C U/4LS THE CITY FOR THE PEOPLE OR THE MUNIGIPALlZflTION OF THE CITY GOVERNMENT AND OF LOCAL FRANCHISES BY FRANK_PARSONS Lecturer in Boston University Law School ; Member Boston Br ; Author of Parsons' Edition of Morse on Banks aud Banking; Editor of May on Insurance. Perry on TrasH, and other legal works; Professor of His- tory and Political Science, and Dean of Extension Lecture Department College of Social Science ; President National League for Promoting Public Ownership of .Monopolies; Member International Co-Operative Union. American Social Science Association, and Xational Institute of Art, Science and Letters; Author of " The World's Best Books," " The Power of the Ideal," " The New Political Economy,' 1 '-The Telegraph Monopoly" Chapters in Municipal Monopolies " of the Ely Economic Series, etc. . etc. No Copyright. On the contrary, an invitation is extended to all to do their utmost in every way to spread the truths contained in the following pages. Newspapers and magazines are at liberty to quote as freely as they will, due credit only being askt. PUBLISH! BY C. F. TAYLOR 1520 CHESTNUT STREET, PHILADELPHIA, PA. p^ Lan- guage is a growth rather than a creation. The growth in our vocabulary is seen in the vast increase in size of our dictionaries during the past cen- tury. This growth is not only in amount, but among other elements of growth the written forms of worojs are becoming simpler and more uniform. For example, compare English spelling of a century or two cen- turies ago with that of to-day ! It is our duty to encourage and ad- vance the movement toward simple, uniform and rational spelling. See the recommendations of the Philological Society of London, and of the American Philological Association, and list of amended spellings, publisht in the Century Dictionary (following the letter z), and also in the Standard Dictionary, Webster's Dic- tionary, and other authoritative works on language. The tendency is to drop silent letters in some of the most flagrant instances, as ugh from though, etc., change ed to t in most places where so pronounced (where it does not affect the preceding sound), etc. The National Educational Association, consisting of ten thousand teachers, recom- mend the following: "At a meeting of the Board of Directors of the N. E. A. held in Washington, D. C., . July 7, 1898, the action of the Department of Superintendence was approved, and the list of words with simplified spelling adopted for use in all publications of the N. E. A. as follows : tho (though); altho (although); thoro (thorough); thorofare (thoroughfare); thru (through); thruout (throughout); program (programme); catalog (catalogue); prolog (prologue); decalog (decalogue); demagog (demagogue); pedagog (pedagogue); "You are invited to extend notice of this action and to join in securing the general adoption of the suggested amendments. IRWIN SHEPARD, Sec'y." The publisher of this Series feels it a duty to recognize the above tendency, and to adopt it in a reasonable degree. PREFATORY NOTE. THE people of this country have been very slow to appreciate the value of public franchises. The shrewd capitalist has been quic-k to note the rapidly growing values and the great possibilities in this direction, and he has also been alert to get the aid of poli- ticians in securing privileges that should belong only to the general public. The rapid building up of private fortunes in this way has at last opened the eyes of many communities regarding the im- portance of public ownership of public utilities, such as water, gas r electrical lights, street railways, etc., of cities and towns. During the winter and early spring of 1897 I began to notice that certain towns in some of the States were anxious to own and operate their water works or gas works, but that they were required to first obtain permission from the Legislature. I at once realized that the most important thing to do in aid of the cause of Public Ownership of Public Utilities was to learn to what extent muni- cipalities are in bondage to the Legislature in the various States, and to show the importance of obtaining municipal freedom as the first step. As my friend, Prof. Frank Parsons, of the Law Department of the Boston University, had already given extensive study to muni- cipal problems, I wrote to him asking if he could undertake the task of examining the Constitution and Statute Laws of each State in reference to the rights and privileges of cities and towns. My plan was to have this information tabulated, one table showing the constitutional bearings, and the other table showing the statutory bearings upon this question, preceded by introductory text and followed by explanatory text. I hoped thus to get the wnoie ques- tion in this condensed form into the limits of a magazine article. The task was a great one, but finally the Professor consented to undertake it, with suitable assistants under his direction. The work was necessarily slow, and waiting for the latest Acts of the Legislatures still further retarded the work. As the work grew, the Professor despaired of getting the results into the limits of a magazine article. In the meantime I had planned a series of volumes, to be called "Equity Series," to deal with leading public questions. In the early autumn of 1898, after mature considera- tion, the Professor and I concluded to incorporate this subject in one of the volumes of "Equity Series," along with other chapters dealing with other basic and vital municipal problems. This volume is the result. Municipal government is the problem of the age. It touches us in our daily lives a dozen or a score of times while the State or National government touches us once. The condition of the water we drink and with which our food is cooked, the condition of the air we breathe, and of the streets upon which we walk or ride, is determined largely or entirely by our local government; and also the public order, public education, public conveyance of all kinds, and other important matters too numerous to mention, are determined by our local government. Let us learn to solve our local problems well, and in the interest of all. C. F. TAYLOK. ^PHILADELPHIA. AUTHOR'S PREFACE. THE city is the condensation of the ages; the aggregation of all that is best in civilization, and all that is worst in the remnants of barbarism. The rapid growth of our cities and the monopoly of their advantages by a few political and industrial schemers, are among the most vital facts of the time. The citizen sovereigns of America dealing with city life are confronted with questions like these: Shall the People's cities be given over to syndicates and corporations? Shall five hundred thousand or a million people build costly streets and then give them to gas and electric trusts, and street railway companies for the private profit of a few indi- viduals? Shall other cities and towns all over the State, or their Representatives in the Legislature, have more to say about the management of this city's local business affairs than its own people have? Shall Councils have Shall the people own the city and its power to govern the city against the people's government or shall they be owned by w in O r only in accordance with the people's the politicians and monopolists? w m shall they have power to legislate in spite of the people's protest, and to refuse legisla- tion in spite of the people's demand? Shall the spoils system con- trol appointments to the great confusion and inefficiency of the service? Shall rings and bosses, machines and lobbyists, corpora- tions and monopolists continue to have large influence in municipal government? And if all these things are not to be allowed, then by what means may they be prevented? This book is an attempt to answer some of these questions, and the chapters that deal with municipal liberty, public ownership, and direct legislation, outline some of the principal means by which a city may become a city for the People and not for the Politicians and Monopolists. Civil service reform, propor- bo"ok ViSi0nS f the tional representation, the electric ballot and the English corrupt practices act, are treated more briefly afterward, and finally statutes, charter provisions, and constitutional amendments are given in full for the three leading movements. In the prelude all parts of the book are co-ordinated by a discussion of the fundamental facts and principles on which the main thought of the book is based. The volume was begun at the request of Dr. Taylor; its general plan is substantially the one proposed by him, and in the work- ing out of the plan his criticisms and suggestions have been of the greatest value. Some repetition has resulted from the effort to do justice to each topic in its turn, but we think the reader will find this method very favorable to a thoro grasp of the subjects treated. FRANK PAESONS. BOSTON. PRELUDE. The problem of the city is the problem of civilization. In 1790 only l-30th of the people of the United States lived in cities; in 1890 about one third of our population lived in cities of eight or more thousand inhabitants. 1 That is, we must multiply the ratio of 1750 by ten in order to get the ratio of 1890. An equal move- ment for another hundred years would make the city population three times as large as the total population of the country. The growth of cities will probably stop short of that predicament, but the stampede from the country promises to continue in the next de- cade, at least, with undiminished and probably accelerated vigor. Automobiles, motor bicycles and possibly flying machines, with paper mache, liquid air engines, will make it easy to travel fifty or sixty miles an hour in your own conveyance. No respectable family will be without its automobile or flying machine, and motor bicycles will be as thick as mosquitoes on the Jersey coast. The country will be covered with a network of magnificent highways, 1 One of the most momentous and expressive movements In modern history is the persistent, restless, and marvelously rapid absorption of he rural population into city life. Read carefully the census records and then let imagination carry you into the future: Proportion of Population of U. S. living in Cities over 8,000, Fraction of Percentage of Year. total pop. total pop. 1790 1/30 3.35 1800 1 /25 4. 1810 1/20 5. 1820 1 /20 5. 1830 1/16 6.5 1840 1 /12 8. 1850 1/8 12. 1860 1/6 17. 1870 1/5 20. 1880 ..1/4 . 22.5 1890 1/3 29.2 The record indicates that more than a third of our people now live In cities, and doubtless half the population will soon be urban. If towns are included the really rural population is already a minor and rapidly dimin- ishing fraction. In Scotland the rural population is diminishing absolutely as well as relatively being only 928,500 out of a total of 4,000,000 in 1891. But the most astonishing and thought compelling facts of all in this relation are those that concern the growth of some of our largest cities. I Insert u couple of hints: Population of Chicago. Population o: New York. 1840 4,500 1800 60,000 1880 503.185 1880 1.206,299 1890 1,099,850 1890 1,515,301 1898 1,800,000 ' 1898 2,000,000 Greater New York 1898 3,549,000 The figures for 1898 are estimates based on state census returns since 1890. The school census of 1892 gave New York 1,800,000, so that 2,000,000 for 8 PBELUDE. broad and smooth, and lined with beautiful trees, and the farmer can live in the city or near it and go to his fields every morning and back at night on his own automobile or liquid air bicycle. Invention is building the cities in another way. Modern machinery enables four men to plant, raise, harvest, mill and deliver to t, bakers flour enough to feed a thousand men one year, and the . is not yet. Electricity is coming to the farmer's help. It is found that electrifying the seeds will increase the yield 50 per cent.: electrifying the atmosphere increases the crop 70 per cent.; electrifying the ground has increased the product 300 per cent. Why not electrify all three? Why not electrify the hired man and the' hired girl? If we get this system into general use and elec- trify the seeds and the ground and the atmosphere, and then go further and electrify the hired man and the hired girl by giving every youth a thorough practical education, making every worker a partner in the business and cultivating a true civic patriotism 1898 Is probably below the truth. Greater New York does not include Jersey City, which has a population of more than 500,000, wherefore the whole city at the mouth of the Hudson numbers over 4,000,000, *"*** fold or more in a century. Chicago appears to double itself in about years. It increased 250 fold in 50 years and promises a record of 700 fold in a century if its present rate of development continues t Since the above was written and put in type Columbia University * published a 500 page book, by Dr. A. F. Weber, about the Growth o Cities" all over the world and some of the facts are of so much mte in this connection that I condense a few of them in the following paragrap In the whole United States 210,873 people lived in 6 cities in 1 whereas 18,284,385 lived in 448 cities in 1890. While the population of the whole country has increased 12 fold in this century, the urban population has increased 87 fold. The rapid increase began with the era of canals in 1820, and swelled in the thirties and forties with the advent and devel- opment of railroads. The decade ending 1850 lacked but 1 per cent, of doubling the city population. In the fifties the gain was 75 per cent., in the sixties 59 per cent, in the seventies 40 per cent, in the eighties 61 per cent. From 1880 to 1890 our manufactures grew enormously, the capital, number of employees, and net value of product increasing 100 per cent. over the preceding decade, and with this growth the number of towns and cities of 8,000 population or more rose from 286 to 448, with a lift of pop- ulation from 11,318,547 to 18,284,385 persons. One-half the urban population of the United States is in the North Atlantic States and four-fifths in the territory north of the Ohio and Missouri rivers. In Massachusetts, Rhode Island, New York and New Jersey more than half the people live in cities, and twelve other states have more than a quarter of their inhabitants in cities. Dr. Weber gives the following table to show the growth of cities In the United States. He begins with cities of 10,000 population instead of with cities of 8,000 as in my table at the beginning of this note. Clanes of Cilift. No. 1800 Population. No. 1850 Population. No. 1890 Population. 100000+ 6 1,393 338 28 9 697 960 20 000100 000 ' 5 201 416 24 878342 137 5 202 007 10000 20,000 36 495,190 180 2,380,110 Total, 10,000-f 5 201,416 66 2,766,870 345 17,230.077 Tn this country 28 per cent, of the people live in cities ot 10,000 or more inhabitants; 24 per cent. In cities of 20,000 or more, and 15 per cent, in cities of 100,000 or more. England and Wales are further on the road 62 per cent, of their people live in cities of 10,000 or more; 54 per cent, in Cities of 20,000 or over; and 32 per cent, in cities of 100,000 or more. Scotland, Belgium, Netherlands, Saxony, Prussia and Australia also have a larger percentage of their people in cities than we have. The rate of advance Is so great, however, with us, and the growth of business and in- vention so enormous that the United States may very likely overtake the older nations in the march of city development as it has in so many other lines of development. Massachusetts already has 66 per cent, of its popula- tion in cities of 10,000 and over. PRELUDE. 9 and lofty ideal of devotion to individual and social service, if we do all this along with the coming improvements in transportation the time will come when 1/100 of the people can do the entire agri- cultural work of the country, and even they can enjoy the advan- tages of city life, so that the whole population will be substantially urban. With the concentration of population has gone the concentration of wealth. A hundred years ago wealth was quite evenly distributed here. Now one-half of the people own practically nothing, one- eighth of the people own seven-eighths of the wealth, 1 per cent, of the people own 50 per cent, of the wealth, and 1/200 of 1 per cent, own 20 per cent, of the wealth, or 4000 times their fair share on the principles of partnership and brotherhood. A hundred years ago there were no millionaires in the country, now there are more than 4000 millionaires and multimillionaires, one of them worth over 200 millions, and the billionaire is only a question of a few years more! Already, it is said, we have a billion dollar trust; hundreds of others from ten millions up, and a total trust and combine capitalization in the neighborhood of eight or ten billions, and all this congestion of wealth and power is centering in the cities. The problem of the city is the problem of the future, and the problem of the city is the problem of monopoly. Diffusion is the ideal of civilization diffusion of wealth and power, intelligence, culture and conscience. Instead of this we have private monopoly of wealth, private monopoly of government, private monopoly of education, private monopoly even of morality and the conditions of its production. Combination, integration, union are most ex- cellent if their benefits are justly distributed integration, plus diffusion or union for the good of all, is the problem of the 20th century. We shall not attempt in this book to deal with the whole prob- lem of diffusion. The case of The People vs. Monopoly is too big for full treatment in a volume of this size, so we shall confine ourselves to a few of the chief institutional aspects of the movement toward a more perfect democracy or self-government in political and in- dustrial affairs, private monopoly in politics and industry being the central and most threatening evil of our time. Self-government is the basic principle of our institutional juris- prudence, resting upon historic and philosophic proof that justice and liberty demand self-government, and that the management of their own affairs is one of the most powerful means of elevating and educating the people. Free institutions are institutions that embody the principle of self-government, and the freest institutions are those that carry self-government nearest to perfection, reducing to a minimum all external control. So fundamental is the principle of self-govern- ment in our law that it is held by high authority to be inherent in our system of government, underlying and permeating our consti- tutions and rendering void all legislation in conflict with it. even tho 1 PKELUDE. such legislation may not be objectionable in the light of any ex- press provision of the constitution under which it is enacted. 2 But while it is clear that free institutions must be founded on self-government, and our constitutions, statutes and theories of government are saturated with the idea, yet the law does not apply the principle consistently thruout. In several respects the application is defective, the three following being within the scope of this book: 1. As to areas. The law recognizes the right of self-government in respect to state and nation, but not in respect to cities. Muni- cipal corporations are creatures of the legislature. They have only such powers as are given to them by the legislature, which may, at its pleasure, abridge or annul these powers and privileges; divide them or consolidate two or more of them into one without their assent, attach a condition to their continued existence or abolish them completely. The principle of self-government requires that a city should be as free and independent in its sphere as states and nations are in theirs. A state has no more right to impose its judgment on a city in respect to the city's internal business than the nation has to impose its judgment on a state in regard to the internal business of the state. The true rule is that national interests should be governed by the nation; the state's peculiar interests by the state; the city's special interests by the city, and the indi- vidual's personal interests by himself, the presumption being always with the lower group and the principle of decentralization. Individual liberty should be left as large as possible, personal free- dom being curtailed only where the public good clearly requires it. In the field of public action as much as possible should be left to the cities and towns, no business being given to state control ex- cept such as the clear interests of the state require to be so placed; and lastly, no powers should be exercised by the national govern- ment except such as are necessary for purposes and interests of national moment. The full control of streets, the power to grant or withhold street franchises and the right to own and operate local public utilities should belong to each city secure from the possibility of legisla- tive interference. The line between state and municipal action should be drawn in each state constitution as carefully as the line between state and national action is drawn in the Federal Consti- tution. A limited sphere of local activity should be clearly marked off and deeded to local self-government, beyond the reach of the leg- islature; and outside the special local sphere a city should be free to act as it may see fit, so long as it does not violate a valid law of the nation or state, reversing the present rule and making a city free to act except where justly prohibited, instead of being pro- hibited except where it has received permission to act. Another HnHhS? g *4 C vi!fiJ' ^^ VS " etrolt ' '* Mich. 228; see also People vs. U8 Ind 426. ' VS ' Dennr> 118 Ind ' 382; Evansvllle VS. State, PRELUDE. plan would be to follow the method of the national constitution, and specify in the constitution of the state, the powers to be ex- -ercised by the legislature, and the guarantees to be observed in respect to individual liberty, and then leave the whole residual sovereignty to the municipalities. Some of our states have gone far toward the accomplishment of Municipal Home-Rule by constitutional amendments enabling cities to make their own charters. But these home-made charters are still subject to legislative control, and municipal liberty will never be complete till the city has the right to manage its local business affairs according to its own discretion. 2. As to departments of life. The law declares in favor of securing self-government in political affairs, but comparatively little effort is made to obtain self-government in industrial affairs. Yet the application of the principles of self-government and democracy is just as necessary to liberty, justice and development in the latter case as in the former. Oppression by an aristocracy of industrial monopolists is as bad as oppression by an aristocracy of political monopolists. The educating and elevating effects of managing their industrial affairs are as valuable to the people as the edu- cating and elevating effects of managing their political affairs; in fact, some of the most developing and most creditably handled subjects in municipal government have been the making of roads, managing of schools, supply of water, gas, electric light and other public utilities. An important proviso, however, must not be over- looked. The whole body of people affected by a street railway service, for example, may properly decide all questions relating to it. provided they have first acquired in an equitable way the right to control it, and not otherwise. This makes it clear that we can- not in fairness expect a large measure of industrial self-govern- ment under existing ownerships, but it may be obtained thru pub- lic ownership in' the case of monopolies, and, in other cases, thru the development of copartnership and voluntary co-operation. Private owners who are public spirited or even intelligently selfish will open the door to labor-copartnership, and aid the growth of co-operation and public ownership, and may even confer industrial suffrage on the workers as a gift where good conditions make immediate emancipation wise; much may be accomplished also thru the efforts of the workers to become part owners thru public ownership and co-operation; but the main dependence must be the growth of enlightened public sentiment thruout the commun- ity, an awakening of the whole people to a realizing sense of the justice and expediency of co-operative industry and the public ownership of public utilities. 3. As to methods. The principle of self-government, even when applied, is generally very imperfectly carried out. We have not even political government by the men to any considerable extent. In cities we have government by councils. In states we have government by legislatures. In the nation we have government ~by congress. 12 PBELUDK. The people have little direct efficient control. They are sov- ereign de jure, but not de facto, except at election time. The actual power exercised by the people consists chiefly in the periodic choice of a new set of masters, who can make laws to suit themselves, and enforce them till their term is up, regardless of the will of the people. We are governed by an elective aristocracy, which, in its turn, is largely controlled by an aristocracy of wealth. Behind the legislatures and congresses are the corporations and the trusts; behind the machines, the rings and the bosses, are the business monopolies, the industrial combinations and the plutocrats; be- hind the political monopolists are the industrial monopolists. The principal remedy under this third division is Direct Legis- lation, which is, indeed, of vital importance under every division, because it opens the door for every other reform. No one who really believes in self-government can refuse to support the initia- tive and referendum, for they merely enable the people to veto laws they don't want and secure laws they do want, i. e., they enable the people to govern themselves. Restating in brief the remedies mentioned, with some others closely related to them, we have: 1. Home rule for cities in local affairs. 2. Direct Legislation, or the initiative and referendum, with which we may name civil service reform, proportional representa- tion, preferential voting, the electric ballot, equal suffrage, effici- ent corrupt practices acts and the popular recall, all of which are necessary in order that the people may really own and operate the government under conditions most likely to secure wise leg- islation and honest, intelligent and economical administration. 3. Co-operative business and public ownership of industrial mo- nopolies, remembering that government ownership of industry is not public ownership of it, unless the people own the government. Public ownership of the government is essential to real public own- ership of industry, and public ownership of government involves Direct Legislation and civil service reform, wherefore these must be a part of every thorough and reliable plan for the public owner- ship of industrial monopolies. On the other hand, an advance in public industry, or even in government ownership of industry, tends to aid the movement toward good government in two ways: First; It helps to do away with the private corporations, which are probably the chief corrupting influence, and certainly one of the leading obstacles to good government in our cities to-day; and Second; it increases the importance of governmental affairs and intensifies the disasters resulting from corruption, partisanship and the spoils system, and so rouses the interest of the citizens and impels them to demand reforms that will guarantee pure and efficient management. Wherefore, except under specially adverse circumstances, sufficiently powerful to overcome the effects just named, government ownership of industrial monopolies tends to- ward good government and public ownership of monopolies, both 1'KELUDE. 13 of which tend, of course, to the diffusion of wealth and power and the realization of a more perfect democracy. 4. To push all these and other reforms, non-partisan leagues should be formed in city, state and nation, to educate the people, turn on the light in dark places, give the facts persistent and judicious emphasis, permeate all parties with the truth, call false officials to account, sustain men who do their duty and develop a civic conscience that will make every public service a sacred trust.* In education lies the final hope, for at bottom it is a new intelli- gence and a new ideal, that must be relied on to mould the real to a more perfect form. Individual development forces a change in the laws, then better institutions help to develop a nobler man- hood. By such interaction civilization is built up. 3 For information concerning such organizations address Samuel B. Capen, "Municipal League," Boston; Edwin D. Mead. Prest. "Twentieth Century Club," Boston: Dr. Charles B. Spahr, Prest. "Social Reform Club," New York; Hon. Clinton Rogers Woodruff, Sec. "Municipal League of Philadelphia," and of "The National Municipal League," GIrard Bldg., Phila- delphia: B. F. Gilkison, 111 Nassau street, New York City, Sec. "League of American Municipalities;" Eltweed Pomeroy, Newark, N. J., Prest. "Direct Legislation League;" Rev. W. D. P. Bliss. Chicago, 111., Prest. "National Social Reform Union;" also the "Citizens Union" and the "City Club," New York; "Citizens Municipal Association," Philadelphia, and the "Civic Federation," Citizens' Association" and "Municipal Voters' League," Chicago. Civil service associations and proportional represen- tation leagues will be referred to hereafter. The books and pamphlets issuing from the offices of President Mead and Secretary Woodruff, together with the works of Dr. Albert Shaw on "Municipal Government" in Europe, and the writings of Professor Good- now, constitute invaluable contributions to municipal literature, and if it were not that I had a share in its composition I should include "Muni- cipal Monopolies," edited and partly written by Professor Bemis, as quite indispensable to students of city problems. For current matter the official publications of the various cities, and such periodicals as "Municipal Affairs." -'City Government," "The Review of Reviews," "The Outlook," and "City and State," are of the greatest use. All the great monthlies contain occasional matter of moment in this relation, and finally no stu- dent of progress can afford to overlook Dr. C. F. Taylor's "Monthly Talks" m "The Medical World." or "The Direct Legislation Record," edited by President Pomeroy. PRIVATE MONOPOLY. I. The most pressing problem of the age is the problem of monopoly. Private monopoly means privilege, unequal rights, breach of democracy;, it means congestion of wealth and power and opportunity; antagonism of Interest between the owners and the public, and power to make that antagonism effective. The monopolists aim at profit; the public desires- service at low cost. Competition generally tends to low rates, but monopoly In private hands tends to extortionate charges and unjust profits. To secure- and protect such profits, monopolists corrupt legislatures and councils, water stock, hide their books, issue false accounts, make fraudulent con- tracts, bribe public officers, control elections and appointments, perpetrate all manner of frauds on the public, oppress their employees, resist regulation and defy the law. Yet with all its evils monopoly has the great advantage of saving the duplications, debasements and wastes of competition. The problem is to keep the advantages and get rid of the disadvantages. Com- petition cannot do it since it forfeits the advantages and is moreover im- practicable and unmaintainable where men have once learned the benefits of unified industry. Regulation will not afford a full solution of the problem because (1) It cannot remove the antagonism of interest between the owners and the public, which is the main root of monopoly evils; c2) it cannot eliminate the congestion of benefit, tho it may modify this con- gestion; and (3) it cannot prevent the existence of a privileged class. You have still antagonism, congestion and aristocracy, instead of harmony, diffusion and democracy. Regulation can do something, but it cannot attain to harmony of interest, or full diffusion of benefit, or equal rights and true democracy. A private gas plant or street railway will be run in private interest. It is a fundamental maxim of business that property is to be managed in the interest of its owners. If the people want the street railways run in tlyir Interest they must own them. Public utilities ought to be managed in the public interest, and not in any private interest, and therefore ought to be owned by the public. The very men who manage the great monopolies in the interest of their private owners now, would manage them equally well for the public if the public were the owner. But if you leave the private interests, which have the managers heart-allegiance, succeed in the managers will use all their power to evade or nullify the law, or control the law-making and law-executing officers in the interest of the private owners who employ and pay them, and for whose pockets they are bound to work under the business ethics of the day. If the public should, thru regulative measures, succeed in taking the control, which is the essence of ownership, so as to compel a management in the public interest, we should have something resembling public ownership by coercion (with borrowed capital and private election of the immediate managers to be watcht and controlled by another set of officers chosen by the public) until the struggling private interests, which have the managers heart-allegiance, succeed in evading or defeating the law: and if regulation does not go so far as to ' *Si control, the substance of ownership, and establish a mongrel public ownership by confiscation if any margin of power is left the mana- gers to serve the Interests of those who still hold the private title to the property, that power will be used to make the still existing antagonism iterest effective against the public. Regulation leaves one set of men to do the work with vast wealth and power in their hands and every interest the work the way we don't want it done, and puts another set to- the first and keep them from doing it their way. creating thereby mgest motives for the monopolists to buy up or capture the regu- lators, control their appointments, or corrupt the government above them, the antagonism, and drive the evils it causes deeper into the dark, I'nYo g ( - SO , I !S e of . J nem aml intensifying others. Instead of our govern- introlling the great monopolies, they are controlling our govern- Public ownership complete and real, brings harmony of interest between l IlOrS and me nil him n v mi I.- in cr +vrv ;,i , .,, t ; .... i ,!,,, ~:s CONTENTS. PUBLIC OWNERSHIP .... DIRECT LEGISLATION II 255 HOME RULE FOR CITIES Ill 387 TUP; MERIT SYSTEM OF .CIVIL SERVICE IV 469 PROPORTIONAL REPRESENTATION V 474 PREFERENTIAL VOTING VI 484 (or Majority Choice of Mayors, Governors, etc.) THE AUTOMATIC BALLOT VII 488 (or Voting and Counting by Machinery) BEST MEANS OF OVERCOMING CORRUPTION. .VIII 492 (Encouraging Experience of England, 498) Appendix LEGISLATIVE FORMS I 505 (Laws and Amendments on I). L., Home Rule, etc.) (Suggested Forms for Future Enactment, 510) LATEST NOTES II 523 INDEX OF SUBJECTS 543 (Analytic Treatment of Leading Topics) INDEX OF PERSONS AND PLACES . 582 PRIVATE MONOPOLY. II. John Stuart Mill observed that monopoly of essential services involved the power of levying taxes on the community. It may be noted further. that these monopoly taxes are not levied for public purposes nor by the people or their representatives as all good taxes should be. The monopolists, or controlling owners and managers of private monopolies, not only exercise the sovereign power of taxation, but the despotic power of taxation without representation and for private purposes. If the matter had been properly considered, every grant of a monopolistic franchise or privilege would have been held void ab initio upon the fundamental principles of justice and the common law, because it involved a grant of sovereign and ultra-sovereign power to private parties. A monopoly controlled in private interest is sovereign power in private hands. Only the sovereign people have a right to monopoly, for only the people have a right to the sovereignty involved in monopoly, and only public ownership can transform the monopolistic power of taxation into a power of taxation with representation and for public purposes, instead of taxation without representation and for private purposes. Not only do the monopolists exercise the power of taxation without representation; they also in large degree determine the distribution of wealth, decide which industry, which class, which individual, which community, shall prosper, and which shall not; make and unmake the fortunes of persons, streets, cities and states; direct the government and control legis- lation. Thus again we find monopoly giving its owners sovereign powers, wherefore again we say that only the people have a right to own a monopoly, for only the people have a right to sovereign power. Monopoly we are bound to have; it is an economic necessity; the only question is, shall the penple own the monopolies, or shall the monopolies own the people? Public ownership of water, gas, electric light, transit, telegraph and telephone systems, etc., is simply ownership by a large body of citizens instead of ownership by a small body, many stockholders in place of few, and equal instead of unequal holdings, whereby the benefits of industry are more evenly diffused, and the conflict of interest between the owners and the public is eliminated by making the owners and the public one an-1 the same. It is democracy and union in place of aristocracy and antagonism. The change of monopoly from private to public ownership and control means a change of purpose from dividends for a -few to service for all. And this change of purpose resulting from unifying of the interests of owners and the public, is the source of the improvements experienced under public ownership in respect to cheaper and better service, purer government, better psiiil and more contented labor, superior citizenship and a fairer diffusion of weiilth and power. Civilization, manhood, and even the public safety, de- mands the change. (See Chap. I and Appendix II e.) CHAPTER I. PUBLIC OWNERSHIP. In dealing with this question we note with special emphasis the most important fact that public ownership and government ownership are by no means synonymous. Russia has gov- ernment ownership of railroads, but there is no public own- ership of railroads in Russia because the people do not own the government. Philadelphia has not had real public own- ership of gas works because the people do not own the coun- cils. AVhere legislative power is perverted to private pur- poses where the spoils system prevails and the offices are treated as private property where government is managed in the interests of a few individuals or of a class, anything that is in the control of the government is really private property, altho it may be called public property. If coun- cils and legislatures are masters instead of the people, they are likely to use the streets and franchises for private gain instead of the public good. If the government is a private monopoly, everything in the hands of the government is a private mo- nopoly. At the heart of all our philosophy about the public ownership of monopolies lies the necessity for public owner- ship of the government. The monopoly of making and ad- ministering the law underlies all the rest. If the people are to own and operate water works, street railways and other in- dustrial monopolies, they must own and operate the govern- ment. It follows that the merit system of civil service and the initiative and referendum are absolutely necessary to real and complete public ownership; the latter to prevent private monopoly by abuse of legislative and judicial power, the former to prevent private monopoly by abuse of official and administrative power. The legal title to property may be in the city or state, and the people may 'get the whole beneficial use of it thru the action of honest legislators and officials, but 18 THE CITY FOR THE PEOPLE. no reliance can be placed upon the continuance of such re- sults if the doors are open for perversion of legislative and administrative power. Control is the essence of ownership, and unless the people have the ultimate control constantly in their own hands, so that they can compel prompt obedience to their will, and enforce the management of public affairs in their interest, the soul of ownership is not theirs in spite of the paper title. It is of vital importance to keep in mind the fact that public ownership of industrial monopolies re- quires public ownership of the government, and that this in- volves direct legislation and a strict, nonpartisan merit sys- tem of civil service, so that these 1 measures are integral parts of any reliable plan of public ownership. To state the case- in another way: Government is a public utility; wherefore the doctrine of the public ownership of public utilities involves the public ownership of the govern- ment. But public ownership of the government requires direct legislation and the merit system of civil service, which axe therefore essential parts of the doctrine of public owner- ship of public utilities. It must not be forgotten in this connection that putting the legal title to a street railway, or other enterprise, in the people may be the means of rousing them to demand civil service reform and direct legislation, in order to transform the paper title into a real ownership, and make it certain that the property will be managed in the public interest. Such movements must be carefully managed, however, else cor- porate power may win the field before the public spirit or civic patriotism of the people can be sufficiently developed, and thoughtless persons may then mistake the failure of paper titles and government ownership for the failure of real public ownership. The present demand for public ownership is largely the re- sult of the evils experienced from private monopoly. 1 A lj r ?if C \ U , S l the demand is Partly due to the conviction that l8 /K e h !? hes t form of co-operation and the best moans of V f b ^ nefl ,V u wheref re it is preferable to private enterprise and e ? ht <; nea and free from the evils of private mo- onol Fnr , e evs o prvae mo- no P re J nJlv tn * P ' .P"^ , e v dllcatlon rests upon the idea that lean, inn is ioi thn? H' e " #** among the whole people by means of 'tools than by reliance upon private institutions. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 19 monopoly is an advantage tending to shut out competition. Monopolies in industry are of various sorts. A business or possession which by its own inherent nature tends to shut out competition is called a natural monopoly, while a privilege or immunity established by legislation or combination is called an artificial monopoly. The distinction is convenient, but it is doubtful if it has much practical value. An exclusive bridge or ferry privilege or railway franchise may constitute as absolute a monopoly as the ownership of a mine. So may an agreement for reduced rates of transportation, or exclusive supply of materials and products, or a combination shutting out competition by the weight of the capital involved and the risk of ruin in a battle with the combine. Similar evils and similar benefits appear to attend upon private monopoly in all its varying forms. Some of the evils that often attend monopoly in private hands are excessive charges, enormous profits, watered stock, false accounting and doctored reports, poor service, disregard of safety, discrimination, fraud and corruption, defiance of law, speculation and gambling, congestion of wealth and power, lack of progressiveness, ill treatment of employes, de- basement of human nature and denial of democracy. These evils do not all develop in every case. In some cases only the congestion of power is present, but, as a rule, private monopoly with nineteenth century human nature tends to produce the evils above enumerated and now to be briefly discussed. THE EVILS OF PRIVATE MONOPOLY. 1. Excessive Charges. One reason men desire monopoly is the power it gives to charge more than a fair equivalent for the service rendered. The owner of an important bridge or ferry monopoly can make the people pay several times as much as the same labor and capital would bring in the open market, and a street railway, or gas company, or telephone company sometimes possesses more power to tax the people than the city government. A few examples will make the matter clear. 20 THE CITY FOR THE PEOPLE. The charges of private water works in the United States average 43 per cent, excess above the charges of public water works for similar service, 1 and the public rates are, on the average, considerably above the cost of the service for which a charge is made. 2 In Indiana the average revenue per family in private water works has been shown to be double the average cost of the service, as disclosed by the records of municipal works. 3 Of the fifty largest cities in the country nine are supplied with water by private companies. These cities are San Fran- cisco, New Orleans, Omaha, Denver, Indianapolis, New Haven, Paterson, Scranton and Memphis. All but three of them refused to give their receipts and expenses for Mr. Ba- ker's Manual of American "Water "Works, 1897, and one of the three, Indianapolis, did not state operating expenses. San Francisco made full returns, and so did New Orleans, where the city is part owner and has an agreement that keeps the company under some restraint.' 1 The Indianapolis company reports: Average consumption 9,000,000 gallons. Debt $1,000,000 Capital stock 500,000 Interest on debt $55,000 Taxes 13,052 Revenue from City 10,000 for street sprinkling. Revenue from City 64,933 for fire protection. Gross receipts 273,753 Careful estimates 5 place the operating expenses in Indianapolis at a sum not exceeding $80,000 with $24,000 for depreciation, where- fore it appears that $117,000 will cover the total expenses, aside from interest. Subtracting this from the total receipts, $273,753, we i Conclusion of M. V Baker in his Manual of American Water Works, L890. He had data for 318 public and 430 private water works all over the country, and compared the total family rentals, the total family rental being the ordinary family or household rate, plus the separate charges for wate? closet, bath tub, wash bowl, cow, horse and carriage, with use of hose for washing the latter, and hose for lawn sprinkling llffe r 3 Investigation of one of Prof. Commons' students, 1890. Average reve- nue per family in the 23 private plants, ?9.7S: average total cost per family including interest for the 30 public plants, $4.61, and the family cons ump- The flrat general Indication of operating cost I got by tabulating data PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 21 have a profit of $156,000 for the capital involved. Taking out the $55,000 interest on the debt we find $101,000 clear profit for the mo- nopolists who hold the $500,000 stock, a profit of 20 per cent, a year. The San Francisco company reports: A bonded debt of $9,975,000 Capital stock 16,000,000 Of which there is paid up only 1,230,500 Operating expenses $376,826 Interest 533,838 Taxes 102,156 Total expenses 1,012,820 Revenue from consumers $1,548,835 Revenue from City for fire protection 137,236 Total receipts 1,686,071 The operating expenses, taxes and reasonable depreciation on real value of plant amount to $660,000, which leaves $1,026,000 profit on capital. Subtracting $533,838 interest on the debt, we have $490,000 clear profit for the stock, or more than 40 per cent, a year on the paid value or actual investment represented by the stock.' from a number of cities, and as the results are of intrinsic interest I give the table here: O-. Ex. Indicated Averag* daily for 9,000,060 gal- Operatlug coasamption Ions av<>. output Expense! ia gallons under similar Providence, R. I $72,091 $8,905,000 U $73,000 Worcester, Mass 55,000 6,500,000 76,000 Springfield, Mass 18,478 4,638,000 36,000 Peabody, Mass 6,125 906,000 62,000 Columbus, 64,000 14,000,000 41,000 Detroit, Mich 107,000 40,000,000 30,000 Toledo, 35,000 8,000,000 40.000 Milwaukee, Wis 118.630 25,291.000 40,000 New Orleans, La 64,000 9,000,000 64,000 Louisville, Ky 71,000 16,800,000 40,000 Allegheny, Pa 80,000 28,000,000 30.000 Chicago, 111 1,435,516 251,839,000 51,000 Boston 440,000 50,800,000 74.000 Philadelphia 1,113,470 215,000,000 46.000 New York city 643,000 189,000,000 31,000 Most of the plants are public. Other things equal, the proportional In- dications, from small plants would be too high, and those from large plants would be too small. Taking into account the cost from pumping from driven wells, 300 feet deep, the use of water power and natural gas, the rate of wages, pressure, character if surface, etc., I concluded that $80,000 was a liberal estimate for the operating cost In Indianapolis. While study- Ing the point I tried to get an estimate from an engineer based on personal investigation of every detail of the Indianapolis situation on the spot. This I have at last succeeded In doing. Mr. John W. Hill, a noted consulting engineer of Cincinnati, has re- cently Investigated the Indianapolis Water Company by order of the City, and his report has been examined and approved by the City Engineer. On page 29, the operating and maintenance expenses for the year ending April 1, 1898, are placed at $80,000. The average daily consumption for the said year was 10.260.IXK) gallons or H4 millions more than the output stated in the Water Manual for 1897, so that my estimate of $80,000 operating expenses for the 9 million output Is a little too high. The results of the two methods of estimate are, however, remarkably similar, and I have allowed the text to stand as I wrote It before receiving Mr. Hill's report. The income of the Indianapolis company for the year ending April 1, 1898, was $292.561, which means a net profit of $130,000, or 26 per cent, on the stock (after paying interest on the debt). The value of the plant is about $1.800,000, or $800.000 above the debt, and the percenfage of profit on this is of course much smaller (15% per cent.), because several hundred thousand dollars have been put into the plant from the earnings, but the money the monopolists purport to have taken out of their own pockets and invested in the enterprise is represented by the stock, and the present rate of profit on that Is 26 per cent. Yet the rates in Indianapolis are not high, but on the contrary are lower than the rates of private companies usually are. "The people of San Fiancisc-.i only get about 12 gallons of water daily for 22 THE CITY FOR THE PEOPLE. In view of such facts it is no wonder that some or all finan- cial items are "withheld" by a large proportion of the private plants all the way thru the Water Manual no wonder that most of the companies in the above named cities refused to furnish financial data; nor that the Indianapolis company aimed to avoid the appearance of evil by omitting the item of operating expenses. Speaking of the benefits of public ownership of water works in small towns, Professor Richard T. Ely says in "Problems of To-day:" "I have lookt into the experience of a whole group of towns in. New York State, and they all tell one story. * * * The experience of Randolph, in Cattaraugus county, New York, tells the story for all. A private company wanted to put in water works, and the lowest bid which they could be induced to make was $28,000, and that was on condition that the town should subscribe for stock. The charge for water was to be $10 for a household, with additional charges for extra faucets, closets, etc., in proportion. Randolph finally built its own works for a total cost of $20,299.86, and with a charge of $4 for each household, instead of $10, is making a profit. Everybody is delighted with the experiment." The price of gas does not appear to have any definite rela- tion to the cost of production. Bronson Keeler found in 1889 that in cities manufacturing under closely simi- lar conditions the selling price varied from 75 cents to $16 per thousand feet, 7 He found a charge of $1.25 in one city and $6 in another a few miles away. Out of 820 plants the prices of 584, or 71 per cent, were multiples of 50 cents, and 84 per cent, were multiples of 25 cents. In 1885 the New York Senate investigated the gas compa- nies in the city of !New York, 8 and discovered that down to ea V, h ye ^ rly i Payout of $1. In Peabody and Springfield the people get 40 gallons daily for $1 per year; in Worcester, 32 gallons; in Cincinnati, 60; in Philadelphia, 87: in Boston, 100; in Chicago, 200; in New York city, 290 gallons daily for $1 per year, and in every one of these eight public systems there ua margin after allowing for interest and depreciation on the whole value of the plant. ' See Mr. Keeler's article in the November Forum, 1889. 9 Senate Doc No. 41, March 31, 1883. The reports immodiatolv became > scarce that it was almost impossible even for a gas engineer' to get a t gives such startling revelations of stock watering and enormous profits, together with valuable information on the cost of gas, and contains ? man / things that the companies do not want the public to know that 8 * y: Accordln g to the belief of many the companies bought U 70.) ""^ ^ hushcd UP th PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 23 the year of the investigation the price to ordinary consumers had been for the most part $2.50 and $2.25 per thousand, and that more than half of such price was clear profit. In 1883 the average cost of gas to all the companies was 60 cents in the holder and $1 delivered at the burner, while the ordi- nary price was $2.25, and the receipts of all the companies averaged $2.16. In the year of the investigation the com- panies made a price of $1.75, and the following year it was reduced by state law to $1.25, which the companies were still charging in 1897, altho 75 cents a thousand would then have yielded a good profit on the real investment, as was proved by the evidence brought out in another legislative investiga- tion. 9 In 1892 gas was being put in the holders in 'Boston at a cost of 33 cents per M; distribution cost 20 cents, allowing 7 cents for depreciation, and 20 cents for interest on an allow- ance of $4 investment per M (which is more than fair), we find that 80 cents per M would yield an ample profit, yet the companies were charging $1.30 per M. 10 In Chicago an excellent water gas is put into the holder at a cost of 20 cents per M 40 cents at the burner including taxes according to the statement of the two chief Chicago companies to the ]^ew York Stock Exchange in 1893 (and 37^ cents according to the report of the Mutual Company of Hyde Park, Chicago) interest at 5 per cent, on the actual value of the plant ($3.80 per thousand according to the 9 Testimony of Prof. E. W. Bemis, the leading authority on this subject in the United States. In his chapter on Gas, in "Municipal Monopolies," p. 588, he says: "Gas is a monopoly, and the individual consumer has no pro- tection from extortion unless it is given by the city and the state." On page 591 he says that 75 cents per thousand is a sufficient rate in large cities east of the Rockies, and calls attention to the Cleveland gas case (1892), in which it was proved that the gas cost the companies 38 cents at the burner, including taxes: 7 cents is enuf for depreciation, and 15 cents will cover interest, or 20 at the very outside; so that 65 cents would be an ample total charge. The company had been charging $1. The city ordered a reduction to 60 cents. The company contested the order. But its officials were forced to admit that, aside from depreciation of about 7 cents, gas at the burner cost less than 40 cents per M. The price was finally fixed at 80 cents, with a special payment to the city of 5 cents per M (in addition to the ordinary taxes), making the real charge 75 cents per thousand (Ibid, 591-2, 650). According to Prof. James' "Relation of Municipality to Gas Supply," 1887, gas could be sold in New York for 65 cents a thousand. 10 The average charge for gas in Boston was increased 8 cents per M in 1892 above the average for 1891 (thru the abolition of discounts) in the face of profits already enormous (30 to 60 per cent, on investment), and in the face of a reduction in the cost of producing gas from 40 cents, in 1891, to 33 cents, in 1892. (See Report of the Legislative Investigation of the Bay State Gas Trust, City Print, Boston, Mass., 1893, pp. 61-63, and Prof. Beniis' chapter on Gas in "Municipal Monopolies," p. 589.) 24 THE CITY FOR THE PEOPLE. Mutual Company's Report) would amount to 19 cents, where- fore, allowing 7 cents for depreciation, it is clear that 65 cents would be a fair price; whereas the actual charge in Chi- cago is $1. In Topeka the gas rate is $1.70; in Kansas City, till recently, it was $1.75, and in Trenton, K J., $1.70. Ac- cording to the evidence accumulated by Professor Bemis, 75 cents to 85 cents ought to be more than sufficient in these places to yield a reasonable profit on the actual value of the plant. Professor Bemis says that in Great Britain (where public ownership has brought the companies to terms) the average price of gas is only 75 cents, or about half the current American price, and adds that there is no reason why the cost should be greater here than in England, 11 our higher wages being offset by our cheaper coal and oil, and the cost of ap- paratus being about the same in the two countries. He says that gas can be put in the holders for 20 to 30 cents per M; distribution will average 15 cents, including taxes, deprecia- tion 7 cents, fair investment $3 per M in large cities, $4 in smaller cities; 50 cents average operating cost, 70 to 75 cents total average price on a reasonable basis of 6 per cent, profit on actual values. (Even this is probably high. See Appen- dix II, A. 2.) Electric light companies levy large monopoly taxes on pri- vate consumers and the public. For commercial lights they charge the people fifty to 100 per cent, more than municipal plants, 12 and their charges frequently average two, three and sometimes four times the total cost of the service, operating expenses, interest, taxes, insurance, depreciation and all. 13 For full data the reader is referred to the authorities named in the notes. A few cases only can be given here. Prices for Commercial Lights. Charge by Private Plant. Charge by Public Plant. Boston, 1 cent per meter hour. Braintree, Mass., y 2 cent per meter Brookllne, Mass., 1 cent per meter Swanton, Vt., 1/3 cent per meter iiour. hour. r \ork city, 1 cent per meter Westfield, X. Y., % cent per meter uOlll . llOlll" Philadelphia, % cent per meter hour. Newark, Del., 3/10 c,ent per meter Detroit, $1 per lamp month. Wyandotte (near Detroit), 16 2/3 Kalamazoo, Mich, 20 cents per Kil- olSioo), 5 cents Chicago, 1 cent per meter hour. Pe*, m.^ce'iit per meter hour. 11 Municipal Monopolies, p. (527 E of - Comlnons in "Municipal Monopolies," p. 156 The usual private company charge for commercial lights is 15 to 20 PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 25 Many more instances could be given in which public plants make rates for commercial lighting that are y 2 to % of the rates of pri- vate companies in neighboring places, where conditions, all things considered, are as favorable for low cost as in the public plants. The density of business in a large city makes up for the increast cost of labor and construction. It must not be forgotten that the difference between public and private commercial charges does not indicate the whole excess of the latter, since the commercial rates of public plants are usually sufficient to yield a good profit the fair price or actual total cost (including operating expenses, taxes, insurance, depreciation and interest on real value of the plant) will run nearer 1/3 than y s of the usual commercial charges of pri- vate corporations." In the early years of electric lighting, many cities paid two to four times the fair price for street lamps, and not a few municipali- ties still pay double the vahie of the electric lighting service. The following table gives a few facts for 1890: Prices Paid to Private Companies Per Standard Arc Per Year. San Francisco, $440. New York, $84 to $182. Washington, $219 St. Louis, $75. Philadelphia, $177. Brooklyn (sub-arc), $182. Boston, $237. Cambridge, $180. Brookline, $182. Springfield, $218. Lowell, $182. Fall River, $180. Worcester, $200. St. Louis paid $75 a year for each street arc of 2000 candle power burning all night and every night, while Philadelphia paid $177; Washington, $219; Boston, $237, and San Francisco, $440 for the same service. The St. Louis rate yielded a profit, and in other cities the prices were sufficient to pay the operating expenses, taxes, depreciation and reasonable interest on actual investment were $75 to $85, in New York, Philadelphia and Boston, a little more in Springfield, Cambridge, Brookline, Lowell and Worcester, cents per Kilowatt-hour. Municipal plants generally charge 10 cents per where Prof. Bemis says that the cost of producing a thousand watts for street lights, including even interest and depreciation, is under o cents. ) 14 See last preceding note. 26 THE CITY FOR THE PEOPLE. and about $100 in San Francisco." With fair rates the taxpayers of Philadelphia would have saved $100,000 on street arcs in the census year; Boston, $125,000; Brooklyn, $177,000, etc., and the sum total saved to the people in all the cities named would have gone above half a million dollars. Gradually people learned something of the facts, and lower rates were demanded, but the companies, for the most part, yielded slow l y _they were protected by monopolistic franchises and agree- ments, by their influence with public officers and by the ease with which they could doctor their accounts and make statements of cost difficult for the people to controvert, since the experts in the large cities were practically all in the companies' employ, or under their influence. Some concessions were made, however, as the following figures for 1894 demonstrate: Yearly Price Per All Night Arc-Reported 2000 C. "P. Unless Otherwise Marked. San Francisco, $200. New York, $146 to $182. Washington, $182. St. Louis, $75. Philadelphia, $160. Brooklyn (1200 c. p.), $182. Boston, $139. Cambridge (1200 c. p.), $115. Brookline, $146. Springfield (1200 c. p.), $15. Lowell, $131. Fall River, $160. Worcester, $127. The reduction is large in some cases: San Francisco from $440 to $200; Boston, $237 to $139; Worcester, $200 to $127; Springfield, $218 to $75, etc. And yet the number of lamps is so much greater than in 1890 that the total excess is larger than before. Boston taxpayers were overcharged $100,000 in 1894 for electric street lights; New York paid $330,000 too much; the excess in Philadel- phia was $425,000 more than $1000 a day, and the sum of the over- charges in all the cities named was a good deal more than a mil- " For the evidence of this see data in my articles on "The Peoples' Lamps," Arena, June, 1895, et seq. ; the report of the Special Committee of the Boston Common Council, Oct. 17, 1895, confirming my figures; the esti- mates of Chief Walker, of the Electrical Bureau of Philadelphia; the data of cost in municipal plants given later in this chapter, and the testimony of William D. Marks, President of the Edison Electric Light Co., before the Pennsylvania Senatorial Investigating Committee, Dec. 5, 1895. The city of Philadelphia was paying $160 per arc. President Marks said his com- pany would take the whole 5300 lights at $100 each, and that the cost would not be more than $80 to $85 an arc. He afterwards told his stockholders that at the $100 rate the company could make $20 on every arc. The Electric I rust, fearing that Pres. Marks would carry his point, bought up a con- trolling interest In Edison stock, blocked the President's plans, and forced his retirement. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 27 lion dollars, or more than twice the total excess for the same cities in 1890, notwithstanding the reduction of rates. In Philadelphia, New York and other cities, the companies said that they could not reduce to anything like the St. Louis rate because of the difference in the price of coal, yet that difference would not justify a difference of more than $5 per arc year between St. Lotus and Philadelphia or New York. 18 Pittsburg, in the very heart of the coal region, was paying $195 per arc year $55 more than Boston, $35 more than Philadelphia and 2y 2 times as much as St. Louis, or $120 excess per lamp year! The chaos of prices makes it clear that the charge for electric light bears no definite relation to the cost of production. It ap- pears to depend chiefly upon political conditions the ratio of intel- ligent public spirit to the power of monopoly in the control of the city's affairs. In Springfield alone did enlightened public spirit reduce the charge to a reasonable point her rate of $75 per sub-arc (1200 c. p.) being equal to $88 per standard arc (2000 c. p.), which, for Springfield conditions is about equivalent to $75 per full arc in St. Louis. The charges to private consumers frequently continue very high after reduction of public rates. For example, the Worcester com- pany continued to charge private consumers $219 per arc after re- ducing the city rate to $127; the Brookline company charged pri- vate parties $182 per arc and the city $146, and the Cambridge com- pany (1898) charges private consumers $160 per arc of 1,200 c. p. burning till midnight, tho the price to the city has been reduced to $100 per arc of 1,200 c. p. burning all night and every night. Some reduction has occurred since 1894. In 1897 and 1898 Bos- ton paid $128 per arc; Brooklyn, $124; Philadelphia, $109 and $146; Pittsburg, $96, and New York, $146, $164 and $182 (for arcs that are not really over 1200 c. p.). The excess is still enormous $70 to $80 being all that should be paid in any of these cities. A few years ago an investigation revealed the fact that the people of Greater Boston were paj r ing the electric light companies a mo- nopoly tax exceeding $800,000 a year, and the excess of charges in New York and Philadelphia was much larger still. Street railway companies in our larger cities are prominent among monopolistic extortionists. The facts indicate that the usual 5 cent fare is nearly or quite double the reasonable charge. Buffalo street cars carry children for 3 cents, and the average of all fares collected is 3.6 cents, yet a good profit is realized. Recently a company asking for a franchise in 1(1 See proof in "The Peoples' Lamps,'" Arena, June, 1895, where it is shown that, considering the density of business, the cost of ooal. labor. real estate, etc., the difference between St. Louis and Boston would be about ?5 or $6 per arc year, $10 for Washington, $12 for Springfield, and little or nothing for New York and Philadelphia. 28 THE CITY FOE THE PEOPLE. Buffalo agreed to sell three tickets for 10 cents, making a uniform 3 1/3 cent rate. A syndicate claiming to represent 35 million dollars has offered to buy up all the old lines in Chicago and sell tickets 10 for 30 cents, good for the hours of working people's travel, and for school children at all hours. And President Farson, of the- Calumet Street Rail- way, of South Chicago, publicly stated in 1896, when a fran- chise with 5 cent fares and little compensation was about to be granted to the General Electric Railway from the heart of the city to Twenty-sixth street, that for such a franchise for twenty years, if he could have it without dishonorable relations with the city government, he would pay $100,000 to the city and give a straight 3 cent fare. Several years earlier, before all the streets in Chicago had been let to the street railway companies, a prominent street railway financier offered to build extensive lines, give a straight 3 cent fare and pay a considerable bonus to the city. 17 Street railway magnates interested in the Detroit system, and thoroly familiar with the business in that city, offered to run all the cars in Detroit on a 3 cent single fare with 40 tickets for $1 (a 2 cent fare) and pay interest on the cost of acquiring the roads, if the city would take them. 18 When we remember that these Detroit capitalists contemplate busi- ness under the existing load of fictitious capitalization, or, per- haps, a still greater load, and that they expect to make a good profit, it is clear that the rate sufficient to cover operating expenses, taxes, depreciation and interest on the actual value of the plant is considerably below 3 cents. The cost of operation on the electric roads in our cities runs from 10 to 12 cents per car mile. 18 The taxes, depreciation and in- terest amount to 8 or 10 cents a car mile, bue when we remember that, far the larger part of this is interest on bonds and stock, and that the capitalization is usually two or three times, and sometimes more than three times, the real value, it appears that 4 to 6 cents would cover all proper fixed charges, mak- ing the total proper cost on electric roads in such cities Chicago, Xew York, Buffalo, Philadelphia, etc., about 14 17 Municipal Monopolies, p. 530. 18 The City was not in condition to effect a purchase of the roads. t Is reported more than this in some cities, but, as we shall see PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 29 to 16 cents a car mile. 20 In Chicago and Philadelphia there are 5 passengers per car mile; in Buffalo, 6; in Boston, 7; in New York a few roads have about 5 passengers per car mile; the Metro- politan and the Cross-town, 7; the Thirty-fourth street horse, 9, and the Broadway cable, 12. A uniform 3 cent fare would yield from 15 to 36 cents per car mile on these roads, and, except on the 5-passenger roads, would yield a profit above normal interest, with- out any increase of traffic. The lowering of fares, however, would surely enlarge the traffic, thereby raising the number of passengers per car mile, and reducing the car mile cost at the same time, part of the new traffic going to increase the number of the car miles run on the road, which tends to diminish the cost of each car mile. Considering all the elements involved, it is probable that a uniform 2y 2 cent fare would be sufficient in most of our large cities, and there is not a little reason to think that a well-managed railway owned by the city could afford to make a 2 cent fare. 21 later, the accounts are doctored. Here are some of the facts with the authorities: Street Railway Operating Cost. Electric Roads. Operating Cost per Car Mile in Cents. Authority. New York (Met. U. Elec.) 10. Engineer of the Road. New York (Union O. Elec.) 12. Co's Report to Railroad Commissioners. Buffalo 11. Co's Reports. (The figures include taxes.) Niagara Falls & Sus. Bridge 10. Co's Reports. Philadelphia 11. Statement of Gen. Man. to Glasgow Com Rochester 10. Co's Reports. Washington 9.27 Elec. Review, June 5, 1896, p. 733. Chicago (City Ry.) 13. Co's Reports. (The figures include taxes.) Chicago (av. of urban r'ds.) 14. Co's Reports. (The figures include taxes.) St. Paul 12. Mr. Higgins in St. Ry. Jour., 1894, p. 292. Kansas City 11. Mr. Higgins in Street Ry. Jour., 1894. Savannah 11. President of the Road. New Haven 11.5 Co's Returns to Railroad Commissioners. Milford & Hopedale 8. Co's Returns to Railroad Commissioners. Braintree & Weyrnouth 6.5 Co's Returns to Railroad Commissioners. Toronto 8.33 City Engineer. (7.61 now.) Montreal 10.50 Co's Statement to Glasgow Com. Budapest 10.21 Glasgow Com. Hanover 9.3 Elec. Review, May 22, 1896, p. 654. Zurich 10. Elec. Review, May 22, 1896, p. 654. Horse Roads. New York (Met.) 17. President Metropolitan Road. New York (34th St.) 17. Railroad Commissioners. New York (2d Ave.) 19. Railroad Commissioners. Buffalo 17. General Manager Buffalo Ry. Co. Glasgow 17.5 Official Report of Road. Montreal 18. Statement of Officers to Glasgow Com. Cable. N. Y. 3d Ave. 11. Superintendent of Road. Metropolitan 17.5 Co's Statement. Elevated Roads. New York L roads 13. Mr. Higg ns in St. Ry. Jour., 1894, p. 362. Brooklyn L roads 11. Mr. Higgins in St. Ry. Jour., 1894, p. 362. 20 The fixed charges amount to 8.55 cents per car mile on the Third Avenue cable, New York; 8 cents on the Crosstown horse; 9 cents on tl Chicago trolleys; 8.5 in Boston (elec.); 10 cents in Buffalo (elec.); 8 in Toronto; 7 cents in Montreal (elec.); 6.5 cents in Budapest (underground leC Fuller data on the cost of street railway service may be had by Citing Prof Parsons for Street Railway Circular No. II, o cents per copy; K 25 cents; 25 for 50 cents; 60 for $1; 500 f or .$5. =iSee "The Peoples' Highways," Arena, May, 189o where the question is discussed with special reference to Boston and Philadelphia, ^ven in the latter city, if the roads were owned by the City free of debt, a 2 c fare would answer. (See also Appendix II. C.) 30 THE CITY FOE THE PEOPLE. Whatever experience may show to be the precise level of a reas- onable railway rate in our cities, there is not the slightest doubt that the present rates are altogether too high. In 1894 a franchise was given the Detroit Electric Railway on its promise to give 3 cent rides in the daytime and 4 cent rides between 8 P. M. and 5.45 A. M. at night. It had 40 miles of road, mostly on the out- skirts of the city, on routs that the old companies had considered too unprofitable to cover. The old companies fought the new one, and then practically absorbed it; and then, according to the con- fession of one of their chiefs, did their best to ruin the new line by running few cars upon it, and giving poor service, in order to make the low fare experiment fail. Yet the road has made a 5 per cent, profit on 1he investment each year from the start, with less than four passengers per car mile (owing to poor location and poor service), and average receipts of 3 1/3 cents per passenger If a poor road like 1 his, working under decree of devastation, can live and profit on 3 1/3 cents, how much less fare would answer on a well placed line, abundantly patronized and favored by the fullest efforts of the magnates for its success? Here are some further facts in regard to the rates of fare in a number of progressive cities on both sides of the water: Street Bailway Fares in Cents. General Average. Working- Rate Fare men's Children's for Short on Whole Ci'y- Population. Rate Rate Distance Traffic Milan 440,000 1. 2 Vienna 1,560,000 1.6 Berlin 1,800,000 Budapest 500,000 London 4,000,000 Belfast 256,000 Glasgow 840,000 Toronto 176,000 Detroit 280,000 2 2.7 2y 2 3 2 2.7 1 2.5 2 *> 1 L78 4 4.2 3 3.3 ... _> O.t> Buffalo 360,000 .. 3 5 3.6 *In Milan cars run night and morning at a 1-cent rate, regard- less of distance. The general rate is 2 cents from the centre all the way out, without regard to distance. The average is esti- mated. Vienna has the zone system with a 2 cent fare for each zone: 4 cents the maximum for a ride regardless of distance, with free tras- fers to any part of the city; 1 3/5 cents workingmen's fares regard- less of distance on special cars; special rates to school children, also, the public authorities have a voice in fixing rates. The aver- age in the last column is estimated. In Berlin the average fare is 3 cents, and the operating cost per passenger is a trifle over a cent and a half. In Glasgow the general rate is 1 cent per half mile, but for lon- ger distances the fares are proportionately less, the average fare charged per mile over the entire system being 1.18 cents. A number f long runs were establisht at a 2-cent fare especially for working- men, and night and morning cars are run at half rates so that working people may live in the country and come to their work PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 31 every clay in the city at small expense. The Glasgow roads became public property in 1894. A record made a couple of years before showed the average fare under private owner- ship to be 3.84 cents per passengar. In 1896 the average fare had been reduced to 1.84 cents per passenger, and in 1898 it had fallen to 1.78 a drop of more than 50 per cent, in five or six years, while in Boston we pay the 5-cent rate, the same as we did ten years ago. The operating cost in Glasgow is 1.32 cents, and the total cost 1.55 cents, with 12 passengers per car mile and horse power, which is considerably more expensive than electric traction. London has a 1-cent rate for short distances. Liverpool, Dublin, Belfast and Edinburgh have a 2-cent short ride rate. The average of all the fares collected in these five cities is below 3 cents. Toronto has 3-cent tickets good from 5.30 t-o 8 A. M., and from 5 to 6.30 P. M., school children's tickets 2% cents, good from 8 A. M. till 5 P. M., and general 4-cent tickets good any time in the day; single fare, 5 cents; night fares are double the day rates, and this brings the average fare up to a shade above 4 cents. How long will the working people of our cities be content to pay monopolists double rates for street car service? And how long will intelligent and conscientious city officers and legislators be content to permit the monopolists to mulct the people in this way? Tlie Bell Telephone Monopoly charges $24 to $75 a year in small places for services worth from $6 to $20, and in large cities $90 to $240 for services worth from $30 to $100. 22 Comparing the long distance tariff in the United States under private monopoly with the government tariffs in England and France, which are like ours expressly framed on the scale of distance, we find the public tariff in England about 1/3 of our private tariff, and in France a good deal less than 1/3 of our tariff on long distances a difference in charges far too great to be accounted for by any existing differences in general prices or cost of labor. 23 For the telegraph also our people have had to pay and are paying double rates to the Western Union monopoly. 24 And even the rail- roads have been known to make excessive charges." 23 See the writer's chapter on The Telephone in "Municipal Monopolies." p. 330, et seq. 53 Ibid., pp. 338-9. "The Washburn Committee of the National House, and Postmaster General Croswoll. examined the rates and distances here and in Europe, and found our rates more than double the rates in Europe, mile per mile, and when intrninl rates in Europe were compared with internal rates h< the committee found that the rate per mile in England was less than one-third the rate per mile in the United States, and in France less than one-fourth of our rate, mile per mile (House Report, 114, 41st Cong, -a 32 THE CITY FOR THE PEOPLE. Monopolies by combination, weight of capital, or privilege secured by agreement with the owners of a natural monopoly, or a legisla- tive monopoly, such as a patent or a franchise, frequently manifest the same tendency to unfair charges. In the Bramkamp wire nail case, 26 the attorney for the trust ad- mitted that the combine had raised the price from 80 cents to $2.50 a keg, wholesale, securing thereby a monopoly profit of several million dollars. That trust went to pieces, but recently another has been formed, and wire nails have advanced 100 per cent, beyond the ordinary competitive price. 27 The coal combine was investigated by Congress in 1893, and the report declares (1) that in 1888 the extortions of the coal monopoly averaged more than $1 a ton, or 39 million dollars for the year, and (2) that from 1873 to 1886, $200,000,000 more than a fair mar- ket price was taken from the public by this combination. It also appeared that in 1892 the combine raised the price $1.25 to $1.35 a ton on the kinds used by housekeepers, tho the price of coal was already high, and the cost of mining diminishing every year. Vice President Holden, one of the leaders of the combine, testified before the New York Senate Investigating Committee, that "in advancing the price of coal the cost of production or transporta- tion is not considered at all." The Linseed Oil Trust in 1887 put the price up from 38 to 52 cents a gallon, or nearly five million dollars additional tax on the yearly output. In the same year the Copper Syndicate put up the price from 10 to 17 and 18 cents a pound, or thirty millions addi- tion on the yearly output. A Congressional investigation in 1893 brought out the fact that on the strength of a rumor that the internal revenue tax was to be increast by Congress, the Whisky Trust raised its prices 25 cents a gallon, which would amount to an additional profit of $12,500,000 on its yearly output. In 1888, just after the Sugar Trust was formed, the average price T 8 h 8 ;' T^ 57 " 6 , 2 ' J 9 ' 32; , R ,, M - Gen>ls Re P- N v. 15, 1872, p. 24. See also Ihe Telegraph Monopoly," Arena, Vol. 15, pp. 400-403) telegraph rates gation two years a o ' J found tQ e following contrast in Ordinary Eat per Ordinary Minimum Average Receipt Word in Cents Charge per 11,-a- per Message sage in Ceuts in Cents Great Britain ____ 1 10 i~i/ France ...... ^ lo|/ 2 Germany ..... } v 1^ Belgium ............ ..;;; %, \* R1/ Switzerland ..... i/ 5 ^ Austria ....... -, /2 1~ United States .......... '.'.'.'.'.'.'.'.'.'. 2 to 7 5 QI See Arena, vol. 16, p. 637. in a future number of the E I' C1 i r- Court - Indianapolis, Nov. 1896. Nails wore retailins it " .3 "Review of Reviews, Vol. XIX, p. 680. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 33 of raw stigar was the same as in 1885, but the average price of re- fined sugar advanced so that the difference 28 between the price of raw sugar and the price of refined sugar was 76 per cent, more than in 1885 and about 70 per cent, more than in 1887, the year the trust was formed. Since then refined sugar has fallen in the market, but raw sxigar has fallen more, so that the difference has never been as small as in 1885, the enlarge- ment being 70 per cent, in 1889, 16 per cent, in 1891, 50 per cent, for 1892 and 1893, 23 per cent, for 1894-5, 27 per cent, for 1896 and 32 per cent, for 1897. For a dozen years we have paid each year a good deal more per pound for refining sugar than we did in 1885 (altho the cost of refining has been constantly diminishing), and our sugar bill has averaged at least 10 and perhaps 20 millions a year more because of the trust. 29 The Standard Oil is another monopoty that has kept prices from falling as much as the diminisht cost of transportation and re- fining would have caused them to fall in an open market 30 and at times it has lifted prices absolutely as well as relatively in spite of the vast improvements in processes of manufacture, great cheap- ening of transportation by the pipe line service and the falling price of crude oil. From 1894 to 1897, for example, the price of refined oil went up 14 per cent., while the price of crude oil de- clined 6 per cent. 30 If any one has conscientious scruples or business interests which, in spite of the facts above described, persist in interfering with his understanding that private monopoly tends to extortion, he will be introduced to tenfold more facts that tell the same story, if he will investigate the matter thoroly for himself; or if he will wait till I get time to write up the rest of the materials at hand. THE PROFITS OF PRIVATE MONOPLY. 2. Enormous profits result from excessive charges, and the monopolistic roll in wealth while the working masses and com- petitive classes are cheated out of their fair share of the world's wealth. In private water supply we have seen monopolists taking 20 to 40 per cent, profit on their money (see above). In Chi- 25 This difference is what goes to the trust, which is simply a refiner. 29 Review of Reviews, Vol. XIX, n. 685. 30 Ibid., p. 684. A monopoly may even reduce prices below what they would be In an open market, and yet its charges may be unreasonable, be- cause the margin between the charge and the cost of production is too great, the public not being accorded a fair share of the economies effected in the business. Finally a monopolistic concern may temporarily reduce prices to a reasonable level or even below it in order to crush out existing or threat- ened competition, or for some other purpose, But the fact remains that, in proportion to the strength of the monopoly, It is in the discretion of the monopolist to raise his prices to an exorbitant degree, and he is almost sure to fix them so as to draw to himself the largest possible monopoly profit, or unearned increment, disturbing to the utmost the fair distribution of wealth. 3 34 THE CITY FOR THE PEOPLE. cago we have found gas profits of 15 per cent. 1 According to an official statement in the Progressive Age July 1, 1891, the Laclede Company, of St. Louis, was making a net profit of 66 cents per thousand, or over 18 per cent on the cost of duplication. In Topeka and in Trenton the gas profit appears to be 25 or 30 per cent, on the real value of the plant. In New York the gas profits of the past have been enor- mous, and, even with the present comparatively low rates, the profits run about 25 per cent, on actual investment, and Con- solidated Gas stock, in spite of generous infusions of water, is selling to-day at 213. The oldest of the New York compa- nies has paid 40 per cent yearly in cash on the $750,000 actu- ally paid in, and over 1000 per cent, in stock dividends be- sides. 2 The New York Senate investigation of 1885 (Sen. Doc. 41) brought out the fact that "The gross sum paid for the ten past years by the gas consumers in the city of New York to the companies, irrespective of any other source of income to them, was $74,656,884. Of this amount nearly half was clear profit, viz, $30,074,715. * * * During the last ten years, in addition to costs of gas and 10 per cent, on the share or nom- inal capital of the companies named, there has been paid by the consumers of New York city about $9,000,000. * * * Taking all the companies, $4,941,000 have been paid in divi- dends in excess of 10 per cent, on the nominal capital in ten years, and the works have been increased out of earnings to the extent of $6,413,000" more than 11 millions above 10 per cent, on the nominal capital, water and all. "If the 10 per cent, annual dividends are calculated on the capital act li- ft Hi/ paid in by the stockholders, it would appear that the gas consumers in ten years have not only contributed such 10 per cent, dividend, but a further amount sufficient, in fact, to nearly duplicate the present system of gas supply" The dividends on stock during the ten years were in nearly all cases from 8 to 35 per cent., in spite of the water or inflation, which, at the time of the investigation, amounted to about 1 Selling price $1 per M, operating cost, taxes and depreciation 45 cents, profit 55 cents; claimed Investment, !?3.80 per m. (See section 1). 2 Municipal Monopolies, p. 503. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 35 2/3 of the capitalization. The average net income for the Manhattan Company during said period was 82 cents per thousand feet, besides $1,626,247 for construction and repairs. In the Metropolitan the profit averaged 85 cents; in the Mu- nicipal, $1.03, and the Mutual, with an average price of $2.29, obtained a net average profit of $1.19, or a net average in- come of $1.08 per thousand feet, besides accumulating a sur- plus of $2,809,327 and expending $616,341 for repairs. A steady profit of nearly 40 per cent, a year on the real value of the investment is pretty good, but Boston can do better than that. The legislative investigation of the Bay State Gas Trust, in 1893, revealed the fact that the Bay State Gras Company had, in the preceding year, paid out $477,000 in dividends and interest, and that the total cost of the plant was $750,000, showing a profit of nearly 60 per cent, on the actual invest- ment. 3 In the Cleveland gas case the evidence showed that the company was paying cash dividends of $1440 a year on each original investment of $1000, besides stock dividends amount- ing up to 1892 to a total of $24,000 for each investment of $1000. The original investor of $1000, without further pay- ment, was receiving an innocent looking 6 per cent, on $24,000 of securities 144 P er cen t- casn profit per year on the real investment and a gift of new securities that would sell in the market for more than $24,000. 4 AY hen John Mcllhenny, of Philadelphia, was asked in court his opinion of this, he said: "That is not an unusual thing in this growing country at all. It is about the history of all the prosperous gas works." 3 Report of the Investigation, revised by Mayor Matthews of Boston, who led the movement, Rockwell & Churchill, City Printers, Boston, 1893. The company admitted receipts of $777,760 in the preceding year, and placed the operating expenses including taxes at $318,837. The report does not state whether or no the company allowed for depreciation; if so the net profit would rise above 60 per cent., if not it would fall somewhat below 60 per cent, on the investment. Mayor Matthews estimated the total ille- gitimate or monopoly profits of the Gas Trust (several Boston companies combined) at $2.000.000 in 3 years and 10 months, after allowing 8 per cent, on the capital invested which he deemed a legitimate profit. The Gas Combine in about four years had succeeded in lifting the profits of the com- panies from $450,000 to $874,000 a year, the former rate being already too large. (See Haverhill Case 70 per cent, gas profit, Appendix II A.) 4 Municipal Monopolies, p. 592. 36 THE CITY FOE THE PEOPLE. In 1890 electric light was selling in Boston at a profit ol 50 per cent, on actual values. And in spit of the great reduc- tion of rates produced by the public ownership movement and the growth of intelligent comprehension of the facts, electric light is still sold in Philadelphia, New York and numerous other cities at rates sufficient to yield over 30 per cent, on the real investment. 1 The Philadelphia Traction Company requires less than half its receipts for taxes and operating expenses, so that it has over 5 millions a year for profit and depreciation. If we estimate depreciation at 5 per cent on the probable cost of duplication, there will still be 4 millions, or 16 per cent, profit on the real value of the plant. 2 In Detroit the Citizens' Company (the 1 In general, all above $65 to $70 per standard arc year is profit. Only In a few cases does the cost, aside from interest or profit, rise to $80. The operating expenses per standard arc (2000 c. p. all night and every night) usually run from $50 to $60 with coal from $2.25 to $3 a ton. For taxes allow $2 per arc, insurance about the same. For depreciation allow 3 to 5 per cent, on the actual value of the plant, an amount which varies from $150 to $300 even a plant as good as the Chicago plant with all its underground construction can be duplicated now for $300 per arc, a,nd a first class plant with overhead construction can be built for $250 per standard arc or its equivalent. (See Arena, Vol 14, pp. 86 and 439 and authorities there cited; also Muncipal Monopolies, p. 209, et seq.). With these data the reader can test the electric profits of his own place, and if the result indicates a high percentage, he should get an expert to make an accurate estimate, or make it himself with the aid of the facts and principles set forth in the authorities just quoted, and if the profit still figures high he should rouse his fellow citizens to demand a reduction of rates, or better still, public ownership of the electric plant. 2 This 16 per cent, does not by any means represent the profits on the money actually paid in on the stock. Most of the cost has been paid out of earnings and the 12 milllions derived from the funded debt. The real profits of the monopolists amount to 20, 30, 40 and even 67 per cent, on the money paid in on stock, as appears from the following state- ment taken from p. 42 of the Railway System of Philadelphia, by Professor F. W. Speirs of the Drexel Institute. "The very large profit on actual investment in Philadelphia railways is registered in the price which these operating companies pay for the privilege of exercising the franchises of the original companies. The following table shows the net return which the present stockholders of the original railway companies are receiving on paid-in capital stock under guarantee of the operating traction companies. The lease terms of the principal lines of the Philadelphia Traction system provide for net returns on paid-in capital stock as follows: Name of Company. Annual Dividend on paid-in Capital Stock. Continental 20 7< Philadelphia City 315 Philadelphia & Gray's Ferry 16 Ridge Avenue 42.8 Thirteenth & Fifteenth Streets... 656 Union 01 'g West Philadelphia ....'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'. 20.'o The dividend charges of the Electric Traction Company are as follows: Frankford & Southwark 27 Citizens tff Second & Third Streets. .".'.'.'!.".'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'. 25 (Note continued on next page.) PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 37 old company) realizes 14 per cent, profit on its stock, water and all, tho selling 6 tickets for 25 cents, with a 3 cent fare (8 for a quarter) night and morning. In Montreal 12 per cent, profits are made on a 4 cent fare and school children 2i cents. The Metropolitan Company, of Washington, D. C., makes 15 per cent, profit on the cost of its system. The Third Avenue Cable earns $38,422 a mile net, or 22 per cent, on the actual cost of the road and its equipment. The profit on. the Broadway line is probably much greater, but the separate figures are not at hand. The whole Metropolitan system,, cable, electric and horse, netted $8000 a mile in 1893 and $25,000 in 1897. Mr. Edward E. Higgins, one of the fore- most writers on street railway matters, told investors in 1895 that in cities of one to five hundred thousand inhabitants net earnings of 15 to 25 per cent, on the actual cost of duplicat- ing the tangible assets might be expected from the street rail- ways. 1 Another high authority 2 says that in 1897 the American street railways were earning $150,000,000 gross, and 40 or 50 millions net return on the investment. And the increase of profits is very rapid, in spite of the bicycle. We have al- ready noted the tripling of net earnings on the Metropolitan system from 1893 to 1897. Further proof will be found in the following circular issued by the Citizens' Committee of Boston and presenting some facts from the Street Railway Supplement of "The Commercial and Financial Chronicle," February 27, 1897. It shows that during the period from 1890 to 1897, when business in general was very dull, failing to keep pace with the growth of population, and suffering in many places an absolute decline, yet street railway earnings enjoyed a marvelous increase. The Peoples Traction Company has pledged the following dividends on> paid-in capital stock: Germantown 24 Green & Coates Streets 40 The Thirteenth & Fifteenth Street's dividend is to be increased to 71.6 per cent, after 1900; the Frankford & Southwark to 36 per cent, by 1903; and the Citizens to 72 per cent, after 1899. 1 "Street Railwaay Investments," p. 77. 2 The Street Railway Journal, Oct., 1897. 38 THE CITY FOR THE PEOPLE. Growth of Street Railway Earnings. in Street Railway Earnings since 1890 ., 28 in clearings since 18UO in clearings since 1890 25 52 93 63 8 Philadelphia 44 15 68 13 68 3 St Paul 66 18 51 5 Boston . 55 13 In some places where there has been a considerable extension of lines, the traffic and earnings have increased at still higher rates. For example, the earnings of the Worcester roads have grown 170 per cent, and the trackage over 200 per cent, since 1890, while clearings have risen only 16 per cent.; in Springfield, the trackage and earnings have grown 180 per cent., while clearings were sta- tionary; in Buffalo, the trackage and earnings have increased 140 per cent., while clearings have fallen 5 per cent.; other similar cases of enormous increase of earnings are chronicled. Pittsburg, 133 per cent., while clearings fell off 5 per cent.; New Haven, 185 per cent., while clearings rose but 12 per cent..; Hartford, 270 per cent., while clearings advanced 14 per cent., etc. In Boston and its suburbs, street railway traffic has nearly doubled in the last ten years. Since 1888, the first year of the West End consolidation, the number of miles of track operated by the company has increased 10 per cent., while the passenger traffic has risen 80 per cent. If such results have been achieved in the last eight years of severe depression, what may we expect from the next thirty years of probable prosperity and ever accele- rating progress? Telephone profits amount to 12, 20 and even 30 per cent, on real investment in towns and smaller cities, while some of the charges in our largest cities are sufficient to yield more than 100 per cent, clear profit. The Bell Company proper reports $21,000,000, or 2/3 of its receipts since the beginning as clear profit above all expenses, including interest, and for 1897 its profit was $4,169,000, or 4/5 of the gross receipts. In a ]STew York investigation the sworn testimony of the officers of the Metropolitan Telephone Company showed that its net profits were 474 per cent, in six years on the cash capi- tal invested 116 per cent, in 1885, 147 per cent, in 1886, 145 per cent, in 1887, etc. While the rate was $60, then raised to $150 and again to $180, the company netted $2,843,- ,454 in six years on an original cash investment of $600,000. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 39 The owners of the Western Union Telegraph pay all ex- penses and interest on bonds and then have left a clear profit of 120 per cent, on the property value that remains after sub- tracting the amount of the bonds from the cost of duplicating the plant. 1 One hundred and twenty per cent, is a pretty good profit even for a monopolist, but there is more. The Hon. John Wanamaker says that "An investment of $1000 in 1858 in "Western Union stock would have received up to the present time stock dividends of more than $50,000 and cash dividends equal to $100,000, or 300 per cent, cash dividends a year." 2 Think of it, getting your money back a hundred times in cash and fifty times more in good securities, selling now at 98 in spite of all the water in them 300 per cent, a year in cash and 150 per cent, in stock! The net profits of the Tin Plate Trust are estimated at 40* per cent, on actual values, and those of the Wire Trust at 60 per cent, a year. 3 The Sugar Trust has realized profits at the rate of 214 per cent, in 1888, 400 per cent, in 1889, 200 per cent, in 1893, etc., 4 and some of its members at least are now receiving more than 360 per cent, on actual values. 5 The Oil Monopoly has been known to make 530 per cent, on its whole capital year after year, and some of its invest- ments and enterprises have netted it as high as 800 per cent. 1 Arena, Vol. 15, p. 600. - P. M. Gen'l Wanamaker's "Arguments for a Postal Telegraph," 1890. 3 Review of Reviews, Vol. XIX, pp. 687, 688. 4 See data for these conclusions in Henry D. Lloyd's "Wealth against the Commonwealth," pp. 32, 33, citing investigations by committees of Congress and the New York Senate. The percentage in 1893 is really infinity because the $10,000,000 bonds more than covered the real values, which were placed at $7,740,000, excluding refineries that had been closed or dismantled by the trust. The whole $75,000,000 of stock was therefore water as well as part of the bonds. So that the 15 millions of dividends and surplus after paying interest on the bonds, was a profit on pure space, rather than 200 per cent, on the $7,740,000 real value which belonged in truth to the bondholders and not to the stockholders. 5 The Trust is now paying 12 per cent, on its common stock. The Brooklyn refineries, capitalized at $500,000. were brought into the Trust at $15,'000,000 in stock. So that in respect to the Brooklyn Company at least the watered capital appears to be quite 30 times the real, and 12 per cent, on the stock means 360 per cent dividends on real values, to say nothing of Brooklyn's share in the rapidly accumulating surplus of the Trust, which amounts to over 30 millions (see data in Review of Reviews, Vol. XIX, pp. 684-5). 40 THE CITY FOR THE PEOPLE. a year, and in one case, thru railroad rebates, over 3000 per cent, profit per year was obtained. 1 Do you realize the meaning of all this? Do you grasp the full significance of these enormous profits and the excessive charges on which they are based? Do 'you perceive that monopoly in private hands means taxation without repre- sentation and for private purposes? Do you know that our people now are subjected by the monopolies to a taxation by the side of which the taxes levied by King George and his Par- liament are as the dust in the balance? Taxation without representation is tyranny, and every mo- nopolistic franchise, privilege or possession, by nature, law or agreement is a transgression of our liberties. A monopoly in private hands gives its owner the power to collect from con- Burners more than the value of what they receive. One may diarge the fair value of the service he renders without a mo- nopoly. The advantage of monopoly the reason men strug- gle so hard to obtain it is the power it gives to charge more than that value. In other words, a private monopoly confers the inestimable privilege of demanding something for noth- isg, and involves the power of taxing the people for private purposes. If these magic methods of accumulating riches were equally diffused, it would not be so bad ; but the working people, as a rule, are not represented in the gas and electric light trusts, the street railway companies, the sugar trust or the oil mo- nopoly. They have to sell their labor and produce in a com- petitive market, and buy very largely in a monopolized market. There are two principles of the common law that are of the utmost moment to students of monopoly. The first is that a monopoly is void as against public policy. 2 The second is 1 Wealth against the Commonwealth, pp. 67, 99 and 100. * Chicago Gas Light Co. vs . People's Gas Light Co., 121 111. 530; Richardson vs. Buhl, 77 Mich. 632; see also 68 Pa. St. 173, 186; 50 N. J. Eq., 52; 130 U. S. 396. In the Michigan case Chief Justice Sherwood said: ''Monopoly in trade or in any kind of business in this country is odious to our form of government. * * * Its tendency is. destructive of free institutions, and repugnant to the instincts of a free people." In the Case of the Monopolies (11 Coke, 84, b) it was held that even the sovereign power of Queen Elizabeth was incompetent to create monopolies PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 41 that a legislative body in a free country has no power to tax for private purposes, and cannot confer such power on any man or set of men. 1 From these two settled principles of our law it clearly fol- lows that no franchise or monopolistic privilege can lawfully be granted in America, and that all such grants actually made are void ab initio. The established rules of the law, logically carried out, would render utterly void every monopolistic franchise and ownership in existence. The public and the public only may lawfully own a monopoly, because under such ownership, and only under such ownership, does the power of taxation involved in monopoly become a power of taxation for public purposes and not for private purposes. All this is clear, and yet our judges would probably hesi- tate to declare a legislative franchise void to-day even if the argument against its validity were fully and strongly urged, (which it never has been so far as I know). And they would hesitate because of the long line of such enactments in the past, and the disturbance that would be caused by an adverse decision at this late day. And yet it is perfectly manifest that the fundamental principles of republican government are broken every time a franchise is granted, and every mo- ment a monopoly is maintained by aid of the law instead because they were detrimental to the Interests of the people. And if the "Divinely Commissioned Ruler" of the people may not Inflict this injury upon their interests, by what authority can it be done by the servants of the people, elected to conserve their interests, not to defeat them? An agent must be loyal to his principal's interests, and the moment he ceases to be so his authority vanishes. This is bed rock in the law of the civilized world. 1 A legislative body can tax, or authorize taxation, for public purposes only (U. S. Supreme Court, 20 Wall, at 664, V. S., 487, 58 Me. 590, 2 Dill. 353. Cooley on Taxation, p. 116 and cases cited) and taxation for the benefit of an enterprise in private control is not for a public but for a private purpose, and is beyond the sphere of legislative power. (Judge Dillon in 27 la. 51, and 58 Me. 590. See also 20 Mich. 487.) It makes no difference whether the constitution says anything about it or not. The provisions of the constitution are not the only limitations on legislative power. There are others that inhere in the very substance of republican institutions, underlying the constitutions as essential to the very purposes for which the constitutions exist, and therefore impliedly recognized by the creation and maintenance of said constitutions. (The U. S. Supreme Court in 20 Wall. See also Judge Billion in 27 la. 51; 25 la. 540; and 39 Pa. St. 73.) These cases and many others declare that legislative power is limited by the great principles of justice for the enforce- ment of which government is instituted, that acts in violation of these principles will be held void by the courts, although no provision of the constitution can be found to. condemn them, and that the taking of As property to give it to B, or the identical act of giving B a power whereby he may help himself to A's property is beyond the limits of legislative authority. And what the legislature cannot lawfully do directly because of the injustice 1 of the act, it cannot lawfully accomplish indirectly under the guise of a franchise. 42 THE CITY FOB THE PEOPLE. of being swept into the list of illegalities, as it should be. The people are bitter in their denunciation of trusts, and Congress has passed severe laws against them for the sole reason that they are monopolies. Whereby we have the serio-comical spectacle of a government creating monopolies with one hand and enedavoring .to choke them with the other declaring absolutely void all monopolies formed by agreement among men because monopoly is in its nature contrary to public policy, and sustaining exactly similar, in some cases identical, monopolies established by the agents of the people without an atom of authority to do it, but thru a flagrant breach of their trust and in violation of the fundamental principles of free institutions. WATERED STOCK AND INFLATED CAPITAL. 3. Overcapitalization is the twin sister of extortion. Both arise naturally from the desire to squeeze as much wealth as possible out of the people and to keep the people quiet during the process. Get a franchise, issue a lot of stock, keep enuf of it to retain control of the enterprise, sell the rest, build your plant, bond it for all it is worth, and recoup all you put into the concern, then double up the stock and keep ad- ding to it as the business grows, so that an actual profit of 20, 50 or 100 per cent', on the real investment will be only 5 or 6 or 7 per cent, on the bonds and stocks, and so appear on the face of the accounts to be only a reasonable profit, not likely to arouse opposition or set in motion the legislative or administrative machinery for the reduction of the rates such is the normal monopolistic plan. And if some public- spirited citizen should stir things up and obtain a law or ordi- nance or order reducing rates, the monopolist can take the matter into the courts and protect his extortions in large de- gree by showing that much of the bonds and stock have come into the hands of "innocent purchasers for value," wherefore he must be allowed to make interest and dividends on the whole capitalization, else the said innocent holders will be cheated out of a fair return and their property practically confiscated, which would be a very wicked thing if it were caused by PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 43 legislative reduction of rates acting on a condition of grievous overcapitalization, but is perfectly justifiable if caused by the stock manipulation or the profit-absorbing tendencies of the monopolist himself. Water in the capital is useful also in protecting the monopolist from public ownership. Dilute the figures so that the profits will seem quite small, and the people will let things go on till the business pays 5 or 6 per cent, or more, on the whole capitalization, and the stock rises to par in the market, water and all, and then if the people get to reading "foolish" books on public questions, or be- come disgusted with corporate monopolies by direct expe- rience, and begin to demand public ownership of gas, electric light works, or street railways, or whatever line you may be in, you can get the legislature to pass a law (if it has not already done so) requiring that cities desiring public owner- ship of public utilities shall buy out existing plants, and the courts will make the cities pay full market value, the effect of which will be to keep your city from going into public ownership, or to give you several times the value of your plant if it does. Some facts regarding overcapitalization may indicate the extent of the evil. For gas plants in large places $3 per thousand feet of output is a fair capitalization, $4 being about the limit. 1 Yet in many states the average gas capitalization rises to $8 or $10 per thousand. In 1890 Brown's Gas Direc- 1 In Massachusetts, in 1897, there were six gas companies outside of Boston having an output of more than 60 million feet each, and free of the complications in accounts which result from the union of electric light and gas works. These companies were in Cambridge, Fall River, Haver- hill, Lowell, Springfield and Worcester, and their average capitalization was $2.87 per thousand feet of output. The Mutual Co., of Hyde Park, Chicago, reports $2.69 stock per M. It has no bonds, and all it claims in sin-plus and tangible assets amounts to $3.80 per M. The capitalization in Richmond is $3; in Philadelphia and In Wheeling about the same. For Washington it was $3.25 in 1890, and $2.59 in Milwaukee. Professor Bemis, our highest authority on gas, says that in Great Bri- tain the total capital that has been raised or borrowed by the public gas companies averages $2.99 per M. of annual output, and in the case of the private companies, $3.27. The average "capital employed" apparently the structural value in eight leading public plants and ten private companies was $2.60 and $2.46 per M. The Professor says there is no reason why gas construction should cost more here than In England, and in cities of 200.00C or more east of the Rockies, he says, the cost of duplication wonld rarely exceed S4 per M. The data collected by Prof. Bemis, Prof. James and Mr. E. C. Brown, editor of The Progressive Age, indicate that in places of 5,000 to 25,000, where the population is scattered, . the real investment is usually from $4 to $6 per M: in places of 35,000 or more it is $3 to $5, and in places above 200,000 it is $3 to $4. (See Bemis on Municipal Ownership of Gas, Amer. Econom. Assoc., pp. 42-5, and his chap, on Gas in Municipal Monopo- lies, pp. 624-5, 627, 590, 591, 598, 608; also Brown's gas directory in Progres- sive Age for 1890, and Prof. E. J. James' "Relation of the Modern Munici- pality to the Gas Supply," Pub's of Econ. Assoc., Vol. I, 1886-7.) 44 THE CITY FOB THE PEOPLE. tory placed the capitalization at $9 in Rochester and St. Paul, $13 in Jersey City, $11 in San Francisco, $14 in Baltimore, $19 in St. Louis and $20 in New Orleans. The present capi- talization in New York city is $10, and in Boston it is $42 per thousand feet of annual output. 2 The Mutual Company of Chicago has been bought by the People's Company, which issued $5,000,000 of bonds in place of the Mutual stock, representing $2,119,667 of tangible as- sets. This made the capitalization $9 per thousand feet, a figure which holds true of all the Chicago companies. Their capital is two-thirds water, and their 60 millions of securities, representing 20 millions of structural value and 40 millions of free gift by the people, are above par. In one Chicago gas case it was affirmed on oath that only $100,000 had ever been paid in in cash to the company, whose stock, in 1887, was about 5 millions, and which, in that year, issued a divi- dend in bonds of 7-| millions, while the stockholders almost doubled their stock in a consolidation of companies then effected. 3 This shows more than 2 of water to 1 of solid since 1887, and an original investor of $1,DOO has now $175,000 of securities, or 17,500 per cent, on his investment, without counting the cash dividends he has received. In Boston in the eighties the Bay State Gas Company was capitalized at $5,000,000 on an actual capital expenditure of $750,000. 4 And the "Boston Gas Syndicate," or "Gas Trust," formed in 1889 by the Bay State and four other com- panies, added $13,365,000 illegitimate capitalization to the $4,640,000 lawful capitalization of the component compa- nies, making a total capitalization of $17,000,000, or nearly 4 times the honest figure. 4 The growth of the water evil in Boston has been aston- ishing. In 1888 the gas capitalization in Boston was about 2 See below for Boston figures. The New York Senate investigation of 1885 found the gas capitalization in New York city at that time $8.75 per M. and stated that the fair capitalization would be about $3 per M of an- nual output. * Municipal Monopolies, 593. 4 The Matthews Legislative investigation of the Boston Gas Trust, Un- mutilated report, City Print., 1893, pp. 6, 47, 48, 95. There were some patents stated at $250,000, in addition to the 750,000 spent in constructing works and laying pipes, but there was no evidence to show that the Bay State ever paid a dollar for the patents, or that they had any value. There was no entry on the Bay State's books of paying anything for patents. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 45 $4 per M, which was not unreasonable, but now (1898) the Boston companies, as a whole, present one of the worst cases of dropsy to be found in the history of diluted capital. The amount of water in their composition is astounding, their total capitalization being in round numbers $99,000,000, or $42 per thousand feet of annual output, which is more than ten times the fair capitalization per thousand in this city. 5 The water in the stock values of Philadelphia street rail- ways averaged 5 to 1 in 1897, and is now about 7 to 1. If we consider the relation between stock values and amounts paid in we shall find it 19 to 1 for the Thirteenth and Fif- teenth street lines, 16 to 1 for the Citizens', 10 to 1 for the Ridge avenue, etc. 6 When the Lynn and Boston, Lowell, Lawrence and Haver- hill street railways were consolidated, the capitalization was increased from $27,000 to $60,000 a mile, or about 125 per cent., nearly the whole increase of which was water. The West End consolidation doubled the capitalization of the Bos- ton companies, and as their capitalization was already in ex- cess of the cost of duplication, it is a mild statement to say 5 The Boston capitalization is over 4 times the New York and nearly 5 times the Chicago capitalization, tho both of these are principally water. In 1888 the Boston companies had an output of 1,161,000,000 feet and a capital of $4,500,000, or a little less than $4 per M of output. In 1898 they have twice the output and 23 times the capitalization of ten years before, or 11% times as much capital per M instead of less, as should be the case with the growth of the output. (See figures of Prof. Gray and Prof. Bemis, Mu- nicipal Monopolies, p. 599.) According to the report of the Gas Commission for 1890, the capitalization of the Boston Gas Co. was under $2 per thousand of output, while the Bay State Gas Co., then in its second complete year of operation, was capitalized at $36 per thousand. "According to figures for January, 1897, given by Professor F. W. Speirs, of Drexel Institute, pp. 43, 47, of the "Street Railway System of Philadel- phia," the market value of the stock of all the street railway companies of Philadelphia exceeds $120.000.000; the funded debt is about $12,000,000; the amount of paid capital stock is about $50,000,000, and the total cost of the construction and equipment of all the roads is about $36,000,000, or $76,400 per mile for the 447 miles of track $56,300 per mile if the cost of paving from curb to curb is subtracted. And as the returns to the Secretary of State refer presumably to original cost the present cost of duplication is probably less than $50,000 per mile. The par capitalization, or amount of debt and stock at par values, was $108-301,800. or $242,280 per mile of track, nearly 5 times the actual value. The market capitalization of $132,- 000,000, or $290,000 per mile, was nearly 6 times the real value of the rail- way plant, and about 4 times the total expenditure, paving aiid all. If the debt is subtracted from the total duplication value, paving and all, we find water in the stock values to have been 5 to 1. Since Professor Spiers wrote, the Philadelphia stocks have advanced so as to increase the market capitalization $42,800,000, for which $1,620.000 must be subtracted for the Hestonville shares owned by the Union Trac- tion, leaving $40,180,000 increase, referable to the 447 miles under consid- 4(J THE CITY FOE THE PEOPLE. that over half the capitalization of the West End in 1889 was baseless. The Massachusetts Board of Railway Commission- ers says that part of the increase of $12,477 capitalization per mile 'for all the Massachusetts companies in 1892-3 was "stock-watering pure and simple," and that many companies did not write off proper depreciation. 7 The three leading Chicago street railway systems have a par capitalization of $130,000 a mile of track, with a market valuation of about $200,000 a mile, while they can be dupli- as values and the amount paid in are shown in the last column below. Strcft Railway Stock Values and Amounts Paid In. Relation '<.- Amount Market Present tween Stock X.VMK OF COMPANY. Par Value. dln Price.^ MarK^ V,,,,,;- ,, I paid in. Continental ........................ $60 $29-00 $131 $145 5 to 1 Philadelphia City ................. 50 23,7o 172 208 Philadelphia and Gray's Ferry ...... 50 2o.OO 82% 101 4 to 1 Ridge Avenue ..................... 50 244 601 iu TO i Thirteenth and Fifteenth Sts ...... 50 16.7o 227% 311 ' I0 88 18 IS 5 t'o . 50,00 334 450 to 1 Second and Third Sts. .. . . M . ".- 58 40.00 237 Germantown ..... 50 21.66 125 loO 7 to 1 GreeTa'nd CoaYeV Sts. . . . .......... 50 15.00 13234 140 9 tc Philadelphia Traction .............. 50 50.00 69% Union Traction .................... 50 10.00 9y 2 Union Traction stock is the chief variable, the Union Traction being the consolidating company, that has gathered all the rest under its wings ana guaranteed dividends on the stock of the absorbed roads. A new a ment of $7% a share has been made by the Union Traction, making t total paid in $17% instead of $10, as in 1897. The other figures in the paid-in column remain the same. The company has 6 cars per mile of track. When Prof. Speirs wrote. IE 1897, the Union Traction system included all the street railways in Philadel- phia except the Hestonville line. The next year that was brought into t Union, but its miles and capitalization have been subtracted from present totals, so as to deal with the same system Prof. Speirs wrote about. 7 Since then something has been done toward more effectively restricting overcapitalization of street car lines in Massachusetts, and the average capi- talization has fallen from $53,000 per mile, in 1894, to $44,683 in 1897. In the central states the average capitalization was $91,500 per mile in 1897, and In the middle states, $138.600. Prof. Bemis thinks the fair capitaliza- tion in Massachusetts would be in the neighborhood of $35,000 per mile, and cites the splendid road in Springfield (with 3 cars to a mile and 180,36- passengers per mile), which cost $33,987 a mile, could be duplicated for $31,500, and is capitalized at $30.829 a mile. (Municipal Monopolies, p. .">.">.> My own investigations lead to the conclusion that $25,000 to $35,000 a mite Is sufficient for a trolley road, except in very large cities. In 1890, wh<>r< the West End claimed about $84,000 a mile. Mr. B. E. Higgins (Editor of the Street Railway Journal, N. Y. city, a very high authority entirely favorable to the private companies) estimated the cost of duplication for Boston at $62,682 a mile as the maximum (St. R'y Jour., March, 1896). He referred to this estimate as high, and in another series of articles, in which the companies were not named, but identification was easy by the data, he said the system might possibly be duplicated for 60 per cent, of its capitalization about $51,000. Paving would add probably $8,000 a mile. The present stock and bond capitalization is $86,000 for each of the 304 miles owned by the company. It operates 315 miles (300 overhead trolley and 15 horse) aud has eight to nine cars per mile. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. -\1 cated for $60,000 a mile. 8 The North Chicago Railway, worth about $60,297 a mile, is capitalized at $146,346, face, $246,000 market value, and assessed at $5,000 a mile. The "West Chicago, worth, with the tunnels, about $61, TOT), is capitalized at $149,500 face, $186,000 market value, and assessed at $5,445 a mile. Out of about $50,000,000 of stock issued by the eighteen companies in Chicago and its suburbs, about $31,000,000 is pure water from the start. In a num- ber of companies the stock is all water. For example, the Chicago and Jefferson, $1,000,000, all water: the Chicago Electric Transit, $1,500,000 stock, all water; the North Side Electric, $1,500,000, all water; the North Chicago electric, $2,000,000, all water; the Cicero and Proviso, $2,500,000 stock, all water, etc. 9 Even an issue of bonds is sometimes 8 Report of Illinois Bureau of Labor Statistics for 1896. Report of Special Committee of City Councils oh the Street Railways of Chicago, 1898, see folding table opposite p. 70 and also p. 306; Municipal Monopolies, pp. 513-4. The Spec. Com., p. 306, states the par capitalization of the three sys- tems at 33 million stock and 30 million bonds, 63 million total; the cost of duplication, $28,858,000, and the overcapitalization, $34,400,000, or $70,600 per mile each for the 487 miles of track. The North Chicago and West Chicago guarantee 30 to 35 per cent, dividends on stock of some of the leased lines (pp. 294-301). The three companies "West Chicago," "North Chicago" and "Chicago City" have 390 miles overhead trolley, 82 miles cable and 15 miles horse, 487 total. The Illinois Bureau of Labor Statistics, 1896, went into the question of cost in great detail and with the estimates of expert engineers, real estate men and the statements of street railway financiers arrived at the following conclusions: (1) That at the maximum the cost of the cable systems, with 50 cars to the mile and all machinery, power houses, etc., belonging with them, would average $136,000, aside from land and tunnels, while $100,000 a mile was probably nearer the truth. (2) That $40,000 a mile was ample for the overhead electric systems, aside from land and tunnels. (3) That, including land and tunnels, $60,000 a mile was a reasonable estimate of the cost of duplicating the whole of the three systems, electric, cable and horse. The land of the companies, valued by experts, amounted to $7,000 a mile for the whole system, with an average of twelve cars to the mile, and the tunnels averaged $4,000 a mile when the cost was spread over the whole 487 miles. On the estimates of competent engineers and statistics- of actual con- struction, the Bureau found that the 42% miles of ordinary construction on the five L roads could be duplicated for $250,000 a mile of double track, including stations; equipment and power plant, $75,000 $325,000 total, aside from right of way. On the 2% miles of loop, $750,000 per mile was allowed for construction and $500,000 per mile for "frontage." The average total per mile was $373,280 aside from damages or right of way. "In not a single instance was a cent paid for the stock (of the L roads), an aggregate of over $49,000,000 of water, pure and simple." Adding up the actual receipts from sales of bonds it was found that the total moneys received by the L companies and alleged to have been invested footed up to $33,203,000, or $754,000 per mile, the difference between this sum and $373.280, or $380,000, representing the cost of the right of way and the 'millions divided among the original promoters.' " 9 See letter of Mr. Vanderlip, quoted in 1896, report of 111. Bureau of Lab. Statistics: "I find in an examination of the street railway companies that there is a total of, roundly, $31,000,000 of stock issued by various local street railway companies that represents absolutely no investment. The capital stock of practically all the street railway companies organized in the last few years represents no money investment." A dozen cases of total water, such as those cited in the text, are then stated, and also the case of the Chicago Pass. Ry.. which "lias $2,000.000 of capital, half of which is paid for and half represents no investment." 