USA > New Hampshire > History of New Hampshire, from its first discovery to the year 1830; with dissertations upon the rise of opinions and institutions, the growth of agriculture and manufactures, and the influence of leading families and distinguished men, to the year 1874; > Part 41
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is no pursuit of life so obscure and no locality so secluded as to be exempt from its power. There is no person so high and none so low as not to be affected by it. It determines largely the material prosperity and civil power of nations, and affects, di- rectly or indirectly, their relations and character.
On an old-time carriage road wheat could be carried three hundred and maize a hundred and sixty-five miles only to market and pay the cost of production. The interior regions of con- tinents could not, therefore, previous to the introduction of rail- ways, unless reached by navigable rivers or canals, furnish to or draw supplies from, maritime commerce; could not reach the markets of the world so as to become, to any extent, either con- sumers or producers in the industrial economy of nations. Car- avans or camel trains could furnish only the slightest relief to the evils of non-intercourse. Countries so located were left, for the most part, unpeopled, or held by rude nomadic tribes, while the great historic nations, to whom mankind is indebted for civilization and human progress, dwelt upon the sea-board or the navigable rivers.
It is impossible to determine to what extent the increased fa- cility, rapidity and cheapness of travel and transportation, intro- duced by railroads, have increased the wealth and population of the world. An able English writer has said that "the first steam engine doubled the world's wealth ;" and when we consider how large a portion of the earth has thus been laid open to settle- ment and productive industry, when we reflect upon the vast ad- ditions it has made to the world's products, and the rapidity and extension which it has given to the work of exchange, we shall hardly be disposed to pronounce the statement extravagant. Railroads have not simply added to the articles of commerce and consumption by opening new fields to enterprise, but also by bringing about a universal division of labor, and so increas- ing the rapidity and perfection of productive work. In addition to this they stimulate production by removing the limitations upon its markets. No man now works for his neighborhood, but all for mankind. Steam-ships and steam-cars take the grains of our fields and the fabrics of our factories to the most distant nations, and bring back for our consumption the fruits of every clime and handicraft of the world. Thus the wealth and the comfort of mankind are enhanced by the universal exchange introduced by our modern methods of transit. All this has an unparalleled application to our own country.
"It is assumed," says Commissioner Wells, "that a line of railway gives access to fifteen square miles of country on each side of it, or thirty square miles altogether. Then the thirteen thousand miles of railways, which it is estimated have been con-
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structed during the five years from 1865 to 1870, will have opened up three hundred and ninety thousand miles of what, for the purposes of general production, may be considered new territory, a tract of country larger than the whole area of France, and nearly three and a half times larger than the whole of Great Britain." If the results of five years of railway construction have been so great, how vast they must have been during the past forty years, and how immeasurable the promise held out by the future. And we must remember that all this grand domain thus opened to settlement and development is as richly stored with the resources of national wealth, is as capable of sustain- ing an industrious and thronging population, as France or Great Britain. The results of thus bringing the interior into commer- cial relations with the sea-board have more than realized the expectations of the projectors of these enterprises.
No statistics furnished by government or by private parties enable us to measure accurately the value of our internal com- merce, but a few facts will assure us of its colossal magnitude. The annual commerce of the cities on the Ohio river alone is placed by careful estimates at $1,600,000,000. That upon the lakes we can infer from the fact that, during an entire season of navigation, an average of one vessel every ten minutes passed Fort Gratiot light-house, night and day. In 1872 ten Western states produced 1,028,987,000 bushels of grain, of which 815,- 955,574 bushels were consumed within those states, and 213,- 021,426 bushels were shipped to home and foreign markets. The gross receipts of our railroads for the same year reached the stupendous sum of $473,241,055, and the value of the com- modities moved by them is estimated at $10,000,000,000, and we must not forget that every cargo of produce shipped from the West purchases a return cargo of domestic or foreign man- ufactures from the East. Our annual foreign trade, which keeps pace with the means of interior transportation, amounts to about $1,202,328,233. This sum seems large, and yet our domestic commerce exceeds it manifold, and the amount paid for trans- portation is more than double the revenues of the government. Our governmental policy of aiding to build railroads into the territories rests upon such facts, and looks to the creation of new states, which may add to the population, resources, revenues, strength and greatness of the country.
Now it is obvious that the growth and prosperity of the West and, as the coastwise populations draw their food from the inte- rior and must find there a market for the surplus of their com- mercial and manufacturing industry, the sea-board states as well, will be determined largely by the cost of transportation. The impression has at length become general, that the railroad
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power is inflicting great hardship upon other industries and the traveling public by its tariff of rates, and the call for reform is loud and imperative. The farmers of New England, even, living a hundred miles inland, claim that they find little induce- ment to send their wood and other products to market at the established rates, while manufacturing towns, like Lawrence, Manchester and Dover, find it difficult to compete with Fall River and other towns on the sea-board.
