Wealth against commonwealth

WEALTH AGAINST COMMONWEALTH

BY

HENRY DEMAREST LLOYD

NEW YORK
HARPER & BROTHERS PUBLISHERS
1894

Copyright, 1894, by Henry Demarest Lloyd.
All rights reserved.

CONTENTS

WEALTH AGAINST COMMONWEALTH

[CHAPTER I]

"THERE ARE NONE"—"THEY ARE LEGION"

Nature is rich; but everywhere man, the heir of nature, is poor. Never in this happy country or elsewhere—except in the Land of Miracle, where "they did all eat and were filled"—has there been enough of anything for the people. Never since time began have all the sons and daughters of men been all warm, and all filled, and all shod and roofed. Never yet have all the virgins, wise or foolish, been able to fill their lamps with oil.

The world, enriched by thousands of generations of toilers and thinkers, has reached a fertility which can give every human being a plenty undreamed of even in the Utopias. But between this plenty ripening on the boughs of our civilization and the people hungering for it step the "cornerers," the syndicates, trusts, combinations, with the cry of "over-production"—too much of everything. Holding back the riches of earth, sea, and sky from their fellows who famish and freeze in the dark, they declare to them that there is too much light and warmth and food. They assert the right, for their private profit, to regulate the consumption by the people of the necessaries of life, and to control production, not by the needs of humanity, but by the desires of a few for dividends. The coal syndicate thinks there is too much coal. There is too much iron, too much lumber, too much flour—for this or that syndicate.

The majority have never been able to buy enough of anything; but this minority have too much of everything to sell.

Liberty produces wealth, and wealth destroys liberty. "The splendid empire of Charles V.," says Motley, "was erected upon the grave of liberty." Our bignesses, cities, factories, monopolies, fortunes, which are our empires, are the obesities of an age gluttonous beyond its powers of digestion. Mankind are crowding upon each other in the centres, and struggling to keep each other out of the feast set by the new sciences and the new fellowships. Our size has got beyond both our science and our conscience. The vision of the railroad stockholder is not far-sighted enough to see into the office of the General Manager; the people cannot reach across even a ward of a city to rule their rulers; Captains of Industry "do not know" whether the men in the ranks are dying from lack of food and shelter; we cannot clean our cities nor our politics; the locomotive has more man-power than all the ballot-boxes, and mill-wheels wear out the hearts of workers unable to keep up beating time to their whirl. If mankind had gone on pursuing the ideals of the fighter, the time would necessarily have come when there would have been only a few, then only one, and then none left. This is what we are witnessing in the world of livelihoods. Our ideals of livelihood are ideals of mutual deglutition. We are rapidly reaching the stage where in each province only a few are left; that is the key to our times. Beyond the deep is another deep. This era is but a passing phase in the evolution of industrial Cæsars, and these Cæsars will be of a new type—corporate Cæsars.

For those who like the perpetual motion of a debate in which neither of the disputants is looking at the same side of the shield, there are infinite satisfactions in the current controversy as to whether there is any such thing as "monopoly." "There are none," says one side. "They are legion," says the other. "The idea that there can be such a thing is absurd," says one, who with half a dozen associates controls the source, the price, the quality, the quantity of nine-tenths of a great necessary of life. But "There will soon be a trust for every production, and a master to fix the price for every necessity of life," said the Senator who framed the United States Anti-Trust Law. This difference as to facts is due to a difference in the definitions through which the facts are regarded. Those who say "there are none" hold with the Attorney-General of the United States and the decision he quotes from the highest Federal court which has yet passed on this question[1] that no one has a monopoly unless there is a "disability" or "restriction" imposed by law on all who would compete. A syndicate that had succeeded in bottling for sale all the air of the earth would not have a monopoly in this view, unless there were on the statute-books a law forbidding every one else from selling air. No others could get air to sell; the people could not get air to breathe, but there would be no monopoly because there is no "legal restriction" on breathing or selling the atmosphere.

Excepting in the manufacture of postage-stamps, gold dollars, and a few other such cases of a "legal restriction," there are no monopolies according to this definition. It excludes the whole body of facts which the people include in their definition, and dismisses a great public question by a mere play on words. The other side of the shield was described by Judge Barrett, of the Supreme Court of New York. A monopoly he declared to be "any combination the tendency of which is to prevent competition in its broad and general sense, and to control and thus at will enhance prices to the detriment of the public.... Nor need it be permanent or complete. It is enough that it may be even temporarily and partially successful. The question in the end is, Does it inevitably tend to public injury?"[2]

Those who insist that "there are none" are the fortunate ones who came up to the shield on its golden side. But common usage agrees with the language of Judge Barrett, because it exactly fits a fact which presses on common people heavily, and will grow heavier before it grows lighter.

The committee of Congress investigating trusts in 1889 did not report any list of these combinations to control markets, "for the reason that new ones are constantly forming, and that old ones are constantly extending their relations so as to cover new branches of the business and invade new territories."

It is true that such a list, like a dictionary, would begin to be wrong the moment it began to appear. But though only an instantaneous photograph of the whirlwind, it would give an idea, to be gained in no other way, of a movement shadowing two hemispheres. In an incredible number of the necessaries and luxuries of life, from meat to tombstones, some inner circle of the "fittest" has sought, and very often obtained, the sweet power which Judge Barrett found the sugar trust had: It "can close every refinery at will, close some and open others, limit the purchases of raw material (thus jeopardizing, and in a considerable degree controlling, its production), artificially limit the production of refined sugar, enhance the price to enrich themselves and their associates at the public expense, and depress the price when necessary to crush out and impoverish a foolhardy rival."

Corners are "acute" attacks of that which combinations exhibit as chronic. First a corner, then a pool, then a trust, has often been the genesis. The last stage, when the trust throws off the forms of combination and returns to the simpler dress of corporations, is already well along. Some of the "sympathetical co-operations" on record have no doubt ceased to exist. But that they should have been attempted is one of the signs of the time, and these attempts are repeated again and again until success is reached.

The line of development is from local to national, and from national to international. The amount of capital changes continually with the recrystallizations in progress. Not less than five hundred million dollars is in the coal combination, which our evidence shows to have flourished twenty-two years; that in oil has nearly if not quite two hundred millions; and the other combinations in which its members are leaders foot up hundreds of millions more. Hundreds of millions of dollars are united in the railroads and elevators of the Northwest against the wheat-growers. In cattle and meat there are not less than one hundred millions; in whiskey, thirty-five millions; and in beer a great deal more than that; in sugar, seventy-five millions; in leather, over a hundred millions; in gas, hundreds of millions. At this writing a union is being negotiated of all the piano-makers in the United States, to have a capital of fifty millions. Quite beyond ordinary comprehension is the magnitude of the syndicates, if there is more than one, which are going from city to city, consolidating all the gas-works, electric-lighting companies, street-railways in each into single properties, and consolidating these into vast estates for central corporations of capitalists, controlling from metropolitan offices the transportation of the people of scores of cities. Such a syndicate negotiating in December, 1892, for the control of the street-railways of Brooklyn, was said by the New York Times, "on absolute authority, to have subscribed $23,000,000 towards that end, before a single move had been made or a price set on a single share of stock." It was in the same hands as those busy later in gathering together the coal-mines of Nova Scotia and putting them under American control. There are in round numbers ten thousand millions of dollars claiming dividends and interest in the railroads of the United States. Every year they are more closely pooled. The public saw them marshalled, as by one hand, in the maintenance of the high passenger rates to the World's Fair in the summer of 1893.

Many thousands of millions of dollars are represented in these centralizations. It is a vast sum, and yet is but a minority of our wealth.

Laws against these combinations have been passed by Congress and by many of the States. There have been prosecutions under them by the State and Federal governments. The laws and the lawsuits have alike been futile.

In a few cases names and form of organization have been changed, in consequence of legal pursuit. The whiskey, sugar, and oil trusts had to hang out new signs. But the thing itself, the will and the power to control markets, livelihoods, and liberties, and the toleration of this by the public—this remains unimpaired; in truth, facilitated by the greater secrecy and compactness which have been the only results of the appeal to law.

The Attorney-General of the national government gives a large part of his annual report for 1893 to showing "what small basis there is for the popular impression" "that the aim and effect of this statute" (the Anti-Trust Law) "are to prohibit and prevent those aggregations of capital which are so common at the present day, and which sometimes are on so large a scale as to practically control all the branches of an extensive industry." This executive says of the action of the "co-ordinate" Legislature: "It would not be useful, even if it were possible, to ascertain the precise purposes of the framers of the statute." He is the officer charged with the duty of directing the prosecutions to enforce the law; but he declares that since, among other reasons, "all ownership of property is a monopoly, ... any literal application of the provisions of the statute is out of the question." Nothing has been accomplished by all these appeals to the legislatures and the courts, except to prove that the evil lies deeper than any public sentiment or public intelligence yet existent, and is stronger than any public power yet at call.

What we call Monopoly is Business at the end of its journey. The concentration of wealth, the wiping out of the middle classes, are other names for it. To get it is, in the world of affairs, the chief end of man.

There are no solitary truths, Goethe says, and monopoly—as the greatest business fact of our civilization, which gives to business what other ages gave to war and religion—is our greatest social, political, and moral fact.

The men and women who do the work of the world have the right to the floor. Everywhere they are rising to "a point of information." They want to know how our labor and the gifts of nature are being ordered by those whom our ideals and consent have made Captains of Industry over us; how it is that we, who profess the religion of the Golden Rule and the political economy of service for service, come to divide our produce into incalculable power and pleasure for a few, and partial existence for the many who are the fountains of these powers and pleasures. This book is an attempt to help the people answer these questions. It has been quarried out of official records, and it is a venture in realism in the world of realities. Decisions of courts and of special tribunals like the Interstate Commerce Commission, verdicts of juries in civil and criminal cases, reports of committees of the State Legislatures and of Congress, oath-sworn testimony given in legal proceedings and in official inquiries, corrected by rebutting testimony and by cross-examination—such are the sources of information.

One important exception is in the description of the operations of a great international combination in England, Germany, Holland, and elsewhere in Europe; this has had to be made from unofficial material. The people there are neither economically nor politically developed to the point we have reached in America, of using the legislative investigation and the powers of the courts to defend livelihoods and market rights, and enforce the social responsibilities of industrial power. Full and exact references are given throughout for the guidance of the investigator. The language of witnesses, judges, and official reports has been repeated verbatim, except for the avoidance of the surplusage and reduplication usual in such literature, and that, to permit the use of the dialogue form, the construction has been changed from the third person to the first in quotations from evidence. With these qualifications, wherever quotation marks have been used, the transcription is word for word. Evidence from such sources is more exact, circumstantial, and accurate than that upon which the mass of historical literature is founded.

To give the full and official history of numbers of these combinations, which are nearly identical in inspiration, method, and result, would be repetition. Only one of them, therefore, has been treated in full—the oil trust. It is the most successful of all the attempts to put gifts of nature, entire industries, and world markets under one hat. Its originators claim this precedence. It was, one of its spokesmen says, "the parent of the trust system."[3] It is the best illustration of a movement which is itself but an illustration of the spirit of the age.

[CHAPTER II]

CUT OFF FROM FIRE

Rome banished those who had been found to be public enemies by forbidding every one to give them fire and water. That was done by all to a few. In America it is done by a few to all. A small number of men are obtaining the power to forbid any but themselves to supply the people with fire in nearly every form known to modern life and industry, from matches to locomotives and electricity. They control our hard coal and much of the soft,[4] and stoves, furnaces, and steam and hot-water heaters; the governors on steam-boilers and the boilers; gas and gas-fixtures; natural gas and gas-pipes; electric lighting, and all the appurtenances. You cannot free yourself by changing from electricity to gas, or from the gas of the city to the gas of the fields. If you fly from kerosene to candles, you are still under the ban.

