Minnesota, the North Star State

by William Watts Folwell

The lands adjacent to the railroad lines, especially within a few miles of the stations, were, of course, in great demand and rose rapidly in price. Cultivation was no longer confined to the river counties, but spread rapidly inland. It did not take a generation of the hardest labor to make a farm on the Minnesota prairie. In the first season the newcomer could win his subsistence, and in the second begin to build. The cultivated area of the state, which was 630,000 acres in the closing year of the Civil War, rose to 1,863,300 in 1870, and five years later fell not much short of 3,000,000.

A large fraction of this area was devoted to a kind of cultivation novel to this country, but which remained profitable only so long as the virgin fertility of the soil survived, and that was rarely longer than ten years. “Bonanza farming,” so called, was carried on by large proprietors or lessees, owning or controlling many thousands of acres, employing machines and large gangs of men and animals. For these estates there were developed out of the petty apparatus suitable to the little eastern farm, the sulky plow with its two mould-boards, the disk harrow, the twelve-foot seeder, the self-binding reaper, and the giant threshing machine. There was but one principal crop, spring wheat, which was commonly threshed from the shock and immediately marketed. To handle the great quantities, grain “elevators” were built at the railroad stations, tall, ungainly structures with conveniences for weighing in, lifting, weighing out, and spouting into waiting freight cars. At terminals were erected elevators for cleaning and drying grain, as well as for storage for many thousands or millions of bushels. The country elevator was also convenient for the small farmer, who was saved the cost of building a granary of high-priced lumber from distant pineries.

Early settlers in the Northwest had found spring wheat, with its power of rapid growth in the long sunshine of high latitudes, a better crop than winter wheat, occupying the soil for two seasons and liable to winter kill. But the spring wheat berry, although of higher nutritive value than that of winter wheat, had a flinty envelope and yielded a flour too dark in color to suit the market. A revolution in the process of milling presently reversed the places of the two flours. Milling had already advanced so far beyond the primitive separation of flour from bran by hand sifting as to segregate a residuum of coarser granules, called “middlings,” which, subjected to a second grinding, yielded a low grade flour. It had been discovered also that these middlings contained the more nutritive elements of the wheat berry, and it had been a problem how to recover them. French millers were in possession of a method for its partial solution. George H. Christian of Minneapolis had long studied on the problem, and in 1870 employed a French immigrant named La Croix to construct a rude apparatus in his mill at Minneapolis. This was the germ of the “middlings purifier,” soon developed and installed in all mills using spring wheat. Receiving middlings from the first grinding, the machine by use of sieves and air currents separated out the pure wheat granules. These were reground and “bolted” into two or more grades of flour. The first grade was put on the market as “Minnesota Patent,” and for a time commanded a price of three dollars a barrel above any other. The same principles, refined upon, have resulted in the more modern process of “gradual reduction” by means of rollers, displacing the immemorial millstones.

The rapid development of a great milling centre at the Falls of St. Anthony opened a market for the spring wheat, which could not otherwise have been grown. The Minnesota crop of fifteen million of bushels in 1870 was to be doubled in 1875. The patent milling process gave to Minneapolis an advantage soon apparent in the multiplication not only of flour mills, but of industries ancillary thereto. The manufacture of lumber out of logs from the pineries of the upper Mississippi and its tributaries, which had been her leading industry, now took a second but still important place. The city of Saint Anthony’s Falls had suffered by the migration of many of her most capable men of affairs to “the west side,” where Minneapolis sprang into being as by magic when the military reservation was reduced in the middle of the fifties. The new city soon outstripped the old in population, in manufacturing, and in merchandizing. At length it became apparent that there was no propriety in the maintenance of separate municipal organizations at the falls. By virtue of an act of the legislature, approved February 28, 1872, the older city lost its name and became the east division of Minneapolis. The regrets of some of her oldest citizens were mitigated by the suggestion that the Minneapolis thus enlarged might some day become the rival of Minnesota’s capital city in wealth and numbers, if not in political importance.

The land grant railroads, rapidly extended after the Civil War, had occasioned the building of new towns, the opening of new farms, the production of more millions of bushels of wheat, to be passed through more elevators and carried in more freight cars to more mills, for conversion into more thousands of barrels of Minnesota Patent flour. All these called for more miles of railroad, and the revolving game went merrily on for some years. So obvious were the advantages of railroad transportation that every possible inducement was held out to invite construction. Rights of way and bonuses in the shape of town, county, and city bonds were willingly bestowed. State and municipal authorities were so indulgent and generous that railroad “interests” came to expect the fulfillment of any requisitions they should please to make. A crowning example of this confidence has been given in the so-called “land grab” of 1871, whose consummation lacked only the approval of Governor Austin. But under this seeming of prosperity for the public and the people whose wealth was going into the railroads there was trouble brewing. Transportation did not come as cheap as the public was expecting from corporations, which had received from Congress public lands worth about $10,000 per mile at government prices, to aid them in building. Five cents per mile passenger fare seemed exorbitant, as did freight rates ranging from seven cents to sixty cents per ton mile. The immense loans made by sale of bonds were understood to be part of a policy of the corporation managers to get their roads built on credit, and to hold the lands, released from the primary mortgages, for speculation. There were abundant innuendoes thrown out in political campaigns that public officials, especially members of legislative bodies, national, state, and municipal, had not been losers by the grants and indulgences showered on the corporations. It is improbable that many individuals were thus persuaded or enriched by large benefactions. When the whole community were ready to grant everything a railroad company could ask, there was little need for “graft.”

Chief, however, among all causes of exasperation were the frequent and notorious discriminations in favor of some individuals, industries, and places against others. By the connivance of one or more companies the fuel supply of a city was put into the hands of a single firm or clique. The big shipper generally was conceded a better rate than his small competitors. But it must be said that at terminal points and junctions, where shippers had the choice of two or more lines, they sometimes forced the hungry traffic managers to offer rates by no means agreeable or profitable. When the rate per hundred pounds on merchandise from New York by way of the lakes to St. Paul, including 156 miles of railroad haul, was 35 cents, that from St. Paul to Faribault, 56 miles, was 39 cents. The state constitution contained (and still contains) the provision that all common carriers enjoying right of way for public use shall carry the mineral, agricultural, and other productions of the state “on equal and reasonable terms.” The farmers could not see that a rate on wheat from Owatonna to Winona of 2.6 cents, and one of 6 cents from Rochester, 40 miles on the road nearer Winona, were “equal”; nor could the people of Faribault and vicinity see what justice there was in paying $29.50 freight per carload of lumber from the falls, while residents of Owatonna, 15 miles farther on, should enjoy a rate of $18.

As early as 1866, in his inaugural address to the legislature, Governor Marshall had advised that body to be looking out “for the interests of the people against possible oppression from these corporations, which will soon be a power in the land.” In his message of 1867 he suggested that it was time to attach proper terms and conditions to railroad aid. He did not like the withdrawal of ten million acres of land from the operation of the homestead act.

Governor Austin, in his inaugural address of 1870, went no further than to ask the attention of the legislature to the complaints of railroad extortions and discriminations, and the use of the constitutional powers possessed by it for their abatement. His first annual message, delivered one year later, is a notable document in the literature of railroad regulation. It may be questioned whether there was another state executive in the country ready at that time to nail any such array of theses on the doors of the capitol. His propositions, briefed out of his text, were: 1. All special railroad charters not put into operation within ten days after consummation, to be void. 2. Every railroad corporation doing business within the state to maintain a public office within the state, and keep therein records of the officials, capitalization, assets, and liabilities. 3. No new road to be built parallel to an existing road. 4. All railroads in the state to be public highways free to all persons for transportation at reasonable charges. 5. No railroad company to issue any stocks and bonds except for money, labor, or property actually received and applied to the purposes of the corporation; all fictitious stocks and bonds to be void, and no increase of either, unless in a manner prescribed by law. 6. The state’s right of eminent domain to apply to railroad as to other property. 7. Adequate penalties, extending if deemed necessary to forfeiture of property and franchise, to be provided for unjust discrimination or extortion. 8. Finally, the creation of a national railroad commission for the regulation of commerce by rail and otherwise among the several states.

