers have been accused partly

because of their escapade about the judges of Illinois, of seeking to

rob the railroad companies of their lawful earnings, by forcing them to

carry on their business at a loss, under the operation of cast-iron

rules, drawn up without reference to its peculiar nature; that the

farmers virtually acknowledged this charge when they saw its gravity,

and that they accordingly now announce that they have no scheme of

spoliation or confiscation in their minds, but have at last hit upon a

mode of ascertaining what are 'reasonable rates,' which consists in

discovering what was the amount of capital invested in constructing and

operating the roads, and treating a fair per cent on this as a proper

return to the stockholders, and all charges which bring in more than

this as 'unreasonable,' and therefore open to prohibition by the courts

and state legislatures." _The Nation_ admits that this rule applied to

companies hereafter organized, and roads hereafter built, would be just,

and assures us that everybody would approve of such a law. Let the road

be built with the proceeds of paid-up stock, and restricted to a fair

per cent dividend on such paid stock, and _The Nation_ will approve. To

verify its hearty indorsement of this plan, it tells us in the next

sentence that it does "not believe that a single mile of railroad would

ever be constructed under such a rule in a new and thinly-settled

country like the west and south." It would be glad to see it tried,

believing "it would stop building railroads for the present, bring

western farmers to a healthier comprehension of their relation to the

roads, and railroad companies to a healthier comprehension of their

relation to the community, and might tend to a solution of the railroad

problem which would be both permanent and satisfactory." It gives as a

reason why no roads would be built, that capitalists would not invest

their money on unsafe security, or where the return would be uncertain.

The logical deduction is, that if railroad companies are limited in the

amount of their stock to the actual cost of the roads, no money can be

obtained to build them; but if the company is allowed to add fictitious

stock--to "water" it at pleasure, then capital can be had.

We do not discover the force of this reasoning. Railroads are usually

constructed with borrowed capital. The capitalist loaning his money

loans it on what he believes to be advantageous terms and good security.

If a road cost $2,000,000, and is built with borrowed capital, we cannot

readily see how the security is improved by issuing to the stockholders

certificates for $2,000,000 of stock, no part of which has been paid.

True, it may have the effect to place the road in the hands of men who

are experienced in operating roads, capitalizing their earnings and

watering stocks, borrowing money on bonds, and loading the road with a

burden that can only be supported by extortion; but it does not increase

the value of the security held by the lender, nor does it enhance the

value of the road. The less burden in the way of debts there is resting

on a road, the more valuable are its stock and bonds. We confess we

cannot discover the strength of _The Nation's_ argument. It seems to

take it for granted that railroads can only be constructed by the class

of men who now monopolize the business; in other words, that the class

of unscrupulous men who have reduced the organizing of railroad

companies and the manner of obtaining capital for the construction of

roads to a system, are the only men who can undertake any railroad

enterprise. It looks upon the south and west as destitute of men

competent to organize a railroad company, or to procure means for the

construction of railroads, or to construct them when the capital has

been obtained. It regards the home construction of railroads in these

sections as out of the question. It concludes that the method now

adopted for procuring capital and constructing railroads is the only one

that can be adopted. It forgets that in purer and simpler times

railroads were built and owned by the parties living along their lines;

that the process of adding large amounts of stock by watering was not

then discovered, and that without these fictitious additions fair

returns were made for the amounts invested. After all, railroads are

only built when and where the business of the country requires them,

save where large bounties are paid. In the west and south, where the

business of certain localities and districts require a railroad, it will

be built, even if the legislature should require the owners and

stockholders to become so far honest as to limit their stock to the

actual cost of the road, and to compel stockholders to pay up before

obtaining certificates for their stock. It does not require these

professional men to organize and control railroad companies, or the

roads after construction.

But for the interference of rings formed to prevent such a consummation,

any company of men who desire a railroad in their locality, by pursuing

an honest course, could organize a company and build their road. If the

amount of stock necessary to build the road was in good faith

subscribed, and the same was being paid up as the construction of the

road progressed, any reasonable amount of money could be obtained by

such company by making an honest showing to capitalists. The demand for

railroads would be as regularly supplied, as for any other article of

necessity. The laws of trade would regulate their construction. In all

such cases capitalists would have the best of security, and the roads

would pay fair dividends on paid-up capital and interest on the sum

borrowed for legitimate purposes. But if there were no legitimate call

for the road, if it were intended as a fraud, by a set of educated

sharpers who desired to receive large dividends on stock not paid up, or

to borrow money by the sale of bonds in an amount double the cost or

value of the road when completed, then it could not be built under the

_new rules_ and _The Nation's_ prediction would be verified. Any

legitimate business not "cornered" or controlled by combinations or

rings can be successfully prosecuted, and to say, as does _The Nation_

in substance, that if railroad companies are forbidden to act

dishonestly and corruptly, no more railroads will be constructed, is an

admission that the whole system is a fraud, and is a strong argument in

favor of immediate, prompt, and efficient action on the part of state

legislatures and of the courts. If men must become dishonest in order to

build and operate railroads successfully, the whole system is rotten and

should be destroyed, and an honest plan substituted.

_Fourth._ But says _The Nation_: "The application of any such rule

to roads _already in operation_, would be spoliation, pure and

simple. * * * * It would not only violate a tacit pledge made by the

state to individuals, but would deprive men of rewards already earned by

running great risks." This is the old argument in favor of railroad

companies, but with this difference: It makes the state a party to the

dishonest practices of men who have enriched themselves at the expense

of the public, and those to whom they have sold their bonds. We venture

the assertion that, with few exceptions, all railroads in the United

States that have been honestly and prudently managed have earned a fair

per cent on the capital actually expended in building, equipping, and

operating them, and that a scale of tariffs greatly less than the rates

now charged would, as a rule, afford fair dividends on the actual cost

of the roads. No instances can be shown, where the states, in granting

charters to railroad companies, directly or in the passage of general

incorporation statutes, have given to the companies the right to commit

frauds upon the parties with whom they deal by using their credit to

build their roads, and without payment of their subscriptions issue to

themselves certificates as for paid-up stock. In all cases, individual

stockholders are made liable for the debts to the amount of their stock.

In contemplation of law the stock is paid up, and the roads are

constructed by using the capital derived from this source. The stock is

supposed to amount to as much as the cost of the road. The state, in

giving the company a corporate or artificial being, enters into no

agreement, express or implied, to make good the contract of the company,

or to be responsible for their misconduct, further than to exercise such

control over them as to prevent or reform abuses, by compelling them to

act honestly--being the same control exercised over all other persons

within its jurisdiction. The creditors of railroad corporations have no

stronger claim on the state in case of the non-fulfillment of contracts

by railroad companies, or in cases of fraudulent and dishonest

practices, than have the creditors of individuals. If a man worth $2,000

represents himself to be worth $4,000, knowing that his representations

are false, and obtains credit upon his property for twice its real

value, he violates the law, can be punished criminally, and is also

responsible in a civil action; but his creditor has no claim upon the

state for payment of the sum loaned or credit given on those

representations. Is the claim different when a railroad corporation is

the party obtaining the credit? Is the state under any greater

obligations in one case than in the other? But _The Nation_ says the

custom of doing business on this plan has obtained and been in use for

thirty years, and from this draws an argument in favor of its

legitimacy. Does this fact make it honest? or change the relation of the

state to these corporations? A man has followed horse-stealing for

thirty years, and is at last detected; he has been in the habit of

selling his stolen horses to innocent parties; they have been reclaimed

by the owners; can the purchasers, because this thief has so long

followed his pursuit, claim compensation from the state? A man obtains

goods under false pretenses, and before the owner can reclaim them,

sells them to a third party; can the person defrauded claim compensation

from the state? We cannot discover the distinction between the cases

stated and that of railroad companies, who by falsely pretending that

they have paid up their capital stock, obtain money on their bonds for

an amount greater than the value of their entire roads. They all commit

crimes for which they are liable to be punished, and all are liable in

law to make good their contracts; but in neither case is there any

pecuniary liability imposed upon the state or the public. Nor would the

application of the rule to railroad companies already in existence, who

have built their roads, be "spoliation pure and simple." It never can be

wrong to compel men to do right. If railroad companies, by arbitrarily

increasing their capital stock, and issuing certificates therefor

without payment of any part of it, as is the general rule among them,

are receiving dividends on such stock, justice to the public demands

that the state legislatures should compel them to purge their stock, and

at once cancel all such spurious and illegitimate issues. The duty the

state government owes to the public demands this, that the oppressions

under which the people suffer may be prevented in the future. But "it

would deprive men of rewards already earned by running great risks."

What these "great risks" are, is not readily seen. They certainly have

not risked their money; they built their roads on borrowed capital, and

have declared dividends to themselves on stock they have never paid.

They extort from the public, in charges for transportation, money

sufficient to pay the interest on the money borrowed for building their

roads, and to pay dividends on their stock that has not cost them

anything, and if they have run any risks they are the same that all men,

who violate the law, have ventured upon. The pecuniary risks are all

taken by the parties from whom they borrow.

_The Nation_ says that the west during thirty years has wanted

railroads, and that there was small chance of making them profitable for

a long time. That "it encouraged eastern men and foreigners to make

them in any way they pleased, running whatever risks existed, and

pocketing whatever gain there might be--and they were made." The people

of the west have vivid recollections of the manner in which the means

were raised to make their railroads. They took large amounts of stock,

and voted large amounts of local aid for which they were to receive

stock and dividends. After contributing sufficient to pay at least

one-half of the entire cost of their roads, their eastern _friends_

mortgaged their roads and sold them out, and the "people of the west"

got neither stock nor dividends, but they are to-day paying taxes to

discharge debts contracted by them in building their roads after having

been swindled by their _eastern friends_ out of values, amounting in

Iowa alone, to not less than $4,000,000. _The Nation_ further says that

"the investment then was one of great danger and difficulty; _to treat

it now as one of no difficulty and no danger, would be simple

swindling_." This journal evidently knew but little of the real facts in

the case, or it would not have made this assertion. But if we admit that

the undertaking was both dangerous and difficult, does that exempt from

all responsibility the adventurers who came west and _fattened_ off of

the simplicity of the people? Does it absolve them from the effects of

their dishonest acts? Are the states pledged to make good the dishonest

contracts of these adventurers because of the danger or difficulty they

run?