The report adopted by the National Association of Stove Manufacturers, at the Thirteenth Annual Convention, 1884, said: "While it is true that iron is a dollar or two lower than last year, and that the cost of labor has also been reduced, your committee is confident that there is not a manufacturer present who can truthfully say he can afford to reduce the price of his goods." "It is a chronic case," the President said in 1888, "of too many stoves, and not enough people to buy them."

The match company, by whose consent all the fires in the United States and Canada are lighted, was organized, as stated, by the Supreme Court of Michigan, for the purpose of controlling the manufacture and trade. Thirty-one manufacturers, owning substantially all the factories where matches were made in the United States, either went into the combination, or were purchased by the match company, and out of this number all were closed except about thirteen.

One of the company, who has been a conspicuous candidate for a nomination to the presidency of the United States, testified that the price of matches was kept up to pay the large sums of money expended to exclude others from the match business, remove competition, buy up machinery and patents, and purchase other match factories. This was told in a suit between two stockholders on a question of their relative rights; but the court, of its own motion, declared the combination illegal, and took notice of the public interests involved.[5]

"Such a vast combination is a menace to the public," said the court. "It is no answer to say that this monopoly has, in fact, reduced the price of friction-matches. That policy may have been necessary to crush competition. The fact exists that it rests in the discretion of this company at any time to raise the price to an exorbitant degree." "Indeed, it is doubtful if free government can long exist in a country where such enormous amounts of money are allowed to be accumulated in the vaults of corporations, to be used at discretion in controlling the property and business of the country against the interest of the public and that of the people, for the personal gain and aggrandizement of a few individuals."

Within the last thirty years, 95 per cent. of the anthracite coal of America—practically the entire supply, it was reported by Congress in 1893—has passed from the ownership of private citizens, many thousands in number, into the possession of the railroads controlling the highways of the coal-fields.

These railroads have been undergoing a similar process of consolidation, and are now the property of eight great corporations. This surrender of their property by the individual coal-mine owners is a continuing process, in operation at this moment, for the complete extinction of the "individual" and the independents in this field. It is destined, according to the report of Congress of 1893,[6] to end "in the entire absorption ... of the entire anthracite coal-fields and collieries by ... the common carriers."

Anthracite coal is geographically a natural monopoly contained in three contiguous fields which, if laid close together, would not cover more than eight miles by sixty. But bituminous coal, although scattered in exhaustless measures all over the continent, is being similarly appropriated by the railroads, and its area is being similarly limited artificially by their interference.

"Railroad syndicates," says the investigation of 1888,[7] "are buying all the best bituminous coal lands along their lines in Missouri, Kansas, Colorado, Arkansas, Tennessee, Alabama, and other Western States and Territories, no doubt with a view of levying tribute upon the people's fuel and the industrial fires of the country."

Canada remains unannexed politically, but its best coal deposits have become a part of the United States. In 1892 a syndicate of American capitalists obtained the control of the principal bituminous coal-mines of Nova Scotia. Among them were men connected both with the anthracite pool and with the combination which seeks control of the oil market of Canada and of the United States.

The process of consolidation is shown by official and judicial investigations to have been in progress in the bituminous fields at least as far back as 1871, with the same purposes, methods, and results as in the anthracite fields, though more slowly, on account of the greater number and vastness of the deposits. From Pennsylvania to the Pacific coast these are narrowed to the territory along the railroads, and narrowed there again to the mines owned or favored by the railroad managers.

The investigations by Congress in 1888 and 1893 both state that the railroads of the country are similarly becoming the owners of our iron and timber lands, and both call upon the people to save themselves. A new law of industry is rising into view. Ownership of the highways ends in ownership of everything and everybody that must use the highways.

The railroads compel private owners to sell them their mines or all the product by refusing to supply cars for their business, and by charging rates for the transportation of coal so high that every one but themselves loses money on every ton sent to market. When the railroads elect to have the output large, they furnish many cars; when they elect to have the output small, they furnish few cars; and when they elect that there shall be no output whatever, they furnish no cars.

One of the few surviving independent coal producers, who is losing heavily on every ton he sends to market, but keeps on in the hope that the law will give him redress, was asked by a committee of Congress why he did not sell out and give up the business? He was willing, he said, to abide the time when his rights on the railroad could be judicially determined. There was another reason. "It might be considered a very sentimental one. I have spent, sir, considerable time and a large amount of energy and skill in building up my business, and I rather like to continue it."

"In other words, you don't want to be forced to sell out?"

"No, sir; I don't want to be forced to sell my product, any more than I want to be forced to sell my collieries."[8]

Though coal is an article of commerce greater in volume than any other natural product in the United States carried on railroads, amounting to not less than 130,000,000 tons a year; and though the appliances for its transportation have been improved, and the cost cheapened every year, so that it can be handled with less cost and risk than almost any other class of freight, the startling fact appears in the litigations before the Interstate Commerce Commission and the investigations by Congress, that anthracite freight rates have been advanced instead of being decreased, are higher now than they were in 1879, and that coal is made by these confederated railroads to pay rates vastly higher than the average of all other high and low class freight, nearly double the rate on wheat or cotton. These high freight rates serve the double purpose of seeming to justify the high price of coal, and of killing off year by year the independent coal-producers. What the railroad coal-miner pays for freight returns to its other self, the railroad. What the independent coal-producer pays goes also to the railroad, his competitor. "This excess over just and reasonable rates of transportation constitutes an available fund by which they (the railroads) are enabled to crush out the competition of independent coal-producers."[9]

By these means, as Congress found in 1888,[10] the railroad managers have forced the independent miners to sell to them or their friends at the price they chose to pay. They were the only possible buyers, because only they were sure of a supply of cars, and of freight rates at which they could live.

The private operators thus being frozen out are able, as the investigation by the New York Legislature in 1878 showed, to produce coal more economically than the great companies, because not burdened with extravagant salaries, royalties, and leases, interest on fictitious bonded debts, and dividends on false capitalization of watered stock. By the laws of supply and demand they would compete out the unwieldy corporations, but these administer a superior political economy in their supply and demand of cars and freight rates. The unfittest, economically, survives.

"The railroad companies engaged in mining and transporting coal are practically in a combination to control the output and fix the price.... They have a practical monopoly of the production, the transportation, and sale of anthracite coal."[11] This has been the finding in all the investigations for twenty years. "More than one, if not all, of the anthracite monopolies," Congress reported in 1888, "run several of their mines in the name of private operators to quiet the general clamor against carrying companies having a monopoly of mining also."

The anthracite collieries of Pennsylvania could now produce 50,000,000 tons a year. The railroads restrict them to 40,000,000 or 41,000,000 tons,[12] nine or ten million tons less than they could furnish to ward off the frosts of winter and to speed the wheels of the world, and this creation of artificial winter has been in progress from the beginning of the combination.

In the ten months between February and November, 1892, the price of coal in the East, as investigated by Congress in 1893,[13] was advanced by the coal railroads as much as $1.25 and $1.35 a ton on the kinds used by house-keepers, and the combinations, the report of Congress says, "exercise even a more baleful influence on the production and transportation of coal for the Western market." The extortion in the price fixed by the coal railroads was found by Congress, in 1888, to be an average of one dollar a ton—"considerably more than a dollar a ton"—on all consumed in the United States, or $39,000,000 in that year, and now $40,000,000 to $41,000,000 a year. The same investigation found that between 1873 and 1886 $200,000,000 more than a fair market price was taken from the public by this combination.[14]

This in anthracite alone. How many hundreds, perhaps thousands, of millions more have been taken by the railroads which control the bituminous coal-fields from Pennsylvania to the Pacific, there are no adjudicated means of estimating.

By the same power which has crushed out the independent coal-miner, the retailer in the cities has been reduced from a free man to an instrument to despoil his neighbors—with whom he is often a fellow-victim—for the benefit of absentee capitalists; he is hounded by detectives; by threats of cutting off his supply, is made a compulsory member of a secret oath-bound society to "maintain prices." "Combinations exist," says the Canadian report, "among coal-dealers in Toronto, Ottawa, Montreal, and London. Detectives are employed and the dealers placed under surveillance.... Oaths of fidelity to the constitution and rules are required not only of the members, but also of their salesmen, and the oaths in the cases of these employés are made in some instances retroactive as well as prospective. All violations of oaths are adjudicated upon by the executive committee referred to, the penalties being heavy fines or expulsion.... In accordance with arrangements made with the American coal-dealers, those who were in default in membership, either from inability to pay fines or from other causes, were prevented from purchasing coal in the United States."[15]

The retailer dare not tell his wrongs even in the committee-rooms of Congress. "Your committee," says the report of 1893 to Congress, "experienced great difficulty in obtaining testimony from retail coal-dealers, who apparently labor under fears of injury to their business in case they should appear and give evidence."

"During the first forty years," Congress reported in 1888, "the mines were worked by individuals, just as are farms. The hundreds of employers were in active competition with each other for labor. The fundamental law of supply and demand alike governed all parties. As to engagement, employer and employé stood upon a common level of equality and manhood. Skill and industry upon the part of the miner assured to him steady work, fair wages, honest measurement, and humane treatment. Should these be denied by one employer many other employers were ready to give them. The miner had the same freedom as to engagement, the same reward for faithful service, and protection against injustice that the farm-hand possesses because of the competition between farmers employing hands.... This virtual combination of all employers into one syndicate has practically abolished competition between them as to wages; and gradually, but inexorably, the workmen have found themselves encoiled as by an anaconda until now they are powerless."[16]

There was an investigation of the coal combination by the Pennsylvania Legislature in 1871, the testimony taken in which showed that when, after a thirty days' strike by the men, a number of private coal-mine owners acceded to their terms, and wished to reopen their mines and send coal again to market, the railroads, by which alone they could get to market, raised their freights, as their men were still on strike, to three times the previous figures. These great corporations had determined not to yield to their men, and as they were mine-owners and coal-sellers as well as carriers, they refused to take coal for their competitors.... The result was that the price of coal was doubled, rising to $12 a ton; the resumption by the private mine-owners was stopped; and they, the workmen, and the consumer were all delivered over to the tender mercies of the six great companies.[17]

The coal companies in the anthracite regions keep thousands of surplus laborers on hand to underbid each other for employment and for submission to all exactions; hold them purposely ignorant when the mines are to be worked and when closed, so that they cannot seek employment elsewhere; bind them as tenants by compulsion in the companies' houses, so that rent shall run against them, whether wages run on or not, and under leases by which they can be turned out with their wives and children on the mountain-side in midwinter if they strike; compel them to fill cars of larger capacity than agreed upon; make them buy their powder and other working outfit of the companies at an enormous advance on the cost; compel them to buy coal of the company at the company's price, and in many cases to buy a fixed quantity, more than they need; compel them to employ the doctor named by the company, and to pay him whether sick or well; "pluck" them at the company's stores, so that when pay-day comes around the company owes the men nothing, there being authentic cases where "sober, hard-working miners toiled for years or even a lifetime without having been able to draw a single dollar, or but a few dollars, in actual cash," in "debt until the day they died;" refuse to fix the wages in advance, but pay them upon some hocus-pocus sliding scale, varying with the selling price in New York, which the railroad slides to suit itself; and, most extraordinary of all, refuse to let the miners know the prices on which their living slides—a fraud, says the report of Congress, "on its face."[18]

The companies dock the miners' output arbitrarily for slate and other impurities, and so can take from their men five to fifty tons more in every hundred than they pay for.[19]

In order to keep the miners disciplined and the coal-market under-supplied, the railroads restrict work so that the miners often have to live for a month on what they can earn in six or eight days; and these restrictions are enforced upon their miners by withholding cars from them to fill, as upon competitors by withholding cars to go to market.[20]

Labor organizations are forbidden, and the men intentionally provoked to strike, to affect the coal-market.

The laboring population of the coal regions, finally, is kept "down" by special policemen enrolled under special laws, and often in violation of law, by the railroads and coal and iron companies practically when and in what numbers these companies choose. These coal and iron policemen are practically without responsibility to any one but their employers, are armed as the corporations see fit with army revolvers, or Winchester rifles, or both, are made detectives by statute, and not required to wear their shields. They provoke the people to riot, and then shoot them legally.[21]

"By the percentage of wages," says the report of Congress, "by false measurements, by rents, stores, and other methods, the workman is virtually a chattel of the operator." It says, to summarize: "The carrier drives out both operator and owner, obtains the property, works the mine, 'disciplines' the miner, lowers wages by the importation of Huns and Italians, restricts the output, and advances the price of coal to the public. It is enabled to commit such wrongs upon individuals and the public by virtue of exercising absolute control of a public highway."[22]

The people of Pennsylvania, in 1873, adopted a new Constitution. To put an end to the consolidation of all the anthracite coal lands into the hands of the railroads, this Constitution forbade common carriers to mine or manufacture articles for transportation over their lines, or to buy land except for carrying purposes. These provisions of the Constitution have been disobeyed "defiantly." "The railroads have defiantly gone on acquiring title to hundreds of thousands of acres of coal, as well as of neighboring agricultural lands." They have been "aggressively pursuing the joint business of carrying and mining coal." So far from quitting it, they "have increased their mining operations by extracting bituminous as well as anthracite."[23]

Instead of enacting "appropriate legislation," as commanded by the new Constitution, to effectuate its prohibitions, the Legislature has passed laws to nullify the Constitution by preventing forever any escheat to the State of the immense area of lands unlawfully held by the railroads. Every effort breaking down to meet the evil by State action, failure was finally confessed by the passage in 1878, by the Pennsylvania Legislature, of a joint resolution asking Congress to legislate "for equity in the rates of freight."

In 1887 Congress passed the Interstate Commerce Law, and established the Interstate Commerce Commission to enforce justice on the railway highways. The independent mine-owners of Pennsylvania appealed to it. Two years and a half were consumed in the proceedings. The Commission decided that the rates the railroad charged were unjust and unreasonable, and ordered them reduced.[24] But the decision has remained unenforced, and cannot be enforced. The railroads treat the Commission with the same contumely they visit on the Constitution of Pennsylvania, and two years after the decision Congress in 1893 found their rates to be 50 cents a ton higher than what the Commission had declared to be just and equitable.[25] The Interstate Commerce Law provides for the imprisonment in the penitentiary of those guilty of the crimes it covers. But the only conviction had under it has been of a shipper for discriminating against a railroad.

[CHAPTER III]

PROHIBITION THAT PROHIBITS

That which governments have not yet been equal to has been accomplished by the private co-operation of a few citizens. They decree at their pleasure that in this town or that State no one shall manufacture alcohol, and they enforce the decree. Theirs is the only prohibition that prohibits.

From the famous whiskey ring of 1874 to the pool of 1881 and the trust of 1887, and from the abandonment of that "trust" dress and the reorganization into one corporation in 1890 down to the present, this private regulation of the liquor traffic has gone on. It is a regulation of a good deal more than the liquor traffic. Through its control of alcohol it is a power over the arts and sciences, the manufacture and the preparation of medicines, and a power over politics. More than one chapter of our history exhibits the government itself holding to these rectifiers relations suggestive of anything but rectification. The report of the investigation by Congress in 1893 notes the fact that on the strength of a rumor that the internal-revenue tax was to be increased by Congress, the Trust raised its prices 25 cents a gallon. This would amount to a profit of $12,500,000 on its yearly output.

By February, 1888, all the important distilleries in the Northern States—nearly eighty—were in the Trust, excepting two, the larger of which was in Chicago. The cases of these irreconcilable competitors were set for consideration, according to the Chicago Tribune's report, at a private meeting of the trustees February 3d. In April the Chicago distillery firm published the fact that they had caught a spy of the Trust in their works. He had given them a confession in writing. In September it was discovered that the valve of a vat in this distillery had been tampered with in such a way as to have caused an explosion had it not been found out in time. The next month its owners made known that they had been offered and refused $1,000,000 from the Trust for their works. In December the country was startled by the news that this distillery had been the scene of an awful explosion of dynamite. All the buildings in the neighborhood were shaken and many panes of glass were broken. A jagged hole about three feet square was torn in the roof. There were 15,000 barrels of whiskey stored under the roof that was torn open, and if these had been ignited a terrible fire would have been added to the effect of the explosion. A package of dynamite which had failed to explode, though the fuse had been lighted, was found on the premises by the Chicago police.

The Chicago representative of the whiskey combination ridiculed the idea that the Trust had had anything to do with this. "Such a thing," he said, "is contrary to the genius of a trust."

The wholesale liquor-dealers threatened, at a conference in 1890 with the president of the Trust, to manufacture for themselves, to escape the advance which had been made in the price of high-wines. The president said, as reported in the Wine and Spirit Gazette:

"I do not believe there is a spirits distillery in the country that you can buy. We own nearly all of them, and have at present seventy-eight idle distilleries."

February 11, 1891, the explosion of December, 1888, was recalled by the unexpected arrest of the secretary of the combination in Chicago by the United States authorities. The Grand Jury of Cook County found an indictment, February 17th, against the prisoner. April 20th he was indicted by the Federal Grand Jury. The crime of which he was charged was attempting to bribe a government gauger to blow up the troublesome distillery. The gauger whom the secretary endeavored to enlist had been loyal to his trust, the government, and had made known to his superiors the offer and purpose of the bribe.

If the explosion had been carried out 150 men at work in the distillery would have been destroyed. The evidence given Congress afterwards tended to show that part of the plan was that the bribed gauger who was to set and explode the infernal-machine was not to be allowed to survive to claim his reward and perhaps repent and tell. The fuse was fixed so that the explosion would be instantaneous instead of giving the time promised him to get out of the way.

In a statement to the press, February 15th, the president of the Trust said, as the result of a conference of the trustees:

"We have unanimously agreed to stand by the secretary."

Early in June rumors were in circulation in New York that the Chicago independent had sold out; and soon after the confirmation of the report, with full details, was authoritatively published.

June 8th the judge of the United States Court in Chicago quashed the Federal indictment, on the ground that it is not a crime under any of the United States laws for an internal-revenue officer to set fire to a distillery of his own volition and impulse, and that it is not a crime against the United States for another person to bribe him to do such an act. He held that the offender could be punished only through the State courts. The United States had property in the distillery to the extent of $800,000 due for taxes, which was a legal lien on the property; but the United States District Attorney and the judge could find no Federal law under which, for the gauger to destroy this property of the United States, or for the Whiskey Trust to bribe him to do so, it was a crime. When the indictments framed by the State Attorney of Chicago came before the State courts, three of the four were found defective and were quashed. The Chicago correspondent of the New York World telegraphed that he had been told by the State Attorney, at the time the Federal proceedings were quashed, that of his four indictments he relied most upon that for conspiracy; "but in court yesterday the State Attorney let the charge of conspiracy fall to the ground because, as he said, there was not evidence enough to secure a conviction."

"We haven't the evidence of the gauger; I don't know where he is," the State Attorney said.

But this witness declared in a public letter in February, 1893, "Myself and others with positive evidence were always ready to testify, and I have the facts to-day."

The judge of the State court held the motion to quash until July, and then announced that he would make no decision until August. He withheld his ruling until October. Then he held the secretary for trial on two counts, charging conspiracy to bribe the gauger and destroy the independent distillery; but remarked "informally," the newspapers said, that conviction would be difficult.

When the case was called March 22, 1892, a delay was granted "until next Monday," to enable the prisoner's counsel to read the "bill of particulars" to find out what he was charged with. The secretary did not trouble himself to attend court. His case was not heard of again until June 24th, when he was released on a nolle prosequi entered by the State Attorney because the evidence was insufficient, and became a free man. That was the end.

Owing to this success of State and United States attorneys in being unsuccessful, the people have never had an opportunity of hearing in court the evidence on which the Government acted in making the arrest, and on which the grand juries found the indictments. But the gauger through whom the secretary of the Trust had attempted to execute his plans was called as a witness before the Committee of Congress which investigated the Trust in 1893, and he told again the story of the infernal-machine. It was as follows, in his own words, omitting names and unnecessary details:

"I was United States internal-revenue gauger from 1879 until after Mr. Cleveland's election, and I was reappointed in 1889, and have been continuously since that time. Late in December, 1890, I received a letter from the secretary of the whiskey combination at Peoria, telling me that he would like to meet me at the Grand Pacific Hotel on New-year's Day. I met him. He said, 'You may be able to do considerable good here; not only for us, but of considerable advantage to yourself. Your $1500 a year is nothing to what you would get by helping us. You can get $10,000 by assisting us in this thing; in fact, to make matters right, you could get in three months $25,000.'" The gauger reported this to his superiors, who told him to go on. "Be particular, and after every interview with him make a note of everything that passes between you while it is fresh in your mind." "I did that," the witness continued, "and I have the original notes in my pocket. There are the original notes," exhibiting them to the committee. "They have never left my possession. I have kept them on my person right along." After some correspondence and another interview, he met the secretary again January 25th. "Now," said the latter, "I can give you something which, if put under a cistern, will in three or four hours go off, and no person know what it was or who did it, and all the trouble that has been caused us will be stopped at once, the sufferings of many people stopped, and no loss to those folks, as they are well insured." "When I recovered from my surprise I asked if it was an explosive. He replied, 'No; a simple but effective thing which would shoot a ball into a tub through the bottom. You will have $10,000 for your work of placing this under a cistern of high-proof, either alcohol or spirits, or what is better than cash, 200 shares of stock.' I asked at what they sold. He said, 'Forty-seven, but it would be up ten points at once,' and I could profit by the raise. 'This will raise a big row.' 'Yes,' he said, 'one cistern well caught, all would go, and it would be right into the warehouse and stop everything at once. It is the most effective way to help us and make a clean job, and you having access to all parts of the distillery and unsuspected is why you could do it so easily.' He had then, in room 35, powder and four steel elongated balls, solid, turned, and with long points. The principal article, however, was a kind of yellowish liquid, which when exposed to sixty-five degrees temperature would produce a flame caused by evaporation. I remarked that there was probably no hurry about this thing, and he said, 'The sooner the better; you may be ordered away from here, and I am come all prepared; everything is ready to load, and that can be done quickly.'"

The gauger reported all this to his superior and told him that "I proposed to take the infernal apparatus." His superior said, "Of course." "I then returned to Grand Pacific, room 35; found loading just completed and much material scattered about, oakum in can saturated slightly with kerosene and alcohol to give good start. The secretary said that three fuses were attached to the gun, one of which would go off under water. He had one steel shell which had been shot through three inches of wood in experimenting. He showed me particularly how to place can; to feel underneath for timbers; put it where ball will enter tub. Also, that in stopping over to meet the president of the combination to-morrow he would have a chance to buy up stock reasonably before our work caused the raise. He expected to buy 1000 shares. Friday, the 30th of January, I rather anticipated a visit from the secretary at my hotel, but I received a letter from him instead of a visit, and Judge Hart, the solicitor of the Internal-Revenue Department, who was there in Chicago, when he read the letter thought that the evidence was certainly conclusive." On Sunday, the 8th, the gauger surrendered the box containing the infernal-machine, which was sealed, to a high official who had come on from New York. "The reason why he came on is that the authorities would not believe my testimony. They did not think it was possible a gentleman in the secretary's position would undertake so heinous a crime, and they did not know but what I was a crank. On Monday, the 9th, I was instructed to write a letter. The thing was to arrest in a proper way. The next day I received a despatch: 'Will be at Pacific to-morrow (Wednesday) morning.'

