Let me not be interpreted as implying that there are any fewer Americans than there are Englishmen who live rightly from the fear of God or for the sake of their own self-respect. The conclusion of most observers has been that the American people is more religious than the English, that the temperament, more nervous and more emotional, is more susceptible to religious influence. It may be so. It is a subject on which the evidence is necessarily so intangible—on which an individual judgment is likely to be so entirely dependent on individual observation in a narrow field—that comparison becomes extremely difficult. My own opinion would be that there is at least as much real religious feeling in England as in the United States, and certainly more in Scotland than in either; but that the churches in America are more active as organisations and more efficient agents in behalf of morality.
But we are now speaking of the business community as a whole, and the force which ultimately keeps the ethics of every business community pure is, I imagine, the same, namely that without honesty the community itself cannot live or prosper and that, with normal ability, he who is most honest prospers most. American business was dishonest before society had settled down and knitted itself together.
The change which has come over the American business world can perhaps best be made clear to English readers by taking a single example; and it must necessarily be an example from a field with which I am familiar.
There is in my possession an interesting document, being one of the (I think) two original manuscript copies of the famous "Gentleman's Agreement," bearing the signatures of the parties thereto, which was entered into by the Presidents or Chairmen of a number of railway companies at Mr. Pierpont Morgan's house in New York in 1891. In the year following the signing of the Agreement, I was in London in connection with affairs which necessitated rather prolonged interviews with many of the Chairmen or General Managers of the British railways,—Sir George Findlay, Sir Edward Watkin, Mr. J. Staats Forbes, and others. With all of them the mutual relations existing between railway companies in the two countries respectively formed one of the chief topics of our conversations, and that at that time the good faith and loyalty of attitude of one company towards another were much greater in England than in America it is not possible to question. British companies are subject to a restraining influence which does not exist in the United States, in the parliamentary control which is exercised over them. Every company of any size has, with more or less frequency, to go to Parliament for new powers or privileges, and any Chairman or Board of Directors which established a reputation for untrustworthiness in dealings with other companies would probably be able to expect few favours from the next Parliamentary Committee. But (although the two last of the gentlemen whose names I have mentioned were notoriously parties to a peculiarly bitter railway war) I believe that the motives which have chiefly operated to make the managers of English companies observe faith with each other better than the American have ever succeeded in doing, are chiefly the traditional motives of a high sense of personal honour—the fact that they were gentlemen first and business men afterwards.
The circumstances which led up to the formation of the Gentlemen's Agreement were almost inconceivable to English railway operators. The railways, it must always be borne in mind, have been the chief civilisers of the American continent. It is by their instrumentality that the Great American Desert of half a century ago is to-day among the richest and most prosperous agricultural countries in the world. The railways have always thrust out ahead of the settler into whatever territory, by reason of the potential fertility of its soil or for other causes, has held out promise of some day becoming populated. Along the railway the population has then flowed. In forcing its way westward each company in its course has sought to tap with its lines the richest strips of territory: all alike endeavoured to obtain a share of the traffic originating from a point where a thriving town was already established or topographical conditions pointed out a promising site. As the American laws impose practically no restrictions on railway construction it necessarily followed that certain districts and certain favourable strategic points were invaded by more lines than could possibly be justified either by the traffic of the moment or the prospective traffic of many years to come. This was conspicuously the case in the region Northwestward from Chicago. Business which might have furnished a reasonable revenue to two companies was called upon to support six or seven and the competition for that business became intense,—all the more intense because, unlike English railway companies, few American railways in their early days have had any material reserve of capital to draw upon. They have had to earn their living as they went, out of current receipts, or submit to liquidation.