While the law should regulate the action of all railroad companies,

would it be "simple swindling" for the legislature to compel these

pioneer adventurers to purge their companies of fictitious or "watered"

stock, or limit their rate of charges? We do not believe that the

legislature ever intended to charter railroad companies to prey upon the

people at pleasure and without restriction, nor is it true that any

injustice would be done in compelling companies, whose roads are

constructed, to reduce their stocks to the amounts actually invested in

their roads, and to limit their rates of charges to a fair and

reasonable compensation for the money so invested. Nor would it shake

the foundations of social order to compel these men to act honestly.

But another difficulty is suggested in this circular. Our author says:

"It is not possible for 'the people' or anybody else to ascertain the

_exact_ amount, on which, in abstract justice, the earnings ought to pay

interest." True, it may be hard to ascertain what is the "exact" amount,

but this fact presents no great difficulty. It is now known to nearly

everybody about what railroads cost per mile. When a road that we know,

in the nature of things, could not have cost more than $35,000 per mile,

is by the "watering" process shown to have cost the sum of $75,000, it

would not be difficult to approximate the amount of stock that should be

cancelled; nor need the fact that the exact amount cannot be ascertained

prevent legislative action. In all cases a large margin to cover any

doubts might be allowed to the companies, and still great reductions

could be made.

_Fifth._ _The Nation_, as it progresses, becomes more earnest. It takes

up the oft repeated cry of "innocent purchasers," "widows and orphans,"

with their all invested in railroad stock. "Charitable corporations and

banks" have invested in railroad stocks and "helpless people generally."

It tells us that "this stock has been sold and resold, in open market,

under the most solemn guarantees known to civilized society, with the

understanding that it represents the _bona fide_ ownership of the roads,

with all their earnings, possible as well as actual. The laws, the

courts, and public opinion, assured to it this character without

reservation or qualification. * * * To throw any doubt on its value now

would be to cause an amount of misery and alarm which no thinking man

could contemplate without a shudder." That some parties would suffer

financially by compelling railroad companies to reduce their stock to an

honest standard cannot be denied, and in some cases it might work

absolute financial ruin. But that any considerable amount of railroad

stock is held and owned by poor people is rather improbable, and that

"helpless people generally" deal in railroad stock is not true. That

some purchases are made by innocent parties may also be true; yet in

this day and age when the fact that at least one-half of all railroad

stock is mere fiction and has no intrinsic value is known to the public

generally, a third party must be "innocent" indeed to purchase it

without knowing that its value is imaginary rather than real.

Most of the stocks and bonds of railroad companies are sold in Wall

Street by the owners and managers, acting in their character of brokers

and stock gamblers. The innocent third parties are generally the dupes

of these brokers who are on the lookout for the unwary. These dupes are

caught and stripped and turned loose without remorse, when the managers

of the great railroad interests of the country are "loading or

unloading," and no complaint is heard. The "innocents" are robbed

without exciting a passing remark; but when an attempt is made to

relieve the people from the onerous burdens imposed upon them, we hear

on all sides the cry of "innocent purchasers!" and of the great wrongs

about to be committed. They virtually admit their own dishonesty, but

say in substance: "We have duped others and you must permit us to rob

the people in order that 'innocent' third parties may not suffer." This

is the pith of _The Nation's_ argument. It goes further, and says: The

law and the courts have sanctioned this dishonest course, and because of

this, the same raid upon the rights of the people must be allowed to

continue without interruption.

Neither the people nor the state are in any manner responsible for the

acts of these railroad managers. All contracts for the sale of bonds or

stocks are in the first instance made with the companies or their

agents. They are responsible to the parties holding their bonds or

stocks. Their roads are liable to their full value, and each stockholder

is liable to the amount of stock he owns, and to that extent must make

good the contracts made by the managers of the road. The purchaser had

the means of knowing the value of the stock he purchased. If he suffer,

his suffering is the result of the fraud of the directors of the road,

and of his own negligence. None of these causes affect the right of the

state to regulate the company, and to compel it to act honestly.

The cry of "innocent purchasers" will not avail. While the people can

sympathize with those who are defrauded by the dishonest acts of the

companies, and appreciate the helpless condition of widows and orphans

who have lost by railroad rascality, the facts will demonstrate that

they are few in number, unless we include among the "widows and orphans"

Commodore Vanderbilt, Col. Tom. Scott, Daniel Drew, Jay Gould, and the

Wall street brokers generally, who own and control most of the railroad

stocks. If we admit all that is stated in the circular, the right of the

people to be protected against the impositions and oppressions of the

railroad companies remains unchanged, and the legislature, acting for

the whole people, can control the management of the companies so far as

it affects the public. If the doctrine advocated by the circular be

true, railroad corporations are now able to defy the government and the

people.

_Sixth._ _The Nation_, in its circular letter, says: "If the state wants

to make the railroads common highways, it has the right to take them,

but at their market value, paying the owners what other people would pay

them, and not inquiring curiously and knavishly into their original

cost. Between honest parties to a bargain, that, to use a common phrase,

is neither here nor there." We get more light as we advance. As we

understand the principles of our government, the states possess the

right of eminent domain. But they have no power to buy and sell, like

corporations or individuals. They may condemn private property for

public use, if the public good requires it. The value of property for

public use is ascertained in the manner prescribed by statute. _The

Nation_ is inconsistent. It says in one paragraph that the state has no

lawful right to regulate railroads and restrict the action of railroad

companies in the issuing of stock, etc., and then declares that the

state can take the railroads from the companies should it desire to do

so. But for cool assurance _The Nation_ is entitled to the champion belt

when it says the state _must_ take the roads at their market value--at

what other people would pay for them--without inquiring "curiously and

knavishly" into the original cost! In other words, these corporations

are so potent that should the state attempt to exercise its right of

eminent domain, they can dictate the terms upon which they would be

willing to surrender their roads to the public. The terms are that the

state must pay the companies' value for all the watered stock with

which they have loaded their roads, as well as for all the bonds the

companies have sold, and do this _without asking questions_. If the

people or the states should stop to inquire into their cost, they would

be acting knavishly. True, the companies could not build their roads

without special grants from state legislatures, but having obtained the

privilege of locating their roads where they pleased, and having, by

false pretences, obtained local aid and defrauded the people who helped

to build the roads; having piled up their fictitious stock by the

billion, and by onerous and dishonest charges reduced the farming

population to poverty, their champion, _The Nation_, tells the states:

"If you want the railroads, you can take them, but you must not be

curious to know what they cost; this would be a knavish act; you can

have them by paying the companies the full amount of money they claim to

have invested, including fictitious and watered stock." This kind of

impudence is sublime. The railroad companies, through this _hired

spokesman_, propose to quit business provided the states will pay them

just what they are pleased to call the value of their roads, and ask no

questions. It is usual for the thief, when seeking immunity for his

crimes, to propose to return a part of the stolen property, but these

corporations, who have been robbing the states and the people for years,

offer to close their career by forcing upon the parties robbed what is

left of their booty, provided the states will pay to them not only the

cost of the roads, but allow them par value for all their bogus or

fictitious stock.

They propose to compel the states to adopt a new rule--the rule that

governs operations in Wall street. They will "bull" their stock to the

highest point, and force the states to purchase at these high figures.

_The Nation_ says that "The people ought undoubtedly to have looked

forward a little when they first began to grant charters; but, not

having done so, they ought not now throw on others the whole damage done

by their own _laches_." The conclusion is that because they dealt with

railroad companies as they deal with honest men, and did not provide in

advance for the punishment of all conceivable dishonest practices on the

part of the officers of the companies, _therefore_ the people are the

guilty parties and should reward the innocent railroad companies by

paying them real dollars for the imaginary dollars they have added to

their stock. The railroad companies took an undue advantage of the

people, but that is "neither here nor there;" the companies must get

from the states all that they please to demand for their roads. This is

the "common sense" _The Nation_ presents to the people.

The power of the states, under the constitution, to purchase, is not

doubted by this advocate of the railroad interest, nor does he, in his

"common sense," consider the immense tax that the purchase of the

railroads would entail upon the people.

_Seventh._ _The Nation_ says that "Much of the outcry over the high

rates charged by railroads is due to an immense but deeply-seated

popular delusion as to the value of railroad property." The reader is

then referred to Poor's Railroad Manual for the value of railroad

property, but _The Nation_ fails to state that in this Manual the value

of all railroads is given as furnished by the companies themselves; it

includes all their watered stock and bonds with which the roads are

"loaded," and does not purport to give the actual cost of any road. The

book, too, is published in the interest of the companies, and for the

purpose of inflating rather than giving the true value of the roads.

From this Manual it appears that dividends do not average more than five

per cent on the stock. When it is remembered that every dollar invested

in railroads (taking all the roads in the United States) represents two

additional dollars, or that by the increase of stock and issuing of

bonds, the reported cost is three times the actual cost of the roads, a

dividend of five per cent is equivalent to fifteen per cent on the

actually paid-up honest capital, it would appear that _The Nation_, and

not the people, is laboring under "a deep-seated delusion." _The Nation_

is not informed upon the subject, or desires to present an unfair view

of it. In the Manual to which reference is made, the New York organ will

find the statement that railroads can afford to carry freights for one

and one-fourth per cent per ton per mile. This is their own statement.

