LETTER VII
My dear Judd:
When I was a youth, trying to find out about my country, one of the first things I learned was that its politics were corrupt. I lived in New York City, and saw that corruption all about me, and the hideous ruin of human lives; naturally I tried to figure out why these things had to be. The explanation given me in school was that it was the ignorant foreigners who crowded into our cities; they didn’t understand our institutions, they sold their votes, and delivered our political parties into the hands of bosses.
It happened that I had a certain relative—I won’t tell his name, suffice it that he was a financial man, on his way to becoming one of our great millionaires. He wanted to break into New York, so he opened an office, and gave a big block of stock to Richard Croker, at that time boss of Tammany Hall; he made another Tammany chieftain the head of his New York office—and that was all there was to it, he was “in,” and his firm took over the city’s business along that line, and all city officials and employes were given to understand that they must patronize it. Later on my relative—he was very fond of me, and told me all his doings—named a certain man for treasurer of New York state on the Democratic ticket; he smiled as he told me what that was going to mean, his firm would open offices all over the state and would get the state’s business. After which my worthy relative proceeded to scold me for my budding “radicalism,” and to assure me that our big business leaders were all patriots and men of honor.
Thus I saw the game from the inside, and little by little I came to understand it. Yes, it was true that the boss paid the ignorant foreigners for their votes; but where did the boss get the money for that purpose? The answer, though painful, was plain: he got it from my relative; he got it from all such business men, seeking all such favors and privileges from the state. And here was a further fact which was plain—my relative did not pay the boss for nothing; he intended to get, and did get, a hundred times as much out of the bargain as he paid to the boss and to the political machine of the boss. And that, I found, was the universal rule of this game of graft; the boss was merely an agent, set up by big business men to run the political part of their affairs; and as for the ignorant foreigner, he was a convenience which the business man made use of, in politics as in the labor market.
In the old days of the Tweed ring, the politicians used to steal our money outright; but that is over now, because every politician knows, just as every business man knows, that it is so much better to “make” money than to steal it; you can “make” so much more, and there is no danger of being sent to jail. So nowadays the rule of our politics is “honest graft.” The chiefs of Tammany Hall do not loot the treasury; what they do is to receive blocks of stock in paving companies and construction companies, which do the work for the city at enormous profits; they own stock in the banks which handle the city’s funds; they are in on all the big traction deals; they get up little pet companies, to do this or that service for the public service corporations—to furnish them with ink erasers, or time-clocks, or chewing gum, at several times the market price; and all that is perfectly safe and regular, and instead of sending them to jail we envy them.
I open my morning paper, and here is Arthur Brisbane, sneering at some young men in New York who are starting a paper called “The New Masses”: nobody in America wants to belong to the “masses,” and the young men ought to call their paper, “How to Make a Million the First Year.” Yes, Judd, that is what everybody wants; but can everybody do it? That is a point which Mr. Brisbane, multi-millionaire real estate speculator, fails to cover. But you see how it is: the very essence of “making a million the first year” is that you take it away from other people, who lose in the great business gamble, and remain the “masses,” in spite of desperate determination not to.
There is a charming fable by an old-time Italian named Pestolozzi, to the effect that the little fishes in the pond held a meeting to protest against the cruelty of the big pike; and the pike considered their protest and declared the matter should be remedied by a decree to the effect that every year two little fishes should be permitted to become pike. The fable does not tell us how the little fishes took that offer; but if they had been little American fishes they would have been delighted, and would have called it “liberty.”
Whether or not some particular little fish becomes a pike is a matter of interest to that little fish, but it does not change the social system. The “masses” remain, and by their labor produce the wealth, and the “classes” take it away from them. What I am trying to make clear to you, friend Judd, is that when you admire the possessor of a bit of juicy graft, what you are really admiring is the power to rob you; because it is your wealth the robber is getting, there is no other wealth for him to get. The old-fashioned criminal graft came out of the tax-payers; and the new fashioned “honest graft” comes out of the consumers of gas and electricity and telephones and transportation and all other services. Every dollar of profits, whether legitimate or illegitimate, is either paid by the consumer, or else it is written down as obligations, covered by “securities” of some sort, stocks or bonds, and forever after its claim is sacred, and the courts will protect its right to draw tribute from the consumer to the end of all time.