"Wednesday morning the secretary was arrested, as he was about to enter the hotel, by a deputy marshal, and conducted to the Marshal's office in the Government building. There was a bottle of this composition found in his grip. He had told me it would go off in three or four hours. I was in the anteroom of the city grand jury after the chemist had given his testimony. The chemist said that it was his opinion it would have or might have gone off in three seconds. Fire would cause the shooting of the ball, and the ball making a hole in the tub—alcohol or high-proof spirits—coming down, of course all would have gone up. It could not have helped it, and the explosion would have followed at once, not from the machine, but from the contents of the cistern. They are very explosive indeed, alcohol and high-proof spirits."[26]

What the Government authorities thought of all this is shown in a letter which is spread upon the records of the Treasury Department. It is addressed by the Commissioner of Internal-Revenue to the gauger. After thanking him for his "highly commendable" conduct in relation to the bribe the Commissioner says to Mr. Thomas S. Dewar:

"While your rejection of the offer was just what was expected from you, considering your official and personal standing, yet I realize that you have done more than simply reject the offer. You so conducted the affair as to place the guilty party, it is hoped, in a position in which he will be punished for this violation of law. The proposition was not only to attempt to corrupt an honest officer of the Government, but was to induce you, by the offer of a large sum of money, to commit a most heinous and inhuman act."

No attempt was made by the representatives of the Trust before the committee to deny this testimony. They simply disclaimed any responsibility for what their associate and employé had done. "Whatever there was in that," testified the president of the Whiskey Trust, "was with the former secretary of this company, if there be anything of it."[27]

The Trust increased the number of plants under its control from "nearly eighty" to eighty-one or eighty-two, the number reported by the investigation of Congress in 1893. Its annual production was then 50,000,000 gallons; about 7,500,000 gallons of it alcohol, 42,500,000 spirits. It is evident, says the report, that the company will soon have within its grasp the entire trade, and be able to dictate prices to consumers at pleasure.

"How do you account for spirits going up and corn going down at the same time in two or three instances?" the treasurer was asked.

"Simply because the distillers were getting in a position whereby they ran less than their capacity."[28]

The experience of mankind has always found, as Lord Coke pointed out, that monopoly adulterates.

The report of Congress states that unquestionably the largest part of the product of the combination finds its way into the open markets in the form of "compounded"—or artificial—bourbon and rye whiskeys, brandies, rums, gins, cordials. The testimony establishes the fact that about one half of the whiskey consumed in the country is of this compound product. These compounded liquors are supplied from the drug-stores to the sick as medicine. One of the expert witnesses summoned to explain the process of this adulteration appeared before the committee with two demijohns, one containing pure alcohol and the other spirits, and a number of bottles containing essential oils, essences, etc., with which he proposed to make some experiments. "The basis here, this white product, is what is known as 'spirits' in the trade. With the use of these essential oils and essences now before you any kind of imitation liquor can be produced at almost a moment's notice. My first experiment will be with Jamaica rum. I put a drop of Jamaica-rum essence into this white spirits, a few drops of coloring matter, and some sugar syrup. Try of it and smell of it. Does it smell like rum and taste like it? If they want to make it cheaper, they reduce it with water. I will reduce it with water, and you will now notice that the bead has disappeared from it. I will reproduce the bead by the use of bead oil. I put one drop in, and here is the result. Now, using rye-whiskey essence instead of Jamaica-rum essence, I will flavor this spirits. I will now put some prune juice into it to tone it. I will put some raisin oil in it to age it, and I will now commence to color it. This first exhibit" (holding it up before the committee) "is about the color of one-year-old whiskey that has been properly bonded. I will now color it so it will imitate a two-year-old whiskey. This is about the three-year-old now" (exhibiting it). "I will now give this the color of 'velvet whiskey,' which is sold as high as $4 a gallon" (exhibiting it). "The present price of spirits, to-day, I think, is $1.30 a gallon. The utilization of any of these essential oils and essences and coloring matter to make the transfer does not exceed a cost of one and a half cents a gallon. I am prepared to make imitations of any of these liquors at any time with this spirits basis—all the different whiskeys, Scotch and Irish whiskeys, the foreign gins and rums and brandies, after-dinner cordials and liqueurs. These materials as you have them exhibited before you of essential oils and essences are part and parcel of the stock in trade of every man in the United States of America who has got a rectifying license as a wholesale liquor dealer.... They are very generally and extensively in use throughout our entire country, in every hamlet and village, in all the branches of trade, the wholesale liquor dealer, the grocer having a liquor dealer's license, and retail druggists.... When a doctor prescribes French brandy, he expects to get a production which is a distillation of wine made from the grape. In that imitation brandy made from spirits and cognac oil he gets a crude product of corn, defeating entirely his purpose in the prescription. The same applies to gin, rum, and other articles wherever the imitations are found."[29]

Some of the substances named by witnesses as occurring in the oils and essences used for this adulteration are sulphuric acid, prussic acid, fusel oil, creosote, nitro-benzol—all poisons, and some of them so virulent that a teaspoonful would kill.

"I have been warned when in the employ of these people not to take the crude material into my mouth," said one of the witnesses. Another witness denied that there was any danger in the infinitesimal portions used of the flavoring matter.

"The only result," said one of the members of the committee, "of the testimony and hearing of the committee will be to educate the public to the Trust methods. It will have no effect on the Trust."

[CHAPTER IV]

"SQUARE EATERS"

"By Heaven, square eaters, more meat I say!"

—Beaumont and Fletcher.

A delegate to one of the millers' national conventions said, "We want cheaper wheat and dearer flour."

The Canadian Parliament reports that "the Biscuit Association," which had been in existence six years, had kept up the prices of its products, "although the prices of the ingredients used have in that time very materially decreased."

An Associated Press despatch from Chicago announced that at "a joint meeting of all the cracker bakers between Pittsburg and the Rocky Mountains, held this morning, it was unanimously agreed to advance the price of crackers."

A "Bread Union" has been formed in London for the amalgamation of concerns controlling hundreds of shops. Its chairman instructed the stockholders that by concentrating a large number of shops under one management in any district it could "quickly stifle the opposition of any small unprincipled trader bent on reducing prices for competition purposes." The Dominion Parliament, in condemning the Grocers' Guild as "obnoxious to the public interest in limiting competition, in enhancing prices," pointed out that "no reasonable excuse exists for many of its arbitrary acts and agreements. The wholesale grocery trade had been for many years in a flourishing condition; failures were almost unknown."

But though prosperous the grocers formed this guild, admitting some, proscribing others, and established by private legislation the profits they desired. The profits were "afterwards increased, and in no instance lowered, though values generally had fallen."

At Minneapolis, the seat of the greatest flour-manufacturing industry in the world, the elevators and railroads have united against the wheat-growers in a way which does much to realize the dream of the miller, of "cheaper wheat and dearer flour." A committee of the Minnesota legislature investigated this combination in 1892. The majority stopped short of reporting that it fixed the prices of wheat, but admitted that some of the testimony tended that way, and that the evidence "would seem to establish" that one of the most powerful railroads had done so, and "had attempted to coerce compliance with its requirements in the matter of prices by threats to embarrass the business of local buyers."[30] A report from a minority of the same committee was more outspoken. It summarizes the evidence, which shows that the railroads and the elevator companies united to enforce a uniform price for wheat. This price was six and a quarter cents below what it should be. All the railroads adjusted their freight rates to the artificial "list-price," and though rivals, they all charged the same rates. The elevator companies, owning an aggregate of fifteen hundred elevators, had a common agent who sent word daily, by telegram and letter, to all wheat-buyers as to the price to be paid the farmers. The report calculates the amount thereby taken from the wheat-growers by the elevators at from four to five millions of dollars a year.

The findings of this report were ratified by the adoption of its suggestions for a remedy. "There is," it said, "no agency but the State itself adequate to protect, now, the producer of wheat in Minnesota and the Northwest from the influence of this combine." It therefore recommended the erection and operation of elevators by the State. This was approved by the Legislature and by the Governor, appropriations were made, and the officials of the State went forward with the plan until the Supreme Court of the State stopped them on the ground of "unconstitutionality."

That which we see the national associations of winter-wheat millers and spring-wheat millers, and the fish, and the egg, and the fruit, and the salt, and the preserves, and other combinations reaching out to do for a "free breakfast table," to put the "square meal" out of the reach of the "square eater," has been achieved to the last detail in sugar and meat. Every half-cent up or down in the price of sugar makes a loss or gain to the sugar combination at the rate of $20,000,000 a year. When it was capitalized for $50,000,000 it paid dividends of $5,000,000 a year. The value of the refineries in the combination was put by the New York Legislative Investigation of 1891 at $7,000,000.

The Hon. Wm. Wilson, of the committee of Congress investigating trusts in 1888, and the framer of the tariff bill of 1893, in a public communication quoted figures showing that this Trust had a surplus of $10,000,000 at the end of 1888, after paying its 10 per cent. dividend. The profits for the next five and a half months were $13,000,000. This surplus of one year and net profits of less than half a year together amount to $23,000,000, nearly half the then nominal capital, and several times more than the real value of all the concerns, as given above. These profits so conservative a paper as the New York Daily Commercial Bulletin called "plunder," and it reaffirmed that epithet when called to account. Stock was issued for this "fabulous valuation" of $50,000,000, put on this $7,000,000 of original value, and was made one of the specialties of the stock market.

"There has been an enormous and widespread speculation in the certificates of the trust," says the report of the New York Senate. "It was plainly one of the chief purposes of the trust to provide for the issue of these certificates, affording thereby an opportunity for great speculation in them, obviously to the advantage of the persons managing the trust. The issue of $50,000,000 certificates was amply sufficient for a speculation of many hundreds of millions of dollars."[31]

Since this investigation by the New York Legislature, the Sugar Trust has been reorganized into a single corporation. The capital of this is $75,000,000, all "water," since the value of the plants is fully covered by the bonds to the amount of $10,000,000. The actual value of the refineries in the Trust, excluding those which have been closed or dismantled, was investigated by the New York World, January 8, 1894, and put at $7,740,000. On this actual value of $7,740,000 in operation the Trust paid in regular and extra dividends in 1893 no less than $10,875,000, and acknowledged that there was in addition a surplus of $5,000,000 in the treasury. This was in addition to the interest on the $10,000,000 of bonds.

When a farmer sells a steer, a lamb, or a hog, and the house-keeper buys a chop or roast, they enter a market which for the whole continent, and for all kinds of cattle and meats, is controlled by the combination of packers at Chicago known as "the Big Four."[32] This had its origin in the "evening" arrangement, made in 1873 by the railroads with preferred shippers, on the ostensible ground that these shippers could equalize or even the cattle traffic of the roads. They received $15 as "a commission" on every car-load of cattle shipped from the West to New York, no matter by whom shipped, whether they shipped it or had anything to do with it or not. The commission was later reduced to $10. They soon became large shippers of cattle; and with these margins in their favor "evening" was not difficult business.[33] By 1878 the dressed-beef business had become important. As the Evener Combine had concentrated the cattle trade at Chicago, the dressed-beef interest necessarily had its home at the same place. It is a curious fact that the Evener Combine ceased about the time the dressed-beef interest began its phenomenal career.[34]

The committee appointed by the United States Senate to investigate the condition of the meat and cattle markets fixed upon St. Louis, Mo., and November 20, 1888, as the time and place of meeting, because the International Cattle Range Association and the Butchers' National Protective Association assembled at the same time and place. It was supposed that prominent members of these associations would avail themselves of the opportunity to appear before the committee. Some of them did testify frankly, but the presence of antagonistic influences, especially in the International Cattle Range Association, immediately became apparent, and industrious efforts were made to prevent the inquiries of the committee from affecting injuriously the dressed-beef interest at Chicago. The committee found that under the influence of the combination the price of cattle had gone down heavily. For instance: In January, 1884, the best grade of beef cattle sold at Chicago for $7.15 per hundred pounds, and in January, 1889, for $5.40; Northwestern range and Texas cattle sold in January, 1884, at $5.60, and in January, 1889, at $3.75; Texas and Indian cattle sold in 1884 at $4.75, the price declining to $2.50 in December, 1889. These are the highest Chicago prices for the months named.

