Monopolies and the People

by Charles Whiting Baker

Thus these seven corporations alone produced from their own mines, carried to market, and sold, over 34,000,000 tons of coal during the year, for which they received about $90,000,000. Of the magnitude of the operations carried on by these great corporations we now have some idea. Let us next inquire to what extent competition is allowed to act between them to keep down prices.

Many years ago these seven companies formed the famous anthracite-coal pool. This was an agreement by which all the companies concerned agreed to maintain a uniform selling price for coal at all important distributing points where two or more of the companies came into competition. Some of the prices which were fixed by the pool were extremely arbitrary. Cities in Pennsylvania within an hour's ride of the coal fields had to pay nearly as high a price for coal as those 500 miles or more distant. Rates of transportation on coal mined by individual operators were made such that the latter could not afford to sell below the prices fixed by the pool, even if they had been so disposed. At the present time the situation has been modified by the long and short-haul clause of the Interstate Commerce law, by which the railroad is obliged to make its transportation rates somewhat proportionate to distance, and also by the passage of a law in the State of Pennsylvania, by which the acts of the anthracite-coal pool were declared illegal and punishable. Nominally, therefore, the pool is a thing of the past; but the practical fact is, that by secret or tacit agreement the various companies are not competing with each other any more now than in the days of the pool, and at points like New York or Buffalo, where two or more roads meet, the same prices are quoted by each different company.

Nor are the charges against the pool comprehended in its autocratic determination of the price of coal. To make production correspond with price, it was necessary at times to close collieries entirely, throwing the miners out of employment. The individual operators, too, have no love for the combination. Their profit depends more than any thing else on the rate of transportation, and thus whether they shall make or lose depends on the railroad companies. They claim that the railways base their rates for carrying coal upon the principle of "charging what the traffic will bear." This is a matter, however, which we can better discuss in the next chapter.

It is thus evident beyond dispute that the production of anthracite coal in this country is an industry uncontrolled by competition. To sum up: these seven great corporations own more than two thirds of the area in which workable anthracite coal is found: they mine and market directly the great bulk of the total production; the individual operators are dependent on the railways for getting their coal to a market; and the price at which they can afford to sell it depends on the railroad rates. Finally, consider that these seven companies work in harmony, both as to traffic rates and prices for the sale of coal, and the conclusion is irresistible that competition in anthracite-coal production in the United States is practically dead.

Let it be noted, for the benefit of those who may conceive that the above statement is unfair to the railway companies, that no charge is here made that the prices fixed by the companies for the coal are at the present time extortionate or unjust. That is a separate matter; in which, doubtless, there would be plenty to affirm on the one hand that the prices charged were no more than a just compensation, while their opponents would declare that the prices adopted by the pool favor some points to the prejudice of others, and that the statement that they were on the whole exorbitant was proven by the fact that the railway lines in the coal regions, where honestly managed, have paid great dividends on the actual capital invested.

Compared with the production of Pennsylvania anthracite, the coal production of any other single section seems small. But it is only so by comparison, for the Western coals, while inferior in quality, are abundant and easily mined, and must remain the staple for general consumption throughout the region west of the Mississippi, as well as for large sections further east.

As is well known, the people of the Western and Northwestern plains are wholly dependent upon the railroads for their supplies of every description, except the raw products of the soil. The railways themselves are great consumers of coal, and have bought up large tracts of coal lands and opened mines. In the desire to develop traffic and ensure a supply of coal to the settlers on their lines—we will even say of cheap coal,—the railway companies have entered the coal trade themselves, either directly or through subsidiary companies. Thus it comes about that hundreds of thousands of people of the West and Northwest must pay for coal, which is an absolute necessity of life during several months of the year, whatever price the managers of a single railway corporation may demand. Let it be understood that no charges are here made of injustice or extortion on the part of the railway companies. It is only wished to bring out the fact that competition is here wholly absent. It is believed that, in some cases at least, an honest attempt has been made to mine and sell the coal at merely a fair profit. But in days to come it will not be so directly for the interest of the railways to deal liberally with their patrons as at present. Other men of less breadth and principle and more ready to grasp at a chance for enormous profits may control the company's affairs; and if that happens, the opportunity to take advantage of the absence of competition and raise the price of coal will be utilized.

A brief review of the actual status of the coal production of the West and South will help us to a clear appreciation of the case. The Missouri Pacific Railway Company, through subsidiary companies, extracted from its mines in Missouri and the Indian Territory, during 1887, 1,618,605 tons of coal. Through its control of transportation rates, private operators have been compelled to sell coal at the company's prices in the market. The company has recently purchased large tracts of coal lands in Colorado, on which it is opening mines. The Atchison, Topeka, and Santa Fé, the Chicago, Burlington, and Quincy, the Denver and New Orleans, the Union Pacific, and the Denver and Rio Grande Railway companies are also heavily interested in the Colorado coal mines. The last company has long held a bonanza in the monopoly of the coal mining and transportation for the Colorado silver-mining and smelting districts. Though the other companies, to which the Rock Island should probably be added, come in as competitors, there can be no doubt that their active competition will be of short duration. The Wyoming coal fields are being worked by the Union Pacific and the Chicago and Northwestern companies, while the Chicago, Burlington, and Quincy and a company supposed to be closely connected with the Northern Pacific are preparing to take the field at an early date. On the Pacific coast the coal trade has long been a monopoly in the hands of the Oregon Railway and Navigation Company, who have kept the prices in San Francisco just below the point at which it becomes profitable to import Australian coal. Other railways are now preparing to reach the coal fields, but can we doubt that the competition to which the coal consumers are looking with eager anticipation will prove evanescent? Returning to the East, we find the coal mines of northern Illinois all held by a single company, which has full control of the traffic; while the mines of southern Illinois, on which the St. Louis consumers depend, are united as the Consolidated Coal Company. This latter corporation has "wrecked" many of its mines for the purpose of limiting the supply and raising the price; and has bought many mines of competing companies and closed them for the same purpose. The Attorney-General of Illinois has been requested to bring suit against this "trust" for the forfeiture of its charter.

In the Hocking Valley coal fields in Ohio, the Columbus, Hocking Valley and Toledo Railway Company owns 10,000 acres of coal lands, and mined, in 1887, 1,870,416 tons of coal. The coal in western Virginia is coming into the hands of the Norfolk and Western Railroad Company, while the coal of Alabama, of which so much has been noised abroad, has been quietly gathered in by the Louisville and Nashville corporation. The Tennessee Coal and Iron Company, which owns 76,000 acres of coal lands, and mined 1,145,000 tons in 1882, is owned by parties largely interested in the East Tennessee, Virginia and Georgia Railroad system. West Virginia has probably the most valuable untouched coal deposits of any State in the Union, but these also are rapidly being gathered up by railway corporations.

To sum up, in the words of one of the best informed authorities, the coal business of the country is at the mercy of the railroads.