USA > California > San Francisco County > San Francisco > San Francisco, a history of the Pacific coast metropolis, Volume II > Part 29
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The increase in the value of property as reported by the State Board of Equali- zation was slow in the first years after 1879. In 1882 it was only $608,642,036, of which $134,048,419 or 21.85 per cent was personal. After that year the increase was rapid, rising to $765,729,430 in 1883 and reaching $1,275,816,228 in 1892, only 14.66 per cent of the total in the latter year being personal property. In 1876, as already stated, public sentiment on the subject of inviting desirable set- tlers from other parts of the Union to make their homes in California was not strong enough to impress the legislature that an exhibit at the Centennial Exposi-
Cutting Up the Big Ranches
Henry George's Prophecy Miscarries
Effects of Fairer Mode of Assessment
Inviting Settlers
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tion in Philadelphia of the resources of the state would prove beneficial, but eight years after a governor devoted part of his message to pointing out the good that would result by disseminating information in the East concerning the capabilities of the soil of California and the opportunities afforded the settler to make for him- self a prosperons home within its borders.
Prosperity Breeds Indifference
In these changed conditions we can trace the causes which contributed to the general prosperity after 18844, and the impetus given to business in San Francisco during several years after that date. The multiplication of small farms, and the diversification of agricultural pursuits, gave employment to increased numbers in the country and in the city. New sorts of occupations were provided and industries which had figured but slightly in former years began to grow and became important factors in the work of wealth creating. The merchants of the City prospered and were contented with results and took their good fortune without inquiring too narrowly whether in their capacity of intermediaries they were doing the right thing for the community they served. Perhaps it was too much to expect that the oppressions of public service corporations should have been regarded by merchants as too exacting when they appeared to be so easily borne by a prosperous people, but the business men of the City were subsequently indicted for their neglect by organizations of their own formation which did not hesitate to expose the fact that they had almost unresistingly permitted the railroad to have its own way in every particular affecting the destiny of the community it was serving.
Trade Rather Than Production Encouraged
While prosperity endured there was little stress laid upon the 'comparatively slow growth of manufacturing in San Francisco. The merchants of the City were far more interested in affairs in which they were more directly concerned, and were not inclined to object to the course of the railroad whose policy it was to secure as much traffic as possible without inquiring too closely whether it was pursuing a "penny wise and pound foolish" course. In the literature of the Traffic Associa- tion of 1891 reference is made to the enormously greater amount per capita drawn from California by the railroad than from the people of other parts of the Union more liberally dealt with by transportation companies, but the attempt to explain the cause was not always satisfactory, for the reason that the chief movers in the effort to bring the Southern Pacific to terms were almost solely interested in dis- tribution. They were importers and exporters, and were therefore more concerned about through than local rates. The importance of the latter being made reason- able was elevated to the first place, and the development of the state was wholly subordinated to that of bringing products into California.
Capital Reluctant to Engage in Manufac- turing
It is doubtful, however, whether any serious economic benefit could have been effected by the pursuit of a policy of stimulating manufactures in a period when the consuming population was too small to encourage production on a scale per- mitting the products to be sold in profitable competition with the great factories of the East. The fruitless attempts of Ralston and others to force results had made men wary. A population such as that existing in California at that time, whose capital had been acquired through the prosecution of other industries than manu- facturing was not inclined to invest money in undertakings with which they were unfamiliar, and which required an extraordinary quantity of demonstration of a verbal kind to convince possible investors that they could be made profitable.
High Wages Deter
The labor question had lost a great deal of its acuteness after the Seventies, and while during the Eighties there were many strikes, the most of them proved
MONTGOMERY STREET, LOOKING SOUTH, AS IT APPEARED BEFORE THE FIRE
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unsuccessful, and in some instances employers were able to wholly displace union men. There was a recrudescence of the anti Chinese agitation, and manifestations of syndicalism under the auspices of the Internationals, but these were directed more particularly against public service corporations and local industries unaffected by outside competition. It may be stated in a general way that the labor condition in San Francisco, so far as the activities of the unions was concerned was not such as to deter capital from making investments, but the wage scale which even em- ployers did not seem inclined to disturb was so high that manufacturing in compe- tition with localities where workers were compensated on a much lower basis offered no temptations to cautious men with experience, and none at all to those who are inclined to put their money in industrials only when they see in them something suggesting an approach to certainty of returns.