"So far has the centralizing process continued that for all practical purposes," the report says, "the market of that city dominates absolutely the price of beef cattle in the whole country. Kansas City, St. Louis, Omaha, Cincinnati, and Pittsburg are subsidiary to the Chicago market, and their prices are regulated and fixed by the great market on the lake."[35] This great business is practically in the hands of four establishments at Chicago. The largest houses have a capacity for slaughtering 3,500 cattle, 3,000 sheep, and 12,000 hogs every ten hours. When the Senate committee visited Chicago, it was found impossible to obtain the frank and full testimony of either the commission men doing business at the Union Stock Yards, or of the employés of the packing and dressed-beef houses. The former testified reluctantly, and were unquestionably under some sort of constraint as to their public declarations. In private they stated to the members of the committee that a combination certainly existed between the "Big Four;" but when put on the stand as witnesses they shuffled and prevaricated to such a degree as, in many cases, to excite commiseration. The committee reported that the overwhelming weight of testimony from witnesses of the highest character, and from all parts of the West, is to the effect that cattle-owners going with their cattle to the Chicago and Kansas City markets find no competition among buyers, and if they refuse to take the first bid are generally forced to accept a lower one.

As to the effect upon retailers, local butchers, and consumers, it was admitted by the biggest of the Big Four "that they combined to fix the price of beef to the purchaser and consumer, so as to keep up the cost in their own interest."[36] They combined in opening shops and underselling the butchers of cattle at places all over the country, in order to force them to buy dressed meat. They combined in refusing to sell any meat to butchers at Washington, D.C., because the butchers had bid against them for contracts to supply with meats the Government institutions in the District of Columbia.

The compulsion put upon local butchers is illustrated in the S—— case. The following telegram was sent from the office of one of the combination at Chicago to an agent in Pennsylvania: "Cannot allow S—— to continue killing live cattle. If he will not stop, make other arrangements, and make prices so can get his trade."

S—— was a local butcher. He testified that he was approached by the agent with a proposition that he should sell dressed-beef. He refused, and was then informed that he would be broken up in business. Notwithstanding this threat, he continued to butcher, and made his purchases of cattle at Buffalo. From the time of his refusal to sell dressed-beef as proposed, he could not buy any meat from Chicago, and could not get any cars from the Erie Railroad to ship his cattle from Buffalo. He was boycotted for his refusal to discontinue killing cattle.[37] One of the combination, when testifying to this matter, disclaimed responsibility for the despatch, but stated that he did not think a butcher should be permitted to kill cattle and at the same time sell dressed-beef. "He could not serve both interests." "We have no hesitation in stating as our conclusion, from all the facts," says the report, "that a combination exists at Chicago between the principal dressed-beef and packing houses, which controls the market and fixes the price of beef cattle in their own interest."

When pork is cheap, less beef is eaten. Beef monopoly must therefore widen into pork monopoly. This has happened. There is a combination between the pork-packers at Chicago and the large beef-packers. It began in 1886. The existence of such an arrangement was admitted by its most important member; and it is found to have seriously affected the prices of beef cattle, both to the producer and consumer. It was shown that one of the companies of the Big Four made in 1889 profits equal to 29 per cent. on its capital stock—which may, or may not, have been paid in—and this was not the largest of the companies. As to the idea that other capitalists might enter into competition with those now in possession, the report says: "The enormous capital of the great houses now dominating the market, which each year becomes larger, enables them to buy off all rivals."

The favoritism on the highways, in which this power had its origin in 1873, has continued throughout to be its main stay. The railroads give rates to the dressed-beef men which they refuse to shippers of cattle, even though they ship by the train-load—"an unjust and indefensible discrimination by the railroads against the shipper of live cattle." The report says: "This is the spirit and controlling idea of the great monopolies which dominate the country.... No one factor has been more potent and active in effecting an entire revolution in the methods of marketing the meat supply of the United States than the railway transportation."[38] There have been discriminations by the common carriers of the ocean as well as by the railroads. The steamship companies exclude all other shippers, by selling all their capacity to the members of the beef combine, sometimes for months in advance. It is useless for any other shipper to apply.

Property is monopoly, the Attorney-General of the United States says. Those who own the bread, meat, sugar, salt, can fix the price at which they will sell. They can refuse to sell. It is to these fellow-men we must pray, "Give us this day our daily bread." And when we have broken bread for the last time, we can get entrance to our "long home" only by paying "exorbitant" toll for our shrouds and our coffins to the "Undertakers'" and the "National Burial Case" associations.[39]

[CHAPTER V]

STRIKING OIL

It was an American idea to "strike oil." Those who knew it as the "slime" of Genesis, or used it to stick together the bricks of the Tower of Babel, or knelt to it in the fire temples, were content to take it as it rose, the easy gift of nature, oozing forth on brook or spring. But the American struck it.

The world, going into partial eclipse on account of the failing supply of whale oil, had its lamps all ready for the new light, and industries beyond number needed only an expansion of the supply.

De Witt Clinton, with the same genius that gave us the Erie Canal, suggested as early as 1814 the use of petroleum for light. Reichenbach, the great German chemist, predicted in 1830 that petroleum would yield an illuminating oil equal to the finest. Inventors and money-makers kept up close with scientific investigators in France, Great Britain, and America.

As early as 1845 the manufacture of coal-oil, both for light and other purposes, had become important in France. Selligue had made himself master of the secrets of petroleum. His name, says one of his chroniclers, "must forever remain inseparably connected with that of the manufacture of light from oil, and to his researches few have been able to add."[40]

The name of this genius and benefactor of humanity has remained almost unknown, except within a small scientific world. He was a member of the French Academy, and almost every year between 1834 and 1848 he came to it with some new discovery. On one occasion he reminds his associates that he holds a patent, granted in 1832, for making illuminating oil from coal, and declares that the business can be developed to any extent which commerce or the arts may require. By 1845 he had unlocked nearly every one of the hidden places in which this extraordinary product has stored its wonders. He found out how to make illuminating oil, illuminating gas, lubricating oil, colors, paraffine for candles, fertilizers, solvents for resin for painters, healing washes, chemicals. He had three refineries in operation in the Department Saône-et-Loire, as described in the report of a committee of the French Academy in 1840. He exhibited his oils in the London Exhibition of 1851, and twelve years before, in the Parisian Industrial Exhibition of 1839, he had crude and refined oils and paraffine to show. "Among the most important objects of the exhibition," said its German historian, Von Hermann, "if they can be prepared economically." This Selligue accomplished. Between 1837 and 1843 he refined more than 4,000,000 pounds of oil, and 50 per cent. of his product was good illuminating oil.

Before 1850, the Scotch had succeeded in getting petroleum, called shale oil, out of bituminous coal, had found how to refine it, and had perfected lamps in which it would burn. Joshua Merrill, the pioneer of oil refining in this country, with his partners, successfully refined petroleum at Waltham, Mass., where they established themselves in 1853. The American manufacturers were making kerosene as early as 1856 from Scotch coal,[41] imported at a cost of $20 to $25 a ton, and getting experts like Silliman to analyze petroleum, in the hope that somehow a supply of it might be got. By 1860 there were sixty-four of these manufactories in the United States. "A crowd of obscure inventors," says Felix Foucon, in the Revue des Deux Mondes, "with unremitting labors perfected the lamp—when it was premature to dream that illumination by mineral oil should become universal." All was ready, as the eminent English geologist, Binney, said, "for the start of the vast American petroleum trade." It was not a lack of knowledge, but a lack of petroleum, that hampered the American manufacturer before 1860.[42] The market, the capital, the consumer, the skilled labor, the inventions, and science were all waiting for "Colonel" Drake.

With Drake's success in "striking oil" came to an end the period, lasting thousands of years, of fire temples, sweep and bucket, Seneca oil; and came to an end, also, the Arcadian simplicity of the old times—old though so recent—in which Professor Silliman could say, "It is not monopolized by any one, but is carried away freely by all who care to collect it."

The oil age begins characteristically. As soon as Drake's well had made known its precious contents, horses began running, and telegrams flying, and money passing to get possession of the oil lands for the few who knew from those who did not know. The primitive days when "it was not monopolized by any one" were over. Thousands of derricks rose all over the territory, and oil scouts pushed with their compasses through the forests of the wilderness in all directions. Wells were bored all over Europe, as well as America, wherever traces of oil showed themselves, sometimes so close together that when one was pumped it would suck air from the other.

As soon as the petroleum began to flow out of the ground, refineries started up at every available place. They were built near the wells, as at Titusville and Oil City, and near the centres of transportation, such as Pittsburg and Buffalo, and near the points of export, as Philadelphia, Baltimore, New York. Numbers of little establishments appeared on the Jersey flats opposite New York.

There was plenty of oil for every one; at one time in 1862 it was only ten cents a barrel. The means of refining it had long before been found by science and were open to all; and even poor men building little stills could year by year add on to their works, increase their capital, and acquire the self-confidence and independence of successful men. The business was one of the most attractive possible to capital. "There is no handsomer business than this is," said one of the great merchants of New York. "You can buy the (crude) oil one week, and sell it the next week refined, and you can imagine the quantity of business that can be done." Men who understood the business, he said, "if they had not the capital could get all of the money they wanted."[43]

Whatever new processes and contrivances were needed the fertile American mind set about supplying. To carry the oil in bulk on the railroads tubs on flat cars were first used; but it was not long before the tub was made of iron instead of wood, and, laid on its side instead of bottom, became the tank of the cylinder car now so familiar.

The fluid which lubricates so many other things on their way through the world is easily made to slip itself along to market. General S.D. Karns was the author,[44] in 1860, of the first suggestion of a pipe line. He planned only for oil to run down hill. Then Hutchinson, the inventor of the Hutchinson rotary pump, saw that oil could be forced through by pressure, and the idea of the pipe line was complete. The first successful pipe line, put down by Samuel Van Syckel,[45] of Titusville, in 1865, from Pithole to Miller's Farm, four miles, has grown into a net-work of thousands of miles, running through the streets of towns, across fields and door-yards, under and over and beside roads, with trunk lines which extend from the oil regions to Pittsburg, Cleveland, Buffalo, Baltimore, New York, Williamsport, Chicago, and the Ohio River.

There was a free market for the oil as it came out of the wells and out of the refineries, and free competition between buyers and sellers, producers and consumers, manufacturers and traders. Industries auxiliary to the main ones flourished. Everywhere the scene was of expanding prosperity, with, of course, the inevitable percentage of ill-luck and miscalculation; but with the balance, on the whole, of such happy growth as freedom and the bounty of nature have always yielded when in partnership. The valleys of Pennsylvania changed into busy towns and oil fields. The highways were crowded, labor was well employed at good wages, new industries were starting up on all sides, and everything betokened the permanent creation of a new prosperity for the whole community, like that which came to California and the world with the discovery of gold.

But shadows of sunset began to creep over the field in its morning time, and the strange spectacle came of widespread ruin in an industry prospering by great leaps. Wherever men moved to discover oil lands, to dig wells, to build refineries or pipe lines, to buy and sell the oil, or to move it to market, a blight fell upon them.

The oil age began in 1860. As early as 1865 strange perturbations were felt, showing that some undiscovered body was pulling the others out of their regular orbits.

Before the panic of 1873—days of buoyant general prosperity, with no commercial revulsion for a cause—the citizens of this industry began to suffer a wholesale loss of property and business among the refineries in New York, Pittsburg, Cleveland, and elsewhere, the wells of the oil valleys, and the markets at home and abroad.

