USA > California > San Francisco County > San Francisco > San Francisco, a history of the Pacific coast metropolis, Volume II > Part 28
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Capital and Interest Rates
Effect of Declining Value of Silver
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climes. The diminished deposits and the abandonment of San Francisco by men like Keene, who had made a profession of stock gambling, lent color to this assump- tion, but the records indicate that sufficient was left for carrying on profitable enterprises, for interest rates steadily diminished after 1879. At the beginning of the seventy decade loans as large as $100,000 were made at 11% per annum, and in 1878-9 the ruling rate was 9%. During the ensuing three years 8% to 9% was the figure. In 1882 a loan was made to a large capitalist at 9%, but since 1883 few mortgages have been recorded in San Francisco above 7%. The gen- eral rate for many years after 1883 was 7%, the lender paying the mortgage tax.
Bank clearings in San Francisco until after 1900 did not as accurately measure the business activities of the City as in some other communities, owing to the per- sistence of the habit of paying bills in coin. The practice of sending out collectors inaugurated when remittances were made by steamer still survives in San Fran- cisco, and the day set apart for that purpose is known as "Steamer day," but checks are more generally used than formerly. During the Seventies and Eighties many business men refused to make checks for small amounts. An investigation made by a reporter in the early Nineties disclosed that many firms were accus- tomed to paying all accounts under $20 in coin. Employers rarely paid by check. But as these habits prevailed almost down to the time of the disaster in 1906, the clearing house figures exhibit the fluctuations in business if they fail to show its true volume.
In 1878 the bank clearings of the City were $715,329,319; in 1880 they were only $486,725,953. After that year improvement began to exhibit itself, but re- cuperation was very slow. In 1883 the volume had increased to $617,921,853, but in the ensuing year it fell back to $556,856,691, but this was only a temporary relapse, the expansion being steady after 1884, rising to $851,066,172 in 1890 and to $892,426,712 in 1891. San Francisco was now no longer an isolated city. It could not, as in the Sixties, detach itself from the currency troubles of the rest of the Union. Its adherence to the gold standard, and its general conservatism were powerless to protect it from the monetary blunders of the country to which, perhaps, it contributed as much as any other section, for singular as it may seem, the financial element of San Francisco, despite the obvious advantage that must have resulted to the City from a successful adherence to the bimetallic policy, was strongly in favor of the single gold standard. Its bankers and business men were therefore not in a position in 1892, when there were signs of an impending storm, to say "I told you so."
In that year there was a decided halt and signs of retrogression. The clear- ings dropped from $892,426,712 in 1891 to $815,368,724 in 1892 and in 1893 and 1894 they descended still lower, reaching $658,526,806 in the latter year. It will be recalled that in 1891 the advocates of a valley railroad pictured the condi- tion of business as extremely bad in San Francisco, and as is usual in the case of advocates of a particular remedy they attributed the trouble wholly to local causes, ignoring others equally potent. A comparison of the alternations in the volume of clearings in the Eastern centers of trade shows that the San Francisco depres- sion synchronized closely with that which culminated in the great panic of 1893, when the failures in the United States aggregated the enormous sum of $346,779,- 889, more than three fold those of the previous year, and exceeding those of the Vol. II-13
Collections and “Steamer Day"
Story Told by Bank Clearings
The Crisis of 1893
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year 1884 by $120,000,000. The crisis of 1893 was attributed to the government currency. By a process of reasoning which was not clearly understood by the people, it was made to appear that there was distrust of the government paper money, a rather queer assumption in view of the fact that greenbacks were sold at a premium. It was on this pretense that President Cleveland on August 7, 1893, convened congress in extra session, but there was a much simpler explanation of the trouble which he ignored. For years the prices of products had steadily declined, and in the year mentioned all classes of producers had become greatly distressed. This condition existed throughout the administration of Cleveland, the lowest price level after 1873 being reached in 1906.