Nevertheless outside of the circle engaged in distribution, and those who ap- proached the traffic problem solely from the standpoint of the distributer, there was criticism of what was deemed the obstructive policy of the railroad, whose freight schedules seemed to be arranged with especial reference to moving raw materials out of the state at the lowest possible rate, and bringing into California finished articles at rates which made profitable manufacturing impossible. It was charged that wool in the grease was shipped to the East at an absurdly low figure as it must have been to have permitted the scouring process to be successfully conducted at the end of a 3,000 mile haul; and it was also alleged that absurdly low rates were made for raw sugar-$7.50 a ton to the Missouri river in some cases. The excuse made by the railroad for these discriminations was the alleged necessity of pro- viding loading for empty cars, the assumption being that the west bound traffic greatly exceeded in volume that of the east bound, but the true explanation in both cases was the desire of the railroad to secure a traffic which, unless the rates were made extremely low, would have moved by sea.
Whether it would have been worth the while of the railroad to move raw cotton and iron from the East to the Pacific seaboard at relatively low rates is still a debatable question. It was at one time thought, and particularly during this period, that cheap raw materials would have stimulated the growth of manufac- tures, but the experience of the Woolen Textile Mills proved the fallacy of this assumption. Nothing short of a protective system could have overcome the ad- vantages enjoyed by the older sections of the Union. The Californian Woolen Mills had cheap raw materials but they lacked cheap skilled labor and failed in consequence. The people of San Francisco have for nearly half a century seen vast quantities of raw silk pass through their port destined for factories in the New England and Middle states, and although vigorous and persistent efforts were made to start the industry they never proved successful. Some silk was spun and a very handsome flag was woven by an enterprising man named Newman, but the investors with him in the enterprise never made even. Under the circumstances it is astonishing that a single cotton textile factory should have survived the vicis- situdes of years. The fact can only be accounted for by stating that the unions have not regarded, until recently, the industry as important enough to engage their particular attention.
It was urged during the period we are now dealing with that the chief obstacle to the development of a manufacturing industry in California was the lack of
Railroad Tariffs Discourage Manufac- turing
Cheap Raw Materials Not Utilized
Obstacles to Manufac- turing
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coal. Undoubtedly dear fuel added to the difficulties of the situation, but as will be seen as the narrative progresses, the situation has not been materially changed now that California has cheap oil and abundant hydroelectric power. Indeed the troubles of manufacturers seemed to have increased with the abundance of fuel and power. Certain industries in San Francisco which had flourished, despite the drawback mentioned, notably those of metal and shipbuilding, fell off in a marked fashion concurrently with the development of the oil fields and the utiliza- tion of the water power of the state. The closer relations of the City with the Eastern section of the Union after the Eighties, in a measure explains the trouble. They intensified a rivalry which it was becoming increasingly difficult to with- stand, and concurrently the growth of other industrial centers in the state served to bring about a condition of affairs not at all favorable to the expansion of the manufacturing industry in San Francisco.
