USA > California > San Francisco County > San Francisco > San Francisco, a history of the Pacific coast metropolis, Volume II > Part 27
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Valley Road Turned Over to Santa Fe Company
The People Betrayed
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Almost concurrently with the operations of the Traffic Association another or- ganization which was formed in May, 1892, and named the Merchants' Shipping Association was striving to bring about a proper utilization of the water facilities of the port of San Francisco. Its efforts were attended with a considerable degree of success, and the association continued in active operation until 1894, when assurance was received that a clipper service between Atlantic ports and San Francisco would be maintained. It was estimated in August, 1892, that 42,000 tons of merchandise were on their way by sea to San Francisco from New York, and about 15,000 from Philadelphia. Twenty-four vessels were at one time en- gaged in this trade, and it was noted that there was a growing disposition on the part of Eastern business men to enter the Pacific coast market to obtain goods for distribution on the Atlantic seaboard so that the vessels carrying merchandise to the Pacific coast could secure return cargoes. It was this situation which brought about the cut rate movement of the Pacific Mail Company that resulted in serious loss to both clippers and steamers, and was followed by the withdrawal of many of the former and the cessation of the subsidies which had been paid by the Pacific Mail Company to shut off the competition of the clipper lines.
When the project of building a people's road into the great valley was under consideration it was assumed that it could "rely with certainty each year upon traffic in all portions of the valley where irrigation is practicable, and with almost un- erring certainty upon a sufficiency of moisture in the foothill country of the Sierra Nevada to produce a crop. It was further shown that the traffic of the Southern Pacific in the valley increased five fold in five years." There was no doubt in the minds of any one concerning the future of a people's road. Mr. Leeds in a report pointed out at the time of the origin of the Traffic Association that only about 14 per cent of the arable land of the valley was under cultivation. The number of acres cultivated was about 2,500,000, and there were at least 4,520,000 acres more of arable valley land which would soon be brought into use, while there was a large quantity of mill timber which would furnish business. Horticulture was in its infancy but was destined to greatly expand. Although in 1892 the popula- tion was still sparse the railroads moved 10,000 carloads of orchard and vineyard products, 390,000 tons of wheat and large quantities of barley, hay and vegetables. The petroleum output was also beginning to give great promise.
In the light of later events it is easily seen that Mr. Leeds was not over opti- mistic, and indeed no attempt has ever been made to show that there was any real apprehension that the Valley road could not be made to pay. Those who put through the Valley railroad scheme and turned over the road to the Atchison, Topeka and Santa Fe may be given credit for sincerity of purpose, but the fact remains that the upheaval of 1892-95 really accomplished no valuable permament results. The people who were active in promoting the organization which was instrumental in the creation of the North American Navigation Company and which started the movement for a Valley road soon found this out. For a while they fancied their work was done but in 1899 they had to come forward again to defend San Francisco's interests. In that year a suit was instituted by the Traffic Bureau of the Business Men's League of St. Louis, et al, versus the Transcontinental Railways. The object of the suit was to break down the terminal route making system. To meet this assault the Pacific Coast Jobbers and Manufacturers Asso-
Making Use of the Ocean
Resources of the San Joaquin Valley
A Dead Sea Apple
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ciation was formed. It originally embraced the merchants and manufacturers of the Pacific coast terminal cities. Wakefield Baker was the first president, and was later succeeded by H. D. Loveland. The association intervened in the suit and bore the brunt of the battle and won the contest which confirmed the principle of recognizing water competition as a factor in rate making.
Pacific Coast Jobbers and Manufacturers Association
The activities of the Pacific Coast Jobbers and Manufacturers Association con- tinued until the organization of the Traffic Bureau of the Merchants Exchange in October, 1908. It succeeded during this interval in securing the abolition of the state toll charges made by the Southern Pacific on traffic which did not cross the wharves. The Harbor Commission imposed a toll of 5 cents per ton upon all traffic crossing the wharves of the port, and the railroad extended the exaction to all freight entering the City whether it entered the City by water or land. The association succeeded in inducing the Interstate Commerce Commission to take up the matter, and after investigation that body declared the charge illegal when applied to interstate traffic. The decision proved the entering wedge to free all the commerce of San Francisco from the discriminating charge, effecting a large saving to shippers, which in 1911 was estimated at fully a million dollars. Before the Jobbers and Manufacturers Association terminated its existence it inaugurated the movement for the abolition of the discriminatory industrial switching charge which was successfully prosecuted before the Interstate Commerce Commission by the Traffic Bureau.