San Francisco was not affected by a scarcity of currency. It was able to main- tain gold payments during the period of stringency, but California producers suf- fered greatly through the fall of prices, and industry was almost paralysed in Nevada, owing to the decline in the value of silver, which had fallen from $1.322 an ounce in 1872 to 78 cents in 1893. All the mines in that state and Utah, ex- cept a few of extraordinary richness, had shut down, thus impairing the purchasing power of once good customers. The exports to foreign countries, which aggre- gated $+5,767,673 in 1883, in 1893 had dropped to $33,853,345 and in 1894 they were only $26,410,672, ten millions less than in 1879. In 1881-82 the receipts of wheat and flour at the port of San Francisco, expressed in terms of centals of wheat, amounted to 23,316,320, and the exports reached 24,862,095 centals during the seasonal year. The value of the wheat shipped during the calendar year 1882 was $31,355,442, and of flour $4,808,291. In 1891 California was still exporting grain on a great scale, receiving $27,323,251 for her shipments of wheat in that year, and $5,781,590 for flour. After 1892 the exports of wheat and flour began to dwindle. In 1898 they were only $5,694,448 of the former and $3,383,755 of the latter.
It is usually assumed that cereal farming ceased to be attractive in California because horticulture offered greater profits. This is true, but the fact is often lost sight of that wheat farming was not an unprofitable occupation before 1882, and that, had it not been for the tremendous drop in prices after that date, wheat might have continued for an indefinite period one of the leading products of the state. In 1882, according to the government reports, the average export price of wheat was $1.19 a bushel; in 1898 it was 98 cents, but during the interval it had fallen as low as 58 cents, notably in 1895. As practically all the wheat raised in California was produced in the northern part of the state, and shipped abroad through the port of San Francisco, the great reduction in price, and the consequent disinclination to engage in the production of that cereal materially affected the business interests of San Francisco by curtailing the consumptive ability of the region tributary to the City. The City was also a sufferer from the diminishing product and the falling price of wool. In 1876 the wool crop was estimated at 56,550,970 lbs .; in 1900 the product was only 21,360,000 lbs. and five years later it was 22,000,000 lbs. In 1875 the price of coarse wools was more than twice that of the later year. The government statistical abstract quotes the average in the former year at 47 cents; and in 1896 at 29 cents. In 1896 it fell as low as 19 cents. As in the case of the cereal wheat the diminished production of wool was due as much to decreasing profits of sheep raising, as to the introduction of other
Falling Prices Affect Wheat and Wool Production
California Producers Suffer from Falling Prices
BAND STAND, GOLDEN GATE PARK
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methods of utilizing the soil, which might have proceeded without interfering with the wool industry, had not falling prices made sheep raising an undesirable occu- pation except under very favorable circumstances.
In view of these great impairments of the incomes of California producers it is impossible to find an explanation of the depression which began to manifest itself in 1891 in San Francisco in currency troubles of the sort loudly com- plained of in the East. The depression was not due to a lack of money necessary to transact exchanges or move crops; it was caused by the failure of the producer to secure a proper reward for his exertions. When this happened he curtailed production, and as a result suffered from diminished returns for his smaller out- put, which he was compelled to sell at a price which meant a loss to him, or at least insufficient remuneration for his labors. On the other hand during the period of ascending prices, when the wheat grower, silver producer and wool raiser were receiving remunerative prices for an increasing product, there was great prosperity in city and country. The latter condition is plainly reflected in the expansion during the years between 1883 and 1891. The disastrous results of the depression which set in after the last year mentioned are seen with equal clearness in the statistics quoted; in the agitation for lower freight rates and better railroad facili- ties, and in numerous other ways which will be apparent when we come to consider the other activities of the City, not directly connected with productivity, but which are fully as dependent upon the latter as though they were part of the industrial machine.
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Perhaps it is no more characteristic of San Francisco than of the nation at large that her people should take things easily when conditions are prosperous ; but it has been charged that after the agitation in 1877-78, and the succeeding depression, there was a disposition shown by San Franciscans to take things as they came. With the recrudescence of prosperity in 1883-4 there was not that manifestation of enterprise which may be properly looked for in a community ambitious to grow and fill a large space on the map. As was shown in the chapter devoted to describing the activities of the railroad, which then practically monopolized the traffic of the state, although there was as much reason as later to resent the corporation's treatment of its patrons, and its usurpation of political power, public sentiment was practically dormant. The press intermittently sought to arouse the people, but without achieving much success.