What _are_ their charges? Recently they have been reducing their rates.

As published, old rates from New York to Chicago were one dollar per

hundred-weight. This has been reduced to seventy-five cents by the

managers of the Grand Trunk lines. By the new scale the rates charged

are about double what the Manual fixes as "paying," and yet _The Nation_

thinks that because the farmers desire lower rates, the question of

reduction assumes a "somewhat ludicrous aspect." We are advised to

examine Poor's Railroad Manual before we permit our minds to be filled

with revolutionary notions about railroads. The farmer should presume

that the advantage is all on his side when railroad companies charge him

_only_ seventy-five cents for carrying a bushel of wheat from Iowa to

New York, and that at present rates railroad companies are making little

or nothing, and are running great risks. These are proper deductions

from the circular of _The Nation_. Having presented the whole case to

its own satisfaction, it gives reign to fancy, and says: "Now fancy

anybody seriously proposing to capitalists to construct railroads, as

most of the western railroads were constructed, _through a howling

wilderness_, for the _chance_ of five and a half per cent whenever the

earnings of the road allowed it; and fancy what subjects for spoliation

are presented by these bloated owners of railroad property, who pocket

on the average less than four per cent _on the par value of their

stock_,"--to which we might add, "including more than one billion of

dollars for which they never paid one cent." The fact that these

self-denying railroad men are constantly extending their roads, buying

and leasing all that they can get control of, for the purpose of more

effectually controlling the government and enslaving the people, and are

devoting all the earnings of their roads to these objects, are not

deemed worthy of notice by this champion of the railroad interest. We

know as a fact, that the leading and controlling railroad men are

spending their whole energy and their money to this end. These men are

fast consolidating the whole railroad interest. We also know, that

companies that are content to divide their earnings, rather than extend

their roads, make large dividends, and leave a surplus to be

capitalized. The "common sense" of _The Nation_ does not strike us with

its intended force. _The Nation_ evidently has but a limited knowledge

of the west. The fancy sketch of self-denying railroad men constructing

railroads "_through a howling wilderness_," is finely drawn; but it

exists only in the mind of _The Nation_. If this writer had been

speaking of the mountain gorges and desolate pine plains which vex and

impoverish the Boston & Albany track from Albany to Worcester, he might

be excused for his words; but the "howling wilderness" does not apply to

the cultivated prairies, whose enterprising farmers helped to build the

roads now so bitterly and justly complained of, and it describes the

domain of no western road save where the companies obtained, through

legislative and congressional aid, enough of the people's land to

construct the roads.

_Eighth._ As a last point _The Nation_ says, that "no corporation should

be restricted by law to a certain rate of earnings unless it consents

freely to do such work on those terms, or has a minimum guaranteed to it

by the state." The state possesses no power to guarantee to any private

corporation any rate of dividends; nor would it be just to compel the

people to donate a part of their earnings to railroad companies, or to

any other private parties. In our judgment, the state has the

constitutional right to regulate and control all private corporations

and, when the good of the public demands it, to restrict the rates

charged by railroad companies for carrying freights and passengers. We

admit that "the questions connected with the regulation of railroads are

questions of morality, in their highest and most important phases, the

settlement of which must touch the security of all property, and affect

the value of constitutions as safeguards of individual rights." We go

further, and say that in the management of railroads, and the favors

shown to the companies, the constitutional rights of individuals have

already been measurably destroyed, and that the most important question

now is, How can those rights be restored and no injustice be done to

railroad companies? These questions we have already discussed, and will

only add that the sole remedy to be applied is legislative limitation

and restriction. The abuses now practiced by railroad companies must be

corrected. The legislatures have the power and it is their duty to

restrict the scale of charges to such rates as will afford a fair

remuneration to the companies on their investments, and at the same time

protect the people from the extortions of soulless corporations. This

power can be exercised over the companies now in being as well as over

those to be hereafter organized.

We have devoted this chapter to an examination of the views of _The

Nation_ for the reason that, in the form of a circular, they have been

widely distributed, and are designed to distract and divide those who

are seeking relief from the oppressions of this railroad monopoly, and

because the writer treats the "Farmers' Movement," the "Grangers," and

"the people" with undisguised derision and contempt. The farmers are

characterized as a _mob_ of politicians--an irresponsible body--ignorant

and careless of the rights of others, and represented as claiming a

superiority to courts and laws. The idea that the people, farmers, or

grangers have not sufficient knowledge to take the lead in any attempt

to reform the abuses under which they suffer, is put prominently forth.