To the building of refineries succeeded the spectacle—a strange one for so new a business—of the abandonment and dismantling of refineries by the score. The market for oil, crude and refined, which had been a natural one, began to move erratically, by incalculable influences. It went down when it should have gone up according to all the known facts of the situation, and went up when it should have gone down. This sort of experience, defying ordinary calculations and virtues, made business men gamblers.

"We began speculating in the hope that there would be a change some time or other for the better," testified one who had gone into the business among the first, and with ample capital and expert skill.[46]

The fright among the people was proportionate to the work they had done and the value of what they were losing. Since the first well was sunk the wilderness had become a busy region, teeming with activity and endowed with wealth. In ten years the business had sprung up from nothing to a net product of 6,000,000 barrels of oil a year, using a capital of $200,000,000 and supporting a population of 60,000 people. The people were drilling one hundred new wells per month, at an average cost of $6000 each. They had devised the forms, and provided the financial institutions needed in a new business. They invented many new and ingenious mechanical contrivances. They had built up towns and cities, with schools, churches, lyceums, theatres, libraries, boards of trade. There were nine daily and eighteen weekly newspapers published in the region and supported by it. All this had been created in ten years, at a cost of untold millions in experiments and failures, and the more precious cost of sacrifice, suffering, toil, and life.

The ripe fruit of all this wonderful development the men of the oil country saw being snatched away from them.[47]

More than once during these lean years, as more than once later, the public alarm went to the verge of violent outbreak. This ruinous prosperity brought stolid Pennsylvania within sight of civil war in 1872, which was the principal subject before the Pennsylvania Legislature of that year, and forced Congress to make an official investigation.

The New York Legislature followed Congress and the Pennsylvania Legislature with an investigation in 1873.

"There was great popular excitement.... It raged like a violent fever," was the description it heard of the state of things in Pennsylvania.[48]

There were panics in oil speculation, bank failures, defalcations. Many committed suicide. Hundreds were driven into bankruptcy and insane asylums.

Where every one else failed, out of this havoc and social disorder one little group of half a dozen men were rising to the power and wealth which have become the marvel of the world. The first of them came tardily into the field about 1862. He started a little refinery in Cleveland, hundreds of miles from the oil wells. The sixty and more manufacturers who had been able to plant themselves before 1860, when they had to distil coal into petroleum before they could refine petroleum into kerosene, had been multiplied into hundreds by the arrival of petroleum ready made from below. Some of the richest and most successful business men of the country had preceded him and were flourishing.[49] He had been a book-keeper, and then a partner, in a very small country-produce store in Cleveland. As described by his counsel some years later, he was a "man of brains and energy without money." With him were his brother and an English mechanic. The mechanic was bought out later, as all the expert skill needed could be got for wages, which were cheaper than dividends.[50] Two or three years later another partner was added, who began life as "a clerk in a country store,"[51] and had been in salt and lumber in the West. A young man, who had been in the oil region only eleven years, and for two of the eleven had been errand-boy and book-keeper in a mixed oil and merchandise business,[52] a lawyer, a railroad man, a cotton broker, a farm laborer who had become refiner, were admitted at various times into the ruling coterie.

The revolution which revolved all the freemen of this industry down a vortex had no sooner begun than the public began to show its agitation through every organ. The spectacle of a few men at the centre of things, in offices rich with plate glass and velvet plush, singing a siren song which drew all their competitors to bankruptcy or insanity or other forms of "co-operation," did not progress, as it might have done a hundred years ago, unnoticed save by those who were the immediate sufferers. The new democracy began questioning the new wealth. Town meetings, organizations of trades and special interests, grand juries, committees of State legislatures and of the United States Senate and House of Representatives, the civil and criminal courts, have been in almost constant action and inquiry since and because.

It was before the Committee of Commerce of the National House of Representatives in 1872 that the first authentic evidence was obtained of the cause of the singular ruin which was overwhelming so fair a field. This investigation in 1872 was suppressed after it had gone a little way. Congress said, Investigate. Another power said, Don't investigate. But it was not stopped until the people had found out that they and the production, refining, and transportation of their oil—the whole oil industry, not alone of the valleys where the petroleum was found, but of the districts where it was manufactured, and the markets where it was bought and sold, and the ports from which it was shipped abroad—had been made the subject of a secret "contract"[53] between certain citizens. The high contracting parties to this treaty for the disposal of an industrial province were, on one side, all the great railroad companies, without whose services the oil, crude or refined, could not be moved to refineries, markets, or ports of shipment on river, lake, or ocean. On the other side was a body of thirteen men, "not one of whom lived in the oil regions, or was an owner of oil wells or oil lands," who had associated themselves for the control of the oil business under the winning name of the South Improvement Company.[54]

By this contract the railroads had agreed with this company of citizens as follows:

1. To double freight rates.

2. Not to charge them the increase.

3. To give them the increase collected from all competitors.

4. To make any other changes of rates necessary to guarantee their success in business.

5. To destroy their competitors by high freight rates.

6. To spy out the details of their competitors' business.

The increase in rates in some cases was to be more than double.[55] These higher rates were to be ostensibly charged to all shippers, including the thirteen members of the South Improvement Company; but that fraternity only did not have to pay them really. All, or nearly all, the increase it paid was to be paid back again—a "rebate."[56] The increase paid by every one else—"on all transported by other parties"—was not paid back. It was to be kept, but not by the railroads. These were to hand that, too, over to the South Improvement Company.

This secret arrangement made the actual rate of the South Improvement Company much lower—sometimes half, sometimes less than half, what all others paid. The railroad officials were not to collect these enhanced freight rates from the unsuspecting subjects of this "contract" to turn them into the treasury of the railroads. They were to give them over to the gentlemen who called themselves "South Improvement Company." The "principle" was that the railroad was not to get the benefit of the additional charge it made to the people. No matter how high the railroads put the rates to the community, not the railroads, but the Improvement Company, was to get the gain. The railroads bound themselves to charge every one else the highest nominal rates mentioned. "They shall not be less," was the stipulation. They might be more up to any point; but less they must not be.[57]

The rate for carrying petroleum to Cleveland to be refined was to be advanced, for instance, to 80 cents a barrel. When paid by the South Improvement Company, 40 cents of the 80 were to be refunded to it; when paid by any one else, the 40 cents were not merely not to be refunded, but to be paid over to his competitor, this aspiring self-improvement company.[58] The charge on refined oil to Boston was increased to $3.07; and, in the same way, the South Improvement Company was to get back a rebate of $1.32 on every barrel it sent to Boston, and on every barrel any one else sent. The South Improvement Company was to receive sums ranging from 40 cents to $1.32, and averaging a dollar a barrel on all shipments, whether made by itself or by others. This would give the company an income of a dollar a day on every one of the 18,000 barrels then being produced daily, whether its members drilled for it, or piped it, or stored it, or refined it, or not.

To pay money to the railroads for them to pay back was seen to be a waste of time, and it was agreed that the South Improvement Company for its members should deduct from the ostensible rate the amount to be refunded, and pay the railroads only the difference. Simplification could not go further. The South Improvement Company was not even to be put to the inconvenience of waiting for the railroads to collect and render to it the tribute exacted for its benefit from all the other shippers. It was given the right to figure out for its members what the tribute would amount to, and pay it to them out of the money they owed the railroads for freight, and then pay the railroad what was left, if there was any left.[59] The railroads agreed to supply them with all the information needed for thus figuring out the amount of this tribute, and to spy out for them besides other important details of their competitors' business. They agreed to make reports every day to the South Improvement Company of all the shipments by other persons, with full particulars as to how much was shipped, who shipped, and to whom, and so on.[60]

The detective agency thus established by the railroads to spy out the business of a whole trade was to send its reports "daily to the principal office" of the thirteen gentlemen. If the railroads, forgetting their obligations to the thirteen disciples, made any reduction in any manner to anybody else, the company, as soon as it was found out, could deduct the same amount from its secret rate.[61] If the open rate to the public went down, the secret rate was to go down as much. For the looks of things, it was stipulated that any one else who could furnish an equal amount of transportation should have the same rates;[62] but the possibility that any one should ever be able to furnish an equal amount of transportation was fully taken care of in another section clinching it all.

The railway managers, made kings of the road by the grant to them of the sovereign powers of the State, covenanted, in order to make their friends kings of light, that they would "maintain the business" of the South Improvement Company "against loss or injury by competition," so that it should be "a remunerative" and "a full and regular business," and pledged themselves to put the rates of freight up or down, as might be "necessary to overcome such competition."[63] Contracts to this effect, giving the South Improvement Company the sole right for five years to do business between the oil wells and the rest of the world, were made with it by the Erie, the New York Central, the Lake Shore and Michigan Southern, the Pennsylvania, the Atlantic and Great Western, and their connections, thus controlling the industry north, south, east, west, and abroad. The contracts in every case bound all the roads owned or leased by the railroads concerned.[64] The contracts were duly signed, sealed, and delivered. On the oil business of that year, as one of the members of the committee of Congress figured out from the testimony, the railroad managers could collect an increase of $7,500,000 in freights, of which they were to hand over to the South Improvement Company $6,000,000, and pay into the treasury of their employers—the railways—only $1,500,000.

The contract was signed for the New York Central and Hudson River Railroad by its vice-president, but this agreement to kill off a whole trade was too little or too usual to make any impression on his mind. When publicly interrogated about it he could not remember having seen or signed it.[65]

"The effect of this contract," the vice-president of the Erie Railway Company was asked, "would have been a complete monopoly in the oil-carrying trade?"

"Yes, sir; a complete monopoly."[66]

Of the thirteen members of the South Improvement Company which was to be given this "complete monopoly," ten were found later to be active members of the oil trust. They were then seeking that control of the light of the world which it has obtained. Among these ten were the president, vice-president, treasurer, secretary, and a majority of the directors of the oil trust into which the improvement company afterwards passed by transmigration. Any closer connection there could not be. One was the other.

The ablest and most painstaking investigation which has ever been had in this country into the management of the railroads found and officially reported to the same effect:

"The controlling spirits of both organizations being the same."[67]

The freight rates were raised as agreed and without notice. Rumors had been heard of what was coming. The public would not believe anything so incredible. But the oil regions were electrified by the news, February 26, that telegrams had been sent from railroad headquarters to their freight agents advising them of new rates, to take effect immediately, making the cost of shipping oil as much again as it had been. The popular excitement which broke out on the same day and "raged like a violent fever" became a national sensation. The Titusville Morning Herald of March 20, 1872, announces that "the railroads to the oil regions have already put up their New York freight from $1.25 to $2.84, an advance of over one hundred per cent." Asked what reason the railroads gave for increasing their rates, a shipper said, "They gave no reason; they telegraphed the local roads to put up the rates immediately." This advance, the superintendents of the railroads told complaining shippers, had been made under the direction of the South Improvement Company, and they had been instructed to make their monthly collections of oil freights from that concern.

The evidence even seems to show that the South Improvement Company was so anxious for the dance of death to begin that it got the freight agents by personal influence to order the increased rates before the time agreed upon with the higher officials. Strenuous efforts were made to have the public believe that the contracts, though sealed, signed, delivered, and put into effect, as the advance in rates most practically demonstrated, had really not been put into effect. The quibbles with which the president of the South Improvement Company sought to give that impossible color to the affair before the committee of Congress drew upon him more than one stinging rebuke from the chairman of the committee.

"During your whole examination there has not been a direct answer given to a question." "I wish to say to you," said the chairman, "that such equivocation is unworthy of you."