Until 1891, when the Valley railroad movement began, the merchants and the people of San Francisco appeared to be satisfied. "Let well enough alone" was the unexpressed motto. Those who were in business during the prosperous period were satisfied with their profits, and were not eagerly seeking to create new sources of income. The inactivity of the merchants was reflected in the conduct of munici- pal affairs. There was a pronounced indisposition to take any step which might add to the tax burden. Innovations were regarded with hostility, and compara- tively few realized the absurdity of a community with abundant means at its com- mand adopting the methods of the necessitous who are compelled to buy or build on the installment plan. The city hall, begun in the early Seventies with a great flourish, was still uncompleted, being built piece meal, the work at times halting for months because supervisors failed to make necessary appropriations. The municipal machinery was badly out of joint and a new charter was needed, but
Sufferings of the Producer
"When the Devil Was Sick"
San Francisco Vegetates
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SAN FRANCISCO
the earlier failure to adopt an instrument discouraged effort. Men of narrow views, but animated by the best of purposes dominated public sentiment, and San Francisco was beginning to vegetate.
The evil effects of inaction were not recognized at the time. The City was increasing its population and wealth, and the volume of business was constantly expanding, and there seemed no need for concern, although a tendency was begin- ning to manifest itself in the interior press to sharply criticize the inaction of the metropolis, a practice which developed to disagreeable proportions a little later, when the possibility of contrasting the rapid advances being made by Los Angeles, which during the Eighties began to emerge from the dolce far niente stage of ex- istence and was growing with great rapidity. The increase in population in San Francisco between 1880 and 1890 from 233,959 to 298,997, while not as great as that made during the previous decade, was considered a healthy showing, and the exhibit otherwise was not bad. The City still retained its preeminence as a port of entry. Imports, which amounted to $35,221,571 in 1880, had increased to $48,751,323 in 1890, while exports during the same period rose from $31,845,712 to $35,962,078. As all the other ports of the state in 1890 only had an export movement amounting to $355,877, and did not import enough to merit being noted in the government's reports, there was no alarm felt. There was much to support the complacent indifference to the intimations that were being made that San Francisco had better look to her commercial laurels in these figures, and likewise in the expanding east and west bound traffic of the railroad, which showed an increase in the local east bound from 255,560,900 pounds in 1876 to 419,817,320 in 1888, and of west bound from 340,674,400 to 696,366,810 pounds during the same period.
There were other causes for complacency, so far as the merchant was con- cerned. The treaty with Hawaii, while it did not result in giving the people of the Pacific coast cheaper sugar, was undoubtedly a great stimulus to trade between the mainland and the islands. In 1875, the year preceding the reciprocity treaty with Hawaii, the total production of sugar on the islands was 25,000,000 pounds; in 1901, under the stimulus of the indirect bounty given to the Hawaiian planters, the output was enlarged to 691,000,000 pounds, and practically all of it came to the port of San Francisco, where part of it was refined, the remainder being shipped to the East, chiefly by rail, the Southern Pacific making a rate which for many years, until the Tehuantepec route was opened, made water competition im- possible. In addition to sugar the islands produced rice, pineapples, coffee, hides and skins and bananas which, during the reciprocity period and up to the time of annexation, which took place in 1898, were wholly handled in the port of San Francisco, which also enjoyed by far the greater part of the export trade to the islands. This active commerce gave employment to considerable shipping in addi- tion to the regular lines of steamers plying between the ports of San Francisco and Honolulu, and greatly stimulated the sale of California products, as well as those of other countries distributed by local merchants.