The officials in charge of the Traffic Departments of each company had to justify their retention in their positions by somehow getting more than their share of the business, and the temptations to offer whatever inducements were necessary to get that business amounted almost to compulsion. Without it, not the particular official only, but his company, would be extinguished. The situation was further aggravated by the fact that the goods that were to be carried were largely staples shipped in large quantities by individual shippers—millers, owners of packing houses, mining companies from the one end, and coal and oil companies from the other. One of these companies might be able to offer a railway more business in the course of a year than it could hope to get from all the small traders on its lines combined—enough to amount almost to affluence if it could be secured at the regularly authorised rates. The keenness of the competition to secure the patronage of these large shippers can be imagined; for it was, between the companies, a struggle for actual existence. All that the shipper had to do was to wait while the companies underbid each other, each in turn cutting off a slice from the margin of profit that would result from the carrying of the traffic until, not infrequently and in some notorious cases, not only was that margin entirely whittled away but the traffic was finally carried at a figure which meant a heavy loss to the carrier. The extent to which the Standard Oil Company has profited by this necessity on the part of the railways to get the business of a large shipping concern at almost any price, rather than allow its cars and motive power to remain idle, has been made sufficiently public.
In some measure the companies were able to protect themselves by the making of pooling (or joint-purse) arrangements between themselves; but the enactment of the Interstate Commerce Law in 1887 made pooling illegal. The companies endeavoured to frame agreements which would not be repugnant to the law but would take the place of the pools; but it was impossible to attach any penalties to infringements of such agreements and under pressure of the necessity of self-preservation, no agreement, however solemnly entered into, was strong enough to restrain the parties. The Passenger Agents framed agreements to control the passenger traffic and the Freight Agents made agreements to control the goods traffic, and both were equally futile. Then the Traffic Managers made agreements to cover both classes of business, which held no longer than the others. So the General Managers tried their hands. But the inexorable exigencies of the situation remained. Each official was still confronted with the same dilemma: he must either secure more business than he was entitled to or he—and his company—must starve. And the agreements made by General Managers bound no better than those which Passenger Agents or Traffic Managers had made before. Then it was that the Gentlemen stepped in.
The Gentlemen, it should be explained, were the Presidents and Chairmen of the Boards of the respective companies. They, it was hoped, would be able to reach an agreement which, if once their names were signed to it, would hold. The meeting, as has been said, was held at Mr. Pierpont Morgan's house[358:1] and an agreement was in fact arrived at and signed, as has been said, in duplicate. It is lamentable to have to record that that agreement—except in so far as it set a precedent for other meetings of the same gentlemen, which in turn led to others out of which finally grew large movements in the direction of joint ownerships and consolidations of interests which have helped materially to make the conditions more tolerable—except for that, the Gentlemen's Agreement did no more good, and it lasted not appreciably longer, than any of the others which had been made by mere officials.
Englishmen will all agree that it is unthinkable that the Chairmen of the great British railway companies could meet and give their words as gentlemen that each of their companies would observe certain rules in the conduct of its business and that a few weeks thereafter it should become evident that no single company was keeping the word so pledged. But it would be just as absurd to question the personal integrity or sense of honour of such men as Mr. Marvin Hughitt, Mr. E. W. Winter, Mr. W. H. Truesdale, and the others, as it would be to question that of the most upright man in England. The fact is that the conditions are almost unthinkable to Englishmen. No company, in becoming party to the agreement, had surrendered its right to retaliate when another violated the provisions. The actual conduct of the business of the companies—the quoting of the rates to secure the traffic—was in the hands of a host of subordinate officials, and when a rate is cut it is not cut openly, but in secret and by circuitous devices. It was, on subsequent investigation, always impossible to tell where the demoralisation had begun, amid the cloud of charges, counter-charges, and denials. There was not one of the subordinate officials but declared (and seemingly proved) that he had acted only in retaliation and self-defence. As there was no way of obtaining evidence from the shippers, in whose favour the concessions had been made, it was impossible to sift out the truth. Each Chairman or President could only say that he had entire confidence in his own staff. There was no visible remedy except to discharge the entire membership of the Traffic Departments of all the companies simultaneously and get new men, to the number of several hundreds, who would be no better able to accomplish the impossible than their predecessors.