But the West has suffered most severely. A congressional ex- amination of this subject has reached the conclusion that grain can be transported from Chicago to New York at 10 cents a bushel. But the average freight on three hundred and fifty millions of bushels of grain sent from the valley of the Mississippi to the Atlantic slope in 1873 was fifty cents per bushel. Taking the average cost of a train per mile on all the roads of Massachu- setts as a standard, the cost of moving a train of thirty cars of ten tons each from the Mississippi river to New York, by an air line, should have been $1,260 or twelve and eight-tenths cents per bushel. Assuming that, as we fairly may, as the necessary cost per bushel for transportation, and adding twelve and eight- tenths cents more, or fifty per cent. of the gross receipts, for inter- est and dividends on the cost of the road, we shall make a saving of $85,000,000, on this item alone, to carry to the profits of ag- riculture. As a further illustration, we will suppose thirty in- stead of fifty cents per bushel had been paid for the transporta- tion of the 213,000,000 bushels of grain moved to the sea-board in 1872. This is five cents more than is allowed by careful es- timates for both cost and profit, and yet it would have lifted a tax of $42,000,000 from the industries of the country. In ad- dition to this, it is believed the producers would have thrown into the market double the amount of grain but for the high transportation charges, which amount in many instances to a prohibition upon production.
The change thus indicated, says the report of a congressional committee, would enhance the value of the improved lands in eight western states to the extent of $1,100,000,000. To this must be added the increased value of farms, cotton plantations and unimproved lands in other states, and the stimulus and profit imparted to factories, foundries and workshops in every section of the republic.
But we have indicated only a fraction of the work done upon the railways. We have no means of ascertaining the total amount of freight moved annually upon our 71,500 miles of road ; we do know, however, that Pennsylvania carries yearly on her 5,369 miles of road, 23,145,000 passengers and 55,000 tons of freight and that the seven great trunk lines stretching westward
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moved, in 1872, 36,000,000 tons of freight, two thirds of which consisted of minerals and miscellaneous matter, and one third, or twelve millions, of cereals. Four millions only, of the twelve, reached tide-water. The remaining eight was local freight and consumed before reaching Atlantic markets. We have no data upon which to calculate our loss from this system of repression, but it must be gigantic. The best authorities judge that with proper facilities and low rates the west could at present ship thirty million instead of twelve million bushels of cereals and vastly increase it in the future. Such an increase would bring about a corresponding advance in all the productions and ex- changes of the country. This limitation upon our productive power is tantalizing, in view of the open markets and the growing competition abroad.
Our cotton exports have fallen off nearly fifty per cent., while those of other countries have increased nearly three hundred per cent. The United States shipped into Great Britain during the five years between 1860 and 1865, 127,047, 126 bushels of wheat and Russia only 47,376,809 ; but during the five years from 1868 to 1873 we shipped 116,462,380 bushels and Russia 117,967,022 ; showing that the imports of wheat from the United States had fallen off 10,584,746, while those from Russia had increased 70,590,213 bushels. This has resulted from decreasing the cost of transportation from the wheat fields of the Don and the Volga to the ports of England.
If we are able sufficiently to reduce the cost of transportation we can easily command the produce markets of the world, and so secure our full share of the carrying trade. Canada is anxious to put her canals and rivers in condition and to furnish steam- ships to freight our produce to foreign markets, knowing if she has the carrying trade of the West, England, and not New Eng- land, will supply the interior markets with manufactures.
A blight from oppressive rates must fall upon the prosperity of every pursuit. Our commerce, both interoceanic and foreign, not less than agriculture and manufactures, must feel the paral- ysis. Merchandise which would naturally pass across our country, in transit between Asia and Europe, will be driven over the isthmus or around the cape, and foreign trade will be crip- pled by a limitation of supplies.
But the hardship of excessive rates falls as heavily upon pas- sengers as upon freight. The average first-class fare per mile in twelve countries on the continent of Europe is three and six one hundredths cents. With us, on twelve leading roads, it is four and three one hundredths, or nearly one third more. The aggregate amount of an excess of one cent a mile upon all the annual railroad travel of the country cannot be exactly
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determined. But we know that in Pennsylvania there are 5369 miles of railway and that they carry 23,145,000 passengers. Now suppose that each person travels on the average one sixtieth the whole distance, or eighty-nine miles ; this excess of one cent a mile would amount to $20,599,050 for that state alone. If we assume that the travel in all the states and territories is only five times as great as in Pennsylvania, we shall have $102,995,250 passing yearly into the possession of the great railroad corpora- tions, which should remain with the traveling public to lighten its burdens and prosper its industries.
