A NEW CONSOLIDATION PLANNED
However, Vanderbilt quickly and multitudinously recouped himself for the losses encountered in his Erie assault. Why not, he argued, combine the New York Central and the Hudson River companies into one corporation, and on the strength of it issue a vast amount of additional stock?
The time was ripe for a new mortgage on the labor of that generation and of the generations to follow. Population was wondrously increasing, and with it trade. For years the New York Central had been paying a dividend of eight per cent. But this was only part of the profits. A law had been passed in 1850 authorizing the Legislature to step in whenever the dividends rose above ten per cent, on the railroad's actual cost, and to declare what should be done with the surplus. This law was nothing more or less than a blind to conciliate the people of the State, and let them believe that they would get some returns for the large outlay of public funds advanced to the New York Central. No returns ever came. Vanderbilt, and the different groups before him, in control of the road had easily evaded it, just as in every direction the whole capitalist class pushed aside law whenever law conflicted with its aims and interests. It was the propertyless only for whom the execution of law was intended. Profits from the New York Central were far more than eight per cent.; by perjury and frauds the directors retained sums that should have gone to the State. Every year they prepared a false account of their revenues and expenditures which they submitted to the State officials; they pretended that they annually spent millions of dollars in construction work on the road—work, in reality, never done. [Footnote: See Report of New York Special Assembly Committee on Railroads, 1879, iv: 3,894.] The money was pocketed by them under this device—a device that has since become a favorite of many railroad and public utility corporations.
Unenforced as it was, this law was nevertheless an obstacle in the way of Vanderbilt's plans. Likewise was another, a statute prohibiting both the New York Central Railroad and the Hudson River Railroad from increasing their stock. To understand why this latter law was passed it is necessary to remember that the middle class—the factory owners, jobbers, retail tradesmen and employing farmers—were everywhere seeking by the power of law to prevent the too great development of corporations. These, they apprehended, and with reason, would ultimately engulf them and their fortunes and importance. They knew that each new output of watered stock meant either that the prevailing high freight rates would remain unchanged or would be increased; and while all the charges had to be borne finally by the working class, the middle class sought to have an unrestricted market on its own terms.