Failure of Economic Theories
The over acute economist who finds himself able to explain the alternations in the fortunes of a business community by concentrating his attention on some par- ticular cause or causes, usually experiences no difficulty in explaining slumps in business. He sometimes oracularly announces that a period of dullness following upon briskness is due to over speculation, or some similar cause. Such an explana- tion may have seemed sufficient to account for the severe collapse in the Seventies, but it hardly fits the condition that arose after 1883. The state was developing steadily; its lands were being entered on by industrious settlers who were utiliz- ing their holdings and intelligently diversifying agriculture, thus accomplishing the homely object of avoiding the putting of all the industrial eggs in one basket, a practice which had caused the farmer and the state generally to suffer greatly when the enormous fall in prices occurred. And the farmer was not alone engaged in the work of diversification. Gold placer mining, as indicated by the quoted figures of output had become a diminishing source of dependence, but quartz mines were being opened and attention was being paid to the production of the commoner minerals. But despite all these encouraging features, and a practical cessation of mining stock speculation during the Eighties, California in common with the rest of the Union experienced a great depression in 1893 in which the metropolis was the most conspicuous if not the chief sufferer.
Some day a school of economists may arise with the ability to disentangle the contradictions, and tell why California and San Francisco should have progressed with gratifying rapidity during the Eighties, and when the prospects seemed brightest suddenly receive a setback, which, if less spectacular than that suffered fifteen years earlier was fully as severe. It is not necessary for the historian to do more than describe what occurred; he may point to apparent causes, but it is not his duty to attempt to furnish a symmetrical explanation of contradictory cir- cumstances, and he certainly has no right to try to bring the contradictions into harmony by suppressing mention of facts which he regards as inconsequential. The subject is too complex to be solved offhand, and there can be no solution of the problem involved unless all its bearings are carefully studied.
Conservative Methods
A few years earlier when the unsoundness of several banks in San Francisco was disclosed, a prompt explanation of the cause was offered by the critics. The numerous failures of 1876 and the years immediately following were attributed to bad banking methods and the utter lack of surveillance. In 1878 legislative
Puzzles for the Economist
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action was taken which should have resulted in a decided improvement, and the comments in the public press during the Eighties indicate that the belief prevailed that excellent results were achieved by supervision. Several unsafe institutions were obliged to close their doors because it was found that they had impaired their usefulness by bad loans. Eight banks were compelled to liquidate in the first two years after the passage of the Bank Commission Act, and with their elimination it was supposed that the banking system stood on a solid foundation. The exac- tions of the commission deterred the formation of new savings banks, and during the eight years following 1879 none was established in the City. The savings banks already in existence commanded complete confidence, their deposits increas- ing from $42,323,000 in 1881 to $63,154,000 in 1888. The evidence of the clearing house shows that equal confidence was felt in the commercial banks, the clearings rising from the low point of $556,857,691 in 1884 to $892,426,712 in 1891. The number of savings banks was not increased until 1888, when the Pacific Home Savings bank was incorporated and a year later the Mutual Savings bank was added to the list, and the Columbus Savings Bank and Loan Society was started in 1893.
These exhibitions of confidence and apparent evidences of prosperity, and the undoubted stability of the most of the financial institutions of San Francisco did not serve to avert the widespread disaster which overtook the nation in 1893. Some eighteen banks in the City were compelled to close their doors in that year, many of them having assets largely in excess of liabilities. But two institutions had their weakness disclosed. The Pacific and the People's Home Savings, the latter an adjunct of the Pacific, its brief career having commenced only five years earlier. The financial condition despite the temporary suspensions was not sen- sational. The community did not take alarm, and showed no panicky signs. The comment of the press at the time indicated a belief, of a portion of the writers at least, that the interruption to banking business was in no respect due to local causes, but was owing simply to sympathetic relations with Eastern money centers.
Some critics of the situation in San Francisco took the view generally enter- tained at the East that the trouble was solely due to an inelastic currency, and closed their eyes to the undoubted evil effects of constantly falling prices, a phenomenon which had been asserting itself for several years throughout the entire country, and had made itself manifest in California in the enormous reduction and value of its chief crop. The same critics a few years later, when prices were on the up grade, looked back on the so called currency troubles of 1893 as a blessing in disguise. We find one remarking "whatever the financial losses in that panic there was some compensation in the fact that it settled the agitation that had been in progress for fifteen years for free coinage of silver on the basis of sixteen to one. If that measure had succeeded, the country would not have enjoyed the same meas- ure of prosperity it has since maintained." The same commentator was called upon to record a collapse in 1907 which in almost every particular resembled that of 1893, despite the fact that the agitation over silver had long ceased, which sug- gests the propriety of the investigator inquiring further into the causes which pro- duced so very nearly similar results, notwithstanding the assumed monetary stability which was supposed to have been produced by the settlement of the question of the standards.