The West complains that its values do not advance and its prosperity is retarded. The East, that her markets are being closed and her manufactures driven westward. If we lay a tariff upon any article which, added to the cost of production and im- portation, raises the price of the foreign product above what we can produce and sell the same for at home, we exclude the foreign product and destroy a branch of commerce. So, too, whenever the tariff of freighting any product of the interior, added to the cost of production, exceeds what the article can be bought for in the sea-board cities, the production of that article must cease to be a branch of general industry, and the populousness, the wealth, the power and prosperity of the country are destroyed or suppressed, to the extent of its possible production of that article. It is evident that the cost of transportation may be so high as entirely to prevent the development of the richest terri- tory, and that the growth of wealth and power in any state will be measured by the profits upon its surplus products in the markets of exportation.
In determining the merits of this controversy it should be borne in mind that the present condition of the country has re- sulted in part from an over-investment of capital in railroad en- terprises. Over $500,000,000 were so expended at the West during the five years just preceding the present popular move- ment. The legitimate business of the country has not demanded and cannot pay even a fair return upon the amounts disbursed in building and operating many of the roads with which this mania of the few past years has covered the country.
An additional cause of the present discontent, at the West es- pecially, is to be found in an overstocking of the market with breadstuffs. The construction of roads into the rich and fertile wastes of the interior has brought such an amount of territory under cultivation, and has so stimulated production on lands already improved, that the supply has become greater than the demand. This has so thrown down the price of grain as to render it difficult, and in some cases quite impossible for the farmers of the interior to pay the reasonable cost of transporta-
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tion. They forget that a railroad can make corn-growing profit- able, even at high prices, only sixteen hundred and fifty miles from the sea-board, and so transfer to the railroad the misfortune due to their own location and the low price of bread. If the country will stop building railroads for a time, the evils now felt will be greatly mitigated.
The distance to, and the loss of time in reaching, the sea- board, are drawbacks upon the prosperity of the interior, which can never be wholly overcome, though compensated by greater productiveness. There are two ways by which this disadvantage may be measurably surmounted. One is by the building up of home markets, and the other by the reduction of the cost of transportation. The latter, as all know, has become a subject of general interest, and its consideration has developed some questions not easy to solve. Experience has shown, what seems to need no proof, that the activity and success of every indus- try, the increase of population, the creation of wealth, the mul- tiplication of states and the growth of national power, are de- pendent upon the facilities and expense of the intercourse of the people and the interchange of their products.
If this is so, it must be conceded, as a rule both of political economy and political philosophy, that the carrying business of every people should be reduced to the lowest rates consistent with a fair return upon the necessary investments in the construc- tion and use of the artificial channels of travel and of trade. Neither justice nor policy will allow rates which will pay a divi- dend on fictitious capital, nor even real capital improperly or unnecessarily invested in such works. Such rates are an insu- perable obstacle to the material prosperity and political devel- opment of the country.
The failure of government, either state or national, to provide adequate means of water communication to meet the increasing demands of trade led to the building of railroads by private companies, and forced the commerce of the country to accept this more expensive method of transportation.
The necessities of trade have easily secured to these compa- nies a monopoly, and rendered them to some extent oblivious to their responsibilities to the public. The abuses charged upon the management of railroads are numerous and very grave, but the most common complaint is of discriminate and extortionate charges. It is alleged that the causes of these hardships im- posed upon the public are :
I. Unjust inequality of rates.
2. Construction rings.
3. The consolidation of companies for the destruction of free competition.
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4. Extravagance and corruption in railway management, to enrich favorites and defraud the public.
5. The introduction of subordinate agencies, such as car- companies, fast freight lines and the like.
6. Stock watering, a process by which the capital stock of roads is increased without any outlay by the parties receiving it or placing it upon the market.
7. The capitalizing of surplus earnings accumulated by ex- orbitant charges.
It cannot be denied successfully, I think, that the public has been wronged and the business of the country checked and hampered in all the ways here enumerated ; yet such charges, made without limitations and exceptions, scandalize the grandest improvement which modern science and enterprise have achieved and throw an unjust discredit upon a class of men to whom society is under the greatest obligations.
The first complaint is of unjust discriminations of rates. When such discriminations are made to favor certain localities, as against others, and give them the monopoly of production ; when they are made to determine the location of towns and cities on lands previously granted to or purchased by the road, or in- dividuals connected with it; when they are made to favor the speculations of favorites, or to advance real estate,-they are a usurpation and an outrage. Nevertheless rates must be graded according to the character of freights and the distances to which they are to be transported. They must also differ somewhat to correspond to the varying necessary cost of building and run- ning the roads.
The next complaint is against construction rings. Now a ring is simply a company, and if an association is to be cursed by an epithet, the church itself is not safe. It may be blasted as an apostolic or Christian ring. The fact is, it is every way as just and proper that a company should construct a railroad as for an individual, and in the case of large contracts it is much better if not an absolute necessity. It is no worse for a company to make money than for an individual, and the hope of profit is the proper motive of great enterprises. It cannot be shown that it is wrong even for the stockholders of a road to organize themselves into a construction company to build their own road and to avail themselves of the profits of such construction, not even when the profits come from government grants and sub- sidies, any more than it is wrong for a farmer to do his own work and avail himself of the profits of his industry. It has been decided by the district court of the United States, that government grants to railroads are gifts outright, not trust funds to be held, expended and accounted for to the government by the directors of such roads.
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If now Congress, through ignorance or corruption, has made unnecessarily large grants, the fault is at its door, not at that of the stockholders or the construction company ; and he who lays the charge of corruption upon a company, because it does not or has not voluntarily returned the bounty which the government proffered to the enterprise of the country as an inducement to enter upon and consummate those great national highways which will return a thousand fold for all its outlays, demands a refine- ment of virtue in these men found in no other calling in life. But when such a ring, for the sake of private gain, so runs up the cost of a road as to depress the value of its stock and bonds and entail exorbitant rates upon its use, it does an unpardonable wrong to the outside stock- and bond-holders and to the general public.
The third charge strikes at the consolidation of companies. When the consolidation consists simply in the combination of separate adjacent lines into one through line, it is in the inter- est of the business public, as it tends to increase the efficiency of the road and decrease its rates. Such a union harmonizes conflicting policies and interests, and substitutes the profits of a single company and the expense of a single set of officers, for the profits of separate companies and the expense of many distinct boards of management.
In 1852 seventeen different companies operated the line be- tween New York and Chicago. They have since been reduced to two, the New York Central and Lake Shore lines, and the union has largely reduced the cost, and added immensely to the facilities, of transportation. These advantages, it is true, must be offset in a measure by the centralization of power which may be abused. But when competing roads consolidate solely to destroy competition and increase power, the union is an unmixed evil and portends both fraud and danger. The prevalence of this kind of combination in Great Britain led a distinguished Englishman to affirm, in 1872, that it was a "question whether the state should govern the railroads, or the railroads the state." This has ceased to be a question in some of the states of our Union.
Extravagance and corruption in the management of railways is the fourth count in this bill of indictment. That some of our roads are conducted with wisdom and prudence we know, and all can claim the right to be judged innocent till proved guilty, yet the developments of the last ten years justify us in suspect- ing that the legitimate incomes of many roads are largely and systematically diverted for the uses and to swell the emoluments of individual officers, or to secure political or legislative suc- cesses in the interest of the road. All such corruption funds
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are a tax upon the industries of the country, and drawn at last without law from the pockets of the people.
As for car-companies, fast freight lines and other such imme- diate agencies, while a convenience and a luxury, it must be said they are often, perhaps generally, employed as a device to di- vert the profits of the stockholders to other parties or to saddle a needless tax upon the patrons of the road.
But the most stupendous wrong inflicted upon society by rail- road mismanagement is what is called stock-watering and the capitalization of surplus revenues. They are twin monsters of business depravity, an unmixed and unmitigated evil. The first is positive robbery without the dignity of courage or the plea of poverty, and the capitalization of surplus revenues is little bet- ter ; and yet there are honored citizens in many communities whose virtuous souls are shocked at the slightest peccadillos, who complacently acquiesce, if they do not participate, in both.
By the process of capitalizing surplus earnings, the net profits, after deducting large dividends on all investments and paying the interest on the indebtedness of the road, are, if not stolen, expended in building new and in buying up depreciated branch lines for the benefit of speculators, or in making permanent im- provements. The amounts thus expended are charged up to capital account, and additional stock issued therefor. This policy throws upon all productive industries and capital a geometrical system of taxation. It first overtaxes, to secure the surplus profit; and when this is capitalized, it entails increased charges on all future transactions to make up a dividend on this fraudu- lently augmented capital stock. Considering the relation of railroads to the industries and the productive capital of the country, it is contended that all which the public welfare will al- low is a reasonable return upon the money actually and properly invested in the roads, and that any surplus expended in improve- ments should inure to the benefit of general business.
It would be a long, difficult and perhaps impossible task, to determine from railroad accounts how much of their nominal capital is represented by stock acquired without investment. Careful estimates based upon what is thought to be reliable data give the following results in respect to three of the great roads of the country :
Name of line.
Present capital in|Probable actu- Excess of capital
stock and bonds.
al cost.
over actual cost.
Erie line from New York to Dunkirk, 459 miles.
$108,807,000
$40,000,000
$68,807,000
New York Central line to Chicago, 980 miles. . . Pennsylvania line from Philadelphia to Chicago, 890 miles
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