48 THE CITY FOR THE PEOPLE. almost wholly water. For example, $3,413,050 of the $4,100,000 first mortgage bonds issued by the West Chicago Street Railway Company for the purchase of the $625,100 of Chicago West, Div. Ry. stock at $650 a share, represented no investment, and is therefore water in the form of bonds. 10 On the five L roads of Chicago there was put a capitaliza- tion of $1,555,000 per mile. They could probably be dupli- cated for $373,280 a mile, aside from right of way, and $754,000 a mile was all that was received for the securities of the roads all there was to cover construction, land damages and the millions divided among the original promoters. One of the roads, the Lake street, had $18,000,000 of liabilities in 1896, on an officially stated investment of $3,317,000 for 7-| miles of road, nearly $6 of liabilities for every $1 of actual cost. The market value of the St. Louis street railways is 4 times the actual cost. 11 The Milwaukee trolleys are capitalized at $100,000 per mile of track face value of stock and bonds, yet the company admitted in court, May, 1898, that the whole plant could be duplicated for $36,037 per mile. 13 The Cleveland roads have an authorized capital of $145,000 per mile, have issued $136,000 a mile, only claim $66,600 a mile loua fide investment; could be duplicated for $29,000 a mile, or $39,000 a mile with the paving, and report for tax- ation only $10,400 a mile. 13 The Capitol Traction Company, Washington, D. C., is capitalized at $333,300 a mile, and could probably be dupli- cated for less than $125,000 a mile. 14 1898p U 301 d substantlallv from Re P- s Pec. Com. of Chicago City Council, nf T 1 nh ( ; PO / t v?. Stre ? t .,?E- Franchi ses by Lee Meriwether. Commissioner ^ 4i-n is80un ' 1 ? 96 ' p - " Market capitalization, $37,987,000; actual RroAkivr ? ? - 00 ; assessed value, $4,246,000. The figures relate to 1895. The Brooklyn investigation was the same year. Rep" g} 111 "* Electric Ry. & L. Co. vs. City of Milwaukee, 87 Fed. "The Street Ry. Problem of Cleveland," by Dr. Wm. R Hopkins 1890 r- mn" P ,?- 31 !' 19 ' 373 -6- 17 " overhead trolley and 10 miles more than 4 cars per mile. an C ?' f ^ujMngton repO rts to Congress $105.660 a n, equipment, etc., of its 22 miles of underground trol- !m-i ^S 1 and the total c,.pltall.atlon, lana, junk pile PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 49 In Toronto the $33,000 of bonds per mile is probably enuf to duplicate the road (overhead trolley), and the $66,000 of stock per mile appears to be all water. In Brooklyn it ap- peared from an investigation in 1895 that the stock was 7 water to 1 solid, and by the returns for October, 1898, it seems that the whole of the 32 millions of stock and half the 21 millions of bonds have no basis of tangible property, but represent the capital value of the franchise right of taxing the people beyond the fair price of the service rendered. 15 The following table represents approximately the situation in the principal street railways of New York: New York Street Railway Inflation. Cost ofduplicat- Probable Nominal cap!- Market capi- ing the system water in t.ilization per talization per probably does market mile of track. mile of -rack, not exceed (per capitallza- niile of track). tion ia about Third Avenue Cable $526,316 ?1,080,000 $150,000 6 to 1 Metropolitan System Lines owned and leased, horse, cable and electric 472,700 640,000 90,000 6 to 1 Metropolitan lines owned cable, electric and horse 1,130,000 2,350,000 100,000 22 to 1 The Third avenue has 14 miles of road, and 28 miles of track. It claims for each mile of track $228,000 for road construction, $200,000 per mile for equipment (cars, machin- ery, land, buildings and fixtures), and $50,000 per mile for right of way. But these claims cannot be sustained. A hig-h official of the company testified before the Special Com- mittee of the New York Assembly (1896, Vol. II, p. 1164) that the cost of the most diffictilt cable construction on the line (as difficult as any in the city, he said) had footed up, aside from real estate, less than $100,000 per mile of double track, and could be duplicated for considerably less than that. On some streets, where the diffi- culties were less, the cost had been only about $60,000 per double mile. So that the company's claim of $456,000 for the road con- struction per mile of double track is 5 or 6 times the true value, according to the evidence; $50,000 a mile of single track is a maximum. As to the second item, the Illinois Bureau of Statistics (1896) has shown that $90,000 a mile of track is a maximum for cars, ma- chinery, power houses, storage houses, etc., on a cable road with 50 cars to the mile. The Third avenue, with half that many cars, should not figure over $60,000 at the outside. Land should not go beyond $15,000 per mile, which is more than twice the value found 15 See section 13, Gaynor note. 4 50 THE CITY FOK THE PEOPLE. by the Illinois Bui-eau for the Chicago electric and cable systems, with an average of 12 cars to the mile. An estimate of $125,000 per mile of track for everything except the right of way would, therefore, seem fair, especially in view of the facts First, that the Columbia Railway Company of Washington has built and equipt a first-class cable road, with 7 cars per mile, at a cost of $85,850 per mile of track, aside from land, and Second, that the engineering data collected by the Illinois Bureau indicate $100,000 per mile as the reasonable cost of the cable systems in Chi- cago complete, aside from the land. As to the claim of $50,000 a mile of track, or $100,000 per mile of road for right of way, it may be noted that such entries are of doubtful character. (See Eep. of Spec. St. Ey. Com. N. Y. Assembly, 1896, p. 1095.) The Railroad Commissioners could not tell me of any sums paid to the city or state for the franchise, nothing but the annual license fees and taxes, which, of course, do not belong in the capital account. I could find nothing to justify this entry of $1,443,000 in the account for capital expenditure, so I wrote to the company and received word from the Secretary that "this sum does not represent the specific payment to the city for rights of way, but it does include all payments made since the incorporation of the company, in 1853, for legal services and other services and expenses properly chargeable as items of expense for rights of way." The italics are mine. In the case of the Broadway franchise we know that "legal services and other services and expenses" in obtaining the right of way cost the company $500,000, without any "specific payment to the city," and the thing got out and the railway officers and the aldermen were indicted; but I am at a loss to understand how any legitimate expenses of organization, procurement of charter, etc., could possibly foot up to $1,443,000. As a matter of fact, most of the city companies make no entry for the cost of right of way. I cannot find such an entry even in the Broadway account! Suppose we allow $200,000 for organization and other expenses properly chargeable to right of way (and that is more than double the cost of everything in this connection that is visible to the pub- lic) ; with 28 miles of track that would be $7,000 a mile for "right of way." Then we shall have $132,000 total cost per mile. Even if we allow $90,000 a mile on the second item, instead of $75,000, we shall still have but $150,000 per mile of track, which is less than one-third of the face of the bonds and stocks per mile, and one- seventh of their market value. The Metropolitan Street Kailway Company owns 50 miles of track (about half horse and half cable and underground electric) and leases 177 miles (about 100 miles horse and the rest cable and electric). Horse track can be built in New York city for $6,500 a mile. (Testimony of Secretary of the Central Crosstown, one of the PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 51 Metropolitan roads, Rep. of Spec. Com. N. Y. Legis., 1896, p. 1097. His accounts showed $103,200 a mile for construction of road, which, he said, could be duplicated for $6,500 a mile.) Cars, 9 to a mile, $6,000 to $7,000. Horses, 40 to 60 per mile, $2,500 to $4,500. For land ajid buildings, $18,000 per mile seems a liberal estimate. (See be- low.) General equipment, office furniture, organization expenses and other incidentals perhaps $4,000. A total of $40,000 a mile at the outside, with $30,000 to $35,000 as probably nearer the real values.* In dealing with, the electric and cable roads it may be well to state a few facts in tabular form: cost per Mile of Track. Electric road construction, including overhead work $12,000 N". Y. Spec. Assembly Com. Eep., 1896, pp. 694, 910, 973. Albany trolley track, 90 pound girder rails (including $4,000 a mile for overhead work), Spec. Com. Rep 11,477 "Huckleberry Road," with 90 pound girder rails and over- head construction (Spec. Com.) 11,000 Metropolitan, Kansas City, electric road construction.... 15,000 Syracuse trolleys, $13,000 per mile of track and $3,000 over- head, total road cost, aside from paving 16,000 (Testimony of officials of the roads to Spec. Com.) Springfield trolley, (Mass.), (3 cars and 180,808 passengers per mile), cost of the system complete, road construc- tion, equipment, etc., entire tangible assets 33,503 Could be duplicated for $31,500 a mile. (Co.'s reports , and valuation of engineer of Mass. Rd. Comssn.) Calumet Electric, So. Chicago, complete 33,333 (111. Labor Bureau Rep., for 1896.) Chicago General Ry., complete 28,752 (111. Labor Bureau.) North Chicago Electric and North Shore, complete 35,000 (Mr. Louderback in Mason, Lewis & Co.'s Investment Supplement, Feb., 1897.) Chicago Electric Transit, complete, with power machinery sufficient for many contemplated extensions 45,800 (111. Labor Bureau.) Milwaukee trolley system complete 36.000 (Admission of Co. in Court.) *See Rep. of Special Cora. N. Y. and Mr. Higgins' estimate in Street. Ry. Journal, March, '96. Mr. Higgins gets a total of $45,000 a mile as the cost of duplication for a first-class horse line in a giant city, but he esti- mates track construction at $15,000, horses at $100 each, etc., his figures being considerably above the cost, as shown by testimony before the Special Committee, by the statements of contractors, and in many instances by the reports of the companies themselves. The Central Crosstown of Now York, for example, reports the cost of 658 horses, with harness, as $38.650, or less than $59 per horse. Rep. N. Y. Rd. Com., 1898, pp. 1314, 1317. The Forty-second street road reports the cost of 145 new horses as $8.200. or about $56 each. Ibid, p. 1332. As to track, See data already given. Mr. Higgius estimates land at $10,000 and buildings at $8,000 a mile, and 9 cars to a mile $8,000. The real estate estimate I have not the means of testing, but the Forty-second and Manhattan reports the cost of 190 horse cars as averaging $630 each, and the Second avenue reports the cost of 375 ears as averaging $750, and 250 of the cars are electric. 52 THE CITY FOE THE PEOPLE. Cleveland overhead trolleys, with paving $39,000 a mile, probable cost of duplication, complete, aside from paving 29,000 (Dr. W. K. Hopkins). Philadelphia Traction system, complete, maximum cost, including $20,000 a mile for asphalt and granite paving curb to curb, $76,000, (Prof. Spiers); probable cost of duplicating road, without paving, is under. 50,000 West End Trolleys, Boston, maximum $62,000 (E. E. Hig- gins, St.Ry. Jour., Mar. '96, figuring track and overhead construction at $22,000 per mile of track, without pav- ing, which is considerably too high), cost of duplica- tion aside from paving is probably not above $55,000 or at the outside 60,000 Mr. Badger (Electrical World, Oct. 31, 1891), gives the average total investment per mile of track, real estate, road and equipment for 45 horse roads 31,093 And for 22 trolley roads 27,780 He says: "As fine and substantial roadbed as electric car ever ran over was built at a cost, exclusive of pav- ing, of about $5,000 per mile. "Overhead construction $2,500 to $5,000, with iron poles, etc." concluding "Thus we have as an extremely liberal estimate, $26,000 per mile, exclusive of real estate, buildings and paving, for a road suitable for the heaviest metropolitan traffic." ($7,000 of the estimate was for cars.) "And it is a fact that a good and satisfactory road can be built and equipt for $20,000 a mile." Estimated cost of overhead trolley system of highest char- acter in giant city, complete (aside from land, with 5.7 cars per mile) 70,000 (Keport of Mr. Pearson, Engineer of the Metropolitan Ey. Co., New York, to the City of Liverpool, 1897. For each additional car per mile, add about $5,000). Cost of underground trolley system of highest character in giant city, complete, aside from land, with 5.7 cars pel mile 96,000 Metropolitan Underground Trolley, Wash., reports con- struction and equipment, complete, aside from realty (13 cars per mile) 105,660 Cable system in giant city, complete, aside from land, maximum estimates, with 50 cars per mile, and full equipment, average 140,000 Reasonable estimate, omitting old cars, etc 100,000 (111. Labor Bureau and their engineers.) Cable road construction (testimony of Third Ave. officers, Rep. N. Y. Spec. Com.), less than $50,000 a mile, Com- plete system, aside from right of way 125,000 PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 53 Columbia Cable Ry., Washington, reported cost, complete, (aside from land), with over 7 cars per mile 85,830 Metropolitan Cable, Kans. City, $50,000 a mile road con- struction, $20,000 a mile machinery, real estate, etc., with 6 cars to a mile, total 70,000 (Mo. Labor Bureau, citing- St. Ry. Journal and Vice Pres. Holmes, of the Metropolitan system.) Land for electric and cable systems in giant cities, ave- rages $7,000 per mile of track, by expert estimates of the actual possessions of the leading Chicago Cos. "Real Estate," (including land and buildings, except the repair shops), is stated for the Metropolitan St. Ry., of Kansas City, as $10,200 a mile. (Mo. Labor Comssrs. Rep., 1896, p. 56, citing the St. Ry. Journal and Vice Pres. Holmes, of the Metropolitan Ry.) The West End Claims $17,000 per mile for "Real Estate," which means land chiefly as the power stations, car houses and shops are named in other items. Mr. E. E. Higgins (St. Ry. Journal, Mar. 1896), puts land at $9,000 a mile for the West End, eliminating what is not needful for the street railway system, a street rail- way company has no right to hold a lot of land for other than street railway purposes and capitalize it as part of the railway system for passengers to pay divi- dends on.) If $7,000 a mile covers land in the Chicago systems and $10,200 land and buildings in Kansas City and $9,000 the land required in Boston, it is surely liberal to allow for land in New York 15,000 Some data relating to the cost of L roads and the history of the Manhattan Elevated, of New York, may be useful here: Elevated road, including stations, actual cost, in Brooklyn, 1892-3, $297,000 per mile of double track; could be du- plicated perhaps for $250,000. Equipment returned by N. Y. L roads, $124,000 per mile, double track. Total per mile of single track, therefore not over 210,000 Cost of L roads in Chicago, according to 111. Labor Bureau, for entire L system, road, stations, cars, buildings, land and all, $325,000; for straight road, including loops, $373,280 per mile, double. Per mile of single track this would indicate 190,000 For the proposed Boston Elevated (13.4 miles of road), the engineers of the Mass. Rapid Transit Comssn. (Rep. 1892, pp. 85, 251) estimated road construction without stations at $443,000 per mile of road; passenger stations, $100,000; shops, yards, trains, coaling and watering stations, equipment entire, $157,000. Land damages, $51,000. Total, $751,000 per mile of road. Indicating for constniction per mile of single track 350,000 And for land damages 25,500 54 THE CITY FOR THE PEOPLE. The Engineer of the Boston L Co. estimates for 10 miles of road electrically equipt, $297,000 a mile for road, $389,000 for stations and equipment, and $300,000 to $500,000 a mile for land damages. A total of about $1,000,000 a mile of road or per mile of track, aside from land damages 345,000 And for land damages 300,000 to 400,000 The difference as to the land damages between the company engineer and the state engineer seems very great, but as I do not know the details of the com- pany's estimate, I cannot compare it with the other. In the light of these facts the history of the New York L roads is of much interest to the student of overcapitalization. In 1879 the New York Elevated and the Metropolitan Elevated were practically consolidated in the hands of the Manhattan by leases for 999 years. The Manhattan agreed to pay to each of the old companies interest on 8y 3 millions of bonds and 6% millions of stock, and issued 13 millions of its own stock for pro rata dis- tribution among the stockholders of the old companies, making the total capitalization 43 millions upon an actual capital expenditure of 22i/ 2 millions. Subtracting the bonds we find that 23 millions of stock represented about 5y 2 millions of capital expenditure 4 times the original cost and probably over 5 times the present value. The stock of the old companies was largely water, and the $13,000,000 issued by the Manhattan was "only a pyramid of water on a pedestal of transparent fraud." (Report of the Board of Railway Commissioners, Assembly Doc. No. 162, 1883.) The stock and bonds of the Manhattan now amount to 86 mil- lions face and 95 millions market value, or $2,640,000 per mile of double track, yet, as we have seen, it could probably be duplicated for $500,000 or $600,000 per mile of road (or $700,000 at the very outside), plus, perhaps, $50,000 to $200,000 land damages a total cost, say, of $400,000 per mile of single track. This estimate, how- ever, must not be taken as having anything like the conclusiveness of the valuations of horse and electric roads, because of the indefinit- ness of the land damage items. There is a chance here for some one to make a valuable contribiition to the science of this subect by ascertaining what the L roads of New York actually did pay for land damages. Returning to the surface lines let us study the leading system in the light of the data tabulated above. The Metropolitan system has 8 cars per mile on the horse lines and an average of 14 on the cable and electric. Taking the highest applicable figures indicated by the above data, with allowance for legitimate organization and franchise ex- PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 55 penses, 16 we have a maximum of $40,000 a mile horse and $150,000 a mile cable and electric for the cost of duplication. 17 This gives an average value of $95,000 per mile of road owned, call it an even $100,000. Taking the whole system as 125 miles horse and 104 miles cable and electric, the high- est figures given for either sort of road, the average value per mile of track would be under $90,000. The stock and bonds of the Metropolitan and the leased lines, less the securities of the leased lines held by the Metropolitan, gives an outstanding face capital of $472,700 per mile of track, and at present quo- tations the market capitalization is $640,000 per mile of track, or 7 times the true value. The bonds and stock of the Metro- politan Company alone, after subtracting its holdings in the bonds and stocks of leased lines, etc., gives a face value capital- ization of $1,130,000 per mile of track owned, and the market capitalization is $2,350,000 per mile of track owned, or more than 23 times the real value. The way, or rather, one way, in which large overvaluations- arise, was explained to the Special Committee of the New- York Legislature by Mr. Caswell, bookkeeper of the Albany Railway. He said that the size of the construction account was due to the fact that it had been receiving all the charges for construction since the road was first built everything that went into the road, buildings, stables, power house, etc., since 1863; one expenditure piled upon another, with no subtraction for depreciation or extinction of property, so that the capital account represented, not the present real value of the plant, but that value plus the value of dead horses, worn out machinery and old tracks long since torn up. (Special Report St. Rys. N". Y., 1896, pp. 10 So far as I can learn, the Metropolitan's claim for right of way is very small. I have several annual reports of the New York Railroad Commis- sioners, and find that only two of the twenty-five lines in the system make any entry for franchise or right of way in their returns, and it is well known that the companies did not pay either city or state for their privileges any- thing except their yearly taxes and license fees. In one case we know that the right of way did cost $500,000, but it was paid to the aldermen and lobbyists, and is not entitled to be considered as part of the legitimate cost of duplication. (See Report on the Broadway Surface Railroad Co., New York Senate Doc., No. 79, 1886.) There is no entry for right of way in the company's accounts, but there is an entry for "Overhead and underground construction, superintendence and organization expenses, law expenses, etc., $4,130,464," and perhaps the $500,000 comes in there. 17 The real value of a railway system is below the cost of duplication. New cars and rails, etc., are worth more than those that are partly worn out.. 56 THE CITY FOR THE PEOPLE. 095-6; see also p. 1096.) The valuations returned by the companies include the cost of all preceding roads in tlie same location, along with the cost of the present road, and some- times other items not mentioned by Mr. Caswell. Looking at the facts of the preceding section about profits, and of the present section on overcapitalization, it is no wonder that Mr. E. E. Higgins, Editor of the Street Railway Journal and author of "Street Railway Investments," advises investors that street railways in large cities "are among the safest and most profitable in the entire range of capital investment, * * * dividends on stocks being with few exceptions regu- lar and satisfactory, in spite of the extreme overcapitalization of costs." If the bonded debt of the Western Union Telegraph Com- pany is subtracted from the cost of duplicating the operative plant, the water in the stock appears to be about 18 to I. 18 The Sugar Trust bought the Brooklyn refineries at 30 times their former capitalization, making the payment in sugar stock, which is now quoted at 120 preferred and 180 common, so that the water in the present market capitalization repre- senting that transaction is probably not less than 40 to 1. When the nominal stock of the Sugar monopoly was $75,000,000, Henry D. Lloyd said it was all water, as the value of the plants was more than covered by the $10,000,000 of bonds. 19 According to a member of the Congressional Committee that investigated the Oil Trust in 1888, $6,000,000 was the value of the "works" on which the trust had issued $90,000,- 000 of stock, which sold in the market at a valuation of $160,- 000,000. 20 The stock now amounts to more than $97,000,000 nominal or face value, and it is selling at 525, which gives it is The Telegraph Monopoly, Arena, March, '96. i "Wealth against the Commonwealth," p. 33, citing legislative investi- gations. The American Newspaper Publishers' Association has made a statement signed by 157 daily newspapers to the effect that the entire output of the Paper Trust could be produced by a present investment of $15,000,000; so American consumers of newspapers are forced to pay dividends on an in- flated and wholly fictitious capitalization of at least $40,000,000. The market capitalization of the Tin Plate Trust is $29,000,000, and its properties are worth about $12,000,000. (Review of Reviews, Vol. XIX, pp. 686-7.) 20 Lloyd, p. 82. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 57 a market value of $509,250,000 over a half billion of value, most of which represents nothing but the monopoly privilege of taxation without representation. Take the Red Manual of Haven and Stout or the Hand Book of Securities, DeHaven and Townsend, 40 Wall street, and run your eyes down the columns of quotations of the va- rious bonds and stocks. Whenever you find a specially high quotation, turn to the name opposite the figure, and almost always you will find a gas company or street or steam railroad, telegraph or telephone, or a trust or some other recognized mo- nopoly, or else a banking institution. Consolidated Gas, 213; Chicago and Alton, 170; Equitable (?) Gas, 213; Commer- cial Cable, 180; Lake Shore, 215; Metropolitan Street, 260; New York Mutual (?) Gas, 290; Pennsylvania Coal, 350; Pullman Car, 216; Sugar, 180; Oil, 490; U. S. Trust Co., 1,290; New York Life and Trust, 1,275; Central Trust, 1,411; Fifth Avenue Bank, 3,205; Chemical Bank, 4,150 such, are some of the figures that meet us as we run over the columns. $4,150 is a pretty good market price for a share whose par value is $100. You may issue $4,000 of stock for every $100 paid into the business, or you can issue $100 of stock and let the excess of profits of your monopoly of po- sition, influence or possession, swell it to $4,000 of market values, or you may overissue in part and let the stock swell the rest of the way up to your profits. In either case your capital- ization is inflated. If your business is regarded as semi-public by the people, and they show an interest in examining your ac- counts, it is safer to overissue the stock. If gas consumers saw on the face of the returns that they were paying 20, 30 or 60 per cent, on the money actually invested, they would be* rush- ing to the Commissioners to have the rates reduced. But issue a lot of stock and get it into the hands of "innocent pur- chasers" and you are comparatively safe. Seriously the inflation of capital, or watering of stock of the inanimate order, is a most pernicious practice, protecting the eimrn'.Miis extortions of monopoly by hiding them from the people, checkmating reduction of -fares by commissions or boards of regulation by confronting them with the innocent 58 THE CITY FOR THE PEOPLE. holders of purchased stock, and compelling the people, when they come to buy the plant, to pay several times its value. FALSE STATEMENTS AND SUPPRESSION OF FACTS. 4. False accounting, misleading statements and suppres- sion of important facts are favorite methods of keeping the people in the ignorance so necessary to the continued exis- tence of the great monopolies. The monopolists know that their mastery over the people could not last one single day if the people knew what they know. Various instances of this evil of deception by commission and omission have already been given. We have seen the private water companies refuse to state their expenses and profits. We have found gas companies and street railways representing their values at many times the real figures, and stating the cost of construction at 2, 3, 5, 10, even 16 times the truth. In fact the whole section on overcapitalization is in evi- dence here since- the paying of apparently moderate dividends (5 or 6 per cent., perhaps) on an inflated valuation, which makes the real dividend on actual value an immoderate one (20, 50, 200 per cent., perhaps), is in itself a most serious form of suppression and deception. A few examples on other lines may be of use. We have seen the Bay State Gas capitalized at $5,000,000 on an actual investment of $750,000, which was the whole capital expen- diture down to 1893, according- to the proof in the Matthews In- vestigation. 1 We may note here the mass of contradictions presented by the company's statements to state officials: Valuations of Bay State Gas Property as per Official Returns. Sworn Returns Sworn Returns Sworu Return* A^-c-.-ur-' Y 'r to Tax to Secretary to Gas Valuations Commissioners of Siate Commissioners 1886 $25,000.00 $725,956.16 $725,956.16 $76,000 1887 500,000.00 876,956.16 876,956.16 202,000 1888 500,300.00 770,317.28 833,912.91 501,300 1889 500,300.00 779,451.52 4,974.554.74 52(5,300 1890 500,300.00 5,047,145.24 5,038,726.49 526,300 1891 4,972,191.49 5,141,774.12 5,130,732.10 631,500 1892 5,022,773.28 5,193,149.33 5,125,006.44 661,500 The investigation resulted in a sort of compromise compelling- the company to cut down its capitalization to two millions. Just 'Report or Bay State Gas Investigation, City Print, 1893, p. 47. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 59 before this was done the company reported to the Gas Commission (p. 162, Eep. of Jan., 1894): BAT STATE GAS COMPANY. Real Estate ) Machinery and Manufacturing Appliances.. > S4.954.330. Street Mains j Now the investigation did not change the real estate, machinery or pipes, but only the paper capitalization, yet the company's next report to the Gas Commission (Rep. of Jan., 1895, p. xi, App. A) contains the following: BAT STATE GAS COMPANY. Real Estate Machinery and Manufacturing Appliances. . . > Sl.9oG.379. s n-et Mains ) The land, buildings, machinery and pipes had shrunk three mil- lions in one year because the legislature had cul^the bogus bond and forced down the capitalization by the said amount., The as- sessors did not appear to find any change in the property, for they assessed it at $661,500 after the bond reduction, the same as before. In 1892 the cost of gas in the holders in Boston was 33.3 cents per M, and the cost of distribution 19.4 cents, yet the Boston Com- pany reported these costs as $1.02, instead of 52.7 cents. 1 The Gas Commissioners knew the truth, but suppressed it. When the Investigating Committee appointed by the legislature ordered the Commissioners to supply information, the Hon. George Fred. Williams, counsel for the city of Boston, went to the office of the Conimisssioners to get a copy of the returns of the gas companies. A clerk brought the copy and gave it to one of the Commissioners, who took it and tore out the last leaf, saying to the clerk, "What did you put that in for?" 2 That leaf contained a statement of the actual cost of making and distributing gas, and it was only with the greatest difficulty that Mayor Matthews and Mr. Williams succeeded in obtaining the facts. The companies did not wish the people to know the truth, and the Commissioners allowed false statements to go out to the people year after year in their reports; refused to allow examina- tion of these returns, tho a part of the public records of the office; kept the facts to themselves during suits for reduction of rates, protecting the companies from just reductions and entailing a waste of time and money that would have been unnecessary if the facts known to the Commissioners had been brought to light and acted upon; sought to suppress the facts even when ordered by legislative authority to supply them, and after all, when the "ver- batim" report of the investigation was published under authority of the state, all these vastly important data were omitted, and Mayor Matthews had to have a corrected edition of the report published by the city in order to get the facts to the people. 1 See Municipal Monopolies, p. 580. - See the City Report of tbe Investigation issued by the Mayor, 1893, pp. 21. 17, 14. 9. * 60 THE CITY FOR THE PEOPLE. The West End Street Railway Company, of Boston, for several years reported an average operating cost, with, electric traction, of 25.8 cents per car mile, while the reports of companies in New York, Buffalo and Chicago, and the statements of railway officials in Philadelphia and New York showed the cost in those cities to be 10 or 11 cents, or 12 cents at the outside. The West End reports gave a higher operating cost per car mile with electric traction than was shown for horse traction by the former reports of the same company. This was absurd for it was well known that elec- tric traction was much cheaper than horse power. To cap the climax, the general manager of the West End told a committee from Glasgow that electric traction had reduced the company's car mile operating expenses 20 per cent. 1 One of the street railway circulars prepared by the writer and issued by The Citizens' Com- mittee called attention to the contradiction, and the next year the West End report was so adjusted as to show a car-mile cost about 1-5 below the old horse reports, but still, in all probability, very much above the truth, as were also the old reports. 2 1 Rep. of Glasgow Com. on Mechanical Traction, 1896, p. 25. 1 See The People's Highways, Arena, May, 1895, for several other im probable statements in West End reports. The portion of the circular referred to above was substantially as follows: The West End reports an operating cost in 1896 of 24.5 cents a car mile, and its reported cost of operation from 1891 to 1896 inclusive gives an average of 25.8 cents a car mile with electric traction, or more than twice the cost in New York, Philadelphia or Chicago. How can it be? It Is not the long .cars, for Philadelphia, Ne\v York, Chicago, etc., have the long car it cannot be wages, for New York electrics pay as much as the West End, and Detroit wages are almost the same; it cannot be the cost of coal, for the difference due to this cause should not exceed 1 cent on each car mile as between Boston and New York, Rochester, Buffalo or Detroit. It may be difficult to believe that the company's reports are Incorrect, but it is quite as difficult to believe that the legitimate cost of electric traction in Boston under good management should be as much as the reported cost. Not only do the data of other roads oppose such a conclusion, but the West End's own reports are equally conclusive against It. In 1889 the company reported the car mile cost as 24.7 cents, 96 per cent, of the mileage being made with horses. In 1888, the whole mileage being with horses, it reported the cost of operation as 24.8 cents per car mile. Now it is a universally recognized fact that the operating cost with electric traction is much less than with horses. Mr. C. L. Rossitut, President and General Manager of the Brooklyn Heights Company, says that the car mile cost with the trolley is about half the cost with "horses. Mr. J. S. Badger, in the Electric World for October 31, 1891, brings together the statistics of 22 trolley roads and 45 horse roads and shows that the average cost with electric traction is less than one-half the average with house power these averages will not permit as precise a conclusion as Is possible where the two modes of traction are tried in the same city, but they have much weight as tending to corroborate the specific statements of leading experts. President Vreeland of the Metropolitan Company, New York City, says C he could have the trolley he could easily operate at 12 cents a car mile, the sixteen million car miles that now cost him 17 cents tvith horses. Electric experience in New York indicates that he would have been justified In placing the cost of the trolley mile below 12 cents The Special Committee of Glasgow that went to many cities for the express purpose of comparing electric travel with horse travel, says on page tuelr report that the testimony everywhere was that electric- traction cheaper than horse power, and that its adoption results in a marked and Immediate increase of the traffic; 34 per cent, in Hamburg. 50 per cent. In Rouen, etc., thus conferring a double benefit on the companies. More pointed still is the statement that Mr. Sergeant. General Manager iur End Street Railway, made to the Glasgow Committee (Glasgow 2LJ& Repor \ I l ece ber ' 1896 > P- 25), to the effect that the adoption of cars had added 17 per cent, to the revenue, and "reduced the ig expense* per car mile by 20 per cent."-a statement in strong contradiction of the West End reports * PUBLIC OWNERSHIP OF PUBLIC UTILITIES. (>1 The Boston Eapid Transit Commission found that the Manhat- tan Elevated of New York charged up new construction to ope- rating expenses. 1 Their construction account is full enough to get along without feeding for a long time, and it's just as well not to let the people know that a 2-cent fare is more than enough to cover the normal cost of operation on a well-constructed L road in one of our big cities. 2 Sometimes when the people or their officers demand an investi- gation the monopolists succeed in packing the committee. A fla- grant case of this sort occurred in Philadelphia in 1894. Mayor Stuart asked councils to make an appropriation for a municipal electric light plant. Councils were dominated by the Electric Trust, the president of one of the chief companies being a leading councilman, and many others being interested more or less, so they did not wish to do as the Mayor desired. They could not afford, however, to ignore a request behind which there was so much force of reason and public sentiment, so they called for esti- mates of cost and appointed a committee loaded with men inter- ested in and acting for the electric companies. The Director of Public Works and Chief Walker, of the Electrical Bureau, returned careful estimates, showing that a 2000 full-arc plant could be built for $318 per arc and operated for $58.50 a year, or $72, including depreciation (3 per cent, on % of the plant, which, the chief said, was sufficient), taxes and insurance (at 1 per cent, each). Interest would add $9.50 more, making $81.50 total, an esti- mate which was high, as the chief said he intended it to be. The chairman of the committee (in reality an attorney of the Electric Trust), instead of conducting the investigation in a judicial man- ner, instituted a determined attack upon Chief Walker and Director Beitler and their recommendations, endeavored, in every way, to magnify the cost, and gave the closing argument to Mr. Cowling, manager of a company a large part of whose business would be gone if he could not keep the city from making its own light, and who testified that the cost of an arc light per year was $146 (a statement shown to be utterly false by overwhelming testimony in the Senatorial Investigation, already referred to, in the same city the following year). The councils refused to make an appro- priation, as, of course, they intended to do when they packed the co'mmittee with the enemies of the measure, and to justify their refusal the ridiculous figures of Mr. Cowling and the chairman's nonsense were printed in pamphlet form and spread broadcast; but the chiefs estimates icere not put into the pamphlet. 3 The publication of false statistics and the making of solemn 1 Report of Rap. Tr. Commission of Mass. Legislature, 1892, p. 91. 1 See estimates of engineers placing operating cost on the proposed Boston L at 38 or 39 per cent, of receipts on a 5-cent fare, or less than 2 cents for operation (Rep. Mass. Rap. Transit Com., p. 90). 3 Arena, Vol. 14, pp. 457-8. See Journal of Select Council of Philadelphia, Oct. 5, 1893, to March 30, 1894, for the full record. 62 THE CITY FOli THE PEOPLE. affirmations that gas, electric light, transit, etc., cost as much, or almost as much, as the existing charges of the companies con- stitutes a favorite pastime of the monopolists. Rarely has a city begun to talk of public ownership but that the movement has been met by assertions of the private companies that under the particu- lar conditions in that city the service cost about as much as was being charged for it, and that the city would lose money if it went into the business; and rarely has a city disreg-arded these state- ments and established municipal ownership without discovering that such assertions were utterly baseless. It will not do to rely upon corporation statistics without disinterested corroboration. "If the city of Des Moines, four years ago, had accepted the sta- tistics offered by its water company, it would not have redxiced the water rates 33 to 40 per cent, by municipal control; nor would the Supreme Court of Iowa have pronounced these rates reasonable had it been guided by the showing of the water company's expense of operation, including interest on excessive capitalization, exorbi- tant salaries to officials, etc. "Neither would the city now be under contract for the erection of a municipal lighting plant, to cost $105,000, which the con- tractors agree to operate for $65 per arc burning all night and every night if heed had been given to the statistics by which the General Electric Company proved (?) that such a plant could not be built for less than $250,000, and might cost $350,000, and could not be operated for less than we were then paying, namely, $126 per lamp. Instead of accepting these 'statistics' we relied on the estimates of our engineers as to the cost of erection and operation, and they corresponded almost exactly with the terms of the con- tract we succeeded in securing." J If Rockford, 111., had paid attention to corporation statistics it would still be paying $125 per arc instead of $52. The city's en- gineer estimated the cost of producing light under municipal ownership at $56 per arc. The electric company declared it could not be done, and exhausted every means to defeat the movement, but at the last minute, when the city was about to contract for a municipal plant, the company offered to furnish light at the rates estimated by the city's engineer if the city would abandon its in- tention of building a municipal plant. The city, preferring to own its own pole line, contracted with the old company at $52 per 2000 candle power lamp burning all night and every night. The monopolies exceedingly dislike the daylight; publicity is not congenial to their retiring dispositions. When in the course of trial their books have been called for they have even abandoned important suits rather than bring their books into court. The gas and electric companies, railways, telephones, Sugar Trust and Standard Oil agree in refusing to furnish materials for a complete biography. Even in Massachusetts, where the companies are re- 18< 8 tOCl snhstantlnll - v froni Mayor MacVicar iu the Progressive Age, Feb. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 63 quired by law to make returns, the big electric light companies omit some facts, like the amount of current sold for motor purposes, etc., the absence of which makes it impossible to make exact com- parisons or reach entirely definite conclusions. The Sugar Trust systematically conceals its books from investigating committees, and even refuses to give the information required by the Census laws.* The Standard Oil not only keeps its books and facts from legislative committees, but it has been known to refuse for years together to make any tax return in a state where it had many millions of property subject to taxation; * it has not hesitated at perjury when necessary to conceal inconvenient facts; 2 and it is strongly suspected of having procured the mutilation of public documents, the theft of testimony taken by a Congressional Com- mittee and the abstraction of court records containing facts it wished to suppress. 3 POOR SERVICE. 5. Poor Rerricr and Lack of Service, tho not so generally characteristic of private monopoly as high charges and exces- sive profits are, nevertheless, sufficiently prevalent to be named among the evils of monopoly in private control. The mo- nopolist does not aim at service, but dividends. Service must yield to profit except where the law intervenes and manages to get itself enforced, or in the extremely rare case of a mo- nopoly whose owners have tender, public-spirited consciences of sufficient power to govern them in their business relations. Fortunately, however dividends are, to a considerable extent, dependent on effective service. If the gas wont burn, people will use electric light, or oil, or acetylene. If the street rail- ways behave too badly, the people will use busses and bicycles. There is no such thing as an absolute and compulsory mo- 11 -ach Telephone To each Telephone Stockholm, Swed., State System 23 New York, Private System..... 108 Chrlstiimin, Norway. Mimic. Trondhjem, Norway, Manic. Grimstad, Norway, Co-op. Berne, Switz., State Geneva, Switz., State 30 Greater New York, Priv. Sys 38 Philadelphia 25 Boston and Suburbs " 40 St. Louis 30 Chicago 170 60 127 Not all the state systems in Europe do better than our companies in the distribution of service some state ownership is by no means public ownership, and even real public ownership is not always in the front rank of progress and enlightenment; but the examples given show how far our companies are from giving our people the full possibilities of the telephone service. DISREGARD OF SAFETY. 6. Disregard of Public Safety is a twin evil with, the last. Grade crossings, that kill and maim their thousands every year; stoves that are dangerous in case of accident; carelessly placed or improperly protected electric light wires, that injure firemen, interfere with the extinguishment of conflagrations, and not infrequently cause them ; overhead trolley wires, that even Yerkes admits are, a menace to life and property; single fiangi rails obstructing the streets and wrenching the wheels of innocent carriages; fenderless cars or heavy iron battering rams instead of true fenders; leaky gas pipes left to contami- nate the air, and sometimes neglected till they cause terrific explosions; beef that is more dangerous to life than Spanish bullets, and oil below the standard test required by law such are a few examples of the tendency of private monopolies to disregard the safety of the public. In 1890 a committee of the New York legislature found that "six- teen deaths were directly traceable to the poor insulation and bad arrangement of the wires of the electric light companies of New York city." Fire Marshal Swene, of Chicago, reported 231 fires caused by electric light wires and lights during two years in that city. In his address to the twenty-eighth annual meeting of the National Board of Underwriters, President Skelton said: "Concur- rent action regarding our greatest enemy, electricity, seems to be imperative. There has been plenty of evidence that fires caused PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 67 by electricity are growing alarmingly frequent, and inspections show that but few buildings in any community are safely wired. This great and increasing danger cannot be ignored. It threatens the very life of fire insurance." In Boston we have had emphatic object lessons on the danger of the wires; they have not only originated a number of disastrous fires, but almost always they greatly hinder the subduing of the flames, and injure more fire- men than all other perils put together. The firemen very justly dread them more than they do the fire. Every one who reads the newspapers knows the fearful record of the trolle3 r cars. 1 In Brooklyn alone they killed 104 persons in two years, according to the press reports. In New York city the cable cars used to swing at full speed round the dangerous curve at Broadway and Fourteenth street, and so many accidents oc- curred that the place became known as the "Dead Man's Curve." Within two weeks I have read of four trolley accidents, in one ot 1 The Philadelphia Press of August 12, 1899, in an editorial on the Bridge- port disaster, brings out clearly the facts that very little care is taken by many companies in the selection of motormen, and that the ill treatment of the men is a source of great danger to the public, even when the men are competent. Part of the article is as follows (italics mine): "The story of Motorman Hamilton, who guided the trolley car which went over a trestle near Bridgeport, Conn., last Sunday, killing nearly thirty people, will be a reminder to the public how completely its safety Is in the hands of the motorman and how much his competency depends upon the way he is treated by his employers. It is due to the millions of people who patronize trolley cars every day and who place their lives in the hands of the employees of the trolley companies to know what precautions are taken in the choice and care of . motormen and conductors to insure safety for life and limb. "The line on which the disaster occurred is over fourteen miles long, making a round trip of nearly thirty miles. Last Sunday morning Motorman Hamilton breakfasted at 7.15 A. M., and then reported for duty. At 8.15 he started out on his first round trip from Bridgeport, returned and at 11.15 started on his second round trip, getting back to Bridgeport at 2.40 P. M., having lost twenty-five minutes from some cause on his second trip. He had then seen six hours and thirty-five minutes of continuous s:rvic" and was tind and hungry. He askt to be allowed time to rest and iat liis dinnfi; but the motorman who should have relieved him was not at hand and thy car startir told Motorman Hamilton that he could not be allowed any stop for dinner but must start at once on another trip, demanding at least three hours more of steady work. He obeyed orders and took his car out on the fatal trip which sent nearly thirty people into eternity. "The trestle from which the car fell was probably not constructed sub- stantially enuf for the work it was called upon to do. There iwere also no guard rails, and the depression or "jounce," just before the bridge was reacht had doubtless much to do with derailing the car. But probably all these factors together might not have been enuf to cause the disaster had not Motorman Hamilton been compelled to go without his dinner. He. was in bad humor, undoubtedly, and weak from lack of food and was in just the condition of mind when evm the most careful workingman losrs his caution and full inclined to disregard strict regulations. The disaster occurred at 5.15 P. M., and it teas then ten hours since Motorman Hamilton had sat down to his breakfast. With no food in the interval to sustain him it is easy to imagine in- ichfit condition h- was. And yet the official of the trolley company took the risk of compelling him to guide a car freighted with human life over a road part of which is now admitted to have been faultily constructed. "The public does not know how many risks it is subjected to from this lack of care of employees by their employers. It is only when a disaster it would be ludicrous to call it an accident occurs that the public is let into the secret of the risks taken. A few years ago a railroad collision occurred in Ohio in which a number of lives were sacrificed, and during the inquest it was made known that the engineer of the train whose care- lessness caused the collision had been compelled to be on duty for forty-eight hours leithout sleep and was worn out mentally and physically, and in no con- dition to perform his duty promptly and efficiently. The same disregard of employees' condition has been the cause of other disasters while many more have been escaped by a fortunate chance." 68 THE CITY FOK THE PEOPLE. which over twenty people were killed and in another thirty persons were injured. The companies, as a rule, do not show much anxiety to report these matters. Laws and ordinances were passed requiring the cars to be furnished with fenders, but the companies have stubbornly refused to fulfil the spirit and purpose of the law, and in some cases, as in Philadelphia, resisted even the letter of it until fined for disobedience. Most of the fenders in use in our eastern cities run four to twelve inches above the level of the road, and some have iron fronts, that would break a man's leg like a splinter. If a child is on the track, the fender knocks it down, probably breaking its leg, passes above it and leaves the car wheels to do the rest. Cushioned fenders, running close to the track, are necessary for safety. In Buda-Pesth the cars have fenders that will push a baby from the track without injuring it. But it will need work to get efficient fenders here. The companies care little for safety unless it will save them more money than it costs. A few years ago in Philadelphia a man presented a safety attach- ment for street cars. On trial with stuffed arms, legs, heads and bodies, it was found in every instance that they were rolled from the track uninjured. The presidents of the street car companies met to discuss the advisability of adopting the new invention. "What will it cost?" they asked. "Fifty dollars a car," was the answer. The presidents ciphered up the total costs, compared it with the damages they had been paying for accidents, concluded it was cheaper to run over people and pay for it, and decided they would not protect the -cars with the safety fender. 1 DISCRIMINATION 7. Unjust Discrimination is an evil natural to monopoly in private control. Whether it be a street railway, an electric light plant, a telegraph or telephone system, a railroad or a department of the government, if the control is in private in- terest, unjust discrimination is almost sure to result. It is one of the chief counts in the indictment of the railroads and the street railways that they are by no means free from this taint. I know a ward heeler in one of our eastern cities who has all the passes or free tickets for street cars he cares to use or give away to his friends or vassals. In Kansas City the investiga- tion of the Missouri Labor Bureau developed the fact that the street railways were lavish with free passes among city officials. The city clerk acted as the railway's, distributor-in-chief in the City Hall, and in the Common Council the sergeant-at-arms at- 1 The story comes to me from a source I have no reason to question. ana it is exactly in line with the well known conduct of the companies in respect to safety fenders. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 68 tended to the matter. One city legislator, Mr. Tiernan, promptly returned the pass laid on his desk, but the Bureau failed to dis- cover any other refusals to accept the "delicate advance." 1 Water, gas, electric light and telephone service are frequently given free of charge to men of position and influence, who are much better able to pay than the mass of consumers, who have to pay for the privileges of the favorites of monopoly in addition to their own. I could mention names, but I do not wish to hurt anj-body's feelings, and the reader can discover examples enough for himself if he will inquire with due diligence and sagacity. It is the system and not the individual that merits the severest con- demnation. Yet it must be remembered that every public-spirited man who refuses a proffered dead-head service is helping to break down the system and develop a truer civic conscience, while one who accepts such service is helping to fasten the system upon us and deaden the consciences of his fellows. 2 Inequitable treatment of consumers, or favoring some persons and places at the expense of others, is not the only form of unjust discrimination of which the private monopolies are guilty. The grand discrimination* is between the mass of consumers, or the common people, on the one hand, and the monopolists on the other. The exorbitant rates and profits and excessive capitalizations by which the monopolists seek their own advantage at the expense of others constitute in themselves a most grievous form of dis- crimination. The fundamental aim and purpose of private mon- opoly is unjust discrimination. FKAUD AND CORRUPTION. 8. Fraud and Corruption are among the most prolific, and are quite the most deplorable, of all the results of private mo- nopoly. As much as the debasement of individual character and the degradation of government are worse than any mere 1 Bureau of Labor Statistics, Mo., 1896, p. 57. The Commission, while speaking of these passes, says they cannot of themselves account for the 30-year franchise, extremely low assessments, neglect to compel payment of taxes and the shutting of eyes to false car reports. The "extraordinary indulgence" shown the street railways is due to the "fact that they wield a tremendous political power" thru the shrewd lawyers and political man- agers in their employ, and the combined effects of their various methods of influence and mastery. 2 -For an account of the Western Union's complicated discriminations against persons, classes, newspapers and places, see The Arena, Vol. 16, p. 70, et seq. For criticizing the W. U., or other similar weighty reason, newspapers have been denied the service necessary to their success, and in some cases newspaper enterprises have been killed by W. U. discrimina- tion. Even the Government's business, tho required by law to be sent ahead of everything else, has to wait if a commercial message wants the wire, etc.. etc. For a discussion of the railroad discriminations which have built so many fortunes and formed the foundation for so many successful trusts and combines, see "The Railway Problem," by A. B. Stickney, and Lloyd's "Wealth against the Commonwealth." See section 8; and section 9 last note. The subject will be treated in a future number of the Equity Series on Transportation. 70 THE CITY FOR THE PEOPLE. matter of property, so much are the frauds and corruptions of monopoly worse than its monetary effects. In a sense, ex- orbitant rates and.profits constitute in themselves a fraud upon the public, and in a large proportion of cases excessive charges and extravagant profits are rendered possible only by frauds of overcapitalization, false accounting, manipulation of stock, unlawful agreement, etc., or by corruption of a legislative body to secure a favorable franchise or other privilege, or of administrative officers to prevent the enforcement of the laws. Fraud and corruption lay the foundation for extortion, and extortion supplies the means for new frauds and corruptions, which open the way for further extortions, and so the uncon- scionable game goes on. The subject cannot be dwelt upon at the length its importance suggests, but a few details and concrete examples will be given to show, what the private monopolies are capable of. Some of the common corporate frauds are inflated construction -contracts with directors or other inside parties, or with construc- tion companies owned by them; exorbitant salaries, false commis- sions, "legal expenses," legislative and advertising expenses; false statements, doctored accounts, suppression of important facts, per- jured returns to tax commissioners and other public officers; seesawing traffic or dividends, paying unearned dividends or with- holding dividends earned, and other methods of manipulating stock values, so as to buy it in at bottom prices and sell it again at high prices; inflating records of value by adding together all past ex- penditures with no deductions for depreciation and extinction of past possessions obtained by such expenditures, large increase of securities on the consolidation of companies, issuing fictitious dividends, issuing valuable stock to stockholders at par, or other- wise watering securities or inflating capitalization; distributing stock among influential people; furnishing free light, transporta- tion, etc., to men of wealth and position; bribing councils and legislators to secure franchise privileges or to prevent others from obtaining grants; scheming to wreck and capture public plants or rival private plants, corrupting officers to prevent the enforce- ment of the law or performance of duty; "bulldozing" employes to vote for corporate agents and vassals for councilmen, aldermen, legislators, etc.; furnishing too few cars, poor quality or over- pressure of gas, undercurrent of electricity and other tricks of traf- fic; workingon public opinion undercover thru the control of news- papers and institutions of learning; stealing inventions, or buying and suppressing them; ruining opponents by expensive litigation; making "ring" contracts above reasonable market rates, or "con- PUBLIC OXVNKESHIP OF PUBLIC UTILITIES. 71 spiracy" contracts to secure unreasonable rebates and advantages guaranteeing enormous profits on leased or rented properties, etc. Governor Hazen S. Pingree, of Michigan, while Mayor of Detroit, discovered that the Citizens' Street Railway Company of that city "literally owned the Council, body and soul." 1 They would pay $3000 for a member, 2 and even made an actual offer of $75,000 to buy the Mayor himself. 3 The Governor says: "My experience in fighting monopolistic corporations and endeavoring to. save the people some of their rights as against their .greed has convinced me that the corporations are responsible for nearly all the thieving and boodling with which our citiies suffer." 4 The bribe does not always take a money form. Mayor Pingree was offered a trip around the world by the agent of a certain company if he would refrain from vetoing a specified franchise. Speaking of the situation in Cleveland, Dr. Hopkins saj's: "When we approach the question of corruption in the award of franchises, it must be admitted that the system has thus far put an immense premium upon all sorts of bribery and corruption. The street railway interest has been all powerful in the control of political machines. It has not only secured, apparently for the mere asking, the most valuable privileges which the City Council could bestow, it has also escaped the performance of many obligations which the state has compelled the Council to make a condition of its grants. And it has prevented the enforcement of nearly every law which it has not cared to obey." 5 The Broadway Surface franchise was secured by bribing nearly the whole Board of Aldermen. The "Cable Railway Company" offered the city $1,000,000 bonus above the compensation required by statute, but the franchise was given to the "Broadway Surface Railroad Company" without compensation beyond the statute mini- mum, the Aldermen overriding the Mayor's veto to do it. Almost the entire Board of Aldermen and the officers of the company were indicted for corruption, and it was shown that in bribes of $20,000 per Alderman and something for go-betweens the franchise had cost the Surface Company just half what the Cable Company had offered to pay the city for it. 6 When Toronto wished to relet its street railways on terms advantageous to the city and called for bids, New York capitalists who went to look at the situation laughed at the idea of paying part of the earnings to the city. "They had been accustomed, so they informed one of the commit- tee, to pay something to the Aldermen, but nothing to the munici- pality." T 1 Facts and Opinions, by Hazen S. Pingree, p. 31. 