Panic of 1893 Not Influenced by Local Causes
Question of the Standards in California
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While it is not particularly clear why San Francisco and California should have been involved in the currency troubles of the East, it is nevertheless true that the monetary stringency in the City was very severe. Isolated cases of difficulties occasioned by the inability to borrow illustrate the condition of affairs far more graphically than columns of figures and statements concerning the closing of banks, It is authentically related that during the period of tightness Mrs. Jane Lathrop Stanford, the wife of the senator, who died in 1893, was in great straits for money and that the sum of $12,000 which she realized on a policy of insurance issued to her husband actually helped to keep open the doors of the university during the most trying days of the depression. There is a letter extant in which Mrs. Stan- ford, writing about this episode, said: "We had been for years accustomed to the use of all the money we required, but so great was the stringency in the money market at the time especially, we all feared that we could no longer obtain any. Just imagine my joy and the relief it was to me to receive the money (that derived from the insurance company), the most precious legacy that has ever come to me."
The insurance company referred to was the Pacific Mutual, the first life company to be formed in the state. Its incorporators were citizens of Sacramento and em- braced the names of men whose lines afterward greatly diverged. The company was formed in 1868 by Leland Stanford, James Anthony, Paul Morrill, Mark Hopkins, Henry H. Hartley, B. F. Hastings, Louis Elkus and James McClatchy. Leland Stanford and Mark Hopkins subsequently became leading spirits in the first trans- continental railroad enterprise and Anthony and Morrill were conductors of the Sacramento Union, which later became so bitterly hostile to the methods of the rail- road managers that they spared no efforts to crush and drive its proprietors out of business, and finally succeeded in their purpose.
The insurance business in California in the early days, like banking, went unregulated, but in 1868 an insurance department was created which succeeded in eliminating a number of undesirable companies. This system of regulation produced the result of inspiring confidence, and life insurance became popular. All the large companies have been represented in the City since that date, and while it is impossible to segregate from the returns the amount of business con- tributed by San Francisco, it is safe to assume that up to 1893 the major part of the business credited to the state may be regarded as San Franciscan. The figures of the report show that premiums to the amount of $23,458,057 were collected be- tween 1882 and 1891, and that the claims paid during the same period aggregated $13,223,314.
One of the incidents of the stringency period which attracted much attention at the time was the movement of $20,000,000 from the subtreasury in San Fran- cisco to New York. The object of the transference was never explained. It was not for the purpose of putting the gold into circulation at the East, as that section, although doing business on a gold basis, used its paper representatives exclusively ; and at no time during the stringency and the period in which Europe made a heavy draft on this country for gold did the stock of the yellow metal in the vaults of the government in Washington, New York and Philadelphia become so low as to re- quire bolstering from this side of the continent. The transfer appears to have been more prompted by caprice than by any real canse, and the account of it is
Monetary Stringency of 1893
First Life Insurance Company
Insurance Business in California
Largest Gold Ship- ment on Record
111
INTERIOR COURT OF PALACE HOTEL. DESTROYED IN THE GREAT CONFLAGRATION
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only interesting as a physical accomplishment, and as illustrative of the facili- ties of the period for moving vast sums of money. The shipment was made in August, 1892. The coin was put up in 500 boxes, each containing $40,000 and was sent under the auspices of the postoffice department by registered mail in a special train of five cars, guarded by 50 men. The cost of the transfer was $5,000. The charge of the express company would have been at least $20,000. It is believed in treasury circles that this was the largest amount of specie ever shipped at one time.