Growth of Sonthern Pacific System
The answer of the men to whose energies the building of the first transcontinental railroad was due to the complaints and denunciations of the people has always taken the form of pointing to the development of the state which has resulted from the promotion of facilities for communication. The corporation has rarely at- tempted to defend its practices, but bas at times dwelt upon its accomplishments. If the fact could be obscured that these latter were practically achieved with the money of the people it would be readily conceded that they proved themselves great benefactors. The growth of the state since the Central Pacific began ope- rating in 1865 is reflected in the expansion of the operations of the corporation which later developed into the Southern Pacific. It is a marvelous showing, and it is not surprising that those who were directly concerned in bringing it about should sometimes become confused respecting the causes that produced the results for which they claim so much credit. And it is not necessary in contemplating them to suppress or underrate the part played by the managers and active spirits of the corporation in developing the railroad system which from its humble beginnings in California has become one of the greatest in the United States.
In 1865 when the first report was made the operative receipts of the Central Pacific were $405,882; in 1910 they had increased to $135,022,607. The freight carried which aggregated 57,981 tons in 1865 reached 25,962,704 tons in 1910, and the 124 freight cars of the first named year had multiplied themselves to 44,979. Nine passenger and baggage and express cars sufficed in 1865 and 1,942 were needed in 1910, and the number of locomotives employed had risen from 12 to 1,808. In 1865 from 18 to 56 miles of track were operated; in 1910 the system embraced 9,752 miles of railroad. No statistics are available to determine what proportion of this vast volume of traffic was contributed by California, but in the fiscal year 1906-07 the freight moving eastward from California aggregated 1,851,-
Traffic Operations of Sonthern Pacific
OLD FERRY DEPOT IN THE EIGHTIES
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058 tons and into California 1,209,223 tons, while the movement within the state was 10,430,811 tons. A couple of years later the Southern Pacific handled 1,031,- 484 tons from San Francisco, and brought to the City 1,860,065 tons. During the fiscal year preceding the fire the Southern Pacific carried out of the state 169,879 tons of green deciduous, 250,067 citrus and 214,667 tons of dried fruit. The cor- poration by no means monopolizes the carrying business of the state, but it has the lion's share, as may be inferred from the fact that its chief competitor the Atchison, Topeka and Santa Fe absolutely declines to furnish statistics.
The earlier policy of the Southern Pacific was not calculated to promote the object which the congress of the United States had in view in extending aid to the constructors of the first transcontinental railroad. High passenger rates ope- rated to discourage immigration into the state and population increased very slowly compared with that of other sections of the Union. In 1880 California had 864,- 694 inhabitants, in 1890 the number had increased to 1,208,130, but during the ensuing ten years only 276,923 were added, the population in 1900 being 1,485,- 053. An explanation of this slow growth may be found in the fact that little at- tention was paid to colonizing before 1900, but after that date vigorous efforts were made to induce settlement by making low rates which promoted immigration. Between 1901 and 1910 the Southern Pacific carried 625,328 passengers at colo- nist rates, the number being 93,547 in 1893. During the same period the Atchison, Topeka and Santa Fe exhibited a like activity, and to the combined efforts of the two companies can be traced the phenomenal increase of population between 1900 and 1910 which exceeded 62 per cent, and which represented nearly as great an addition to the inhabitants of the state as there were people within its borders twenty years earlier.