It is remarkable that the same legislature which passed the 500,000 acre land grab also enacted one of the first and most stringent acts for railroad regulation. It is chapter 24 of the General Laws of 1871. It classified all freight and fixed a maximum rate for each of the five classes, according to distance. It determined a maximum passenger fare of five cents per mile. It declared all railroads in the state to be public highways, and fixed a penalty of $1000 for every denial of the right of any person to travel or ship goods at the prescribed rates. The law finally declared the rates therein established to be “maximum reasonable rates,” and any corporation demanding or receiving more should, on conviction, forfeit its charter.

The same legislature (1871) provided for the appointment by the governor of a state railroad commissioner to observe the behavior of the corporations under the new law. The first incumbent was General Alonzo J. Edgerton, who had given proof of ability by gallant military service and successful practice as an attorney. The three reports of this official are a pitiful record of the unequal struggle of the legislatures with their informally confederate creatures, the railroad corporations. To the regulative act of 1871 the corporations gave not the slightest heed, partly on the ground of their rights as quasi-persons, partly because in their territorial charters they had been authorized to make “reasonable charges” for services, and the legislature had not reserved the right to determine what charges were reasonable. If some of the roads somewhat abated their rates, it was not because of the legal mandate. Gross discriminations continued to be practiced. The evasion of taxes by the companies by various devices added to public exasperation. The commissioner was gratified to have exacted an increase of railroad taxes from $56,505.54 in 1871 to $106,876.35 in the year after, and regretted his inability to reach $250,000 more illegally withheld. One company, the Minnesota Central, sold its entire railroad property to the Milwaukee interest, retaining its unsold lands, and claimed to survive as a railroad company entitled to hold its lands free of taxation. For lack of authority to make personal inspections of company accounts and property the commissioner could not verify their reluctant reports, which, because not made on a prescribed uniform plan, were of slight practical service. In his report for 1873 he reminded the legislature that the companies, which had by the beginning of that year constructed 1900 miles of road, had received from the nation, state, and municipalities, grants and gifts to the value of $51,000,000, being about $27,000 per mile of completed road. The average necessary cost of construction and equipment, according to an expert computation, would have been a trifle over $23,000 to the mile. In that year the bonded debt of the roads amounted to $54,500,000. The aggregate of capital stock, $20,000,000, raised the “capitalization” of the roads to $74,500,000; nearly $48,000 per mile. Only nominal amounts of stock-proceeds had gone into construction and equipment, and there were wide margins between the face value of the bonds sold and the actual expenditures. In some instances, says the commissioner, not more than forty per cent. went into construction. In these years in which building was going on so swimmingly, operation was far from encouraging. The managers had been more concerned to increase mileage than to build substantially. Heavy grades, sharp curves, and slight construction were the result. The iron rails weighed for the most part but fifty pounds to the yard. Equipment corresponded, of course, with track and rail. The amount of business obtained at the fares and rates exacted was disappointingly small. After the grain crop was moved the amount of paying freight was meagre and backloading trifling in amount. Operating expenses rose to eighty per cent. of the gross earnings. The balance of earnings and expenses for the year 1873 was but $1,400,000 for all the Minnesota roads, a sum which must have seemed pitifully small in the eyes of the men whose money had built them. The reader need hardly be told that the Minnesota railroad corporations went down in the crash which came upon the country in 1873. Three defaulted in their interest, two borrowed money to pay it, two went into receivers’ hands, and others attempted assessments on their stockholders. In the next four years but eighty-seven miles of new road were built.