Higher Education and Business Standards

by Willard E. Hotchkiss

There are strong historical and temperamental reasons why nineteenth-century Americans were inclined to take a short-time view of business situations. Our fathers were pioneers, and the pioneer has neither the time, the capital, the information, the social insight, nor the need to build policies for a distant future. The pioneer must support himself from the land; he must get quick results, and he must get them with the material at hand.

Every one of our great industries—steel, oil, textiles, packing, milling, and the rest—has its early story colored with pioneer romance. The same romantic atmosphere gave a setting of lights and shadows to merchandising and finance and most of all to transportation. Whether we view these nineteenth-century activities from the standpoint of private business or of public policy, they bear the same testimony to the pioneer attitude of mind.

Considering our business life in its national aspects, our two greatest enterprises in the nineteenth century were the settlement of the continent and the building-up of a national industry. In both these enterprises we gave the pioneer spirit wide range. With respect to the latter, industrial policy before 1900 was summed up in three items: protective tariff, free immigration, and essential immunity from legal restraints. This is not the place to justify or condemn a policy of laissez-faire, or to strike a balance of truth and error in the intricate arguments for protection and free trade; nor need we here trace the industrial or social results of immigration. We need only point out that the policy in general outline illustrates the attitude of the pioneer. The thing desired was obvious; obvious instruments were at hand—immediate means used for immediate ends. From his viewpoint, the question of best means or of ultimate ends did not need to be considered.

In building our railways and settling our lands the pioneer spirit operated still more directly, and in this connection it has produced at the same time its best and its worst results. The problem of transportation and settlement was not hard to analyze; its solution seemed to present no occasion for difficult scientific study or for a long look into the future. The nation had lands, it wanted settlers, it wanted railroads. If half the land in a given strip of territory were offered at a price which would attract settlers, the settlers would insure business for a railroad. The other half of the land, turned over to a railroad company, would give a basis for raising capital to build the line. With a railroad in operation, land would increase in value, the railroad could sell to settlers at an enhanced price and with one stroke recover the cost of building and add new settlers to furnish more business.

In its theory and its broad outline the land-grant policy is not hard to defend. The difficulties came with execution. We know that in actual operation the policy meant reckless speculation and dishonest finance. We know that no distinction in favor of the public was made between ordinary farm lands, forest lands, mineral lands, and power sites. We know that the beneficiaries of land grants were permitted to exchange ordinary lands for lands of exceptional value without any adequate quid pro quo; and we know that there were no adequate safeguards against theft.

Wholesale alienation of public property was intended to secure railroads and settlers, but the government did not see to it that the result was actually achieved. Speculation impeded the railways in doing their part of the task, while individuals enriched themselves from the proceeds of grants or withheld the grants from settlement to become the basis of future speculative enterprises. All this seems to show that in execution at least our policy from a national standpoint was short-sighted. Careful analysis and a more painstaking effort to look ahead might have brought more happy results.

And how about the railroads from the standpoint of private enterprise? A railway financier once described a western railway as "a right of way and a streak of rust." The phrase was applicable to many railways. Deterioration and lack of repairs were, of course, responsible for part of the condition it suggests, but much of the fault went back to original construction. It was the wonder and the reproach of European engineers that their so-called reputable American colleagues would risk professional standing on such temporary and flimsy structures as the original American lines. Poor road bed; poor construction; temporary wooden trestles across dangerous spans—everything the opposite of what sound engineering science seemed to demand. Why did not the owners of the roads exercise business foresight to provide for reasonably solid construction?

What seems like an obvious and easy answer to all these questions is that both the Government and the road were controlled in many cases, as the people of California well know, by the same men, and these men were privately interested. As public servants or as officers of corporations they were supposed to be promoting settlement and transportation; as individuals they were promoting their own fortunes. This result was secured by the appropriation of public lands and the conversion of investments which the public lands supported. That this sort of thing occurred on a large scale and that it involved the violation of both public and private trusts is fairly clear.

Public sentiment has judged and condemned the men who in their own interests thus perverted national policy; and we approve the verdict. But it is not so easy to condemn the policy itself or to indict the generation that adopted it. Looking at the matter from the standpoint of the nation, it was precisely the inefficiency and the corruption in government which augmented the theoretical distrust of government and made it unthinkable to the people of the seventies, that the Government should build and operate railways directly. The land-grant policy entailed corruption and waste, of course; but what mattered a few million acres of land! No one had heard of a conservation problem at the close of the Civil War. Resources were limitless; without enterprise, without labor and capital, without transportation they had no value, they were free goods. The great public task of the nineteenth century was to settle the continent and make these resources available for mankind. This task it performed with nineteenth-century methods. From our standpoint they may have been wasteful methods, but they did get results. In its historical setting, the viewpoint from which the task of settlement was approached was not so far wrong.

When we examine the counts against the railroads as private enterprises, we find that the poor construction, which from our point of vantage looks like dangerous, wasteful, hand-to-mouth policy, is only in part explained by the fact of reckless and dishonest finance. I am advised by an eminent and discriminating observer that the distinguished Italian engineer to whom Argentina entrusted the building of its railroad to Patagonia, produced a structure which in engineering excellence is the equal of any in the United States to-day. But the funds are exhausted and the Patagonia railroad is halted one hundred and fifty miles short of its goal; there are no earnings to maintain the investment.