Take our railroads, for example; the history of American railroads is a history of bribery and fraud, continued through generations, and of stock-watering and speculation monstrous beyond belief. The common idea is that two-thirds of our railroad securities are water. LaFollette succeeded in getting a provision for a “physical valuation” of the railroads, and I saw, tucked away in an obscure corner of a newspaper, the results for two Southern lines—the water was nine dollars out of ten! So the “physical valuation” project was apparently dropped—at least, I can’t find out any more about it. And now what has happened? The courts have decided that the railroads are entitled to a “fair return” on their present paper values; it is the law of the land that they are guaranteed 5½% on their securities, and if they fail to earn that, the government makes it up to them!
The same principle applies to the public service companies in all our cities and towns. No matter by what bribery their franchises may have been gained, no matter how many oceans of water may have been pumped into their stocks, these values are sacred, and no legislature may pass a law reducing prices below a “fair return.” We have public service commissions which are supposed to put a stop to future stock-waterings and fraud, and to protect the public against unjust rates; but what are these commissions doing? The answer is, they are selling us out; and the proof is published daily, in the stock market quotations for the securities of these corporations. That is one kind of proof to which there is no answer, Judd; other people may be fooled about money matters, but the men who buy and sell in Wall Street are not fooled for long; they watch earnings, and, automatically every stock takes the ranking to which its dividends entitle it. If public service commissions are protecting you and me in our rights, then the stocks of public service corporations are of no use for purposes of speculation in Wall Street; on the other hand, if Wall Street is scrambling for them, and boosting the prices of them, it means one thing and one only—the big thieves have broken down the defenses we built up against them.
And what are the facts? Here are the “high” quotations for some of our biggest public utility corporations, the first figure for the year 1921, and the second for the year 1925; the gains speak for themselves: American Gas, 49, 79; American Light and Traction, 112, 249; Middle West Utilities, 24, 112; Public Service Company of N. Illinois, 82, 126; Standard Gas and Electric, 17, 59; Western Power, 30, 86.
And incredible as it may seem, Judd, here is our old friend the “stock dividend!” Yes, even in public utilities, they are getting away with so much that they have to hide it! American Water Works gave five new shares for one old share; Cities Service Co. the same! Western Power declared a 50% stock dividend; Columbia Gas and Electric gave three new shares “of no par value” for one old share. Here is a new trick, Judd—no par value any more, so you will never be able to say what that corporation ought to earn! You will never be able to raise the awkward question how much real money was put into the concern at the start! They won’t have to declare any more stock dividends, for the old ones will serve to infinity; as the cheerful phrase has it, the sky is the limit!
Look, Judd; three years ago we had a big “power fight” in Southern California. It was proposed by public-spirited people that the state should issue bonds for $500,000,000 and develop its own water power. Our big newspapers raved at the wicked idea; they told you that would be “Socialism,” and you believed them, and voted down the proposal. So now the great power companies have the field without a rival; they are spending the money—and where are they getting it? Selling stocks and bonds in Wall Street, of course; and on what basis? What basis could there be—except the fancy prices they intend to charge you for power, with the permission of the corrupt public authorities of this state?
And one thing more, Judd; when they come to present their bills—with the permission of the public service commission—they are going to include in the items the amount of $501,605.68 which they paid in the political campaign to bamboozle you! Yes, Judd, they will do that, and you will never know it, because it will be classified as “organizing expenses,” or “advertising,” or something like that; and how carefully do you go into the reports of the public service corporations which supply you with power? Six power companies admitted before the legislative investigating committee that they had paid that sum in the campaign; the Pacific Gas and Electric Company, the old established rulers of this community, the purchasers of our local government, put in the tidy sum of $133,933.80. And so here is a sentence to paste in your hat, Judd:
Not only do they rob you; they make you want to be robbed, and they make you pay them for teaching you to want to be robbed!
And one more, Judd—a “slogan” for the next campaign:
Letting yourself be robbed is Americanism; defending yourself against robbery is Socialism!