2 Ibid., p. 30. 3 Ibid., pp. 86. 122. 'Ibid., p. 24. 5 "St. Ry. Prob. in Cleveland," Amer. Econ. Ass'n., 1896, pp. 315, 316. 6 Final Rep. Com. on Rds. relative to B'y. Surf. Rd. Co., Senate Doc. Xo. 79. 1886; People vs. O'Brien, 111 X. Y. 1. Dr. Max West in Municipal Monopolies, pp. 376, 377. 7 "NV. I). Gregory in The Outlook, Feb. 5, 1898. 72 THE CITY FOR THE PEOPLE. Philadelphia has had ample experience with railway morals and traction politics from the open purchase of the Union Passenger charter, in 1864, to the "Suburban Trolley Grab" of 1894. The former was bought by the liberal distribution of options on stock among the members of the Pennsylvania Legislature. The latter was an ordinance framed in Councils to give 100 miles of street in a suburban district with absolutely no return to the city, and not even an agreement on the part of the company to build roads in the locations granted. The press and the people stormed and ve- hemently charged the Councils with corruption, but the measure passed by more than a three-fifths vote. The Mayor's veto, how- ever was allowed to stand, but the traction mastery was clearly indicated in the outcome. "Every newspaper of repute in the city, regardless of party, had denounced the 'Grab,' and as the annual municipal election approached at which one-half the Common Councilmen and one-third of the Select Councilmen were to be chosen, the papers demanded the defeat of every man who had voted for the 'Traction Grab Bill.' Lists of those who voted for the bill were published in all the papers, and their respective par- ties were exhorted not to renominate them. But the political ma- chine responded to other forces than those of public opinion. The terms of seven Select Councilmen who voted for the bill expired. All but one were renominated, and all nominated were re-elected. In the Common Council the terms of forty-seven supporters of the 'Traction Grab' expired. Thirty-six were renominated and thirty- five re-elected. The net result of the agitation of a united press and a long and vigorous reform campaign in behalf of honorable candidates was the election of one reform Councilman. A more re- markable assertion of the control of a municipality by a political machine identified with the interests of a railway company it would be hard to find." " The Philadelphia press, pulpit and platform have continually proclaimed in recent years, practically unchallenged, that a con- siderable number of Councilmen are in the pay of the street rail- ways and other great corporations. 9 The "Railway Boss Act" of 1868, which practically gave Philadel- phia into the hands of the street railways; the "Gas Ring," 10 in the seventies, which owed much of its power to the ownership of one of the principal railways of the city, and the "Motor Bill" of 1887 are further illustrations of the political methods of Philadelphia street car companies. The passage of the Motor bill, giving extraordinary powers to motor companies was severely denounced by the press and by the people in mass meeting. 11 The companies yielded a 8 S't. R'y. System of Phila., 1897, by Prof. Speirs of Drexel Institute, "ibid 10 A fnll description f the famous "Gas Ring" of Philadelphia is easily accessible in Vol. II of Bryce's "American Commonwealth," so it need not be dwelt upon here. 11 Prof. Speirs recounts a part of what occurred in 1887 as follows: "Mr. H. L. Carson, the distinguished historian of the Supreme Court, PUBLIC OWXtRSHIP OF PUBLIC UTILITIES. 73 little and had the law modified somewhat, but their political power remained undiminished, as subsequent events already described have clearly shown. A street railway financier, who offered to build extensive lines in Chicago with a 3-cent fare and a good bonus, was told by mem- bers of the City Council that these items were unimportant. The vital condition was that he must pay $50,000 to the Aldermen at the start and $250,000. when he secured his franchise. 12 In his book "If Christ Came to Chicago" Mr. Stead estimates that, on an average, franchises worth $5,000,000 are annually given away in Chicago to those who best understand how to give the members of the city government the proper encouragement. It is matter of common knowledge in Chicago that the street railway compa- nies spent vast sums in getting the Legislature of 1897 to pass the infamous Allen bill permitting the grant of 50-year franchises. Here is a legislative investigation of the West End Street Railway Company of Boston in 1890 (House Document 585). The committee found that the West End had, in one year, paid, or promised, the following sums to influence legislation: To lobbyists $22,000 To an attorney for services, influence, etc., in procuring legislation.. 10,000 To another, ditto '. 500 For dinners to members of Legislature at the Algonquin Club 1,922 For carriages for said members 584 To newspapers for printing speeches, arguments, etc., gotten up by West End 7,500 $42,506 Besides this, the committee found that "large sums" had been paid to other petitioners to withdraw. It is altogether improbable that the committee came within hailing distance of all the expen- ditures in the case, and perhaps the most vicious of them escaped the light; but enough was discovered to give us a clue to some of the items in the West End's overgrown expense account. The electric light companies are not far behind the trolleys when the exigencies of their situation demand political action. Indeed, the two monopolies usually aid each other, and are often con- trolled by the same men. We have already seen how they con- trolled the Philadelphia Councils, packed the investigating com- mittee and "gutted" the Edison company to prevent the city from getting its light at a reasonable rate. Electrical politics constitute the reverse side of the shield on whose front we have found Extortion. The companies are obliged to give due attention to politics in order to keep their right to ob- denounced the act as 'an example of reckless and arbitrary power outgrowing all the bounds of decency and restraint.' The conservative Public Ledger says of the bill: 'It Is wrong in policy, bad in principle, a trick and a fraud.' And again the Ledger explains the public hostility to the company by saying that it is due to 'the breaking of their bargains with the city, their pretence of abiding by the decisions of the courts of law, with their attempt to circumvent the courts by covered up and tricky proceedings in the Legislature, and their defiant contempt of -public rights.'" 12 Statement bv Prof. Beniis to whom the said financier gave the facts. 74 THE CITY FOE THE PEOPLE. tain an exorbitant profit on light, and they are compelled to make large profits on light in order to give due attention to politics. They begin usually by bribing the Councils to get their franchises. Then they have to keep on bribing to prevent the granting of rival franchises and measures looking to the reduction of prices, and all other legislation injurious to their interests. To secure immunity from interference with their monopolistic right to overcharge, and to intrench themselves in the law, they put their money and influ- ence into politics, robbing the public with one hand and with the other bestowing a part of the booty on the officers of the law tc keep them from stopping the game. This is well known to be the situation in Boston, New York, Brooklyn, Philadelphia, Chicago, Minneapolis and other large cities. In Northampton, Mass., it was found that all the city government, from the Mayor down, were holders of stock in the electric lighting company. A member of Council in Paris, 111., says: "The light companies are composed of sharp, shrewd men. Their stock is distributed where it will do the most good. It was observed that the company took special interest in city elections. Men who never seemed to care who was made congressman, governor or president, would spend their time and money to elect a man of no credit or standing in the community. The question was, 'Are you for the light company?' " One of the Aegis investigators questioned nearly every large city in the United States upon this point, and a great majority replied that the electric light companies are in politics, and some said that the companies own and run the city. Mayor Weir, of Lincoln, Neb., wrote: "The electric companies are in politics in every sense of the word. They attempt to run our city politics, and usually succeed." Similar words came from the officials of Milwaukee, Kansas City, Sacramento and many other cities. Elec- trified politics are not a success for the people; electricity is un- doubtedly beneficial to the body politic when properly adminis- tered, but it will not do to leave the treatment to unprincipled quacks, who care nothing for the health of the patient, if they can only get his money. Public plants have sometimes been crippled and captured by the scheming of private companies. Michigan City built a public electric light plant in 1886, with 84 arcs, for $7500. During the first three years the cost per arc was $43. Then the Electric Street Railway Company wished to buy the plant. The company had backing in the city government, but the opposition was strong. The result was that the reported cost mysteriously jumped to $80 per arc, and the plant was sold to the Electric Street Railway Com- pany for $2,500, the company agreeing to furnish the city with light at a cost not to exceed $75 per arc. In Portland, Oregon, also, the electric light company had suffi- cient influence in the city council to force the sale of the municipal plant in East Portland when it became a part of the city of Portland, PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 75 and the Mayor says they are now paying two prices for electric light, with little hope of deliverance. A fraud of a similar nature produced the lease of the Philadel- phia Gas Works. The works were paid for and doing well, furnish- ing $1 gas and making a profit above all expenses, depreciation and interest on the value of the plant, if the value of the free gas fur- nished the city is included, and could have supplied good gas at 75 cents if Councils would have authorized proper repairs and im- provements. Under the hypnotic influence of the monopolists Councils refused to do this, and purposely withheld not only im- provements, but needed repairs, in order to disparage the works in every possible way. The people understood the situation and were overwhelmingly against the lease. 13 But the attorneys and lobbyists of the monopolists had more influence in the Councils than the people, and "despite the public protests, despite the public indignation and despite the very much better offers of competing companies, the United Gas Improvement Company, controlled, as it is, by those who have already secured the street railway, electric lighting and gasoline franchises and privileges, was able to carry the day." 14 Some time ago a professor in a prominent Pennsylvania Univer- sity was given to understand that if he would give an opinion favorable to the lease or sale of the water works of his city, his opinion would be worth fully $25,000, and he says that prices have risen since then. 13 One might expect the water business to be free of taint, but it is not so, 16 and the reasons are quite clear when you come to think of it. Suppose a water company is seeking a franchise, and finds that the rates it favors will bring in $10,000 or $20,000 more than those proposed by the City Council. This difference for even one year of a twenty year franchise, judiciously distributed among prominent councilmen, or handed to the leader of the dominant party in the Council, may mean a gain to the company of $190,000 to $380,000 during the life of the franchise. The Governor of a great state was offered 20,000 shares on option, without cash down, if he would sign a certain franchise measure, which he was told if signed would probably raise the value of the said shares from $1,400,000 to $2,000,000, yielding him $600,000 clear profit. He did not sign the bill, but his successor did, and the rise of value was even greater than had been predicted. 17 13 See full statement by Prof. Bemis in Munic. Monops., pp. 602, et seq. 11 The Hon. Clinton Rogers Woodruff, Sec. Municipal League of Phila- delphia and of the Natl. Munic. League, and member of the Pa. Legislature, in American Journal of Sociology, Mar., 1898. 15 Statement of Prof. Bemis, Munic. Monops., p. 656. 18 See M. N. Baker's strong words in Municipal Monopolies, p. 48. "Prof. Bemis in Municipal Monopolies, p. 657: I am told by the Hon. John Wanamaker that while he was Postmaster General $1,000,000 was offered if he would withdraw the La. Lottery Bill, and another million, corning from Western Union sources, felt its way among those close about him to ascertain if it would do to offer itself for the withdrawal of the Postmaster General's bill for a Postal Telegraph. In 76 THE CITY FOR THE PEOPLE. In an address 18 to the Ohio Gas Light Association, Mr. Dohert>, of the Columbus Gas Company, said: "Keep the newspapers on your staff, also the city authorities." He proceeded to describe a plan for giving shares of stock to the managers and proprietors of news- papers on note at less interest than the earning capacity of thfe stock, and with the privilege of paying off the note at any time. or of giving up the stock, by endorsement of which the note was secured, if they preferred to do that. In other words, the news- paper man makes no outlay, takes no risks, and if the stock pays good dividends, or rises in value, he is a gainer, wherefore he will feel an interest to work for the success of the company. The plan being made clear, Mr. Doherty says, "To be brief, it should be our business to-day to keep the stock of our companies distributed among those who are in a position to promote the welfare of our business." In the Cleveland gas case it was in evidence that editors of lead- ing papers and other influential people were supplied with free gas, and it was admitted that $24,000, which was charged to "insur- ance and depreciation" (in 1890 and 1891, when the entrance of a competing gas company was being defeated in Council), did not go to those purposes at all, but to expenses, the nature of which the secretary-treasurer could not remember, and for which he had no vouchers or written memoranda, altho the expenditure of every cent for other purposes was plainly accounted for in his books. A high authority in Boston gas negotiations said in 1897, "The a speech at Williams Grove, Pa., Sept., 1898, Mr. Wanamaker spoke of the relations of the corporations and the Quay machine in the following terms: "The principal allies and partners of the machine are the corpor- ations. * * * The corporation employees of the State are controlled for Quay's use. * * * The steam railroads of the State employ 85,117 men, and pay them annually In wages $49,400,000. * * The great street railways of the State, which have received valuable legislative concessions for nothing. give the machine loyal support with 12,079 employes, who are paid in salaries $6,920,692 every year. That monopoly of monopolies, the Standard Oil Company, pays annually $2,500,000 to its 3,000 employees who are taught fidelity to Senator Quay's machine. The Bethlehem Iron Works, whose armor plates are sold to the Government for nearly double the contract price offered to foreign countries, influence their employees to such an extent that, in the city of Bethlehem, It has been found difficult to get men to stand as anti-Quay delegates. The thousands of working men of the Carnegie Iron Works, it is said, are marched to the polls under the supervision of superintendents and foremen, and voted for Quay can- didates under penalty of losing their jobs. The great express companies, who furnish franks to machine followers, one of which is bossed by Senator Platt. with their thousands of men, can be counted on for great service to the machine. The telegraph companies, whose State officials can, it is said, be found at the inner Quay councils, with the thousands of employees distributed at every imporant point throughout the State, and before whom a large share of all-important news must pass, is one of the most dangerous parts of the Quay machine. The interests of the corporations and those of the masses have been diverging for many years, until now what is for the people's good will not suit tin- corporations, and what will seemingly satisfy the corporations is no longer safe to the people. * * Capital with its manifold possibilities for good in itself, becomes an agency of wrong and calamity when harnessed with favored legislation. Unscrupulous Pennsylvania corporations have been willing to purchase advantageous legislation and dishonest political leaders have made a business of selling it to them. * * * The Quay machine in Pennsylvania * * deals exclusively in legislative privileges, and demands its price, and the corporations are its patrons." 18 At Cincinnati, Mar. 18, 1896 (Progressive Age, April 1, 1896). PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 77 Massachusetts Pipe Line's mongrel charter, procured from the 1896 Legislature, cost about $500,000." " But the most remarkable of all gas frauds and corruptions, in Massachusetts, at least, were those unearthed in Boston a few years ago by a legislative investigation started by the Hon. Nathan Mathews, who was Mayor of the city. It appears that a Delaware man, by the name of J. Edward Addicks (since promi- nent in politics) obtained a franchise in Massachusetts for the "Bay State Gas Company" (which was practically himself), with a right to issue $500,000 of stock, and no more. He then, under the laws of Penns3'lvania, organized the "Beacon Construction Com- pany" (which was also practically himself, as he owned 14,980 of 15,000 shares). The Bay State secured from the city the privilege of laying its pipes thru the streets on condition that it would -lay pipes in every street where the Boston Gas Light Company had pipes. The Bay State Company (Addicks) then made a contract with the Beacon Company (Addicks) by which the Beacon Company was to build works and lay pipes as specified, and the Bay State was to pay the Beacon $5,000.000, consisting of the $500,000 in stock and a 4% million 99 year bond. Works were built and some pipes laid when the Boston Gas Corn- Company opened negotiations resulting in an agreement by which the Bay State Company was not to lay any more pipes, but was to manufacture gas and sell it to the Boston Company, which was to distribute it to the people. When construction was arrested, the Beacon Company (Addicks) had expended about $550,000 in building gas works and $200,000 in laying pipes, or $750,000 total, but the Bay State Gas Company (Addicks) had a meeting (1889) and accepted the said construc- tion in full performance of the contract of the Beacon Construction Company (Addicks) and turned over the $500,000 of stock and the $4,500,000 bond in payment for $750,000 worth of work, thereby capitalizing the Bay State at $5,000,000 on a real value of $750,000. The construction bond, with the acceptance of part construction as full performance, was a cover for the evasion of the Massachus- etts law against fictitious capital, and a shrewd device for the con- cealment of enormous profits. Under the compact between the Bay State Gas Company and the Boston Gas Company (which had been far the strongest company in the city) the Bay State, in 1892, made gas at 33 cents per thou- sand feet and sold it to the Boston Company at $1 per thousand, 20 19 Thos. "U". Lawson, till lately vice-president and director in several Boston companies, and the negotiator, as he says, "of the various sett ments, deals and organizations consummated or attempted in the Bost gas field during the last three years," preceding the time of his writing in 1897. See Munic. Monops., p. 599. 20 And now. a decade after the compact spoken of in the text. I find in the papers the following paragraph: "J. Edward Addicks, the gas man of Delaware and other places, filed in the United States Court four bills in equity against the Boston (T<-\S Light Company and allied companies, asking for an injunction restraining 78 THE CITY FOE THE PEOPLE. which in turn sold it to the people at $1.30 per thousand. This arrangement was a beautiful one thruout, for if the consumers asked the Gas Commissioners to reduce the price of gas, the Boston Company could say, "Why how in the world can you expect me to sell gas for less than $1.30 when I have to pay $1 per thousand for it under my contract?" And if it were complained that the Bay State's profits were 200 per cent, on the cost of production 90 per cent, on its entire stock it could point the complainor to the fact that it had to pay interest on a $4,500,000 bond. The Boston Gas and three other companies combined with the Bay State to form what was known as the Boston Gas Syndicate, or Gas Trust. 21 The consolidation was completed in 1889, and the capitalization was $17,000,000, or $13,365,000 above the lawful capi- talization of the companies involved $4,640,000 was excess of mar- ket value above par at the time of consolidation, about $2,000,000 was excess of prices paid by the combine for stock of the com- ponent companies over and above the existing market values, and about $7,000,000 was pure unadulterated water. The Boston Gas Company's stock ($500 par) was selling in 1889 for $900 a share, but the combine paid $1200 a share for it in stock and bonds and cash. Eoxbury stock (par $100) was sellkig at $190, and the Trust paid $225, etc. The five men chiefly concerned in this conspiracy against the Com- mon law and the Corporation law of Massachusetts made large fortunes out of the transaction. The bond acted as a sort of con- duit pipe to convey the profits collected from the people of Boston out of the state and away from the control of its laws into the treasury of a foreign corporation at a rate which would have made the total burden of the bond and its interest amount to nearly $40,000,000, which the people of Boston were to pay substantially for nothing almost wholly a monopoly tax under the concealment and protection of the fraudulent bond. And the Trust served to increase the profits available for abstraction. The profits went from $450,000 to $874,000, or about double (in 1892) what they were (in 1888) before the Trust got control, while the cost of manufacture the defendants from carrying out the contracts between them and the Massachusetts Pipe Line Company, under which the latter is to supply the former with all its gas for the next fifty years at twenty cents per I,uu0 cubic feet. Mr. Addicks alleges that the contract is fraudulent and Illegal, and asks that it be declared null and void." Mr. Addicks is probably right about the character of the contract. He is an expert in such cases. The contract tends to shut out competition and the cost of gas may sink far below the agreed price during the life of the contract. Mr. Addicks sees very clearly that a contract to buy gns of the Haas. Pipe Line at 20 cents is fraudulent, but a contract to buy gas of his Bay State Co. at $1 when It made the gas for 33 cents, was verv good in his sight. 21 The stocks of the companies were assigned to the Mercantile Trust Company of New York as security for the bonds and stock of the Bay State Gas Company of New Jersey, which were largely used in paying for the Boston stock. The Bay State bond was transferred by the Beacon Construction Company to the Bay State Gas Company of Delaware (another Addicks company) and the stock and bonds of the Delaware Company were also used in paying for Boston stock. All this was to get out from under the laws of Massachusetts so far as possible, and to get the bond into the hands of "third parties." PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 79 fell from above 40 cents to 33 cents. The Trust abolished the dis- counts that had been allowed, and thereby raised the average price 8 cents a thousand. In one respect, however, it was not economical. It paid big sala- ries. In 1887 the aggregate salaries paid the presidents, treasurers and directors of the five companies was $18,160; but in 1892 the amounts paid by the Trust for salaries for president, treasurer and directors were $60,930, or more than three times as much for the single organization as for the five separate companies, and of this extravagant total $25,000 was the salary of Mr. J. Edward Addicks, who spent his time in Philadelphia, Wilmington, Brooklyn and New York, and only came to Boston to testify that he didn't know anything about gas. The organizers even paid $150,000 in pensions and gratuities to retiring officers of the Boston Gas Company, and had the impudence to capitalize the amount, as they did also $350,000 "expenses of the Boston Gas Syndicate," including $250,000 to the trustees for organizing the Trust. The Bay State rented its fifteen miles of pipe to the Boston Gas Company at a rental which in two years paid back to the Bay State the whole $200,000 which its pipe lines had cost. The Bay State also bought tar of the other four companies to the extent of $29,000 in two years and sold it for $49,000. The Trust bought coal of Ad- dicks' Delaware Company at a uniform advance above the market price, adding $33,700 to the operating cost of the Boston Gas Com- pany alone. Anything to turn profits into the hands of the Dela- ware man and enamel the process. In less than four years the Trust took from the people of Boston over $2,000,000 in monopoly taxes above 8 per cent, on the lawful capitalization. It turned in false statements to state officers and swore to them. It broke its agreement with the city of Boston and never fulfilled the condition upon which it was permitted to lay its pipes in the city streets. It violated a dozen statutes of the state of Massachusetts, besides breaking the Common law into splinters. And when Nathan Mathews, the Mayor of Boston, sought to have the Syndicate investigated, there was a tremendous fight to keep the facts from the light. Even the Gas Commissioners were so under the thumb of the Trust that they tried to suppress some of the most vital facts 'in their possession. The Bay State paid two lawyers in the Eing $20,000 for "legal expenses" at the start, though there was no litigation at the start, nor any legitimate legal expenses beyond drawing a few papers no legal expenses unless the expenses of obtaining the license from the Board of Aldermen could be called "legal." The Baj r State started with a pretence of competition, but with the intent to capture; they built their works in Dorchester and laid big mains into Boston. They ran a main up to the Eoxbury works and then said: "Now, gentlemen, take your choice. If you want to go on with the gas business, go -right on; but if you don't give up your business to us we'll parallel every foot of your pipes, and we will do the gas business, and you will perish." 80 THE CITY FOR THE PEOPLE. Well, the Mayor brought out the facts before a committee of the Legislature, and demanded that the Bay State charter be forfeited and its assets distributed. And the Hon. George Fred. Williams quoted these memorable words from the United States Supreme Court in Loan Association vs. Topeka, 21 Wallace, 655: "If the char- ter granted, whether by special act or under general law, is used not for the public benefit, but for the public injury, it is not only the right but the duty of the Legislature to revoke that charter." Seven of the committee signed a majority report against revoca- tion. The report bears strong evidences of corporation bias and even denies that the Bay State bond was a fraud (p. 151), tho ac- knowledging that it was mostly fictitious "a dear bargain to give this obligation of $4,500,000 for the Bay State plant, costing not less than $750,000 to $1,000,000" (p. 148), "but who can say that they had not the legal right to enter into such a bargain, and who can take exception thereto? Certainly no one but the stockholders of the company or its creditors then existing; but there were no creditors, and the stockholders, at a legal meeting, afterwards ratified it." (p. 149.) According to these gentlemen the public ap- pears to have no rights that corporations are bound to respect. A minority report, signed by six of the committee, states the case fairly and says: "We are of the opinion that the methods above shown of conducting the affairs of the Bay State Gas Company of Massachusetts, in evading the statutes of the Commonwealth pro- vided for the very purpose of regulating the corporations organ- ized under its laws, and protecting the public from the abuse of the privileges conferred iipon such corporations, and particularly in the issuing, ratifying and paying interest upon said fictitious obligation at the rate of ninety per cent, of its entire net earnings, is sufficient reason for revoking the charter of said company, if the Legislature can devise no other means of annulling the said fictitious obligation." (p. 160.) Another committeeman made a little report of his own in which he said that "on giving up the note for $4,500,000, which appears to be a fictitious note of no value," some arrangement should be reached by which the Company could go on. He did not think it necessary to take away the charter of the Bay State Company. The Legislature passed an act (ch. 474, 1893) revoking the said charter o'n Dec 1st, 1893, unless before that time the Bay State obligations for $4,500,000 should be legally cancelled and discharged and surrendered to the Commissioner of Corporations. The act permitted the company to capitalize at the market value of its property as estimated by three Commissioners. The obnoxious obligation was cancelled and surrendered and the company was allowed to continue its career with a capitalization cut down from $5,000,000 to $2,000,000. Some of the most import- ant portions of the proceedings were omitted from the official re- port of the investigation, and, most remarkable fact of all perhaps, Mayor Matthews the hero of the battle, went from the Mayoralty to the presidency of the Bay State Gas and its allies at a salary of $25,000 a year. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 81 The Bay State Gas transactions were a fraud from beginning to end; a fraud on the city, a fraud on the state, a fraud on the con- sumers, a fraud on other companies, a fraud on the Common Law, and they inoculated the Gas Commission and the government with the virus of disloyalty to the public interest. 22 Only a small proportion of the frauds in the ocean of monopo- listic corruption ever come to the surface, and those above men- tioned are but a fraction of the cases that have come to light, but space will permit no more. 23 DEFIANCE OF LAW. 9. Defiance of Law and Justice is a distinguishing charac- teristic of private monopoly. Everything that has been said in the eight preceding sections is in evidence under this head. The very existence of private monopoly is a violation of the fundamental principles of justice and constitutional law on which our institutions are based. (See Section 3.) In Chicago the City Railway Company has not hesitated to de- liberately smash up and completely destroy property of the Gen- eral Railway Company during a dispute between the companies as to the right to use certain tracks. 1 A serious battle in the streets was narrowly escaped. During the great Railway Union strike in Chicago, according to the Chief of the Police Department in that city, and the opinion of Hon. Carroll D. Wright, expressed to several gentlemen in Boston, the railroads secured the appointment 23 See Report of the Bay State Gas Trust, City Print. 1893: Mass. Gns Commission's Report, 1894, p. 4. In Wall Street the Bay State Gas episode is called "The Boston Skin Game," and the general situation is termed the "Beans Mystery" (Progressive Age, Jan. 15, 1898, editorial). 23 For the frauds of the Western Union Telegraph Co. see "The Telegraph Monopoly," Arena, Vol. 16, pp. 70, 73, discriminations; pp. 74, 81, control over newspapers and interference with the liberties of the press; pp. 186, 189. distribution of franks among Congressmen and Legislators, influencing legislation with money, and even aiding two attempts to steal the Presi- dency of the United States. For Standard Oil morality, with its thefts, perjuries, briberies, deceits, assaults, conspiracies, destructions of property, attempts to ruin honest business men, and even whole classes of producers, fraudulent contracts with railroads and other violations of law, see Henry D. Lloyd's "Wealth against the Commonwealth," published by Harper. From the conspiracy to blow up a rival refinery and the plugging of the Independent Pipe Line in mid-country to the forced agreement by which a railway undertook to carry oil for the Standard at 10 cents a barrel, charge rival shippers 35 cents a barrel, and pay the Standard 25 cents out of each 35 thus collected from said rival shippers (Handy vs. Cleveland & Marietta Rd. Co., 31 Fed. Rep. 689), the reco-rd of the Oil Monopoly is a record of fraud, violence and corruption. For Railroad frauds see Lloyd's "Wealth against the Commonwealth:" Chas. Francis Adams' "Chapters of Erie;" Stickney's "Railway Problem." nnd Cowles' "A Gen'I Freight and Passenger Post." The statements in the latter book as to possible rates must be taken with some allowance but it contains many valuable farts as to raiFway methods. The question will be discussed in a future number of the Equity Series. 1 Chicago Gen'I R'y vs. Chicago City R'y, 111. Appellate Court, Oct. Term, 1895, p. 521; Municipal Monopolies, p. 532. (See Appendix II C. 2.) 6 82 THE CITY FOR THE PEOPLE. of several thousand thieves, thugs and toughs from the city slums as special United States police or deputy marshals, and thru them the roads accomplisht the burning and destruction of a large number of cars, in order to accuse the strikers of violence and turn public sentiment against them. The roads afterward claimed dam- ages, and made the city pay for the property they had themselves destroyed. (See Rep. Supt. Police, Chicago, Jan., 1895, p. 17.) The ordinance under which the new railway in Detroit is ope- rated requires 3-cent fares in the daytime. This new road is now controlled by the old company, the Detroit Citizens' Railway, the two roads having the same officers and the same power house. When the old company absorbed the new, the frequency of service on the new lines was much reduced. It was clear that the company was aiming at a practical nullification of the ordinance by driving passengers to the other roads. A great deal of complaint was made, and it was charged that the company was trying to ruin the new road and kill the progress of the low-fare movement by making it a financial failure in Detroit. The company denied this, but recently, when the franchises of the roads were to be valued pre- paratory to the proposed purchase by the city, the company's offi- cers desired that the franchise terms of all the lines should be averaged, and the value calculated on the average earnings and the average term for the whole system. Professor Bemis, how- ever, insisted on valuing the franchise of each road separately, and an official remarkt that that method would be very much against the interest of the company, because the longest franchise term by far was on the new road, which they had been trying to ruin. In Cleveland, as we have seen, "The street railway interest," ac- cording to Dr. Hopkins, "has prevented the enforcement of nearly every law which it has not cared to obey." In Philadelphia, Boston, New York and Chicago the street railway interest is in the habit of having the law made to suit itself, but if it fails in this, it does not hesitate to defy or evade an inconvenient statute or ordinance. The Philadelphia companies refused to obey the fender laws until repeated fines compelled them to act, and then they fitted the cars with miserable, cheap, heavy, clumsy, dangerous evasions of the law. Similar episodes have occurred in other cities. Perhaps the commonest breaches of the law by the great mono- polies relate to taxation. In Cleveland the street railways reported for taxation $1,869,000, or 1/14 of the capitalization, 1/G of the claimed actual investment, and about % of the cost of duplication. The rule calls for 60 per cent, of actual values. 2 In St. Louis the Missouri Bureau of Statistics found the street railways assest $11 on each $100 of value, while property in general was assest at more than $50 on the hundred. Some private prop- erty was assest at 95 per cent, of its market value, while the St. Louis railways, with a market value of $37,987,000, were assest only 3 Cleveland St. Rys., Hopkins, p. 376. 1'UBLIC OWNERSHIP OF PUBLIC UTILITIES. 8-3 $4,246,190. They are willing to pay interest and dividends on nearly nine times as much as they wished to pay taxes on. The Lindell system of street railways cost $1,298,000, was capitalized at $7,000,- 000 and assest at $769,720. It paid over 4 per cent, interest and divi- dends on the whole capitalization, and 23 per cent, on actual invest- ment, but was "so poor" it could only pay taxes on about a tenth of its market value. The People's Railway track was originally assest at $15,000 a mile, but when the president of the People's Raihva\ was appointed a member of the Board of Equalization, the assess- ment was reduced to $9000 a mile. The president was willing to help the other companies also. In 1894, 186 miles of track were assest at $2,142,650. But in 1895, with the People's president on the Board, 216 miles of track (or 30 more than in 1894) were as- sest at only $1,718,930, or $500,000 less than the year before. At this rate the growth of the city and increase of track will reduce the street railway taxes to zero. The Union Depot Line had 54 miles in operation, according to its. return to the City Register April, 1894, 34 miles, according to its return to the City Assessor, June 1, 1894, and 76 miles, according to the survey of a competent civil engineer, November 5, 1894. Taking the company's own returns, the city's loss at the regular tax rate was $2800, and on the engineer's report, adopted by the Missouri Labor Bureau as the true figure (which is just if care was taken to ascertain that the company did not build the additional miles between June and November), the city was cheated out of $5880, or more than half the tax due under the law. Under the law the railways must pay $25 tax on each car ope- rated, and are subject to a fine of $100 to $200 for each unlicensed car used in carrying passengers within the city. In 1895 the rail- way officials returned sworn reports, giving the number of cars used as 714. An agent of the Bureau watcht the cars in use on the streets, took down the number of each and found 903 cars in use, indicating a fraud on the city of $4725 license fees in one year. In June, 1896, the companies swore to 722 cars, but if you went to the Railway Advertising Company they would guarantee to put your advertisement in 926 cars running every day in St. Louis. At the time when the company was paying license tax on 714 cars and the Bureau found 903 in use, the assessor found that the com- panies possest 1430 cars, and the number reported to the Street Railway Journal was 1686, or 5% per mile of track. 8 In Kansas City the agents of the Bureau counted 133 cars of certain lines in use March 7, 1896, but the sworn return of the general superin- tendent of the company for that day was only 88 cars. Every count that was made showed a similar discrepancy.' Perhaps the Kansas 8 Report of Hon. Lee Meriwether, Labor Comm'r for the State of Mo., 1896. pp. 3, 4, 65-7, 29. 14-16. The railways absolutely refused to give the Labor Bureau the slightest assistance in its investigation. From start to finish every attempt to get information from railway officials was met with a rebuff. In order to do everything possible to avoid inaccuracies, the Com- missioner scut a draft of h'is report to the railway officials for criticisms and suggestions, but they refused to make any beyond a few irrelevant and impudent remarks; they would say nothing at all about the facts, pp. 6-8. 84 THE CITY FOB THE PEOPLE. City and St. Louis railways calculated on the same basis as tiw Philadelphia railways, which were discovered by the watchman of the Department of Public Works to be evading- the law by chang- ing the license from one car to another; a car going 1 out of the citj limits would meet a car coming into the city and give the latter its license, so that quite an economy of licenses was effected. In Chicago the Labor Bureau (1896) found that the North Chicago Street Railway Company was assest only $500,000, or 2 per cent, of its market value. The West Chicago Street Railway was assest at $1,100,000, or 3 per cent, of its market value. The Special Com- mittee of the Chicago Common Council (1898), with the Mayor at its head, discovered that the companies were operating lines in numerous locations for which the public records showed no grants whatever. The companies had simply helpt themselves to the streets. The committee called the attention of the railway officials to this and other important matters, and askt for explanations, but the Chicago City Railway neglected to answer the committee's questions, and "the North and West Chicago Companies, thru their president, Mr. Yerkes, peremptorily declined, by letter to the Mayor, to render the committee any assistance or recognition." 4 In the Bay State Gas investigation, Mayor Matthews and Hon. George Fred. Williams enumerated a dozen laws which the evidence showed had been violated by the company. It takes a couple of pages in each report of the Massachusetts Gas Commission to re- count the violations of law respecting the purity and candle power of gas. 5 In the Cleveland gas case of 1888 the company defied the ordinance reducing the gas rate from $1.25 to $1 per thousand until the city took the matter to the courts and got a decision sus- taining the ordinance.* Resistance to laws and ordinances reducing gas, water, electric light, street railway and telephone rates has occurred in Detroit, Indianapolis, Des Moines and many other places indeed, it is the common practice of the companies in most states to resist to the utmost until the position of the city or state has been establisht by expensive litigation, the object of resistance being to discourage, so far as possible, all exercise of the public power of regulating rates. 7 Sometimes the companies nullify a reduction without open re- sistence. During proceedings for securing lower gas rates a few years ago, an official of one of the companies involved was heard to remark that he "did not care what they did with the rates if they only left the pressure alone." * The company could increase 4 Report of Spec. Com., p. 16. ' See (or example pp. 109-10, Rep. 1894; pp. 118 and 119, Rep. for 1895; pp. 153 and 154 Rep. for 1898. 9 State vs. Cleveland Gas L. and Coke Co., 3 Oh. Cir. Crts., 251. 7 In Detroit, when the railways refused to obey the law in respect to fares, Mayor Pingree laid the basis for a suit by offering the legal fare, and allowing himself to be ejected from the car for refusing to pay more than the legal rate. See cases cited in my chapter on "The Legal Aspects >f Monopoly" in Municipal Monopolies, p. 425. Also, p. 185. This may help to explain what has long been known to be a fact, viz.: PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 85 the pressure and force enuf gas thru the meters to make the same total profit as before. Electric light companies also, unless closely watcht, can and do evade the law by manipulating current and candle power. These companies play with the tax laws after the usual corporate manner. The Boston Electric Light Company reports $2,552,000 assets to the Commissioners (1895), and is assest at $710,900. Even the Edison (Boston) reports $3,534,000 assets, and is assest at $1,208,000; while the Worcester Electric reports $349,270 assets, $304,500 capitalization and $253,300 assessment over 2/3 instead of 1/3, as in the other cases. What a dainty plan it is for a little group of men (women are not yet sufficiently "developed," thank goodness) to pay in $100,000 and vote themselves stock to the amount on its face of $500,000! Or better still, to issue a million of stock and bonds, keep a good lot of it, give your friends some, and the legislators and council- men some, sell the rest, build the works with a part of the money you get from the "bloomin' public" in this quiet way, spend another part to buy the sort of politics and laissez-faire adminis- tration your business needs and put the remainder in your pocket; then make some light, charge three or four times what it is worth, get a contract from your friends in power to light the city, turn in a small valuation to the assessors so as to make the expenses light, but roll up the capitalization so as to spread out big profits over a large surface and make them look thin and small to the stingy people who are apt to object to a man's making a few hun- dred per cent. nice plan, isn't it? Almost as good as a bank rob- bery for getting hold of other people's funds. Almost as good for rapidity, and a great deal safer. And then if the people should wake up and attempt to take control you can put on an innocent look and tell them it's mean to ruin your trade, and if they insist that your gas bills are frequently as high or higher when you consume little and the gas Is comparatively low In price as when you consume at the ordinary rate and gas is higher, 1. e. your gas bills do not seein to bear any definite and ascertainable relation either to the price per thousand feet, or to the amount you consume. Take a few cases from the argument of Henry R. Legate at the State House in Boston a few years ago: "In Cleveland, O., gas was reduced by the City Council from $1 to 80 cents per thousand, but the gas bills grew larger instead of smaller. A citizen writes that for the six months from October to March, 1891-2, his bill was $18.50 at $1 per thousand, while from October to March, 1892-3, his bill was $19.58 at 80 cents per thousand the conditions being the same except that there was one less member in the family during the last six months. "A similar comparison from H. T. Hlckok, of Brooklyn, N. Y. (whero the companies were compelled to reduce their charge from $1.50 to $1.25) gives six mouths' gas at $1.50, $18.45, and the same six months the following year at 1.25, $21.88. The conditions were just the same, but the lower the prices per thousand the higher the bills every month. Reduction in gas don't reduce." The United States Superintendent of Gas in Washington reports that "the cause of large bills is excessive pressure In the street pipes." In 1892, Henry M. Cross made complaint at the State House in Bos- ton, as counsel for the United States Hotel, the Quincy House and a large number of other gas consumers, whose prices had been advanced 30 per cent, or more by the Boston Gas Company, as appeared from the increased size of their bills, without change of conditions. Bills of the United States Hotel, for example, showed $492 for January of one year, $592 for January of the next year, and $713 for the same month of the third year (1892), with "no addition to the number of lights." 80 THE CITY FOR THE PEOPLE. they at least ought to buy up your plant at the entire amount of your capitalization. But be careful, else some eminent and respectable citizens may organize a new company, -with the "boss" of one of the leading parties at its head, and a number of prominent business men, editors and officials let in on the ground floor to control public opinion and the councils, and incidentally make a profit for them- selves thru the rising value of the new stock. The new company will promise lower rates and vigorous competition; will get a fran- chise pay for it in cash if stock and persuasion wont do; erect a few poles to hold the franchise, and then make overtures to you of the old company. It is wasteful and ungentlemanly to fight, so you sell out or "consolidate" at two to twenty times the real value of your property, and the reorganized company goes to work with $500,000 of bonds, which represent the actual value of the plant, and $2,500,000 of stock, which represent the right of way in the councils and the influences and consciences of ten or a dozen prominent citizens purchast by the company plus the greed and impudence of the corporators. Law and justice! They are secondary considerations in the electric light business, or the gas, water, telephone or street rail- way business, or the business of any powerful monopoly. There is something much more worthy of its regard, and that is the al- mighty dollar." 9 Electric companies do not hesitate to bring pressure to bear to Induce manufacturers of electrical machinery to boycott municipal undertakings. (Progressive Age, Aug., 1897, reporting a meeting of the Northwestern Elec- tric Association, which unanimously and enthusiastically adopted a proposal to confer with manufacturers of electrical apparatus, secure their willingness to be guided by the wishes of the Association, and keep them, whenever thf Association thought best, from bidding on proposed municipal plants.) The Wire Nail Trust of 1895 compelled manufacturers of wire nail machines to break contracts with independent nail makers, recall machines delivered to the carrier under such contracts, and even wreck machines that had been delivered to consignees. ("Legal Aspects of Monopoly," p. 469.) The Telegraph Monopoly does not hesitate to break the laws of the United States as to the order of messages and the facilities to be given the weather service. The Bell Telephone Company is believed to have defrauded the public by buying up and nursing the Berliner claim of priority till its own patent expired and then by bribery and collusion securing a new 17-year lease of patent monopoly under the B. claim. The charges were found true, and the new patent set aside by the U. S. Circuit Court, but the Supreme- Court reversed the decision. (See my chap, on The Telephone in Municipal Monopolies, pp. 326-7 and U. S. vs. Amer. Bell Tel. Co., 167 U. S., 224.) The railroads have "defiantly" gone on buying hundreds of thousands of acres of coal land in Pennsylvania, in spite of the express prohibition In the Constitution of that State, and neither the Legislature nor the Supreme Court can be got to interfere, for the railroads own them both. (Lloyd's "Wealth against the Commonwealth," pp. 18-19, 181, citing Con- gressional investigations and "Leading Cases Simplified." by J. D. Lnwson. who warns the student of railroad law "not to pay much heed to the decisions of the Supreme Court of Pennsylvania at least during the last ten or fifteen years. The Pa. Rd. appears to run that tribunal with the same success that it does its own trains.'") With equal success, but less openly the railroads defy the laws of the United States against discrimina- tion, and the decisions of the Interstate Commerce Commission. (Lloyd, p. 19, and "The Railway Problem," p. 207, by A. B. Stickney, then Chair- man of the Board of Directors, and now President, of a g'reat railway.) The Interstate Commerce Law provides for Imprisonment, and the violations of the law are numberless, but the only conviction had under it was that of a shipper for discriminating nsralnst a railroad. In respect to the Inter- state Law, Stickney quotes a railway president as saying that "If all who PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 87 have offended against the law were convicted, there would not be iill:u!s to the pipes of the Trust. Pittsburg and Cleveland, had similar experiences (126-7). To shut out the oil fields and independent refineries of Colorado and Wyoming, the Combine resorts to terrific discrimination in rates. The Chicago and Northwestern Road would bring a carload of cattle from Wyoming to Chicago for $105, but for a car of 75 barrels of oil the freight was $348. The rates from the Western fields to San Francisco were also put very high, and the Combine built great storehouses on the Pacific Coast, which ; from the Eastern fields, the freight rates from the East being suddenly lowered when it wishes to refill the said storehouses, and put back again as soon as they are full (Lloyd. 480-1.) The people of California are compelled to buy Eastern oil for the profit of the Trust instead of buying Colorado oil, because the freight on the latter is prohibitive (427). J. he Combine sells oil below the quality required by law, and bribes State oil inspectors to loan their stencils to the Trust to do its own branding. An inspector in Iowa exposed the swindle In written charges to the Gov- ernor, which the Governor refused to investigate or allow to be seen, and PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 89 dismissed the inspector. The latter said In his complaint that the repre- sentative of the Oil Combine said to him in substance: "You are the only fool among the inspectors. We have the stencils of the inspectors at every other point where we want them." Many conflagrations in cities can be traced to low-grade kerosene. (See the whole story of this defiance of law and public safety; Lloyd, 411-19.) The Trust has systematically done its utmost to ruin C. B. Matthews of Buffalo (245, et seq), and Geo. Rice (199 et seq., 200, 206, 224, 226, 233), and all others who have made a stand against it. The persistent, systematic, all-pervading, ruinous persecutions of Geo. Rice by the Oil Trust and its railroad allies form one of the most dramatic chapters in the history of industry. (Read Lloyd, Chap. XV, et seq., and write to Geo. Rice, Marietta, O., for the expanded and continued story. See also Equity Series 4, to appear soon.) The first railroad contract to ruin Uice doubled his freight to 35 cents a barrel from the oil field to his refinery, at the same time that the Combine paid 10 cents a barrel and received 25 cents of each 35 paid by Rice. The contract came into court (31 Fed. Rep., 689) and was denounced by the court as "gross," "illegal," "inexcusable." The Trust got the contract by threatening to build a pipe line and withdraw its valuable business from the railroad. "Most impudent and outrageous," said the Select Committee of the U. S. on Interstate Commerce (Rep. 49th Cong., 1st Sess. p. 199). Indeed, the courts have uniformly denounced the relations of the Trust to the railroads in language of stinging severity (Lloyd, 143. 206-8). Stealing property, or compelling sale of it far below value, is a familiar method of getting money to give to churches and colleges (Lloyd, 52; 73. et seq, the Widow's Case, forced to sell for $60,000 property worth over $200,000, and perhaps $400,000, pp. 78-9). Inventors are swindled and ruined if their processes threaten to interfere with the prosperity of the Trust, or lessen the value of its properties (191-3). Taxes are dodged (166), cheating Pa. out of millions of dollars (168). Suit brought for taxes, but Trust buys off the Attorney-General (176). Indictment for bribery and corrupt solicitation of a public officer (179i, but ditched by the succeeding Attorney- General, tho the fact was publicly known by the confession of one of the principals (180). The Trust got the railroads to bill its tank cars at 20,000 Ibs., tho they actually weighed from 25,000 to 44,000 Ibs., and when an investigation of the matter was ordered, the numbers of the tank cars were painted out one night and the billing could not be tested a pot of paint and a paint brush crippled the investigation and shielded the Trust and its allies (229, 230, 235). The chairman of one of the Congressional Investigations said to the President of the Combine: "During your whole examination there has not been a direct answer given to a question, and I wish to say to you that such equivocation is unworthy of you." (50.) Concealment is an essential part of the Trust's arrangements. It lives in the dark, and can live nowhere else. Even perjury is a common affair with its oflicers (59, 61, 87, 89, 95-6, 231, 234, 235, 243), and it does not hesitate to mutilate evidence and steal public archives, records of courts, testimony taken by Congressional Com- mittees, or anything else that it thinks will be more convenient in its own possession (60, 83, 373), unless it is something that can be bought, and then it appears to prefer "purchase" (with money captured from others by the methods outlined above). It even purchast a U. S. Senatorship in Ohio for its vassal, Henry B. Payne. A member of the Ohio Legislature confest that he had received $5,000 to vote for Payne. The editor and proprietor of the principal Democratic journal in Ohio had stated, as was sworn to, that he had spent $100,000 to elect Payne; the Representatives and Senators had to be bought and it took a good deal of money to satisfy them: and he complained that the Oil Trust had not dealt squarely with him in the matter. Among the chief managers of Payne's campaign were four <>f the principal members in Ohio of the Oil Trust. One of them, who was given financial management of the Payne campaign at Columbus, carried with him $65,000 to use in the election, as he told an intimate friend, etc., etc. After the Ohio Legislature had examined sixty-four wit- tht- IIi>use and Senate each resolved that Payne's election had been brought about by the corrupt use of money. An investigation by the U. S. Senate was urgently requested by the Governor and both branches of the Legislature of Ohio officially . and unofficially by the press, the public- appeals of leading men and the petitions of citizens regardless of party (373-4. 377, 378. 379, 382, 383-7 1. "Technicalities" defeated the demand for an investigation, despite the earnest appeals of Senator Hoar and others. Payne did not want to be examined. He had not a dollar's interest in the Trust, he said, and pleaded that its officials were good men because they gave a great deal of (other people's) money to charitable purposes. But the charge he would never allow to be investigated was that the Trust had a great many dollars interest in him. And, as for the charity, it is well-known that, as Lloyd has so well said, "The Trust is evangelical -at one end and explosive at the other." (358.) Such are a few of the atrocious acts of the oil monopoly: not a complete list of oil atrocities by any means, nor even a complete list of those that 90 THE CITY FOE THE PEOPLE. GAMBLING. 1 0. Speculation and Gambling in stocks is an evil largely due to the great private monopolies. Stickney says that pri- vate railways and stock exchanges "constitute the most per- fect machinery for the purpose of legalized robbery that the human intellect is capable of devising." l The italics are his. If you will go to the stock exchange in any great city, or look thru the Red Manual, or read the reports in any big daily, you will find that gas and electric stocks, traction companies and a few great trusts, together with the railroads, make up the lists. The evils of a system that encourages men to seek wealth by the rise and fall of stocks instead of by honest industry are too clear to need comment. We may note, however, an indication as to the influence that controls our law making and our teach- ing when we see gambling with dice and cards prohibited, but gambling with stocks permitted and protected by law; grab- bags and raffles condemned in Sunday schools and churches, but the stock broker and manipulator in the front pew poor folks' gambling very immoral, but the gambling of the rich folks with the loaded stocks of the big monopolies hush! UNJUST INDIVIDUAL AGGRANDIZEMENT. 11. Congestion of Wealth and Power is practically synon- ymous with private monopoly. Private monopoly involves congestion of power, and is almost sure to produce congestion of wealth. Preceding sections have shown this, and all that T ,ve need to do here is to emphasize the extent of the evil. According to Dr. Spahr's tables, 1 one-half of the families in the United States own practically nothing have no part in the productive capital of the country, and no property of any kind except their clothes and a little furniture; seven-eighths of the families hold but one-eighth of the wealth, and one per cent, own more than the other ninety-nine per cent. have been discovered, but a few indications of what may be expected if this combination and its allies get control of our gas-works, electric light slants, street railways, etc. (See end of sections 1, 2, 3, 4 and 8.) These, MI 25 above Paragraphs, show that the oil combination exhibits every evil incident to private monopoly, and most of them in an aggravated form. 1 The Railway Problem, p. 202. 1 "Distribution of Wealth," by Dr. Charles B. Spahr. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 91 ^ statement I have found exceedingly effective as a sum- mary of the results of the United States census and other in- vestigations, including those of Dr. SpaJir and the Massachus- etts Bureau of Labor, is as follows: Half the people own practically nothing. % of the people own y 8 of the wealth. 1% of the people own more than 50% of the wealth, or 1 family in each hundred owns more than the other 99 families put together, and could buy out the 99 and have something left. 1-200 of 1% own over 20% of the wealth, or more than 4,000 times their share, on the principles of partnership and brother- love. The following diagrams will present the facts more clearly to the eye, which for the majority of us is the most important avenue to the brain and conscience : A. B. c. u People, mtl^ I I I I I I I I I I I I I I I I Wealth. Mlll^MBBflHHHHHII^HHHLZ 13 X. Y. Z. A. B. = | of t e families, owning of the wealth (X. Y.). B. 1). = | of the families, owning of the wealth (Y. 7*.). P. L. O. People, @ 1 "Wealth, S. "T. P. L. = \% of the families, owning more than half the wealth (8. T.). L. () = 99$ of the families, owning less than the 1 % own. M. _ People, | _ M. = the little group of 4000 millionaires, or about 1-200 of i % of the people, owning '10% of the wealth (T. R.), chiefly the result of monopoly profits, or tarsttion without representation, and for private purposes. Professor John R. Commons 2 has analyzed the Tribune Millionaire List with the following results: 91 or 24.G$> made their fortunes mainly in land values. 3*6 or fl.7 " " " other natural monopolies. 124 or 3.1 " " " artificial monopolies. 1647 or 4'.. 5 " " *' some business known to be aided by monopoly, natu- ral or artificial. 864 or 21.4 " " " business not known to be aided by monopoly. 1 "Distribution of Wealth,' rP- ^528. 92 THE CITY FOR THE PEOPLE. That is, upon the face of the returns industrial monopoly is clearly traceable as a cause in the building of about four-fifths of the fortunes of the millionaires and polymillionaires named in the Tribune List. If we knew all about the 854 cases in the last entry, it is probable that we should find some rebate, or government influence, or favoritism of some monopolistic magnate some special privilege aside from individual char- acter and intellect, entering as a vital factor into nearly every case. Brain and soul may bring a competence in a fair field, but it is a rare thing for them to bring great wealth without the aid of some outside advantage tending to shut out compe- tition; and when they do it will usually be found, as in the case of fortunes made in the legal profession, that the result could not have been achieved but for the enormous salaries and fees which the monopolists paid, and were able to pay be- cause of their monopoly profits, and were willing to pay be- cause their own great gains and salaries had put them in the habit of giving large prices to men close to them and high in their affections. I am not sure of a case where brain and heart have won a million without the aid of some natural monopoly or governmental influence, or the weight of accumulated wealth, or the favor of one or more undoubted monopolists. If the reader is^sure of such a case, I shall be grateful if he will write to me of it, giving such detailed proofs as he can. The amount of monopoly tax upon our people cannot be ac- curately ascertained, but it sums up to an enormous total, 3 and the worst of the system is that its effects are accumulating with vast and ever accelerating rapidity, and that it is separating our people into inharmonious classes, creating castes in our cities, and bleeding whole groups of states to enlarge the profits of a few great monopolies. The farmers and mechanics, merchants, doctors, builders, the whole body of workers pay tribute to the monopolists; and the West and South and Cen- tre pay tribute to the East, because the monopolists mostly re- side in that quarter. Private monopoly and its profits are dangerous to peace and free institutions. "Monopoly in any kind of business in this country is ad- See Prof. Commons' Distribution of Wealth, pp. 257-8, whore a few fact/ nre given relating to land, transportation, gas, etc. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 93 verse to our form of government" said Chief Justice Sher- wood. "Its tendency is destructive of free institutions and repugnant to the instincts of a free people, and contrary to the whole scope and spirit of the Federal Constitution. In- deed, it is doubtful if free government can. long exist in a country where such enormous amounts of money are allowed to be accumulated in the vaults of corporations to be used at discretion in controlling the property and business of the coun- try against the interest of the people for the personal gain of a few individuals." 4 "I want to know," said Senator Hoar, in 1888, on the floor of the United States Senate, "I want to know the facts about these five or six great trusts, which are sufficient in their power to overthrow any government in Europe, if they existed in those nations, that should set itself against them," naming transportation, coal, sugar, oil, etc. "The freest government," said Daniel Webster, "cannot long endure where the tendency of the law is to create a rapid accumulation of property in the hands of the few." INERTIA OR NON-PROGRESSIVENESS. 12. Non-progressiveness on certain lines is natural to the monopolist. He wants to get all he can out of his capital, and is more or less protected from the compulsory progress imposed upon the owner of a competitive business. So we find gas works putting out the old-fashioned product instead of giving the people the benefit of the cheaper and better gas we can make to-day. Street railways keep on using the old rail that makes the street rough and dangerous to delicate buggy wheels, instead of putting down the grooved rail, level with the surface of the road, so that the street may be smooth and safe from curb to curb. We find them also neglecting to warm the cars, or fit them with fenders or vestibules, till forced to do so by law. Even severe mandatory legislation sometimes fails to move the monopolies. It has failed to make the rail- ways remove the deadly stove from their cars, or adopt safety couplers and crossings. Even Chauncey M. Depew is re- 77 Mich.. 632, 657-8. 94 THE CITY FOB THE PEOPLE. ported to have been arrested for violation of the law in respect to the use of stoves in the trains of the railway of which he was president, and charged with manslaughter, under the pro- visions of the act, for permitting the continued use of stoves, which in an accident burned up a few travellers. Professor Bemis says: "The natural tendency of a monopoly so strongly protected as are the lighting monopolies of Massachusetts would be toward lack of progressiveness." And, as the 'Prof e r remarks in the next sentence, the lighting business in other states is, in fact, about as complete a monopoly as in Mas- a- chusetts, and, therefore, equally non-progressive. None of the private monopolies, so far as I know, have the development of manhood and the progress of civilization as their aim ; none of them seek to extend their services to people in rural districts, as the Post Office does, and the English postal telegraph, and the public water and electric systems, and the school and road departments, do in all our states; and some of the private monopolies not only neglect to move, but even deliberately suppress important inventions which would com- pel movement if not supprest. 1 MASTERSHIP AND OPPRESSION OF LABOK. 13. 7/7 treatment of employes is emphatic in the ca- some monopolies, but is by no means so universal as most of the evils previously discussed. There are two reasons for this : (1) Some monopolists from business policy, humanity, good feeling, pride, or love of approbation, pay fair wages and ac- cord their employees reasonable treatment. (2) In some mo- nopolistic industries the workers, or large classes of them, at least, are able to protect themselves. The history of the great strikes on the the street railways of Brooklyn, Philadelphia, Boston, Detroit, Cleveland, Wheeling, etc., and the record of die telegraph and telephone monopolies show what private mo- * Postmaster General Wanamaker's Argument for a Postal Telegraph. ftHl. pp. 11, 3 43-5, enumerates 16 inventions suppressed in one way or another by the Western Union some of them of vital importance for cheap- ening quickening and improving the transmission of intelligence; but their Introduction would relegate part of the Western Union plant to the junk lie, so we must wait till the millionaires are ready for the curtain to go up. (See Arena, Vol. 16, p. 362, and Vol 17, pp. 200, et seq. ) PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 95 nopoly may mean to employees where neither of the above- named safeguards is operative. The strike of the employees of the "Big Consolidated" street railways of Cleveland has been attended with riots which the police appear to have been unable to quell. Two cars carrying passengers have been blown up with dynamite. Troops have been sent to restore order, and the cars are running again. The strikers and those who sympathize with them have instituted a "boycott" against all who us*e the cars, forbidding all deal- ings with such persons, and endeavoring to cut them off from all supplies, even from medicines and the attendance of physi- cians, and local business has suffered greatly in consequence. 1 In Brooklyn also street railway strikes have proved prolific sources of violence, and have caused great loss to the compa- nies, the strikers and the public. In 1895 it took all the police of the city and 7,000 soldiers to preserve order. The compa- nies refused to grant the reasonable wages and hours demanded by the men, and as they could not get men to accept the terms they were willing to give, they did not run their cars even after order was restored. Wherefore Justice Wm. J. Gaynor, of the Supreme Court, in the matter of Loader v. Brooklyn 1 The text expresses facts visible to an observer at a distance thru the medium of the best papers. The following statement of facts comes from the Rev. W. D. P. Bliss, President of the National Social Reform Union. His sympathies are strongly with the men, but he is a man of the very highest character, and he got the facts on the spot, and when he relied on testimony he did not take It from the worklngmen, but from "unprejudiced observers." The cause of the trouble was consolidation and strenuous effort to make dividends on overcapitalization. The companies worked the men longer hours and made them drive the cars faster and at illegal speed. Some of the "trippers," or men employed for special runs, had to bo at tho car shed= waiting for runs from 5 A. M. to 1.30 A. M. the next night, 20% hours out of the 24. Many accidents occurred and several children were killed. Th< men protested against the long hours and the fast runs. They did not enjoy killing children nor spending their whole lives in barns, or on the road. The only heed the companies gave was to employ a new superin- tendent, noted for harsh dealings with his men. Men who dared to complain were discharged on the slightest pretext. Finally the men struck, not for higher wages, but for humane treatment. Knowing that without a union they were helpless, they demanded recognition of their union. The company re- fused. The State Board of Arbitration tried to mediate and failed. A com- mittee of the City Council succeeded In patching up an agreement and the men went back to work. The company failed to keep Its contract, those who had struck being discharged as rapidly as possible. The men struck again. Every employee went out. There was no violence. The company got new men, but could not get patronage. The sympathy of the city was with the men. Then the companies blew up a barn with dynamite, viously and one and the pape_^ .. _._ and their terrible use of dynamite. As a result of these atrocities and the provocation of the state troops some violence has been done by the strikers. The city still shows its faith in these facts by largely sympathizing with the strikers and refusing to ride in the boycotted cars. e men. Tnen tne companies Diew up a Darn wirn aynamue, prt-- notifylng the "scabs," who slept in It, not to do so that night. ; of their armed "scab" motormen shot a boy who yelled "scab!" ? papers were filled with lurid columns about "the riotous strikers" 96 THE CITY FOE THE PEOPLE. Heights Co., &c., issued writs of mandamus to compel the roads to run their cars. 1 In a letter to the Board of Mediation, Feb. 4, 1895, Judge Gaynor said that the real cause of the trouble was deeper than anything in the statement of grievances before them. "It lies in a state of disquiet and moral protest not confined to the employees of the companies, but pervading this intelligent community, and which was caused by the recent speculative uses and manipulations to which these companies have been subjected." It was overcapitalization and the strain for divi- dends that caused the heartless disregard for the welfare of employees and the public which brought on the strike. 2 1 The judge said that a body of workers acting in concert had a right to fix a price for their labor, and refuse to work at a less price, and that if the roads could not get men to work at its terms, they must offer terms on which they could get men. They could supercede their employees gradu- ally, day by day, by men who would work on their terms if they were abl-> to find such men, or they could supercede them all at once if they had a sufficient number of new employees for that purpose; but they had no right to stop their cars during such a controversy, while they were gradually get- ting other men. It was their duty to the public to run their cars with a full complement of men. Any citizen could apply for a writ to compel the roads to do their duty. As a question of fact was raised by the companies, the writ had to be In the alternative. And as the statute allowed 20 days time in which to answer such a writ, it really amounted to little in this case. An extrem> absurdity in the law to require that carriers shall not stop their cars n single day, and yet allow 20 days time on the writ of compulsion. The time should be shortened, either by definite provision or by putting the matter in the discretion of the judge. Or the companies should be required 10 obey the writ until they show cause to the contrary, and then let them fix the date of hearing as soon as they like, subject, of course, to recoupmcn for the intervening time if they succeed in showing that the order should not have issued. - The judge remarkt that a few years before the Brooklyn City Road had three millions of stock and three millions of bonds (or $30,000 total capital per mile, which is high for horse lines). The bonds were increased to six millions and the stock to twelve, in order to change from horse to electric tractioc overhead (an increase of $60,000 a mile of track, or about double the probable cost of the change). "But," as the judge said, "the case does not stop here. The next two steps are what aroused the public i-mt^rii no-. Those in control took this great company, and in 1893 leased it for Df>9 yvars to a little street railway company called the Brooklyn Heights Railroad Company which they had got control of. This little company had a paper capital of $200,000, and a mile or less of track. One might think that instead of the great Brooklyn City Railroad Company system (with its 200 miles of track) being turned over to this minature com- pany, the reverse would have happened; but it did not, for that would not have served the purpose in view. By the terms of the lease this little company agreed to pay the interest on the $6.000,000 in bonds and a yearly dividend of .10 per cent, on the $12,000,000 in paper stock of the Brooklyn City Company. All the overplus it was to keep. That was to go to its stockholders. Thus the little company was made the absorber of all the earnings of the Brooklyn City Company over and above what would have to be taken to pay, as above stated, the interest on the bonds and a 10 per cent, annual dividend on the stock of the latter company. 'But this did not satisfy those who had gone that far. They must go further. To evade the payment of the incorporation tax of this state they went down to the state of West Virginia, and there, in March, 1893, formed a corporation, called the Long Island Traction Company, with the enor- mous paper capital of thirty million dollars ($30,000,000). "l need hardly say that this huge paper company had not a day's work or a dollar back of it. It did not own a steel rail, a stick of wood or anything in the world. All that there was of it was on paper. It was not a railroad company, but a business company, its very name being a falsehood. It was brought up to i rnLu; owxEjcsurp OF PUBLIC UTILITIES. 07 In the Philadelphia strike of 1895 the men demanded re- cognition of their right of organization, a ten-hour day, with wages not less than $2, and vestibules to protect the motor- men from the rigors of winter and the inclemencies of the weather. Public sentiment was overwhelmingly with the men, and after a time the traction authorities patched up a truce on an agreement to consider grievances, and not to discharge any one for membership in the union. The men went to work again, and the company began to discharge the active mem- bers of the union, one by one, on the flimsiest pretexts little mistakes formerly unnoticed and almost impossible to avoid, trivial accusations of being two or three minutes late, some small breach of the rigorous and complex rules that street rail- way companies know so well how to make, and which even the best men find it practically impossible to conform to perfectly. Some of the men discharged had served the roads for fifteen to twenty years, and had records entirely clear of any real fault, unless membership in the union be so considered. The company paid no more heed to its agreement to consider grievances than to the rest of the contract. So, in one of the Brooklyn, and those who created It, and also owned and controlled the little Brooklyn Heights Company, turned over to It the certificates of the stock ($200,000) of the latter company. And thus, connected by these two links with the Brooklyn City Company, this West Virginia company, with its sham paper capital of $30.000,000, became the absorber, thru the little Brook- lyn Heights Company, of all the earnings of the Brooklyn City Company over the interest on bonds and the 10 per cent, annual dividend on stock already specified. "The effect of these transactions was pernicious to the community. They were discussed and condemned wherever two or three met. Our people lookt on and became justly Irritated and uneasy. They knew that the thing remaining to be done by those in control of these enterprises was to thus absorb a surplus out of the Brooklyn City Company large enuf to pay a dividend on this sham $30,000,000 of paper stock of the West Vir- ginia company, thereby to make that stock worth par, and enrich its holders out of the industry of others. To do this the employees of the company knew, and every one knew, that the expenses of the Brooklyn City Company would be cut down to the lowest point. The result of such stock inflation is always the same, and the attempt by this means and by that to get money to pay a dividend upon it always follows, and thus it is always the cause of heartlessness and oppression. In giving this history concerning the Brooklyn City Company I have given you the history of the Atlantic- Avenue Company, which is subject to the same process of inflation and absorption by another so-called traction company." Since the judge wrote, the leading Brooklyn companies have been ab- sorbed by the Brooklyn Rapid Transit Company, a New York corporation of 1S:)6. Excluding the 1.2 miles of cable and the 2.3 miles of "L" road and their capital, we find that October 1, 1898, the capitalization of 261 miles of overhead trolley, with less than 9 cars per mile, was $53,000,000, or $200,000 per mile of track. The bonds alone amount to more than $80,000 a mile, or at least double what it would cost to duplicate the system complete, so that half the bonds and all the stock must be considered simply as paper, without a base. About $10,000,000 of new stock will soon be issued to enable the company to get control of the 132 miles of the Nassau trolley, already capitalized at $200.000 a mile, and the absorption of the Coney Island line is also contemplated. That will complete the consolidation of the Brooklyn surface roads under the rapid Transit Conpauy. 7 OS THE CITY FOR THE PEOPLE. most promising strikes on record, with the men well united and an outraged public sentiment overwhelmingly with them, the corporation won by faithless strategy, and the men were really worse off than ever. Wages and hours remained as be- fore, 1 and the power of capricious discharge, and the failure to protect conductors from loss by careless or fraudulent mis- counting of the money they turn in, which could easily be done by ordering such moneys to be counted in the conductor's presence. The men have not secured any real recognition of their right to continued employment, and organization, and impartial arbitration, or even fair consideration of grievances. Even the vestibules were not obtained, and motormen had to keep on whizzing thru the winter at the rate of 8 to 12 miles an hour or more , and sometimes in the teeth of a 40-mile zephyr at zero or lower, with nothing in front of them to break the force of the wind.* Cold and exposure, long hours and nervous strain materially shorten the lives of motormen; but men are cheap, cheaper even than the horses the companies used to ill-treat before they got the motormen. Often they get frosted fingers, ears and feet, and sometimes, as in Boston, January 26, '96, numbers of them find their faces frozen. The locomotive engineer, the steersman of a tug, the pilot of an ocean steamer, are all protected against the weather. In Ohio, Indiana, Michigan, Minnesota, Wisconsin, and perhaps some other states, the law requires vestibules on street cars, and they are voluntarily used on a number of lines in Massachusetts, New York, New Jersey, Pennsylvania, etc. The postal cars in Philadelphia have them. There is no reason in the world but heartless greed why vestibules, with moveable windows, should not be put on every trolley and cable car in the north. 1 The nominal day was 12 hours, but the practical day was 13 to 14 hours, with a brief Intermission for lunch, and the pay 16 2-3 cents an hour. In New York the men on some lines declare that they work 14, 15, 16 and even 17 hours to earn a two-dollar bill. The Union Traction Company of Philadelphia said it couldn't afford to pay any better wages. It had inten- tionally put ir <>,;t i'f Its power to make reasonable concessions to the public or the men by a scheme of leasing the united roads at enormous rentals, amounting in soino cases to more than 60 per cent, on real investment, and fooling up about five million dollars. It is the old scheme of keeping yourself in several pieces and making a contract with each piece, so that you can say. if any demand is made upon you, "I really can't reduce rates or pay good wages or do anything else (except run the business as I want to). If you doubt it, Just look at the contract obligations I am under. " *A year oi- two later vestibules were put on the cars on the longest, sub- urban lines. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 90 The lesistanee of most of the companies to this humane re- quirement till forced by law to adopt it, their persistent re- fusal to arbitrate or consider grievances, their arbitrary dis- charges and burdensome regulations and their efforts to crush the unions are strong indications of their attitude toward em- ployees, who are no more to them than so many cogs in the machinery of their power-houses. 2 The strikes that blaze out now and then to show us the real condition of things are industrial rebellions, little civil wars, relics of the barbarous age in which men fought out their dif- ficulties in the streets instead of submitting them to decision by the intelligent arbitrament of a court of justice. They are calamities in general to the public, the companies and the strikers. Now and then, there is a successful strike, as in De- troit, with the help of its splendid Mayor, Pingree. 3 But, as a rule, these battles with monopoly fail, and even their educa- tional effect, for the most part, seems to fade and die in a little while. Put not your faith in strikes, my brother, but in steady, peaceful education and the ballot. LOW CHARACTER PRODUCT. 14. Debasement of Human Nature is a natural result of any arrangement by which a few selfish men are able to achieve industrial and political mastery over others. The mo- nopolists themselves become arrogant, overbearing, undemo- cratic, disregardful of the rights of others, apt to look at men not as equals and brothers, but as so many things to be used in their works, grist to be ground up in their money mills, oranges to be squeezed and thrown away. The workers, on the 1 For the treatment of employees by the Telegraph Monopoly, see Arena, Vol. 15, pp. 802-14. ' The men began to form a union, got 39 members, the companies began discharging them, the men went out In a body, perfected their organization and demanded its recognition, with better wages and hours, and with the help of Mayor Pingree they won. The companies in Detroit agreed to recog- nize the Amalgamated Association of Street Railway Employees, and make a yearly agreement with It covering wages, hours, etc., and providing that all difficulties should bo submitted to arbitration, the award to be binding on both parties. (Motorman and Conductor, October, 1895.) In Milwaukee also the companies deal with the men thru their association. In Boston, top, the men have an organization, which is recognized by the company. But ii New York the men do not dare to belong to a la'bor union, or at least they do not dare to have it known that they do, and it is very hard to keep tl fact from the company's spies. The men, both on the elevated and on the surface lines, tell me that the moment a man joins a union he is discharged. 100 THE CITY FOR THE PEOPLE. other hand, too often take on the character of serfs unques- tioning obedience to constituted control, un protesting submis- sion to low wages and ill treatment, slavish deference to wealth and power, regardless of its justness, willingness even to think and vote the way their masters dictate. Divide men into con- trollers and controlled on any basis Hut that of intelligent selection of the controllers by the controlled, for the service of the controlled, and subject to their instructions, and you destroy the truth, courage, independence and brotherly sym- pathy that lifts human nature to its highest type. ARISTOCRACY. 15. Denial of Democracy is the very marrow of monopoly. Democracy says "Equal rights to all; special privileges to none." The monopolists say "Special privileges to us; the rest may have what they can get, and what we may choose to give them." Democracy means equality of opportunity and equal protection of the laws. Monopoly means inequality of opportunity and government by and for the few. We do not need to dwell upon the topic here, for the aristocratic tenden- cies of private monopoly and its dangers to republican gov- ernment and free institutions have already been rendered em- phatic by the facts of the preceding sections. (See especially 8, 9 and 11.) THE BENEFITS OF MONOPOLY. The benefits derived from monopoly thru its stoppage of the wastes of competition within the field it covers, are ad- mitted by all serious students of the subject. Competition in the supply of water, gas or electric light, or in the street rail- way, or telephone service, is an absurdity. It has been tried scores of times, but has never succeeded. It is a terrible waste to tear up the streets and put in parallel systems of gas or water pipes, and then maintain two pumping or producing plants and collecting agencies where one would do. With the telephone the case is even worse, for besides the duplication of systems, subscribers are forced to belong to both svstems i>r > PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 101 order to communicate with the whole field, and sometimes, where the systems are quite unfriendly, complete service be- comes impossible to secure. The vast economy of union is indicated by such facts as that the consolidation of the street railway companies of Boston saved 200 cars a day, and that the 31 manufacturers of matches in the United States were able, by combining, to close all the factories but 13 and still supply the market fully. A carload of facts to the same effect could be adduced, but it is not needful, for no one denies that conflict is wasteful or that union and concentration mean strength and economy. The irresistible movement 1 toward the abolition of competition in respect to gas, water, electric light, street railways and other public utilities, that has brought the companies together into solid trusts and mighty combina- tions, is fully justified on economic grounds. !N"o well-in- formed economist advocates competitive enterprise in the public utilities of a municipality, for he knows that it means large wastes and ultimate failure thru open or secret combina- tions of the competing companies, with high rates fastened, upon the community by a double capitalization. 2 1 Within the last few years the gas companies In Boston, New York and Chicago have united. A single monopoly controls the gas works in thirty cities. Electric light companies are also combining, and street railway sys- tems are consolidating at a tremendous rate. Substantially all the roads in Boston have been gathered under one wing, which also covers the elevated franchise. In New York all the elevated roads have come under one management four surface roads are united in the Third avenue sys- tem, and thirty roads, all the rest in the city, are operated by the Metro- politan Company. In Chicago the crystallization has not gone so far, but the chief lines have clustered into three great systems. This was the situa- tion also in Philadelphia till 1896, but in that year the three systems came together in the Union Traction Co., and now the Hestonville line has been swept within the circle, and all the twenty-five original roads In the city are in one solid system, the lines being leased to the Union Traction Co. for 999 years. 5 See Prof. Ely's "Problems of To-day," chapters on gas and railways. Also "Municipal Monopolies," p. 594, quoting the testimony at Cleveland of Captain Wm. Henry White, identified at different times with competing gas companies In Boston, Chicago, Baltimore, Brooklyn, etc. The Captain says: "Among the blessings that long-suffering communities have in this country is the competing company. * * * They produce a new plant, put In all the apparatus and parallel the mains of the other company, and they try for a while to fight, and we have the usual gas war. Then the two companies get together and say: 'Well, now, we have done the philanthropic act long enuf, and we think the public had better pay for this little picnic of ours.' They unite, and usually double the capital when they unite." (That is, they double the total existing capital of both companies, making a capital four- fold that of a single unmanipulated plant.) After speaking at some length of the gas consolidations in Boston and vicinity, and in Chicago, all on the principle just mentioned, the Captain said: "The competing company is not a panacea for the ills the public has suffered. The opposition company is the greatest mistake that is ever made." Prof. Ely says: "Competition in gas has been tried 1000, yes, probably 2000 times, but never has been and never can be permanent." (Problems of To-day, pp. 128, 142, 256.) See also Bronson Keeler's article in The Forum for November, 1889, and Prof. James' discussion In Pubs, of Econ. Asso., 102 THE CITY FOB THE PEOPLE. The competition we have been speaking of is competition between two or more private plants. Competition between a public plant and a private one may be successful (as in Hamilton, O., with gas, and in Stockholm, Sweden, with the telephone), successful, that is, for the public plant; it almost certainly means ultimate ruin for the private plant, and is subject to the objection of a wasteful dupli- cation of systems. THE PROBLEM. The problem of monopoly is to retain the advantages and get rid of the evils of the monopolistic systems that so largely control our industries, and especially the public utilities of our cities. THE SOURCE OF BENEFIT. The element in monopoly from which its good effects arie is the exclusion of conflict, with its wastes and debasements, from a certain field, and the development of union, co-ordina- tion and harmony of effort within said field. THE ROOT OF EVIL. The evils of monopoly flow from power plus antagonism of interest between those who own and control the monopoly and those who are served by it. The antagonism of interest be- tween the monopolists and the public, together with the power which the monopoly gives to make that antagonism ef- fective, is the fundamental cause of the excessive rates, exor- bitant profits, watered stock, false accounting, poor service, disregard of public safety, unjust discrimination, fraud and corruption, defiance of law, speculation and gambling, con- gCition of wealth, non-progressiveness, ill treatment of em- ployees, debasement of human nature and opposition to de- mocracy, which we have found to characterize the monopolistic Vol. I, where twenty great cities are named which had tried competition in gas, always with the same result combination, with division of territory, or some form of consolidation, and a determined onslaught upon the public. In Baltimore the companies united and advanced the price 75 cents a thousand. In Harrisburg the price went up from $1 to $2. In New York some years ago, before consolidation, gas sold for a time at 75 cents, but when the com- panies came together they put enuf more water in the capital to buoy It up from 18 1/3 millions to 39 millions, and raised the price 10 $1.75, n jump of 130 per cent, above the competitive level. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 103 systems under consideration. All these things are contrary to the public interest, and are clearly so understood by our people, wherefore they could not exist except for an interest antagonistic to the public interest and in possession of suffi- cient power to make its antagonism effective. To abolish the evils of monopoly, therefore, it is necessary to remove the an- tagonism of interest between the owners and the public, or else to deprive the monopolists of the power of pushing their interests against the public interest. That the antagonism of interest is the vital cause, and the power merely the condition, is clearly evidenced by the fact that the very men who man- age the great monopolies with a single eye to the private in- terests of the stockholders who own the properties, are often among the most efficient and public-spirited servants of the people when entrusted with public business. As officers of a gas company or a street railway they serve the company with all their power, and any interests that oppose it must take a back seat. As officers of a public enterprise they serve the public with equal power. They are true to the financial in- terests of those to whom they owe the primary financial alle- giance as they understand it. If they are to manage the prop- erty or conduct the business of A., B. & C., they think it ought to be managed or conducted in the interest of A., B. & C. If they are to manage the property or conduct the business of a city, they think it ought to be managed or con- ducted in the interest of the city. If A. & B. own the prop- erty, they have a right to manage it for their benefit; if the city owns the property it ought to be managed for the benefit of the city. This is the attitude of practically all our honest business men, and nine-tenths of them are honest, according to the financial ethics of the day, a fundamental maxim of which is that property should serve the interests of its owner. Business men believe that if a plant belongs to a small body of stockholders it should be run to make money for them; and on the same principle, if the body of stockholders expands until it includes all the inhabitants of a city, or in other words, if the plant becomes public, they believe it should be honestly conducted for the benefit of the public. Make them the agents of a few private stockholders, and the community must take 104 THE CITY FOR THE PEOPLE. care of itself. Make them the agents of the community, and all their energy and integrity come over to the service of the community. It is at bottom a question of ownership and the sentiment and business ethics that go with it. The antagon- ism of interest arising from the private ownership of monopoly is therefore the real root of the evils of monopoly. 1 Public ownership of monopolies removes this antagonism between the owners and the public by making the public and the own- ers identical. Public ownership is therefore a solution of the problem, since it retains and even intensifies the benefits of union, co-ordination, exclusion of conflict, etc., at the same time that it eliminates the effective cause of evil. Further, Public Ownership is the only complete solution, for it alone can remove the active principle of evil. And the condition of its activity, the power that goes with the private ownership and control of a great monopoly can only be destroyed by 1 To illustrate the breadth and strength of the antagonism of Interest between the monopolists and the public, take the following analysis from my Fabian pamphlet, "Municipal Street Cars:" THE PEOPLE WANT. 1. Low fares. 2. Good service. 3. Seats for all. 4. Efficient fenders. 6. Cars well wanned in winter. 6. Grooved mils. lnid so as to leave the streets smooth. 7. A system safe and convenient. 8. Reasonable profits on actual in- vestment. 9. Honest book-keeping. 10. Just assessments and equal taxa- tion. 11. Honest and impartial govern- ment in the interests of all. 12. Good wages and reasonable hours for all employees. 13. Full freedom of organization. 14. Vestibules for the motormen. 15. Arbitration of difficulties. In short, the people ask for justice, kindness, fair play and the pub- lic good. The people say, "Do what is fair by your patrons and employees, and all will be well." THE CORPORATIONS WANT. 1. High fares. 2. Small expenses. 3. Passengers on the straps, in the aisles and on the platforms. 4. No expense for cushioned fend- ers; it is cheaper to pay dam- ages than buy good fenders. 5. Little or no expense for heating: it is cheaper to freeze the pas- sengers. 6. The cheapest rails, whatever ef- fect it may have on the streets. 7. The dangerous, ugly, street- marring overhead trolley sys- tem. 8. Big dividends on watered stock. 9. Doctored accounts. 10. Shrunken assessments and es- cape from taxation. 11. Corrupt government in the in- terest of corporations. 12. Long hours and short wages for the men; short hours and big wages for the managers. 13. No union men. 14. No expense for vestibules; men are cheaper than glass and wood; if a man freezes now and then it is easy to buy an- other. 15. Their own imperial way, with "nothing to arbitrate." In short, the corporations aim at for- tunes for industrial aristocrats. The corporations say, a la Vander- bllt (and act it when they do not say it), "The people be d d!" PUBLIC 0\YNEK*HIP OF PUBLIC UTILITIES. 1 05 eliminating the said private ownership, or the control, which is the essence of the ownership.* COMPETITION. Competition is clearly no solution of the monopoly prob- lem. First, because it forfeits the benefits of monopoly, which consist precisely in getting rid of competition with its wastes and obstructions. Second, because it is impossible. (See above, "The Benefits of Monopoly," also Appendix II.) REGULATION. Regulation, tho of decided use, is not a solution of the prob- lem of monopoly, because it cannot remove the root of the evil, nor the soil in which it thrives. The antagonism of inter- est remains as long as the private ownership remains, and the power to make the antagonism effective will also remain so long as the private ownership of the monopoly continues. Private ownership of monopoly means antagonism to public interest, and it also means power. If you take away the mo- nopolist's control, you take away the heart of his ownership. The paper title is not the ownership; it is only the evidence of ownership. The substance of ownership is the power to con- trol the property. You may modify this power and still leave the monopolist some ownership, but if you take the whole power you take the ownership. 1 And if you do not take the * If yon leave the private title and do not take the whole control. y get real puMic ownership, and not a mere change from private monopolists to private politicians. Have good civil service rules and the referendum as part of the plan. And then, if there's any reasonable degree of intelligence and public spirit in the com- munity the problem is solved. Excessive rates and enormous profits for a few will no longer exist, for the motive will be changed from private profit to public service. The watered stock, inflated capitalization, false accounting, discriminations, frauds and corruptions and violations of law, intended to cover or protect or render pos- sible the schemes of profit, will fall with their cause. The change of motive will also tend to good service instead of poor, safety instead of danger, and progress instead of inertia, tho it may not always pay in dollars and cents. Public plants have no stocks to gamble with. They do not make million- aires or cause congestion of wealth and power, or debase hu- man nature, or oppose democracy. Their tendency is to serve at cost. If there is any profit it goes to the public treasury. No aristocratic salaries are paid. Real public ownership is the very essence of democracy. And, instead of debasing human nature by conflict and corruption, and by dividing men into masters and mastered, it brings men together in a union of interest, accords to all a share in the development arising from the exercise of judgment and discretion in the control of business affairs, and affords the co-operative conditions necessary for the evolution of the highest traits of conscience and character. 1 To carry the matter beyond appeal, it is needful, of course, to show >nly that public ownership retains the good and cures the ills of privatp monopoly but also that it does not entail as great, or greater evils of its own. This we shall do. We may note, a priori, that a change from conflict OWNERSHIP OF PUBLIC UTILITIES. 115 ADVANTAGES OF PUBLIC OWNERSHIP. I. Lower rates would naturally accompany the change of aim from private profit to public service, and the fact accords with the theory. Roads. When Glasgow took over the tramways, fares were re- duced one-third at once, and reductions have been continued till now the average fare is below 2 cents, and less than half the average fare collected by the private company half a dozen years ago. Our private companies have done nothing like that. We pay the West End the same 5-cent rate we did at the beginning of the decade. The only tramway owned by the public in this country is the bridge line between New York and Brooklyn, which for years was operated by the municipalities in partnership on what was nearly the same as a 2y 2 -cent fare (3 cents single fare and 2 for 5 cents). The ride was short, it is true, but the private companies charge 5 cents no matter how short the ride, and the investment (15 mil- lions) was large enuf for 100 miles of ordinary cable line (it would have been watered up to 40 or 50 millions in private hands, likely), and the wages paid were very high, yet a good profit was realized. The cities lately gave the private companies a right to run their cars over the bridge, so that a passenger might cross on the same car that would carry him to his destination, but the rights of the public have been carefully guarded. If New York and Brooklyn had been ready for the move, it would have been better for them to have united the services by taking over the private railways and to co-operation, from secret fraud to open dealing, from private profit to public service, from congestion of benefit to diffusion of it, from speculation and gambling to quiet certainty, from defiance of law to obedience, from danger to safety, from watered stock and false accounts to honest capital and truthful records, from denial of democracy to government by and for the people, from conditions tending to the debasement of human nature to conditions tending to the elevation of human nature, cannot, in the very nature of things, be attended by evils greater than those it cures, otherwise devolution would be better than evolution, retrogression better than progress. There is nothing quite perfect in this world, unless It may be the blue sky or a beautiful flower, and even public ownership has its diffi- culties, but they are virtues and charms compared with the evils of private monopoly. We shall find that philosophy, history and experience unite in proving that, even if all the objections the monopolists and their sympa- thizers have ever raised against public ownership were admitted to be true, it would still, on the whole, be vastly superior to private monopoly. When we look closely at the matter we shall find there is no difficulty at all with public ownership; the difficulty lies in the process of attaining public ownership. The main trouble is to obtain REAL public ownership, and the chief sophistry of objectors lies in mistaking a change from one form of private ownership to another form of private ownership for a change to public ownership. The difficulty has been and is being overcome in many, many cases, and can be overcome in every case where the people come to understand the facts, and have civic patriotism enuf to unite in a truly co-operative undertaking for the pood of all concerned. The sophistry is easily exposed, and when once understood the matter becomes very clear. The simple question is: Shall the city be run for the benefit of the people or for the benefit of a few individuals? Shall the jrrent franchises and monopolies, the value of which has been created by the people, belong to a few for their private profit, or shall they belong to the people for the public good? Shall the streets belong to the community that builds them and gives them value by its presence and its industry, or shall they be turned over to little groups of stockholders for corporate profit? 116 THE CITY FOR THE PEOPLE. let the people have a 3-cent fare all over Greater New York; but in the present state of public education the lease is probabty as good a move as could be had. Bridges. There is a bridge at St. Louis owned by the Goulds, and the contrast in the charges, etc., on the millionaires' bridge and on the bridge owned by New York and Brooklyn is one of the most enlightening it has been my fortune to discover. The Two Bridges. Charges for Crossing. Private Bridge. Municipal Bridge. Bt. Louis Bridge (Cost $13,000.000, Brooklyn Bridge, (Cost $15,000,000.1 bought by Gould interests On L roads 3 cents (2 fares for for $5,000,000.) 5 cents) if you simply wish to cross the bridge if you On steam cars 25 to 75 cents come from a distance or per passenger. are going beyond the bridge it costs nothing to cross it either in the L cars or the Street car fare 10 cents, 5 surface cars the ordinary cents for bridge. car fare takes you over without extra charge. Foot passengers 5 cents. Foot passengers Free. Vehicles, one horse.. 25 cents. Vehicles, one horse... 5 cents. Vehicles, two horse.. 35 cents. Vehicles, two horses ..10 cents. Bicycles 10 cents. Bicycles Free. Before the recent lease giving the companies the use of the Brook- lyn Bridge the public operation realized more than enough to pay expenses and interest, on a 2% cent fare, etc. (as above), paying the car men $2.75 for an 8 hour day. The elevated railway compa- nies running over the bridge pay the car-men an average of $2 for ten hours, and some of the men receive less and work longer, so I am told by the men themselves. On the electrics running over the St. Louis bridge the men work 12 hours, for which the conductors get $2.25 and the motormen $2. Under the lease the elevated roads pay about $100,000 a year for the use of the bridge, and the trolleys 5 cents a car, a fraction of a cent per passenger. The franchise charges were made very small in order to arrange matters so that no extra fare for crossing the bridge would be collected from those paying the ordinary 5 cent car fare, thus making the bridge free for passengers coming from or going to a distance, and more than free to those who simply cross it in the bridge cars, since a ride in the cars anywhere else for any distance, no matter how short, costs a nickel instead of the 2y 2 cent bridge rate nothing for the bridge and half price for the car ride. The arrangement is good for the people and good for the companies, as it increases their traffic, It could only be improved by larger payment from the companies, or lower fares in general, or, best of all, public ownership of the street railways as well as the bridge. The net earnings of the St. Louis bridge are 1% millions a year, or 25 per cent, on the Gould investment, and 12 per cent, on the im- pairable capital (the excavating of the tunnels, etc., will never have to be done over again). The St. Louis charges may be ob- jected to, not only as extortionate, but as discriminating. A pas- senger who buys a ticket in New York or Philadelphia to St. Louis PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 1 1 7 or beyond has to pay 75 cents for crossing the bridge, whereas if he buys a ticket to East St. Louis and then crosses the bridge in a railroad train it will cost him only 25 cents, or 10 cents if he crosses on a street car. The St. Louis bridge is managed for private profit; the Brooklyn Bridge is managed for public service, the aim being to make the bridge as useful to the people as possible. Telegraph and Telephone. When England bought out the private telegraph companies, in 1870, and made the telegraph part of the postal service, she reduced the rates one-third to one-half. 1 Our own government has had an experience with the telephone which is even more emphatic tho on a smaller scale. In 1894 the De- partment of the Interior paid the Bell company in Washington $60 to $125 each for 65 telephones, and employed a lady to attend the main exchange at $600 a year, making the total cost average $75 per phone per year. In 1895 the Department put in its own phones, and the cost of operation and repairs is only $6.43 per phone, with $3.80 for interest and depreciation, making a total of $10.25 per phone year for what used to cost $75 under the Bell regime the cost under private ownership being 7 fold more than under public ownership. 2 The ordinary Bell rates for towns are $24 to $36 for residences and $48 to $75 for business places. For large cities the usual rates are $90 to $240. With municipal ownership or co-operative asso- ciation we could have excellent telephone service at less than half these rates 50 cents to $2 a month for small exchanges in towns and country districts, and $2.50 to $5 in large cities. 3 Trondhjem, the third city of Norway, with 30,000 people, has a municipal system with the following rates: Per year. For a business place within iy 2 km. (about one mile) of cen- tral station $16.65 For a second business connection by the same person or firm 13.31 For a private house, same distance 8.33 For each 100 meters beyond iy 2 km 1-37 The town builds all lines, supplies the instruments and maintains the sj-stem. With 780 exchange lines the average rental was $13.25 'The Telegraph Monopoly, Arena, Vol. 17, pp. 9-29. 2 See p. 350 of Municipal Monopolies for a complete statement of the facts as given to me direct from the books of the Department. In the same chapter many facts are collated relating to the low cost of public or co- operative telephone service. * Contrary to the ordinary rule of cost, the telephone service becomes more costly as it increases in density, a fact that is due to the complexity of large exchanges and the great increase in the number of calls per phone where each subscriber may communicate with any one of many thousands, Instead of being limited to a few hundreds, or a few dozens. Even in Chi- cago or New York, however, responsible capitalists have offered to estab- lish exchanges at $30 to $50 for residence and $75 to $100 for business phones. And with municipal ownership or co-operative association, eliminat- ing private profit, considerably lower rates could be made. The cost of construction is $40 to $70 per subscriber in towns, and $75 to $200 In large cities. The yearly operating cost is $8 to $12 per subscriber in small ex- changes. 118 THE CITY FOR THE PEOPLE. a year. Operating expenses, $8 per phone; fixed charges (4% per cent, interest and 5 per cent depreciation), $4.35; total cost, $12.35. The subscribers speak to surrounding towns (there are 11 of them) within 50 miles at the rate of 4 cents for 5 minutes. The non-sub- scribing public pays 6% cents per conversation interurban, and 2y 2 cents for a local conversation. Each subscriber makes an average of 8 or 9 calls a day, so that the cost of a local conversation to a subscriber is about % a cent. The Trondhjem telephone re- ceipts afford a surplus, after covering all working expenses, interest on the capital invested, a reserve of 5 per cent, a year on the capi- tal, and insurance of employees against death, accident and sick- ness. Stockholm, Sweden, with 290,000 population, has a public ex- change with a $14 entrance fee, $16.66 per year for residence phone and $22% for a business place an average rate of $20 per sub- scriber, with metallic circuit, underground wires, interurban com- munication free within a radius of 43 miles, telephoning telegrams and telephoning messages to be written down and delivered by messenger at low cost. The Bell Company, bought out by the gov- ernment, was charging $44 for far inferior service. The public telephone of Luxembourg, 44 by 30 miles, makes a uniform yearly charge of $16, and each subscriber has the free use of all inter- urban wires, and can talk all over the Duchy. Besides the special services just mentioned, the subscribers can telephone a letter (that is, he can telephone matter to be written down and posted as a letter) for 2 cents plus postage. Switzerland also has an excellent system, metallic circuit, at a moderate charge, $8 plus 1 cent for each call, the average total rate being $15 per subscriber in Zurich and other cities. In France, when the government took possession of the telephone lines in 1889, the rates were at once reduced so that a comparison shows the charges of the private companies to have been 50 per cent, more than the public rates in Paris, and 100 per cent, more in other cities, except in Lyons. In Sweden there are over 160 co-operative telephone exchanges, and others are dotted over Norway and Finland. The annual as- sessments in these co-operative exchanges for working and main- tenance are frequently as low as $6 to $8, rising in a few places to $16, and averaging about $10 a year for the whole list of towns from which I have been able to get returns. The public and co- operative exchanges have brought out the facts about the business so that even the local private companies, in some parts of Europe, give the people very low rates. In this country there are a few co-operative plants which show what can be do,ne by the elimination of private profit and monopoly methods. In Fort Scott, Kansas, the members of the Mutual Com- pany pay $1 a month. The operating expenses are $12 per phone, and the construction cost $50 per line. Any person can be a mem- ber who will take a share of stock. The railroads, express com- panies, etc., would not become members, but were willing to pay PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 119 a good rental, so the company has a number of subscribers on ren- tals above $1. At Grand Rapids, Wisconsin, the Bell Company was charging $36 for residence and $48 for business places, and refused to lower the rates. A co-operative company was formed, each member taking- one and only one $50 share of stock. And In the company's second year (1897-8) with 186 lines (costing $50 each for the total construction and equipment account), the expense to members was 50 cents a month for residence and $1.75 for business. 4 The first president of the company, Mr. John A. Gaynor, writes me that the cost to subscribers has now been reduced to 25 cents a month for residence and $1.50 for business places. There are now 220 phones in the exchange. The total investment per phone is $43. The ope- rating cost is about $9 per phone, including a repair allowance suffi- cient, Mr. Gaynor says, to cover depreciation. Interest would add $3 per phone year at the rate (7 per cent.) paid by private bor- rowers in Grand Rapids. 6 If all those having telephones were mem- bers of the company the rates would probably be about $6 house and' $18 business, or $8 and $18, perhaps, if the co-operators wished to pay in 5 per cent, on the investment as a surplus or improvement fund. Under public ownership, free of debt, $6 and $18 would cover the total cost according to the data sent me by Mr. Gaynor. When the co-operative exchange was organized the Bell folks lost their subscribers, but in 1897 began to ask the privilege of put- ting in free phones. They wanted to get a big exchange, which would be so valuable to business men that they would have to leave the home company. When the people saw that the Bell was scheming to kill the co-operative, they unanimously ordered out the free phones. 6 Water. We have become so accustomed to the idea that the water supply is naturally a public affair, that many overlook the fact that in the early part of the century the movement for public water works was as much a matter of opposition and criticism as the 4 There were 100 members and 86 renters all paying $1.50 to $2.50 per month. A monthly dividend of 1% per cent, on the stock brought the cost to members down to the figures stated in the text. The surplus earnings in 28 months were $3.000 which, with the $5,000 from sales of stock, paid for the plant, except $1,000. * The present rates are $1 residence and $2.25 business, with 1% per cent, monthly dividends to stockholders. Mr. Gaynor thinks residence rates will uot go any lower, but says that the company has $100 a month surplus, which should be used in lowering business rates. He advocates putting the business rate at $1.50 and the dividends at 1 per cent, per mouth. "Some local private companies, independent of the Bell, give very rea- sonable rates. There is one in Elyria, Ohio, that reports a construction cost of $40 a phoue and 12 per cent, profit on monthly rates of $1 residence and $2 business. One in Elkhart, Indiana, reports a construction cost of $60 per subscriber, operating expenses of $10 per phone per year, and 16 per cent, profit with 360 phones at $1.50 and $2 a mouth. One in Manhattan, Kansas, has a construction cost of $45 per line, $9 operating expenses and 12 per cent, profit, with $1 a month each for 170 house lines, and $2 a month each for 50 business phones. A small local company is a very different matter from a big monopoly that can fight to the death in one city, while it draws its support from other cities. The reasonable rates are found in places so small that Hell interests have not cared to monopolize them, or where there is civic patriotism and common seuee enough not to remain in subjection to the great monopoly. 120 TIIK CITY KOll TIIK POPLE. movement for public street cars is now, and the history of the water service, with its powerful testimony for public ownership, is too much neglected. The very fact that public water supply has come to be looked at as the natural order of things, is in itself strong evi- dence that the public service has proved its case. But a few of the vast mass of specific proofs have a right to a place in this investi- gation. In Schenectadj-, New York, just before the water system became public, the family rate was $9; public ownership reduced the rate to $7, and still there was a good profit. In Auburn, Neve York, the family rate was reduced from $8 to $6 when the city bought the plant in 1894; but the consumption increased and the operating ex- penses decreased to such an extent that the profits were larger than ever. In Syracuse the family rate was $10 under private ownership. Public ownership reduced it to $5. The meter rates have also been reduced. The reduction of rates by the public works saved the citizens $100,000 last year, according to the estimate of the Chief Engineer. We have seen that Randolph secured a $4 rate thru a public plant where private enterprise demanded a $10 rate. 1 'For the public water works of Indiana the cost per family is found to be less than half the revenue per family received by the private works. In 1890 Mr. M. N. Baker collated the rates in 318 public and 430 private water works in every part of the United States. The re- sults speak for themselves. The ordinary family rate is the first charge, the price of admission of water to the premises. The total family rental is the ordinary first charge, plus the rates for water closet, bath tub, horse and carriage, garden hose, etc. Charges for Water. Ordinary F amily Rate Total Family Rentals Cost of Works per Family _,,, ( Public works ... 5 7.8 6.07 7.16 55 8.0 B.I 6.05 6.01 7.53 6.75 7.66 6. 8.5 6 8 6.66 10.58 9.51 16.43 13. 38.5 55 10.2 13.5 26.73 2474 31.16 28.85 38. 18.66 25.87 19.43 29.18 2145 2<.63 23.44 26.43 215 2U 27 34.75 31.9 49.41 37.2 68.25 16.75 56.2 119.9 181.3 107 04 101.42 223 193 98.82 87.5.i 112.3:! 164-M 85.8 106.3 82.2 82.1 93 79 . 44.5 57.5 48.52 70.74 72.97 53.47 81.98 155. 1 Private works U-.....1. f Public works ..., Massachusetts... | priyate works ; p^/wio ,'c.i. r, i / Publie works .... Rhode island j prfvate workg ^ . ,,. .,..;,..,.,!., ( Public works .... Pennsylvania ~ { lMvate worki ; Virginia f Public works.... Vlr * lma {Private works ,*v !,!; (Public works st Virginia., j pnvate wQrkg /-.__. ( Public works...., Geor s )a t Private works........:...::: Texas { u . blic work , s 1 Private works norrnn (Public works Oreg0n 1 Private works xr^ nn *; ( Public works NOYS Scotia { p r i vate works 'See section 1 for this and other facts relevant here. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 121 I have made some calculations as to the effect due to the dif- ference in the cost works as follows: On the ratio between operat- ing expenses and fixed charges that prevails in Nova Scotia, the extra capital in the private works, if it is real cost, might justify $12 addition to the public total rental, but not an addition of $40. In Maine an average of the statements of the plants reporting expenses shows fixed charges, interest, depreciation and taxes rang- ing from % to 6 times the operating expenses, and averaging 4 fold the operating cost. This would justify an addition of $5.5 to the total rentals of the public works if the reported cost of works for the private companies is real cost. In New York the re- ported difference in cost of works would justify an addition of about $7 to the public total rentals. It is not safe, however, to deal with the cost of works as stated for private plants except as a maximum. The companies are not apt to understate the cost, but they are very apt to overstate it. In Pennsylvania the difference of construction cost, if truly stated, would about equalize the rates, but in Massachusetts, Rhode Island, Connecticut, West Virginia and Oregon the difference in construction cost would intensify the dif- erence in rates. In Oregon the total rentals were $37 public and $68 private, or about 60 per cent, more for private rentals, though the public works cost nearly 40 per cent, more per family than the private works. The Oregon reports show fixed charges averaging five times the operating cost, so that the average private company total rental would be $90 instead of $68 if the average cost of the private works were as high as that of the public works and the companies charged on the higher capital in proportion to their charges on the present capital. With this equalization of capital charges the contrast would be $37 total rentals for public works and $90 total for the private works. In Massachusetts Mr. Baker found the total water rentals averaged $24.74 for the public works and $31.16 in the private plants, altho the cost of the works was less per family in the private plants than in the public. Taking the Northeast and Middle States to- gether the total rentals average 30 per cent more 111 private than in public plants, and the investment per family is about the same. The last sentence holds true substantially 2 for the entire United States, aside from the Pacific coast, there the private rentals average 71 per cent, more than the public, but the investment is much larger in the private than in the public plants, tho a great part of the excess is due to irrigation works. Excluding these and taking tlie United States as a whol-e, tne investment per family is about the same in public as in private water works, yet the total rentals - In the United States, outside of the Pacific States, the private works cost :;'.', per cent, less per family and charge 31% per cent, more than tho puMic works. The Syracuse Commissioners in 1889 found that the private works in 129 towns charged 37.3 per cent, more than the public works iu 123 towns investigated. Census Bulletin 100, July, 1891. finds the water charge in 133 cities owning their works as $19.50, against $23.43 in 11^ cities with private works. 122 THE CITY FOR THE PEOPLE. average 43 per cent, more per family in the private plants than in the public* The Water Manual of 1897 states the rates for 1250 cities and towns. Mr. Baker has not analyzed them, but an assistant has worked up a few states for me with the following results: Water Kates, 1897 Manual. Ordinary Family Rate Total Family Rentais Private Public Private Public y, 8 Mi 17 5% 5^ VA 10 27 26% 4<% 40 23K IBJi 23 25 Texas Washington In Washington the cost of works per family is a trifle more for public than for private plants ($167 to $164). In Texas the reported costs are $102 public and $117 private. If the lower capital were brought up to the higher and the usual ratio between operating expenses and fixed charges holds good, the difference would add about $1.10 to the family rate and $3 to the total rental, making the real contrasts about $15 private to $10 public and $40 private to $26 public. In Illinois the cost of works is reported to be $79 per family in public works and $95 in private works, making the real contrasts $8 private to $6 1-3 public, and $26% private to $18% public. In Massachusetts the cost of works appears to be $225 ; IT family in public works and $139 in private works, making the real contrasts $11 private to $5% public, and $40 private to $23y 2 public. It must be remembered that the contrast of rates by no means expresses the full difference between public and private ownership of water works, because in addition to the rates charged consum- ers the private companies receive hydrant rentals and fees for street service, etc., from the city treasury, while public plants, as a rule, collect nothing from the city for fire protection, street watering and sewer flushing, but render these services free, and often pay in a profit besides to the public funds. The full contrast would be shown by comparing the total revenue per family in private plants with the total cost per family in public plants (including lost taxes, depreciation and interest actually paid), the conditions as to population, cost of works, supply, etc., being ascertained, so that * "We find the average total family rate for 318 public works $21.55 and for 430 private works $30.82." (Baker's Manual of American Water Works, 1890, p xlix.) Mr. Baker further says: "In every state and territory of the Union and in every province of Canada, private works show a hir/hcr 1otal family rate than public." On p. Ill, he says in substance, "The raising of money by taxation to pay interest on the bonds of the public plants does not ucrfiunt for the lower rates charged by public works, such taxation bo- ing oflVf t by the hydrant rental, which is almost invariably paid to private companies, and the money for which is always raised by taxation. Again, he s.-i.vs (same page), "There is but one conclusion. Private works chary- as hi* Wheeling, W. Va 45 56* Kellefontaine, Ohio 54 70* Hamilton, Ohio ,.. . 43 PO Henderson, Kv 74 90* PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 127 Selling Price 31.00 1.00 1.33 .75 .87 av. .80 1.0(1 * Column B represents the actual cost to the citizens, operating expenses, depreciation and taxes, and in the case of Hamilton in- terest also (26 cents of the 80) all the other plants have more than paid for themselves out of the earnings and the people have no in- terest to pay. The addition of interest would bring the cost in Richmond up to about 82 cents, and in Wheeling to 67 cents, etc. Taxes run from 3 to 6 cents per thousand; depreciation 7 to 12 cents. The figures of column B are above the truth in several in- stances, perhaps in all, because the superintendents have a habit of including the cost of improvements and extensions, with ope- rating expenses, which makes the first column really include an item that partly or wholly offsets depreciation and sometimes more than overbalances it. Wherefore the depreciation added to column A puts some of the figures of column B above the fact. The small size of most of the places and the consequent small output, the use of coal gas and the high price of coal in Virginia puts the cost of production above that which obtains in our larger Northern cities. The Philadelphia works are leased to a private company. The Toledo plant we have spoken of. Fredericksburg, Virginia, began with public gas in 1891. The price has fallen from $3, under private ownership, to $1.50 under public management, and the consumption has more than doubled. The total cost to the city, including in- terest, is $1.33. Dtiluth has recently bought the gas and water plants. The charge under private ownership (1897) was $2 per thousand, under public ownership (1898) it is $1.50, and $1 for fuel gas. In Massachusetts, Wakefleld and MiddleborougJi began with public gas in 1894, and Holyoke and Westfield have recently voted to follow their example. In Wakefield, before public ownership, the charge was $2.19, afterward $1.75, which covers all expenses, in- cluding interest, in spite of the heavy capitalization ($11.37 per M), due to the fact that under the imperfect laws of Massachusetts the cit}' was forced to pay the private company for its works more than double the cost of duplication. In England the public works sold gas for 82 cents in 1889, and made a profit of 22 % cents above interest and sinking fund, so that the real cost to the citizens was 60 cents, while the private com- panies charged 90 cents. In 1897 the public works received an average of 75 cents a thousand, including 18 1/3 cents profit, where- fore the real cost was not over 56 cents, while the private compa- nies charged an average of 86 cents. 8 8 The cost in the holder in English plants of large output is about 30 cents, and distribution 6 to 7 cents in both public and private plants, being 128 THE CITY FOR THE PEOPLE. A feic contrasts. Bringing together a few crisp contrasts from preceding paragraphs and adding some new ones we have the fol- lowing: A Pew Crisp Contrasts. Water and Gas Charges Under Prirate Ownership Under Public Ownership Ordinary family charue for water: Syracuse, N. Y $10 5 g 6 Randolph, N. Y 10 4 9% P 54^ Average in Massachusetts 7% 5^| 164 9% Aren-ge in Washington State Cost of gas per thousand: 11 |2 lu 81 IHiluth 1% and Si Wakefield 24 1% 3* 1% Washington (priv.) 1.25 Richmond (pub.) .70 Pittsburg (priv.) 81.20 and 81 net Wheeling (pub.) .75 and .96 net 2.11 1.17 Average in W. Virginia for '91 1.80 .50 Electric Light and Telephone. ! Private Charges Public Cost Cost of electric light in private plants:! Cost (1893-4) Pittsburgh, Pa., (IS91-7)Troy, N. Y (1896) Buffalo, N. Y (1897-8) Bufralo, N. Y.... per telephone : United States Department of the Interior., Grand Rapids. Wise. (prir.) ...... 8195 148 27 100 875 ouse usinesa Cost of electric light lor like service by public planis in the sameyears: Allegheny, Pa S3 West Troy, N. Y 75 Detroit 83 Detroit 73 Washington (priv. metallic, tin- f ? i 00 nouse limited) j -j s , 5 business (225,000 population) S<-henectady, N. Y. (priv.) (27,000 population) f 836 house I 866 business f $!l ay.cojfof pro- Gran.) f 86 house I d"etiun per Rapids \ -\ $%& (co-op.) (18 business | whic h wouli add I?:',. Stockholm (priv. me- ($16 house tallic, unlimited).. -< (21-0,000 population) ($22 business Trondhjem. Norway, :intmi-{ upal system < (30JOOO population) Telephone Conversation Charges Private Oionership Local conversation by non-subsciiber Bell prices United States 10 to 15 cts. To call a friend to public station nearest his home by telephone and messenger. Bell price in Philadelphia 50 cts. luterurban talk Between Mount Holly and Philadelphia 18 miles 25 cts. Boston to New York 200 miles 82 Boston to Philadelphia 304 miles 83 Philadelphia to Chicago 820 miles 58 Public Ownership ( Switzerland 2 cts. \ Germany 5 cts. f Christiania 12 cts. I Stockholm H cts. Anywhere in Luxenbur^" cts. and Belgium 5 cts. Same Distances (England, postal < lines, 6 cts. (Sweden 4 cts. England 60 cts. f England 91 cts. j France 50 cts. | Germany 25 cts. [Sweden 13 cts. ("Sweden 767 miles 27 cts. j In Germany you can talk 1 all over the empire for " Public ownership and control is estimated to have reduced transporta- tion cbargefl in Switzerland 78 per cent, below private monopoly level ( sec p. . I'J i . OWNERSHIP OF PUBLIC UTILITIES. 129 These contrasts and the facts relating to water rents, the Glas- gaw tramways and the "Two Bridges" stated in the earlier part of this section, are sufficiently remarkable, but the antitheses now to be stated from the history of electric lighting are, perhaps, still more astonishing. Electric Light. The table below and the explanation following it are parts of one statement, and should be so treated in reading or quoting. Cost of Electric Light Before and After Public Ownership. Tutul cost per lamp year for electric street lights before and after public operation, the alter service being as good or better than the service it replaced. AFTER BEFORE AFTER Price paid private Cot per ro in- Cost under complete put'\ic owner- ship in -lulling operating expen- cluding operating ses, taxes, insurance and depre- street arc just be- expenses, taxes. ciation, but not inf rest, there fore public oper- insurance, d--pre- being no interest 10 p: |.2 sis s h E s. s-o B B. W b'p.e O. 6 IH o * 2i ^""Q w S 1 & k "S . 8- O) CO S* * 5.1 o Q, a Bel |g la I! 3 >.o i! 01 o o H >.-- -g e.jj q) Q> C4 r|| O fcc > o a> ^2 * ^ ,0 ^ " ~ =2 ^ a O.B wealth and leisure. Private ownership may attain the bene- fits of co-ordination to some extent, but only public ownership can realize them fully. The dangers and detriments of private monopoly increase with combination and so offset the benefits of union. This is why the law is so careful to limit the scope of franchises and restrict the consolidation of private com- panies. Only public ownership moreover can attain complete co-ordination, for many services owned by the public now will 3 Sre Mr. Foote's article "No Government Should Operate an Industry." Munh-ipnl Affairs, June, 1897. 142 THE CITY FOR THE PEOPLE. not be given over to private control, and no perfect union can be made between public industries aiming at service, and private corporations aiming at dividends. Unification of motive, method and control is essential to complete co-ordina- tion. Between public control and private control there is at bottom, not a harmony but a discord, not a co-operative im- pulse, but an impulse of battle. The water works and the electric light plants are operated in co- ordination with each other in Aurora, Batavia, Paris, La Salle and Bloomington, 111; Columbus, Goshen and Martinsville, Ind.. Marshalltown, la.; Portsmouth, O.; Dunkirk, N. Y., and doubtless other places, in respect to which I do not know the facts in this re- gard. Of the 12 cities now operating gas works in this country, all but 4 (Richmond, Charlottsville, Fredericksburg and Duluth) have public electric plants also, which are more or less co-ordinated w'th the gas works. 1 In Duluth the water and gas plant is one institu- tion under a single manager. Speaking of water works Mr. Baker says: "Under municipal own- ership a harmonious development of this and other public works is possible. Water mains may be laid before streets are paved, thus saving the damage and expense of tearing up good pavement to lay water pipes. The health and police departments may easily work with the water department for the public good, instead of the water company being continually fearful lest the health board declare its water insanitary, and being too often ready to vcs'st efforts to secure a better supply." Co-ordination is possible not only between departments in the same city and town, but between services in different municipali- ties. The Massachusetts Metropoltan Water act of 1895 provides for the co-ordination of the water supply of Boston, Chelsea, Ev- erett, Maiden, Medford, Newton, Somerville, Belmont, Hyde Park, Melrose, Revere, Watertown, Winthrop, etc. Such interurban fed- erations are of the utmost value, and we hope they may have a wide development in the near future. In Detroit the electric light poles are used by the police and fire departments and by commercial, telephone and street railway companies. This is only a small co-ordination, but it is in the right direction. We have already spoken of the advantage of having the 1 This sort of union is not infrequent with private companies in some sections of the country. Private monopolies unite to a considerable extent and would form more unions if the law y direct employment ol labor, make thereby a large saving on the cost of doing the same work by contract in the same or neighboring cities, see "City Government, vol. 7, No. 3, pp. 53, 56-7. The experiences cited by Mayor Perry of Grand Rapids and H. J. Gondon of New York, in the papers referred to, prove that the direct method, properly used, saves the profits of contractors and the costs entailed ly their frauds and blunders. 144 THE CITY FOK THE PEOPLE. interest to pay. The works, moreover, furnish free service to the city, which, at the meter rate charged by the city, would be worth $200,000 by the Chief's estimate. At private rates the city would pay $555,000 for the 11,100 fire hydrants alone ($50 per hy- drant is the price paid the private company in Indianapolis), and $50,000 to $100,000 for street sprinkling, sewer flushing, etc. So that the city treasury is fully iy 2 millions ahead thru the public ownership of the water supply. If we include the savings to con- sumers, who pay a little less than 3 millions now at 3 cents per thousand gallons (nearly a million of it being clear profit to the city), and would probably pay two or three times as much to a private company (the receipts in Indianapolis are 8 cents per thou- sand gallons), we shall see that the total saving to the people of Philadelphia is probably not less than 4 millions a year, and maybe a good deal more than that. Her gas works paid for themselves out of earnings, and at the time of the lease, with gas at $1, were yielding over $400,000 a year cash profits above operating cost, which was more than enough to cover depreciation and cost of collections, water, etc., leaving as clear profit the 700,000,000 feet of free gas annually supplied to city buildings, etc., worth $700,000, or 7 per cent, on the value of the works. A few years ago, when the charge was $1.50 per thousand, the gas receipts of Philadel- phia paid for the large amount of gas burned in the streets and public buildings, and also turned about $1,000,000 cash into tiie public treasury every year. In New York city the public water works turn $1,530,000 cash into the public treasury after paying interest and cost of operation. The free public service at current rates would surely be worth $600,000, making a total profit of $2,130,000, or $1,500,000 after allow- ing for depreciation. Chicago's water works yield a cash profit of $1,483,000 above ope- ration and interest on the water debt. This with free service that would probably cost $700,000 or more if obtained from a private company, indicates a clear profit of nearly $2,000,000 above depre- ciation. 1 We have spoken already in Section I of the profits of public elec- tric plants that do commercial lighting profits sometimes suffi- cient even in small communities to cover the whole expenses of the plant and give the city its street lamps free. In large places municipal works doing all the commercial lighting can cut the prevailing private rates in two and still more than pay all costs, tho lighting the streets and public buildings free. Every one of the twelve cities operating public gas works receives a considerable margin above operating cost, and all but Middle- borough make a good profit above operation and depreciation, tho Hamilton has to pay her profits over to the capitalists for interest. 2 For numberless other cities and towns making a profit on water, tho selling at very reasonable rates, see Baker's Manual of American Water- Works, 1897. 2 For the details as to public gas profits see Municipal Monopolies Chap, on Gas, 1898, and Bemis on Municipal Gas, 1891, pp. 55, 87, etc. For 1890 PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 145 The Wheeling gas works have paid for themselves out of earnings on a charge of 75 cents per thousand feet, and are helping to pay for the electric light works. The public gas works of Richmond paid for themselves over fifteen years ago, and the works of Hen- derson, Bellefontaine, Alexandria, Danville and Charlottesville have also made their cost and paid off their debt out of earnings, and some of them a good deal more. The Philadelphia gas works paid for themselves long ago if they are credited with the actual value of the gas they furnished the city free of charge. 3 The English public gas Works make a good profit also. (See Sec- tion I.) Take one case. When Nottingham took over the gas plant the price was 83y 2 cents per thousand. The city lowered it to 70, then 62, and after a few years to 54 cents. The consumption rose from 500 million feet to 1106 million, and the profit rose from $25,000 to $165,000' a year. The rate was lessened 16 per cent, at the start, and in 8 years the price was lowered 25 per cent, more, con- sumption more than doubled and profits increasd 600 per cent. LARGER FACILITIES. V. Enlargement and Extension of Facilities as public hc((l may require is a distinguishing characteristic of public enterprise. Private gas and water companies lay their mains only in streets that will yield a profit. Public works put their pipes into any street where there is a reasonable demand for the service. Private schools and turnpikes go only where they will "pay" can't go any- where else except on the basis of charity; but public schools and roads go into every district where there are children to educate or people to travel. Mr. H. A. Foster, tho opposing public ownership, in a review of :!4 towns having public electric plants, admits that "somewhat over half the number are places where it is doubtful if a commercial or private plant could be made to pay under any circumstances." ' In cities and towns of every size, with or without public lighting plants, it is public enterprise, not private, that lights the streets and Professor Bemis found the cash profits above operation ran from 6 to 24% per cent, on the value of the plant. In round numbers Hamilton C. Wherhm," Philadelp ia 1.'-%, Danville M Hende son 10^ Riehmond 19tf ( harlottesville S%f, BelUfontaiuo ># Alexandria 11^' "I believe it would be better if each department were credited every year with the value of all the service it renders. If the totals of receip profits included such values and the accounts were balanced by e to the public good also including said values, the people would understand more clearly the full value of their public works It would also be a good thing if each department chief, as far as possib e. would close his ' repor with a comparative statement of prices and results in . h wn r * ft?" other public and private enterprises of similar character in the same localit or neighboring communities. He might be given authority to call for Persons and papers to get the facts from private companies. The bottom facts are what we want everywhere and all the time. 1 Electrical Engineer, Sept. 5, 1894. 10 146 THE CITY FOB THE PEOPLE. alleys, and if it were left to private companies the streets of the poor and the alleys if the shims would be left in darkness the very places most in need of light for safety in travel and as a police measure to prevent crime, would be without the protecting influ- ence of the street lamps. 2 Our postal service goes to every hamlet in the land, but the tele- phone monopoly confines itself to cities and densely populated dis- tricts, where the profit will be large. In England, also, where the local telephone service has been in the hands of a licensed and protected national monopoly, small towns and country districts have remained for the most part without the service. But in Nor- way, Sweden, Luxemburg and Switzerland the public telephone has netted the rural districts and become almost as universal as the post.* When England bought out the telegraph, the "government's first move was the rapid extension of the lines into districts hitherto unprovided with telegraph service, and the reduction of the tariff." The miles of line were increased from 5601, under private owner- ship in 1869, to 15,000 under public ownership in 1870. The public telegraph developed "large additional facilities by opening more offices, locating offices more conveniently and making every pos1> office and post-box a place where a telegram may be deposited to be taken to the nearest telegraph office for transmission."* MORE BUSINESS. VI. Increase of Business is one of the marked advantages of public ownership. Lower rates and increased facilities en- large the volume of business, and the natural tendency of the people to patronize a public enterprise more cordially than a private one has a further effect in the same direction. And the larger output means a fuller satisfaction of the wants of the community and a lessened cost of production per unit of service and per individual served. In 1889 the water commisssioners of Syracuse, N. Y., investigated 250 towns, and found that, even where prices were the same, there -It must be noted however, that while public ownership is apt to put water mains, gas pipes, light wires, etc., wherever there is reasonable need for them, yet where the voters and taxpayers are not directly and personally Interested in the service, as in the case of schools, the facilities provided, tho far in excess of what private enterprise would probably afford, are nevertheless considerably below the reasonable need. 8 Germany has not been so successful in the extension of the telephone to town and country, because she has made the mistake of adopting a uni- form rate of $35.70 which is fair enough in the larger cities but is prohibi- tive in the country. To charge the same rate for local telephone service in a farm district or a town of two or three thousand people, as in a city of a million and a half is an absurdity. A uniform rate in the post is good and a uniform rate for interurban telephone service would be all right, but a uniform rate for local exchanges is by no means so easily justified and If such a rate is to be adopted it should be the town rate, not the big city rate. 4 The Arena, Vol. 17, p. 29. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 147 was a much greater use of water in towns supplied by public works than in towns supplied by private companies. The statistics of the 50 largest cities in the country, collated by the eleventh census, showed the same. I put the Manual of American Water Works (1897) and tables of population by census returns and later esti- mates into the hands of an assistant, with instructions to find the average consumption per family in all the large cities having pri- vate works returning data from which the fact could be ascer- tained, and then find the consumption in an equal number of large cities having public plants and scattered over the country as widely as the private systems. The following table shows the results: l Consumption of Water with Public and Private Service. Averagp Daily Consumption per Family in Gallons. Private Works. Public Works. Indianapolis 275 430 300 450 600 160 1-20 650 170 320 200 220 1167 850 760 500 (? 1140 530 510 375 1373 950 1000 700 1000 630 BOO 800 600 600 300 500 1(166 1000 inno 700 1000 920 712 700 Buffalo. Terra Haute Wheeling San Francisco Memphis Nashville Mobile New Orleans Charleston S C New Haven Albany. Quincy, 111 Chicago. Peoria, " Cleveland Kansas City, Kan Kansas City Mo Des Moines, la St. Louis Los Angeles, Cal Oakland, " Portland, Oreg Detroit. Bridgeport, Conn Pittsburg. Elizabeth N J Camden N J Paterson " Lancaster, Pa. Elmira NY. Troy N. Y. Total averages... 486 887 The left column includes all cities registered as over 30,000 popu- lation in 1890 and having private works which made sufficient re- turns to permit the estimate of consumption per family to be made, the private companies supplying seven cities of the specified rank made no returns of the average consumption, and one made very incomplete returns. In the further case of Omaha the average had to be estimated from the maximum and minimum consumption. Running over the tables of ownership and keeping in mind both population and location, a list was made of comparable cities hav- ing public water works, and the right hand column contains the first 20, for which the Water Manual and the population estimates afforded the requisite data, 23 public cities being looked at in get- 1 The figures in the Water Manual refer to '95 and '96, and the family consumption here stated must not be taken as absolutely precise, for *he population for those years is not certainly known. The estimates of local authorities and statistical experts are. however, likely to err equally in respect to the cities In the left column and in respect to those in the rteht. 148 THE CITY FOR THE PEOPLE. ting he said 20, and the facts for three of the attempted cities be.ug found incomplete. Pittsburg has private works as well at. ^ublic, but as % of the service is public I have allowed it to stand. In respect to gas, Professor Bemis found that the proportion ot consumers to population was 20 per cent, larger in cities owning public works than in the Massachusetts cities with private works selling at about the same average prices. 2 On the Brooklyn Bridge "when the railway fare was cut in two in 1885, the traffic at once more than doubled, and the receipts, in- stead of falling off, were considerably increased." s Glasgow had a similar experience with her street railways when she began to operate them. The fares were cut one-third and the business was doubled in about two years. When England took the telegraph, in 1870, pushed the lines into rural districts and cut the rates 1/3 to y 2 , the number of messages increased 50 per cent, and the amount of business done (or number of word-miles) about doaibled the first year. By the middle of 1871 (about a year after the postal telegraph had got things ar- ranged in the new order and was well prepared for work) even the number of messages was nearly double what it had been under private ownership, and the average length of the messages was very much greater, partly on account of the extremely low rates for press work under the postal tariff. Since 1869 the per capita use of the telegraph has grown six times more rapidly in Great Britain, under public ownership, than in this country, under private ownership. In 1869 there was about one message to five persons in Great Britain, and one to three per- sons in the United States. Our telegraph was considerably ahead of the English when both were in private hands, but when theirs became public it speedily went ahead of ours, so that now the mes- sages are nearly two to each person in Great Britain and less than one to each person here. 4 The quality of the new business is also specially worthy of note. The result of public operation "was a vast and immediate increase in the popular use of the telegraph. Social messages and newspaper traffic developed enormously. The telegraph became something more than an aid to speculation, and began to be of use to the people." 5 The president of the Western Union Telegraph Company, testifying before committees of Congress a few years ago, said that "less than 1 per cent, of the people used the telegraph" in the United States, and that only "about 5 or 6 per cent, of the messages were social." Afterwards he said "46 per cent, of the total business is purely speculative stock jobbing, wheat deals in futures, etc.; 2 Municipal Gas, p. 23. 3 Dr Max West in Municipal Monopolies, p. 407, citing Report of Rridge Trustees, 1885, pp. 4-10. The Dr. says, "There was at the same time no in crease in operating expenses of the bridge as a whole, but a slight decren.se. The operating expenses of the railway itself are not separately reported, but they undoubtedly comprise all the large items." 4 See facts and references in The Arena for Dec., 1896. pp. 20-22. f The Arena, Vol. 17, pp 17-21. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 149 34 per cent, legitimate trade; 12 per cent, press; and 8 per cent- social." In Europe, with the public telegraph, "two-thirds of all despatches are on social or family matters." In Belgium, with her low public rates, 63 per cent, of the messages are on social matters." The increased use of a public service by the mass of the people is one of the strongest recommendations of public ownership. NO SECRET REBATES OR BUSINESS PREFERENCES. VII. More Impartiality in the treatment of customers and /r.s'. having public works in 1891, declared that experience in every one of those cities, not excepting Philadelphia, had shown that public ownership tends to diminish political corruption. Professor Commons says: "I maintain that nine-tenths of the existing municipal corruption and inefficiency result from the policy of leaving municipal functions to private parties; and that an essential part of the present unparalleled awaken- ing of civic conscience on the part of all classes of the people is the desire for municipal ownership of franchises. As the people become aroused to the degradation of their politics and to the need of reform, their attention is concentrated on the chief source of that degradation, the underhanded and often PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 155 high-handed domination of city officials and machine politics by the corporations whose life is maintained by city fran- chises." (Tor the facts see sections 8 and 9.) Professor Ely says: "Our terrible corruption in cities dates from the rise of private corporations in control of natural monopolies, and when we abolish them we do away with the chief cause of corruption. 'But,' it is said, 'we must take natural monopolies out of politics.' It never has been done, and it is an impossible thing to do absolutely impossible. No gas-works, no water-works, no street-car lines, no steam rail- ways, are so thoroughly in politics as those in the United States. Our American railroads are incomparably more in 'polities' than the German railroads. ]STot only this; those German railroads which have been bought by the state, I bef lieve, are less 'in polities' than they were Avhen they were pri- vate property I unhesitatingly advocate public ownership and management for gas-works, and I challenge anyone to instance a single American city or, for that matter, any city, wheresoever situated which has gone over to public ownership and which regrets it; which, indeed, has not found that a corrupt political influence was thereby removed and political life purified." Dr. Albert Shaw says: "'The pressure that would be brought to bear on the government to produce corruption under municipal ownership of monopolies like gas, electric light, transit, etc., would be incomparably less than the pres- sure which is now brought to bear by the corporations." Governor Pingree says: "The corporations are responsible for nearly all the thieving and boodling with which our cities suffer." Private monopolies are by their very nature compelled to be more or less "in politics;" but make the works public with a provision that they shall not be sold or leased except on a referendum vote of the people, and many of your council bribers and government wreckers will stand among the lead- ing friends of honest government. 1 1 See "Objections" below for points on the subject of corruption. The only political abuse claimed by objectors to attach to public works relates to misuse of patronage. But this abuse exists only where public ownership 156 THE CITY FOR THE PEOPLE. ATTRACTS GOOD MEN INTO POLITICS. XV. The Inducement to Good and Able Men to take part in politics is greater under public ownership of pubic utilities than under private ownership of them, while the inducement to selfish and scheming men is less than under private owner- ship. The chance to gain money and power by selling votes and influence in council and legislature to gas or electric, or street railway companies, or by other political work for some big monopoly is one of the things that attract bad men into politics. And the fact that so much of this sort of work is done is one of the principal things that keep good men out of politics. They do not like to live in an atmosphere charged with filth. The abolition of the private monopolies will do more than any other one thing to purify politics, and the puri- fication of politics is all that is necessary to get the best and ablest men to take their full part in public affairs. DEVELOPS CIVIC INTEREST AND A BETTER CITIZENSHIP. XVI. The Mass of citizens will take more interest in pub- lic affairs, and a better citizenship along the whole line will result. The interest which the average citizen takes in civic affairs depends on the number, importance, and directness of the ways in which the government affects his interests. One of the surest ways to develop public spirit and a nobler civic ideal is to enlarge the scope and importance of city govern- ment. A government that means order, education, roads, fire protection, water, gas, electric light, street railways, telegraph and telephone service, will engage the attention, interest and effort of the average man much more effectively than a gov- ernment that means only half or a third of the services named. To some the tendency of public ownership to intensify public spirit and civic patriotism seems the very highest of all it? many advantages. For example the famous Mayor Jones of has not been fully adopted. A modified form of private ownership with the all important monopoly, the government, largely controlled in private in- terest is not really entitled to be called "public ownership." Yet even this partial public ownership tends to produce a strong movement toward real public ownership and at its worst the abuse of patronage is an evil utterly insignificant as compared with the secret, all pervading, soul degrading, government destroying corruptions of private monopoly to-day. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 157 Toledo, said in his admirable address to the League of Amer- ican Municipalities, Detroit, 1898: ''The greatest good that we are to find through municipal ownership will be found in the improved quality of our citizenship." OPPOSES THE SPOILS SYSTEM. LEADS TO THE MERIT SYSTEM OF CIVIL SERVICE. XVII. Civil tier vice Reform will be aided by Public Own- ership. The awakening of civic interest in the mass of the people, the infusion of better men and nobler influences into politics, and the elimination of some of the worst men and most degrading influences, will help the cause of every govern- mental reform, but there are even more specific reasons for believing with Professor Ely that "The door to civil service reform is industrial reform." In the first place large masses of business cannot be so well or economically managed with- out good civil service regulations based on the merit system of appointment and promotion, wherefore the enlargement of public business intensifies the losses of taxpayers from the absence of such regulations, deepens their interest in civil ser- vice reform and strengthens their demand for it. In the second place the managers of public works are prompted to favor such reform because their works cannot reach the highest efficiency or economy without it. The pride which every good superintendent has in his works and the natural desire of de- partment chiefs to make as good a showing as possible makes such men the friends of civil service reform. The Detroit Electric Commissioners express the feeling of many depart- ment heads when they say in the last report (1899), p. 10, "To a strict adherence to the policy which assured the work- ing force of the Commission a tenure of position dependent solely upon good behavior and the system of promotion in service according to merit which has always prevailed, the suc- cess which has thus far attended the administration of this department of the city's government, is mostly due. The Commission has had occasion to call attention to the import- ance of this subject. The work of the past year confirms its belief, and has served to emphasize the necessity of a rigid 158 THE CITV FOE THE PEOPLE. adherence to this principle A departure from this policy would result in decreasing not alone the uniform efficiency of the service, but also seriously interfering with its economical administration." In the third place experience proves that public works become powerful means of improve- ment in the civil service. This has been the case in Chicago, Wheeling, Richmond, and other large cities. Superintendent Darrah of the Wheeling works told Professor Bemis in 1891 that the very fact of the gas works being in public hands was forcing the question of civil service reform to the front. When the legislature granted the Wheeling works the right to sell gas, it required that the board of gas trustees should be non-partison i. e. selected from the twoi chief political parties. Professor Bernis made a special study of this subject and states the result as follows: "The tendency of public ownership in every city investigated is, I find, to a gradual separation of politics and patronage from the gas and other departments." 1 There is no doubt upon reason and experience that public ownership tends to destroy the spoils system and establish the merit system of civil service. TENDS TO IMPROVE THE GOVERNMENT. XVIII. Better Government is likely to result from the public ownership of monopolies, not only thru its tendency to force civil service reform, improve the quality of citizenship, deepen the interest of the masses in municipal government, attract more good and able men into politics while discour- aging bad men, change the financial interest of the rich and influential from opposition to good government to support of it, and abolish the corporations that constitute the chief cause of corruption, but also thru its tendency to liberate thinkers, speakers, writers, editors, preachers, teachers and working- men from the restraints now imposed upon them. It is not quite safe to-day to be a reformer or to talk too plainly about the doings of the big monopolies. Editors of great dailies would lose their positions if they told the people what they 1 Municipal Gas, p. 135. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 159 know and think about the street railways, electric light com- panies, etc., for the owners of such monopolies are in many cases the owners of the papers also. Preachers who apuly Christian principles too specifically to industrial conditions find the church purse and policy controlled by those who favor a statute of limitations on the Golden Rule when it comes into the neighborhood of private monopoly or brings suit against a trust or combine. A professor of economics who discusses the evils of monopoly with reasonable thoroness is in danger of losing his position thru corporate influence, or the pressure of wealth upon the trustees, or their fear of losing support. The business man may lose his trade and the workingman his employment by expressing himself on the monopoly question. A public spirited merchant of Chicago who took a vigorous part in exposing and opposing the outrageous scheming of the street railway companies to get a fifty year franchise, was threatened with ruin again and again if he did not desist. Reform under such conditions is not an attractive occupation. Press, pulpit, college, and market wear the chains of monopoly as well as the city hall and the state house. But make the monopolies public and the chains will fall. It will no longer be dangerous to advocate the reforms that are now so bitterly fought by the private monopolists. Governmental reform will have only natural inertia and the politician to overcome, and if the referendum is added to public possession of monopolies the politician will be swept aside along with the industrial monopolist. FRANCHISE ADVANTAGES. XIX. An unlimited franchise is an advantage which a public monopoly possesses as a rule over private monopolies. The point is well brought out by Mr. A. R. Foote of the Cen- sus Department, who claims that a public plant has economic advantages over a private company at present in the fact that the franchise of the public plant is unlimited, exclusive, and unrestricted. Unlimited because successful public ownership mil probably never be abandoned; exclusive because govern- ment tends to complete supremacy in its sphere of action; 1GO THE CITY FOR THE PEOPLE. and unrestricted because free to adopt all improvements. The advantages of such a franchise economically and politically are sufficiently obvious. It is the necessity of effort to prevent invasion of franchise, and to secure enlargement or renewal of it that keeps private companies in politics. It is not quite true, however, that the franchise of a public plant is unre- stricted, as may be seen from the large number of electric works that would like to do commercial lighting but arc not allowed to. Public franchises ought to be less restricted than they are, and will be, as the people come to understand the situation more thoroughly. The great advantage of public ownership in this relation lies in the fact that public plants can be trusted with unlimited, exclusive, and unrestricted franchises while it would not be safe to accord such franchises to private companies. HIGHER REGARD FOR LABOR. UNDER PUBLIC OWNERSHIP THE WORKERS ARE CO-PARTNKUS. XX. Better Treatment of Labor is one of the chief recom- mendations of public ownership to the mind of a philanthro- pist, a democratic philosopher, or a workingman. The ten- dency shows itself in shorter hours and longer wages, better provision for safety and comfort, larger liberty and care for accident and old age. Public ownership puts Labor above Capital. Private ownership puts Capital above Labor. Men before money in one case; money before men in the other. The Brooklyn Bridge record of $2.75 for an 8 hour day on the public cars, while the private companies, running over the same bridge, pay $1.50 to $2.30, or an average of less than $2 for 10 hours, shows the tendency of public ownership in this regard. 1 The Bridge Railway also gave its men a two weeks' vacation on full pay, rubber coats and gloves and two uniforms a year, free medical attendance in case of injury, and usually half their regular wages as long as needed. The employees of the private roads have none of these ad- vantages. When Glasgow took over the tramways, hours were reduced 2 to 4 hours a day and 24 to 38 per week, or over 30 per cent.; wages were raised 2 shillings a week (two years later 1 The wages given are those of the train hands. A comparison of engi- neers and firemen's wages in 1897 showed $4 for engineers and $2.37 for firemen for an 8 hour day on the public trains, while the L roads in New lork and Brooklyn paid $3 to $3.50 for a 10 hour day to engineers and $1.75 to $2 for firemen. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 161 another increase was made, amounting- to a 25 per cent, advance), and two uniforms a year were supplied to each man free a volun- tary improvement of the conditions of labor exactly contrary to the policy of the private companies. The public tramways of Huddersfield pay higher wages for 8 hours work than are paid by the private companies in surrounding places for 12 to 14 hours. Sheffield, on taking the tramways, increased wages over 10 per cent, and provided uniforms for its men. The municipal gas works of Wheeling and Richmond both pay more for common labor than the competitive rates in their localities, and the Chicago electric plant has been criticised by the opponents of municipal ownership for employing two shifts, with short hours, at $2 a day, instead of working the men in one shift at $35 to $50 a month, as the private companies do. A private corporation usually cares little about its ordinary work- men. They are only part of its tools and the part most easily and cheaply replaced. But with a public corporation it is different. Well-paid labor and contented citizenship are of the first impor- tance to the community, and the employees are part of the people for whose benefit the municipal railway or other public institution exists, are partners in it, in fact, with a share in its control, and the consequence of these united facts is a powerful tendency to shorten hours, raise wages, provide for protection from storm and accident, establish the rights of promotion for merit and se- curity from unjust discharge, and recognize the right of organiza- tion, freedom of petition and independent political action. Years of careful study of the attitude of public and private cor- porations toward laboring people led me, in a series of articles on Street Railways in 1897, to make the following comparative state- ment of 1 abor's Interest in Public Ownership. J>r Means Long hours and low wages for Short hours and high wages for workers. workers. Short hours and big salaries for Reasonable hours and moderate managers. salaries for managers. Denial of the rights of organization Full recognition of the rights of or- aud petition. ganization and petition. Oppressive regulations for private Moderate regulations for the public interest and caprice. good. Insecurity of employment arbitrary Greater security of employment iirni discharge at the whim of a petty a growing movement toward ma boss. ing it absolutely secure. Strikes, boycotts, blacklists. Petition, investigation, redress, win. the ballot as the final resort. Carelessness of the conditions of la- A definite and persistent policy of bor, men bought as commodities improving the conditions of labor, at the lowest market price and appointing and promoting for merit and thrown away like old clothes and service, protecting employes when the value is worn out from storm and injury, providing of them; no protection from cold for sickness, old age and death; and storm; no provision for the recognizing that a contented, well- worker in case of sickness and old fed citizenship is of the first im- age, nor for his family in case of portance; that men are worth more his death; no sympathetic treat- than money; that 4.000 ment of the workers as partners homes in moderate circumstances and brothers or even as valuable are better than 20 luxurious pal- live stock, but merely as money- aces and 3,980 tenements pinched making tools that can be replaced by poverty, at little if any cost. 11 162 THE CITY FOR THE PEOI'LK. High fares, curtailing the use of the Low fares, enabling the working peo- roads by the working people, and pie to live at a distance and reliev- compelling them to live in crowded ing the pressure in the tenement tenements near their work. districts. Large profits to a few, adding to the Profits for the people no overgrown disturbance of wealth diffusion fortunes for the few; tendency to which constitutes the main griev- wealth diffusion and removal of ance of labor to-day. the greatest danger of present industrial conditions. Mastership and moneyed aristocracy. Partnership, democracy, fraternity. When the street railways are owned by the public every laboring man in the city will be a partner in the business, a co-owner of the plant. The roads will belong to him as much as to the richest man in the community. He will have an equal vote in determining their management. He will share the benefits of the system in the shape of cheaper transportation, public utilities bought with the profits that accrue to the municipal treasury, larger freedom, greater se- curity and increased remuneration of labor. One may get a clear view of the relations of public and private enterprise to the labor question by comparing the Boston police with the street railway employees: A full-fledged policeman gets $1,200 A full-fledged conductor or motor- a year. man gets $800 a year if he loses no time. The policeman has an excellent The conductor and motorman have chance of promotion, one in each little or no chance of promotion. seven members of the force being an officer enjoying a salary of $1,400 to $2,800. The policeman is on duty ten hours The conductor or motorman is on day or seven hours night. duty more than ten hours whether his service Is day or night. The policeman is secure In his po- The conductor or motorman may be sition during good behavior. discharged any moment at the whim of a petty boss. The police board may retire a police- The conductor or motorman, when man on half pay after twenty old or disabled, is dropped like a years service in case of disability, burnt-out fuse. and shall, upon request, retire him on half pay at 65, or, in case of permanent disability, by accident, etc., in the service. The police are free to organize, to The conductors and motormen or- petltion, to vote as they please, to ganize at the risk of discharge, speak their minds on any public petition with little chance of fair question. consideration, strike with small probability of accomplishing any- thing but loss of wages for all con- cerned, and permanent dismissal, with blacklisting, perhaps, for the leaders, and are often afraid to vote or speak on public questions according to their independent judgment, for fear the company management may deem their ac- tion adverse to corporate interests, and mark them for dismissal. The superintendent of police gets The president of the West End is $3,500 a year as the agent of the said to receive $25,000 a year as people. agent of the company. One of the most striking contrasts under this head is brought out by a comparison of the treatment of employes by the Western Union Telegraph monopoly, on the one hand, and by the English postal telegraph and our own post office on the other. The heaviest count in the indictment of the present telegraphic system in America is the ill treatment of employes and the general abuse of the employing power child labor, overworked operators, PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 163 long hours and small pay for those who do most of the work; short hours and big pay for those who manage and scheme; less wages to women than to men for the same work; favoritism and unjust distinctions between men in the same service; a settled policy of reducing wages and increasing work; denial of the right of peti- tion, the right of organization and the right to consideration be- cause of long and faithful service; fraud; oppression, merciless discharge, blacklisting, boycotting, breaking agreements, treating men as commodities to be bought at the lowest market price and thrown away like a sucked orange as soon as the company has squeezed the profit out of their lives such are the items, or some of the items, under this vital count. The employment of thousands of little boys, twelve to sixteen years old, is a very serious wrong. These children ought to be in school, not in the street. One of the best things about public business is that it does not impose the burdens of toil upon child- hood. In the post office the carriers are men, not boys. There is no better measure of the difference in the spirit of public enter- prise and the spirit of a great private corporation, than is to be found in the contrast between the fine looking men who act as messengers for Uncle Sam, 8 hours a day, on salaries of $600, $800 and $1000 a year, and the little mind-starved, opportunity-cheated bovs that act as messengers for the telegraph companies, 10 to 16 hoxirs a day, on salaries of $2 or $3 a week. The contrast between the operators and the carriers is scarcely less intense. In the cities, 9 and 10 hours constitute a day's work for an operator, but elsewhere the day is from 12 hours up. The majority of operators work 12 and 13 hours, some work 16 and 18 hours, and at times 20 hours. 2 Yet the labor of an operator is so confining and exhausting that life and health do not ordinarily stand the strain very many years, and Mr. Orton, a former presi- dent of the Western Union, told a committee of Congress that no operator should work over 6 hours a day. A few operators get $75 or $80 a month, but nine- tenths of the operators of the Western Union are paid from $15 to $40 a month, 3 and girls are employed as low as $12. United States mail carriers, on the other hand, work 8 hours at far less exhausting labor and receive from $50 to $84 a month $84 always after the second year. And this is not the end of the contrast by any means, as the following table shows: 4 Quite as emphatic is the contrast between the English public telegraph and the Western Union. Here are the facts in parallel columns: 'Blair Rep. U. S. Sen., Vol. 1, p. 119, 125, 150, 156; I. T. U. Hearings, p. 50. 8 Postmaster General Wanamaker's Arg., 1890, p. 141. 4 The clerks in the postofflces are not included In the comparison for In the mass of the offices they are not federal employes, but are hired by t postmasters who really stand to the government- in the relation of contrac tors. In 3d and 4th class offices the clerkage is entirely in the hands of the 164 THE CITY FOK THE PEOPLE. WESTERN UNION. Two big strikes in a quarter of a century- Serious losses and inter- ruptions of business. Large drops In wages and progressive mal-im- proveinent of conditions of labor. Poor service and discontented em- ployes. Persistent policy of lowering wages and increasing the burdens of the workers. The managers took ad- vantage of the defeat of the men in the great strike of '83 to re- arrange matters so as to get "one- third more work out of a man for a days service." (Pres. Green's words. Wan. Arg., p. 221.) The Blair Committee of the United States Senate found thai the Western Union had pursued a systematic policy of reducing wa- ges by filling positions vacated by death, resignation, transfer or dis- charge with new men at salaries |5 or $10 below the pay of former occupants; that the reduction had amounted to 40 per cent, from 1870 to 1883, and that all the while the hours of labor were increasing and the profits of the company grow- ing larger. Organization frowned upon. Em- ployment insecure. Promotion at a minimum. Long service re- warded by dismissal to make room for the cheaper labor of a boy the old operator has taught to do his work. No provision for sickness, disability or death. ENGLISH TELEGRAPH. No strikes. Harmonious uninter- rupted operation. Large increase of wages, and progressive improve- ment of conditions of labor. Su- perior efficiency of well treated and contented workers. Persistent policy of Postal Tele- graph Department from first to last to raise wages, shorten hours arid add to the privileges of labor. Since 1870, when the government took the telegraphs, wages have risen from 39 per cent, to over 72 per cent, of the total revenues. As a rule, the salaries of telegraphers in England have been raised $150 to $200 each since 1881 and hours have been shortened one-seventh, the present hours being eight in the day time or seven at night for six days in the week. Employes free to organize. Employ- ment is secure. Merit finds pro- motion. Long service is rewarded with increased pay. And liberal provision is made for pensions in case of sickness, disability and old age. Note 4 continued Private Telegraph and Public Post. Average pay per month Average hours Promotion .... Length of service.. Tenure. Eights of petition, organi- zation, etc TKLKGRAPH OPKR'AIORS. $40 to 851. 9 to 16. For merit, rare. Not recognized as giving any claims to increase of pay, or continuance in employ. Prpoarious dependent, on individual whim ami ar- bitrary power of an irre- sponsil>l<> superior. Denied. CARRIERS. RAILWAY MAIL Cl.KRKS. $75. For merit the rule. Clearly recognized as giving a valid title to increase of pay, retention and preferment. "Freedom from removal except for inefficiency, crime, or in s- conduct."** Accorded. The daily train run of a railway postal clerk is 4 to 6 hours. (Post- master General's Rep., 1892, p. 523 et seq.), but the clerk is obliged to devote some further time to making reports, checking records, preparing supplies for the following trip, etc. A carrier receives $600 the first year, $800 the second year, and $1,000 the third. Between four and five thousand of the seven thousand railway clerks receive $1,000 to $1,400 each, and fifteen hundred more receive $900 each. The postofflce does not seek to buy labor at auction, but aims to pay as much as it reasonably can, regardless of the price of labor at forced sale in the markets of competition. **Statement of Postmaster General John Wanamaker, 1892. Rep. p. 501. not merely as the aim, but as the actual condition of the railway mail service a condition which had produced great improvement in the service. Post- master General Bissell, 1894 Rep., p. 395, says: "The civil service laws and regulations as applied to the Railway Mail Service accompish all the most sanguine expected," and goes on to speak in the highest terms of fho fine quality of appointments, the high efficiency, the permanence of employment, ami the promotion for merit, secured under the civil service rules. PUBLIC OWNKKSIIIP OF PUBLIC UTILITIES. 165 The following paragraph from the Telegraphers' Advocate, Nov. 6, 1896, expresses the feeling- of the great body of employes in this country in respect to the advantages of public service: "The mail carriers sent a delegation to Washington not long since to see the Postmaster General. Think he will refuse to receive the committee? Think all the mail carriers in the United States will have to strike in order to get their organization 'recognized?' Oh, this government service is fearful short hours, good pay, live where you please, vote as you please, no wage-cutting, no reduction in force, no strikes, lockouts or blacklists. It's just awful, so it is. No self-respecting operator coxild stand it." Under private ownership labor has no means of redress but the strike, and that is often disastrous to the employes as well as to the public; witness Brooklyn, Philadelphia, Boston, etc. Organized labor fully recognizes the evils of private monopoly and the advantages of public ownership, and the American Federa- tion of Labor, representing a vast body of workers, adopted the folllowing resolution at its annual convention in December, 1896: "Resolved, That the sixteenth anmial convention of the American Federation of Labor urges upon all the members of affiliated bodies that they use every possible effort to assist in the substitution in all public iitilities municipal, state and national, that are in the nature of monopolies public ownership for corporate and pri- vate control." The reader may find it helpful to carry with him the following comparisons. They are not the strongest that can t>e made, for the right hand column does not represent the extremes of low pay or long hours in private corporations, and even as averages the hours are understated, being the theoretical and not the actual hours, which often run 10 to 20 per cent, over the theoretical day. The contrasts, however, are crisp and clear and easily remembered, and all the more forceful from the fact that they are not the ex- tremes: Hours and Wages under Public and Private Ownership. PUBLIC. PRIVATE. Average Average Average Average hours pay hours pay ' per day. per year. per day. per year. Railway Mail Clerks ... 7 81030 12 9540 Western Union Opera- tors. Postal Carrier* 8 900 12 72) Conductors and Mot.-r- 111 e n, Philade pliia Street Railwavs. .'-t. Brooklyn Bridge Kail- way Trainmen 8 1000 10 700 Louis about the sunif. Trainmen on New Yo k and Brooklyn L Roads. Boston Police 7}* 1210 10 . 520 Employes West End Street Railway, Bo- ton. 166 THE CITY FOE THE PEOPLE. NO INDUSTRIAL RIOTS OR REBELLIONS. XXI. No costly strikes and lockouts adorn the history of public works. Diligent inquiry has brought to light only two strikes in public institutions, one among the trimmers of a municipal lighting plant, and the other among the employes of a post-office who were not really public employes, but con- tractees of the postmaster. Neither strike occasioned any serious loss. Compare this record with the following items relating to strikes in private industry: Losses Occasioned by Strikes. Loss to Employes. Loss to Employers. Loss to Public. Total. New Orleans Street Railway Strike, 1892. New York Street Railway Strike, 1889... 