The attempt at reform in Illinois is referred to in the following words,

in speaking of the remedy for present abuses: "How far we are from both

(_i. e._, ascertaining and applying the remedy) is best shown by the

Illinois attempt at reform, which consists at present in taking the

working of the roads out of the hands of the exceedingly able body of

trained business men who have charge of it, and compelling them to use a

crazy table of 'rates' drawn up by a _mob_ of excited and ignorant

politicians." The prevailing notion which has obtained in some parts of

the country, that farmers and working men are not qualified to act in

matters of a public nature, is reflected throughout the circular, and

the rights and privileges of railroad corporations are spread before the

reader in what is termed a "common sense" manner. The object of all this

is apparent: It is to impress upon the public mind the idea that the

people are not equal to the occasion, and that no reform can be

effected.

CHAPTER VI.

THE INFLUENCE OF MONOPOLIES UPON LABOR.

It is a self-evident proposition, that the wealth of a country lies in

its products, and that the quantity of its products depends directly

upon the amount of labor employed. The diverse interests and pursuits in

our country afford opportunity for the employment of an immense number

of laborers. Indeed, the persons employed in manual labor in the various

industrial pursuits of the country number more than one-half of the

whole population. This great army of laborers is engaged in agricultural

and horticultural pursuits; its rank labors in shops, factories,

furnaces, mines, stores, and offices, upon railroads and canals, and in

vessels, and in the numerous other relations requiring their services.

Their right to fair remunerative prices for their labor is admitted by

all. Whether that remuneration is paid in money, as when the labor is

hired, or shares in the product of its creation, the workman should

receive a just reward for his services. No onerous taxes, duties, or

restrictions, should be imposed upon labor. The profits derived from

labor should belong to the laborer. When capital and labor unite in

producing, a fair division of the product should be made. Any system

that gives the whole product to the capitalist, except the small stipend

paid for the time the laborer is employed, is oppressive. We are not an

advocate of a division or distribution of the wealth of the country

among all classes and pursuits, but contend that it is but just that the

operatives in the factory, the forgers of the foundry, the skilled

artificers of the machine shop, the miners who extract wealth from the

earth, the laborers who build and operate railroads, canals, etc., and,

in short, all whose work and skill, combined with capital, produce a

profit, should receive a fair proportion of the profit thus created.

Prosperity and contentment can only be found where all industrial

pursuits prove remunerative; where manual labor not only supports the

laborer, but enables him to acquire a competence in process of time.

That division of labor and capital which compels the laborer to toil

daily to keep want from his door, and is so inflexible that the sickness

of a single day entails the loss of necessaries to his family, is a

species of slavery. When by the customs of the country, or by its laws,

the line dividing labor and capital is so clearly defined, that the

laborer, by a life-time of toil, can accumulate nothing, while the

capitalist employing him realizes from ten to one hundred per cent per

annum upon the amount invested, the one is but coining the life-blood of

the other, and the laborer is but little better than a bond-servant.

From time immemorial, those who obtain their support by manual labor

have received less attention from government than any other class.

Indeed, in all monarchial governments they are left out of

consideration, except as their labor can be made useful in advancing the

interests of the superior classes. In our own country there has existed

a prejudice against the laboring classes. Especially was this so in the

south until the abolition of slavery. As a nation, we have been apt to

follow old opinions, and look upon labor as degrading, and the laborer

as a menial. This prejudice still exists to a great degree, and our boys

seek speculative rather than legitimate industrial employments. While in

theory all men are considered equal in our country, practically the old

feudal distinction is kept up. We have no titled aristocracy in America,

but we are fast creating an aristocracy of wealth and pursuits. While

labor is the motive-power, and manual laborers the engineers who keep

the car of progress moving forward, they receive less consideration from

the hands of government than the loungers and speculators. While acts of

congress and state legislatures, designed to benefit the wealthy

capitalists, are of frequent date, but few can be found designed or

enacted in the interest of the laboring classes. Special legislation in

favor of the capitalists, corporations, and manufacturers, has been the

rule; legislation in the interest of the laboring classes the exception.

The _dignity_ that should attach to labor is entirely wanting, and the

respect the laborer should command is not accorded to him. Not that he

is looked upon as the inferior of other men, but that in all matters

affecting the public welfare, the interests of the capitalist, the large

operator, the banker, manufacturer, and corporations generally, claim

special attention, while the real wealth-producing portion of the people

is neglected. This is not the result of any design on the part of those

engaged in other pursuits--it results from the fact that capital pays

particular attention to its own interests, while labor is content to let

other interests take control of the government, of all public matters,

and of even its own pursuits, quietly accepting a secondary position,

and neglecting to claim the consideration and respect to which it is

entitled from its intimate connection with the capital of the country

and the body politic.

The laborer's political existence is seldom felt save at elections, when

the strongest _vote_ decides the day, and then generally in the blind

following of its file leaders. The reforms promised to labor on these

occasions are seldom realized, and the laborer, without asserting his

rights as a freeman, is too apt to continue in the old, beaten track,

sometimes complainingly, it is true, but willing and ready to be

directed by his party or employer, whenever his help is needed. All of

which is calculated to widen the line dividing capital and labor, and to

increase the wealth and power of the capitalist.

Let us illustrate: The capitalist is engaged in manufacturing, and

wishes protection from the government. The question of protective

tariffs is one of the issues of the campaign. He employs one hundred

voters. He makes known to them his wishes, and explains to them the

benefits he expects to receive. They wish to oblige their employer and

accept his views as correct, and all cast their votes for what they are

led to believe will be his benefit. They are not less intelligent than

other men, but instead of acting independently they wish to please their

employer. By this act, they involuntarily take an inferior place among

men, and lower their dignity. While they have by their action enabled

the manufacturer to increase his gains, by the success of a protective

tariff, they have secured nothing for themselves, not even an advance of

wages, unless their employer voluntarily allows such an advance. He is

aided by legislative enactment through their votes, and can demand

additional profit for the product of their labor; but the act is of no

personal benefit to them. All they receive, if anything, is voluntarily

allowed by the capitalist employing them. Had they examined for

themselves they might have discovered that the act which benefited him

was detrimental to their own interests. The same illustration will apply

to all pursuits requiring capital and labor. The consolidation of any

business so as to destroy or prevent competition is detrimental to the

interests of labor. Monopolies, of whatever kind, are encroachments upon

the interests of those who depend upon manual labor for support.

Railroad corporations in the United States employ not less than two

hundred thousand men. This large number of men have no interest in these

corporations excepting the wages paid to them. Subtract the sums they so

receive, and their daily labor still adds to the wealth of these

powerful corporations. They are employed to perform manual labor; they

are free and independent citizens of this republic. Their employers do

not have any claim upon them for anything but their labor. Yet, as a

general rule, in all matters affecting the interests of railroad

corporations, when the issue is made at the ballot box, these men are

found voting as their employers desire, too often without giving the

matter due attention, and not unfrequently in support of measures which

are at war with their own best interests. In thus voting they are

influenced by what they deem proper motives; they desire to gratify

their employers. This state of things is also most strikingly presented

in local and municipal elections, when certain measures are to be

carried. In such cases, as a general rule, the person or officer

controlling or employing men votes them "solid" on the side of the

question he supports. In the cases we have given, as well as in all

others of a like character, where any combination or corporation desires

to influence or carry certain measures, the undivided support of the

employees is expected. So long has this manner of voting been practiced,

it has grown into a custom; for the employee, if he refuses to observe

it, does so at the risk of losing his employment. We have referred to

these things, not for the purpose of showing that the men engaged in

manual labor are inferior to other men, or to prove that they act from

improper motives, but to demonstrate our proposition that they do not

think and act independently in matters of public concern, and are

indifferent to their own best interests. That while other interests

procure special favors from government, the laboring classes are content

to occupy an inferior position, and even give their support to measures

tending to degrade rather than to ennoble them. Because of these things,

the laboring classes, as a general rule, are treated by those who are

getting control of the capital and business of the country as inferior

beings, and labor is not classed by them as of honorable calling.

The creation of privileged classes in our country is to be deprecated.

The centralization of wealth and the grading of the standing of men by

the amount of money they possess; the creation of great corporations,

with power to control the business and finances of the country, now

threaten to overthrow our republican institutions. But equally to be

dreaded is the indifference manifested by the laboring classes in

asserting and protecting their rights. Practically, so far as the

business of the country is concerned, the line between capital and labor

is now sharply drawn, and in the administration of the government, the

old-time dogma, that the class controlling the wealth of the country

should rule, while those who labor for a support are to remain "hewers

of wood and drawers of water," is fast assuming tangible form, and

unless the far-reaching and grasping policy of monopolies is checked by

the laboring and producing classes, the absolute control of the

government will pass from the people into the hands of their oppressors.

By the action of railroad corporations; the special legislation in favor

of certain interests; the monopolies given to manufacturers, and the

action of the Wall street brokers, the wealth of the country has become

centralized, and is controlled by and in the interests of the

monopolists, who, because of their combinations, also control the value

of labor throughout the country. The influence of the laboring classes

is made to subserve the purposes of monopolists. The manufacturer,

protected by government, enjoys all the profit accruing from the labor

of the operatives, and uses the influence incident to his position to

strengthen his interests by controlling their suffrages.

In all the different labor-employing pursuits, the political privileges

enjoyed by the employe are directed and controlled by the employer in

his own interest; the whole mental and physical structure of the laborer

is used in advancing his employer's interest. Because of this law of

capital, the comparatively few men now controlling the railroads of the

country, our manufacturers and other great interests which have become

the special favorites of those in power, have obtained an almost

unlimited influence over the best interests of the country. They have

been able to entrench themselves in their strongholds, and compel all

the agricultural, the commercial and other industrial pursuits to

contribute to their already dangerous power. The great army of laborers,

instead of controlling the political affairs of the country in their own

interest, become the instruments in the hands of the monopolists of

their own oppression. With sufficient strength to shape the whole policy

of the government they are content to let others control them, while

they toil from day to day for the small compensation allowed them, and

derive no benefit from the proceeds of their labor.

If the capital and labor of the country were combined, so that the

products could be divided and a fair proportion allowed to the laborer,

his social and financial condition would be improved, and the power of

the few who now control the government in their own interest would be

destroyed. While the duty of providing for himself and family is imposed

upon every one, in _this country_ every citizen has another important

duty to perform: the duty of aiding in the preservation of republican

government and the equal rights of all the people. Those who become

indifferent to these objects and duties, and allows selfish or ambitious

men to get the control of the government, and prostitute it to their own

purposes, are the authors of their own sufferings. And those who permit

themselves to become instruments in the hands of the people's oppressors

for the continuance of oppression, commit great wrongs to themselves and

their country.

The public opinion that accords to the Wall street stock gambler a

place among honorable men, and allows him to shape the financial policy

of the country, that allows him to live outside of prison walls, is

corrupted and perverted. Yet there is no class of men in the whole

country who have so great an influence over the government and the

commercial and financial interests as the Wall street brokers.

No class of citizens should command greater respect than that engaged in

manual labor, nor should any other class exercise a more potent

influence in the nation; yet, as a matter of fact, no class receives so

little consideration or has less influence in national affairs. While

great interests with concentrated wealth, requiring no special aids from

government, are constantly receiving them, the interests of the laboring

and producing classes receive no special care or attention. While

railroad corporations and other great monopolies are vigilant in

protecting and strengthening their interests, the laboring classes are

indifferent as to what is to be their future.

While other interests are extending their influence, the interests of

the laborers are neglected, and the laborers themselves are content to

occupy inferior places in the body politic. While labor is the means,

and the _laborer_ the _power_ that developes and enriches the country,

the _interests_ of the laborers languish, while those of the speculator,

the stock broker, and capitalist, _prosper_. Before we can become a

prosperous, contented, and happy people, all honorable pursuits must

have equal rights before the law. Special and class legislation must be

abandoned, and the _dignity_ of labor must be fully vindicated.

But it may be asked, How are these things to be accomplished? We answer:

1st. By laborers asserting their right to think and act as independent

men; by giving their employers to understand that they do not hire their

intellects, their _rights_ as citizens, but only their physical force;

that while they labor for their employers, they preserve their

individuality and self-respect; by giving their employers to understand

that they are only paid for manual labor, and that they are not

bondsmen. 2d. By demanding for labor such remuneration as will allow the

laborer to share in the profits resulting from his toil, either by

treating it as an investment in the business in which it is employed, or

by the payment of such compensation as will allow a surplus for

investment--refusing to wear out their lives in procuring a bare

subsistence. 3d. By the diffusion of knowledge among the laboring

classes, especially of the theory and objects of our government, and the

relation sustained by the laboring classes to the government, and by

demanding for themselves due respect and consideration on the part of

those engaged in other pursuits; by demanding of legislatures and of

congress the enactment of such statutes as shall not impose taxes upon

their labor for the benefit of other pursuits, and such as shall require

all taxes levied for any purpose to be levied upon the _property_ and

_not the labor_ of the country. 4th. By demanding the unconditional

repeal of all statutes which confer upon individuals, classes,

companies, corporations, or callings, special bounties, grants,

privileges, or profits which in their operations act oppressively upon

the laboring and producing classes. And lastly, to strive to eradicate

the ancient and continuing prejudice against labor, and to vindicate the

truth of the often repeated declaration of eminent men: "That the person

engaged in manual labor is following the most ancient as well as the

most noble calling."

These objects can all be accomplished by united and intelligent action.

The false, yet popular, idea that a man's respectability among his

fellows is graduated by the extent of his possessions, and his political

standing scaled by the amount of his money, can be obliterated, and

merit alone will become the rule by which to measure the man. The

laboring man with intellect and personal merit will supersede the man

who has money but lacks mind, in the social and political world.

When the laboring classes, including the farmers and mechanics, shall

boldly step into the front ranks they will make their influence felt;

reforms will be the order of the day; trading and dishonest politicians

will be suffered to go into retirement; courts committed to the

interests of monopolies will be reformed, and the law will be

administered by judges who will not pervert the plain letter and spirit

of the constitution for the purpose of upholding unjust laws; the

monopolists who now rule and ruin the country will be shorn of their

power, the producer and laborer will receive for their labor and

products fair value in money, and will not be obliged to receive payment

in depreciated paper, while the speculator, the broker, and the

government buy and sell gold and silver as articles of commerce. The

agriculturalist, the mechanic, and laborer will be the _peers_ of the

men who are now forming an aristocracy of wealth; the laws will be

faithfully and honestly administered, and peace and prosperity will fill

the land.

End of Project Gutenberg's Monopolies and the People, by D. C. Cloud