Great Fortunes from Railroads

by Gustavus Myers

THE SMALL CAPITALISTS' LOSING FIGHT.

The great capitalists both dared and did. If specific statutes were against them, the impelling forces of economic development and the power of might were wholly on their side. The competitive system was already doomed; the middle class was too blind to realize that what seemed to be victory was the rattle of the slow death struggle. At first, the great capitalists made no attempt to have these laws altered or repealed. They adopted a slyer and more circuitous mode of warfare. They simply evaded them. As fast as one trust was dissolved by court decision, it nominally complied, as did, for instance, the Standard Oil Trust and the Sugar Trust, and then furtively caused itself to be reborn into a new combination so cunningly sheltered within the technicalities of the law that it was fairly safe from judicial overthrow.

But the great capitalists were too wise to stake their existence upon the thin refuge of technicalities. With their huge funds they now systematically struck out to control the machinery of the two main political parties; they used the ponderous weight of their influence to secure the appointment of men favorable to them as Attorneys General of the United States, and of the States, and they carried on a definite plan of bringing about the appointment or election of judges upon whose decisions they could depend. The laws passed by the middle class remained ornamental encumbrances on the statute books; the great capitalists, although harassed continually by futile attacks, triumphantly swept forward, gradually in their consecutive progress strangling the middle class beyond resurrection.

Such was the integral impotence of the warfare of the small against the great capitalists that, during this convulsive period, the existing magnates increased their wealth and power on every hand, and their ranks were increased by the accession of new members. From the chaos of middle-class industrial institutions, one trust after another sprang full-armed, until presently there was a whole array of them. The trust system had proved itself immensely superior in every respect to the competitive, and by its own superiority it was bound to supplant the other.

Where William H. Vanderbilt had thought himself compelled to temporize with the middle class agitation by making a show of dividing the stock ownership of the New York Central Railroad, his sons Cornelius and William ignored or defied it. Utterly disdainful of the bitter feeling, especially in the West, against the consolidation of railroads in the hands of the powerful few, they tranquilly went ahead to gather more railroads in their ownership. The Cleveland, Cincinnati, Chicago and St. Louis Railroad (popularly dubbed the "Big Four") acquired by them in 1890 was one of these. It would be tiresome, however, to enter into a narrative of the complex, tortuous methods by which they possessed themselves of these railroads. By the beginning of the year 1893 the Vanderbilt system embraced at least 12,000 miles of railways, with a capitalized value of several hundred million dollars, and a total gross earning power of more than $60,000,000 a year. "All of the best railroad territory," says John Moody in his sketch entitled "The Romance of the Railways," "outside of New England, Pennsylvania and New Jersey was penetrated by the Vanderbilt lines, and no other railroad system in the country, with the single notable exception of the Pennsylvania Railroad, covered anything like the same amount of rich and settled territory, or reached so many towns and cities of importance. New York, Buffalo, Chicago, Cleveland, St. Louis, Cincinnati, Detroit, Indianapolis, Omaha—these were a few of the great marts which were embraced in the Vanderbilt preserves." So impregnably rich and powerful were the Vanderbilts, so profitable their railroads, and their command of resources, financial institutions and legislation so great, that the panic of 1893 instead of impairing their fortunes gave them extraordinary opportunities for getting hold of the properties of weaker railroads.

It was now, acting jointly with other puissant interests, that they saw their chance to get control of a large part of the fabulously rich coal mines of Pennsylvania. These coal mines had originally been owned by separate companies or operators, each independent of the other. But by about the year 1867 the railroads penetrating the coal regions had conceived the plan of owning the mines themselves. Why continue to act as middlemen in transporting the coal? Why not vest in themselves the ownership of these vast areas of coal lands, and secure all the profits instead of those from merely handling the coal?

The plan ingratiated itself as a capital one; it could be easily carried out with little expenditure. All that was necessary for the railroad to do was to burden down the operators with exorbitant charges, and hamper and beleaguer them in a variety of compressing ways. [Footnote: See testimony before the committee to investigate the Philadelphia and Reading Railroad Company, and the Philadelphia and Reading Coal and Iron Company, Pennsylvania Legislative Docs. 1876, Vol. v, Doc. No. 2. This investigation fully revealed how the railroads detained the cars of the "independent" operators, and otherwise used oppressive methods.] As was proved in subsequent lawsuits, the railroads frequently declined to carry coal for this or that mine, on the pretext that they had no cars available. Every means was used to crush the independent operators and depreciate the selling value of their property. It was a campaign of ruination; in law it stood as criminal conspiracy; but the railroads persisted in it without any further molestation than prolix civil suits, and they finally forced a number of the well-nigh bankrupted independent operators to sell out to them for comparatively trifling sums. [Footnote: Spahr quotes an independent operator in 1900 as saying that the railroads charged the independents three times as much for handling hard coal as they charged for handling soft coal from the West—"America's Working People": 122-223.]

By these methods such railroads as the Philadelphia and Reading, the Delaware, Lackawana and Western, the Central Railroad of New Jersey, the Lehigh Valley and others gradually succeeded, in the course of years, in extending an ownership over the coal mines. The more powerful independent operators struck back early at them by getting a constitutional provision passed in Pennsylvania, in 1873, prohibiting railroads from owning and operating coal mines. The railroads evaded this law with facility by an illegal system of leasing, and by organizing nominally separate and independent companies the stock of which, in reality, was owned by them.

To the men who did the actual labor of working in the mines—the coal miners—this change of ownership was not regarded with alarm. Indeed, they at first cherished the pathetic hope that it might benefit their condition, which had been desperate and intolerable enough under the old company system. The small coal-owning capitalists, who had emitted such wailings at their own oppression by the railroads, had long relentlessly exploited their tens of thousands of workers. One abuse had been piled upon another. The miners were paid by the ton; the companies had fraudulently increased the size of the ton, so that the miners had to perform much more labor while wages remained stationary or were reduced.

But one of the most serious grievances was that against what were called "company or truck stores." Ingenious contrivances for getting back the miserable wages paid out, these were company-owned merchandise stores in which the miners were compelled to buy their supplies. In many collieries the mine worker was not paid in money but was given an order on the company store, where he was forced to purchase inferior goods at exorbitant prices.