8500,000 8750,000 $5,000,000 86,250,000 1 707,000 Reading Strike 1887 3,620,000 1 000,000 70 ),000 5 320 000 Gould Sirike, 1886 1,400 000 3,180,000 Chicago Strike 1894 1,739,000 5 353 000 80,000,000 87 097 000 Telegraph Sirike, 1883 250,000 709,300 1881-6, 3902 strikes involving 22304 establishments and 1,332,200 employes 51,814,700 30 701,500 1887-94, 14,389 strikes involving 69,166 establishments and 3,714,230 employes 163,807,657 82,587,786 400 000 000(?) Most of the figures are taken from government reports. For the Chicago strike the estimates of loss for employes and companies were made by the United States Commission, the loss of the country at large is Broadstreet's estimate. The strike was caused by a 25 per cent, reduction at Pullman on wages already down to an average of $613 a year, with a large class making far less than that. The United States report says: "Some witnesses swear that at times for the work done in two weeks the employes received in checks from 4 cents to $1 over and above their rent. (They lived in Pull- man's houses, and he did not reduce the rent when he cut wages.) The company has not produced its checks in rebuttal." There was rioting and destruction of life and property; over 700 persons were arrrested for murder, arson, burglary, assault, intimidation, riot and violation of the United States statutes. The railway strike of 1877 was caused by a 10 per cent, reduction in wages already low. There was rioting, with loss of life, at vari- ous places. The state militia at Martinsburg and Pittsburg refused to fire on the strikers, and United States troops were called out. In Cincinnati, Toledo and St. Louis mobs of roughs and tramps succeeded in closing shops, mills, etc. At Pittsburg the crowds resisted the troops and 22 persons were killed in one day. Cars to the number of 1600 and 126 locomotives were burned. The loss at Pittsburg alone was estimated at $5,000,000. If the people owned the roads would they burn their own prop- erty ? If the railway men and street railway men were part owners PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 107 and directors in the roads, would they not vote instead of striking? If the public managed the monopolies would they disregard the rights of labor, and then refusing to arbitrate produce 2000 strikes a year, with a total loss of 350 or 400 millions? History and psy- chology and common sense say, Xo. CO-OPERATION. XXII. Public oivnership is a step toward co-operative in- dustry. A public business soon becomes substantially an all inclusive co-operation in itself. I presume that no co-operative undertaking of any sort has more universal and hearty good will of those concerned in it than have the national post-office or the schools and parks, water-works and fire departments of our cities. COHESION. XXIII. Social strength and cohesion will be aided by pub- lic ownership. The water, gas, electricity, railways, tele- phones, and telegraphs are food, light, arteries and nervous system for the body politic, and a being that controls its own food supply and has possession of its own nerves and blood vessels is more likely to be well and strong than a being whose supplies and means of communication and distribution are owned and controlled by somebody else. PUBLIC ASSETS CITIZENS* RICHES. XXIV. Ownership of useful property is in itself an ad- vantage to a municipality or a state. A man is better off when he owns a good business himself than when it is owned by another, and the same thing is true of a city. Mr. Dow, for- merly of the Detroit electric plant, and now of the Edison Company in the same city, puts the matter well when he says: "If a municipal plant is operated and managed in good run- ning order, at such a figure as, added to interest, sinking-fund, and lost taxes, will equal, or rather not exceed, the contract cost of lighting, there is a gain to the taxpayers in municipal lighting, directly by reason of ownership of a marketable asset, free from incumbrance at the winding up of tlie sink- 168 THE CITY FOR THE PEOPLE. ing-fund; and indirectly by the retention of the depreciation fund in the active business of the taxpayers." 1 DIFFUSION OF WEALTH AND POWER. XXV. Diffusion of benefit is one of the most important of all the advantages of public ownership. The public schools and the post office, municipal water and gas and electric light works, fire departments, and public railways, telegraphs and telephones, do not figure in the biographies of millionaires. 1 The Tribune list of sources of the fortunes of millionaires and polly millionaires does not mention these things nor speak of any public business whatever in that connection, but it has much to say of private railways, telegraphs, telephones, and express companies, gas works, water works, ferries and street railways. Low rates and good service, smaller salaries, larger wages and shorter hours, no lobby-work, no rebates, no stock,, true capitalization, profits paid into the public treasury every- thing about public ownership tends to the diffusion instead of the congestion of wealth and opportunity. The following words of Justice Marshall in a great monopoly case in Ohio, ought to be framed in gold and hung in every legislative hall and council chamber. "A society in which a few men are the employers and the great body are merely employes or servants, is not the most desirable in a republic; and it should be as much the policy of the law to multiply the members engaged in inde- pendent pursuits or (sharing) in the profits of production, as to cheapen the price to the consumer. Such a policy would tend to an equality of "fortunes among its citizens, thought to be so desirable in a republic, and lessen the amount of pauper- ism and crime." 2 1 Western Electrician, Feb. 22, 1896. 1 The reader must not understand that I have the slightest prejudice against millionaires. At least half a dozen among the people for whom I have the profoundest respect and admiration are millionaires. I speak of millionaires as an evil economically because the congestion of wealth is bad. A community in which a few men are very rich while a large class at the bottom is very poor, is not so good as a community where wealth is more evenly diffused so that all are in moderate circumstances or well to do, and a system that develops millionaires at the top and tramps and slums at the bottom is not a good system even tho the personality of some of the millionaires may be as flue as any to be found in the middle classes. J Supreme Court of Ohio. 49 Oh. St. at 187. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 169 111 Xew Zealand the progressive land, income and inheri- tance taxes, and the public ownership of railroads, telegraphs and telephones has gone far toward preventing the growth of enormous fortunes and stopping the concentration of wealth in few hands. 3 PROGRESS. XXVI. Progress it-en csti of the best sort is apt to charac- terize public enterprise. There are two kinds of progressive- ness. The progressiveness that adopts whatever will produce more dividends is perhaps less intense in the majority of public plants than in the offices of private companies. This is certainly true in the case of industries open to private initia- tive. The fresh blood of vigorous competition keeps such in- dustries close to the front. But remember that public owner- ship is not contrasted here with all private business, but with private monopoly; and private monopoly bars out private in- itiative far more effectively than public monopoly does, for any one in the community may suggest an improvement in a public service with a chance of being cordially heard, and if the public ownership is rounded out with the initiative and referendum, a few people can secure the discussion of any desired improvement and bring its adoption to vote by those most interested to have every reasonable improvement pos- sible, viz: the people served by the plant and responsible for its expenses. AVhen we turn to the sort of progressiveness which aims at improvement in the usefulness of the works to the community, or the greater safety of the service whether monetary gain results to the business or not, then there is no question but that public ownership greatly excells the private monopolies. Such improvements if made at all by such monopolies gen- erally have to be forced upon them by public action or a re- bellion of their employes. As a matter of fact, allowing for differences in individual cases due to variations in the personal equation of the management, the 3 Letter from Henry D. Lloyd who has just returned from a visit to New Zealand. 170 THE CITY FOK THE PEOPLE. history of public roads and fire departments, water, gas and electric light works, shows a very commendable spirit of progress even on the purely economic side of the question. The water works of Syracuse, the federated system of the Metropolitan Water District in Massachusetts, the electric plants of Allegheny, South Norwalk, Dunkirk, Peabody, and Detroit, and the gas works of Eichmond and Wheeling will compare favorably with the best private works in regard to their progressiveness and its results under the condi- tions in their respective localities. Summing up his investigations of all the public gas plants in the United States Professor Bemis says: "Progressiveness is characteristic of all the plants save Alexandria." 1 While my studies of electric plants do not warrant quite so sweeping a generalization, yet the returns year after year certainly indicate a definite, systematic and successful effort to keep abreast of the times with both sorts of progress, in at least four-fifths of the large number of public plants whose reports I have seen. In some cases the strength of the progressive spirit is quite remarkable. Topeka, for example, built electric works in 1887 and found them poor, so bad in fact that Topeka has been held up as a warning to municipalities not to trespass on the pre- serves of monopolists. But in spite of her poor plant Topeka made light at a total cost of $100 per arc interest, taxes, depreciation and all, saving $20 per arc on the price she had paid a private com- pany, and in May, 1896, she entirely rebuilt the plant with modern machinery, and now the operating expenses are only about $40 per arc and the total cost $60, with a management that is a credit to the city and a source of pride to her citizens. Even Chicago in the last few years has brought her electric record up from one of the most criticized to one of the most admirable, as we shall see when we speak of objections. The Brooklyn Bridge and the Glas- gow tramway managements have proved themselves extremely pro- gressive. The former has been untiring in its efforts to increase the usefulness of the Bridge and the latter has won an interna- tional reputation for an energetic and intelligent progressiveness exceeding that exhibited by any private tramway company in Great Britain. Glasgow not only sent a committee all over the civilized world to study the best methods of street railway service but she made it a definite purpose to use the roads to relieve the conges- tion of the tenement districts by arranging rates and runs so as to encourage tenement dwellers to move out of the city, and bring suburban homes within the reach of the poorest classes; a matter of the utmost moment to which private companies give no heed unless compelled to do so by public law or the necessities of a franchise agreement. Our post office is all the time introducing new ideas and better 1 Municipal Monopolies, p. 620. See also p. 610 where the i'rofessor speaks of the Richmond Management as "very progressive," and p. ny. 1 City of Crawfordsville vs. Braden, 130 Ind., 149. 8 Thousands of owners of land In our cities and their suburbs are made PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 179 4. By income and inheritance taxes, waich vvhen progressive constitute a powerful means of raising funds for public purposes from those best able to pay, and at the same time are equally potent as. a means of counteracting the congestion of wealth in few hands. The amount to be paid may be reduced to a reasonable figure, 1. By making the franchise terminable at will; 2. By preventing or eliminating stock-watering and overcapitalization prevention by drastic regu- lation, forfeiture of charters, etc.; elimination by requiring companies to write off liberal de- preciation and call in excessive stock, or hold face capital where it is till the real value comes up to it, allowing companies a reasonable period in which to rid themselves of excessive capitalization; both prevention and elimina- tion by taxing FACE and MAKKET values. 3. By careful regulation of rates; 4. By thoro investigation and public supervision. of corporation bookkeeping; 5. By competing works. Publicity, reduction of rates and prevention or cutting down of inflated capital, are of the first importance. The latter is even more fundamental than the former for over- capitalization obstructs due reduction of rates. The taxation of companies upon the face or par value of their securities where such value exceeds the worth of the physical plant (or on the market value of the securities if this is higher than the face value) and other measures to prevent and reduce over- capitalization seem to me to be the thin edge of the wedge the measures which under ordinary circumstances should come first, as a preparation for full and effective reduction of rich by the increase of land values thru the construction of street railways, water works, lighting plants and telephone exchanges, the laying of side- walks and the paving of streets. It would be perfectly just under public ownership to take a part or the whole of such increase of values to pay for the works. This principle is already applied in the <-nse of ?a v; ^ sidewalks, sewers, etc., and its application could be extended to suburban railway lines, gas mains and electric light and telephone systems. 1 80 THE CITY FOR THE PEOPLE. rates to a reasonable level, which, together with fair capitaliza- tion, constitutes the true preliminary to public purchase. Jnder our constitutions, Federal and State, the courts require that in taking over the works of a private gas or water or street railway company the city shall pay the market value of the prop- erty, including the franchise, and the market value of the franchise depends on the length of its unexpired term and on the earnings of the company, present and prospective, so that the higher the rates the more the people have to pay for the franchise which very likely the company got for nothing. 7 During the negotiations in Detroit the street railway franchises, on the basis of earnings and unexpired terms were estimated to have a value of about 8 millions or substantially equal to the struc- tural value of the whole system, so that the people would have to pay double the worth of the physical plant. In Washington, D. C., and in Massachusetts, the street railways have no franchise terms. The grants may at any time be altered or repealed. In Mass., water works and bridges have frequently been taken for public use at or near the structural value and far below the market value indicated by their earnings. 8 Efficient measures for the prevention or eradication of over- capitalization, and for the reasonable regulation of rates, are of .great importance. Where franchise terms exist, such measures are often absolutely essential in preparation for a transfer to public ownership at a just price. The Mass, commission plan will do something toward keeping down fictitious capital, tho it lets the capital get waterlogged in the big companies, just where it is of T Some people say that there are no longer any "innocent holders" of corporate stock, and insist that as the public may squeeze the water out of a gas plant or street railway or other monopoly by regulation of rates and capitalization or by competition, therefore it may do the same thing directly and immediately by condemning the property to public use and paying only the value of the physical plant. The trouble with this is that it is impos- sible and would be unwise even if possible. The courts and the constitutions are in the way. The time-honored rules of law and establish! conceptions of justice are in harmony with one method and against the other. A long line of decisions and a practically unbroken consensus of opinion confirms the principle that a city taking property by eminent domain must pay its market value. And a franchise is as much "property" as a building or a railway track. Where- fore if tracks and franchise are taken, the city must pay the market value of both, which is indicated by the market value of the company's bonds and stocks, and more precisely determined by the cost and depreciation of the physical plant, and the term and earnings of the franchise. To take an unex- pired franchise without compensation, paying only for the physical plant, runs counter to the judicial sentiment of the race and is therefore unwise in spite of the fact that by the deepest principles of the law the custom of granting private franchises should never have arisen. Having been granted its market value must be paid if it is taken by eminent domain. On the other hand, the reduction of market values by competition, public or private, or by the regulation of rates or capitalization, is recognized as just and proper by an equally well establisht set of ideas and decisions. When there are two ways of accomplishing a purpose, one of which runs counter to establisht ideas of justice and the other is in harmony with those ideas, the wise man chooses the latter plan. 8 See cases cited in my chapter on the Legal Aspects of Monopoly, in "Municipal Monopolies," p. 463, ct seq. In England the law allows munici- palities to buy street railways at the structural value at stated periods, the ends of franchise terms, 21 years first, then at the end of each 7 years. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 181 most importance that it should be undiluted. Laws providing for forfeiture of franchise on proof in court of serious overcapitaliza- tion might avail more than the commission method if it were also provided that suit for this purpose might be brought by, or must be brought at the demand of, twenty or more reputable citizens. The elimination of overcapitalization may be secured by requiring the companies to write off liberal depreciation and call in each 3 r ear a certain amount of the excessive stock, or in some cases simpty holding the face capitalization where it is until improve- ments and extensions bring the real value up to it. A date might be fixed after which it should be unlawful to have a face capital of bonds and stocks exceeding the actual value of the physical plant plus the patents or other privileges, honestly bought and paid for, allowing the companies 15 or 20 years for the gradual exudation of the dead matter in their systems. Of all the measures for preventing or reducing over-capitalization, however, I have most faith in the plan of taxing corporations on valuations not less than the value of their assets, nor less than the par values of their securi- ties, nor less than the market values of their securities. Take the three values in each case and tax the company on the one that is highest. With honest execution such a law would be very effective especially if a strong progressive increase of taxation were awarded /H;H tJie excess of par or market values above real values. In Massachusetts, since 1871, no street railway company can issue stock till the par value is paid in in cash. Since 1893 stockholders must pay market value for new stock. In 1894 all stock or script dividends by telegraph, telephone, gas, electric light, railroad, street railway, aqueduct and water companies are forbidden. In 1897 the increase of capitalization upon consolidation of street rail- ways was forbidden. The issue of bonds was restricted in 1889. In 1896 the provision that no increase of stock could be made in excess of the structural value of the plant and the cash assets was re- pealed and the matter was left with the commissioners. This was done for the benefit of the West End Company, as one of the com- missioners informed me. This is a step backward, but the Mass, laws have shown what can be accomplished by regulation of cap- italization, for the street railway capitalization in this State has fallen from $52,963 per mile in Sept., 1894, to $44,683 in Sept., 1897. The average capitalization in Ohio, Indiana, Illinois, Michigan, Wis- consin, Minnesota, Iowa, Missouri, and Kentucky, was $91,500 per mile, or more than twice the Massachusetts figure, altho the number of cars per mile averaged 3.78, which was exactly the same as in Massachusetts. Massachusetts franchises are liable to revocation at the pleasure of the Legislature, and formerly the street locations of tramways could be revoked by the Aldermen. But in 1897 the right of the city government to revoke street railway locations in the streets was made subject to the consent of the Board of Railway Commis- sioners, a great gain for the companies. 182 THE CITY FOE THE PEOPLE. The regulation of rates is most important as a means of squeez- ing the water and fiction out of corporate capital. By such regu- lation net earnings may be reduced to a level which will bring the total eminent domain valuation somewhere within reasonable limits. Gas, water, street railway, telephone and other monopoly rates may be regulated by the Legislature or by the city under Legislative authorization, and probably under the implied authority of the municipal police power. 8 The only limitation is that the regulation shall be reasonable. Property cannot be taken for public use without compensation indirectly thru the regulation of rates any more than it can be so taken directly. What amounts to compensation is a difficult question. It has been held that a rate is constitutional if it is sufficient to cover cost of service, interest on bonds, and some dividend which latter may be only one per cent, or even less.* Where the proposed rates will give some com- pensation, however small, to the owners of the property, the courts have no power to interfere. 9 It is not quite settled, however, that courts would sustain a profit of 1 per cent, or less. 10 It is clear that a corporation cannot claim rates sufficient to allow dividends on excessive capitalization. The U. S. Supreme Court says in the Nebraska case: "If a railroad corporation lias bonded its property for an amount that exceeds its fair value, or if its capitalization is largely fictitious, it may not impose upon the public the burden of such increased rates as may be required for the purpose of realizing profits upon sucJi excessive valua- tion or fictitious capitalization." But if the evidence before the court indicates that the proposed rates will not cover operating expenses, as was the case in the Nebraska decision, of course the rates will not be sustained. 11 Legislative reduction of telephone rates from $11.16 a month to $2.50 has been sustained. 12 The speed, accommodations, and rates of street railways may be regulated under the police power of a State or municipality. 13 A State may order a street railway to remove snow and ice, to number and license cars, to limit their speed, to operate more cars, etc. 14 8 "When a business becomes a practical monopoly, to which the citizen Is compelled to resort, and by means of which tribute can be exacted from the community, it is subject to regulation by the legislative power." (Brad- ley, J., interpreting the Munn case in Sinking Fund case, 99 U. S., 700, 747.) * In 35 Fed. Rep. 879, the court said: "Compensation implies three things payment of cost of service, interest on bonds, and then some dividends," which Justice Brewer declares may be only 1 per cent, or less. Even a lower rate than this rule would allow may be entirely constitutional and perfectly just in some cases as was pointed out by the Interstate Commerce Commission in its fourth annual report. See also Larrabee's Rd. Question, p. 365. 8 Chicago & N. W. Rd. Co. vs. Dey, 35 Fed. Rep., 879. If any compensa- tion is left above proper and lawful expenses, the reasonableness of the margin is a legislative, not a judicial question, 143 U. S. 546. 10 See Milwaukee Elec. Ry. & L. Co. vs. Milwaukee, 87 Fed. Rep. 577. 11 Smyth vs. Ames, 169 U. S., 466, Mar., 1898. 171 U. S. 361, May, 1898, commonly known as the Nebraska Case. "Hockett vs. State, 105 Ind. 250; 106 Ind. 1; 118 Ind. 194. "Buffalo, etc., Ry. vs. Ry.. Ill X. Y. 132 (1888); 117 Mass., 544; 58 Pa., 119; 95 111., 313; 36 Neb., 307; 22 N. J. L. (2 Zab.) 623; 19 Minn., 418. 14 Frankford, etc., Ry. Co. vs. Phila., 58 Pa., lin. Booth on St. Ry. Law, p. 336. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 183 A statute fixing transfers at 8 cents is good, 15 so is a law limiting ferry tolls collected of street railway passengers, 18 also an Act reducing fares on the Buffalo street railways to 5 cents." The Legislature has a right to fix rates on street car lines, tho no such power was expressly reserved, and tho the charter says "the di- rectors shall fix rates." 1S Upon the principle that control of street railways comes under the police power of a city, Lincoln, Nebraska, fixed street car rates at 6 rides for 25 cents, and the ordinance was held good. 1 ' Indiana passed a law reducing street railway fares in cities having a population of 100,000 or more according to the U. S. census of 1890, and the law was sustained in the State Supreme Court but held void in the Federal Circuit Court because it was a special act in clear violation of the Constitution of Indiana. Reformers should be careful in drawing their bills. If this law had said "cities of 100,000 or more," it would probably have been sustained; but as it said "cities of 100,000 or more according to the census of 1890," it was a special act, there was only one city to which it applied or ever could apply and the author of the bill might as well have written "Indianapolis" instead of the circumlo- cution he used. 20 A State may authorize municipalities to fix the charges of a private water company. 21 Chief Justice Waite said: "Statutes have been passed in many States requiring water companies, gas com- panies, and other companies of like character, to supply their cus- tomers at prices to be fixed by the municipal authorities. "That it is within the power cf the government to regulate the prices at which water shall ba sold by one who enjoys a virtual monopoly of the sale, we do not doubt." Investigation of monopolies, regulation of their bookkeeping, and public supervision of their accounts are very necessary to form the basis for laws regulating rates; and to aid the enforcement of such regulations and of proper limitations upon stock and bonded capitalization. There is no doubt that very complete regulation and publicity of corporate accounts would be sustained, for the courts hold that monopolies of transportation, water supply, etc., are "performing public functions," and are subject to full control. In general it is not desirable to build competing works because 15 Wakefield vs. South Boston R. R. Co., 117 Mass., 544, chap. 381, 36, Laws of 1871. 16 Parker vs. R. K. Co., 109 Mass., 506. 17 Buffalo E. S. R. R. Co. vs. B. S. Rd. Co., Ill N. Y., 132, chap. 600, X. Y. Laws. 1875. 1S 111. Cent. Rd. Co. vs. The People, 95 111. 313; the legislature has a general power to "define, prohibit, and punish extortion," p. 315. l; ' Maxwell, C. J., in Sternberg vs. State, 36 Neb., 307, 317 (1893). 20 For a much fuller discussion of this case and of the whole subject of regulation of rates, see my chnp. on The Legal Aspects of Monopoly in Municipal Monopolies. 21 Spring Valley Water-Works vs. Schottler, 110 U. S., 347, 354. 184 THE CITY FOE THE PEOPLE. of the absolute economic waste entailed and because it is a resort to a method beneath the dignity and conscience of a public body. When a city wishing 1 to establish public works is already in- debted up to the limit allowed by law or near it, or in any case where it wishes to secure the works with little or 110 resort to loans, the choice lies between the installment, franchise, stock pur- chase and rental methods. A city may rent the tracks of a street railway company, operate the cars and pay for the road out of earnings. Or it may have its agents openly or secretly buy a controlling interest in the stock, and then operate the system and make it pay for itself out of earn- ings. Or it may contract with private parties to build or buy the plant and allow the city to pay for it in installments from the earnings, if the city assumes the operation, or from the yearly taxes if the private parties operate the plant till the payments are complete. Or it may be provided in the franchise agreement that in consideration of the franchise term the tracks or lighting plant, etc., shall become the property of the city from the start or at the end of the term without further payment. Or it may be pro- vided that after a certain date the city may purchase at the actual value of the physical plant and then the city may lay by each year a certain sum from the yearly taxes to build up a fund for such purchase. Or the company may be required to pay into the public treasury each year a percentage of receipts sufficient or more than sufficient to provide the means for said purchase at the end of the term. The French Government granted Jelephone franchises to private companies on condition that they should pay 10 per cent, of their gross receipts to the State, and that the State should have the right to fix rates, and to buy the system at the end of the five-year franchise for the value of the materials employed in it. When the government took the lines the 10 per cent, receipts had more than covered the purchase price under the agreement. Berlin's agreement with the Berlin Electric W T orks Company se- cures the city 10 per cent, of the gross receipts plus 25 per cent, of all profits above 6 per cent, on the actual capital invested, and very low rates for public lighting. The agreement also fixes the rates to be charged private parties, and no departures from tljese rates can be made without assent of the city authoritites. The city authorities retain the fullest rights of inspection, both technical and financial, and all the campany's affairs are open to the knowl- edge of responsible public officials. A deposit of 250,000 marks is required from the company to hold it down to the rules as to laying wires, etc. Finally the city reserves the right to buy the plant after 7 years at a fair valuation carefully provided for in the contract. Dr. Albert Shaw, from whose "Municipal Government in Europe" this Berlin agreement is condenst, says on p. 350, "In studying these German contracts one is always imprest with a PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 185 sense of the first-class legal, financial and technical ability that the city is able to command; while American contracts always im- press one with the unlimited astuteness and ability of the gentle- men representing the private corporations." Berlin has recently extended the franchises of its street railway companies till 1920 under the following conditions: 1. The companies are to unite and convert the entire system to electric traction. 2. Extensions to be made as the city orders; the city to pay a part of the cost of construction after 1901 1/3 1 at first, y 2 after 1907, and the whole after January 1, 1914. 3. The overhead trolley to be used except where the city may require storage batteries or other motor system, on just arrange- ments as to increased cost. 4. City to have 8 per cent of the gross receipts within city limits and y a the excess of net income over 12 per cent, on present capital and 6 per cent, on any additional capital. 5. Company to pave streets. 6. No "running boards" for conductors on the outside of cars to be used, and motormen not to work over 10 hours a day, except on special occasions. 7. After 3 years fares shall not exceed 2% cents within the city, nor to the end of every line in 20 enumerated suburbs. Commu- tation and scholars' tickets at reduced rates, and also workingmen's fares at certain hours. 8. At the end of the term all property of the company located in the streets or on city land, and all patents come to the city with- out payment. 9. Disputes to be settled by arbitration. 10. The company to establish a pension fund for all employees. Leipsic has an admirable lighting contract, one part of which pro- vides that at the end of the franchise term the works shall become the property of the city without cost. In Hamburg the street rail- way tracks revert to the city at the end of the charter period. In 1894 an outside company offered to build a plant of 1000 electric lights in Minneapolis and sell it to the city for $1 at the end of a 5-year franchise, if meanwhile it might receive $150 per arc per year, which was the price the old company was getting. The city engineer investigated the matter and found that the new company could afford to make the offer. But the contract with the old com- pany was renewed for 5 years at the old rate of $150 per light. That is, the city gave away a thousand arc plant. Do you ask why? Well, the old company had "influence." In 1891 the franchise of the Toronto street railway expired. The city paid the appraised value of the physical plant, $24,640 a mile, and operated the road for six months at a profit of $25,000 a month. Then the city council of 24 members decided by a majority of one to sell the system, which was done on the following conditions: 186 THE CITY FOR THE PEOPLE. First: The company to pay the city $800 a year for each mile of single track, plus 8 per cent, on gross receipts up to one million dollars, 10 per cent. " " " between 1 and iy 2 millions, 12 per cent. " " 1% and 2 millions, 15 per cent. " " 2 and 3 millions, 20 per cent. " " " above 3 millions. This means about 15 per cent, of the total income in Toronto with 91 miles of track and a little over a million receipts ($1,077,600). In Boston it would mean about 20 per cent of the gross receipts of the railways, or 1 & 1/3 millions a year, and in Philadelphia, with 450 miles of track and almost 11 millions of receipts, a Toronto contract would mean nearly 21 per cent, of the receipts, or 2% millions a year in the city treasury. Second: Five cents for a single cash fare; 25 tickets for $1, or 6 for a quarter; tickets good from 5.30 A. M. till 8 A. M., and from 5 to 6.30 P. M. (the hours in which the great body of working people go to and from work), 8 for a quarter, or 3 cents a ride; school children's tickets, good from 8 A. M. till 5 P. M., 10 for a quarter, or 2% cents a ride; half fare for children under 9. Fares on night cars double the single day rate; free transfers thruout. Third: City engineer to have control in respect to number of cars run, speed, improvements to be introduced, removal of snow, repairs of streets, etc. The system to be transformed from horse to elec- tric, and extensions to be made from time to time* as directed by the city authorities. Fourth: The company's system of bookkeeping to be subject to approval of city treasurer and city auditors, and all the company's books and accounts to be subject to monthly audit by city auditors. Fifth: Employees not to be required to work over 10 hours a day, nor more than 6 days a week, nor for less than 15 cents an hour. Sixth: At the end of 20 years (or 30, since the franchise may be "renewed for a term of 10 years, and no longer") the city may take the plant at its actual physical value as determined by arbitration. The Review of Reviews for August, 1894, says that "This contract is the most complete and satisfactory municipal franchise that has ever been granted in America. It ought to form a model for the cities of the United States." Yet under this contract, fine as it is, the city received only $10,000 a month from the railroads in 1892 as against $25,000 a month under public ownership in 1891, which would cover depreciation and interest and still leave more than the net income under the agreement. In 1897, with a large increase in mileage and traffic, the city's share amounted to about $14,000 a month. The company realized $20,000 net per month in 1894, $30,000 in 1895, $31,000 in 1897. In the latter year it paid interest on $33,000 of bonds per mile, or enuf in all probability to duplicate the road (4.8 cars to a mile), and had a profit of 4.5 per cent, on $66,000 of stock per mile, all water. The company has invested about 3 millions, including the purchase price and the cost of chang- ing from horse to electric traction. It has issued 3 millions of bonds and 6 millions of stock, and the stock was selling at 80 cents on the dollar in 1896, probably more now 9 millions of capitalization PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 187 and nearly 8 millions of market value on a plant worth less than 3 millions, and the people pay interest and dividends on the excess of value, in spite of the famous contract which is really very ad- mirable as a contract, but still vastly inferior to municipal owner- ship, which would give the people still lower rates, banish the water and put all the profits in the public treasury. The gross receipts run nearly 16 cents per car mile, and the operating expenses are under 8 cents. The average receipts per passenger, including the night rates, are ^cents, and the cost per passenger, exclusive of franchise tax is about 2 cents. With municipal ownership, free of debt, a uniform 2 cent fare could be made, and the increased traffic would certainly take care of depreciation and a moderate payment to the public good. It is said that the councils did not intend, when they took the roads, to continue public operation any longer than necessary to make the sort of contract they desired. It might be thought that the success of public operation would have changed this intention. In trying to understand the excessive* capitalization and also why the city council voted as it did after the great success of municipal operation in 1891, one may get some help from the statement of one of the counsel of the road to Dr. Charles B. Spahr, of The Outlook, that the capitalization is not excessive because two of the original four who received the franchise had sold out after doubling their money, and the owners of the franchise were entitled to com- pensation for the vast amount of credit they had to command in order to take the franchise and also their labor in agitating against municipal ownership! In 1894 Springfield, Illinois, was paying $138 per arc of 2000 candle power on the moon schedule, i. e., burning dark nights only. The city knew the price was exorbitant, but the company (which con- trolled the gas plant as well as the electric) presented a signed statement that the cost of the service was $117 per light, and re- fused to come below $120 anyway. The city wisht to build, but had reacht the limit of its borrowing power. So it made a contract with 60 citizens by which the latter were to form a company and build and operate a plant, the city paying $113 per arc, $53 of each $113 to go toward paying for the works, and all profits arising from the administration of the plant to be applied on the capital account. When the works are paid for by these means they become the prop- erty of the city. The 60 citizens put in $1000 each, built the plant, leased it to two electricians, who agreed to suppply light at $60 per arc ($43 operating cost and 7 per cent, interest on the capital, 7 per cent, being what the banks charged for the money loaned). The public buildings are lighted with incandescents (800) free of charge (a gift of at least $1800 to the city), and 25 per cent, of the gross receipts for commercial lighting are credited to the city. It is estimated that in five years from the start the plant will be paid for, and then it will belong to the city free of debt, and the people will get electric light at cost. By this plan the city has incurred no debt, has not increased taxation, but, on the contrary, has di- 188 THE CITY FOR THE PEOPLE. minisht it, and the public spirit and co-operative feeling 1 of th citizens has been brought into play. The lessees get operating ex- penses and interest from the city arcs and 75 per cent, of the com- mercial receipts, which yields them a good return, altho commer- cial rates have been reduced 40 per cent below what they were in June, '95, when the company started. In June, '98, the company had credited the city with over $60,000 profits, leaving about $51,000 debt on the whole plant for municipal and commercial lighting. In two or three years the plant will come to the city clear, street lights will be operated at a cost of about $40, probably, and the commercial lighting, even at the present low rates, will yield enuf to cover all the cost of the public lighting. Contractors have offered Des Moines to build a good plant and operate 500 arcs all night and every night for $62.50 each, the city to levy a 2 mill tax for two years, which, with the saving to the yearly electric light fund, will pay the cost of the plant ($105,000 for 600 arcs and 1500 incandescents) in about 2 years. Indiana has a law authorizing the construction of water works by companies, with a contract provision that the city by annual payments to the company should become the owner of the works at a time stated. In Great Britain, under the Tramways Act of 1870, municipalities may build their own tramways if they so desire, or if the lines are built by a private company, then at the end of 21 years and of each subsequent franchise period of 7 years, the town or city has two years in which it may buy the railways at the actual value of the physical plant. About one-fourth of the tramways (with }<> per cent, of the mileage) in England and Scotland are owned bv the municipalities, and additions to the list are being made as fast as the franchise periods come to an end. Most of the cities owning railwaj-s have leased them on terms which will cover in 21 years the principal and interest of the debt incurred for building or purchase, and in many cases the city re- ceives a considerable annual payment beyond what is needful for interest and sinking fund. In Manchester the lines were built in 1877, and the rentals to 1895 amounted to $1,275,000, while the total cost of the lines wa* but $725,000. In 1900 the city will receive a valuable railway prop- erty in good condition, and free of debt, and can use its revenues to accomplish a considerable reduction in taxation, or render a service to the mass of the people by putting fares down to the level of cost. Before 1896 it was not easy to obtain permission for municipal operation of street railways. A few permissions had been given but the House of Commons had a standing order forbidding the introduction of any bill for such a purpose. In 1896, however, the order was rescinded and the door thrown open. An act allowing Sheffield to operate street railways was unanimously passed," and Sheffield took the railways. Increased wages 10 per cent., provided unl- PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 189 other pUies soon obtained similar powers. There are now 43 tram- Avays owned by municipalities and 117 by private companies, the mileage being 620 public and 934 private. Of the public ownea tramways, 16 with 318 miles of track are operated as well as owned by municipalities. One of these lines with 48 miles of track is in London. (See Appendix II.) The English electrical journals report that the London County Council has determined to acquire the street railways as fast as the franchises expire. A strong syndicate has offered to take all the tramways, rebuild them for electric traction with the underground conduit, put the ownership of the tracks and conduit in the county council at once tcithout consideration, and pay a yearly rental to the city equal to the entire net earnings of the existing roads for the preceding year, on condition: (1) That a 28-y ear's lease shall be given the syndicate. (2) That the equipment and power plant shall belong to the syndicate, and shall be bought by the Council at the end of the lease at a valuation to be determined by arbitration. (3) That no regulations shall be imposed upon the syndicate as to service or employees. The Council objected to the latter condition and were doubtful of the desirability of the conduit system, so that the offer was not accepted, but it shows very clearly the willingness of capital to build even the most expensive systems, pay large rents for franchises and at the end of the term turn over the plant to the city at a cost that is practically nothing, since the syndicate was to receive no pay for the tracks, and only the actual value for equipment and power plant which would be much more than covered by the franchise rentals. In Australia it is said the common method is for the city to build the tramways with money borrowed from the State, and then lease the roads for 20 or 30 years under conditions requiring the lessees to take care of the debt and return the roads to the city free of incumbrance at the expiration of the term. In Milan, a city of 44,000 population, the horse roads with a 2 cent fare paid the city 10 per cent, of their gross receipts. The new Edison Electric Company has bought the horse roads and obtained a new franchise for 20 years from Jan. 1, 1897. The company is to hand over all the tramicays to the city, which is to convert them for electric traction, and then the Edison Co. is to equip and work them on the overhead system. Of the total receipts the company is to get 7.72 cents per car mile for operation. From the remainder a fixed sum per mile is to go to the city to cover depreciation and maintenance of the permanent way. Of the balance 60 per cent, goes to the city and 40 per cent, to the company. The city regulates the service and the number of cars to be run, and has fixt the fares at 2 cents all the way out from the centre, with one cent fares night and morning for working people. forms for the men, reduced fares 10 per cent., and made a surplus in 1896-7 of S40.000 above interest and sinking fund, or 6 per cent, on the capital of $650.000. 190 THE CITY FOR THE PEOPLE. In Budapest, the capita' of Hungary, a city of about 500,000 inhabitants, the street railways were built by private capital, and at the expiration of existing charters, the roads and their equip- ment are to be the property of the city without payment to the private owners. The fares are fixt by law and average 2% cents per passenger. Heavy taxes are paid to the city, a good reserve fund and a fund for the care of employees are provided, and after all the electric roads pay 8 per cent, dividends on the investment. The underground conduit is used in the centre of the city, and the overhead system in the outer districts. All books and accounts of the companies are open to public inspection. In a mimber of our States laws have been passed enabling cities and towns to own and operate water, gas and electric plants, street railways and telephones being sometimes added, and municipal power to grant street franchises is given (see Chapter III) so that cities in such States can make contracts similar to those adopted in Europe. Before leaving this important subject of method I should like to suggest: 1. The advantage of putting public works under the con- trol of non-partisan boards or boards which must be com- posed of members from each of the leading parties, as in the Wheeling Gas Board. 2. The importance of a provision such as that which pro- tects the Richmond works, by prohibiting the sale or lease of public plants except upon a referendum vote of the people to that effect. This will nail down the coffin lid of corporate monopoly. When works become public under such a pro- vision they are protected from being purposely run down and injured in order to give apparent reason for a retransfer to private operation, as in the case of the Philadelphia gas works. The referendum clause discourages the corporation schemers, and they are far more likely to let the plant alone. 3. More important than all the rest, perhaps, is this final recommendation: that every city council be supplied with a small number of good books on economic and political sub- jects. The list should include the writings of Dr. Shaw, Henry D. Lloyd, Professors Ely, Bemis, Commons, Jenks, andGov. Pingree. If the discerning reader feels inclined to put this book also in the list, we shall not object. The publica- tions of the National Municipal League and the League of PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 191 American Municipalities, and the reports of famous investi- gations into municipal and corporate affairs such as the Bay State Gas, West End Street Railway, Broadway Franchise, Cleveland Gas, New York Gas, Philadelphia Gas, Tweed Ring, Chicago Street Railway, St. Louis Street Railway, New York Special Street Railway Committee's Report, Massachu- setts ditto, Glasgow ditto, etc., should certainly be included. It would greatly add to the value of such a little library if a competent expert would go thru the books and mark the most important passages with black and blue and red, make brief marginal notes and cross references, and paste on the inside of the front cover a brief index bringing together the best points of the book under the heads most likely to be of use to members of council. 23 Some of the principal politico-economic periodicals might be added with advantage, and arrangements should certainly be made to obtain the yearly reports of leading public works such as the Wheeling, Detroit and South Norwalk lighting plants, the Glasgow Street Railways, etc., and the complete reports of a few progressive cities and towns such as Boston, Brook- line, Springfield, Glasgow, Birmingham, etc. The city council of Ithaca, N. Y., set the example in Feb- ruary, 1898, by appropriating $25 for books on municipal questions for the use of councils. The Hon. Josiah Quincy, the progressive Mayor of Boston, has an admirable little de- partment of municipal statistics and general information, with an excellent man at the head of it, but it is not located so as to make it likelv that councilmen will become saturated with facts thru its instrumentality. The plan suggested for councils would be valuable also in high schools, Christian associations, labor unions, and young men's societies of every sort. It is simply the plan followed in the best colleges, of making little special libraries by grouping together the principal books relating to a given subject, plus " I am authorized by the Trustees to state that any City Coun c s * n <" n S $25 or $50 or $100 to the "College of Social Science" will be supplied witl a number of books proportionate to the remittance markt and indext as suggested, a reasonable charge for marking being added to the > ord nary price of the books. With a $50 or $100 set there will be sent a ^litt e Jndex bo consolidating the chief references in all the books under the leading muni- cipal topics Dr. C. F. Taylor, 1520 Chestnut Street. Philadelphia, is tr urer of the College. 192 THE CITY FOR THE PEOPLE. my own method of marking and marginal notes, cross refer- ences and analytic indexing, that enables one to collate with ease all the material he has upon any specific point. EXPERIENCE. Under this head many volumes might be written describing the successes of public ownership, the mistakes that have been made here and there and the precautions that should be taken to prevent similar errors in the future. We have already spoken of the Brooklyn Bridge Railway with its efficient ser- vice, wonderful freedom from accident, and admirable treat- ment of employes. We have stated the facts about some of the public telephones, the Springfield electric plant, the Lo- gansport and Jamestown works, etc., and hinted at the great successes in Richmond, Wheeling, South Norwalk, Allegheny, Detroit, and other cities. In this section I will confine myself to three additional illustrations selected from widely different fields; the water works of New York State, the municipal un- dertakings of Glasgow, and the experience of England with the telegraph. The facts about the water works of New York State I take from a thesis prepared in 1896 by Almon E. Smith, one of Professor Commons' students in Syracuse University. Table I divides the cities and towns of New York into ten groups according to popula- tion from below 1,000 to 2,000,000. The number of cities in each group having public water works and the number having private works appears in columns 2 and 3. 1 It will be seen from columns 4 to 14, that the miles of mains, number of taps and hydrants, and consumption of water per family are all greater in places having public works than in places served by private companies. This indicates greater efficiency and more general use and satisfaction under public ownership. In the vast majority of cases there is not only a contrast, but a very emphatic 1 Data on all points were not obtained from all the cities but the facts were secured for a sufficient number of municipalities to make valuable com- parisons except in the eighth and tenth groups. In the first group 3 and 10, 4 and 12, 3 and 11, 4 and 11, 3 and 6, 3 and 6, 3 and 6 represent the number of public and private plants reporting. In the second group the numbers are 23 and 37, 30 and 46, 24 and 39, 30 and 44, 9 and 13, 21 and 26, 20 and 26, 20 and 25. In the third group the numbers are 9 and 19, 11 and 23, 9 and 19, 11 and 21, 5 and 7, 8 and 8, 9 and 9, 8 and 10. In the fourth group, 9 and 19, 12 and 18, 10 and 18, 11 and 18, 6 and 12, 9 and 10, 9 and 7, 10 and 10. In the fifth group, 12 and 10, 13 and 10, 13 and 10, 13 and 10, 5 and 3, 13 and 3, 13 and 3, 12 and 3, etc. That is, in group 5 the number of cities having public works reporting percentage of taps per family is 12, and number of private works so reporting is 10. The number of plants in the group re- porting miles of mains is 13 and private works 10, etc. PI-P.LIC (JWJVERSHIP OF PUBLIC UTILITIES. 193 A V Kit Ami CIIAKliK. Per Kamily 5W a* "- I ? w CO o J : i - ? 3 5 fi>^ i o 10 ^ s> -;' o r 10 o T)- ai 1 2 2 : -< M M CO C-J -H ~5 CO CS e t~ o Per Mile of Mai us. a'ls ft** o * "* f- S H 00 I a CO s f 1 S i i ' CO CO 3 Average Daily consumption iu gallons per family 5- iS a> CO B CO CO CO S ' C-t ^ 10 CO & ^< s g i i S5 to i Average Number (in hundreds) of Hydrants. ^-r-* ^ * o CO e* e .37 per cent, where the supply is private. This leaves a margin of 21.25 per cent, on the side of municipal ownership. In the cities \vhrsc population is between 10,000 and 25,000 the proportion of consumers to the entire number of families is 48.16 per cent, public and 39.74 per cent, private. In those whose population is over 25,OOU and less than 50,000 the percentage of consumers is 50.42 per cent, public and 30.18 per cent, private. * * * It is certain that if we adopt the proportion of taps to families as our standard of efficiency of service, and moderation of rates, we shall be obliged to concede the preference to be with the public works. "We consider next, columns (6) and (7). This seems of vast importance as it marks a tendency to supply all suburban localities on the one hand, and on the other, simply to furnish the most densely populated sections. * * * "There is a longer line of distributing main for an equal popula- tion where it is owned by the city. The plants have more suburban lines when under public control. This encourages the people to abandon the overcrowded centers in our cities and to build homes PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 105 in the outlying districts. * * * A very significant fact may be seen from the possibilties for fire protection. We may notice that in 'every class the number of hydrants is greater when the works are under public control. The difference being from 2.5 per cent, in group 3, to 72.2 per cent, in group 7." * * * The consumption is also everywhere found larger per family and per capita when it is supplied by the city, the greatest difference appearing in group 4, where the average in public works is 547.7 gallons, in private 309.96 gallons per family, or a difference of 237.74 gallons per family." "From columns 15 to 20 it appears that the public service is de- cidedly cheaper than the private service in every group, the charge per family is considerably lower in every case, and also the charge per tap, which in two groups is less than half for public plants what it is for private works, and averaging all the groups but the first the private charge is about 100 per cent, above the public charge." The savings to the cities and towns thru public ownership are thus summed up by the essayist, after elaborate calculations in which interest, taxes, hydrant rentals, etc., are fully allowed for. Saving by Municipal Ownership of Water Supply. GROUPS ON CITIES. Annual Balances Saved by Public Ownership (considering both family service and public consumption, fire protection, Ac.) Per Family Per Tap. Total Amount Cities of 1st group 85.47 814.17 84,387 Cities of 2d group 4.42 14.31 58,976 Cities of 3d group 8.10 14.10 75.835 Cities of 4th group 5.05 14.26 110,098 Cities of 5th group 6.23 15.68 286,479 In the 6th group only one city of each sort is reported, the savings shown by public ownership being $1.68 per family, $5.57 per tap, and $r>4,2'!7 total. For the private works in the remaining classes the essayist had no price data. For a second illustration of the results of experience in public ownership we will take a statement concerning Glasgow which 1 drew up recently from letters and reports direct from Glasgow together with the writings of Dr. Albert Shaw and Sir James Bell, and which has been adopted for issue by a referendum vote of the National League for Promoting the Public Ownership of Mon- opolies. It is called: THE WISDOM OF GLASGOW. Glasgow is the second city of Great Britain. Its population is 196 THE CITY KOI; TIIK I'KOI'LK. 750,000, br 900,000 with suburban towns. In respect to the munici- palization of industry it is probably the leading city of the world. Jt has extended the field of municipal business far beyond the limits usually prescribed. It owns and manages public slaughter houses, a consolidated market system, public swimming baths, laun- dries, sanitary wash houses, model tenements, municipal lodging houses, a family home, a municipal art gallery, public water works gas and electric works to supply light, heat and power; the street railway system, a city farm where the sewage is used and fodder raised for municipal horseflesh in the street cleaning department and on the street railways, the harbor and everything pertaining to it harbor tramways, ferries and steamers, graving docks, weigh- ing scales, cranes, various yards and offices, and the supply of water for ships all belong to the city and contribute to its reve- nues. And it would have had a municipal telephone system, if the permission it has more than once requested had been granted. 2 The results of these extensive experiments in public ownership have been the development of an active local patriotism, the purifi- cation of politics, improved conditions of labor, better homes, better health, cheaper and better service, a remarkable increase of busi- ness, diffusion of wealth, power and benefit, and a new impulse to- ward noble ideas the tendency being to substitute the ideal of public service for the ideal of personal aggrandizement. In the model lodging houses every lodger has a separate apart- ment, the use of a large sitting room, a locker for provisions and the use of a long range for cooking his own food. The charge is 7 to 9 cents a day, and at the women's lodging 6 cents. These mu- nicipal lodging houses have led to a great improvement in the pri- vate lodging houses. Private parties have opened improved estab- lishments on the plan of the public houses, with the same prices, and the same strict rules as to order and cleanliness. Many of the smallest and worst of the private houses have disappeared entirely. In the public baths the charge for a swim, as long as you like, is 4 cents, 12 tickets for 36 cents; boys and girls under 13, 2 cents and 12 tickets for 18 cents. Special reduced rates for schools, classes and associations of young people. Clubs can get the exclu- sive use of the pond for one night weekly, between 9 and 10, for $1.60 (which admits 40 members) and a charge of 2 cents for each person bej-ond 40. Women's clubs, 96 cents for 24 members and 2 cents for each additional person. Private hot baths, 6 to 12 cents. 3 2 In a letter relating to the Glasgow situation and the Natl. Pub. Own. Circular, Col. Thos. Wentworth Higginson calls attention to the fact that while Glasgow has done much In the development of municipal business sli-- has neglected to establish public libraries. Our cities, tho far behind in the public ownership of material utilities, have shown more wisdom in respect to provision for the intellectual man. 8 Condensed from p. 177 of "Glasgow" by Sir Jamos Bell, Lord Provost >f Glasgow 1892-5, and 1895-6. Boston has just opened (Oct.. 18!>8i her first permanent all-the-yoar-round public bath. The baths are all private. The only charge is for soap and towels 1 cent, and Saturdays from 10 A. M. to 5 P. M. boys and girls are supplied with soap and towels free. Boston is ahead as to charges but there is no swimming pool, which is one of the most important persuasions to cleanliness, changing Its pursuit from a labor to a pastime. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 197 Hardly less useful, as Dr. Shaw says, in the cause of cleanliness, are the public laundries. For 4 cents an hour a woman can have "the use of a stall containing an improved steam boiling- arrange- ment and fixed tubs, with hot and cold water faucets. The washing being quickly done, the clothes are deposited for two or three min- utes in one of a row of centrifugal machine driers, after which they are hung on one of a series of sliding frames, which retreat into a hot air apartment. If she wishes, the housewife may then use a large roller-mangle, operated, like all the rest of the machinery, by steam power, and she may, at the end of the hour, go home with her basket of clothes washed, dried and ironed. To appreciate the convenience of all this it must be remembered that the woman probably lives with her family in one small room of an upper tene- ment flat. In each of these establishment the city also separately conducts a general laundry business, drawing its patronage from all classes of society." (Dr. Albert Shaw, Municipal Government in Great Britain, pp. 109, 110.) Most important of all her undertakings, perhaps, are Glasgow's public tramways. The general manager, Mr. John Young, has re- cently revised and brought down to date a condensed statement of the facts drawn up by me two years ago for the use of the Citi- zens' Committee of Boston. He also sends the report for '97-8. These documents, with the writings of Dr. Albert Shaw and Sir James Bell, and the Report of the Massachusetts Rapid Transit Commision, supply the data on which the following summary is based In 1894 the city of Glasgow became the owner and manager of its street car lines. The consequences were: 1. The hours of labor were reduced from 12 and 14 to 10 per day, and from 84 and 98 to 60 per week; wages were raised 2 shillings per week, and two uniforms a year were supplied to each man free a voluntary improvement of the conditions of labor showing a policy exactly contrary to that of the private companies. 2. Fares were reduced at once about 33 per cent. the average fare is below 2 cents, and over 35 per cent, of the fares are 1 cent each a voluntary movement in the direction of cheap transporta- tion, disclosing once more a policy precisely contrary to that of the private companies. For short distances the fare is 1 cent, and night and morning working people can go long routes for a cent. For the year ending May 31, 1898, the average of all fares was 1.78 cents; a few years ago, before the city took the lines, the private tramway company collected an average of 3.84 cents per passenger.* At the private charges of 1891 the 106,345,000 passengers of '97-98 would have paid the company $4,083,648 instead of $1,900,000 they paid the city last year. The same number of rides in Boston would cost about $5,300,000. We pay the same 5-cent rate that we did ten years ago, while in Glasgow fares fell 50 per cent, in 5 years (1891 to 1896), and are now 55 per cent, below the level of 1891. * M:is*. Rapid Transit Report, April, 1892, p. 13l. 198 THE CITY FOR THE PEOPLE. 3. The service was improved. An editorial in the Progressive Re- view, London, November, 1896, says: "The tramways of Glasgow has been made the finest undertaking of the kind in the country, judged both by their capacity to serve the public and as a purely commercial enterprise." Glasgow is one of the first cities in Britain to take steps toward replacing horse power by mechanical traction. She sent a commit- tee all over the civilized world to study the best methods, and an electric system is now being introduced while even London con- tents itself with horses. 4. The traffic was greatly enlarged .doubled in about two years, by low fares, good service and the increase of interest naturally felt by the people in a business of their own. 5. Larger traffic and the economics of public ownership have re- duced the operating cost per passenger to 1.32 cents, and the total cost, including interest, taxes and depreciation, is 1.55 cents per passenger. When the private company was collecting 3.84 cents per passenger it declared that only .24 of a cent was profit. Now the city collects 1.78 cents and still there is about a quarter of a cent clear profit, and this is with horse power, which makes the cost per car mile at least 20 per cent, more than with electric traction. 6 6. The profits of the business go to the public treasury, not into the pockets of a few stockholders. For the year ending May 31, 1898, in spite of the extremely low fares, there was a clear profit of $189,070 above operating cost and all fixed charges, interest, taxes, depreciation and payments to the sinking fund. In round numbers the profits above operating expenses and ordinary fixed charges were $240,000 and the profits above operating expenses alone were $500,000. We are told that conditions are different in America, and infer- ences must not be drawn from Glasgow. Let us see. It is true, of course, that it would not do to say that as Glasgow has a 1% cent fare, therefore our roads can be operated on a 1% cent rate. Street railway wages are higher here than in any city of Europe, so far as I know, and our cities are not so compact as Glasgow. But is it not fair to conclude that public ownership would have an effect in our cities similar in kind to the effect it has had in Glasgow? If the change to public ownership in Glasgow brought lower fares and better service than existed under private ownership in Glasgow, is it not fair to believe that the change to public ownership here would give us lower fares and better service than we now have? Public railways in Glasgow have proved far better for employees and the people than private railways. We infer that similar results will follow in America. Details may be different, but the essential 6 The average fare in Great Britain in 1897 was 2.66 cents and the average operating cost 1.97 cents per passenger, facts which are partly due to the public ownership of 40 per cent, of the mileage, partly to density of traffic produced by compact population and low fares. (Glasgow has 12 passengers per car mile, abt the same as Broadway, New York, while Boston hiis abt 7) and partly to lower wages which in Glasgow make n diil'crcnce oi about half a cent per oassengei. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 199 conditions are the same, as shown first, by experience with indus- tries already public here, and second, by a study of the cause of improvement under public ownership in Glasgow. 1. In public business here, as elsewhere, the workers are freer, get more pay and work fewer hours than the employees of the great private monopolies. The public service is good, the charges are very low and the profit, if any, belongs to the people. 2. The change from private to public ownership of a great mo- nopoly means a change of purpose from dividends for a few to service for all. This change of purpose is the source of the improvement under public ownership in respect to cheaper transportation, a better paid and more contented citizenship, a fairer diffusion of wealth and power, etc. This change of purpose will accompany the change to public ownership here as well as in Europe or Aus- tralia, and, therefore, public ownership of the railways here will cause a movement in the same general direction as in Glasgow: Fares will be lower than they are now. Wages higher. Hours shorter. Service better. Traffic larger. And all the profits and benefits of the railway system will go to the public instead of a few individuals. Private enterprise seeks to get as much and give as little as possible, while public enterprise aims to give as much and take as little as possible. A business owned by a few is apt to be run in the interest of the few, while a business owned by all, is apt to be run in the interest of all or, to put it in one comparative phrase, a business otoned by the people is MORE apt to be run in the interest of the people than a business oic tied by a Moryan Syndicate. THE ENGLISH TELEGRAPH. As a final example under this head let us take the experience of England with her telegraph lines." Up to 1870 the telegraph busi- ness in Great Britain was in the hands of private companies, and for many years complaints had been made of excessive charges, poor service and inadequate facilities. The companies pretended to compete, but in reality had an understanding among themselves which prevented the reduction of rates to a just figure. The press of Great Britain complained of the extortions, delays, errors, wastes and inadequacies of the telegraph service, and the Chambers of Commerce of thirty prominent cities memorialized the House of Commons, stating that the petitioners "had reason to complain of the high rates charged by existing companies for the transmission of messages, of frequent and vexatious delays in their delivery, of their inaccurate rendering and of the fact that many important towns, and even whole districts, are unsupplied with the means of telegraphic communication." An able commissioner appointed by the Postmaster General made a scientific study of the abuses of the existing service, and the con- See fuller statement in my article on The Telegraph Monopoly, Arena, Vol. 17. p. 9. 200 THE CITY FOR THE PEOPLE. dition of the service in Belgium, Switzerland and other countries where the telegraph was public property, and reported a plan for public ownership. The telegraph companies used every effort to prevent and impede the reform. The objections they raised were: 1. It was not the government's business to telegraph. 2. There would be a loss if it did. 3. The telegraph would be better conducted under private enter- prise. 4. The government rates would be higher. 5. And the use of the telegraph would decrease. 6. The government service would be non-progressive no stimulus to invention, etc. 7. The secrecy of messages would be violated. 8. The telegraph would be used as a party machine. 9. The government could not be sued. 10. To establish a public telegraph would be an arbitrary and un- just interference with private interests. In spite of these terrible prophecies .England bought the tele- graphs and made them a part of the postal system in 1870, and none of the predictions came true, not even the last, for the com- panies received more than the fair value for their property. The immediate results of public ownership were: 1. A reduction in rates of 1/3 to %. * 2. A vast increase of business the work done by the telegraph doubling in the first year after the transfer. 3. A great extension of lines into the less populous districts, so as to give the whole people the benefit of telegraphic communi- cation. 4. Large additional facilities by opening more offices, locating offices more conveniently and making every post-office and post-box a place where a telegram may be deposited to be taken to the nearest telegraph office for transmission. 5. A considerable economy by uniting the telegraph service with the mail service under a single control, avoiding useless duplica- tions, using the same offices, the same collecting and delivery agencies, and often the same operatives for both services. 6. A marked improvement in the service, throwing complaint out of the steady occupation she had had so long the aim of the post-office being service, not dividends. 7. A decided gain to employes in pay, hours, tenure of office, etc. 8. Unprecedented advantages to the press for cheap and rapid trans- mission of news, at the same time freeing it from the pres- sure of a power that claimed the right to dictate the views and opinions it should express. 9. The development of business and strengthening of social ties, ties of kinship and friendship, through the. growth of business and social correspondence. 10. The removal of a great antagonism and the cessation of the vexa- tious and costly conflict it had caused between the companies and the people. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 201 Looking at the subsequent history of the English postal tele- graph we find: 1. A further reduction of nearly one-half in the average cost of a message. 2. More than a tenfold increase of business in twenty-five years while population increased but one-fourthover 1000 per cent, telegraph growth to 25 per cent, population increase. 3. A sixfold extension of lines and fiftyfold increase of facilities. 4. A steady policy of expanding and improving the service, adopt- ing new inventions, putting underground hundreds of miles of wire that formerly ran oger houses and streets, etc. 5. A systematic effort to elevate labor, resulting in a progressive amelioration of the condition of employes in respect to wages, hours, tenure, promotion, privileges and perquisites. 6. A good profit to the government (excluding interest on the water-logged capital cost) in spite of low rates, large exten- sions into thinly populated areas, advancing wages, heavy losses through carrying press despatches below cost, compe- tition of telephone companies in the best-paying part of the traffic, etc. 7. Satisfaction with the telegraph service even on the part of con- servatives who objected to the- change before it was made. Comparing the English situation with our own we find: IN ENGLAND. IX THE UNITED STATES. Low rates. High rates (twice as high). Good service. Poor service. Extension of telegraph facilities to Facilities only for the classes, the masses. Rapid growth, 40 times as rapid as Slow growth, less than one-sixth of the growth of population, and 4 the growth of the English system, times as fast as the growth of the letter mail. Progressive improvement of labor. Progressive maltreatment of labor. Harmonious uninterrupted operation. Big strikes. Large popular use of the telegraph. The telegraph an adjunct of specu- lation. A management aiming solely at serv- A management aiming solely at serv- ing the people. ing themselves. Moderate salaries for leading offl- Exorbitant salaries for leading offi- cials, cials. No big fortunes from telegraph The telegraph a millionaire machine, manipulation. Universal satisfaction with the tele- Universal discontent with the tel - graph situation. graph situation. Public monopoly. Private monopoly. The fact that Great Britain began with the private telegraph and gave it twenty-five years and more to show what it could do, that she found it unendurable, and changed at large cost to the public system, which proved a great success, and after a trial of more than twenty-five years is acknowledged by all to be incom- parably superior to the old plan and the further fact that the said country is very like our own in government, language, customs, sentiment, etc., give the history of the English telegraph a peculiar value to us. The parallel between the English telegraph before 1870 and our own system to-day is very striking we have in an aggravated form all the evils the English reformers complained of and several addi- 202 THE CITY FOR THE PEOPLE. tional ones of our own boundless dilution of stock, enormous profits, telegraphic millionaires, monopoly of market reports, sys- tematic ill treatment of employes, etc. England had abundant reason for revolt; America has still greater reason. What could constitute a stronger proof of the benefits of the public ownership of monopolies than this experience of a quarter of a century of private ownership, full of abuses and complaints, followed by a quarter of a century of public ownership of the same monopoly in the same country, resulting in remedying the abuses, stopping the complaints and convincing the stoutest opponents of public ownership that they had been mistaken, and that it was the best plan after all, having abundantly proved its case by actual trial. SATISFACTION. Several investigations into the degree of satisfaction with public electric plants show over 90 per cent, of strongly favor- able replies from the officials/ and so far as the mass of the people is concerned the cities having public plants are prac- tically unanimous in favor of public ownership. Professor Bemis finds that in every city having municipal gas works public ownership has given general satisfaction. "The people believe they have gained thru public ownership and operation and wish to continue it." 2 Glasgow is enthusiastic over her municipal street railways and other public enterprises. Our public water works and fire departments are much more satisfactory to the people as a rule than the private variety. Norway and Sweden, Luxem- burg, Belgium, and Switzerland are abundantly satisfied of the wisdom of their public telephone systems, while our people are anything but contented with the telephone monopoly which controls most of our cities and charges 2 or 3 prices for its services. As to the telegraph, every country, kingdom, or republic that began with public ownership has had un- 1 Arena, Dec., 1895, p. 101. Municipal Monopolies 221-2 (1898). The main objection made by superintendents answering unfavorably is that the charge to private consumers is put too low. The places from which objection comes are nearly all very small towns. 2 Municipal Monopolies, 619 (1898); Municipal Ownership of Gas (1891), p. 14. The I'rotess(,r questioned all the citizens he could meet in the cities visited and on the trains going to and from them and found that "general satisfaction prevails over the results of city ownership. No one expressed any desire to return to private ownership, or uuy faith in the objections that city ownership is dangerous paternalism, or interference with private rights, or that it leads to corruption of politics thru an enlargement of the number of offices." PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 203 broken telegraphic peace and satisfaction, while the countries that have made trial of the private system have found it so imperfect that they have abandoned it for public ownership or made a strong effort to do so, backed by a public sentiment that nothing but the money and influence of a gigantic cor- poration could have resisted. Even the most strenuous oppo- nents of public railways in Germany now admit that they were wrong and that experience has shown the public system to be superior to the private. No one here would think of turning over the post office to a private corporation.* Every- where the satisfaction of the people with the socialization of monopoly is being shown in the most substantial manner pos- sible by the GBOWTH OF PUBLIC OWNERSHIP.! In 1800 there were 16 water works in the United States, all built and owned by private parties except one in Win- chester, Virginia; 14 of the 15 private plants have since become public, and from 1800 to 1896 the public works went up from 1 in 16 to 1690 in 3179, or from 6.3$ to 53.2$ of the total. 1 Of the 50 largest cities in the United States, 21 origi- nally built and now own their water works, 20 have changed from private to public ownership, and only 9 are now depen- dent on private companies for their supply. 2 According to * Imagine the watered stock, the doubled and trebled, squared, cubed and integrated rates, the discriminations between individuals and places, the postal lobbies, the indifferent service except for high-pay-commercial mail, etc., etc. 1 By 1810 there" were 5 public plants in a total of 26. From 1810 to 1825 (the second war period of the country and the years immediately preceding and following it), no public plants were added, and the ratio stood 5 to 32. From 1825 to 1855 the percentage of public works rose from 15.6 to 45.3; but the agitation preceding the civil war and the war itself set back the develop- ment of public works to 42 per cent, in 1865. In 1863, the central year of the struggle, not a single water-works plant was built. From 1865 to 18 1 5 the percentage of public works rose rapidly. From 1875 to 1890 franchise fetting became a business and private ownership gained several points, ince 1890 the development of public works has been more rapid than ever before, the number rising from 806 in 1890 to 1690 in 1896. while private plants increased from 1072 to 1489 only. (Mr. Baker in Municipal Monopolies Chap. I.) The effect of war in stopping municipal development, and the recent enormous increase of public works, are facts of exceeding interest. - The 9 cities are San Francisco, New Orleans, Omaha, Denver, Indian- apolis, New Haven, Patersou, Scranton, and Memphis. All the other chief cities have public works. In New Orleans the works were first built by a private company (1833), then sold to the city (1868), then sold back to a company (1878), and now the taxpayers have voted 6,272 to 394 for public waterworks. Indianapolis has had an engineer examine the situation with a view to municipal purchase of the works. Many other cities and towns both in the United States and Canada are proposing to establish municipal works either by purchase or construction. f See further Appendix II F. 2Q4 THE CITY FOR THE PEOPLE. die "Water Manual of 1897 there have been 205 changes from private to public ownership in water supply, and only 2<* changes from public to private. About of all the private- works built have become public, while only 1/75 of the public works have changed. In Massachusetts 29 plants out of 67 have changed from private to public ownership. In other words 43$ of the works built by private companies have be- come public, and no plants have changed the other way. In New York there have been 26 changes from private to public- and 1 the other way. In Pennsylvania 14 changes from pri- vate to public and 1 the other way. In Canada 19 out of 54 private works built have been changed to public, and the changes^ the other have been none. In Massachusetts 75$ of the water works are now public, in Illinois 78$, Michigan 81$, Iowa 82$, New York 50$, Pennsylvania 24$, California 16$, Minnesota 87$, Nebraska 88$, Canada 75$. From 100 per cent, private to 75, 78, and 81 per cent, public in less than a century is a very decided change. 3 And the movement is ac- celerating; from 1890 to 1896 the growth of public owner- ship has been far more rapid than at any previous period, the public works more than doubling in the six years (110$ increase to be more exact), while the private works increased only a little over one-third (39$). The net gain in the number of public works was 884, while the net gain of private works was only 417. In England and Wales 45 out of 64 great towns and bor- oughs own their water works, with all the large towns in Scot- land, and Dublin, Belfast and Cork in Ireland. In 1898 the London County Council has voted to get Parliamentary per- mission to own and operate its water works. (See Ap. II F.) 3 In 1800 Massachusetts had water plants in Boston, Plymouth, Salem, Worcester, and Peabody, all private. The first system in the state was built In Boston by a private company in 1652, and the first public works in the state were those built by the city of Boston in 1848. Worcester bought out the private works in 1852. The first plants in Illinois were those of Chicago. 1840, and Ottawa 1860, both private, and the first public works were built by Chicago in 1854. Michigan began with the private plant in Detroit, 1827, bought by the city in 1836. The common council of New York ordered a well sunk and reservoir built in 1774. The work was stopped by the Revolution. In 1799 the Manhattan Co. built works. In 1830 the city built water works for fire department, and in 1842 the Croton works were put iu operation by the city. The first complete works in the state were at Geneva, 1787 (private), bought by city 1896. Albany had private works in 179H, changed to public in 1813, back to private in 1831 and finally to public owner- ship in 1851. The first works in Pennsylvania were -at Bethlehem, 1761. private, bought by city in 1871. The Philadelphia works were begun by the fity in 1800, the first water being supplied January 2, 1801. PUI5LK' OW.XKKSIUP OF PUBLIC UTILITIES. *2Q5 Private gas works were in successful operation at 'Baltimore in 1VJ1. at Boston in 1822, at New York in 1827, and at Philadelphia in 1835. In 1841 the Philadelphia Councils attempted to take pos- session of the works but it was found that they had merely suc- ceeded in creating- a trust which under the rulings of the courts made the managing 1 board trustees for the bondholders and the absolute masters of the situation till all the bonds had matured and were paid. So that the first real public gas works were estab- lished in Richmond in 1S52. Since then 11 other municipalities in this country have secured public works by purchase or construc- tion. In Great Britain Birmingham, Glasgow, Manchester, Lei- cester, Nottingham, etc., own their gas works one-third of all the gas works are public and more than one-third of the gas supplied is from the public works. From 18S2 to 1897 the number of public- works grew from 148 to 208, or from 29.6 to 32.45 per cent, of the total, and the proportion of gas sold by municipalities rose from 31.7 to 36.9 per cent. Outside of London one-Jialf the gas used and one-half the consumers are supplied by public works. In 1898 the number of public works rose to 212 or 32.7 per cent, of the total of 648 works, and 48.8 per cent, of all consumers in the United Kingdom were served by public plants. Taking two nations of Europe, Bronson Iveeler found, as long ago as 1889, that 500 muni- cipalities owned their gas works; 168 public works in the United Kingdom and 338 in Germany out of a total of 667 plants (in Saxony every plant public), over 500 cities altogether. The growth of public electric lighting is shown by the following approximate figures: Number of Public Electric Plants. 1882 1 1884 3 1886 11 1888 32 1890 61 1892 192 1895 220 1898 nearly 400 From no per cent, in 1880 to 15 per cent, in 1898; from 1 in 1882 to about 200 in 1892 and nearly 400 in 1898 is good progress. 4 In Great Britain municipal electric plants in 1895 sold 31.9 per cent, and in 1897 they sold 45.2 per cent of the total consumption ot electric energy. (See Appendix F.) 4 There have been 2 sales of public lighting plants because of dissatis- faction, and in both cases the works were a failure under private, as w as under public management : 3 sales distinctly stated not to have been caused by dissatisfaction but to be due to very different causes, two ot them to corporate influence in councils, and one to the inability of t to raise the money for needed reconstruction and extensions. There is one case where a fire destroyed a very satisfactory public plant, but the cit was too heavily involved to rebuild. In five other cases of alleged failure the facts have not been ascertained. That is the extent of the offsets from the forward movement of electric public ownership. (See below. 1 , 200 THE CITY FOK THE I'EOri.K. In Great Britain as we have seen one-fourth of the street railway systems with 40 per cent, of the mileage belong to municipalities, and 16 systems with 318 miles of tracks are operated as well as> owned by the cities. Huddersfield was allowed to operate its roads from the start (1882) becatise no private company could be got to undertake the work. Between 1893 and 1895 Plymouth, Blackpool, Leeds, and Glasgow began to operate tramways, the first two for the same reason as iii Huddersfield. All these places have made a success of public ownership notwithstanding the adverse condi- tions in the first three. In 1896 Parliament gave Sheffield the right to operate tramways, and withdrew its prohibition upon such peti- tions and immediately a score of cities began to make plans for public ownership, London and Liverpool among the number, ;ind 11 cities entered upon the public operation of their tramways from 1896 to 1898. No wonder Professor Bemis speaks of "the rapidly rising tide of municipal operation in Great Britain." Here is the list of cities owning and operating their tramways in Great Britain, with their population. (See further Appendix II F.) 1882. 1896-98. Huddersfield 100,460 Sheffield 347,280 Aberdeen 136,000 Blackburn 129,460 1893-95. Bradford . 228,900 Plymouth 98,120 Dover 33,000 Blackpool 35,000 Halifax 94,775 Leeds 402,450 Hull 225,050 Glasgow 750,000 Liverpool 644,130 Nottingham 229.775 South Hampton 100.000 London 4,500,000 Partial operation, 24 miles of track, Jan., '9!>. America has had but three examples of public ownership and operation of street railways, the Brooklyn Bridge Railway, the interlude in Toronto, and the municipal system of Port Arthur, Ontario. 6 There have been strong movements for public purchase and operation of street railways in Boston, Philadelphia, Chicago, St. Louis and other cities. In Detroit a commission was appointed with Governor Pingree at its head to secure city ownership of all the street railways. A substantial agreement with the companies was reached and the city was about to take a referendum on the matter (which would doubtless have sanctioned the purchase) when the movement was checked by the peculiar decision of the State Supreme Court already discussed. (See Method above.) This all-important fact, that the stern logic of experience is pushing the people into public ownership, is further illustrated by the history of the telephone. Belgium began with private tele- phones in 1884, but found it best to transfer them to public opera- tion in 1893. Great Britain has ciphered out the same sum in social economics; the trunk lines became postal property in 1895, and it is generally believed that the government will acquire the entire 6 Municipal Monopolies, p. 508. The town runs an electric light system in connection with the railway. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 207 business of the exchanges when the National Telephone Company's license expires. Norway also decided in 1895 to take possession of all the trunk lines. Trondhjem has bought up its exchange. Stockholm has a public exchange. Other cities like Rotterdam, Amsterdam, etc., were reported in 1896 to be constructing ex- changes, and many more were said to be discussing the subject. Glasgow has repeatedly asked permission to establish a municipal telephone plant. Austria has moved along the same path and since Jan., 1895, private telephone companies have ceased to exist in Vienna. France took possession of the telephone lines in 1889. Switzerland also began with private telephones but has made the whole system public property. Sweden has gone far on the same road; the state owns most of the interurban lines and is fast ab- sorbing the exchanges. In Italy and Spain concessions of 25 and 30 years have been granted to private companies on condition that at the end of the franchise term the telephone system shall become public property without any payment to the companies. Germany, Luxemburg, Wurtemburg, Bulgaria, Bavaria, and some of the Australian Republics began with public telephones and have re- tained them. Thus in seven countries that began with private telephones we see a transformation to public ownership, and provision for it in two others, 6 while not one of the countries that began with public telephones or have had them now for a number of years, show any disposition to transfer them to private corporations. The move- ment is all one way in the telephone world. It is substantially the same with the telegraph. With the ex- ception of the sale of the experimental line from Washington to Baltimore, no country has changed from public to private owner- ship, but every country in the world that began with private tele- graphs has changed to public ownership except, Bolivia, Canada, Cuba, Cypress, Hawaii, Honduras, and the United States, and even in Canada the government owns some of the commercial lines, so that the only countries without government ownership of com- mercial telegraphs are Bolivia, Cuba. Cypress, Hawaii, Honduras, and llu- UNITED STATES. 7 The company is not the best in the world, but Uncle Sam seems to have a tendency to afiliate with Cuba and Hawaii in more ways than one. France, Germany, Russia, Sweden, Norway, Den- 'In Austria, Belgium, France, and Switzerland the l complete, the telephone systems in those countries being now entiiely See the Telegraph Monopoly Arena, vol 15, p. ^l. and authorities there cited. 208 THE CITY FOB THE PEOiM.K. murk, Switzerland and some other nations built their own lines at the start. In Belgium and in the Netherlands some of the early lines were built by the government and some by private enterprise. The government lines proved the most satisfactory and the public system was rapidly extended both by direct construction and by the purchase of private lines. In England the telegraph was orig- inally private but became public in 1870. Even in the United States the government puts up military telegraph lines, and it is a com- mon thing for cities to own police and fire alarm systems. In the history of railways the power of the movement toward public ownership of monopolies is equally apparent. Prussia at first adopted the private system almost wholly, the State content- ing itself with building lines in out-of-the way districts where pri- vate enterprise would not condescend to go in Southern Germany, on the other hand, the nations considered the making of the rail- ways an exclusive function of the State for years the two systems worked side by side, with the result, not of showing South Ger- many the need of a change to corporation railways, but of showing North Germany the need of a change to the public system, so that the Prussian Government bought up the private railways, and now owns nearly all (about nine-tenths) of the mileage in the State; Saxony learned the same lesson and bought all the railways be- longing to private companies; Belgium tried both systems, with the result that in 1870 the Government decided to buy out most of the private lines; on a referendum after thoro discussion Switzerland has voted to buy the railroads; in Austria-Huno-ary, Holland, Norway, and other countries the movement is from pri- vate railways to a State system, gradually enlarging its scope and absorbing the private lines; in France the reversion of the private railways is in the State, and they will become public property when their terms, expire; in Australia the same double experiment with public and private roads has been made with the same results continuance of public ownership wherever adopted, and change from private to public, until now nearly the whole system belongs to the Government, some colonies having no private roads at all; such illustrations could be continued almost indefinitely, but enough has been said to reveal the law of the movement. THE MOVEMENT OF HISTORY. The recent remarkable growth of public ownership dis- cussed in the preceding section is but a part of one of the greatest, most fundamental and far reaching movements of history. From the dawn of civilization to the present f civil service reform. . . . Burden develops responsibility. There is a reserve of patriotism and capacity of self-government in our citizenship, to which we are not afraid to appeal. Nothing could do more to bring out the latent virtue of the indifferent citizen than freighting the ship of state with still dearer interests. I am not afraid to startle our money-making voters by producing a situation which will alarm them into a state of perpetual political vigilance. Arouse them to the seriousness of the prevailing conditions, and the spasmodic energy which now cleans the augean stables of municipal corrup- tion once in ten or fifteen years, would be harnessed by unavoidable necessity into constant connection with the public services whose functions would be to supply them with street transportation, light and water, and would exert an influence that could not be satisfied excepting with the best service possible. Every citizen would be interested in securing the greatest efficiency in the public service and in a very short time demands would be made by a quickened and enlightened popular sentiment for the enactment of a strict civil service law. So long as the corporate interests operate PUKLIC OWNERSHIP OF PUBLIC UTILITIES. 221 these public utilities for private gain just so long will we have uncompromising opposition to civil service and good city govern- ment. Eemove first the incentive to this opposition, which to my mind can be accomplished by removing our public franchises from the public mart, and a new era will dawn in which the best citizen- ship will be the dominant force -in municipal government." Parts of the opinion by Prof. Ely referring to corruption and the advantages of public water supply have already been quoted. A few further paragraphs may be of interest here: "I unhesitatingly advocate public ownership and management for gas works. * * * When we take up electric lights, we shall find no reason to abandon the principle of local self-government and municipal self-help. * * * Street railroads are one of the most important natural monopolies, and a tendency for public owner- ship and management is beginning to become manifest. There is not a shadow of doubt that passengers could be carried in Balti- more for three cents more than is charged in Berlin where the companies must keep the streets paved from curb to curb, must provide each passenger with a seat, must, in laying tracks, have some respect for the rights of owners of vehicles, and do a thousand and one things which an American corporation does not dream of, to say nothing about the fact that in 1911 their entire property reverts to the city without compensation." The following paragraphs adopted for issue by the N. P. O. League, are from Dr. Albert Shaw, our most eminent writer on municipal government, and one of the world's profoundest students of, and highest authorities upon, the municipal ques- tions we are considering: i "All the monopolies of service, such as gas, water, trams and the like, should belong to the community. Simplify the administration, trust the people, give the municipality plenty to do, so as to bring the best men to the work, keep all the monopolies of service in the hands of the municipality, and use the authority and influence of the municipality in order to secure for the poorest advantages in the shape of cheap trams, healthy and clean lodgings, baths, wash- houses, hospitals, reading rooms, etc. "The pressure that would be brought to bear on the government to produce corruption under municipal ownership of monopolies like gas, electric light, transit, etc., would be incomparably less than the pressure that is now brought to bear by the corporations. "The wear and tear upon the morals of a weak municipal govern- ment are greater by far when it comes to the task of granting fran- chisesthat is to say, of making bargains with private corpora- tionsthan when it is attempted to carry out a business undertak- 222 THE CITY FOK THE PEOPLE. ing directly ou the public account. Thus jobbery and rascality, wastefulness of public money, and bad results in the end, are more likely to be the outcome when the contract system is used in street cleaning, paving and various other public works, than when the municipality employs its own men to clean its own streets, lay its own pavements, and do its own public work on direct municipal account. "Our municipal officials are elected or appointed for short terms. The city's legal advisers draw small salaries, and have no expecta- tion of remaining in the public employ for more than a few brief > years at most. They hope and expect after leaving the public em- Iploy to find lucrative private practice. Such practice can hardly be obtained except through the favor of the rich corporations. What motive, therefore, could impel the legal advisers of an Ameri- can municipal government to fight desperately for the public in- terest as against the great array of legal talent representing those corporations that seek to gain, to enlarge or to renew franchises, on terms prescribed by themselves? "In studying German contracts one is always impressed with a sense of the first-class legal, financial and technical ability that the public is able to command, while American contracts always im- press one with the unlimited astuteness and ability of the gentle- men representing the private corporations. "The ablest lawyers in all our cities are retained by these private corporations. They are given fat fees, directorships, stocks and bonds, and all sorts of pecuniary emoluments, besides political and social consideration. In return, they are expected to use their sharp wits, their technical knowledge of corporation law, and their training in the practical art of politics, to get the better of the community at large, and thus to retain or obtain for the benefit of their respective corporations very valuable public privi- leges, which ought not to be granted at all except upon the pay- ment of their full value, with their exercise always subject to full public control. When municipal franchises and privileges are to be granted, it is not the municipal authorities that make the terms, btit the private companies. The laws and ordinances that have to do with the granting of these privileges are carefully prepared by the attorneys of the corporations. They are never drafted by the legal representatives of the state or the city. "The enormous sums of money contributed for purposes of politi- cal control by the corporations enjoying municipal supply privi- leges, have given us the boss system in its present form. And the boss system, which, in fact, knows no distinction of political party, is fast destroying state and municipal government as the stedfast and loyal servitor, defender and promoter of the public interest. "We find public and municipal authority and prestige weak and low; while the authority and prestige of private corporations en- gaged in such services of municipal supply as public illumination and street transit are enormously active and strong. No such rela- tive disparity as that between the prestige and strength of munici- PUBLIC OWNERSHIP OF PUBLIC I LILIIIKS. 223 pal government and the prestige and strength of private corporate influence, exists anywhere else in the world. Direct ownership and operation would at least tend to build up the municipal govern- ment on the side of its dignity and prestige. "The views that one encounters in the United States, which pre- sume to settle all such practical questions in advance by the recital of dogmas touching the nature of government, would be deemed the merest silliness by practical men in Europe. Those men see no possible reason why a modern government, which is, after all, nothing but the organization of the people for their own benefit, should not render the public any service which upon careful inquiry it may be agreed that the government can render with actual and permanent advantage to itself and the citizens." Two other authorities of the highest character, Professors Bemis and Commons, also take strong ground in favor of the public ownership of monopolies, but their writings have been so often referred to in this chapter that a special citation here seems unnecessary. Hon. Josiah Quincy, the progressive Mayor of Boston, ha? established municipal baths, a municipal paper, and a muni- cipal printing plant. In the Arena for March, 1897, p. 532, et seq., he expresses himself in favor of public ownership and operation of electric lighting plants, and in respect to transit suggests the advisability of city ownership of the tracks at least. 1 After speaking of the difficulties in the way by reason of the franchises granted private companies and the large amounts that have been invested in their securities, he says: "But aside from the question of dealing fairly with vested in- terests, there seems to me to be no reason why an American city should not take up any service of this character which may be recommended by business and financial considerations. There is no principle that stands in the way, for instance, of the municipal ownership and operation of an electric light plant. It is purely a commercial question in each particular case. The electric lighting business in particular, with the present improved dynamos and en- gines, is one which a properly organized city ought to be able to conduct for itself with some economy and advantage. "The argument is sometimes made that new fields of work of this character cannot safely be entered upon until the civil service 1 This is the recommendation of the Massachusetts Special Committee appointed to investigate the street railway question. (Report Feb.. 1898.] The report is a valuable one but is written with a strong bias in favor of the private companies as against complete municipal ownership and opera- tion, and Is marred by statements and .omissions likely to mislead 1 unwary reader, as has "been shown by Prof. Bemis' able comments on the report.' (Municipal Monopolies, pp. 518-9, 531, 538, 557, 569, 639, 648-9.) 224 THE CITY FOR THE PEOPLE. system is more firmly established in our cities, and their general standard of government is higher; but it does not seem to me that such reasoning rests upon a sound basis. Any extension of mu- nicipal functions must tend to arouse a public interest which can- not but assist in improving administration and hastening the adop- tion of a strict civil service system. The indifference of the more intelligent and well-to-do citizens, and their willingness to vote their party tickets blindly, while exercising little or no influence over party nominations, is the curse of many of our cities. Business men of large and unselfish views can control a city government if they will take the pains to do so. If some extension of municipal functions in the directions above indicated would arouse some who are now apathetic to a sense of their vital interest in sound admin- istration, it would do a good work. We should not, therefore, wait for a perfect municipal organization before we undertake any de- sirable addition to the services now rendered directly by the city, but should be willing to trust something to the educating and awakening effect of imposing further responsibilities upon a mu- nicipal government, and thus bringing it into a new and close re- lation with the citizens. "Only the business considerations in favor of municipal owner- ship have been hitherto touched upon, but the broad political con- siderations are even stronger. The power now necessarily wielded by the great corporations which control such branches of public service as lighting and transportation often gives them too great an influence over municipal governments. It must be admitted that there have been many cases in our American cities where corpora- tions have practically dictated the action of city councils. Their influence over nominations and elections, where they choose to exert it, may often be a determining one. Even a corporation hold- ing a municipal franchise that has nothing further to ask of the city, and only desires to be allowed to prosecute its business with- out interference, is often drawn into municipal politics by the skilfully planned attacks of politicians who have purposes of their own in view. "It may be urged that the influence of the additional city em- ployes made necessary by the taking over of branches of service now performed by corporations will be equally great and equally selfish; but experience proves pretty conclusively that this is not the case. It has frequently been demonstrated that any influence which may be exerted by municipal employes in favor of a party in- power is likely to be fully offset by the opposition of those who have been disappointed in obtaining public office or employment. And even those engaged upon city work are sure to have grievances, real or imaginary, against the administration in power, and are never solidly united in its favor. Moreover, with the extension and firmer establishment of the civil service system, public employes are coming to feel fairly secure in their positions, regardless of political changes." PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 225 Hon. James D. Phelan, the far-sighted Mayor of San Fran- r-isco, writes as follows in the Arena for June, 1897, pp. 991-3: "The street car service, the telephone, telegraph, garbage disposal, water and artificial light are owned by private corporations. As might have been expected, the result has been the creation of pow- erful monopolies and the imposition of high rates for all kinds of service, and to maintain them we have, as a corollary, the suspected corruption of public bodies. Legislators and supervisors, and even courts are exposed to the machinations of these corporations, which, with the Southern Pacific Company, the overshadowing railroad monopoly of the state, nave been classified by the people, in impo- tent wrath, as 'the associated villainies.' They have debauched poli- tics and have established a government more powerful in normal times than the state government itself. "These conditions emphasize the desirability of the public own- ership of utilities, because, while better results could no doubt be attained, especially under a reform of the civil service, public bodies would not be exposed to the insidious inroads of corruption, which carries with it the ultimate destruction of representative govern- ment. Where the commodities supplied are a public and universal necessity, either natural or made so by the demands of civilized life, the state, in granting franchises, practically transfers with them the power of taxation. * * * "The growth and development of the business of a city depend very largely on the transportation facilities which it possesses within its limits and connecting with its suburbs. One system of street railway, for instance, costing less than $9,000,000 to build and equip, and which collects over $3,250,000 annually in fares, has issued stock for $18,750,000, and has outstanding bonds for $11,000,- 000, upon all of which it pays interest. Its earning power with five-cent fares should not be the measure of its value. Its value for the purpose of estimating reasonable dividends should be its actual cost. And, on this theory, such a system should supply the citizens of San Francisco with cheaper service, especially during certain hours of the day, when the working classes pay the toll permitted to be collected over the public streets. "A gas company whose plant can be duplicated for less than $5,000,000 is paying 6 per cent, dividends on $10,000,000, and a water company, whose capitalization of stock and bonds amounts to $23,- 000,000, and whose property, held for the legitimate purpose of sup- plying the city with water and not for the exclusion of competitors or for speculation, is very considerably less, is paying regular rates of interest to its stockholders and bondholders on the face value of its securities. I closely estimate that $7,000,000 is annually paid by San Francisco for her water, light and street car transportation, a sum $3,000,000 in excess of the amount raised last year by the municipality from direct taxation for the support of the local gov- ernment. 15 22b' THE CITY FOR THE PEOPLE. "The state should not permit private fortunes to be made out of the necessities of the people, nor should city councils permit the use of public streets to become the means of oppression. Unjust and unnecessary taxation is oppression. The questions here in- volved are equally momentous with those which stirred to action the American revolutionists, and John Hampden before them. * * "Modern American cities, careful to preserve representative in- stitutions in their purity, should be prepared ao own and operate public utilities. That is the ultimate solution of this disturbing question. Failing of this, the unequal and demoralizing- struggle between the weak and the venal on the one side, and the strong and the unscrupulous on the other, must go on. In practice the power of regulation is the opportunity of the corrupt and the cor- rupter, and is no adequate remedy." The Hon. Hazen S. Pingree, former Mayor of Detroit, and now Governor of Michigan, says: "I was elected Mayor by the most influential people of the city. Directly after I was elected I discovered that the railroads were paying less than their lawful taxes. I said so, and the railroad support was lost to me. I found the gas companies charging exor- bitant rates, and I said so, thus losing their support. I found bank- ers speculating with the city funds. I denounced them, and they said I was unsafe. I attacked the surface railroads, and they called me an anarchist. I was four times elected Mayor. I lost a lot of old friends, but I was elected by a larger majority each time. It is s(;ii'ething to be proud of when the influential classes turn their backs on me and the common people stand by me.. I have come to lean on the common people. They are the real founda- tion of good government. In May, 1897, Mayor Pingree said: "I am loth to surrender my belief in municipal control and accept the doctrine of municipal ownership; but I am free to confess that I am being gradually forced into the position of an advocate of ownership. The methods of franchise holders compel it, as also the ignorance and venality of many of the people's representatives. But mu<;h of this venality, I may say, is the outgrowth of corporate methods. "I have advanced so far as to advocate ownership of street rail- way tracks, and through the manipulation of lighting companies I was compelled to force through the municipal ownership of a public lighting plant. "After some seven years of struggle against extortionate rates and the exploitation of watered stock, I must admit that my hold on municipal control is feeble. The methods of franchise holders are forcing the expedient of municipal ownership, and yet they expend large sums of money to defend themselves against muni- cipal ownership. PUBLIC OWNERSHIP OF PUBLIC UTILITIES. 227 "Unless there is a great change in the present general outlook, indeed, as I am constrained by conditions to say, unless the leopard change his spots, we will be obliged to adopt municipal ownership as a defense against these franchise holders. In Xovember, 1897, lie says: "Good municipal government is an impossibility while valuable franchises are to be had and can be obtained by corrupt use of money in bribing public servants I believe the time has come for municipal ownership of street railway lines, water, gas, electric lighting, telephone and other necessary public conve- niences, which by their nature are monopolies. In 1898 the Governor says without qualification: "THE REMEDY is ix PUBLIC OWNERSHIP. This will not only solve municipal questions, but will bring railroads, express companies, street lines, telegraph and telephone companies and other agencies into the proper subjection. The five mayors above mentioned, with Mayor Harrison of Chicago, Mayor Rose of Milwaukee, Mayor Truelsen of Duluth, Mayor Black of Columbus, Mayor Johnson of Denver, the Mayors of Atlanta, Cincinnati, and St. Paul, Governor Rogers of Washington, ex-Governor St. John of Kansas, ex-Governor Larrabee of Iowa, and other leading mayors and governors have, come by actual experience to know that adequate regulation of corporate monopolies is a prac- tical impossibility, and that public ownership is the only solu- tion of the monopoly problem. The fact that such men advo- cate public ownership of lighting plants, transit companies and other monopolies, carries the matter beyond the realms of theory and puts it on a basis of business sense and practical necessity. They are men of affairs, several of them men of large wealth, all of them men of great experience in govern- ment, and all of them high in public esteem. The words of such men spoken for the public good have untold weight. From Jefferson to Pingree the record of authority for public ownership is overwhelmingly strong, especially when we re- member that all who have lifted their voices against it are either laissez-faire theorists clinging to the worn out philoso- phy of a bygone age, or aristocrats at heart distrusting the people and desiring the monopoly of privilege by a feu, or 228 THE CITY FOR THE PEOPLE. business men whose financial interests are linked with private monopoly. (See Objections below.) The sentiment of the general public is growing very fast in the direction of public ownership. 1 This is shown by the strong movements for municipal railways in Philadelphia, St. Louis, Chicago, Detroit, and other cities. In Chicago Mayor- elect Carter H. Harrison and each opposing candidate stood on a platform favoring city ownership of street railways. At the Detroit convention of the League of American Mu- nicipalities in August, 1898, when 1,500 members of the city councils and other branches of city governments and many prominent mayors were present from cities in all parts of the country, the sentiment was overwhelmingly in favor of muni- cipal ownership and operation of public utilities. * In December, 1898, the convention of the National Muni- /cipal League, received most favorably a municipal program / and model charter presented by a committee consisting of Dr. I Albert Shaw, Professor Goodnow and Horace E. Deming of New York, and Hon. Clinton Eogers Woodruff, Charles Rich- ardson and Professor L. S. Howe of Philadelphia, and strongly favorable to public ownership. Some of the provisions of the model charter are as follows: Cities "may acquire or construct and may also operate on their 1 In Oct., 1895, a committee of the Boston Common Council reported unanimously In favor of city ownership of an electric light plant. The committee visited ten cities east and west. In Springfield, 111., they found the situation already stated in this chapter. Their study of Chicago con- vinced them that when the city puts its plants into full operation the cost per arc will be reduced to $60, even with 8-hour labor at good pay. They discovered that Bloomington, 111., saved enough in five years by public ownership to pay for its plant, etc., etc. They tested the data cited in the Arena articles and finding them correct endorsed my conclusions. They Bummed up as follows: "The actual cost of construction will not exceed $168 per arc for an overhead system of 3,000 arcs in Boston, and your committee are positive that they are not in error in making this statement. The additional cost of real estate will of course depend upon the location, but your committee believe that such locations can be secured as to bring total cost of plant, Including land and buildings, not over $250 per arc. "Assuming that an estimate of $250 per arc is correct, the cost to the l& SL a 3,000-arc plant (600 lights in excess ot present needs) would be $750,000. The Interest on the investment, a fair charge for depreciation, and well-paid labor, would in the opinion of your committee, make the total cos- n ?oe ^Sf * 75 per arc > and tnere would be a net saving to the city of at least $125,000 per year. "The City of Boston should not pay more than $75 per arc per year for its electric lighting, pending the establishment of a municipal electric-light In reply to a criticism on the report the committee strongly reaffirmed their conclusions and stated that since 1882 Boston had paid 'the electric light companies $2.125,000 for services which could have been produced for $00,000 under public ownership. The report was adopted by the Common Council by a unanimous vot<>, but it was killed by neglect when it got to the Board of Aldermen. PUBLIC OWNEBSHIP OF PUBLIC UTILITIES. 229 own account * * * railroads or other means of transit or trans portation and methods for the production or transmission of heat, light, electricity, or other power in any of their forms, by pipes, wires, or other means." A city may issue bonds without debt limit restrictions, if their bonds are for a revenue producing business. A two-thirds vote of councils and a majority vote of the citizens on a referendum shall be sufficient for the issue of bonds and the assumption of any undertaking from which the city will derive a revenue, but the alienation of city property shall not take place without a four-fifths vote of the councils and such referendum vote as the people may provide for in their charter. Municipal franchises are to be limited to 21 years. Public audit of the accounts of companies receiving franchises is to be established. Cities of more than 25,000 inhabitants to have the fight to make their own charters and provide for municipal ownership and operation of public utilities as they see fit. The recent Social and Political Conference at Buffalo, by practically unanimous vote (only 1 dissent), adopted a resolu- tion for the "Public ownership of public utilities." We have already spoken of the resolution adopted by the American Federation of Labor in 1896. (See XX.) Another symptom of the rapid growth of public sentiment in this direction is the great development of legislation favor- able to public ownership. In 1890 no state in the Union had any general law authorizing cities and towns to own and oper- ate lighting plants or street railways, now one state has put such a lighting provision into its constitution and 31 other states have general laws of this kind (Tennessee and Massa- chusetts being the leaders in 1891), and 5 states have author- ized municipal ownership and operation of street railways. See Chap. Ill for these and other similar indications, and for the new charter of San Francisco, which announces a definite policy of bringing all public utilities under public ownership and operation. One of the strongest indications of the trend of public opin- ion is to be found in the concerted movement of street rail- way interests in various cities from one end of the country to the other to obtain 50 year franchises. The companies see the rising tide of sentiment in favor of municipal ownership, 230 THE CITY FOE THE PEOPLE. and in the last few years they have stopped at nothing, how- ever dishonest, that promised a continuation of the enormous powers and profits of their existing franchises. 2 Perhaps the most definite and striking of all the evidences of the movement of public sentiment on this question thru the power of discussion is contained in the following statement adopted for issue by referendum vote of the iSL P. O. League. THE RAILROADS OF SWITZERLAND BY PROFESSOR FRANK PARSONS. Rapid Growth and Final Triumph of the Sentiment in Favor of Public Ownership. On the 6th of December, 1891, the question of national purchase of the Swiss Central Railroad was submitted to a referendum vote with the following result: In favor of such purchase 130,500 Opposed 290,000 Majority against purchase 159,500 On the 20th of February, 1898, the question of national owner- ship of railroads was again submitted, a referendum being taken on the government purchase of the five main railroad lines of Switzerland (the Jura Simplon, Swiss Northeast, Swiss Central, United Swiss and Gotthard.) The question had been long and bitterly discussed. The arguments pro and con had been thor- oughly considered. This second vote was as follows: In favor of national purchase 384,382 Opposed 176,511 Majority for public ownership 207,871 Consul General James F. Du Bois, in the report 1 from which these facts are taken, makes some interesting comments. "It will be seen," he says, "that there has been, since 1891, a great change in the minds of the people of Switzerland concerning the Govern- ment ownership of railroads and this change has been brought about by a thoro discussion of the subject in the press and on the platform. Never before in the history of the Republic has such a bitter contest been waged, and never before has the Govern- ment received such a large majority." ti of Dr ' Albert Shaw ln the N <^ York "Independ- polies, pp 6M-5 a Part