For more than half a century the mint in San Francisco has performed a useful function; those in other sections of the country so far as the coinage of full legal tender is concerned have merely been wasting the substance of the people, as the coins turned out by them have reposed unused in the vaults of the government, not passing into circulation except by means of paper representatives. The coins struck by them are only distributed when adverse trade balances have enabled foreigners to draw on this country. In such cases the gold coins of the United States minted in the East would find their way into foreign metal pots. Just what proportion of the gold coined in the San Francisco mint remained in circulation no statistician has been able to do more than guess. It has, however, only been a small part of the total coinage of the establishment which amounted in round fig- ures to nearly $635,000,000 in the years intervening between 1854 and 1883. During this period the annual coinage of gold varied between $4,084,207 in 1854 and $36,209,500 in 1879. Between 1884 and 1892, both years inclusive, the mint coined nearly $200,000,000 in gold, an average of over $22,000,000 a year. It is probable, however, that $30,000,000 satisfied the needs of the state for gold cur- rency throughout this period.
The unscientific and unbusinesslike methods of the mint, however, receive a more signal illustration in the figures of the coinage of silver. As already stated, California, while the rest of the country was using fractional paper currency, employed subsidiary silver exclusively. The injury inflicted upon the state, par- ticularly San Francisco, by the failure during several years to provide a flexible system by which minor coins could flow back into the treasury when business was slack has already been described, but the extent of the mismanagement of the affairs of this branch of governmental activities is not realized until the figures of silver coinage and the condition of the treasury are considered. The San Francisco mint first coined silver in 1855, the amount struck being $164,075. Between that year and 1883 the total coinage of silver by the San Francisco branch was only
$105,000,000. This embraces the subsidiary coins and the trade dollars. The . product of the San Francisco mint between 1883 and 1892 was only a little in excess of $26,218,000. When it is borne in mind that a large proportion of the standard silver dollars now piled up in the vaults at Washington were produced from the bullion mined in the neighboring state of Nevada, and that the people of California have been the only Americans who have kindly taken to the dollars of 4121/2 grains, there is ground for the charge that has frequently been made against the mint authorities that they have not been governed by motives of economy in their operations nor by consideration for the needs of the people.
The use of the standard dollar since the passage of the modified Bland Act has not been general in the United States. Only in California has it been used to
Operations of the San Francisco Mint
Uneconomic Methods of United States Mints
The Subtreasury
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the exclusion of the minor government bills, and at one time, although the presses of the mint in Philadelphia were pouring out streams of silver coins, it appeared as though an effort was made to drive them out of circulation in this state. This condition endured for some time, and was only relieved by legislation which was enacted when the pressure of complaint became strong enough to move congress. Since then silver and minor coin, not mutilated, when it can be clearly and readily identified as to denomination and genuineness is redeemed at its face value at the subtreasury. The result has been to retain in circulation a larger quantity of the silver coined by the government than is found elsewhere in the country, the people of San Francisco and the state generally preferring it to paper money for hygienic and other reasons. When the amount of standard dollars becomes too large for easy absorption they find their way into the treasury and when the re- quirements of business demand a renewed supply they can easily be obtained.
During the first quarter of a century after the passage of the National Banking Act there was no attempt made to organize a bank of that character in San Fran- cisco, and after that for a considerable period there was only one. Later several were formed, all of which availed themselves of the privilege of taking out circu- lation, but the invincible objection of the people to paper money prevented its use in the City, and the notes emitted in the names of San Francisco banks under au- thority of the National Banking Act are far oftener met with in cities of the East than in the place in which they originated. To some extent this paper money, and that of the other national banks formed in the southern part of the state, has circulated in the interior, and in Los Angeles and the southern counties, but greenhacks or national bank notes, while always freely accepted by San Francis- cans, have promptly found their way into banks from whence they were shipped to places where paper money was more favorably regarded, a practice which pre- vailed down to the time of the writing of these annals.
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