The plea needs no answer, but if it did, the language of the railroad men themselves supplies one that cannot be bettered. To the representatives of the people, who had telegraphed them for information "at once, as the excitement is intense, and we fear violence and destruction of property," General McClellan, of the Atlantic and Great Western, replied that the contract was "cancelled;" President Clark, of the Lake Shore, that it was "formally abrogated and cancelled;" Chairman Homer Ramsdell, of the Erie, that it was "abrogated;" Vice-president Thomas Scott, of the Pennsylvania Railroad, that it was "terminated officially;"[68] Vice-president Vanderbilt, of the New York Central and Hudson River Railroad, that it was "cancelled with all the railroads."

Contracts that were not complete and in force would not need to be "cancelled" and "abrogated" and "terminated." These announcements were backed up by a telegram from the future head of the oil trust then incubating, in which he said of his company: "This company holds no contracts with the railroad companies."[69] But in 1879 its secretary, called upon by the Ohio Legislature to produce the contracts the company had with the railroads, showed, among others, one covering the very date of this denial in 1872.[70]

Before Congress the South Improvement Company sought to shelter themselves behind the plea that "their calculation was to get all the refineries in the country into the company. There was no difference made, as far as we were concerned, in favor of or against any refinery; they were all to come in alike."

How they "were all to be taken in" the contract itself showed. It bound the South Improvement Company "to expend large sums of money in the purchase of works for refining," and one of the reasons given by the railroads for making the contract was "to encourage the outlay." Upon what footing buyer and seller would meet in these purchases when the buyer had a secret arrangement like this with the owners of the sole way to and from wells, refineries, and markets, one does not need to be "a business man" to see. The would-be owners had a power to pry the property of the real owners out of their hands.

One of the Cleveland manufacturers who had sold was asked why he did so by the New York Legislature. They had been very prosperous, he said; their profits had been $30,000 to $45,000 a year; but their prosperity had come to a sudden stop.[71]

"From the time that it was well understood in the trade that the South Improvement Company had ... grappled the entire transportation of oil from the West to the seaboard ... we were all kind of paralyzed, perfectly paralyzed; we could not operate.... The South Improvement Company, or some one representing them, had a drawback of a dollar, sometimes seventy cents, sometimes more, sometimes less, and we were working against that difference."[72]

It was a difference, he said, which destroyed their business.

He went to the officials of the Erie and of the New York Central to try to get freight rates that would permit him to continue in business. "I got no satisfaction at all," he said; "I am too good a friend of yours," said the representative of the New York Central, "to advise you to have anything further to do with this oil trade."

"Do you pretend that you won't carry for me at as cheap a rate as you will carry for anybody else?"

"I am but human," the freight agent replied.

He saw the man who was then busily organizing the South Improvement Company. He was non-committal. "I got no satisfaction, except 'You better sell, you better get clear.' Kind of sub rosa: 'Better sell out, no help for it.'"

His firm was outside the charmed circle, and had to choose between selling and dying. Last of all, he had an interview with the president of the all-conquering oil company, in relation to the purchase of their works. "He was the only party that would buy. He offered me fifty cents on the dollar, on the construction account, and we sold out.... He made this expression, I remember: 'I have ways of making money that you know nothing of.'"

For the works, which were producing $30,000 to $45,000 a year profit, and which they considered worth $150,000, they received $65,000.

"Did you ascertain in the trade," he was asked, "what was the average rate that was paid for refineries?"

"That was about the figure.... Fifty cents on the dollar."

"It was that or nothing, was it not?"

"That or nothing."

The freight rates had been raised in February. This sale followed in three weeks.

"I would not have sold out," he told the Legislature, "if I could have got a fair show with the railways. My business, instead of being an enterprise to buy and sell, became degraded into running after the railways and getting an equal chance with others."[73]

"The only party that would buy" gave his explanation a few years later of the centralization of this business.

"Some time in the year 1872," he swore, "when the refining business of the city of Cleveland was in the hands of a number of small refiners, and was unproductive of profit,[74] it was deemed advisable by many of the persons engaged therein, for the sake of economy, to concentrate the business, and associate their joint capital therein. The state of the business was such at that time that it could not be retained profitably at the city of Cleveland, by reason of the fact that points nearer the oil regions were enjoying privileges not shared by refiners at Cleveland, and could produce refined oil at a much less rate than could be done at this point. It was a well-understood fact at that time among refiners that some arrangement would have to be made to economize and concentrate the business, or ruinous losses would not only occur to the refiners themselves, but ultimately Cleveland, as a point of refining oil, would have to be abandoned. At that time those most prominently engaged in the business here consulted together, and as a result thereof several of the refiners conveyed" to his company, then as always the centre of the centralization, "their refineries, and had the option, in pay therefor, to take stock" in this company, "at par, or to take cash." This company, he continued, "had no agency in creating this state of things which made that change in the refining business necessary at that time, but the same was the natural result of the trade, nor did it in the negotiations which followed use any undue or unfair means, but in all cases, to the general satisfaction of those whose refineries were acquired, the full value thereof, either in stock or cash, was paid as the parties preferred."[75]

The producers were not to fare any better than the refiners. The president of the South Improvement Company said to a representative of the oil regions substantially: "We want you producers to make out a correct statement of the average production of each well, and the exact cost per barrel to produce the oil. Then we propose to allow you a fair price for the oil."

Within forty-eight hours after the freight rates were raised, according to programme, "the entire business of the oil regions," the Titusville Herald, March 20, 1872, reported, "became paralyzed. Oil went down to a point seventy cents below the cost of production. The boring of new wells is suspended, existing wells were shut down. The business in Cleveland stopped almost altogether. Thousands of men were thrown out of work."

The people rose. Their uprising and its justification were described to the Pennsylvania Constitutional Convention of 1873 by a brilliant "anti-monopolist," "a rising lawyer" of Franklin, Venango Co. The principal subject to which he called the attention of his fellow-members was the South Improvement Company, and the light it threw on the problems of livelihood and liberty. Quoting the decision of the Pennsylvania Supreme Court in the Sanford case,[76] he said:

"That is the law in Pennsylvania to-day. But in spite of this decision, and in spite of the law, we well know that almost every railroad in this State has been in the habit, and is to-day in the habit, of granting special privileges to individuals, to companies in which the directors of such railroads are interested, to particular business, and to particular localities. We well know that it is their habit to break down certain localities, and build up others, to break down certain men in business and to build up others, to monopolize certain business themselves by means of the numerous corporations which they own and control, and all this in spite of the law, in defiance of the law.

"The South Improvement Company's scheme would give that corporation the monopoly of the entire oil business of this State, amounting to $20,000,000 a year. That corporation was created by the Pennsylvania Legislature along with at least twenty others, under the name of improvement companies, within a few years past, all of which corporations contain the names as original corporators of men who may be found in and about the office of the Pennsylvania Railroad Company, in Philadelphia, when not lobbying at Harrisburg. The railroads took but one of those charters which they got from the Legislature, and by means of that struck a deadly blow at one of the greatest interests of the State. Their scheme was contrary to law, but before the legal remedy could have been applied, the oil business would have lain prostrate at their feet, had it not been prevented by an uprising of the people, by the threatenings of a mob, if you please, by threatening to destroy property, and by actually commencing to destroy the property of the railroad company, and had the companies not cancelled the contract which Scott and Vanderbilt and others had entered into, I venture to say there would not have been one mile of railroad track left in the County of Venango—the people had come to that pitch of desperation.... Unless we can give the people a remedy for this evil of discriminations in freight, they will sooner or later take the remedy into their own hands."[77]

Soon after this attorney for the people was promoted from the poor pay of patriotism to a salary equal to that of the President of the United States, and to the place of counsel for the principal members of the combination, whose inwardness he had descried with such hawk-eye powers of vision. Later, as their counsel, he drafted the famous trust agreement of 1882.

The South Improvement Company was formed January 2d. The agreement with the railroads was evidently already worked out in its principal details, for the complicated contracts were formally signed, sealed, and delivered January 18th. The agreed increase of freights went into effect February 26th. The pacific insurrection of the people began with an impromptu mass-meeting at Titusville the next day, February 27th. Influential delegations, or committees, on transportation, legislation, conference with press, pipe lines, arresting of drilling, etc., were set to work by the organization thus spontaneously formed by the people. A complete embargo was placed on sales of oil at any price to the men who had made the hateful bargain with the railroads. The oil country was divided into sixteen districts, in each of which the producers elected a local committee, and over all these was an executive committee composed of representatives from the local committees—one from each. No oil was sold to be used within any district except to those buyers whom the local committee recommended; no oil was sold to be exported or refined outside the district, except to such buyers as the executive committee permitted. One cent a barrel was paid by each producer into a general fund for the expenses of the organization.

Steps were taken to form a company with a capital of $1,000,000, subscribed by the producers, to advance money, on the security of their oil, to those producers who did not want to sell.

Able lawyers were employed and sent with the committees to all the important capitals—Harrisburg, Washington, the offices of the railway companies. The flow of oil was checked, the activities of the oil world brought near a stop.

Monday, March 15th, by the influence of the Washington committee, a resolution was introduced into the House of Representatives by Representative Scofield, ordering an investigation of the South Improvement Company. Immediately upon this the frightened participants cancelled the contracts. By the 26th of March the representatives of the people had secured a pledge in writing from the five great railroads concerned of "perfect equality," and "no rebates, drawbacks, or other arrangements," in favor of any one thereafter. March 30th, Congress began the investigation which brought to light the evidence of the contracts, and meanwhile the committees on legislation and pipe lines were securing from the Pennsylvania Legislature the repeal of the South Improvement Company charter, and the passage of a "so-called" Free Pipe Line law, discovered afterwards to be worthless on account of amendments shrewdly inserted by the enemy.

It was an uprising of the people, passionate but intelligent and irresistible, if the virtue of the members held good. Until April 9th the non-intercourse policy was stiffly and successfully maintained. But by that time one man had been found among the people who was willing to betray the movement. This man, in consideration of an extra price, violating his producer's pledge, sold to some of those concerned in the South Improvement Company a large quantity of oil, as they at once took pains to let the people know. The seller hoped to ship it quietly, but, of course, the object in buying and paying this additional price was to have it shipped openly, and the members of the South Improvement Company insisted that it should be done so.[78]

This treachery had the effect planned. Every one became suspicious that his neighbor would be the next deserter, and would get the price he would like to have for himself. To prevent a stampede, the leaders called a mass-meeting. Reports were made to it of what had been done in Congress, the Legislature, and the other railway offices; the telegrams already referred to were read affirming the cancellation of the contracts. Amid manifestations of tumultuous approbation and delight the embargo on the sale of oil was declared raised.

"We do what we must," says Emerson, "and call it by the best name possible." The people, as every day since has shown, grasped the shell of victory to find within the kernel of defeat.

The committee of Congress noticed when the contracts were afterwards shown to it, that though they had been so widely declared to be "cancelled," they had not been cancelled, but were as fresh—seals, stamps, signatures and all—as the day they were made. This little circumstance is descriptive of the whole proceeding. Both parties to this scheme to give the use of the highways as a privilege to a few, and through this privilege to make the pursuit of livelihood a privilege, theirs exclusively—the railroad officials on one side, and their beneficiaries of the South Improvement Company on the other—were resolute in their determination to carry out their purpose. All that follows of this story is but the recital of the sleuth-like tenacity with which this trail of fabulous wealth has been followed.

The chorus of cancellation from the railroads came from those who had meant never to cancel, really. In their negotiations with the representatives of the people they had contested to the last the abandonment of the scheme. "Their friendliness" to it "was so apparent," the Committee of the Producers reported, "that we could expect little consideration at their hands,"[79] and the committee became satisfied that the railroads had made a new contract among themselves like that of the South Improvement Company, and to take its place. Its head frankly avowed before the Investigating Committee of Congress their intention of going ahead with the plan. "They are all convinced that, sooner or later, it will be necessary to organize upon the basis on which the South Improvement Company was organized, including both producers and refiners."