High Prices for Free Sugar
The importance of this rapidly developed trade was largely instrumental in closing the eyes of the people of San Francisco to the one-sided operation of the reciprocity treaty, under whose terms the planters of the islands were practically made a present of the remitted duty, the price of sugar in San Francisco actually
Complacent San Franciscans
Growth of Hawaiian Trade
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SAN FRANCISCO
being higher during the entire period while the convention was in force than in the states on the Atlantic seaboard, where the population consumed duty-paid sugar. The fact that the planters were chiefly San Franciscans, or operating with San Francisco capital reconciled the community to the indignity of seeing a raw mate- rial pass through their port on its way to the East, and after paying a high rate for railroad transportation, being sold in the markets of that region at an average rate of a cent a pound less than it was sold for in San Francisco.
During the Eighties the merchants of San Francisco were still building on the prospect that the City might prove a great distributing market for tea, but they were gradually disillusionized. One of the complaints voiced during the anti rail- road agitation which resulted in the building of the San Joaquin valley railroad, was based on the disappearance of this prospective trade. The steamship lines cooperating with the Southern Pacific arranged rates in such a fashion that the cargoes destined for the East passed through the port of San Francisco unbroken, and merchants in Chicago were enabled to ship tea back into territory formerly securely held by the jobbers of the City. It was contended that this action was in open violation of a ruling of the Interstate Commerce Commission that had been secured by a San Francisco commercial house, which, however, there was no at- tempt ever made to enforce. There is no doubt that the Southern Pacific, had its policy been to build up the port of San Francisco, could have compelled such an adjustment of rates that the City would have realized its dream of being a great tea market; but at that time, and for a long period afterward, the managers of the railroad were almost wholly devoted to the long haul idea, and expended the most of their ingenuity in devising schemes which practically compelled the con- sumer to pay all the traffic could be made to bear.
In a circular arraigning the Southern Pacific for its alleged discrimination against San Francisco, issued about 1892, and designed to promote interest in the Valley railroad project it was shown that imports of tea into San Francisco had fallen from 170,696 packages in 1886 to 154,353 in 1891, and this reduction was attributed to the cause above named. The only answer made to complaints of unfair treatment was that Suez canal competition forced the railroad to adopt a course which it would have liked to avoid, but San Francisco merchants were indisposed to accept the explanation in view of the fact that tea was being moved from Yokohama to Salt Lake City via Portland, Oregon, at 11/8 cents a pound, while the rate for the same commodity from the Japanese port mentioned to Salt Lake City via this port was 234 cents a pound. The struggle to retain the coffee market which the merchants of San Francisco had succeeded in building up did not attract general attention until it was made perfectly clear in the course of the animated discussion in the early Nineties that for some inexplicable reason rates were so adjusted that New York merchants could control the coffee market as far west as Denver, and completely shut out the Central American product handled in San Francisco.
One of the sources of mercantile prosperity during the years between 1883 and 1893 was the trade developed in Alaska, which was almost wholly confined to this City during that period. The trade reports prior to the acquisition of the Phil- ippines, dealing with the non-contiguous territory of the United States, did not command so much attention as later, but the volume of business was by no means
Failure to Create a Great Tea Market
Why the Tea Trade Dropped Off
Importance of Alaskan Trade
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inconsiderable, and occasionally people would be reminded of the importance of Alaska by publications issued by the treasury department. One of these states that up to 1890 the government had received $5,956,565 in payment for the seal skins taken by the company which had bid for the privilege, and that the value of the seal skins of various kinds and of other furs taken in Alaska aggregated $46,466,330. The salmon pack of the territory from 1878 to 1889 was valued at $6,439,997 and between 1865 and 1889 the number of codfish taken in Alaskan waters was 24,585,300. The same authority computed the value of merchandise shipped from Pacific coast ports to Alaska between 1868 and 1890 at $15,845,506. Prior to 1896, when the rush to the Klondike began, this large business was mainly confined to San Francisco, and was one of the causes which helped for a time to conceal the evil effects of the changing price conditions which disturbed the rest of the country as well as California.
Changes In Production
Fortunately for the state and its metropolis when the cultivation of the staple products which had once proved a profitable resource declined, its people were able to turn their attention to other pursuits. When the output of the gold placers began to shrink attention was paid to the production of cereals, and the diminish- ing product of the mines was offset by the generous yield of wheat, and by large wool crops. In turn, when cereal and sheep raising ceased to be profitable indus- tries horticulture was resorted to on an increasing scale, and concurrently with its development other resources were being exploited which constantly tended to increase the revenues of the producers, and which would probably have brought about a transition without a shock had the general arrestment of progress through- out the Union not occurred.
Yield of the Mines Declining
At the beginning of the decade 1880 California had already adapted itself to the change involved by a reduction in the output of gold from an annual amount exceeding forty millions during the Fifties to about twenty millions, by greatly extending her agricultural operations. And although there was a further decline during the Eighties, the yield being only $11,212,913 in 1889, she was adapting herself to the changed circumstances created by this loss of revenue from this source, and also to the lessening profits of the Nevada trade, resulting from the shrinkage of the operations on the Comstock, due in part to the exhaustion of the rich deposits and the impossibility of profitably working low grade ores at the prices to which silver had fallen during the years following demonetization.
The result of turning to other sources when wheat farming ceased to pay is , visible in the growth of horticulture. After 1887 the production of fruit became of enough consequence to merit the collection and preservation of statistics, and we can gather from them the rapid advances made between that date and 1893. The total yield by no means aggregated anything like the amount of the shrinkage in gold production, and the decline in the value of the wheat and wool crops; but it represented many millions of production. There was being produced on a constantly increasing scale many fruits which a few years earlier were almost unknown, and they had become a commercial factor of importance. The output of prunes had expanded from 7,500,000 pounds in 1887 to 52,180,000 in 1893, and the crop was valued at a couple of millions. The yield of peaches had grown from 8,000,000 to 16,800,000 pounds during the same period. Apricots were grown in larger quantities as were also pears, prunes, nectarines, figs, hops, wal- nuts, almonds, oranges, lemons, honey, beet sugar and raisins.
Progress in Horticniture
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The value of these products to the producers footed up several millions annually, but the change involved in the production of one or two crops to the diversified plan of farming which had taken its place had produced results which would hardly be divined from a study of the figures showing the value of output. The transition from cereal farming and wool growing to horticulture had effectually disposed of the burning questions of the decade 1870, especially that of land monopoly. The tendency which Henry George deprecated in his "Progress and Poverty," and which he predicted would increase as the years rolled on, had wholly disappeared. The land owners were no longer desirous of holding their estates intact; on the contrary they were eager to cut them up and sell them. They had ceased to hope for any change of sentiment that would permit them to operate their holdings with cheap Oriental labor. The decisive vote of the state against Chinese immi- gration, and the action of congress and the acquiescence of the nation in the policy of exclusion made it clear that the development of California's resources would have to be made by free labor.
In considering the subject of land monopoly Henry George had been guided too largely by observation of tendencies in old world countries where the prestige attaching to the ownership of land made it the most desirable form of wealth. And his intense convictions regarding the efficiency of free trade to produce con- ditions which he thought would better humanity had caused him to underrate in- dustrial progress in other directions than agricultural production. It was impossible therefore for him to foresee that owners would desire to exchange their land for other forms of wealth. This is what actually happened. The increasing burden of state taxation compelled assessors to abandon their former practice of favoring the large owner. Although the State Board of Equalization was deprived of the power to reach the individual shirker, or favored property owner by the Wells, Fargo decision, the expedient of raising the roll of an entire county had its ef- fect, and public sentiment soon compelled an approach to fairness within county boundaries.
The value of all property within the state as found by the assessors in 1879 was only $549,220,968; in 1892 this value had increased to $1,275,816,228, of which latter amount only $187,008,874 or 14.66 per cent of the whole was personal property. A large part of this enhancement was due to the growth of population which increased from 864,694 in 1880 to 1,208,130 in 1890, but it is clearly ap- parent that the addition of inhabitants without the assistance of the changed system of taxation would not have produced the result noted. Between 1870 and 1880 a relatively greater addition was made to the population than during the 1880 decade, but the assessed value of all California property which was $637,232,823 in 1872 was only $549,220,968 in 1879, the year of the adoption of the constitution.
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