It would be easy to trace an apparent connection between the advancement and retardment of progress in San Francisco and the operations of railroads which serve it, especially those of the company which dominated for so many years. Between 1883 and the great fire of 1906 San Francisco had many variations of fortune. There was a period of prosperity after 1883 which endured for several years, but in 1891 the people were complaining of stagnation, and as related in the ac- count of the movement which led to the construction of the San Joaquin valley railroad, the merchants and the community generally adopted the view that the short sighted policy of the Southern Pacific was responsible for the troubles they were experiencing. But it would be a mistake to lose sight of the fact that there were other causes operating, and that San Francisco was suffering in common with the rest of the country. In 1893 the United States was visited by one of the most disastrous panics ever experienced in this country. The Pacific coast was no longer isolated, and its inhabitants had to accept the evil with the good which results from interdependence and improved communication. Earlier, under dif- ferent conditions, San Francisco was able to escape and even to profit by the currency troubles of other parts of the Union. In 1893, although it still maintained its system of gold payments, it was caught in the maelstrom. Its business men perhaps may be held accountable for the money ills of the period as the exploitation of the Comstock mines and the consequent silver troubles may be directly traced to their activity.
Central Pacific Man- agers and Immigration
The Monetary Trouble of 1893
CHAPTER LVII
MONETARY PECULIARITIES OF SAN FRANCISCO AND CALIFORNIA
THE USE OF GOLD COIN IN CALIFORNIA-WHY THE STATE WAS ABLE TO MAINTAIN SPECIE PAYMENTS-AN EXCESS OF SUBSIDIARY SILVER CAUSES TROUBLE IN SAN FRANCISCO-THE VARIABLE "BIT" AND THE HOSTILITY TO THE 5-CENT NICKEL- THE TRADE DOLLAR EXPERIMENT-IGNORANCE OF EFFECT OF SILVER DEMON- ETIZATION IN SAN FRANCISCO-THE TRADE DOLLAR REDEMPTION JOB-FALL IN SILVER PRICES INJURES MINING INDUSTRY-CAPITAL AND RATES OF INTEREST- BANK CLEARINGS-THE CRISIS OF 1893 AND THE SUBSEQUENT BUSINESS DEPRESSION -CALIFORNIA PRODUCERS SUFFER FROM FALLING PRICES-SAN FRANCISCO VEGE- TATES-HAWAIIAN TRADE-TEA MARKET SLIPS AWAY-IMPORTANCE OF ALASKAN TRADE-CUTTING UP BIG RANCHES-OPERATIONS OF MINT AND SUBTREASURY- OBSTACLES TO MANUFACTURING DEVELOPMENT-AGRICULTURE-IMMIGRATION.
HE adherence of California to the gold standard throughout the Civil war, and the subsequent period during which the M national currency was at a discount, was regarded as an exhibition of financial wisdom by most Californians, al- OF SA ANF though there were some who stoutly contended that its ef- # SE fect was to deter people with small sums at their command from making their homes in the state, and that it abso- lutely prevented the investment of outside capital. Curiously enough, although the state maintained gold payments with apparent ease, the fact did not attract the attention of the economists, who did not seem to regard as anything out of the usual the ability of California to defy what was later declared to be an inexorable law, namely, that the inferior money must inevitably drive out the superior. There was an excellent opportunity during the period to study the operation of the so- called Gresham's law, but no one thought of doing so, perhaps because no one up to the time of the agitation over the silver question had thought of making an observation of Sir Thomas Gresham, which had reference only to the impossibility of keeping silver coins of full weight in circulation side by side with coins whose weight had been impaired by clipping, apply to all sorts of currencies. At any rate there was no serious study made then, nor after, of the effects of the Specific Contract Act of California, although some valuable suggestions might have been derived by students. They might have learned, for instance, that a superior cur- rency can never be driven out of a country which is able to maintain a supply of gold, and that it is impossible under abnormal conditions for a debtor people to retain a sufficient quantity of the metal which by universal consent has been
California and the Gresham Law
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selected as the medium for settling balances between nations foreign to each other.
Why California Maintained Specie Payments
A Subsidiary Coln Nuisance
The rest of the American Union during the Civil war was compelled to use paper money, not because an inferior currency drove out the superior, for there was no such occurrence, but because it could not procure gold or retain it after obtaining it; California was able to remain on a gold basis because she had an abundance of that metal and was practically a creditor country. So when her people resolved to adhere to specie payments they found no difficulty in doing so despite the enormous temptation which the opportunity to use the depreciated legal tender money of the United States presented, the resort to which at one time would have been regarded as a patriotic act by the people of the other states of the Union. There was absolutely no barrier to the adoption of the so-called inferior currency except the persistent determination of the people to use gold, which found expression in voluntary contracts sanctioned by a law which could only be made effective by the pressure of public opinion.
While the wisdom or unwisdom of adhering to gold when the rest of the nation was using an unconvertible paper currency was sometimes discussed, curiously enough a collateral consequence of the refusal to use United States paper money has almost escaped comment. In 1862 the government began the issuance of frac- tional paper currency. San Francisco, and California generally, absolutely re- jected the new issues and insisted upon being provided with subsidiary silver coinage. The supply was not overabundant during several years after 1862, but the people managed to make shift and submitted without much complaint to the inconvenience caused by the rejection of the fractional paper currency. This con- dition continued for several years until the government began to discover a source of profit in minting subsidiary coins. The mint regulations and the science of money were not well understood by congress, and an abuse was permitted to grow from which California was the chief sufferer. Methods of getting the subsidiary coins into circulation worked well, but there was no device by which, when the quantity emitted became greater than could be absorbed, the excess could be with- drawn from circulation.
Money Changers Profit by An Abuse
As a consequence San Francisco in course of time contained more of this sort of money than it required and it went to a discount. Subsidiary silver being a legal tender to the amount of only $5, storekeepers soon refused to receive it in greater sums, basing their declination on the fact that the banks refused to receive deposits of small coins. Money changers' shops sprung up on all the prin- cipal streets of the City, and they did a brisk business selling twenty dollars in gold for twenty-two dollars of subsidiary money. The presumption is that the brokers sold the depreciated silver to employers who paid it out to wage earners, and that they made money buying and selling. The abuse continued during sev- eral years without any attempt to remedy it being made until some years after the election of Newton Booth to the United States senate, about the close of the decade 1870, when an act was passed by congress which permitted the holder of subsidiary coins to take them to the subtreasury and exchange them for legal tender money. The cure was almost instantaneous. The money changers disap- peared as if by magic, only a very small number surviving, who devoted them- selves to the legitimate pursuit of exchanging domestic for foreign money.
Perhaps the toleration of this monetary abuse was attributable to the same cause which made the "bit" an amount determinable by the nature of the transaction.
Hostility to Small Coins
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There was no such coin as a "bit" in existence at any time, but in the early days a foreign piece rated at 121/2 cents was known as such and passed current for a time, but utterly disappeared when the government was able to supply domestic money. But the term "bit" was retained and is still in use, although shorn of its variability. In the careless period a "bit" was indifferently 10 cents, 121/2 cents or 15 cents. If a person in a store asked the price of an article and the salesman told him it was a bit, and he tendered a silver quarter of a dollar he received ten cents change. If he offered a silver ten cent piece it was received without com- ment; but if the price was "two bits" twenty-five cents was expected. The dime was the smallest coin used during the early Seventies, the nickel being viewed with distrust until it was popularized by the passage of the legislature in 1878 of the act fixing the rate of street-car fare in San Francisco at 5 cents. As for the cent piece it has not yet attained complete recognition, although its use is growing. During the years following 1880 many efforts were made to introduce the one- cent piece without success. The small coin was regarded with hostility by the classes which might reasonably be expected to derive the most benefit from its use, and on several occasions was made the object of a boycott. No cents were coined at the United States mint in San Francisco until November, 1908.
Owing to the scarcity of coins in the days immediately following the gold rush, and to the neglect of the government to exercise its function of providing a circu- lating medium numerous private coining establishments were started which proved profitable to those who conducted them. There was no concert of action in the production of these unauthorized coins, and apparently no serious abuse grew out of the irregular practice which was almost unavoidable. The makers secured a big seigniorage, but there were no complaints of debasement. In 1874, however, at the suggestion of San Franciscans the government was induced to embark upon a coinage scheme which had an extraordinary and disgraceful outcome. For many years a profitable business had been done by San Francisco banks buying Mexican dollars and shipping them to China. When the Comstock mines began yielding on a large scale the idea was conceived that a market could be made for silver by coining a "trade dollar," which would contain several grains more of the precious metal than that emitted from the Mexican mints. The conservatism of the Chi- nese defeated the project. They were accustomed to the Mexican dollar and showed no disposition to accept the proposed substitute.
The act demonetizing silver was passed in 1873 and its influence was soon apparent in the declining price of the white metal. In 1872 the value of a fine ounce of silver at average quotation was $1.322; in 1873 it was $1.298; in 1874 it fell to $1.278. It does not appear that the San Franciscans who interested themselves in the trade dollar device to arrest the falling price of silver associated the latter with the act of congress which struck the standard dollar of 4121/2 grains from the list of legal tender coins; the depreciation was accounted for solely by the enlarged output of the Comstock mines, and it was thought that the only mode of maintaining the value of the metal was to secure additional purchasers. Men as keenly alive to the interest of the silver miner as Stewart, afterward senator from Nevada, were unaware of the effect of the act, and did not criticize it ad- versely until years after its passage. It is quite probable that the leading finan- ciers of San Francisco with whom Linderman, the director of the United States
The Trade Dollar Experiment
Ignorance of Effect of Demonetiza- tion
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mint consulted, were equally ignorant or indifferent to the consequences of demone- tization. It is inconceivable that they would have remained quiet if they had un- derstood that the deprivation of the legal tender quality of the standard dollar would have the result, as it did later, of cutting the price of silver in half.
The Trade Dollar Redemption Job
But whether they knowingly or unknowingly assented to the act of 1873 it is undeniable that the trade dollar panacea was suggested by San Franciscans. Un- der this act trade dollars of 420 grains were coined between 1874 and 1879 to the amount of $36,000,000. The trade dollar was not a legal tender, but for a time it freely circulated in California, and to a limited extent throughout the rest of the country. This practice was speedily arrested, however, by the refusal of the banks to receive them for deposit, an action which made the country familiar with their nonlegal tender quality, and at once put an end to their circulation. In the meantime it was discovered that the Chinese did not take kindly to the new coin, and the mint authorities in 1879 discontinued their coinage. Many years later the stupid transaction had a finishing touch put to it by congress directing that the trade dillars should be redeemed at par. This was done on the assumption that the dollars had been received in ignorance of their true character by those holding them, and that the public faith demanded that the deceived persons should be reimbursed. As a matter of fact the dollars which were redeemed had all passed into the hands of a gang of speculators who had bought them up at their value as silver bullion. Very few, if any, were in the hands of deceived receivers. The speculators made a great sum out of the transaction which was sanctioned by con- gress, although it had full knowledge of the fact that it was a rank job.
It was stated in the chapter devoted to the description of the mining stock speculation during the Seventies that much of the prosperity which preceded the collapse of the market in 1876 was due to the large amounts of treasure poured into the lap of San Francisco from the mines of Nevada. While the output of the Comstocks was on the great scale which marked the early years of the boom the falling price of silver naturally had little perceptible effect. In a comparatively brief period it is estimated that the leading mines produced nearly $300,000,000, Con. Virginia alone being credited with $130,000,000 of that amount. While the big bonanza and the other productive mines were turning out such immense quan- tities of bullion the dropping price of the metal made a small impress, but when output and price declined concurrently, as they did after 1876 the result was disastrous and must be included in the causes which contributed to the depression in 1877-78, and which continued during several years following.
The extent of the depression has already been described. It was exhibited in the numerous bank failures which occurred, and in the shrinkage of the deposits in savings banks of the City which decreased from $55,871,000 in 1875 to $42,323,- 000 in 1881. At the same time there was a great diminution of the resources of the commercial banks, which declined from $30,329,000 in 1877 to $21,000,000 a few years later. In 1878 deposits in the commercial banks aggregated $38,000,000; two or three years later they dropped to less than $23,000,000. In 1880 the clear- ings of the San Francisco banks were only 68% of those of 1878. During the struggle over the adoption of the constitution in 1879 one of the arguments most frequently urged against the proposed instrument was its assumed effect on cap- ital. It was declared that it would take unto itself wings and fly to more hospitable
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