This conviction has been faithfully lived up to. Under the name of the South Improvement Company the arrangement was ostentatiously abandoned, because to persist in it meant civil war in the oil country as the rising young anti-monopolist lawyer pointed out in the Constitutional Convention. Mark Twain, in describing the labors of the missionaries in the Sandwich Islands, says they were so successful that the vices of the natives no longer exist in name—only in reality. As every page will show, this contract no longer exists in name—only in reality. In the oil world, and in every other important department of our industrial life—in food, fuel, shelter, clothing, transportation,[80] this contract, in its various new shapes, has been kept steadily at work gerrymandering the livelihoods of the people.

The men who had organized the South Improvement Company paid the public revolt the deference of denial, though not of desistance. The company had got a charter, organized under it, collected twenty per cent. of the subscription for stock, made contracts with the railroads, held meetings of the directors, who approved of the contracts and had received the benefits of the increase of freights made in pursuance of the agreement. This was shown by the testimony of its own officers.[81]

But "the company never did a dollar's worth of business," the Secretary of the Light of the World told Congress,[82] and "there was never the slightest connection between the South Improvement Company and the Standard Oil Company," the president of the latter and the principal member of both said in an interview in the New York World, of March 29, 1890. "The South Improvement Company died in embryo. It was never completely organized, and never did any business. It was partly born, died, and was buried in 1872," etc.

Still later, before a committee of the Legislature of New York, in 1888, he was asked about "the Southern Improvement Company."

"There was such a company?"

"I have heard of such a company."

"Were you not in it?"

"I was not."[83]

So help me God!

At almost the moment of this denial in New York, an associate in this and all his other kindred enterprises, asked before Congress who made up the South Improvement Company, named as among them the principal members of the great oil company, and most conspicuous of them all was the name of this denier.[84]

The efficiency with which this "partly born" innocent lived his little hour, "not doing a dollar's worth of business," was told in a summary phrase by one of the managers of the Pennsylvania Railroad, describing the condition of the oil business in 1873:[85]

"All other of our largest customers had failed."

When the people of the oil regions made peace after their uprising it was, as they say, with "full assurance from the Washington committee that the throwing off the restrictions from trade will not embarrass their investigation (by Congress), but that the Sub-Committee of Commerce will, nevertheless, continue, as the principle involved, and not this particular case alone, is the object of the investigation."[86]

The Committee of Commerce did not "continue." The principal witness, who had negotiated the contracts by which the railroads gave over the business of the oil regions to a few, refused in effect, beyond producing copies of the contract, to be a witness. Permission was given by the Committee of Congress during its first zeal to the Committee of Producers from Pennsylvania to copy the testimony as it was taken, but no official record of its discoveries exists. This transcript was published by the producers, and copies are possessed by a few fortunate collectors. The committee did not report, and in the archives of the national Capitol no scrap of the evidence taken is to be found. All has vanished into the bottomless darkness in which the monopoly of light loves to dwell.

[CHAPTER VI]

"NOT TO EXCEED HALF"

Notwithstanding the ceremonial treaty of equal rights on the railroads to all, which had been secured by the uprising of the people against the South Improvement Company in 1872, the independents, one after the other, continued to be side-tracked by an unseen power. Four years later, on the 20th of July, 1876, their only two important survivors in Cleveland, frightened by the high death-rate of the business, and by a deepening pressure on themselves, answered a summons to come to the palace of the President of the Light of the World. The contract which was then made was afterwards produced in court.[87] It was called an "Agreement for an Adventure," in something like "the merry sport" in which the good Antonio gave a bond for a pound of his flesh.

A few years after this "adventure" with his competitors and his efforts to have them closed by the courts, the President was asked if his trust had sought in any way to diminish the production of refineries in competition with it.

"Oh no, sir," he replied.

"Nothing of the kind?"

"Oh no, sir."[88]

He was asked the question again, and again the denial was repeated.

"Done nothing of the sort?"

"Not at all."

But now he said, You must bind yourselves for ten years to refine only 85,000 barrels of oil a year.[89]

They had refined 120,000 barrels the year before, and could have done 180,000, and were growing up with the country. "The prospects were much better for the future."[90]

But they agreed.

You must give me and my associates all the profits you make during this period above $35,000 a year, until we too have got $35,000 a year out of your business, and we will guarantee you $35,000 a year, if we let you run.

They had made $41,000 the year before, but they agreed.

You must divide with "us," after each has got $35,000 a year, all the additional profits.

They had to put into this "adventure" all their buildings and machinery, valued at $61,760.42, all their time and attention, and $10,000 in cash, while their conquerors put in only $10,000 cash and no plant and no time. But they agreed to this demand for "half."

You must stop refining altogether, and let us take out our $10,000 whenever we send you notice that through competition, or a decrease or change in the production of petroleum, Cleveland can "barely compete" with other places. You must sell the kerosene you manufacture, and buy the petroleum you make it of at the prices we fix.

The combination could make the business unprofitable whenever it chose, and under the previous stipulation could close them up at its own pleasure, until the ten years had rolled by. But they agreed.

You must resume again after any such suspension, and let us take half the profits whenever we give you notice. You must let us enter or withdraw, throw our $10,000 in or out, suspend or resume, again and again, as we choose! They agreed.

You must make us monthly reports of all your transactions. You must not enlarge nor contract your works without our consent. They agreed.

You must not go into the manufacture of petroleum, nor any other new business anywhere else in the world during this adventure! You must ship your products by such routes as we direct! They agreed.

You must keep this adventure secret. Our name must not appear, and even if you all die, you must agree that we may continue the business in your name, or any other name we choose.

"The firm name," as their counsel pointed out, "was to be kept up even when the members were mouldering in their graves. But the public were to understand that the business of that firm, as it had been conducted in the lifetime of those men, was still being carried on."

You are to be thus tied up for ten years, limited at the best to half the profit on half your capacity, with a right in us to close you up altogether, or to close and resume whenever we choose, with no right in you to start or stop or withdraw. But we are to be left free, in our own refineries, to refine all the oil the market will take, and keep all the profit, and enlarge our works and extend our business.

And, finally, you must put your hand and seal to a statement that you do this to "reconcile interests that have seemed to conflict" and "equalize the business," and that this agreement gives you your "due proportion thereof."

This "free contract" two of the three men who were to make it knew nothing of until their consent was demanded.

One of the partners had secretly been won over. Through him all preliminary negotiations had been conducted.

"I was not consulted," testified one of the other two, until after the contract was "all drawn and prepared," and at first he refused to sign it. The plan was concocted "secretly and unknown to me."

"I was at first opposed to the arrangement," declared the other.[91]

But this was not all the contract. The President, who, as he testified, "conducted most of the negotiations," and "had been familiar with the dealings thereunder," supplemented the written documents with oral instructions:[92]

You must not seem to be prosperous. You must not put on style,[93] he cautioned them; above all, you must not drive fast horses or have fine rigs; you must not even let your wives know of this arrangement.[94]

A false account was opened on the books to conceal the nature and origin of this transaction from their own book-keepers. In the name of that account false and fictitious checks were drawn, bills made out, balances struck. A box was taken out at the Cleveland post-office—box 125—in the name of an imaginary "Mr. G.A. Mason," and through this box the correspondence of the "adventure" was carried on. Each of the three parties to the "adventure" continued to march and fight under its own flag as before. All possible pains were taken to conceal the fact that they had ceased competition with each other. They kept up every appearance to the public of being actively engaged in competitive business. The inevitable spy appears in this scene as in every other in the play. The "reconciler," to enforce the provisions that the "reconcilees" should not engage in business elsewhere, extended a system of espionage over them, and followed their movements, and kept watch what they did with their money, and made oath to the courts of the results of these "inquiries and investigations." The espionage continued after this.

A year or two after this contract had been broken by the help of the courts, the then secretary of the great oil company, through an intermediary, approached the book-keeper of the firm which had been freed from the trust.

"Would you not like to make some money?"

"He inclined to let him believe he did want to make some money," his employer afterwards told Congress. "He came and told me about it. I requested that he continue and find out what information they wanted. He was to have had so much per year, but he was to have been paid a down payment; he got $25."

"What service was he to render for that?"

"I have a memorandum. There were so many things he was to do that I cannot carry it in my head."

"One of the questions was, 'What was the result of last year's business?' The other was, 'A transcript of the daily shipments, with net prices received from the same; what is the cost for manufacturing outside of the crude; the kind of gasoline and naphtha made, and the net prices received for the same; what they do with tar and the percentages of the same; what per cent. of water white and what per cent. of Michigan water white; how much oil exported last year?' This information, as fast as received, to be mailed to Box 164, Cleveland post-office.... He (the book-keeper) made an affidavit of it, and I took the money back myself personally."[95]

When orders came in for more oil than the limit put upon them, the "reconcilees," asserting their commercial manhood, went on refining to supply the demands of the public instead of the commands of the clique. They contended that they were not bound by the limitation, and in this were afterwards upheld by the court; but, meanwhile, they were called to account and frightened into another "reconciliation." He was present, the chief reconciler told the court, at the interview in which they "agreed to diminish their manufacture ... to bring the entire amount within the terms" of the contract.

But again they began to refine to supply the needs of the people evidenced by the market demand. Then their supply of crude was shut off. Their suzerain owned the pipe line to Cleveland. When its escaping victims got around that difficulty, it took its "contract" to the courts.

To shut these competitors down to half their capacity, and to reconcile and equalize interests by taking half of all they made on that was merely an incident, collateral to the grander plan, the vaster "adventure," of getting all the profits of that greater field out of which these competitors were barred altogether. Such contracts as these, its counsel said, were made with refiners all over the country. The chief profit of the adventure lay, not in the divided profits of the picayune business it let the vassals do, but in the undivided profits of the empire kept for itself. Why should the reconciler hurry with expensive lawyers into court for a summary injunction to prevent a "reconcilee" from making more oil, when the reconciler, who toiled not nor spun, was to get half of the gain of $2.05 on every barrel of it? Why, but that every "co-operative" barrel so made would displace in the markets a barrel, all the profits of which went to it.

The "reconcilees" were called into court. A judge was asked to issue an injunction forbidding them to depart from the strict letter of the contract.

They have been refining more than 85,000 barrels of oil a year, was the complaint.

They "threaten to distil crude petroleum without regard to quantity."[96] They are "parties in rebellion," said the lawyers. The judge said, No. This is a contract in restraint of trade, and released those who were in its toils.

The immediate effect of this "equalization" was an advance in the rates of profit. The year before the independent refiners had made a profit of only 34 cents a barrel.[97]

The first year of the "adventure" the profits jumped up to $2.52 a barrel. The dividends rose from $41,000 to $222,047, while the production fell from 120,000 to 88,085 barrels. For the four years the average profit was $2.05 a barrel, or 500 per cent. advance. The lowest profit was $1.37.

"Refined oil advanced to an average of $8 per barrel for that year" (1876), says the counsel of the trust.[98]

These great winnings were made in the depth of the depression following the panic of 1873.

While a world-compelling decline not only of prices but of profits, was in progress, the authors of this arrangement kept up kerosene to a point at which $630,691 was made in four years out of an investment of $81,000, half of which went to those who put in $10,000 and their power over freight agents.

This "adventure," as was said by the Hon. Stanley Matthews, who appeared as counsel for the victimized refiners, was better than a gold-mine. It was a mint. Without giving any personal supervision or any time, without any expenditure except the insignificant investment of $10,000, made as a mere stalking-horse, these men took a share of the profits of "the party of the second part," which is not to be calculated by ordinary percentage, but by multiplications, over and over again, every year, of the money they put in it.

By reducing the volume of business one-half, by increasing the profit from 34 cents a barrel to $2.05, the reconcilers pocketed $315,345.58 in four years, on an investment of $10,000, with no work. This was the fact. The theory with which the fact was hidden from the people is given to the New York Legislature in 1888. The principle on which the trust did business, its president said, was: