The first regular water connection between the eastern and western coasts of the United States was provided by the clipper ships on the route around Cape Horn. These swift sailing vessels supplied the gold miners with the tools and manufactured goods necessary for their enterprises, and took back such commodities as California was able to export. Oil, soap, cement, coal, iron, nails, paper, glass, tobacco, liquors, dry goods, and the like moved west—hides, wool, canned fruits, salmon, sugar, wine, and grain went east. The business was for the most part handled by ships chartered for single voyages, not by lines of ships operating on regular schedules.[343]
As early as October, 1848, however, at least one regular line, the Pacific Mail Steamship Company, entered the field. The establishment of the Pacific Mail service was made possible by the grant of a government contract for the carriage of mails—its profits during the early years were largely derived from business arising out of the gold discoveries in California. The business of the Pacific Mail grew rapidly. In 1851 it operated eleven steamers varying in size from 600 to 1,300 tons, and had a capital stock of $2,000,000. Thirty years later it operated fourteen ships, large and small,[344] reported gross earnings of $3,762,083 (1882) and had $20,000,000 in stock outstanding. At first the Pacific Mail operated steamships between Panama and San Francisco. Later it extended its service to Astoria; and still later it established a line across the Pacific to China and Australia. Among its competitors by sea at one time or another, besides the clipper ships, were Mr. Vanderbilt’s Atlantic and Pacific Company, the Mexican Coast Steamship Company, and Messrs. Goodall and Perkins. At one time Jay Gould, at another Trenor W. Park, of the Panama Railroad, were dominant in its affairs.
Problem of Water Competition
There is much of romance in the history of ocean transportation into and out of San Francisco, and in its proper place the story should be told at length. Some aspects of the water service, indeed, will be touched on later in this book. Attention is directed to the matter at present, however, not for its own sake, but because the fact of water competition raised one of the problems with which the Southern Pacific had to deal. It seems clear that the associates were compelled to define their attitude toward water competition as soon as their through line was completed in 1869.
Broadly speaking, the alternatives were competition or agreement. In respect to the Pacific Mail, however, the situation was complicated by the fact that the relations between the railroads and the shipping lines were of two sorts: In the first place, the Pacific Mail served as a valuable connection for the transcontinental railroads on business originating in or destined to China and Japan. Tea and silk eastbound were usually delivered by the steamships to the rail lines at San Francisco. Westbound the higher classes of manufactured goods likewise moved part way by rail and part way by water haul. During the ten years ending in February, 1881, the Pacific roads carried 177,278,505 pounds of tea and other Asiatic goods, secured to them by the co-operation of the Pacific Mail Steamship Company, resulting in earnings of $3,264,456.44.[345] On the other hand, the rail and water lines were competitors in important respects.
Steamship Company Organized
In 1874 the Huntington interests organized the Occidental and Oriental Steamship Company and chartered three steamships to ply between San Francisco and the Far East. This was said to be the result of a decision of the Pacific Mail to make Panama the terminus of its transpacific route, relegating San Francisco to the secondary position of a port of call.[346]
Huntington wrote to Colton, on November 9, 1874:
I am surprised to learn that anyone should think it was for our interest to put on the China line seven steamers to start with. I think three is plenty, and we shall, no doubt, have such an opposition on the start that we shall have to run them at a loss, but with those three we can make the prices for the old line, and I think there is enough to break them with, unless the managers of that company are changed, and then we most likely can get their steamers.[347]
Huntington intended to develop the Occidental and Oriental Steamship Company as a permanent connection of the Central Pacific for Oriental business in competition with the Pacific Mail. At the time his decision was made he discussed with his associates the advisability of asking enough eastern lines to join with the Central Pacific to form a single transcontinental route from the Pacific to the Atlantic coasts for export and import traffic, but decided against this project because it would make enemies of the railroads which were not included, and because also the admission of partners would make it impossible for the Central Pacific to control by itself a majority of the shares of the Occidental and Oriental Company. Huntington’s letter to Colton on this matter is a model of sound reasoning on a large question of policy: