^mMm^mmmm "GBEED AND LABOR" OB "MONEY AND MUSCLE." The one therm- of poets and songsters since the world began has been the subject of labor. And why nut? It is labor that produces the wealth of every community — and greed takes from this producing force of brawn and muscle the richer benefits. It is admitted by all thoughtful people that in the natural course of events there must be financiers, but they are only made possible by the help of labor, assisted by its truest friend, nature. Our pho- tograph is of a painting by Mr. G. P. Watts, an artist of world-wide reputation, and is remarkable from the fact that it was painted in his eighty-fourth year. THE "SQUARE DEAL" OR FLASHES FROM THE BUSINESS SEARCHLIGHT HUMANITY'S PLEA FOR JUSTICE AND PROTECTION AGAINST OPPRESSION BY THE GREAT FINANCIAL AND COMMERCIAL POWERS WHOSE MARVELOUS GROWTH IS THE WONDER OF THE TWENTIETH CENTURY GATHERING A NATION'S WEALTH From Field and Farm, Shop and Factory. .Mine and Range, Bi st City Life, Etc. THE TRUTH ABOUT THE TRUSTS; M'.nky INTERE8T8, STANDARD OlL MONOPOLY, BEEF COMBINE. RAILWAY Mergers, Et< . .JUGGLING WITH THE PEOPLE'S MONEY At the Stock Km manges, Boards of Trade. Banks. Insurance Companies, Ftc. FIGHTING THE GAME OF "GRAFT" Is National, state and Cm Government; the Business World, Tb \ des Unions, Eti . MUSCLE AGAINST MONEY The Stsuoole Between Labob \nd Capital EMBELLISHED AND ILLUMINED BY HUNDREDS OF ILLUSTRATIONS BY II E R B ERT B. M U LFOB I) WAUL BTREBI cnl(llt>l'uMil M \ Mi | I \ \ \< I \ I, I I Ml i II! OK I II I 0HI0AUO K \ KM Mi POST \ND TB UMBULL Will r r E u rBOH "i nil ITOBLD'fl PBOGBMS," "OOH m.« POSSESSIONS,' Copyright 190G hy W. R. Vnnnant. A NEW AMERICAN DOCTRINE. I < \ '*! shall go into the presidency unhampered by any \ J pledge, promise, or understanding o_f any Kind, sort or \ description, sax)e my promise made to the American ! Si people, that so far as in my pobuer lies I shall see \ \ to it that cVery man has a square deal, no less j | and no more." I 1 i c* c* os os c# \ j "\\ e recognize the organization of capital and the organization of labor as natural outcomes of our industrial system. Each kind of organ- ization is to bv favored so long as it acts in a spirit of justice and of re- 5 gard for the rights of the other. Each is to be granted the full protec- j tion of the law, and each in turn is to be held to a strict obedience to the I law, for no man is above it and no man below it. The humblest individual I is to have his rights safeguarded as scrupulously as those of the strong- i est organization, for each is to receive justice, no more and no less. The i problems with which we have to deal in our modern industrial and social f I life are manifold: but the spirit in which it is necessary to approach | their solution is simply the spirit of honesty, of courage and of common | ( | sense." THEODORE ROOSEVELT. Q K> K> K> K> K> \ ~ TLo Hll JBelievers in tbe (Soloen IRule "Do 'Clnto ©tbers as Jtfou Woulfc Ubat XTbc\? Sboulo Wo to U?ou" Tlbis iJBoofe ©eoicateo I I BY THK OHIO SUPREME COURT, In its decision of March 2, 1892, < which ousted the Standard Oil Trust from the State: 4 . ... - . . I "Experience shows that it is not wise to trust human cupidity where i it has the opportunity to aggrandize itself at the expense of others." B BY JOHN D. ROCKEFELLER, JR * "The American Beauty rose can be produced in its splendor and a fragrance only by sacrificing the early buds which grow up around it." I BY PRESIDENT THOMAS, of Lehigh Valley Railroad, Member of Coal i Trust: "As long as the people are willing to pay our price we would be poor i merchants not to accept it." j j BY HENRY H. ROGERS, of the Standard Oil Company and mouthpiece for John D. Rockefeller: ! "Slavery in certain sections of the United States was legal until I ['resident Lincoln's Proclamation of Emancipation. Rebates were just Notable Statements Concerning Trusts as legal until the passage of the Interstate Commerce Act." BY THEODORE ROOSEVELT, Author of the American doctrine of the BY WILLIAM H. VANDERBILT: J ''square deal for every •man": ! ■"Neither this people nor any other people will permanently tolerate a the use of the vast power conferred by vast wealth — and especially by Bfl wealth in its corporate form — without lodging somewhere in the govcrn- Hunt the still higher power of seeing that this power is used for and not f against the interests of the people as a whole." I j "I never came in contact with any class of men as smart as they are ! ( meaning the Standard Oil people) in their business, and I think that a f great deal of their advantage is to be attributed to that. They never j could have got in the position they are in now without a great deal of | ability, and one man would hardly have been able to do it. It is a com J bination of men. I don't believe that by any legislative enactment, or i anything else, through any of the states or all the states, you can keep L ass such men down. They will be on top all the time." j PREFACE In presenting this volume to the reading public, we are frank to admit a con- siderable degree of pride in its form and contents, a pride which we consider par- donable by virtue of the merit of the matter. The American demand for the "square deal" for every man has become insistent as it has never been before, and where in former years a single voice of discontent might be heard here and there, those voices now have become a chorus almost universal in the demand for fair play in the financial, industrial and political world. The work in hand is intended to be a general discussion of the relations between public and private affairs in our country. So rapid has been the move- ment of change in these departments of human activity, that references con- tinually meet the eye only to be obscure because the facts leading up to them are not familiar to the average reader. Says one of the authors in outlining the scope of the volume, "Our purpose from the beginning was to write and compile such material as would be of most practical service to every reader seeking light on the great events of today. Roughly speaking, the contents of the volume may be described as including everything bearing on the public interests in industrial, financial and political betterment- in other words; the expounding of the 'square deal' policy by ■ ipounding the evils and errors that have stimulated the demand for the 'square deal.'" While the foregoing quotation broadly defines the plan the authors had in view, it does not do justice to the comprehensiveness with which they have executed their task. The work was planned to be exhaustive within Its own field. and well has the plan been carried to completion. The authors firsl have heated the popular demand for fair play that has been voiced so sturdily by Presidenl Roosevelt, indicating some of the abuses thai stimulated the demand, and some of the movements thai have beer made to correct the abuses. \e\l they Like up for a complete discussion the tremendous financial interests thai have assembled in a money group of corporate magnates. The showing here i^ an Impressive one, indicating thai a single board of directors represents interests controlling money t<> the amount of $11,000,000,000, or !) 10 PREFACE. more than one-tenth of the entire wealth of the United Slates. "Who owns the United States?*' is a query which the authors put to the nadir, and then answer it in a way that i» genuinely edifying. With this fact as a nucleus the authors have treated in fascinating chapters all the ramifications of tin- money power, tracing it through banks, life insurance companies, trust companies, railways, industrial trusts, hoards of trade, stock exchanges, ami every such organization as enters into the complex system of high finance, if there he one who doubts that such solid and sober facts can be of interest to the casual reader, let him but turn at random to any page in the book and discover for himself. For ourselves, we believe that the tremendous facts here related, the stupendous sums here involved, the play of greed against greed in the struggle for sold, the rise and fall of fortunes and of men in the warfare of business, are as theatrical, as melodramatic, as fascinating if you will, as the nio-t exciting play ever staged. Here are revealed the inside truths of the financial, industrial and business world. Here are told the secrets of Wall Street and of the trusts. There is no acrimony in it, no effort to argue for or against the contending interests, but merely the plain record of the things that have happened and are happening today, at least as plain a record as there can be for facts so spectacular. But the financial world is not the only phase of this work, although to a degree it i- the one around which all others revolve. In the end the huge finan- cial interests must have a foundation on production and industry, and so in order to preserve the balance and make the facts complete, the authors have given careful attention to tin methods of trade and industry in the United States and throughout the civilized world. For example, the Standard Oil Company is not alone a financial institution of almost inconceivable influence and magnitude, but it is also the greatest of institutions in the actual production of petroleum and its by-products. The ! Trust is not merely a monstrous corporation for the handling of financial interests, hut it is also the greatest of producers and manufacturers of steel and the things that are made from it. The Railway Mergers are not merely cor- te schemes for controlling stocks and bonds, but they are also calculated for the opt ration of the greatest of railway systems. Therefore, to make the book complete, it treats not only of Standard Oil, the Steel Trust, and the Railway Mergers as factor- of surpassing importance in finance, but it treats with full- in- as well, the actual methods in the petroleum, steel and railway industries. Thesi are hut examples of :i policy which is carried throughout the volume. Another detail which is given attention with like completeness and clearness, PREFACE. 11 is the struggle for the political purification of cities, state and nation. There never was a time when such general interest was displayed toward this end, and no more hopeful sign for the welfare of our country exists than this fact The course of controversies between labor and capital is likewise traced, showing how these two elements in national prosperity have come into conflict and have organized to battle against each other. It would be profitless to expand our own summary of this noteworthy work, when the volume is in the reader's hand. We can hut call attention to the fact that it is embellished by a large number of carefully chosen photographic illus- trations, including both scenes and portraits. In addition to these a number of carefully chosen diagrams are included, which will assist in making clear some of the more technical portions of the work. This book has been prepared to be informing and enlightening rather than argumentative. The authors had no politics to advocate or theories to uphold. They have stated facts as they found them. With the belief that it will be of service to every reader in whose hands it is placed, the work is presented by THE PUBLISHERS. PROGRESS AND SCIENCE BRING ALL NATIONS INTO CLOSE COMMUNICATION. In this advanci ean cables, wireless telegraphy, long-distance telephones, rural mail delivery, fast railroad trains, ocean greyhounds -everything thai will put us in immediate and direct communication with our fellow men all over the world. 11 frequently happens that we know more about what is going on at a great distance than we do of what may be transpiring in our own town or among our neighbors. This illustrates the rapid age in which we live — and consequently, when we come to think of it seriously, the world seems to be growing smaller. CONTENTS Page .1 Xi'/r American Doctrine 6 ■ a I inn 7 XMable Statements Concerning Trusts 8 ice 9 Introduction 23 CHAPTER I THK CRY FOR THE "SQUARE DEAL." The Awakening of the People — "Publicity" Demanded — Government Investi- gations Lead to Government Regulations .1 General Movement for Fair Dealing in Business 33 CHAPTER II THE ANTI-TRUST WAVE. rnmenta] Supervision to Keep Apace with Industrial Development De- manded — The Cry for Reform in Business Ethics — "Big Money" Musi Not Be Allowed to Control the Law— Right Li rim/ and Right Thinking the Basis of Material Prosperity -Our Government Musi Stand for Every Man, Rich or Poor Alike If II < Does No Wrong, He Shall Suffer No II rang 39 CHAPTER Ml Wllo o\\\s THE UNITED STATES? New York the Financial Center of Our Nation Enormous Influence of Twenty-three \Len in Wall Street, Composing the Greatest Money Power in America Two Hundred Millions of Dollars Deposited in One Hunk — Fourteen Trusts, Whose Captains Are of the National City Bank Direc- tory, Represent Thirty-eight Per Cent of the Capitalization of All the Industrial Trusts of the Country Great $5,000,000 Banks— Power of i Companies World's Saving Deposits 50 18 U CONTENTS. Page CHAPTER IV HOW MANY MILLIONS CHANGE HANDS— THE CREDIT SYSTEM. Amount of Actual Money Needed in Huge Business Transactions — A rnhi Per Cent of tin- Business of the World Done on Credit — I Fin- ns An Made— The Clearing House — The Cry Against Reserve Abuses — Unjust Distribution of Property and Wealth 63 CHAPTER V PERILS THREATENED l'.Y THE MONLY TIM' ST— THE DANGER OF BANK CONCENTRATION, ,ng the Parting of the Ways in the Field of Modern Hanking — A Sys- l,ni of Federation or Brotherly Alliance a Probability of the Future — /■'• irs that Aggregation of Capital May Become More Powerful than the ruin, nt Itself 77 CHAPTKIJ VJ TI1K LIFE INSURANCE TRUST, ONE OF THE GREATEST FINAN- ( I \L SCANDALS OF THF AGE. Money Power of Life Insurance Companies — How the People's Savings Are Used for Trust I'm, nations ami other Speculative Enterprises — The Scan- dal and Jealous >lrife for Control of the Enormous Holdings of One Company — Who Onus the Surplus?— Gleanings from the Committee Re- port 83 CHAPTER VII STAN DA LI) OIL. standard Oil" as a Financial System Are an Hundred 'Finns as Important as the Art mil Oil Business of that Concern — Wealth of the Rockefellers— "Standard Oil" Influence <)i> rill !l Recognized in the Management of Nearly Sixty-five per rent of the 'Fatal Railway Mileage of th, United States " 115 CHAPTER VII] THE TRUST IN OIL— THE STANDARD OIL COMPANY. How Advantageous Transportation Rates Called Discrimination Helped BuMd a Gigantic Monopoly and Crush Out Competition — The Faun, as South /„. ..,/ Company — The Ohio Supreme Court Ousted the Standard Oil Trust from thai Stale— The Oil Fields of the World 129 CONTENTS. 15 Page CHAPTER IX THE WAR ON STANDARD OIL. Kansas Legislation Appropriated Money for a state Refinery to Refine tin' Oil Produced in that state — The Pipe Line Made a Common Currier in Kansas — "The Entire Business is Dependent upon the Pipe Line System" — Signs now Point to Federal Control of the Pipe Lines — Pursuing a Policy with the Motto "Business is War." 13? CHAPTER X THE BEEF TRUST. A Far-reaehing Trust, as it Calls on Most ■/■'amities Three Times a Day — It Fixes Its Own Friers Both in the Buying of Lire Stock ami the Selling of Dressed Meal — Special Privilege Thru ugh the Frirate Car System — Members of the Beef Trust Characterized as "the Most Arbitrary, the Most Remorseless, thai Have Free Bt en Known/' i:.l CHAPTER XI THE GREATEST OF ALL MONOPOLIES— THE RAILROAD TRUST. The Railroads Are the World's Greatest Arteries of Commerce — Six Systems ('antra/ ur Dominate Mare l/ia,i lla/f Hie Railway Mileage of /lie Country — Rockefeller and Railways A I mast as Suggestive as Rockefeller ami Standard Oil — .1 Qreat "Community of Interests" Has Grown Up in the Natural Monopoly of Fail rami Business 161 CHAPTER XII DANGER l\ RAILWAY MONOPOLY. The Railway Ts the Mother of oilier Monopolies -Efforts la Regulate Hales ami Prevent Discrimination in Favor of Trust Combinations as Against mil Shippers "The Freight Fate is the Life-blood of Commercial Activity" "The Function of a Government Ts to give Every Man a Fair Chance." ,. . . . i: ; i ii \itki: xin i: AM.w \Y \m SES LAID BARE. 'I In Railroad is a Carrier, not a Producer- Discrimination against Certain Localities — Secret Cipher-code of Private Car Lines People /'refer Less Prosperity to Lost of Liberty 183 l,; CONTENTS. Page CHAPTER XIV THE WORLD'S GREATEST [NDUSTRY. Combined Length of the Railways of the United States Amounts to About Two-fifths of the Total Mileage of the World — Great Advancement in Railway Construction, Train Equipment, High Speed and Safety Devices — Railroad Buiiding I In 1 Foundation of Com inn-rial and Industrial Prog- ind Prosperity 193 CHAPTER W JUGGLING WITH DOLLARS, OR HOW SPECULATION TS CARRIED ON. Speculative Fever is Inborn — Speculation Means to Spy Out — Before the A Ivent of Instantaneous Communications by Telegraph and Telephone, Business Carried on Between Distant Communities was Speculative — Modern Speculation is Gambling on a Basis of the Element of Time and is Considered Injurious to the Murals ami Interests of the Public — Barom- • i, r of Business 197 CHAPTER XV] DIFFERENCE BETWEEN SPECULATION AND [NVESTMENT. .1 Majority of the American People are Speculators — Invest Their Money Blindly in Securities — Do not Know the Difference Between Sarin;/ and ulation — Real Estate the Real Safe Investment 31 1 ] CHAPTER XVI] MORALITY IN WALL STREET. i Financiers Are Trustees of Wealth for Others — Abuses of Sacred Trust culating with "Inside Information" — Juggling with the People's Sav- ings- -Great Power ( 'rentes a real Obligations 227 CHAPTER XVII] LYING TO MAKE MONEY— HOW WALL STREET THRIVES OX IALSK RUMORS. "Fake" Quotations — Gambling on Ram or Sunshine — Government Weather rts Eagerly Sought and Often Perverted — How Fortunes are Made and Lost on l! a mors and Canards 232 CONTENTS. 17 Page CHAPTEE XIX WHAT'S WHAT IX BUSINESS. .1 New Business Dictionary — The "Lingo"of Wall street — A Comprehensive Explanation of All Technical Words and I'll rases Used in the World of Finance and Speculation 239 CHAPTEE XX THE SENATE OF AMERICAN FINANCE. The Directory of Directors — Extreme Concentration of Corporate Organiza- tions — Ninety Men Control the Purse Strings of the Country — Fifty-seven Members of the Money Semite — Abuses in the Directory System 255 CHAPTEE XXI THE BIRTH OF THE TRUST. How Great Combinations of Capital Have Multiplied — The Harvest Time of the Promoter and the Muni/minim- — Dummy Directors and Trust Nur- series — The Nation Becoming . I roused to the Fuels -ji,", CHAPTER XXII "GOLD BRICKS"— FRAUD UNDER THE GUISE OF SPECULATION. Bunco Humes in the World of Finance— Traps Hulled with Promises of Big Dividends — Typical "Get-Rich-Quick" Schemes — Fake Banks and Fake Credit Agencies and References — The Work of the Bucket Shu/* — The Rule for Safety 27] CHAPTEE XXIII THE STEEL TRUST— WONDERS OF THE INDUSTRIAL AGE. Sufficient Natural Resources in the Earth to Promote the Happiness and Pros- perity of all Mankind The Universal Demand For and Use of Iron Ore — Minnesota, with Ranges Opened as Lute us 1892, Supplies More Ore Than Any other Section of the World— How it is Converted for Use in the . I rU and Trades < II U'TKi; XXIV THE COPPEB TRUSI Copper Tin Most Valued of All Minerals Its Use as a Base in Supplying Fie, ten Power Ancient Races of People Used Copper in the Manufacture of Weapons and Pottery The Tempering of It Considered u Lost Art — Mines Nearly Five Thousand Feet Deep Ladder-ways into the Bowels of the Furl l, a Mile Long 287 18 CONTENTS. Page CHAPTER XXV SOME OTHER BIG TRUSTS. Toba M ger — Whisky Trust — Peoria County, Illinois, Pays One-fifteenth of All the Government Expenses in Internal Revenue Tax — Some Trusts That Went Wrong— The Ship-building Hubble— Men Who Fail—Why M. n Tail— Coal Mining 897 CHAPTEE XXVI THE HARVESTER TRUST. .1// Estimated Pro/it of Forty Million a Year— Save the Wheat Fields — Wealth of Agriculture — Improvements in the Implements of the Fanner — Imiin nse Hay and < 'orn ( 'rops 319 CHAPTEE XXVII THE RISE OF A GREAT NATION. Marvelous Growth of this Country of Ours Since the Close of the Civil War — Population Increased from 33,000,000 to 83,000,000 Soul's— Wealth Increased nearly Six-fold — Thousands of Miles of Railway Built — World's < 'niton Monopoly, Etc 331 CHAPTEE XXVIII MONEY. Chinese the First to Coin Money— Source of Paper Money — The Modern Bank-Not e Regarded as a Swedish Invention 340 CHAPTEE XXIX THE GOLD SHIP— HOW A NATION PAYS ITS DEBTS TO FOREIGN COUNTRIES. Not Enough Actual Money in the World t<> Conduct its Business on a' Cash Basis for a Single Day — How the Exchange of Com modules Equalizes rvthing — Explanation of "Balance of Trade" and Foreign Exchange. . 345 CHAPTEE XXX. TOIL VERSUS LUXURY. Millions Wasted by the Rich in Shameful Extravagance, while Children of the Poor Work for Nine Cents a Day — .1 Fifteen Million hollar House — Evils of the Sweating System in Large cities 351 CONTENTS. 19 Page CHAPTER XXXI MUSCLE AGAIXST MONEY. Where the "Square Deal" Doctrine Should Rule at All Times — Growth of Organization in the Industrial World — Labor Legislation — Child Labor and the Lair — The War Between ( 'a [dial and Labor 359 CHAPTER XXXI L WEAPONS OF THE LABOR TRUST— Till: STRIKE AND BOYCOTT. The Arms and Am munition of the Conflict — Skilled versus Unskilled Labor — Some II is/uric Strikes and Their Attendant Disorders — Methods of Attack and Defense 3ti9 CHAPTER XXXII] THE CRIMES OF LABOR STRIKE VIOLENCE AND ITS CAUSE. The Rights of the Individual — Union and Non-Union Laborers — The Suffer- in;/ Public Between Two Fires — The "Picket" and the "Scab" — Epochs in the Long War — "Bleeding Colorado" — The "Grafting" Labor Boss — Bribe and Blackmail — Who Is Responsible for the Disorders that Accom- pany Strikes f 379 CHAPTER XXXIV CAPITAI/S ANSWER TO LABOR— NO "SQUARE DEAL" FOR. THE PUBLIC. How Employers' Organizations Have Multiplied — Radicals and Conservatives Here as Well as A mum/ Labor Unions — The Lockout, the Blacklist and the In jaw tarn Ansae,- lite Strike ami the Boycott 385 I EAPTEB WW SOCIALISM. .1 Theory of the Industrial Millennium and the Tendencies vn that Direction us Hastened by the Abuse of Monopoly in both Capital ami Labor Classes — The Municipal Ownership Movement an Evidence of the Growth of Socialist l'n m iples 390 CHAPTEB WW I GRAFT l\ AMERICAN < [TIES. The Plundering of the Private Citizen— Public Conscience Aroused Phila- delphia Corrupt but no Longer Contented Signs of Hope for the Future. 391 SO CONTENTS. Page CHAPTER XXXVII THE GRAFTER IN BUSINESS. Private and Public draft Work in Close Partnership — Business Men as Bood- § Juggling With Life and Safety — The Labor Boss and the Capital Boss Strikes ami Strike Settlements for Sale — Higher Standards ed W5 CHAPTER XXXVIIT WHAT ARE YOU GOING TO DO ABOUT IT? Plutocratic Impudence — Education Mast be the Foundation to the Solution of Present Day Evils — Broadening of Governmental Power — Publicity the ,,,- draft — The Same Brand of Honesty for PuVlic as fur Private Life. 411 LIST OF ILLUSTRATIONS PAGE Greed and Labor Frontispiece Progress and Science 12 Abraham Lincoln 32 Theodore Roosevelt 32 Haymakkkt Square '■'>'> Tin: Trust Company of New Jersey Building . . . . 40 Where the Directors of the United States Steel Corpor- ation Meet 43 The "Searchlight" p.v Roent- gen -X" Kays 47 Jacob II. Schlep 48 Charles S. Fairchild is .1 mi i:s K. Kllni: -18 Col. John Jacob Astob 48 William Rockefeller !'.• Henri II. Rogers 19 .1 mils Stili.m \n 49 George W. Perkins r.» First National Bank Building, ( Hi' \(, ( . 5t Some of the Trusts 60 United States Mini. Philadel- imii \ G4 Lnteriob View, Chicago Clear- [ng House G7 \ Great Banking Hous] 69 II \i ling I ngots k i Sob ipi rs" !• I THOM 18 W. LaWSON 111 Rev. Dr. Washington Gladden. 11 1 Si i rii in Gib lrd 1 1 1 page Andrew Carnegie 111 .John Davison Rockefeller L22 University, of Chicago 124 University of Chicago....:.... L25 Filling an Oil Tank L28 Oil Well Gushes L28 Baku oil Fields 132 Kansas Legislature L36 New Style of Grain Elevator.. L49 Chic lgo's Financi \i. < Ienter. . . L50 Residence of J. Ogden Armour.. L52 Cattle on the Range 154 I teESSiNG Beef L56 .Main Entrance to Chicago Union Stock Yards L58 Making Music Strings 160 A Refrigeb ltob Cab 1>>I ( ' lttle Pens L65 Gre \t Railw 11 Freight Y lrds. L6"3 Michigan Avenue, ( !hic igo ill The Stables of a Millionaire.. L75 A Banquet to Pbesident Roose- velt l ji Knw \i;i> II. II lrriman 182 J a -Mi:s J. Hill 182 \\ 1 i.i.i a m II. Moore 182 A. J. C *ss \ 1 1 L82 Grain Elevator on Chicago Riveb isi Olisi.LV V.TION (' LB 1*1. \ 1 mini 194 Ki.lv Mm Loop, Chic lgo 19S J. < Igden Armoub L98 Charles M. Schwab L98 J Mil B A. I'\ Tl IN 1!IS John W. G ites L98 'I'n i Blaob bo \i;h \\i> Ticker . . . 202 Trading 'Tits," Chicago Board of Tb lde 209 Sr\ I I Si i;i ET, < 'II If \c<» 216 r IA pic \l Bi btn ess < Iffioe of \ LaRG I < fORPOB ITION 220 Sil'.M \l;|\| ( ' \LI I M \KI\f M \- f ill Nil: \ The Gbe \t I > mi it Assi \\ LIST OF ILLUSTRATIONS. PAGE James B. Forg \\ 238 M \i;sh \i.i. Field 238 Paul Morton 238 ,lo\is M. II \i.i 238 LiARGESl KM CAIL STORE IN THE World 253 Baron Rothschild 254 Lord Nathan Rothschild 254 III NK\ 0. H Wl MI.1 IK 254 Claus Sprj ckles 254 The W lldorf Astori \ Hotel. . . 262 James B. Dili 262 Charles T. Yerkes 262 [llinois Theateb 264 Pennst ev \m \ Steel Mm 268 Where Nature Supplies the Power 27"3 [international Convention of Civil Engineers 278 J. Pierpont Morgan 280 A Lake Superiob Region [ron Mini: 283 Mount [ron Mini:. Minnesota.. 285 F. An. i -n B Hi.iNzi; 381 No. 2 l'n Adams Mini:. Minne- sota 293 A Remarkable Salt Field in Southern Californ] \ 295 The Largest Lumbeb Yard in the World 296 Vault Stored with Tobacco * ompant Bonds 297 Clerks at Work ontheTobacco Merger 298 Transporting Coal on the Ohio Rtveb 310 Trolley I»< omoi m: in ( Ioal Mine 311 Electric Coal Cutter 312 Electric Drill at Wore in a Mini: 313 line Locomotives in a Coal Mini: 314 A Vr.w Way or LOADING Cos], on I B 315 Entrance to Chk uso River.... 316 [nterioe View of a Marble Quarry 317 RAGE Where the Mowers ^ndKeapers Are Make 318 The M an u facte ke of Bindeb Twine 320 A Model Wheat Farm 322 A Garden Truck Farm 325 The Culture of Onions 328 Castle Garden and Batteri Park 330 Cotton Ready for Shipping.... 334 Gold Prospecting in the Yukon Coi nti^ . 336 Store in a Gold Mine 337 [nterior of a Gold Stamping Mill 339 Early Chinese Money 340 Chinese Knife Money :'■ 1 1 Tribute Money 341 Chinese Money (Blade Short- ened) 342 Chinese Cash 342 The "Widow's Mite" 343 Exchequer Tally 343 A Great Steamer 34 1 The World's Largest Camera.. 351 Photographing prom a Tower.. 352 Sorting Sheep Skins 356 Sham Traction Engine Plow.. 357 Carroll D. Wright : 358 John Mitchell 358 Frank P. Sargent 358 Samuel Gompers 358 Interioh View of a Modern Ma- chine Shop 361 "Breaker Boys" 36*3 Beef Dressing Room 368 Wash Day in Tenement House District 270 Tailob Shoe 31 1 Making Locomotive Springs.... 372 Window Glass Makers at the Melting Furnaces 374 A Cable Engine 375 Glass Bottle Blowebs 377 Typesetting Machines \ni> Dp- l.l: \toi;s o7o The Poob Quarter, New Yore City 384 Excavating a Tunnel 388 INTRODUCTION INDEPENDENCE OK INTERDEPENDENCE Mi: \sikkd In the age of the records of mankind on earth, the length of a single generation, or even a single century, is but a short span. But there are single lives that are privileged to see greater events and greater progress than art- recorded in a dozen centuries in the dark ages of the past. There is a tendency among all men, as there has been for many a day, to look back on the "good old times" and wish for a share in life as it used to be. No doubt the student of the Thirtieth Century will look back upon the romance that is dead, just as we are prone to look back on the picturesque events of colonial days, and the develop- ment of the civilization of Greece and Koine with a feeling that we lost much by not living when such significant things were happening. lint if we look at thf situation judicially, we are forced to the conclusion that never in all history wen- greater movements under way than those of the imme- diate present. It seems probable that the Twentieth Century is to go down in history as one in which the most vital of human relations were determined and readjusted, the mosl important controversies of the classes and the masses settled, the rule of the special privilege brought to an end. and the recognition of the ethical righteousness of the "square deal" for every man, impregnably fixed in national policies and in the individual conscience. The man who lives today cannot say with the dreamer, "The age of romance i- dead." Instead, he should realize that he is in the midst of the most dramatic period in history the period in which human rights are to be defined and pre- served as they have never been before. The man who shares the activities of today, in station however humble, is a participant in the significanl movements that .in- \isib|r to every thinker. Tidal waves may wreak havoc upon a com niunity, and be remembered for the disaster they have wrought. They are but local, even whin greatest. Tin real work is done by the tide itself, which is universal over every sea, and though less spectacular than the cataclysmic storm. is irresistible, silent and constant. Perhaps we do not all notice the tide, but we living .it ,i time when it 1> approaching its maximum, and it will be well to oli erv< its progress and its probable effects. %A INTRODUi TION. The tide has different manifestations which can be noted and defined with Perhaps the most conspicuous of these is the growing appreciation of the f ac | thai in civilization as it is today, there is no such thing possible as inde- pendence, luit only interdependence. He who wants to be independent in the extreme sense of the word, must seek isolation, depend upon the chase and his own garden for food, upon his own weaving for garments, and upon his own building for shelter. If one lives amid human society he cannot be independent. Neither can a nation today be independent of the rest of the world. China, Japan and Korea in turn have been forced to absolute abandonment of their historic policies of seclusion, and even Tibet has seen its walls breached within the last year, by the entrance of a British expedition and the forcing of a treaty prohibiting the exchange of trade and travel. Tlu' complexities of civilization increase in exact ratio with the increase of comfort, and this is readily demonstrated by even the most superficial glance at the progress of the world. From the era of the cave and cliff dweller, of stone hatchet and bronze hammer, we have come to a time when we shelter and feed and clothe anil educate ourselves in a manner that makes our ancestors seem like savage beasts rather than men. The farmer or the mechanic of today commands more genuine comfort, convenience, and even luxury in his household, than could be found in a royal palace two hundred years ago. This change has come simultaneously with the growth of interdependence as against independence, and perhaps because of this growth. The robber baron of the Middle Ages was almost independent, although even he had to depend for his food and his fighting-men upon the peasants over whom he lorded it. The robber baron of today, if we admit for a moment that such may still be found, is far less independent than was his progenitor. The latter, if necessary,' prob- ably could have gone out in single combat and fought for himself with admirable strength and skill. He of the Twentieth Century might earn his own living by digging coal from the mine, or pumping petroleum from the earth, or bartering the product of his loom to a waiting merchant, if all his retainers, high and low, were to withdraw from his service. Hut certain it is, he would not be a magnate, but only a man, if such a condition should arise. The magnate, indeed, is as truly a dependent as is the humblest of those in hi- organization, his only advantage being, perhaps, a keener perception of con- ditions in the field, and a larger supply of ammunition and provisions for sus- tenance in the event of hostilities. It would be a shallow observer indeed who could not discover the interdependence between these elements and every other dement in our civilization, local, national and international, if the parallel be pursued to its logical conclusion. INTRODUCTION. 25 A few paragraphs which will summarize the growth of civilization to its present form will be pertinent in introducing the broad subject concerning which tbis work treats. In the childhood of the race, individualism was the only social system. Each man demanded for himself food, shelter and safety, and for these he strove individually at whatever cost to bis neighbors. Soon be discovered that these necessities were better provided by joining with Ins neighbors than by fighting with them, and tbis was the nucleus of the social system which we have attained today. Say- a recent writer: "The conspicuous tendency ruling today, is the con- solidation of enormous commercial, industrial and financial powers, into what we characterize a- 'Monopolies,' 'Syndicates' and 'Trusts.' lint even the Trust itself, in its most extreme form, is but a natural outgrowth of conditions Long developing. There is no essentia] difference in principle between the great department store of the metropolis, and the general store of the country cross roads. Size is the only vital distinction. The village banker embodies all the characteristics of the moneyed captain of Wall Street, except that of magnitude. Tin owner of the transfer line, which carries passengers and their baggage from railroad to hotel, is a transportation magnate on a smaller scale. Any man who has goods which another wants, and holds up the price therefor to the limit of bis customer's ability and willingness to pay, is illustrating the principle- of mo- nopoly. Broadly speaking, any form of organization which economizes labor and produces a given result with the least demands upon man and material is good. The surplus thus released becomes available for other service, and the genera] tendency is toward a broadening of industry and opportunity. Tins is not less true because in many instances the process of readjustment is a painful one, bringing hardship to individuals or classes. Nor is it controverted by the fact that monopolies and their kin are sometimes oppressive, claiming for themselves all tb«' benefits of economized labor and material that should accrue to the public they aervi ."' The pubhc at large perhaps does not understand the ruling policy which governs those who are operating great financial, industrial and commercial under- takings. It will be edifying to glance at the viewpoint of the men who control the trust- that are reckoned as almost impregnable in the volume of trade in this country. "Business is competition,'" they declare. Competition means strife to e\ce|, and strife means the survival of the fittest, not from a personal, moral ot ethical point of view, but economically speaking, and meaning bv "fittest" the man who rises to the top. Thus "Business is war** becomes the watchword <»l the captain of industry. But there an' laws of w 1 1 generally recognized, INTRODUCTION. and so there are rules l>\ which the uars of business are regulated. And just as in war there Is a cry for humanity which the civilized nations are heeding and are writing into international law. so is there a cry for a moral outlook upon the business field a cry for the "square deal," which is rising in volume and is being heard. This is the cry which promises to force itself upon the recognition of even the most heedless in the war, by Legislation if all other means fail. "Big money" is the principal weapon in the hand of the circle of men who have now come to the conclusion that it is unwise to right each other within their own circle. Now that combinations to restrain trade and to control competition are meeting concerted resistance from the weaker men, this weapon meets the voting [tower by influence and bribery. As soon as this condition is realized by tin public, a more strenuous struggle begins for what the injured multitude concci\t to be fair, and of equal advantage for all. At last obloquy falls upon the man who buys special privilege and advantage by the lavish use of his accumulated wealth, and the public, not understanding the conception of busi- ness which, generally speaking, obtains among the capitalist class, marvels at the versatility of the multi-millionaire who may teach a Sunday-school class, support the cause of education, and give large sums to missionary undertakings, while at the same time he is credited with the use of methods which ruin com- petitors, corrupt legislatures, establish industrial injustice, and stimulate the grow th of cla^s hatred. Astonishing as it may seem to one reared in another school of thought, the simple explanation i> that such men absolutely disassociate their personal life and habit- from their business life and habits. Apparently they put on a new code of ethics and morals when they change their street coat for their office coat, and -it at the desk to consider the plan of the day's campaign. It is probably true that the rising cvy for the "square deal" in business and industry, to all men and from all men, has caused genuine surprise and perplexity in a great number of those against whom the cry is directed, and who have considered them- selves playing the game of business as they would play the game of war, with the ruthless intention to win at any cost to the vanquished, and with no realiza- tion that any other code obtained anywhere. Today a demand is abroad throughout the land for the abolition of the most glaring wrong- in tin- body economic. Long since has the suffering public, ground between the upper and nether stones, felt that conditions must be so changed a- to avert tin constant succession of ruinous and bloody strikes. It has »t' absolute honesty in the political and the industrial field as well. The newspaper and magazine press have done noble work in the ferreting out of injustice and dishonesty in high places, and in creating in the public mind a proper indignation against those who have betrayed their trust. Such investigators as Miss Ida Tarbell, Lincoln Steffens, Hay Stannard Baker, and others who might be named in the same list, have found in the Federal Government, in State Legislatures, and in Municipal Councils, the details of dis- honesty and corruption that were but imagined or charged at random before they did their work. Organized capital, organized labor, and organized politics, alike, have been discovered to be tainted with rottenness, vice, bribery, corruption and avarice. Revelations have been made to the world that would have fallen on dull ears only a few years ago, so little prepared were the people to hear them. In a large degree partisanship has been eliminated from these exposures. It i> coming to be realized that there is little of political principles and economic policies troubling the professional politician ; and with that realization, honest voters are caring less for the political label worn by a candidate or an office holder, in comparison with what they discover of his honesty or dishonesty. It i> becoming largely a matter of indifference to the thoughtful, whether a Roose- velt, a Folk, a Deneen or a La Follette supports one school of political economy or another, when discovered to be standing with the people and demanding a "square deal*' for every man. The result of all this has been a wide-spread demand for a correction of abust 5, tni a termination of the rule of "graft," and for a more intimate knowl- edge of both -ides of the controversy in which the questions of trust, monopolies, special privilege, government supervision, government ownership, and all of the things growing out of these are paramount. The public has welcomed with voracity the detailed facts developed by such investigations as that of the so- called Beef Trust, the dissolution of the Northern Securities Company under the Anti-Trust law. the intervention of the President in the great anthracite coal -trike in 1901-2, the unearthing of bribery in the departments of the National administration, and the endeavors of the President to check discrimination in railway rates, and to control by federal legislation all corporations doing an state business. At the same time those magazines which have published definitive articles on the inside history of Standard Oil, the Beef Trust, the Railway Merger, the Life Insurance Group, the Copper Ring, the Theatrical Trust, and a host of INTRODUCTION. 29 others that might be named in the same category, have found the public waiting eagerly month by month for such material. Ever beyond this point, it is manifestly true that the result of recent elections in several American cities, noteworthily Chicago, indicates a rapid drift toward government or municipal control of public utilities, a fundamental and primary contention in the programme of the socialists. With a full appreciation of the magnitude and importance of the task which they have assumed, the authors of this work have surveyed the entire field as here outlined, into many ramifications not suggested in this introduction, and have believed that tin production of such a work would be of distinct service to a large circle of inquirers who have not the large number of facts at their command. They have realized their responsibility to the public, and to the tremendous interests which they discuss in the following pages with absolute frankness. They have had no desire to cast oblocjuy upon any person or any organization, not yet to gloss over any evils which they have been able to discover. The simple pur- pose has been to relate the facts as they are, as lucidly and as interestingly as they were able to do, and let those facts speak for themselves. In other words, the authors have approached their task not as advocates for or against any system or ■ conomjc theory, but judicially, and as recorders of things as they are. They have appreciated likewise that the individual, high or low, is entitled to full consideration in every controversy of methods and policies. They have believed that their obligation is just as great to the humblest individual as to the itest corporation or trust. Under no other circumstances could they justify the offering of a work which purposes to expound the whole subject of the "square deal." Perhaps there has been too much attention paid to the man of large business, and too little to the one of small business. Indeed, we may question it' the word "business" has not been too narrowly applied. Politicians ami economists have sought to discover whai the business world thinks of questions at issue, more than once, when they limited their inquiry to the man who dealt in money, or the man who sold goods over a counter. In truth, every man who earns his living is in business. Whatever you do that brings you a return for your efforts is your business, whether it he a profession, a handicraft, or the occupation of the mer- chant. He who wields the tool of the mechanic is as truly a business man as is the millionaire railway president, banker, or merchant prince. If we follow v.ih Webster's definition of the word, and that of every other recognized Lexicographer, we will not make the common mistake of calling one person a busi man and another a laborer. The school child who cues for a garden bed 90 INTRODUCTION. or .1 fruit tree, or gathers the eggs from the hay mow, is rendering a service, and is entitled to be reckoned as a factor in the business world. It would be reckless to cuter the realm of prophecy, bu1 at least one may venture to interpret some of the signs of the times. \fter a careful observation of the course of public opinion ami Legislation, it seems that the American public niav he permitted to felicitate itself that a better day is dawning. No Longer do we tolerate' dishonesty in the political, industrial, financial and commercial world, merely because the guilty first become prosperous and then give grudgingly a part of their plunder to some public cause in the effort to palliate their offense. No longer do we view with patience the oppression of the many by the powerful few. No longer do we accept as intelligent argument the answer that "there have always been such evils in the world and there always will be." And no longer do we deny our own responsibility, washing our hands of the matter and Leaving the solution to others. The whole mass of the people must enter into the subject. They must share the struggle and the responsibility for what follows. NO man can shirk his part in the work of readjustment. That the facts here assembled may contribute in some degree to the mass of information necessary before any inquirer can arrive at well founded and honest conclusions, is the earnest hope of THE AUTHORS CHAPTER 1 THE CUV FOR THE "SQUARE DEAL." The Awakening of the People — "Publicity" Demanded — Government Investi- gations Lead to Government Regulations — A General Movement for Fair Jji cding in Business. "The bquare deal." — "a rough phrase covering the noblest sentiment that has stirred American polities since the Emancipation Proclamation." It is thus that an eminent writer upon large political issues, William Allen White, characterizes the action of President Theodore Roosevelt, who used this homely yet powerful appeal to the American people in a great and successful political campaign and who, taking it as the motto for his administration "led the way from the consideration of problems that concern the accumulation of national wealth toward problems that concern its equitable distribution." "Led the way" puts the matter quite significantly before us, for though to the ••Strenuous"' President is due the credit for coining the phrase that means BO much in tins age of growing monopolies, when problems more serious than ever before confronted the business, social and mora] world, there had been a cry for a "square deal'* heard from many quarters. It was for the President to lead the wav. What he has accomplished has been a leap toward justice for which humanity is pleading; what may he accomplished from these beginnings cannot be estimated. Hut this much seems true: The twentieth century prob ably will go down into history as the age when emancipation from trust misrule and monopolistic oppression was won by the sturdy light of the people, just as the close of the eighteenth century saw the chains of foreign oppression broken and the nineteenth century saw the freedom of the negro slave. Ii tras not a mere coincidence that led to this movement for fair dialing. I., I us glanci -it ;i sliort page in the history of the country, dating back only ;<> 190£, <»r. Bay, to about the time when Roosevelt succeeded the murdered President McKinlcy. Two great acts of this young and strenuous man stand out iii tlu flash< - of th. business searchlight : one «.'i> the order for the Depart mi nt of Justice to investigate the legality of tin- great Railway Merger the Northern Securities companj over whose formation there had been a battle 34 THE CRY FOR THE "SQUARE DEAL" of millions of dollars; also the test of the legality of the action of the meat packers of the country in controlling the supply of meat; the other was the intervention of the President in thai great anthracite coal strike in Pennsyl- vania which had lasted nearly a year unci had caused untold misery and loss of wealth. Such action seemed a great departure from the usual path of duty of the chief executive. The Coal Trust stormed; the Railway Trust magnates cried out in rage. The knives of the rich wire sharpened to defeat Roosevelt when he should run for re-election. What was the result, or rather results, for they came s<> fast that they seemed almost myriads? Let us state briefly some of tiie most important : Election: Roosevelt's majority of 2,523,000. Vote for Debs, socialistic candidate, 386,955, a remarkable demon- stration of discontent with existing conditions. Railroads: President Roosevelt recommended that the Interstate Com- merce commission he given increased powers so as to regulate railroad rates. Bill to this effect passed the House of Representatives with only s< \ > ntecn negative votes. A storm of protests arose from railway' interests, which caused the Senate to postpone action in order to investigate before passing a law. Sharp criticism by leading citizens and the press of the action of the Senate, with charges that tin Senators were controlled or unduly influenced by railroad Interests. Anti-rebate law passed in Wisconsin. Railroads retaliate by stop- ping further railway improvements in the state. Presidents of railways admit pernicious custom of allowing rebates. Interstate Commerce Commission finds Beef Trust, has monopoly of private car lines. Secret codes discovered, indicating illegal rebates and overcharge^. Armour car lines succumb to pressure and reduce exorbitant icing charges on fruit shipments. Complaints from merchants in small towns and cities that railways have wrecked small business centers in order to build up the larger cities through rate favoritism. B f Trust: Following the first investigation of the so-called beef trust the United States Supreme Court handed down a unanimous decision THE CRY FOR THE "SQUARE DEAL." 35 declaring the big Chicago packers to be a combination in restraint of trade and giving a wider meaning to the term '"interstate commerce," which is controlled by the United States government. Investigation of the Beef Trust ordered by the Department of Com- merce and Labor, which resulted in a first report practically exonerating the packers. Criminal prosecution begun in the federal courts at Chicago. Standard Oil: An investigation of the Standard Oil company ordered by President Roosevelt, largely because Kansas oil producers set up charges of illegal trade conditions maintained by the Standard in that state; this investigation under the direction of the Bureau of Corporations of the Department of Commerce and Labor. Anti-trust bills, resolutions or similar action taken in a dozen states. Kansas to erect a state oil refinery. Steel: Congress takes measures to investigate the United States Steel corporation, but forcible action becomes unnecessary, for the company furnishes Commissioner Garfield of the Bureau of Corporations with all the data on the company's business desired by the government. Dissolution of the several steel material pools which were regulating production and prices of products contrary to the anti-trust law— Fear of steel magnates that Roosevelt would Investigate and punish them. Insurance Companies: Recommended thai insurance companies be placed under federal supervision. Greal scandal arises in the Equitable Life Assurance Society, because James II. Hyde, Bon of the founder of the company and inheritor of control of the company's Btock, would not wkV- control to President Alexander, friend of Hyde's father and trustee of Hyde's stock. Mutualization of the Equitable Life Assurance Society. Banks and Trust Companies: Secretary of the Treasury recommended thai trust companies of greal power and capitalization !><■ incorporated under the federal law. Effort to have New York trust companies make frequenl reports of their financial condition and be compelled to keep larger cash reserves to protect depositor-. Effort to compel bank directors actually to direct banking business in which they are directors and not to allow transfer of control without notice. ;ii THE CRY FOR THE "SQUARE DEAL." Interstate Business: Recommendation by Commissioner Garfield thai all companies doing an interstate business be compelled to secure a federal license in order to do Interstate business, and in order to secure such license to submit to certain requirements for publicity. Labor War: Severe struggles between the forces of capital and the forces of labor. Trade unions use the sympathetic strike in order to force cap- italists to grant concessions. Riot and murder in the wake of strikes. Employers bribe union leaders to call strikes against competitors as a business weapon. Trade unions revolt from this bribery and the em- ployers band together to crush out labor organizations. Both sides use unfair methods. The suffering public insists on law and order and President utters his famous Chicago labor peace doctrine, "Back of the City stands the State and back of the State stands the Nation." Grand .jury investigation into labor lawlessness. Business Ethics: Awakening of the people to the fact that "big money" acts upon the mottos that "Business is war" and that "All is fair in war." Demands that business men shall be honest in their competition and conform to the spirit of honesty, even though immoral business methods may not be illegal. Graft : Revolt in great cities and states against domination of legislative bodies by organized gangs of corruption forces such as politicians, con- tractors, labor leaders, etc., all seeking to steal money from the public through the purchase and sale of valuable legislation. Investigation in many quarters of legislative bribery and convic- tions therefor. Defeat of gangsters in Philadelphia who sought to steal $100,000,- 000 worth of gas properties through corrupt officials. Reformation of Mayor Weaver through the influence of public remonstrance and through public prayers. Stock Market Manipulation: Exposures of practices of "high financiers" in trust promotion and stock watering. Flagrant violation of financial ethic- in "watering" the stock of the United States Shipbuilding Com- pany. Scandal in the promotion of Montreal Consolidated Mining and Smelting Company, causing resignation of Vice-President Archibald, G. Loomis of the National City Bank of New York City. THE CRY FOR THE "SQUARE DEAL." 37 Court orders commanding the repayment by directors of unearned dividends paid out by them illegally on the "watered" stocks of the American Malting Company, American Grass Twine Company and other corporations. General cry against "watering" stock for the benefit of a few in- siders to the detriment of investors. Violation of Trust: Big defalcations by hank presidents. Use of "inside information" by directors of stock corporations for the purpose- of win- HAYMARKET SQUARE, CHICAGO. Hundreds or small truck farmers with their wagons loaded with produce gather hero and frequently remain all nlgrhl In order to hold a favorite position to dispose ol their wares in the morning. The monument In the foreground Indicates the spol where a number ol (lists were gathered In an open-air meeting. When a platoon oi police endeavored to erse them, a bomb was thrown Into their ranks, killing and wounding scores For tins crime several of the leaders were executed and others sent to prison for life. The monument was erected to the memory of the brave officers who were assassinated while doing duty. The Inscription reads: "In the name of the people of Chicago, i command peace. nine fortunes in the slock market al the expense <>f legitimate stock holders. Demand thai slock "washing" and "matching" orders j n the slock markets c< ase. Genera] Reform: Action by writers "li<> favor the "square deal," exposing on fair busim ^> dealings. Protesl against acceptance of John I). Rockefeller's gifl of $100,000 is THE CRY FOR THE "SQUARE DEAL." to American Hoard of Missions of the Congregational Church, on the charge thai the money was tainted and the fruit of dishonest practices. Demand for tariff readjustment so as to take away from great trusts one of their principal special privileges. Municipal Ownership: Great cry in Chicago against the Wall street con trol of the street railway system and the election of Major E. F. Dunne bv a large majority on a platform favoring municipal ownership of these traction lines. The "Square Deal": Addresses by President Roosevelt advocating fair treatment alike for every person, whether working man, middle class, or capitalist. Socialism: Predictions by eminent financiers and students, that socialism, which appears to be growing rapidly in Europe and spreading to this country, will be powerful in the country's future politics, especially if there is not some success in controlling monopoly, which seems to be here to stay. Publicity: Standard Oil, Sugar Trust and other corporations refuse to publish complete financial reports for benefit of stockholders, but trust magnates wince at adverse criticism. Judge Grosscup and other public men advocate publicity as a cure for rottenness in politics, finance, labor and business. CHAPTER H THE ANTITRUST WAVE. Governmental Supervision to Keep Apace with Industrial Development De- manded- -Tlte Cry for Reform in Business Ethics — "Big Money" Must not be Allowed to Control the Laze — Night Living and Right Thinking the .Basis of Material Prosperity — Our Government Must Stand for Every Man, Rich or Poor Alike — If He Does Xo Wrong, He Shall Suffer No Wrong. If the foregoing epitome suggests anything to the reader of American his- tory, whether he be capitalist or laborer or middleman, it should be the con- clusion that the American public is aroused today over the aggression of trusts, the abuse of the monopoly power, as never before. Three times in the history of the industrial combination age of the nation anti-trust waves have swept over the country. Each time the name of Rockefeller has been prominent in the agitation. Hack in 1872 the first crusade of importance was begun. Then the cry for the "square dear' 1 was heard in a different degree; the slogan W8LB missing and the leader of the great movement for industrial freedom of today was but a boy. In that fight against the abusive power of monopoly tin battle was waged around what is now the Standard Oil banner, although there were other phases of the struggle. To recount some of this history is not ami--, for it may reflect some of the causes of the present war. In 1872 independent oil producers of Pennsylvania were threatened with annihilation through the formation of the gigantic combination in which the young Standard Oil Company was a leading spirit. Tins combination was the South Improvement Company. It bad secured contracts with the principal railway trunk lines leading into the oil country, by the terms of which it was to get a rebate on the freighl lor the oil which it shipped and a drawback of the same amount on all oil shipped by its competitors. When the independent oil men understood the full import of this firsi wedge of the oil monopoly into their business, .'i Btorm broke, the fury of which was not slacked until the combination was disrupted, the contracts with tin- railways annulled and the arrogance of the Oil Trusi Was held in check for a lime. This outburst of popular wrath, together with the great "granger movement" the legislation againsl railway aggression in the middle western states left its imprint most 99 ■mmm . BUILDING OF "THE TRUST COMPANY OF NEW JERSEY," AT TRENTON. This is the so-called "home" office of "The Northern Securities Company," the I'nited 9 Steel Corporation, and other gigantic business combinations. The corporation laws of New Jersey appeal to promoters and organizers because they give them a sweeping advantage over minor investors who may later acquire the stock. While other states — particularly West Virginia and Michigan — limit the capitalization- of corporations, there is no maximum as to the bonded indebtedness or capitalization of business enterprises organ- ized under the laws of New Jersey. THE ANTI-TRUST WAVE. 41 effectively through the passage of the "granger" laws, which for the first time in history brought the railways under the supervision of state governments. In 1887 another epidemic against trust aggrandizement was prevalent. In that year the Interstate Commerce law was passed, by which business transac- tion made between two or more states of the Union was brought under the jur- isdiction of the federal government. During the year following the Oil Trust was submitted to inquisitorial proceedings by the New York Senate and the national Congress. The effects of this tumult was to stun the whole public. The nation was dazed at the phenomenal power and greed of the Standard Oil Trust and the unfailing certainty of ruin on the part of every person who tried to compete with it. At the moment the effect in law was not remarkable, hot in l!S!)() the Sherman Anti-Trust Law was passed, prohibiting combinations in restraint of trade, and two years later the attorney-general of Ohio pro- ceeded in the Ohio courts, which resulted in driving the Standard Oil Trust from its native state and forced it to fly to the wide, hospitable asylum of the New Jersey corporation laws. While, as has been stated in the foregoing, the great 1905 crusade for square dealing really started when President Roosevelt determined to intercede in the horrible war to the death in the great Pennsylvania anthracite coal strike of 1902, in his order of that year to prosecute the Bcri' Trust and the Northern Securities Company- or railway merger — under the Sherman Anti-Trust law, the fruits of this man's efforts were not seen for some time. It was during 1902 that Congress went quietly to work to feel the national pulse in the mat- ter of monopoly and tnisl abuses. The Fifty-seventh Congress, 1902-1908, passed four bills aimed directly at the trusts, which, of course, were promptly signed by Presidenl Roosevelt. The first was for an appropriation of $500,- ()()() to be drawn upon by the Attorney General of the United States to defray expenses incurred in prosecuting illegal combinations of capital like the Beef 'IViht and Railway Merger. This was the first nnti trust legislation iii nearly On years. Tin- second movemenl was a bill in the interest of President Roosevelt's idea of "publicity" on winch he had dwell in messages lo Congress and speeches throughout the country. This bill, when it became a law, created the Bureau of Corporations in the newl} established Department of Commerce and Labor, thus placing dind l\ ,it the disposal of the President, through a member of Ills cabinet, ,i power winch should investigate all trusts, monopolies, combina tions, etc., prepare statistics of trade conditions and report to Congress results and conclusions. It was under Ibis bureau. Hie first chief of which was Com i: / •///■: ANTI-TRUST WAVE. missioner James K. Garfield, sou of the martyred President, thai the investi gations and prosecutions <>t' tin- trusts which made 11)05 famous were conducted. The third trusi bill was the Elkins Act, which professed to aid the Inter- state Commerce Commission in dealing with the railroads and other common carriers thai gave illegal rebates on freight rates. In reality the effect of the law has been nil, and it has been charged that the Senate devised the law in behalf oi' the railway interests in order to dodge the penalties of existing stat- utes This act struck out the provision for punishment for violation of the law hv imprisonment as well as by fine. The maximum fine of $20,000 fixed hv this law has not vet been sufficient to prevent large railways from breaking the laws hv granting unfair privileges to favored shippers. The- fourth hill was designed to aid the public in its fight for the "square deal" and provided measures for curbing illegal monopolies by removing such cases pending in the Circuit Courts to a hearing before a bench composed of three judges and by carrying appeals from the Circuit Court directly to the Supreme Court of the United States. This "short cut" through the courts was used in the case of the government against the Coal Trust when the right of the Interstate Commerce Commission to compel witnesses to produce contracts and private' accounts was questioned. These four bills are the latest anti-trust legislation enacted. Early in 1905 the House of Representatives passed by an almost unanimous vote the Esch- Townsend bill, favored by President Roosevelt, providing for the regulation nt' railway rates. But the Senate did not. concur and a long investigation of railway conditions followed. Up to tin enactment of these laws actual results from the anti-trust wave had been few and had been restricted to suits in the courts and injunctions in a few cases against trusts, the chief of which was in the Beef Trust case in Chicago before Judge Grosscup. In 1903, however, the United States Circuit Court of .Minnesota declared tin Northern Securities Company an illegal com- bination. Shortly after this the Missouri Supreme Court found the principal packers in tin Beef Trust guilty under the anti-trust law and fined five of them $5,000 each. After this followed thick and fast investigations of the Coal Trust, Standard Oil and several gas monopolies in various states, the enuncia- tion of the doctrine of the "square deal,'" the Kansas blow to Standard Oil, which resulted from the announcement that that trust would buy no more oil in Kansas, tin far-reaching reports and recommendations of Commissioner (Jar- field and Secretary Met calf looking to federal control of interstate commerce companies and tin hue and civ against John D. Rockefeller's "tainted money." THE ANTI-TRUST WAVE. 43 What the results of this anti-trust movement will be arc doubtful. There are two distinct views of the problem: One is that, monopoly is essentially wrong and that the trusts which have this monopoly or partial monopoly must be rooted out of existence to make room for a return of the old conditions where the business of the country was conducted by myriads of small traders, small partnership concerns, small corporations, small railways; where small communities were the rule rather than large cities; where the farmer did work WHERE THE DIRECTORS Or THE UNITED STATES STEEL CORPORATION MEET. Meeting """ii ni "The Trust Company of New Jersey" building. Here the directors of hundred* •■! rorporatlom meet a1 times, and manj .1 large financial deal has 1 n planned in this room. "on shares" instead of owning thousands of aero of lands; where the ranch man had but a fe* head of cattle instead of hundreds and thousands of herds. Tin- other view is thai evolution has changed conditions so materially thai monopoly i- here to -!.i\ ; thai economic methods demand greater and greater combinations both of industrial concerns and of railway corporations; thai banking today musl be done on Mi. ..inn gcale with the enormous crrowth of U THE ANTI-TRUST WAVE. wealth; thai to return to the condition where the smaller trader ruled would be as unprogressive as going back to the use of* the stagecoach Instead of the railway, the pony posl Instead of the postoffice department, the hand seeder instead of the gang plow and drill, the cradle scythe instead of the steam mower, reaper and binder, tin- sail boat instead of the ocean greyhound. The perusal of the following pages will point many conclusions which favor the latter view. The pertinent question therefore arises how best to control the enormous power which rapidly has been concentered in the hands of such great industrial and financial oligarchies as the Money Trust, the Beef Trust, the Oil Trust, the Railway Trust, the Coal Trust, the Steel Trust, the Copper Trust, etc.. etc. Already legislation Looking to this control has made fair headway and there is promise for more before President Roosevelt accomplishes his purpose of freeing industrial America from dangers of downright serfdom. With the motto "Business is war." the great captains of industry have given little thought of the serious possibility, now become fact, that there is such a tiling as business morality. Heretofore the test of right lias been the statute law. If it has not been "against the law" the "big money" of the country has termed it right. Standard Oil recently put up the pitiful plea that "slavery in certain sections of the United States was legal until President Lincoln's Proclamation of Emancipation and rebates on railroads were just, as legal until the passage of the Interstate Commerce Act." The implication found here, that slavery was not wrong until it was declared illegal, indicates a peculiar moral standard which would make assault, rapine, theft, burglary and even murder innocent if there were no legal code. Under the scheme of business ethics as thus defined, the captain of industry could dare to do in his office what he never would think of doing in his home. Under this code, if there were no law, common or statutory, in existence, it would be right for one man to bargain with railroads not only to serve him .it a much lower charge than his rivals in business, but to pay over to him the - collected from those rivals. Under this code the trust manager or "big iness" man would be justified in using any available device or practice to annihilate his rival in business and get possession of all his property. Dis- tinctly Standard Oil sets up the new motto "Everything that does not incur punishment for crime is good morals in business." Here seems to be the ^ist of the whole fight against monopoly and trust Ejgrandizement. If the law does not prohibit an act, apparently it is not a wrong. If "big money" is big enough to control the law, as has been shown time and again in legislative bribery, the vicious business ethics suggested in this new motto will be the law of conduct. THE ANTI-TRUST WAVE. 45 President Roosevelt enunciated principles which now are working to over- come such had business morals when he said, "Neither this people nor any other free people will permanently tolerate the use of the vast power conferred by vast wealth — and especially by wealth in its corporate form — without lodging somewhere in the government the still higher power of seeing that this Powel- ls used for and not against the interests of the people as a whole. '"The principles which Lincoln applied to the solution of the problems of his day are those which we must apply if we expect successfully to solve the different problems of our own day — problems which are so largely industrial. Exactly as it is impossible to develop a high morality unless we have as a foundation those qualities which give at least a certain minimum of material prosperity, so it is impossible permanently to keep material prosperity unless there is hack of it a basis of right living and right thinking. "In the last analysis, of course, the dominant factor in obtaining this good conduct must he the individual character of the average citizen. If there is not this condition of individual character in the average citizenship of the country all effort to supply its place by the wisest legislation and administra- tion will in the end prove futile. Hut, given this average of individual char- acter, then wise laws and the honest administration of the laws can do much to supplement it. If either the business world or the world of labor loses its head, then it has lost something which cannot he made good by any govern mental effort. Our faith in the future of the repuhlic is firm, because we believe that, on the whole and in the long run, our people think clearly and act rightly. ■•1 nquestionably, however, the great development of industrialism means that there must he an increase in the supervision exercised by the government over business enterprises. 'I 'he supervision should not lake the form of violent and ill-advised interference; and assuredly there is danger lest it take such form it tin hiiMnc>> leaders of the business community confine themselves to trying to thwarl the effort at regulation instead of guiding it aright. "Meanwhile the men in public life and the men who direct the great bus] nesa interests of tin- country should work not in antagonism hut in harmonj toward this given end. In entering •■• field where the progress must of neces Bity he so largely experimental it is essential that tin effort to make progress should he tentative and cautious. "We musl gron by evolution, not by revolution. There must he no hurry, hut there mii-t also l»e no halt and those who are anxious that there should he no sudden and violent changes must remember thai precisely these sudden Ki THE ANT1 TRUST WAVE. and violent changes will be rendered likely it' we refuse to make the Deeded changes in cautious and moderate manner. "At the present moment the greatest need is for an increase in the power of the national government to keep the great highways of commerce open alike to all on reasonable and equitable terms. Less than a century ago these highways were still, as they bad been since the dawn of history, either water- ways, natural or artificial, or else ordinary roads for wheel vehicles drawn by animal power. The railroad, which was utterly unknown when our govern- ment was formed and when the great principles of our jurisprudence were laid down, has now become almost everywhere the most important, and, in many large regions, the only form of highway for commerce. The man who controls its use cannot be permitted to control it in his own interest alone. ''It is not only just, but it is in the interest of the public, that this man should receive the amplest payment for the masterful business capacity which enables him to benefit himself while benefiting the public; but in return he must himself recognize his duty to the public. He will not and cannot do this if our laws are so defective that in the sharp competition of the business world the conscientious man is put at a disadvantage by his less scrupulous fellows. "It is in the interest of the conscientious and public spirited railroad man 'bat there should be such governmental supervision of the railway traffic of the country as to require from his less scrupulous competitors, and from unscru- pulous big shippers as well, that heed to the public welfare which he himself' would willingly give and which is of vital consequence to the small shipper. "In some such body as the Interstate Commerce Commission there must be lodged in effective shape the power to see that every shipper who uses the rail- roads and every man who owns or manages a railroad shall on the one hand be given justice and on the other hand be required to do justice. "Justice, so far as it is humanly possible to give and to get justice, is the foundation of our government. We arc not trj-ing to strike down the rich man : on the contrary, we will not tolerate any attacks upon his rights. We arc not trying to give an improper advantage to the poor man because he is poor, to the man of small means because he has not larger means; but we are -t riving to see that the man with small means has exactly as good a chance, so far as we can obtain it for him, as the man of larger means; that there shall be equality for the one as for the other. "We do not intend that this republic shall ever fail as those republics of olden times failed, in which there finally came to be a government by classes, which resulted either in the poor plundering the rich or in the rich exploiting, THE ANTI-TRUST WAVE. 47 and in one form or another enslaving, the poor, for cither event means the destruction of free institutions and of individual liberty. Ours is not a gov- ernment which recognizes classes. It is based upon the recognition of the indi- vidual. We are not for the poor man as such, nor for the rich man as such. We are for every man, rich or poor, provided he acts justly and fairly by his fellow, and if he so acts, the government must do all it can to see that, inas- much as he does no wrong, so he shall suffer no wrong." THE "SEARCHLIGHT" BY ROENTGEN "X" RAYS. It is less than ten years sin..- the announcemeni was made < auppoae thai with the aid <>r science tii>- time may come when a man's heart — for good or evil — can i»- searched and examined by some such method? JACOB H. SCHIFP, Of Knhn, Loeb & Co., one of the largest pri- ■ inking institutions in the world. CHARLES S. FAIRCHILD, Ex-Secretary United States Treasury, a di- rector of the National City Bank. JAMES R. KEEKE, The World-famous Speculator. Has COE. JOHN JACOB ASTOR, a fortune of over one hundred million dollars and Is the richest land owner living in America. WILLIAM ROCKEFELLER, or the Standard Oil Company HENRY II. ROGERS. Of Standard Oil "system" fame. JAMES STILLMAN, , !. ,ii National C11 \ Bank, N'-w roi k. GEORGE W. PERKINS, The able partner of J. Plerponl U CHAPTER Til WHO OWNS THE UNITED STATES? .V< w York the Financial Center of Our 2V 'ation — Enormous Influence of Twenty- three Men in Wall Street, Composing the Greatest Money Power in America — Two Hundred Millions of Dollars Deposited in One Bank — Four- teen Trusts, Whose Captains Are of the National City Hank Directory, Represent Thirty-eight Per Cent of the Capitalization of All the Industrial Trusts of the Country — Great $5,000,000 Banks — Power of Trust Com- panies — World's Saving Deposits. In a modest, old-fashioned building in Wall Street, so modest that it seems out of place in the locality of the canon-like streets of America's great financial center, there gather occasionally about a directors' table twenty-three men who all but own the United States. They are the directors of the National City Bank of New York City, the greatest bank of America, and they represent a total financial power of $11,000,000,000, or about one-tenth the entire wealth of the United States. It would be incorrect to state that these men arbitrarily could dispose of this vast amount of wealth, but their judgment would go far toward deciding the destinies of the nation in respect to its financial welfare. Indeed, they are almost what public opinion has called them, "money kings," whose subjects in a sense are the people whose savings arc employed to carry on the great industries of the country. Their names are known the world over, for they stand for all that is great in finance and commerce. Even the law-makers of the country listen to what they say, for these twenty-three men represent the trusts of America. Let us glance over the roster of names of this powerful body of men and see who they are and what they represent. This board of directors is com posed of: William Rockefeller, of the Standard Oil company, the most powerful single organization on earth. George W. Perkins, business partner of J. Pierpont Morgan, the world- famed financier and promoter of trusts and giant corporations. Jacob II. Schiff of the firm of Kuhn, Loeb & Co., one of the greatest bank- ing houses of the world, — so great, in fart, that within two days it raised sub- 50 WHO OWNS THE UNITED STATES? 51 scriptions for $500,000,000 to supply the Japanese government with the money with which to carry on the war with Russia. Edward H. Harriman, railway king, president of the Union Pacific Railroad company and many other organizations. P. A. Valentine, of Armour & Co., representative of the great Beef Trust. Henry 0. Havemeyer, president of the American Sugar Refining company, the Sugar Trust. John A. McCall, president of the New York Life Insurance company. Cyrus H. McConnick, president of the McCormick Harvesting .Machine company and representative of the Harvester Trust. Henry C. Prick, steel, coal and coke magnate. Moses Taylor, vice-president Lackawanna Iron and Steel Co. Samuel Sloan of the Delaware, Lackawanna & Western R. R. Co. Stephen S. Palmer, president of the New Jersey Zinc Co. John W. Sterling of Shearman & Sterling. James II. Post of B. II. Howell, Son & Co. Francis M. Bacon of Bacon & Co. Cleveland H. Dodge of Phelps, Dodge & Co. Charles S. Fairchild, chairman New York Security & Trust Co. James StiDman, president; ally of John 1). Rockefeller. .James A. Stillman, assistant cashier and director. Edwin S. Marston, presidenl Farmers' Loan & Trust Co. William Douglas Sloane of W. .V .J. Sloane. M. Taylor Pyne. I If these men lie perhaps the greatest money power in America. if not in the world. While they in themselves do not constitute all the so-called "Money Trust," still this hank of hanks of America is powerful enough to wield almost unlimited sway in the world of dollars, and does, indeed, make its trength fell often. N« w York is recognized as the financial center of the Western hemisphere, for many years to come, it' not for all time. It even is fasl encroaching upon Ihe position thai London has long held as financial center of the world. When. then, it is said thai the deposits of the National City Hank amount to nearh 0,000,000 of the people's money, or over 1 I- per cent of all the deposits of the fit'i\ three clearing house hank- of New York City, and thai it has ;l capital and surplus of over $42,000,000, or more than 16 per cent of the entire cap- WHO OWNS THE UNITED STATES? ital and surplus of these associated batiks, it will be seen what a powerful factor this bank i> in Wall Street, America ami the world. Hut when this is said not all has been stated. For this hank is the head of group of banks, twelve in number, which arc under its influence through close affiliation of boards of directors, of interrelated ownership of capital stuck, etc. As center of this banking group the power of the National City, or "Standard Oil Bank," as it is generally known because it is the financial organ of .John D. Rockefeller and his lieutenants, is enormous. Let us put the matter more clearly. In the United States there are about 1 4,000 national and state banks, trust companies and private bankers. These institutions control about $11,000,000,- 000 of the people's wealth and savings in deposits. Now the National City group of twelve New York banks alone controls one-twentieth of all the power of all the banks in the United States and actually the loans of this group amount to almost half a billion dollars. But we cannot stop here. The machinery of influence and inter-control goes still further. This influence is not in dollars alone, nor is it confined in any sense to New York City alone. Through the practice of country banks depositing in city banks and all city banks holding some of their money on balance in New York City this money power has become almost supreme through th( banking influence alone. But the life insurance company reaches out and rbs the people's savings to a marvelous degree. This money and industrial influence largely centers in the eastern Money Trust. Still further, as was stated before, the other great trusts of the country, the partial monopolies of t industries, are represented in this money group. Some of the trusts are Hk United States Steel corporation, or Steel Trust; the International Mercan- tile Marine, or Ship Trust; the United States Realty and Construction Com- pany, or Building Trust; the Standard Oil Company; Armour & Co., member of the Beef Trust; the Amalgamated Copper Company, or Copper Trust; the Union Typewriter Company; the American Brass Company; the Allis-Chal- mers Company; the Colorado Fuel & Iron Company: the International Ilar- i- Company, etc. Fourteen of the trusts whose captains are of the National City Bank directory represent 38 per cent of the capitalization of all the indus- trial trusts of the country. Then there is the railway influence. Nearly every part of the nation is touched by a road directly represented by the twenty-three directors of the National City Bank. Principal of these roads are the Lackawanna, the C, B. & Q., the Union Pacific, the Alton, the Missouri Pacific, the Northwestern, the WHO OWNS THE UNITED STATES? 53 St. Paul, the Rock Island, the Denver & Rio Grande, the Mexican National, the B. & O., the Northern Pacific, the Southern Pacific, the New York Central, the Texas t Sj Pacific, the Eric, the New York, New Haven & Hartford, the Delaware & Hudson, the Illinois Central, the Manhattan Elevated of New York City and the Rapid Transit lines of Brooklyn. In NVw York City there are two other very powerful banks — the National Bank of Commerce and the First National Bank. These two with the National City are the three greatest institutions of the country. If they actually were under one control they would, indeed, be a triumvirate all-embracing. These two other banks in turn have chains of influences in New York likened to that <>}' the National City Bank. The great life insurance companies with head- quarters in New York and assets amounting to about a billion and a quarter of dollars and very closely allied with the great banking house of Morgan & Co. come largely under the influence of these two latter banks. This insurance interest makes them almost one family. There are, then, two great banking families in New York, and on close discrimination there may be three. But what is the relationship between these families? In fact intermarriage has been so frequent that while the two prin- cipal families still remain distinct, when the occasion demands they may have a reunion. In this case President Stillman of the National City Bank, as the representativ< of "Standard Oil" or the Rockefellers, whichever you choose to call it. would >it at the head of the table. The twenty-three directors of this chut' bank through their various and far-reaching relations and influences would represent over 350 other banks, trust companies, railroads and industrial corporations whose aggregate financial power may be summarized thus: [nsurano company assets $1,288,000,000 National and state assets 620,000,000 Saving banks assets 272,( ><>(),<)()() Trusl companies assets 758,000,000 Railroads, capitalization 5,300,000,000 [ndustrial and miscellaneous corporations, capi tali/at ion 2,852,000,000 'lot.-, I financial power $11,040,000,000 Great $6,000,000 Hauls More Giant Institution* Than Ever Before. There are now more banks in tin- United Stales with deposits of $5,000,- 000 or ovi i than i vi r before in the history of banking. Statistics it the office 54 117/0 OWNS THE EXITED STATES? YfWU of the comptroller of currency at Washington show no less than 1-14 such institutions. Naturally New York heads the list, with thirty-one to its credit. Boston is second with twelve and Philadelphia has eleven. Chicago has nine, Pittsburg seven, Cincinnati and St. Louis six each, Cleveland and Baltimore five each, Kansas City, Indianapolis and New Orleans four each; Denver, San Francisco, Minneapolis, Newark, N. J., Detroit and St. Paul three each; Milwaukee, Buffalo, Albany, Omaha, Los Angeles and Brooklyn two each; and Birmingham, Duluth, Dallas, Rochester, Atlanta. Scranton, Port- land, Ore., Jersey City, Washington and Pueblo one each. The leader of all these gigantic banks in the matter of gross deposits is the National City Bank of New York City, the great bank of banks and money representative of the Rockefellers and Standard Oil inter- ests. It has over $200,000,000 of deposits. The National Bank of Commerce and the First National Bank of New York and the First National Bank of Chicago, with de- posits running from almost $100,- 000,000 for the last named to over $200,000,000 for the first, follow closely in the order named. The growth of the banks with such large holdings of the people's wealth can be traced almost wholly to tlii marvelous advance in prosperity the country has enjoyed in receni years. In 1900 there were only 115 banks of this class. And even some of those were merged with other hanks, making larger institutions. Following is a table of the twenty-two largest national banks of the country with the amount of their deposits in 1905: £ ^ S? ri S £ & WWW' W 1! 1- ■_ ft_ HOME OP THE FIRST NATIONAL BANK, CHICAGO. This new building, completed in 1905, is built of granite and steel an<3 is fireproof. It is 17 stories in height and covers inure than one solid quarter nf a city block. An office build- ing of this size bouses more employes than there are people in a small city. The First National Bank, owner of the building, is the fourth largest National bank in the country, with deposits of Close to one hundred million dollars. WHO OWNS THE UNITED STATES? 55 National City, New York $201,340,000 National Bank of Commerce, New York 192,660,000 First National, New York 101,650,000 First National, Chicago 94,123,000 National Park, New York 90,790,000 Hanover, New York 89,170,000 Chase, New York 61,056,000 Continental, Chicago 52,000,000 National Bank of Commerce, St. Louis 50,525,000 National Shawmut, Boston 49,150,000 Corn Exchange, Chicago 46,000,000 First National, Boston 41,200,000 Fourth Street, Philadelphia 39,800,000 Philadelphia National, Philadelphia 38,900,000 American Exchange, New York 38,730,000 Fourth, New York 33,350,000 Commercial National, Chicago '. 33,000,000 Nat. Bank of Commerce, Kansas City 31,400,000 .Mechanics National. New York ." 31,320,000 Bank of New York, N. B. A. New York 31,030,000 Girard National, Philadelphia 30,750,000 Chemical National, New York 30,260,000 Civilized Nations Report N2,64().()()0 People Saving up Money for Old Age — I), posits are $10,500,000,000 — United States Leads -with $3,060,178,611. The people of the United States of all classes and of almost every stage of life are notoriously greal spenders. Compared with the frugal German and tin' economic Frenchman Americans cannot he said to he great savers. We as a people are lavish with our expenditures and the Frenchman, who always figures l national banks we give the following statement of resources of 958 trust companies and 5,331 national banks in dune, 1904: Total resources. Average each. Trust companies.. .$3,188,375,397 $3,120,000 National hanks.... 6,655,988,686 1,250,000 This shows that while there are over five limes as man) national banks as trusl companies in the United States, tin trust companies have about half the "THE HOME OF THE TRUSTS." This is a photographic reproduction of the name-plate in the office building occupied by "The Corporation Trust Company of New Jersey," al Trenton, the capital of the state. This company claims more than 1,200 "principal offices" of corporations of other states with a capitalization of close to four billion dollars. Stockholders meetings must be held within the state — hence all these offices. When you consider that the state chartered nearly 10,000 corporations between 1*'><> and 1902, you can imagine why the claim is made that New Jersey is selling out the rest of us. Almost the entire history of the organizing of great corporations is one of commercial and political corruption. The state of New Jersey issues charters to the trusts. The laws of the state are so framed that the citizens pay no state tax, directly. The income derived from the corporations more than pays the expenses of the state government. Mr. Lincoln Steffens, of the editorial staff of McClure's Magazine — who has been Investigating commercial and financial problems — terms New Jersey as "a traitor state," and adds: "Jersey shows, plainer than any other state or city, how we are all betraying one another, and that what we Americans lack is representative government — not good government, not privileges, not advantages over one another, but FA I It PI. AY all around, and before the law, equality." WHO OWNS THE UNITED STATES? 61 resources and the average resources of the trust companies are over twice as great as those of the national banks. To show the growth of trust company financial power we submit the fol- lowing statement of resources and number of companies in recent years: Number of Companies. Total Resources. 1904. 958 $3,188,375,5397 1903 531 238,554,063 1902 4.17 1, 983,21 4,707 1901 334 1,614,981,605 1900 290 1,330,160,343 1899 260 1,071,525,994 Trust companies are among the greatest investors in stocks and bonds in the country. This is one reason why the}' are powerful both with the public and in the stock market. Banks which conduct the usual sort of business do not invest much in stocks and bonds, for they need to keep their money in readiness for merchants and others who want to borrow it to carry on other kinds of business. This particular phase of banking is called "commercial." The trust companies' depositors largely are of a class who from time to time use their money in securities, but who have deposited it with the trust compan- ies for Bafe keeping and for interest pending transactions of their own, "Com- mercial" banks are criticised for investments of a heavy nature in securities, but thi-> is not so true of trust companies, provided investments are made with due regard to its deposits and not for the purpose of promoting speculative or doubtful enterprises. It may be said that the more the trust companies enter into competition with the "commercial" banks, the more they will be obliged to keep their assets ready for emergency, and the less will they be able to tie them up in permanent investments. The fact thai the trust companies held large amounts of securities during tin stock market panic of 1903 was one of the Causes of deep concern during thai year. With a few exceptions, however, they stood the long liquidation verv well. The wor->l possible phase of this kind of business is where the bank or trust company lends heavily to one borrower or invests heavily in one class of Securities. This makes it possible for one failure to wreck the institution. The extent to which the trust companies of the country are holders of stocks and bonds is but littk known. A recent compilation of the holdings of securities l>\ companies in fourteen large cities showed this concentration of power to control nearly $555,000,000 of stock and bonds. Even the three greatest life insurance companies, the New York Life, the Mutual and the Equitable Life, together hold only a little more than $100,000,000 in excess WHO OWNS THE UNITED STATUS? of this amount. They hold about $658,000,000 of stocks and bonds. So great indeed is this power thai the trust companies of these fourteen cities hold almost as many stocks and bonds as those of all the national banks of the United States, when government bonds are not taken into consideration. Fol- lowing is a statement of the security investments of the trust companies of fourteen large cities oi' the country: Greater New York $236,890,596 Philadelphia 75,809.309 Pittsburg 52,548,300 Chicago 52,199,235 Cleveland 25,052,151 Boston 24,333,188 St. Louis 23,707,558 Baltimore 19,232,541 Rochester 14,858,734 Jersey City 7,208,515 Buffalo . 4,919,684 San Francisco 3,^.00,496 New Orleans 3,131,406 Washington 1 ,793,245 Total $544,945,018 The following comparison shows the trust company investment holdings of fourteen cities and all the security investments of all the national banks of the country, not including bonds deposited to secure bank note circulation and gov- ernment deposits: Investments in Securities. Trust companies in fourteen cities. .$549,945,018 All the national banks in the United States 589,241,085 The following is a comparative statement of the security inyestments of trust companies and national banks of eight leading cities: Trust Companies. National Banks. Greater New York . $236,890,596 $133,816,080 Philadelphia 75,809.369 30,042,098 Pittsburg 52,548,300 19,059,293 Chicago 52,199.235 13,238,840 Cleveland 25,052,151 3,271,039 Boston 24,333,1 88 1 1 ,724,639 St. Louis 23,707,558 8.662.030 Baltimore 19,232,541 7,780,740 Total S509.772.93S $227,594,759 CHAPTER IV IIOW MANY MILLIONS CHANGE HANDS— THE CREDIT SYSTEM. Small Amount of Actual Money Needed in Huge Business Transactions — Ninety Per Cent of the Business of the World Done on Credit — How Loans Are Made — The Clearing House — The Cry Against Reserve Abuses — Unjust Distribution of Property and Wealth. When one considers that the wealth of the United States is about $110,000,- 000,000 and that the money in the country is only a little more than one-fortieth of this amount — less than $3,000,000,000 — it seems marvelous that this amount should serve in all the business transactions of the nation. Indeed it is neces- sary that every inhabitant of the country do with an average of about $31 in carrying on his business. The fineness and complexity of the financial machinery of the country is suggested further when it is considered that, with less than $3, 000, 000, 000 actual money in circulation, the savings deposits of the country alone amount to $3,060,000,000 and all the bank deposits of the country amount to about $10,000,000,000. But if the money of the country i> less than one-third the actual bank deposits, let us look further and we shall see that in a year nearly the whole wealth of the country changes hands — and what with? To solve the mystery in one simple word, it is not wholly money with which the world does business but credit. Indeed more than 5)0 per cent of the biisine^ of the world is done on credit. It i> a usual thing to see items in the newspapers speaking of the •'money market" or the rates for "money." Former Secretary of the Treasury Lyman .1. Gage coined a new phrase recently when he said this should l, r changed and instead we should Use the term "rates f nr credit."' Other authorities have spoken of hank- as factories "factories of credit." Daniel Webster said that commerce could not exist without credit; that credit was the vital air of the system and that it had done more, a thousand times, to enrich the nation than all the mines of the world. The tendency of the times is for the volume of credil transactions each year to gro* more rapidlj than the Bupply of actual mom \ . '1 W but natural to inquire how this business is carried on and it is 68 64 HOW MANY MILLIONS CHANGE HANDS. explained simply when it is said thai the chief principle of credit is collecting many small sums which are not needed and placing them where they are most needed. When money lies idle it does no one any good. If every one carried the average amount of $81 around in his pockel the country would stagnate in a very little time, for there would be insufficient money to make all transac- tions in cash and there would not be enough money piled up any place to be a basis o\' credit. This leads us to the second principle of credit — that there always should he a liberal amount of actual money held in reserve for emer- gencies. For there is a time when credit becomes strained and supplies of actual monev must be at hand for immediate use. - .. n UNITED STATES MINT, PHTLADEIiPHIA. mint is a place of great Interest to every visitor who wishes to seo how money is made. Credit today has reached the stage where dealing in it is a fine science. In a word, tin- business of credit is simply that of lending the use of wealth. It is the banker's business to gather this wealth and to lend it where it will do the most good, for the owner, the banker and the borrower. The banker i-. of course, or should he, an expert in his science. Occasion-, ally a hanker may be a knave, hut considering all the amounts of money handled each year by the men, their integrity is a monument to them. It would he impossible even to attempt to set forth all the methods by which a hanker transacts his business of lending money, hut a i\\v of the principles HOW MANY MILLIONS CHANGE HANDS. 65 may be stated. Not only is it the privilege of the banker, but it is his duty, io furnish credit in the community in which he docs business. The merchant, farmer, manufacturer or other business man desires to embark upon a certain line of activity which will be good for the community, but lie has insufficient ready capital. Other people, perhaps, have more than they can use, but they may not be able to ascertain all the facts concerning the nature of the business man's prospective venture. Here comes in the banker with his special training in the science of credits. When the application for credit is made the banker at once must make up his mind on this question: Has he the ability to earn, and will he pay? It depends upon the kind of business the bank is in whether the loan is made, some banks demanding actual security for loans, others lend- ing on the man's "credit.'" or ability and disposition to pay. Where a bor- rower is not well known he may be called upon to give security such as can be Bold at once in case the loan is not paid as agreed upon. Mortgage loans, Becurity collateral loans, bill of lading loans, etc., come under this class of CTt dit vending. How Loans Arc Made. One of I he greatest branches of hanking, however, is "commercial." This is where a business man has high enough standing financially to "be good" for a certain amount. Such a man has a "rating" by which bankers and other business men know his capacity and disposition to pay. Thus some men may be in possession of a great amount of wealth, but are "poor pay," hard to collect from: while others may be "good pay" — willing to make good their debts if it t ; d>es them their whole life time, hut are poor earners. Either of these classes make poor bank creditors. In the bank doing a general business the first man probably would be mad. to ad\ame a mortgage or other collateral, SO that the banker would not have to be put to the trouble of suing to recover the amount of the loan when it fell due. [ n "commercial'' hanking much of the business is done on simply promissory notes with no assets put up for security. Some times the note i, hi. I have an endorser one who will stand good for the loan it' the borrower does not pay when due. Where there is no such endorsement Hie note is called "one name paper;" where there is one endorser it is called " tu " name paper," etc. In determining on the extension of credit to a pros pective borrower the banker who lends on commercial paper considers the appli- cant i n this wise: Honesty: the borrower musl be trustworthy beyond doubt. Business ability: as honesty without business ability !-- useless commercially tin mat I. r must be considered. 66 HOW MANY MILLIONS CHANGE HANDS. Business experience: the banker musl judge what risk there is in relying upon the ability and reputation of the borrower to do what he thinks he can do, and past history of the borrower is the guide. Hank's previous experience: it the man who solicits the loan has failed, it. almost always bars him from receiving new credit. Condition of business: a man's present status reflects his ability and there fore is a guide. Resources: it' these are not put up as collateral security tor the loan they are of >mall importance, though of course they help to gauge the borrower's ability. People who do not come in touch with great financial transactions marvel at s, )mr of the methods of Wall street and other hankers. In courts of law, juries and often the judges do not understand processes that are very simple and clear to the hanker. For instance, in a recent report of a hearing in bank- ruptcy the following statement is found: "That hanks loan hundreds of thou- sands of dollars to customers without any other security than the good credit, of the brokers desiring the loan," was the cool admission made by a witness in the hearing. It appeared from the testimony that a well known Wall Street hank had been lending a firm of stock brokers about $1()(),0()() every day with- out security and without interest To the layman this seems a marvelous opera- tion in finance. To Wall Street, however, there is nothing strange or startling about such a transaction. It was simply every-day business between bank and broker. In such dealings the broker agrees to keep a certain daily balance d< posited with the bank. The bank in return agrees to give the broker a daily loan of a certain amount, this loan being credited to the broker's balance and upon this he can draw checks in payment of securities which he may buy during the day. The broker's account is closed and balanced each day, and each day his agreed balance must be made good. The broker gains by being able to have his ducks promptly certified. The bank gains by obtaining the use of the broker's daily balance with which it can make profitable loans. Practically tin- bank buys the deposits of the broker by giving him certain facilities u hich In needs in his business. The fact that no security is required for such loans other than the firm's note is not unusual. There can be no bet- security ordinarily than the good name of a firm doing an active and legiti- mate business. Tin- fact that no interest was required is not surprising in view of the fact that in return for these facilities the bank obtained continuous use of the broker's balance without interest. - ■- - ■god v - - _ — ■ r hi 5 r- BO - — '{■ 3 « 3 - - o '- : 2~ r hi - • ■- od • at s - ES *§&« - = > J - -- - 2 » e ! o% « p,* 1 _ « r. : E DqC* - — - r-~ a ^ u~ BO -ill -i :- : -J |J X ' flu -3°0, jg. ti »< go 5 5P u - -- e c : *.S "32 & - u = I I ~ - I - •/.-- = — > B " bog 5 " = c - bo •_ — BO T BO Ef : ^ 1 bp.2 "C 2"*< — G £ ~ — _. m -•*■"£: •/. £ ~ ~ - Oi.ce 3 a o »-.£•- - z -2 to D 00 o5h3 lis HOW MAN1 MILLIONS CHANGE HANDS. It is l>ut aatura] when one considers the size of the credit transactions of the country or the world that doubl should arise over the freedom of this busi m>s from fraud. It will be found upon examination, however, that not only in banking, hut in general business, credit is extended very liberally and gener- ally. It !•- estimated that in the sale of merchandise alone credit is extended h\ business men to the amount of $70,000,000 and so careful are merchants in this line of business that losses average only about 1 ' i per cent. The ( 'learmg House. Oih of the greatest -factors tor extending business today is the bank check method. Time was when every man saved his own money and paid in currency. As has been shown in the foregoing, such a thing would he impossible today. It is altogether probable that had not the system heen invented by which money could be deposited in a hank and he drawn against by check, business would not have gone forward by the great leaps and hounds with which we are familiar. Then was a time even when every checking transaction necessitated the use of money. When the check was paid, money had to be handed oyer by the hank Unless the cheek was deposited hack in the same institution. Soon, however, there developed a system by which this was almost entirely done away with. This was the method called clearing. In most of the prin- cipal cities there are associations of the hanks called "clearing houses. " At _ Jar intervals clerks from each hank in the association meet at the clearing house with all the cheeks the hank has received against other banks in the asso- ciation. Hv an ingenious method the checks are passed around to the debit banks so that a great many will cancel each other. That is, one bank may have received clucks drawn against each of three other banks, and in turn the three other banks may have received checks drawn against the first named bank. It' these checks happened to be for the same amounts they would cancel each other. No money would change hands, yet the transactions in business for which the check payments were made would have been effected just as well as if actual money had been used. When many banks are members of a clearing house and the transactions are very intricate nearly every bank has to pay or ive a balance in currency because the checks will not cancel against each otlnr. It is usually the case, however, that enormous business can be done with little money. For instance, in 1901, the New York Clearing House mounted to $77,020,672,493 and the actual cash balances paid to transact thi~ enormous volume of business were only $3,315,037,741. r.v = t ~ = -E -A z CO - - - W r -. /. a £ M * « n E3 eg w : — - - ' i w S * o - - ■- ?Ei — r. : c- h£ HOW M i\) MILLIONS CHANGE HANDS. I - ins that nearlj $1 1,000,000,000 in one year was done without actual in fact l>\ mere credit and bookkeeping. This method is such a labor- levice that in cur day, May 10, 1901, after the celebrated Northern r 6c panic on the New York Stock Exchange, the New York Clearing House 7,490 in business with only $23,873,115. One day in May, 11)02, the Chatham Hank o( New York settled exchanges amounting to $1,323,694 with an actual cash transfer of only ten cents. An average number of checks d daily through the New York Clearing House is about 500,000. That it would be impossible to carry on modern business now without the machinery of tin clearing house system is an undisputed fact. It seems probable that the present banking system is here to stay, for busi- ness in the use of checks and clearings is increasing everywhere. In the year 1904 the clearings of the London Clearing House increased more than $2,000,- (init. ooo over the year 1903. This was due principally, according to compe- tent authorities, because the public lias recognized the greater safety and facility afforded by the l>ank-> for people of even small means. In New York the hank exchanges from 1900 to 1904 increased $16,000,000,000. National Banking System. Tin- National Banking System of the United States is one of the great cogs in the credit machinery of tin country. It is based on the old principle of using idle funds where they will do the most good in business. It is compara- tively easy to organize a national hank, any set of men having $25,000 capital g able to start one in a town of not more than 3,000 inhabitants. Where then an not more than 6,000 inhabitants $50,000 capital is needed; 50,000 inhabitants need $100,000 and over that $200,000 or more may be used as Permission i^ granted by the government on application of five indi- viduals, corporations or firms or associations not being eligible. One-half of ■ 1 capita] -lock musl he paid in in cash before the government will certificate of organization. Promissory notes will not do. As soon as tificate is issued preparation must be made to pay in the rest of the . this balance being due in not more th;uu five installments of 10 per ';. one at the end of each thirty days after grant of authority to begin issui d. ry national bank must keep on deposit with the United States treasurer earing government bonds to protect depositors. The necessary amount '■ of Si 50.000 capital or less is one-fourth of the amount of tip . while for capital over that amount the minimum is $50,000. It HOW MANY MILLIONS CHANGE HANDS. 71 is accessary that at least three-fourths of the directors of the hank shall reside in the state or territory where the bank is located. Any stockholder who is a citizen of the United States owning ten shares or more of stock is eligible as a director, provided the stock is not incumbered. One of the chief privileges of a national bank is to receive deposits of the government funds not held in Washington and to issue bank circulation or bank notes. Both the privileges are safeguarded by deposits of government or other approved bonds with the government at Washington. Every national bank may issue circulation to the amount of its paid-in capital. The amount of bonds to secure this circulation (and these bonds must be United States Gov- ernment bonds) must be equal to the face value of the amount of notes issued. This deposit of bonds is in order to insure payment of the notes on demand. If a bank fails to redeem any, the Comptroller of Currency is empowered to appoint a receiver to sell the bonds and redeem the bank's outstanding circula- tion. A national bank note is not legal tender, is not receivable for customs duties, is not good tender for payment of interest on the national debt and is not counted in the reserve of a national bank. Otherwise national bank notes serve as ordinary money. The profit in a national bank issuing bank circula- tion is in the difference between the amount of interest it can earn by lending this money out in the credit market and the cost of the bonds, interest, etc. The same holds true in banks having on deposit, secured by government or approved bonds, funds of the nation. The reason that the government has money in the national banks at all is that it is not good to horde money in the Treasury at Washington. Money is made for use among the people and the hanks are the most serviceable agents in getting this money back into circula tion. Hanks that put up bonds and secure such government funds are called ( lovernmenl Depositories. One of the principal regulations of the national banking act is that pro- vision by which a reserve fund shall be kept on hand in order to proted depos itors who need to draw out their money. It is of course, as has been pointed out, the province of a bank to collect deposits and to lend them. It has been found that of the million^ of money changing hands much of it is in credit and not actual money, yet all these transactions are done in the faith that the money i> there if needed. It is also found that the amount necessary to saf< guard the depositors, save in times of panic, is very small. The law provides thai in the country hanks a reserve of only 15 per cent ,lll|st '"• held, and only two-fifths of this need be kept in their own vaults, the remainder being privileged to go to banks in a Reserve City or a Central HOW w i.\ ) MILLIONS CHANGE HANDS. i; , m City. Central Reserve Banks musi keep 25 per cent of the net depos- m hand in their own vaults. Reserve Hanks musi have 25 per cent in m imt tlu\ have the privilege of depositing one-half of this with a bank in a Central Reserve City. The Central Reserve Cities are Chicago, New York and St. Louis. The Reserve Cities arc: Albany, Baltimore, Brooklyn, B ston, Cincinnati, Cleveland, Columbus, Dallas, Des Moines, Denver, De- troit. Dubuque, Houston. [ndianapolis, Kansas City, Kan.; Kansas City, Mo., Lincoln, Los Angeles, Louisville, .Milwaukee, .Minneapolis, New Orleans, ia, Philadelphia, Pittsburg, Portland, St. Joseph, St. Paul, San Francisco, innah and Washington. Cry Against Reserve Abuses. The national banking system often is not understood because of some of its complexities. There lias been a good deal of critic-ism against it by malevo- lent persons who have charged that the government should not favor the national banks. It remains -i fact, however, that very little money is lost through the failure of national banks, either through swindle or through l)id business judgment. A system of handling the great credits is ssary and as yet the lawmakers of the country have devised no better method. One thing against which critics have railed most is the "pyramiding" of rves. We have seen how a country national bank may lend all but 15 per of iN deposits. Even three-fifths of this can go to an approved agent in I; - ( ity. \<>u the bank in the Reserve City may lend out the greater part of this reserve of the country bank, because it itself, needs to keep only 25 per cent reserve on all deposits of all and even half of this may be sent to ' ntral Reserve bank. What is the result? Wall Street banks, being the largest and most powerful and in the most influential of the Central Reserve ittract balances from almost every bank in the country. It is often --.ir\ for banks in other cities to do business with New York and there- sier to have money on deposit there. The huge banks of Wall onstantly offer inducements to banks of interior cities to deposit with 1 •■" the reservt provision of the National Banking Act it will be hat r . jupposed to be held intact to support deposits, drift to the Res or t entral Reserve Cities and are loaned out to within a very small nal percentage. Critics of the system say that while the for reserves is kept out of local circulation, the method of per- - to deposit portions of the reserve with banks of other cities HOW MANY MILLIONS CHANGE HANDS. 73 serves to give \Y;ill Street the benefit of millions of dollars to lend out which really are supposed to be held as reserves. To show how this works it may be said that in the year 1904 the lawful money reserves of all the national banks of the country increased $55,000,000. The gain in lawful money reserves of the national hanks of New York City during the same time was $24,000,000. To bring it down to a more centralized comparison, the gain in lawful money reserves of the four great national banks of New York — the National City, the National Bank of Commerce, the First National and the Chase National banks — in the same period was .S°,(),(j()(), ()()(). Tims 85 per cent, of the gain of reserves of New York City and !>S per cent of the entire cash gain of all the HAULING INGOTS OF SILVER BULLION IN THE PHILADELPHIA MINT. national banks of the United Stales were by these four banks. As yel no serious accidenl has resulted from llii-> concent ration of national banking reserves in New York to be lent out for the benefit of big financiers, for it has been found that, except where fright occurs, a very small amount of reserve is necessary. It is generally the case that if mone} is needed badly in one place if can be drawn readily from the bank where the reserve has been depos lied. II is Only where 1 1 1 ; 1 1 1 \ people and mall\ ei HillllU II 1 1 les are disturbed at one tin:' thai withdrawals are general. Then withdrawals may strain credil so I h.it some! ones panics ensue. When disturbance arises in the money markel the (zovernment, because it HOW MANY MILLIONS CHANGE HANDS. is responsible in a great degree for the banking methods of the country, fre- quentlj comes to the aid of the financiers. This is done in several ways, but all methods Lead to a release of money held in the vaults of the National Treas- ure so that the people will have the use of it. One way has been to purchase mmenl bonds to retire them from circulation. This is done by the Secre- tin: Treasury calling in the bonds at a given price. It' the money is badl) needed the bankers will buy up a lot of the bonds and exchange them lor cash, which in turn can he lent out where it will do the most good to ral business. Another method often used is to deposit a large amount of money in the aggregate among a number of national hanks on government bond security. In the fall when the farmer needs money to move his crops this customary method. Then the government does not send the money to W ". Street or to the big reserve centers, hut directly to the small banks in the agricultural districts. Not only does this frequently check great uneasiness, hut naturally it helps, by restoring confidence, to keep money rates down to a normal level where the average business man will be able to get accommoda- tion^ without being cramped to pay for them. \ re criticism has arisen against the method of depositing reserves in Central Reserve Cities to the degree that permits Wall Street to profit more than any one else. One critic recently said: "Money in circulation was below *14 per head of 35,000,000 population at the close of the civil war, in 1865, but is now over $30 per head of 80,000.000 population. The natural flow of so great an increase should have furnished the only source of supply to the money market. These malign permissions thus by indirection override natural demand and supply and constitute a prefer- in law for the use of money and credits based thereon. No law could be i to directly accomplish this end. Wall Street gets the lion's share and by • as has tin country at its mercy, through capitalistic juggles. Hun- dnd- of millions of dollars of loans, — not in national banks only, — have grown from the reserve there disbursed, and without which the great "watered" capi- ould not have been "floated." which oftentimes tax the very necessa- irn dividends on the "water." "Artificial persons (corporations) or those who control them have thus preyed upon the people by method- which natural persons, however numerously ted, can never collectively exercise, and made the creator secondary and tributary to the creature. The permissions have converted the plain demand very opposite, and instead of the reserve being faithfully held only justifiable purpose of law in compelling the money to be with- HOW MANY MILLIONS CHANGE HANDS. 75 held from local public use, viz. : to protect depositor*, they are made a tender for speculative money supply, and basis for illegitimate ventures. Money is the life blood of all undertakings, and the measure of all values. Labor, industry. and property arc all gauged thereby. It should therefore circulate without favor or impediment of law. "President Roosevelt advocates 'a square deal for every man, no less, no more.' How is a square deal possible under these permissions of law? Again he says, 'Ours is not a government which recognizes classes.' That in a sense is true, but had he said, 'Ours is not a government which creates classes,' it would not be true. This great monetary discrimination creates an on-Ameri- can favored class, and provides for the already rich a special path to greater fortunes. Means, opportunity and incitement, have been thereby provided for people of small means to risk their all on narrow margins, and for the already rich to exploit the great industries and products of the country by trusts, com- bines, corners, and false capitalizations, for their further enrichment. "National laze which thus enables unjust distribution of money, thereby enables unjust distribution of property and wealth. If the reserves now with- held arc too great to be everywhere kept intact in money for security of depos- itors, let the required percentage be reduced. Rich indeed is our country, and gnat its seeming prosperity. But multi-millionaires, and their colossal for- tunes acquired as by a magician's wand, attest unjust law to be their founda- tion. Belief in the goodness and Fatherhood of God forbids the idea that lb' creates men with such disparity of brains. "In vain will righteousness and justice between man and man be inculcated, so long as this root of unrighteousness and ///justice imbedded in law. continues to widen disparities and ripen its fruits of prodigal wealth and luxury on the One hand and hardening conditions of living and progress in the world on the other. Substantia] repeal of the permissions was recommended by Comptroller Dawefl in his annual report December, 1<)()(), to Congress, in which he discussed the danger, which had made itself apparent years before, of continuing the practice. Even a gradual repeal, first making it apply only to Philadelphia and Boston banks, would probably distress Wall Sheet. Hut there is a con Bideration more important t<» the people <>f this country than regard for stimu lated Wall Street prosperity, viz.: Equal laws, and public justice. Without these, liberty itself uill fail." COMMODORE CORNELIUS VANDERBILT, Lini h and . rbilt Fortune. WILLIAM WALDORF ASTOR, Now a citizen of Greal Britain, but the richest owner of United States real estate. WILLIAM K. VANDERBILT, I RUSSELL SAGE. The Famous Financier. CHAPTER V PERILS THREATENED BY THE MONEY TRUST— THE DANGER OF BANK CONCENTRATION. X caring the Parting of the Ways in the Field of Modem Blinking A Sys- tem of Federation or Brotherly Alliance a Probability of the Future Funs that Aggregation of Capital May Become Mon Powerful than the Government Itself. It is generally believed at the present time that the world, and especially the United States, confronts a great change in banking. The banking system of the United States is based on the principles of liberty and independence. Practically any one in this country can establish a bank, either under the national or state law, provided he lias sufficient capita] and can comply with the other necessary but moderate requirements of the laws. As a result of this free system there are nearly 1 !•,()()() banks in the country, lint the independent banks, like the small trader in competition with the industrial '"trusts," have learned that their stability and business are best promoted by co-operation, and hence there has developed a large measure of federation between them. The organization of clearing-houses and of bank- ing associations throughout the country for the purpose of facilitating busi ness transactions, and notably the issuing of loan certificates by associated banks to help out feeble brother institutions in time of panic, have all been measures of alliance for protection of the small banks. Developments which have resulted in such marvelous concentration as that seen in NV« VTork City under the had of the "Standard oil*' <>r National City iiank BUggest to man\ observers that in the not far distant future there will in only a few giant banking institutions in the leading cities, with branches scattered all oyer the country. Others believe that fraternal federation will result in the establishment of an immense centra] government bank of reserves, similar to the liank of England, to which all the other banks «,f the United States will be subordinate. [f this is true, then we are near the parting of the ways in the field <>f modern banking. On the one side there is independence so loved by all - s PERILS OF THE MONEY TRUST. square dealing; on the other, concentration. On the one side there mi of federation or brothcrlv alliance; on the other there is dangerous 1 Is plain that each system lias its advantages and its evils; its points strength and its elements of weakness. Carried up to a certain point con- ration ma\ be economical and advantageous to the whole country. It is lesired that interest rates shall not he so high when money is needed by the farmer or planter to move his crops or for the merchant or manufacturer ,ir\ on his business, that commerce shall suffer by monopoly power. |) ibtless it would he dangerous to put the money market of the country hi thi' hands of a f < u bankers for good and all. On the other hand, in mod- ern and improved business, it is plain that it is unwise to diffuse the power of making interest rates among thousands of bankers, so that the borrower of money in rexas max have to pay as high as 10 per cent, as has been the years, while New Yorkers could get loans for 2 or 3 per cent. The chief" danger at present is that the tendency towards concentration will be t.»o far and that it will put the credits of the country too largely under the control of men more concerned in the operations of the stock market and Wall Street than in the legitimate commerce of the country. only is the government exercising a jealous care over this tendency urd absolutism in the "Money Trust," but all fair-minded writers and financial critics are pointing to the danger, not of the mere growth of big hank- in proportion to the expansion of the wealth of the United States, which ealthy and to he expected, but of bringing about a condition where the will actually hi- what some people think them to be already, Hy all powerful. BigTi ss alone does not mean that the hanking methods of today are dan- B . 5S, in fact is one of the developments of the age. Not only in United States, hut elsewhere, there are powerful groups of great hanks ipidly absorbing each other. The Deutsche Bank of Berlin, for . heads a group of h.-mk- with $205,000,000 capital, and there is an- oup in that city with $81,000,000 capital. 1 other countries there are similar institutions and groups of powerful ry growth speaks an apparent necessity for expansion in the 1 1 industrial conditions. .More and more, as great corporations >lil style, cona rvative, "commercial" banking gives way to "financial" d herein lie- one of the gravest dangers in the hanking concen- tration of i'c. lit history. The day when the smaller merchant or trader bor- PERILS OF THE MONEY TRUST. 79 rows on his promissory note the money needed in his business is not wholly passed. Indeed the greatest corporations still have access to the commercial paper market. But obviously, with the growth of the "trusts," borrowed money comes largely from gigantic bond issues and new capital from "'watered," or possibly "unwatered," stock issues. The banker who heretofore has done a "commercial" business — that is, lends money to merchants, rather than backs corporations by underwriting the securities or Lending on them — is the banker upon whom the commercial com- munity depends for aid in the usual walks of business life. It is not intended here to imply that banks throwing the weight of their prestige and resources into the field of speculation, promotion and investment do not perform their just and valuable functions. Many a railway would not have been built bad not banking interests come to the aid of promoters. The distinction, however, between "commercial" and "financial" banking must be sharply defined. For instance, let it be assumed tli.it marginal specu- lation in stocks is to continue and to be aided by our banking institution-. On.- of the principal assets of the banks in time of money panics, when the mercantile and commercial bouses of the country are in need of assistance from I be banks in order to keep business and prosperity alive, is found to be a mass of securities. Unencumbered and valuable as they are supposed to be for re- demption into ready money with which to meet crying demands, actual prac- tice proves they are of little ready service. A page taken from recent financial history shows that when a money pinch came on in the fall of 1902, banks were largely loaded up with security col- lateral. When business of the country suffered from enormous liquidation the banks in almost no degree took their stocks to market in order to free capital for other commercial needs. Loans out on security collateral were called in and the owners had to -ell their stocks in a declining market in order to meel their loan-, lint Mm- banks rather than cause further panic by adding their holdings to those in process of liquidation, bought more in time of financial peril, thus -fill further tightening money supplies and adding to the weight of liquidation upon the country. Indeed in the last thirty years the banks have in- creased their holdings of securities from a modest amount to aboul $500,000,000. \V< have seen what the tendency is among members of the Money Trust to work together. This affiliation through the quesl for dollars in "high financial" operations has developed* as i- shown later in this volume, at a class -pint that makes even competing money interests fighi Bide by side when opposed |> v ., PERILS OF THE MOM.) TRUST. So grea , ftrc the profits along the line of risky promotion and „ financiering that frequently thej have tempted bankers from the rtu , even as viewed ... the light of "high financial" ethics. Frequently, . „,. fi n d the tendency for a development of banking methods which , themselves impair the old fashioned moral code of "Honesty is the besl It i. not beside the point to say thai the hank president whose busi- ; 8 .,, |„ :l frequent member of speculative syndicates is tempted to turn quickly and easy, though doubtfully honest, dollar by using his wards' de- posits for the purpose of personal speculation. Of course this amounts to lothing h\ barefaced peculation. Still, small as the hazard of modern banking this direction, the danger in some measure can he laid to the door of "high finance" banking. \\ 'hat the outcome of both expansion and the tendency to embark further on the sea of "financial" banking (and the former is due largely to the latter) \ dear. It appears quite logical, however, that a day must come when the banks whose business it is largely to serve the Wall Street speculative and underwriting constituency must be equipped with resources specially adapted to this sort of business, leaving "commercial" hanks to their particular field. The Wail Street Journal, a paper published in the interests of the capi- talists in the heart of the country's financial center, points out these dangers ,ii this mannt r : \\ hat is taking place is a concentration of banking that is not merely a normal growth, but a concentration that comes from combination, consoli- dation and other methods employed to secure monopolistic power. Not only but this concentration has not been along the lines of commercial hank- Tin- great hanks of concentration are in close alliance with financial sts intimately connected with promotion of immense enterprises, many ,. in being largely speculative. The hank credits of the country are being dlj concentrated ill the hands of a few hankers, who are more interested in it- financial [watered slock-, etc. | side than in banking on its centration as this is dangerous in a political sense. The people : •. been greatly disturbed by the concentration that has taken place industrial world, and the fear that these aggregations of capita] would powerful than tin government itself has led to the enactment of ik< tin Sherman anti-trnst law and to measures like that of the suit Northern Securities Company [the great railway merger of the Me. nt rat ion in the industrial world is a far less menacing PERILS OF THE MONEY TRUST. 81 condition than concentration in banking. The men or the set of nun who control the credits of the country, control the country. And, if this concen- tration continues at the rapid rate with which it has progressed in the past ten years, there will surely come a time when the people, alarmed at the growth, will rise up in some vigorous measures to assert their power. Such an uprising- would involve the most serious consequences and would likely he carried to the most unreasonable limits. Yet there can he no doubt that further concentra- tion of banking power in New York is the end in view of some of our leading bankers. They believe that there will be a further reduction in the number of banks, and of a further increase in the power of the big banks. That is one reason why this banking concentration needs to be studied and its consequences carefully weighed. "Hut there i- still another reason why this development in modern banking is open to criticism. It is largely a departure from commercial [legitimate] banking. It is turning the power over the bank credits into financial [stock promotion | channels. So long as the country is prosperous no immediate danger may be apprehended from such a development as that. Moreover, no one can question the extraordinary ability in which these institutions are con- trolled, nor the intention of their officers to operate them on a policy that will secure them against any possible disaster. Hut it is always the unexpected th.it happens, and our panics are commonly ushered in by some unforeseen calamity, and it I- a fair inquiry to make whether banking conducted on a 'department store' principle, with credits concentrated in a few great institu tions, and with these institutions having large interests in financial and specu- lative enterprises, would be in a position in such a moment of unexpected Calamity to do more than to protect the financial and speculative interests with which it i-* allied. In such a contingency what protection would be left for the great commercial interests of the country? ••'There has been a congestion of money in New York,' said a report made I,, i| 1( . recnt convention of Illinois bankers, 'which leads to unwise speculation ,.,,.,! crcai • conditions resulting in unstable and fluctuating rales of interest.' To this condition banking concentration contributes." JAMES H. KYDE, JAMES W. ALEXANDER, Equitable Life Assur- President of the Equitable Life Assurance ■ ty and owner of a majority • '" " ' li - . of iis capita] stock. OEOBGE GOULD, JOHN A. McCALL, President of the New York Life Insurance Co. CHAPTER VI THE LIFE INSURANCE TRUST, ONE OF THE GREATEST FINAN- CIAL SCANDALS OF THE AGE. Money Power of Life Insurance Companies — How the People's Savings Are Used for 'Prust Promotions and Other Speculative Enterprises — The Scan- dal and Jealous Strife for Control of the Enormous Holdings of One Com- pany — Who Owns the Surplus? — Gleanings from the Committee Report. It ls doubtful if a very great number of tbc thousands of people who have invested in life insurance realize the magnitude of the power of the insurance companies, or that next to the banks these institutions control more of the savings and wealth of the country than any other single combination of finan- ce rs. Rut such is the astounding fact. Today the total assets controlled by the life insurance companies of the Unit.-d Stat., amount to at leasl $2,500,000,000, while there are at hast 25,000,000 life insurance policies of all kinds now outstanding in this country. When it is known that there are only 7,305,448 people in the United States with savings bank deposits to their credit and that the total of the sayings deposits is $8,060,178,611, while all other kinds of bank deposits bring the total deposits controlled by the banks of the country up to about $11,000,000,- 000, it will be seen what a great factor are the small sayings which the people contribute to these insurance concerns. The great inter.. t which bas developed of late in the affairs of the insur- ance sompanies is due largely to the remarkable growth of the institutions. With 25,000,000 policies outstanding, many of them, of course, representing several policies on the lite of one individual, nearly every person in the United es i- directlj interested in life insurance. If each person in the country i. not insured himself, doubtless some relation near enough to him has invested in this sorl of a saving institution to make it worth while knowing what this great aggregation of financial power is and how it acts and USes its power. That this interest has been so lively that the whole country has to some <\lenl mad.- an investment in insurance is shown bv the figures which indicate Hie growth <>f this financial power in the last twenty five years. In 1880, when life insurance was not so well Known and well tried as now, the assets of H'.i st THE I IFE INSURANCE TRUST. all lit'.' insurance companies of the United States amounted to $452,000,000. s was 1.01 percent of the wealth of the country a1 thai time— $42,000,000,- Today, with the wealth of the country increased to $108,000,000,000, life insurant assets have rushed up to $2,500,000,000, or 2.42 per cent of the nation's wraith. The gain in the wealth of the country in 25 years was 1 PVJ per cent ; but the gain in life insurance assets was 454.2 per cent. This is an extraordinary statement, but it is true. And, furthermore, as startling figures can be broughl forward to show the rate at which the annual income of these insurance companies is growing. In 1901- the income of all companies of the country was marly $600,000,000. In the fiscal year of 1904 the government of the whole United States had an income of $684,000,000, or only $84,000,000 more than the life insurance companies operating under this government. I low rapidly life insurance assets have increased in the United States is >hown by the following table, giving the total assets in five-year periods from L880 to HM).-, : 1880 $ 452,000,000 1885 551 ,()()(),()()() L890 770,000,000 1895 1,159,000,000 1900 1,742,000,000 1905 2,500,000,000 [1 is of interest to compare this growth with the estimated increase in the wealth of the country since 1880. This is shown by the following table: Per Cent of Wealth of Country. Life [nsurance Assets. Assets to Wealth. 1905 $103,000,000,000 $2,500,000,000 2.42 1880 1-2,000,000,000 1)52,000,000 1.07 [ncrease .S59, capitalized the institution for $100,000. At that time the concern was managed by those who owned this stock, the policy holders dialing in dividends and profits about like those of other com- panies but not having the right to vote and say what should be done in the man- lent of the society. When Hyde, senior, died he left about 60 per cent of thi> stock to his miii. who became vice president of the company. The society ad become very powerful and prosperous. Life insurance had become a method for people of small means to save their money. The assets of the society grew ich an extent that new capital stock was not needed to run the company, for Dney of the people was sufficient. In time this grew until today the com- bout $478,000,000 in securities. Of this the policy holders could ,000,000 and the stockholders about $81,000,000. It will be seen, it power was centered in stock left to young Hyde, for $60,000 ontrolled the comoany and therefore controlled $187,000,000 of invest- ment s< curit '■-i for any young business man was this power that the senior H J de kft *' ! nt Alexander the trusteeship of this controlling stock until THE LIFE INSURANCE TRUST. 87 his son James H. Hyde should reach 30 years of age. It will be seen, then, that when the row broke out Alexander had but one year to remain in power, unless he could get Hyde's consent. If an ulterior motive were desired it could be possible to say, as in fact it was said, that President Alexander wished to dis- credit the young vice president before the financial world in order to force his resignation and then change the voting power of the company so that Alexander would continue in control after Hyde reached 30 years of age. Whether this be true or not, the war that resulted went so far that many of the nooks and crannies of the world of finance, generally so dark that none but the "insiders" could know what was there, were explored by the business searchlight. In the first place President Alexander declared that it was not just to permit a condition which did not allow nearly 600,000 policy holders of the company a voice in the management of their $487,000,000 of savings. To that end one of humanity's pleas for the "square deal" arose in the demand by the president that the company be mutualized — that is that, whereas before the officers and directors were elected by the vote of the stockholders (really one man, James H. Hyde's representative), now every policy holder should have a vote at election. Inas- much as other big insurance companies have this method of voting, the Hyde party conceded to this demand. Hut this was because it was expected the policy holders could be controlled as easilj as the stock. The stumbling block to peace terms was the enormous surplus of about $81,000,000, which under the law was owned by the stockholders, hence by Mr. Hyde and a few others. It was feared that the Alexander party had designs on this vast fortune; hence Hyde decided to fight. On tin board of directors of the Equitable Life were some of the greatest financiers of the world. Most of these men threw the power of their influence to Hyde. This incensed the Alexander interests, who seemed to be seeking con trol, although they professed only to be seeking the best interest <>f the policj holders. The result was charges of the most serious nature made against Hyde and many of the most prominent of the directors. Some of the charges made against Hyde and his friends wer< : 1. That Hyde charged to the Equitable Life Assurance society the expenses incurred in his format ion of the Cercle Francais; the expenditures due to hi> four in hand coaching trips from Holland house to Ardslcy through the park, in which Alfred Vanderbilt participated; private dinners given bv him to distin guished individuals, chief among them M. Cambon, ambassador from France to the United States. That with all these things he burdened the Equitable exchequer, asserting anything he did that brought him into the light of pub- THE I III- INSURANCE TRUST. liciti limbic advertising for the Equitable and thai the society therefore ' to p.u for it. That the item <>t "advertising" showed the results of these extraordinary expenditures !>\ its enormous increase in the last few years. The advertising item alone in 1904 exceeded $500,000, although given in such ;i way that it was not possible to tell from il what the real expenditure was. The items "commis- sions, advertising, postage, and exchange," being taken together, totaled at In 1903, without "commissions to agents," the items "adver- tising, postage, and stationery" reached the staggering total of $700,971. SO. :>. That the ventures were financed with Equitable funds, by which private individuals profited more largely than the life assurance society, although it was Equitable money that made the investment possible. !. That there was impropriety in the managemeni of the financial affairs of tlie society. o. That the manner of life of James Ila/.cn Hyde raised questions as to his business r< sponsibility. (i. That Hyde was in absolute control of the surplus of $80,79-1,269, and that while he could not take it personally he could, by an extraordinary expendi- ture, materially decrease or entirely dissipate it. ", . That through his influence there was carried in trust companies and other institutions in which he had a personal interest, money that should be invested and earning inter* si . That the Equitable conservatism was at an end, and that the expense it which insurance was carried by the society was increasing yearly. 9. That by the arbitrary exertion of his will he forced many expenditures that were inadvisable and which, were they known, would he injurious to the con- tinued prosperity of the society. lu. That he carried numerous personal employes on the roll of the Equit- able and insisted they should be paid from the Equitable funds. 11. That he used hi- portion as chairman of the finance committee of the to obtain hi- election as a member of the hoard of directors of many institutions. t Hyde held a club over the head of every officer of the society; it impossible for them to do other than obey his dictates; and that r to depose or dismiss any officer or employe who opposed his will. since Hyde came into control the policy holders did not have the t the) reposed in the management of the company during the lifetinx of his father and the period immediately following his death. THE LIFE INSURANCE TRUST. 89 14. That Hyde's domination already- had caused dissension in the board of directors by the arbitrary enforcement of his will, one of the occasions being that on which he insisted the society should pay for the Canibon dinner. In turn the Hyde party responded with countercharges of breach of faith by President Alexander. Some of these charges were: 1. That Alexander paralyzed the Equitable society's credit. 2. That he did everything lie could do to hurt the society and nothing whatever to help it. .'3. That he broke his promise to keep quiet, and opened up "the sewers" in violation of this promise. 4. That his charges brought against Hyde were untrue. (a)— That Williamson, who had been alleged to be the gardener at Bay- shore, whose wages were stated to be an extravagant figure, paid by the society, really was the confidential man in charge of the foreign business of the Equitable, who had been with the society many years, his services dating back to the time of the late Henry B. Hyde, whose stenographer he was, and that Williamson handled the foreign business of the Equitable from the office of Hyde at his residence, !) West Fortieth street, New York. (b)--That the Canibon dinner, the expenses of which were said to have been $30,000, really cost only $6,000, and that this dinner was a business venture and not a •"society" affair in any way. There was not a society man there. All the guests were selected because of their prominence in a business way. (c) Thai Alexander had as much to do with getting up the affair as any one else. Five of Alexander's supporters were there. All the directors wire invited. It was a discreditable thing for the exact situation to become public, but Prcsidenl Alexander "besmirched the society" by bringing it out. All this was very interesting to the newspaper reading public and the slock holder--, but tin dcvelopmenl which raised the question as to how the savings of the policy holder^ were being used caused the greatest public clamor. four of the most influential directors of the Equitable wire August Belmont, American representative of the great European money-lending famih of Rothschilds; George J. Gould, head of the grcal capitalistic family of Gould and in control of th«' Gould Bystem of railroads and other big corporations; Edward II. Harri man, head of the gigantic railway system of America which is now affiliated with the Rockefellers, and Jacob Schiff, Mr. Harriman's banking partner in the firm of Kuliii. Loch \ Co., iIk- most powerful private banking-house in America, and director with Harriman and others iii mam big corporations. Besides these men were oilnr millionaires such as A. d. Vanderbilt, I). II. Moffatt, ('. Ledyard THE LIFE INSURANCE TRUST. H r, John Jacob Astor, M. E. [ngalls, A. J. Cassatt, James J. Hill, Henry C. 1 i, i . \. Bliss, Chauncey Depew, 1). (). Mills, Bradish Johnson, V. P. Snyder, .1. .1. McCook ami others, who threw their influence to Hyde. New, when recriminations came thick and fast it was said that these railway presidents and bankers were in the directory, not for their health, but to make mom \ out of the policy holders by selling to the Equitable Life Assurance society millions upon millions of the stocks and bonds of their companies at high prices and getting fat commissions for doing so. Thus they were charged with being in the doubtful position of not being able to act justly by the policy holders of the Equitable in selling stocks and bonds, for it was said naturally they would try to make good profits for themselves on these sales. This was one of the principal objections raised against Hyde, for he was said to have favored huge speculative schemes with these men, using the money of the Equitable. An effort was made to oust Messrs. Schiff and Harriman because it was said in one year their firm of Kuhn, Loeb & Co. sold to the Equitable $22,000,000 of bonds. In this fight the personal honesty of the men was not impugned, but it was 1 ted that they could not justly act as both buyers and sellers. It was stated that oik of the principal reasons why Mr. Harriman was on the board of the company was because he Deeded its aid in borrowing huge sums of money in his t railway financial schemes. Another development which did not appear just to those who were waging war against a system which would permit $51,000 par value stock of the Equit- able to control $487,000,000 of wealth, was the fact that some of these powerful directors had almost no stock. Messrs. Harriman and Schiff were what were known a- "five spotters," having only rive shares of stock each, though of course this -to on behalf of the society; that whatever dealings his linn has had with the Equitable society have been most advantageous to the latter. "If his firm has sold high class investmenl bonds to the Equitable, il has -old o| tin' same bonds many more millions during the same period to other insurance companies in which Mr. Schiff is not a director. "No offer, Mr. Schiff says, has at any time been made by him to Mr. llyde lOT Ins majority stockholding in the Equitable society; to the contrary, Mr. Schiff has insisted throughout that if the stockholding were to be dealt with nothing must he done with il except it. retirement by the Equitable Assurance itself under aulhoril y of law ." A typical implication of duplicity in the financial affairs of the Equitable, Uh;i1 i- '.die,! in modern banking circles "high finance," was that connected with the purchase of the Western Maryland Railroad in dune, 1902. This road was nil. 1 ill. INSURANCE TRUST. .Jit to ui\e the Gould railway system a tide-water terminal at Baltimore. \\ !i another small road the Western Maryland connects with the Wabash. The I wa> taken ii|> h\ what was known as the Fuller syndicate of which George .1. Gould, one ot' the so called "dummy" directors or "live spotters" of the Equit- able Society, was a prime mover. It was said he induced a number of the - ot' the assurance society to become interested in the syndicate. Although this pool paid only about $8,751,000 for the Western Maryland, two bond issues wiie promptly math', their aggregate being $85,189,000. The first issue was for $25,189,000 ot' first mortgage bonds and the other a second mortgage for $10,000,000. The capita] stock of the road is $16,000,000, making in all over $50,000,000 securities for the road which cost less than $9,000,000. On this basis then would he about IS per cent value, and S°, per cent "water" in these rities, although doubtless much of the proceeds of the stock and bonds when sold weid to build up property. Tie officer, of the Equitable put $1,830,000 into this venture. The society took $1,01 ii. (KM) in shares in the syndicate formed to sell the bonds, paying in cadi $915,000. It also purchased $1,000,000 of bonds, paying $915,000 for tin m. Both of these investments at one time showed losses, according to the n ports of the society. Besides selling to the Equitable Life, the Western Mary- land syndicate sold out to the Mercantile Trust company, the Equitable Trust company, thi Lawyers' Title Insurance company and other financial institutions which the Equitable Life Assurance Society either controlled or owned. ! ii the fight for the control of the Equitable, therefore, was simply the management of the insurance business, but the vast financial power which came from the company's control of certain banking institutions and its influence on others, for instance, in the published records Mr. Hyde was a mera- I" r of the hoard of directors of at least fifty well known financial institutions. • of tin in are: the Mercantile Trust, Equitable Trust, Lawyers' Title nd Trust, and Lawyers' Mortgage companies of New York; the Commercial t and the Franklin National bank of Philadelphia, Mercantile Safe Deposit York, Security Safe Deposit of Boston and Missouri Safe Deposit of Louis. These, with the Mercantile Trust company. United States Mortgage Trust company, and Fifth Avenue Trust company of New York; the Central and Bond company. Fidelity Trust company of Philadelphia, and the Trust company and Union National Bank of Newark: Union Trust of Elizabeth and the Esses Countv Trust company of East Orange 1 in the Equitable Life-Mutual Life National Bank of Commerce financial powers. THE LIFE INSURANCE TRUST. 93 In the chapter on the "Money Trust" it was stated that there was a great interrelation of financial interests between the three bi*^ insurance companies oi' New York and the banking powers. In addition to the group just named must be considered the affiliations of the First National Bank of New York, or "Mor- gan" institution, which includes the influence of the First National Bank of Chicago, the Chase, Liberty and Astor national banks of New York, the Man- hattan Trust company of New York and the New York Life Insurance company. Apparently nowhere else in the world is such a huge dominating financial interest shown. But this chain extends still further through friendly relations between the Equitable and the Mutual, for these two practically control the National Bank of Commerce of New York, which in turn is affiliated with the National City or "•Standard Oil" bank. This National Bank of Commerce is one of tin largest banks of the country, which, with capital, surplus and deposits control* $189,000,000. These two life insurance companies and this bank form the cen- ter of a financial web reaching out through banks and trust companies in various cities with ;ism ts and deposits of more than a billion dollars. All told, through these myriad interests marly $2,000,000 was influenced by the power wielded by the $51,000 nominal value of Equitable stock owned by young Hyde, which he increased later to about $90,000 nominal value in order to strengthen his grip of influence on the Equitable's policy holders' wealth and savings. What tin actual value of this capital stock of the Equitable was lias been in doubt. Before the row broke out fourteen shares of the stock, which by the way paid only 7 per cent dividends, were sold al $3,000 each, or thirty times their par value of $100 each. About that time it was report. d that Hyde hail been offered $15,000,000 for his firsl $51,000 of stock. At that time ii was said ndard Oil"' wanted the stock. Some of t he financial investments of the Equitable society in financial institu- tions follow : ( 'apital ( )w in (I by Company. Slock. Equitable. Deposits. Mercantile Trust Co., New York $2,000,000 $1,268,500 $76,500,000 Fifth Ave. Trust Co.. New York.... 1,000,000 231,200 15,285,000 Commercial Trust Co., Philadelphia... 1,000,000 245,000 9,950,000 Girard Trusl Co., Philadelphia 2,500,000 lo.ooi) 27,524,000 Equitable Trust Co., New York 8,000,000 1,293,100 U,877,000 Franklin Nat. Bank, Philadelphia.... 1,000,000 100,000 21,500,000 Fidelity Trusl Co., Philadelphia 2,000,000 250,000 20,900,000 Lawyers' Title Ins. Co., New York .... :l..>o 141,000 Lawyers' Mortgagi < !o . New York. . . 2,500,000 k27,300 otographic Co. TYPICAL NITW YOKE "SKY-SCBAPEItS." ol the in rj.'« .<- 1 office buildings in the world. Nowadays structures in lifi^lit are not uncommon. Office buildings such as are here From one to three million dollars. The great banks, life insurance ad own these buildings, considering the same a safe and ■ tnent. THE LIFE INSURANCE TRUST. 95 International Banking Corporation, New York 3,947,200 180,300 8,550,000 Union National Hank, Newark 1,500,000 100,000 7,370,000 Central Realty Bond & Trust, N.Y.. 1,000.000 100,000 9,811,000 First National Bank. Chicago 8,000,000 2-19,000 100,000,000 Hibernia Bank, New Orleans 3,000,000 100.000 12,000,000 First National Bank. Denver. ....... 1,000,000 110,000 9,700,000 Bank of .Montreal. Quebec 11,000,000 40,000 First National Bank, .Minneapolis. .. . 2,000,000 20,000 0.500,000 National Bank of Commerce, N. Y. . . 25,000,000 1,500,800 161,000,000 Some of the investments in railroad and other stocks: Stocks owned hv Equitable. Pennsylvania -$ 662,000 New York, New Haven and Hartford 507,000 Illinois Central 50,000 Delaware & Hudson 710,000 Chicago and Alton preferred 10.000 Brooklyn City 267,000 Manhattan Elevated 1,180,000 New York Central 1,550,000 Union Pacific preferred syndicate 1,100,000 Vu York and Harlem.! 23,300 Long Hand 230,000 Chicago .V Northwestern 720,000 Chicago .V Northwestern preferred 170,000 [nterborough Rapid Transit 250.000 Consolidated Gaa of New York 1.121.500 The contest for the control of the Equitable Life Assurance Society and for ll,. ■ spoliation of the policyholders through the exploitation of their sav- ings in questionable speculation brought on a crisis in life insurance affairs. This came through the appointment of a committee of directors of the cora- pany to investigate the charges made against the management of the society. The committee was composed of Henry C. Frick, the steel and coke magnate, Cornelius N. Blis>, prominent financier and former Secretary of the Treasury of the United States, Edward II. Harriman, railwaj kin-. Melville E. Ingalls and Brayton [ves. The report which these men made concerning the rotten methods of "high finance" that had been permitted and abetted in the Equitable brought down a storm in Wall Street the like of which had not hen known in v a re. President Alexander and Vice President Hyde, not to Bay other officers, THE LIFE INSURANCE TRUST. were excoriated in a merciless manner by the report. And although Alexander been the one who started the charges againsl Hyde, the young vice presi- dent finally joined forces with Alexander in order to suppress the report of the committee and prevent the policyholders knowing the worst about the society's management. Hyde explicitly charged Harriman with trying to buy his stock . ridiculously low price in order to gain control of the company and he further said that Harriman had "knocked down the Equitable and dragged it about in the dust." Tlu determined stand of Hyde not to relinquish his hold on his stock while under fire, and the refusal of the board of directors to accept the investigating committee's report and dismiss officials charged with mismanagement, brought the immediate resignation of the members of the committee. In order to exonerate themselves the members of the united Alexander and Hyde parties said their joint action was solely for the purpose of frustrating a gigantic conspiracy to seize this insurance company for private purposes. The out- come of the scandal was cleaner practices in the insurance business, the re-ar- rangement of official position of the society and plans to secure the Hyde stock at figures satisfactory to both Hyde and the directory. So important is the report of the Frick investigating committee in the annals of "high finance." as disclosing the methods used by men placed in tion of trust to ride over their trusting wards with an easy conscience, that it i- given here nearly in full. It begins with a letter from President Alexander addressed to tin committee in which he accused .Mr. Hyde with grave irregu- larities in his official capacity as vice president. The letter read in part: "1- Speaking of Mr. Hyde, I proceeded in my statement to the committee twelve to say that he has committed the society to transactions, positions, relation-, and agreements without prior consultation with the president or other officers or with the committee, calling the matter to their attention only after the society had been placid in a position from which it was difficult, if not — 1 1 * 1 ■ . to r< <■< de. "For example, I mention the purchase of some $700,000 par value of bonds of thi Coney Lsland and Brooklyn Railroad company, the purchase of 1,000 stock of the Hibernia Hank and Trust company of New Orleans, • purchase of some $1,700,000 of the preferred stock of the Union Pacific !>:■..(]. None of these transactions was submitted beforehand to the cxecu- ir committee should note, in connection with these particular Iran, to the Coney [sland and Brooklyn railroad bends, that Mr. THE LIFE INSURANCE TRUST. 97 Hyde is one of the vice presidents of that company and heavily interested in it; second, as to the Union Pacific preferred stock, that at the direction of Mr. Hyde it was entered in the books and statement of the society of January 1, 1904, as a 'syndicate' holding. These purchases were made without prior con- sideration by the executive committee and without my knowledge. I am informed that Mr. Hyde personally was a member of the syndicate. "Upon "inquiry since made I am satisfied that this stock held by the Equit- able is the proportionate amount of stock subscribed for under the syndicate agreement by Mr. Hyde individually: that one of the conditions of the agree- ments was that the stock shall not be sold by the individual subscribers for a period of years or some provisions to that effect. "This particular transaction evidences two things — the improper assump-. tion of authority to commit the Equitable to large transactions without proper consultation and supervision, and the making of the Equitable to all practical purposes a party to an agreement such as, in my opinion, it is not justified in becoming a party to by reason of the fact that the agreement is speculative and binds the society to its conditions, which may not only become onerous but damaging to its interests, and which lies entirely outside of the pale of per- missible transactions for an insurance company. ■•<_> Not only does he (Mr. Hyde) thus disregard the established check upon improvidence and indiscretion of any individual officer, but he under- mines the president's authority behind his back and admonishes officers and subordinates and notifies people dealing witli the society to have their trans- actions with himself, stating that the president's wishes, action, and judgment in the matter may be ignored. "Man\ instances of this could he given. Mr. Mclntyre, who is regarded as the personal representative and spokesman of the vice president, not only has carried out transactions without their submission to the president, but also, on being questioned -is to the president's attitude or approval of such transactions, has, in repeated instance-,, expressly stated in answer to such inquiries that it made no difference. Mr. Alexander further stated in his letter that Mr. \\\(\i' had committed tin- BOciet} upon hi- nun responsibility to enterprises on which he should have consulted others, and mentions further "the extensive purchase of the stock of tin \Yw York Central railroad company, made under the urgency and per- suasion of Mr. Hyde for the purpose of creating a basis for a request on his part tor election to the hoard of director-, of the \e\\ York Central." Continuing, Mr. Alexander said: lis THE LIFE INSURANCE TRUST. "II, i Mr. ll\tl< ) has displayed i strong persona] ambition and an inordi- nate and unsafe love of prominence, a quick responsiveness to flattery, a pliancy in the hands of persons whose interests arc no1 necessarily parallel to those of the policyholders of the society. Tliis, in con junction with liis con- ception of arbitrary power and righl as the holder of the control of the stock, renders him a highly unsafe official."' \- illustrative iA' the foregoing charge Mr. Alexander gave the names of forty sis corporations in which Mr. Hyde had procured his election as director and said thai as an aid to his election in certain of them he had had large amount^ of stock which were owned by the Equitable in these companies trans- ''. lit il to his individual name and that he now appears in many instances as a large stockholder of record, when, as a matter of fact, the Equitable is the real owner of the stock. Mr. Alexander instanced the Equitable holdings of stock in the following companies, all standing in the name of Mr. Hyde: Long Island Railway Company, 4,000 shares. Interborough Railway Company, 2,400 shares. The Delaware and Hudson Company, 10,000 shares, purchased on August 11. 1903, and placed in the name of .lames H. Hyde by his procurement. Manhattan Railway Company. 12,800 shares. \i\v York Central and Hudson River Railroad Company, 12,000 shares. Hibernia Rank and Trust Company of New Orleans, 1,000 shares. Pennsylvania Railroad Company, 10,380 shares. Chicago and Northwestern Railway Company, 2,900 shares common stock, ;.7<»i) shar< - preferred stock. Chicago, Milwaukee and St. Paul Railroad Company, 500 shares. New York. New Haven and Hartford Railroad Company, 3,666 shares. Rank of Montreal, 800 shares. First National Rank of Denver, 1,100 shares. Continuing, Mr. Alexander said: "The amounts of the stock held by the Equitable in the foregoing com- panies may have increased or diminished slightly since the original purchases from th. record of which the foregoing facts are taken. I some of these companies he is a member of their governing or executive ittees. The* positions he has procured without consultation with the nt of the society, save in a few instances, or with the society's executive aid with no consideration as to the propriety of accepting such portions, and the compatibility of their varied and extensive duties with his THE LIFE INSURANCE TRUST. 99 work as an officer of the societ} or with his freedom of attitude as the repre- sentative of the society's interests, [f there is any real need for the society to be represented upon the boards of companies, whose securities the society holds, that representation should not be centered in one person, who cannot, by any possibility, give proper attention to the duties of so many positions. "As a further illustration of the statements contained in the foregoing specifications, I mention the fact that he has, in return for election to the boards of various companies, and as an inducement or reward for such recogni- tions by other companies, displayed a partial and ready willingness to extend to >uch companies and to individuals interested therein, pecuniary and other favors from the Equitable. On this subject I must defer complete specifica- tion until reports now under way are furnished and submitted to inc. -He (.Mr. Hyde) has acquired a wide celebrity and unpleasant notoriety by reason of his recreations and enjoyments of a more or less public nature, which is exceedingly hurtful to the company, disquieting to its policy holders, and discouraging to its agents. And this notoriety cannot he said to he a mis- fort urn that has overtaken him, because he has cultivated, striven for it, and ii used the instrumentalities that he commands in the society to achieve it. "Public coaches, special trains, elaborate banquets, costly and ostentatious entertainments, accompanied a- they are by continuous notoriety of a flippant, trivial, cheap description, are not only damaging to the influence of .Mr. U\i\c as an officer of the society hut are directly hurtful to the society. They SUg gest a lack of serious attitude and feeling toward hi- duties as an officer of the society, a deflection of the time and energies into channels and pursuits from which the society can gain no advantage and from which, on the contrary, it i ll;iv suffer. The} suggest, by their obvious expensiveness, the possibilities of enrichment in the service of the society, which should not exist and are impos- sible to explain, and. by virtue of the publicity attending his life these pur- suits are matters of notoriety and prove a serious obstacle to the success of the work of the society's agents, upon which its growth and vigor depend." Mi. Alexander said thai Mr. WyiU absented himself from his ,„..i at leasl half of ever} year, spending his time chiefly in Paris, where he has a residence. Concerning the Cambon dinner, Mr. Alexander says it cbsl $12,800, and that it was paid for by the socict) without his knowledge. Mr. Hyde in his letter turning hack tin money said that the dinner was given to advertise the society. Mr. Alexander says he was not aware of tin-, and that he accepted an iinita lion in entire ignorance of the fact thai he was participating in an advertise 100 THE LIFE INSURANCE TRUST. mi nt nl the company, and thai lie did nul learn the real reason why the dinner n 11 nt il t wo and one hall \ ears ago. II. called attention to the fad that .Mr. Hyde was vice president of the M v.mtil. Trust company, at $12,500 a year; vice president of the Equitable Trust company, at $10,000 a year, and vice president of the Commercial Trust company of Philadelphia, at $2,500 a vear. Mr. Alexander continued: "1 think the committee should ascertain whether there are other companies from which Mr. Hyde i> in receipt of salaries. The salaries paid to him by the Equitable Trust company and the Mercantile Trust company are full pay i< the withdrawals under these headings are obviously excessive. ! ilso have discovered from recent examinations that Mr. Hyde lias arbi- trarily raised the salaries of certain of the society's employes without con- ization with me or with any committee and without any semblance of uthority to do so. I instance the recent increase of Mr. Mclntyre's salary from $25,000 to $30, 000 upon Mr. Hyde's personal direction; the salary of I I'. Williamson, his personal secretary, from $5,000 to $7,200; the of th« salary of W. B. Bramwel] from $6,000 to $7,500. "H< (Mr. Hyde) has often been remonstrated with and has at times aade promises of more careful consideration of the duty of his relations to the society. But these promises are soon forgotten and his mistakes have be- come more and more frequent and aggravated. THE LIFE INSURANCE TRUST. 101 "His connection with the society has become an argument used against the Equitable by its competitors and against which the society's agents con- fess themselves unable to make satisfactory headway. "I believe this to be one of the most important specifications which I made in my statement to the committee of the twelve. A great amount of evidence can be submitted under this heading. For two years the society lias been in receipt of protests that have come in increasing frequency, and a number from the agents as to the difficulties they experienced by virtue of Mr. Hyde's rela- tions to the society as an officer." In his letter Mr. Ilvde detailed the operations of the syndicates of which he was the chief figure. According to the report, "James II. Ilvde and asso- ciates" was not a permanent organization, hut changed its personnel fre- quently. As shown in Hyde's letter, it conducted a considerable number of transactions. In nine of these the Equitable became the purchaser of some or all of the securities involved. In these nine transactions securities of the par value of $9,800,000 wire handled. The total profits to the syndicate on them were $204,504. In tun of these nine transactions the Equitable was a party in the syndi- cate, receiving $18,397. Of the total profits $167,741 was received by eight individuals who were directors in the society and si\ of them members of the exenutive and finance committees. Beside. Mr. Hyde, the members of the board who participated were V. 1\ Snyder. II. ('. Deming, (i. II. Squire, d.nnes \Y . Alexander. \Y. II. Mclntyre, A. VV. Krech, and Louis Fitzgerald. Commenting upon these transactions, the report said: •"In one case in which the syndicate profit was $30,210, the society now holds the securities purchased, which at present quotations show a loss of about $60,000. "In all other casts the society cither has made a profit or could make a profit by selling the securities at the present market. "The ml result to the society of the purchase of these syndicate securi- ties has been a considerable profit. If the society had acquired the securities by taking allotments in the original underwritings to which the Hyde syndicate was ;i part} it would have made larger profits. The profits would have been greater bj $186,107. Or if the society's directors who figured in the syndi- cate had acted -o|e|\ for the society the society's profit would have been $167, "t 1 1 greater t hat it h "In this course ol dealing with n corporation which lhe\ were serving in positions of the highest trust and delicacy these officials were guilty of a breach in- //// LIFE INSURANCE TRUST. of propriety and a serious breach of trust, which, so far as the principle of the thing is concerned, is nol mitigated by the fact that the society has lost nothing by the transactions, hut is the gainer by reason of the subsequent in- crease in the market value of the securities which it purchased. "The committee lias been advised by Mr. Hyde that he has deposited with the cashier of tin society his check for $61,466, the amount of his share of the profit- on the aforementioned transactions, with the request that the hoard decide whether these profits rightfully belong to himself or to the soci- ety. The committee recommends that the board inform Mr. Hyde that, in it- opinion, these profits wire obtained in violation of the rights of the society and that therefore lie is indebted to the society in an amount equal to the profit- in question, and that his check for that amount will he placed to the credit of the society. "The committee finds as a fact that the syndicate operations were con- ducted a- described in Mr. Hyde's letter of April 27 for the benefit of the persons and in the proportions therein named, and that said persons received the respective amounts detailed by Mr. Hyde, and that such of them who were director- and members of the executive committee at the time the purchases of -aid securities were authorized are likewise indebted to the society in such amounts with interest." Concerning tin charges made by Mr. Alexander against Mr. Hyde the report -aid that the president certainly should have disclosed their nature to the hoard of directors in order to prevent the re-election of Mr. Hyde as vice president last February. Mr. Alexander knew, or thought he knew, the re- port -aid. lone. - before the annual election of the grossest sort of breach of duty on the part of Mr. Hyde, and though protesting against his re-election for reasons of hi- own. he failed to disclose to the hoard of directors this breach • duty, which would have been a sufficient reason for not re-electing Mr. Hyde. The report continued: "Upon Mr. Alexander's own statement of the misdoings of Mr. Hyde committee find- that Mr. Alexander was culpably negligent in acquiescing in them for so long ;l period and in not bringing them to the attention of the hoard of director- at such time and in such a way a- to enable the directors to consider them in connection with the exercise of their responsible duty of electing the officers of the society. "Not only hi- Mr. Alexander concealed from the directors the irregulari- Mr. Hyde, of which he was cognizant and of which he now complains, THE LIFE INSURANCE TRUST. 103 but Mr. Alexander openly encouraged them. In >o important a matter as aiding in the proper conduct of the examination that the by-laws of the so- ciety provide the fiscal or examining committee should make the accounts and assets of the society at the close of each year. Mr. Alexander openly advised Mr. Hyde while he was entirely under his tutelage that this might and should be ignored. "November, 14, 1904, Mr. Alexander wrote to Mr. Hyde: " "I don't know just when Willie is to return, but I suggest, with your concurrence, that he he charged with the responsibility of steering the fiscal committee when it meets. We have two new members on it, and it is just as well that they should all be under reasonable observation. Let him remember that the only duty of this fiscal committee is to prove our annual statement. " 'It is not their province to go into the management of the company, or to express opinions about methods. When they come to proving what we call our "ledger balances" it has been the usage that the chairman of the committee (Mr. Wheeloek) should make the comparisons and the committee adopt his n port. I shall cross this off my memorandum, and you can, if you like, lay it aside for Willie on his arrival, unless you have some other views.' "From letters of Mi-. Alexander to Mr. Hyde, which the committee has examined, the committee finds that he flattered and encouraged Mi-. Hyde in methods wholly vicious and tending to autocracy in the administration of the soci< ty'e affairs. "Tin coi ittee also finds that so far as Mr. Alexander's charge against Mr. Hyde is true namely: 'Thai he has displayed a strong personal am- bition and an inordinate and unsafe love of prominence, a great responsiveness to flattery, ;i pliancy in the hands of persons whose interests ire not necessarily parallel to those of the policy holders of the society,' that Mr. Alexander is largely responsible. "The committee finds that many <>l the charges of Mr. Alexander against .Mr. Hyde are true, or measurably true. "Tin- evidence submitted satisfies the committee: "Firsl Thai Mi - . Hyde has habitually involved the society in transac tions, specially of purchase of securities, which were of great magnitude with out tin- previously obtained authority of the executive committee. "Second Thai In- carried large amounts <>l slocks belonging to the bocj ety in his own name, without there appearing any minute of any act of directors or committee authorizing d. "That he has used tin funds of the society l<- pa\ lor certainly one social 104 THE LIFE INSURANCE TRUST. entertainment given in his came and the aame of one other director of the society . "Fourth Thai he shared in the profits made by banking syndicates in ejecting sales of securities to the society at a time when he was a member of the committee which made the purchase, he frequently voting for the same. "Fifth Thai he has been guilty of other acts which were irregular and not in compliance with the society's law or with sound business practices. "The committee has fully considered Mr. Hyde's explanations of these charges. In the main he seeks to exonerate himself by pleading the custom of the society, the participation of others, the return of money improperly acquired or used, and the beneficial results to the society. As it is the function ot this committee to determine what is wrong in the society's management, Mr. Hyde's arguments cannot avail. The practices lie has pursued are wrong. The fact that others have pursued them or acquiesced in them only convicts them of equal guilt."' Tin report said that instead of being a check on each other the executive and finance committees were made up of the same men. A number of gentle- men meet and do certain acts as the executive committee. They adjourned and immediately reconvened as the finance committee and approved the acts of themselves while in session as the executive committee. For permitting this state of affairs the hoard of directors was held responsible, and the report recommended that the two committees be reorganized. Speaking of the work of the executive committee and the interesting ques- tion ot' salaries paid, the report said: •"There are no resolutions whatever Hearing on the salaries of officers or others, the closest approach to this being a resolution advising the directors to grant pensions to two retiring medical directors. In addition to the forma! minutes of the committee there is a large amount of what are called 'memoranda minutes.' These are typewritten sheets con- taining a list of securities bought and sold, and it is assumed that in each case the executive committee approved of such transactions. I executive committee appoints a subcommittee of two to adjust sal- II" i'' are no minutes covering the report of such subcommittee; hut it i- verbally stated that the subcommittee gave direct instructions to the con- troller a- to the rates of salaries to he paid. The subcommittee fixed salaries of high itive officers only- those of subordinates being arranged by their ••The last subcommittee on salaries, of which there is a record on the THE LIFE INSURANCE TRUST. 105 minutes (December, 1902), was composed of two persons, one of whom re- ceives a salary from the society and the other a salary from an institution in which the society is largely interested. Then' arc in 1905 thirteen executive officers in the society who held the same positions in 1900. In 1900 these thir- teen officers received salaries aggregating $297,000. In 1905 the same officers received salaries aggregating $448,500, an increase of $151,500, or 51 per cent. Of the thirteen officers, three have received no increase in salary since 1900. Deducting these, the average rate of increase to the other ten has been 61 per cent. The salaries of six of the thirteen show an average increase' of 86 per cent. "The salary of the vice president, which was $30,000 in 1900 and 1901, was advanced to $75,000 in 1902, and to $100,000 in 1903. The rapidity of these Increases in not only unusual, but there can be no warrant for them through any question of ability to retain the officers' mix ices at lower rates ot compensation. At the time the vice president received a salary of $80,000 he was 24 years of age. When his salary was increased to $75,000 he was 26 and when it was again increased to $100,000 he was 27 years old. These facts indicate that the experience of the officer in question could hardly have briii considered a factor in the estimation of the value of his services. It is found that the vice president of the society, in addition to holding the presum- ably purely honorary position of director in over forty corporations, is vice president of three companies, from which he receives salaries aggregating $17,000. In the table presented showing the increase of salaries since 1900 appears tin' name of Anna I.. Ajnendt, secretary to Vice President Tarbell. Five yean ago Bhe was drawing $1,200 a year. In 1901 her salary jumped to mio. in 1903 to $10,000, and this year to $12,000. The percentage of in- increase in her pay for the period covered was 185.7. While on tins subject the report said: "The wav in which the directors, through their executive committee, and that committee through its subcommittee, have increased the salaries oi the principal officers <>f the society quite naturally does not in its effect end there. An examination of the office pay rolls shows that the treatment received by each officer from the board is generally reflected in the treatment accorded by him lo bis subordinates. In these departments, of which the heads have re ceived no increase in salaries, the salaries of the working force have remained constant or have shown such slight increase as appeals Id have been no more than consistent with the general tendency of salaries in all industries. On the 106 l III LIFE INSURANCE TRUST. other hand, those officers who themselves have been rapidly advanced quite generally have seen thai their subordinates shared in their prosperity — at the society's expense. In tin- vice president's office four employes who received in the amrreaati $5,4 14 in 1900. receive $13,900 in 1905, an increase of 155 per cent. In the second vice president's office six employes who received $10,720 in 1900, receive $24,840 in 1905, an increase of 182 per cent. The total salaries paid to employes of the president's office have increased 48 per cent since 1900: of the vice president's office 134 per cent, and of the second vice president's office 120' per cent. The total office pay roll of the society increased from $770,282 in 1900 to $1,177,501 in 1904, or 5!} per cent. As compared with this the total income of the society increased but 36 per cent from 1900 to 1904. On the subject of making advances to agents the report said that while the practice was almost universal, such advances never had been recognized as assets by the insurance departments and there had been a general inclination on the part of most companies to cease the practice and to close out these ac- counts as rapidly as possible. In November, 1904, the Equitable carried $2,809,000 on its books as loans to agents. By the transfer of the bulk of this account to the trust companies, said the report, it has appeared as a much smaller amount on the society's subsequent statements. In the majority of cases the amount of one agent's loan, which was carried by a trust company, was exactly five times the appraised value of his annual renewal. The amounts carried on the society's books were in most cases sums in excess of the fivefold limit accepted by the trust com- pani The company was also criticized for carrv'ng excessive cash balances. The society, the report said, is not subject to sudden or unexpected called for un- usually large sums in the regular course of its business. Yet on Jan. 31, 1905, it had a cadi balance of over $29,000,000, deposited principally with the National Hank of Commerce, the Mercantile Trust company, and the Equitable Trust company. T'uder tin head of "entangling alliances with auxiliary companies," the n port discussed the society's interest in banks and trust companies, and said, judging these investments either on general principles or on specific results, their wisdom was "gravely questionable." "In the remark^ under the heading, excessive cash balances, it has been shown that the -ociety carries abnormal balances with those concerns in which it hold- a considerabL stock interest, and the society's controller says that the THE LIFE INSURANCE TRUST. 107 reason for this "must be obvious.' The fact that the society does not carry excessive balances in institutions in which it does not have a largo stock owner- ship indicates that these large balances are maintained for the purpose of aiding the concerns with which they are deposited. "In making these investments the society is concerned not merely in the amount it realizes in dividends as constituting a proper return on the invest- ment, but becomes actively engaged in the building up of the auxiliary con- cern in order to show appreciation in market value of the original investment. "Having been committed to such a policy complications increase, which force the society away from the position of an investor, which it should oc- cupy, into that of a promoter and manipulator, which it should not occupy. Under date of Aug. 80, 11)01. President Alexander wrote to J. II. Hyde: " *I am glad you watch the bank and that it is doing so well, but we must perform some coup and increase iN size and importance. Also in the case of the .Mercantile. I would like to buy a couple of trust companies and double up that concern.' "It seems needless to state that the making of 'coups' to enlarge banks or the buying of trust companies are not proper subjects of concern to a life in- insurance company ."' Tin report >aid that the society should purchase neither bonds nor stock< which would require manipulation or nursing. It should make no purchases oi securities where their subsequent sale could ever be inadvisable for any other reason than genera] market conditions. In other words, it should be a life insurance company. On the subject of deferred dividend policies the report said: "The Equitable, in common \s it 1 1 several others of the large companies. issues the greater portion of its policies on the deferred distribution period plan. Under this system the excess portion of the premium is not returnable to the policy holders annually, but is retained b\ the society for various stipulated period of years (usually twenty years), and the accumulations then paid in one sum. The advantage which is In Id out to the policy holder under this system is that he not only eventually receives all tin' natural accretions of his own policy, hut shares of those which were earned by the policy of those who were unable to continue them to the end. "The question as to the ethics of extending tin- hope of one policy holder that hi- prosperity will be increased through tin misfortune of another policy holder i> punk academic and need not be discussed lure. As each policy holder understood the conditions and accepted them with the hope that he [08 THE LIFE INSURANCE TRUST. would be in the fortunate class, he seemingly would be estopped from com- plain! if events forced him into the unfortunate class. "But, entirely aside from this question, as between the individual policy holders, there can be no doubt concerning the at least potentiality of evil which this Bystem of deferred distribution possesses. "When annual dividends are paid the policy holder has an immediate and yearly recurring cluck upon the operations of his company. He is enabled and is quite apt to compare his results with those of his acquaintances insured in other companies. Extravagance in managemeni and errors in investments are at once reflected in decreased dividends or impaired surplus. '•On the other hand, the holder of a twenty-year distribution period policy ha- no knowledge whatever concerning the earnings of his policy until the expiration of the twenty years. Hi- cannot make comparisons with the re- sults in other companies because he does not know the results in his own case. lb entertains hope for nineteen years, and if dissatisfied with the realization at the end of twenty years it is futile for him to protest. The incident is closed. "These condition- are mentioned for this purpose — to illustrate the pos- sibility of deterred distribution policy leading the society into a generally lax method of doing its business. The annual dividend company is held to ac- countability every year. The deferred dividend company is never held to ac- countability by the bodv of it- policy holders and is so held by its individual policy holder- only when their Opportunity for action has passed. "Tin- absence of accountability makes possible the pursuit of rapidity of growth at undue cost, because the effect of that cost is not felt by the policy- holder until, a- -aid before, it is too late for his availing protest. Another embarrassing outgrowth from the deferred dividend system is the popular misapprehension of tin so-called surplus." Th» society's published report -hows a surplus on Dec. 31, 1904, of $80,- '. and popular sentiment demanded that this sum be divided among the policy holder-. There was even seen a discussion of the ownership of the surplus a- between policy holder- and stockholders. As a matter of fact, the actual surplus of the society on Dec. 31, 1904, was approximately ^10,200,- 000. Of the balance, $6,750,000 was apportioned for dividends payable in 190.",. and $63,800,000 was merely as reserve against future contingenl liability. That i-. it was the amount which had been earned by the total number of deferred dividend policies, and which becomes a direct liability as each individual policy matures. THE LIFE INSURANCE TRUST. 109 "The soliciting agents of those companies which write almost exclusively deferred dividend policies habitually state that the superiority of that form of policy is demonstrated by the fact that the public invariably selects it in preference to- the annual dividend policy. As bearing on this statement it is of some interest to know that the Equitable society allows its agents commis- sions and expenses of 50 per cent of the first premium on deferred dividend policies, while it allows them but 25 per cent on annual dividend policies. "The general policy of the society having been diverted from its true course, it is hardly to be wondered at that there is found throughout its offi- cial personnel a sort of moral obliqueness — a condition where personal gain seems at times to be the paramount idea. It is this which has led your com- mittee to find that the society's transactions with outside concerns have been placed so systematically that the profits fall into the hands of those closely connected with the society's officers, and it is this which has led the officers of tin- society to say with undoubted sincerity that they saw no wrong in accept- ing profits from syndicate transactions in which the society played an im- portant part." Concerning the directors the report said: "First- That the title of the great majority of the board to their office as directors is open to question under the law of the society by reason of the fact that the shares of slock held by them were transferred to them for the purpose of qualifying them as directors. "Second That this practice of qualifying directors is almost coeval with the existence of the society itself, and, further, that there has not been a time for years when there were enough male stockholders in the corporation owning (i\. shares of stock to constitute the number of directors required by the charter, indeed at the present date, not more than half enough for that pur- pose. "Three Tliat the directors, in whom the corporate powers of the societ \ are vested l»\ its charter, created, by the by laws, certain committees and offi ceis to whom the directors delegated the exercise of substantially all the powers of tin society. The committee further finds that the relation of the board of directors to the exercise of the society's powers has been practically nominal since the establishment of the society. '■fourth Thai the directors are responsible for constructing the executive and finance committee of the same persons (except one), thus destroying the check upon and the supervision over the executive committee which the by laws HO THE LIFE INSURANCE TRUST. provide shall be exercised l».\ the finance committee. The committee recom- mends the reorganization of these committees. "Fifth '11i.it the minutes of the proceedings of the executive committee have not been kepi in the manner provided l>.\ the by-laws, and that in the con- duet of its business there has been a marked absence of that formality which is proper, if not essential, in dealing with a trust of such greal magnitude. "Sixth That the members of the executive committee named in Mr. Hyde's Utter to the committee of April 27, 1905, participated with Mr. Hyde in the profit- of the syndicates, detailed in said letter, and are justly indebted to tli.' society for the amount of said profits." The report summed up the ease against Mr. Alexander as follows: "As to the president of the society the committee finds that he concealed from the hoard of directors his knowledge of the irregular conduct of the vice president in relation to the society's affairs at times when the vice president was a candidate for re-election, and that the president had knowledge of the gularities to the extent that the committee finds they existed and that many of these irregularities were openly encouraged and participated in by the presi- dent." The committee also finds that Mr. Alexander participated in the profits of" the syndicates and that he is justly indebted to the society for the amount thus secured by him. As for Mr. Hyde, the committee finds that "he habitu- ally involved this society in transactions of great magnitude without previous- ly obtaining authority of the executive committee; that lie carried large amounts of stock belonging to the society in his own name without first having secured the authority of the society: that he used the funds of the society to pay for tin- 'Cambon dinner (which he subsequently returned). •I also finds he conducted and participated in the profits of the syndicates described in his letter of April 27, 1905, having frequently as a member of the executive committee voted for the purchase of such securities as shown in said litter in detail: that he is indebted to the society to the amount of the profits he has received as shown by his letter, and that he has heen guilty of other irregular acts, irregular in tin sense that they are not in accordance with iety's law, or with sound business practices, treating the society and its affairs largely as if they were his own personal concerns." In conclusion the report said: "As to the other officers of tin' society the committee finds that a general - prevailed in the administration of the society's affairs, requir- prompt and thorough rectification, and that there is a general lacking in • THE LIFE INSURANCE TRUST. Ill the organization of the strong moral fiber so essential for the accomplishment of satisfactory results. ''The committee also finds that the society's methods of doing business are unsystematic and should be corrected; that the cash balances carried by the society are excessive; that the society's alliances with financial institutions are unnecessary and undesirable in the conduct of its legitimate business; that its advances to agents, directly and through financial institutions in which the society is interested, are excessive and that the society's efforts should be directed to conducting a strictly legitimate life insurance business at the lowest cost to the insured along the general lines hereinbefore indicated. "The imperative need in this and all other similar associations is a more lively sense of the true nature of the relations existing between the society and the assured and of the duties owing by the management to both. "When we consider that the fabulous accumulations held by such associa- tions represent a voluntary tax placed by the provident upon their lives, and when we recall the tremendous self-denial and sacrifice that is represented in daily living to secure provision against the inevitable, then we begin to realize the high and delicate nature of the trust involved in the administration of such a fund. "Every economy consistent with sound administration and norma] progress should be practiced. Excessive salaries, excessive committees, excessive ex- penses, iiul superfluous offices should not he tolerated. "Investments should be carefully made and all the useful formal precau- tions employed to insure the location of the moral responsibility of the officers ■a Iki an- charged with the duty of making them. "Tin' committee having pursued its investigation of the present manage- ment of tin- society sufficiently far to convince it that the personnel of the managemenl should be radically changed and the methods of conducting the busine8S Of the BOciety brought back to sound legal and ethical lines, begs to be relieved from further duty. "The committee desires, however, to recommend that further investigation as indicated in its chairman's letter of April 8, to Mr. Alexander be proceeded with by a reorganized management, whose immediate connection with tb" source of information for the work and personal responsibility for the future will enable it to conduct the investigation more thoroughly, expeditiously, and Satisfactorily than it would be possible for the committee to do. The coinmit- tei also recommends that Ihi' new managemenl have a thorough audit made of all the society's honks and records. US llll I III' INSURANCE TRUST. "It other irregularities in the present management are brought to light they will be only cumulative and therefore could not affect one way or the other the finality o\ the conclusion expressed above. "The extraordinary powers of the principal officers of the society carry with them the highest measure of responsibility. The committee finds that of these the president, vice president, and the second vice president have fallen far short of their duty both in acts of commission and omission, and changes in these offici s should be made. "The loose and irregular methods obtaining in the management are largely due l>oth to the example of the acts and the example of the neglect of these officers. The shortcomings of inferior executive officers are largely due to the methods which the principal officers have encouraged or permitted, and so far orrection of these irregularities calls for further removals of officials that matter should be dealt with and largely controlled by the judgment of the re- sized management." When the public and the financial world had digested the contents of this report and had received intimations of the possible bursting of a thunder-cloud when Superintendent Hendricks of the New York state insurance department should make known the result of his investigations into the Equitable scandal, financii rs found it necessary to inaugurate sweeping reforms. For that pur- Paul Morton, Secretary of the Navy under President Roosevelt, was ted to the position of chairman of the board of directors with full author- ity to reorganize the society. Immediately afterward it developed that Thomas F. Ryan, head of a powerful clique of New York stock market operators and trust magnates, had bought control of the Equitable through acquiring James II. Hyde's stock for $2,500,000. Severe criticism arose over this maneuver, for the Tobacco Trust, of which Ryan was a prime mover but a short time re, had been watered to the extent of $34,000,000. Furthermore, the Ryan interests had great plans on foot for building new subways in New . and Paul Morton had been secured originally by Ryan to manage these I - was supposed somewhat generally that the purpose of Ryan's pur- * the control of the Equitable was to give him greater power in the cial world. And indeed the coup did thi>. But Ryan at oner executed a trust i\wi\ by which Ex-President Grover land, George Westinghouse and Judge M. J. O'Brien were made trustees for the purpose of voting Ryan's stock for the best interests of policyholders any. Mr. Cleveland, in his letter of acceptance of the trusteeship, struck the keynote of the "square deal" when he said, "I cannot rid myself of THE LIFE INSURANCE TRUST. 113 the belief that what has happened to this company is liable to happen to other insurance companies and fiduciary organizations as long as lax ideas of responsi- bility in places of trust are tolerated by our people. The high pressure of speculation, the madness of inordinate business scheming and the chances taken in new and uncertain enterprises are constantly present temptations, too often successful, in leading managers and directors away from scrupulous loy- alty and fidelity to the interests of others confided to their care. "We can better afford to slacken our pace than to abandon our old simple American standards of honesty: and we shall be safe if we regain our old habit of looking at the appropriation to personal uses of property and interests held in trust in the same light as other forms of stealing.** While the fad that the law prevented dividends of more than 7 per cenl to be paid on the stock of the Equitable caused many interested and disinter- ested persons to wonder why Mr. Ryan had invested such a great amount of money for $50,000 worth of stock, the public had to assume that the $2,500,- 000, which was only a small percentage of the Ryan fortune, was paid to Hyde for the sake of preserving order in financial circles. Such fear of every action by prominent men of business had spread among the people that there was dread among the men of money that the public might believe that all busi- riess transactions were more or less tainted with downright dishonesty. Even the Ryan purchase of the Hyde stock did not quell this feeling of unrest, for tin' Ryan interests had been so prominent in Wall Street affairs that it was supposed this transaction was of the usual sort. Whether it shall prove to have been philanthropic and meant honestly to -'tile a serious difficulty without further disturbance remains to be seen from future developments. It seems likely, however, that hereafter government investigation of insurance officials will be more thorough and more frequent. It seems also that the brand of dishonor has been placed upon all financiers who gain pecuniary advantage' through sharing in underwriting syndicate- which profit from Sale8 of securities to C panics of which the members are trustees or directors. Probably, also, insurance directors will be more careful in the future about making such financial alliances as purchasing the majority of the -lock of ;i bank or trust company, which in turn shall do a banking business on the funds of the insurance policy holders to the detriment of their besl interests. In a phrase, it would SCem that, scandalous as the disclosures were in connection with (Ik Equitable embroglio, they have resulted in helping to restore thai old American standard of honest \ for u hicli Mr. Cleveland argued and for which the Roosevell doctrine of the "square deal" stands. THOMAS W. LAWSON, Of Amalgamated Copper fame, and whose arti- Frenzled Finance" have cre- ■ i world-wide Interest. BEV. DR. WASHINGTON GLADDEN, Noted lecturer on .Municipal Reform and who objects to the Rockefeller gift to the Con- gregational Church for foreign missions, referring to it as "tainted money." STEPHEN GIRABD, Founder of Girard College, Philadelphia In a $5." an, Girard to the front and subscriber] for the whole amount He drew his own will, covering :;•; large printed Oil] ANDREW CARNEGIE. He st rted i" work when 11 years old, earning $1.20 per week, and is now believed to ., (200,000,000.00 apart from the more (100,000,000.00 he has given away. CHAPTER VII STANDARD OIL. The Operations of "Standard QU" as a Financial System Are an Hundred Times as Important as the Actual Oil Business of that Concern — Wealth of the Rockefellers — "Standard Oil" Influence Openly Recognized in the Management of Nearly Sixty-five per cent of the Total Railway MUeagt of the United States. If a vote were taken throughout the length and breadth of this fair land on the question of what single power exerts the greatest influence in the husincss affairs of the country, it is probable the unanimous verdict would he "Standard Oil." And unquestionably, taken in its broadest sense, this would he well a it hin the truth. But there are two distinct and different entities which operate to pile up it hordes of wealth under the cloak of this cabalistic name. One is simply that world-famed corporation, the Standard Oil company, which i> supposed t<> enjoy the monopoly of the oil business of tin- world, through the ownership or leases of oil wells, the operation of pipe lines to carry oil from the wells to the refineries, and. after the refining process, the working and control of tank line cars and -hips to carry the product to market. The other "Standard Oil" is not a company, nol even a legal partnership, hut a body of men,' a Bystem, vrhose interests are closely interrelated with those of the Standard Oil company. L< t u> examine into the workings of both these kinds of Standard Oil And because of the greater influence now exerted on every phase of business and public life, lei US consider first that "Standard Oil" wliicli now does not make its chief business that of dealing in oil, hut which through haying first made a great success in oil was able to draw into its ranks the greatest busi nesi linn of the age and thereby becomes the most powerful influence known in banking, speculation, promotion, mining, etc. This influence, if one i- to it a name Other than Standard Oil. is known as "Rockefeller." after the head and brains of fhe gre.it aggregation of capital, John I). Rockefeller. This aggregation, which we will call the Rockefeller interest-, although it is known .'ind spoken of in Wall street and elsewhere as "Standard oil," is 115 11,; STAND //.'/> OIL. made up chiefly of the officers of the Standard Oil company. These are John D Rockefeller, William Rockefeller, Henry II. Rogers, W. H. Tillford, Charles M. Pratt, John 1). Archbold, Henry M. Flagier, Oliver II. Payne, I \\ '. Harkness, F. Q. Barstow, J. A. Moffett, Walter Jennings and E. T. Bedford. While these oilier- of the Standard Oil company do not all enter actively into the outside financial operations of the Rockefeller interests, there are several other men who do act as important principals and agents with John D. Rockefeller, although they arc not on the official roll of the Oil company. These are John 1). Rockefeller, Jr., and E. Parmelee Prentiss, son and soh-in- lau respectively of John 1). Rockefeller; William G. Rockefeller, son of William Rockefeller and nephew of the head of the house, and James Stillman, president of the National City (or Standard Oil) hank. Of these the most influential are John I). Rockefeller, William Rockefeller, his brother, H. H. Rogers and James Stillman. far-reacliing is the influence of this great party of capitalists — to which is limited that described as the "money trust" — that the business world long since has Income used to the modern proverb of "Scratch a banker and you "ill find Standard Oil beneath." As is well known, and as will be shown in detail later, there is a great influence in the control of nearly all the oil industry oi America and of much of that of other continents. When this oil business became so successful that great wealth accumulated for the men in the oil trust, it \\a> necessary to invest the wealth in other enterprises to keep it employed. This caused the Rockefellers to search out the most profitable investments and business alliances in the world. The nature of the oil business itself brought affiliations with railways, steamship companies, banks, etc. Gradually many of the companies into which the Rockefellers embarked were absorbed entirely by the wealth of the family and of its allies. Of the shrewd character of these men the best testimony is borne by William II. Vanderbilt, who said before a government investigating committee: ••I never came in contact with any class of men as smart and able as they are in their business, and I think that a great deal of their advantage is to be attributed to that. They never could have got in the position the}' are now in without a good deal of ability, and one man would hardly have been able to do it. It (the Standard Oil compan\ ) i> a combination of men. I don't believe that by any legislative enactment or anything else, through any of the states, or all of the states, you can keep such men down." I head of the great party to which such tribute is paid, John Davison STANDARD OIL. 117 Rockefeller, was born in 1839, in Richford, Tioga County, New York, of parents of only moderate means. When twelve years of age his parents took him to Cleveland, Ohio, where he had a public school education, and at sixteen he became a clerk in a commission house. In 1858 he embarked in the com- mission business for himself with a partner named Clark. Both were clever at driving bargains and their success was immediate. In 1862 they became acquainted with Samuel Andrews, an expert oil refiner, and under the name of Andrews, Clark & Co., engaged extensively in the oil business. William Rockefeller, his brother, was admitted to partnership and a new concern, William Rockefeller & Co., was formed, which built, in 1865, a Large refinery at Cleveland, Ohio, known as the Standard Oil Refinery. This was the nucleus of the great Standard Oil company of today. In the intervals of a busy career, J. 1). Rockefeller devoted a part of his time to religious, benevolent and educational institutions, particularly those connected with the Baptist Church. In 1892 he founded and endowed the University of Chicago, known officially as "The University of Chicago, Founded by -John D. Rockefeller." By 1905 he had given more than $6,500,- ()()() to this Institution. He also gave largely to other institutions. His gifts for education, which in the aggregate amount to a greater sum than has ever been contributed before by a single person to such purposes, generally have been conditional upon the raising of a similar amount by the institution bene- fited. Because <>f the widespread belief that the trust methods of today are list fair and square dealing, and because Mr. Rockefeller's great corpora- tion, the Standard Oil company, violated the doctrine of equal rights for all and the other "Standard <)il" power, now called the "system" by some writers, repeatedly has abused public confidence and good public policy, greal criticism againsl this multi-millionaire and his methods of making money arose. Its most outspoken form was that which followed the offer of a gifl of $100,000 by John I). Rockefeller to the American Hoard of Missions of the Congregational church of this country. At the lime this offer was made so many charges of violation of justice, if not of law, on which criminal pro ceedings could be made, were being uttered againsl the Rockefellers, the Standard Oil company itself :iud John D- Rockefeller as chief of this mighty coalition of money, natural resources and special privileges, thai a protest arose againsl the acceptance of th< will. II had not been supposed that such a protesl ever would .'iris, ami even aboul half of tin monej had been spent before the prolyl was filed. II was charged that the m \ never rightfullj lis STANDARD oil.. belonged to Mr. Rockefeller, though he had secured it Legally. Hence, accord- ing to the protestations, I Ik- monej king had no right to give it away. Some of the unjusl methods used in the acquirement of this money, according to the protests made againsl receiving the gift, which finally was accepted, were "despoiling citizens of their honest gains and shutting the doors of opportu- nity upon them"; "injustice and oppression"; "illicit and iniquitous control of railways"; "shameful prostitution of agencies created by public law for the public service," etc. The chief objector to the gift was the Rev. Dr. Washington Gladden, moderator of the National Council of the Congregational church and pastor of the First Congregational church, Columbus, (). His characterization of the methods of the trusts is so typical of the age that it follows in full: "R< garding my position as to the Rockefeller gift to our board of missions, it should be understood at the outset that I am not authorized to speak for the denomination to which I belong. I possess no shadow of authority. My word is worth just as much in the councils of my denomination as the truth and reason it contains give to it, no more. ••(>n the other hand, I do not consider myself debarred by the position I hold, from the clear expression of my convictions upon any important question of public morals, even if that question touches nearly the life of the Congre- gational churches. My first obligation is not to these churches, but to the kingdom of God. "I oppose, and shall continue to oppose, the acceptance and use of the gift of .Mi - . Rockefeller for several reasons. ".John I). Rockefeller is the responsible representative of the system known Standard Oil. This system, to say nothing worse of it, is convicted, by a ma-- of testimony which it is puerile to dispute or ignore, of using its vast power in the most unscrupulous ways to crush competition and to build up colossal fortunes on the ruins of happy homes and holiest industries. '"Anything more hostile to the whole genius of the Christian religion than tin- career of this enterprise it would be difficult to conceive. It has done what t could to reduce business to brigandage. Espionage, bribery of the employes of competitors, and all other underhanded methods have been its constant •m-. "I". e case is worse than this. The Standard Oil could never have gained - power to oppress but for it- alliance with the railways. From the begin- ning of i - career it has been able to coerce the railways into the most humili- ating submission to its behests. By a system of rebates of the most astonish- STANDARD OIL. 119 ing injustice, it forced the great trunk lines not only to do its business for half of what its competitors had to pay, but to pay over into its treasury the excess which it extorted from them. "For the service which cost the Standard $1 its competitors had to pay $2; and tlii' extra dollar extorted from them was paid over to it by these meek and subservient railway officials. This is not rumor: it is a matter of public record; it is action which has been denounced by upright judges in Ohio courts. It was upon this foundation that this structure was reared. Methods have been subsequently modified, but the hold upon the railroads has never been relaxed, and they are used today all over this country to extort tribute from the indus- tries of I lie people for the aggrandizement of Standard Oil. ''This use of the railways, by overpowering aggregations of capital, as instruments of oppression, is the tap root of social injustice. It is the one stupendous and threatening social evil. The railway officials have become mere puppets in the hands of these trust magnates, who use them to squeeze the life out of all independent enterprise. "This is the business in which Standard Oil has been engaged from the beginning until now. It represents, as no other aggregation in the land rep- resents, the method of using public utilities for private aggrandizement. The railways, which are chartered to render to all the people an equal public service, and which could not have been granted the power they possess on any other terms, have been employed by this system from the beginning to despoil and to oppri "At present this system owns a large majority of the principal railways of the rountry and \\> methods of oppression are illustrated by what has been going on jn Kan "Againsl all this there is now, all over the land, an insurrection of public sentiment. The blindness of the people to what has been going on has beiii amazing, hut the} are beginning to be aroused, and a great battle is imminent. "Our presidenl has clearly discerned the nature of this issue; he is right in his judgment thai it is l>\ far tin most important question before the country, that the injustice perpetuated b\ the railways under the domination of com- binations of e;i|iit;i| is flagrant and deadly and thai it must be exposed and punished. 1 1 « is bringing 'ill the power of the government thai he can com- mand to bear in t his dired ion. "Standard Oil and its doings are now al the bar of the United States courts. Is it a good time for the Congregational churches to accept momy from the man who represents this system? Lso STANDARD OIL. "Some of those who favor the acceptance of this gift argue thai we cannot go behind the action or inaction of the courts to see whether money has been unjusth acquired. 11 the verdict of the courts is to govern our judgment in such cases, illicit it not be well to wait and see whether the courts justify Standard Oil methods? Ii' we approve of the action of the president in trying to bring to justice those who are accused of great public wrongs, would it not be well to decline to receive presents from the men who are on trial? Thai certainly does indicate a degree of sympathy with them which a great mis- sionary society mighi wisely withhold. "Bui all this talk about legal unanimity as an adequate screen for evil-doers i^ hardly worthy ^A' religious teachers. " 'The prince of Monti' Carlo,' says one of my correspondents, 'has never been convicted of crime, and is said to be a cultivated, benevolent gentleman. Would they accept $1 ()(),()()() from him for foreign missions? Or from the Louisiana lottery in the days of its prime, when it fleeced its victims under sanction of the state?' "But even this comes short of the true statement of the case. The wrong of which Standard Oil is the representative is far more deadly than anything of which gamblers or brothel keepers can be accused. "Jt i> an organized, persistent, and tremendously successful attempt to over- throw the industrial liberty of the American people. Those who do not know- that this issue is squarely before us must be pitied for their blindness. Those who cannot see thai it is the most serious issue that this nation has ever faced have not thought deeply on the matter. "The question is now on trial. The courts of the United States are dealing with it, but above and behind these is the great tribunal of the American people. It is their verdici thai will be decisive and final. What will this court of last resort have to say about the methods by which John I). Rockefeller, within a quarter of a century, has built up a fortune of perhaps a thousand million dollars? I think thai he cans a good deal more for the decision of this court than for the decisions of the lower tribunals. "The case is now before this highest court. The people are the judges and jurors. We. the Congregational people, are the judges and jurors. The nd members of this missionary society are the judges and jurors. We ver been called to act upon a more momentous case. The simple ques- tion before us is whether we think it right during the trial to accept a present from the p< rson under indictment. "This is the issue, stripped of all its sophistrie.8. It is idle to compare the STANDARD OIL. 121 case with other cases of ordinary immorality. It means a great deal more. It touches the life of this nation far more vitally." Dr. Newell Dwight Ilillis of Plymouth Church, Brooklyn, one of the greatest divines of the age, referred to John D. Rockefeller and John D. Rockefeller, Jr., in reference to the taint upon their wealth, as follows: "The saddest words that have been written in this generation on the Rocke- feller gift were spoken before Brown University by a young man who is to inherit one of the greatest fortunes in this country. They were spoken in defense of the trusts. Listen to them: " 'The American beauty rose can be produced in all its splendor only by sacrificing the early buds that grow up around it. The rose has one thousand buds, and in order to produce the American beauty the gardener goes around with a knife and snips 999 in order that all the strength and beauty may be forced into one bloom.' In his economic argument, this young man tells the working classes brutally that 909 small business men must be snuffed out of existence in order that his American beauty, the trust, may be produced. "Listen to Christ: 'Let the strong bear the burdens of the weak.' And in: 'Give and it shall be given unto you.' "These words in defense of the trust are the most heart-breakine things in literature to those who know what is going to come in the future. Can you wonder that after that, when a man gives gifts, we have no gratitude to return P" Wealth of the Rockefellers. Probably it i- true, as John 1). Rockefeller i^ credited with having .said, thai the wealth of the Standard Oil chief cannot he calculated at a given time within a feu millions of its evict amount. A.S has been shown in the case of the chief organ of the Rockefeller financial party, the National City Bank, direct influence i-, brought to bear upon $11,000,000,000 of corporate and other wealth. Inasmuch OS no financial interest ever thinks of opposing "Standard Oil" and remain in the business game, much of this influence i^ absolute, though public opinion of late ha^ been roused to fighl al the very name of Rockefeller or Standard Oil. The Standard Oil company itself, of which John I). Rockefeller i< presi dent, in the firs! twentj three years of its existence paid out in dividends on its $100,000,000 of capital stock, $496,065,000, or considerably more than one fifth the supply of nioiiev iii the United States gold, Bilver ami paper. Of course these dividend payments do not represent .ill the earnings of the oil JOHN DAVISON ROCKEFELLER. This is .1 late portrait of Mr. Rockefeller and it is said thai it was the first sitting he had given a photographer m forty years. STANDARD OIL. 123 trust. Inasmuch as the Standard Oil company refuses to give out regular statements of its earnings, even to its few smaller stockholders outside the Rockefeller party, no one knows what surplus and undivided profits have accumu- lated, or what has been spent in crushing competition, lobbying, influencing legislation and strengthening its grip on the oil monopoly of the country. That the profits have grown since the trust first secured its vital grip on the industry is shown in the following table of annual dividends paid: 1882 $ 3,940,000 1895 $ 17,000,000 1««'3 4,500,000 1896 31,000,000 1884 4,500,000 1897 33,000,000 1885 7,875,000 1898 30,000.000 1886 7,500,000 1899 33.000,000 1887 9,000,000 1900 48,000,000 1888 10,350,000 1901 48,000,000 1889 10,800,000 1902 45,000,000 1 890 1 0,800,000 190S 44.000,000 1891 10,800,000 1 904 36,000,000 1892 12,000,000 1905 (first quarter). . . 1 .",,000.000 1898 12,000,000 1894 12,000,000 Total $496,065,000 On the oilier hand, much has been said about tin's company which has not bcin founded wholly on tacts. For instance, the statemenl that the Oil Trust has never issued a statemenl of it-, finance and operations is wrong. On several OCCasion8 the authorities at Washington have asked for figures and they have been given. One of these recent statements showed the company to have only $150,000,000 tangible assets, though it is supposed now that these assets arc nearer $250,000,000. This presumably shows a reason why all the capital stock of the conip.uix was not disposed of. At present there are 50,000 shares of Standard Oil stock in the treasury of the company. At current market figures this stock is worth about $30,000,000. The impression has been that all but a few shares of the $100,000,000 original slock ha. I been issued. Pre- sumably the company ha- been so prosperous it has not needed to use this stock to raise money. ( tin' reason, according to well informed financiers, is because il has been the Rockefeller policy to pay out most of the earnings l<> the stockholders and not to pile up or hale ,i surplus. Some jrears ago an attempt was made to show thai the Standard Oil company had a fabulous surplus, but this attempt failed. Furthermore, the report thai this company pays enormous salaries i<> its 12 I STANDARD OIL. officials is wrong. President John 1). Rockefeller himself draws a salary much below thai of an average bank president. This is said to be $20,000 yearly. - [•. c. \)odi\. for years the chief legal official of the company, has been reported to be receiving $250,000 a year, hut this now is said to be far in • Geo i: Lawrenci THE UNIVERSITY OF CHICAGO. Pounded by John D. Rockefeller. (North section, looking - east.) rly 5,000 - d this University. of the actual figures. In fact, economy reigns in Standard Oil as else- wh< irally it i> to !>•• supposed that most of the Standard Oil dividends went Into the hand- of the Rockefeller family. Indeed, when it is seen to what pur- cumulation has been placed it is proof that such was the case. Such ST AX DA HI) OTL. 125 a vast amount of money piling up hour by hour and minute bv minute had to find some place for investment, for the Rockefeller party always is looking for increased profits of the wealth it controls. With some few mistakes, but generally with a marvelous understanding of 1 .• i i : La \vi ■ ni ■ THE UNIVERSITY OF CHICAGO. Pounded by John D. Rockefeller. (South section, looking east. "Midway" of World's Fair fame shown at rig-lit.) .., i , the increasing wealth of tin country, the guiding genius of tlii> great money famil) directed tin accumulating wealth into banks where great amounts of lli«' people's savings were deposited thus giving greater financial power; into boards of insurance companies, where more savings of the people found todge- 1 1 m nt ;ind where >till more power was secured; into the railways and steamship l-.'li ST l \ P. I HI) OIL. lines upon which the public had to depend for transportation and to which it constantly paid tribute in freight and passenger tolls; into gold mines, coal mines, gas, electric and telephone and telegraph companies: in short, wherever wealth would bring wealth. John 1). Rockefeller recently resigned from the hoard of the United States i corporation because of a desire to lav off some of the cares of business in his advancing years. This left him as an officer and director of only one corporation in the country — his pel Standard Oil company. He even has repudiated publicly his connection with the Amalgamated Copper company, scandals against which brought the name "Standard Oil" into great disrepute. Hut through such representatives as his brother William Rockefeller, his son John I). Rockefeller, and the other lieutenants of his money army such as William G. Rockefeller, -fames Stillman and Henry II. Rogers, he and the so-called "Standard Oil crowd" constitute the largest stockholders in railroad and industrial companies in the United States, if not in the whole world. Probably this much could he said of John D. Rockefeller as a single investor, apart from the association of his lieutenants and co-operators. The "Standard Oil" influence is now openly recognized in the management of railways having a mileage of over 131,000 miles — nearly 65 per cent of the total railway mileage of the United States. Some of the many companies in which this party i^ almost all-powerful are the following: National City Bank. Rank of tin- Met ropolis. Bowery Savings Rank. Central Realty Bond and Trust Co. Columbia Rank. Farmers' Loan and Trust Co. Fidelity Rank. fifth Avenue Safe Deposit Co. Fidelity Trusl ( !o. Hanover National Hank. Guaranty Trusl Co. Industrial Trust Co. Lawyers' Title Insurance Co. Lincoln National Rank. can Surety Co. Lincoln Safe Deposit Co. ! Butchers' & Drovers' Hank. .National Citizens' Hank. National Hank of Fairhaven. Newport Trust Co. Neu York Trust Co. Riggs' National Rank, Washington. Second National Rank. United States Trust Co. Standard Oil Co. United States Steel Corporation. Colorado Fuel and Iron Co. Tennessee Coal and Iron Co. American Linseed Oil Co. Federal .Mining and Smelting Co. Consolidated Gas. Brooklyn Union (las. Fast River Gas Co., Long Island Mutual Alliance Trust Co. Mutual Life Insurance Co. New York Carbide Acetylene Co. National Transit Co. New York Mutual Gas Light Co. STANDARD OIL. 127 National Fuel Gas Co. New Jersey and Staten Island Ferry Co. Rapid Transit Ferry Co. Richmond Borough Co. Richmond Light and Railroad Co. Staten Island Ferry Co. Tennessee Copper Co. Allis-Chalmers Company. Audit Company of New York. George A. Fuller Company. New York Life Insurance Co. Queens Insurance Co. Terminal Warehouse Co. Western Union Realty Co. Union Pacific Railroad. Central Pacific. Southern Pacific. Galveston, Harrisburg and San An- tonio. Houston and Texas Central. Illinois Central. Kansas City Southern. Morgan, Louisiana and Texas R. R. \ S. S. Oregon and ( 'alifornia. Oregon Short Line. Oregon Railway and Navigation. Texas and New ( Orleans. Pacific Coast Railway. Baltimore and Ohio. Chicago and Alton. Atchison, Topeka and Santa Fe. Erie. Northern Pacific. Chicago, Burlington and Quincy. Delaware and Hudson. Denver and Rio Grande. Rio Grande Western. Northern Securities Company. Pacific Mail Steamship Co. Chicago, Milwaukee' and St. Paul. New York Central. Lake Shore and Michigan Southern. Delaware, Lackawanna and Western. Missouri Pacific. Central New England Railway. Harlem River and Port Chester. Hartford and Connecticut Western. New York and Harlem. New York, New Haven and Hart- ford. Poughkeepsie Bridge Co. Atlantic Coast Electric Railroad. Missouri, Kansas and Texas. Chicago and Northwestern. Louisiana Western Railroad. Morris and Essex. V? v.'r> *: p E § a H H H i o h a o £ w a i 5 W r h ■*-> H C OJ2 3 tU - s u* a 1) c - S a > crl >> 0 a s C ■J. 3) h It s bi i •o B Bl-0 w 7. 3 0) u a 3 0) bx 3 c 0) Slit) 2 a> o >> 03 C £ bO 4) ' .-.bOOC •a e 3 c5 C tj H -5 c. 3 ^ u u 3 3Si| W 5 .S ft: •- 'S 5 >, ft ° « ~ ft .2; s£ en — .0 * 0/ o rt fc, » 3 in z. tf „ o cs 5 ■ 1 1- s « 9 2 5 distill coal into petroleum before refining petroleum into the useful product, kerosene. Hardly a year had passed from the time of Drake's sue . however, than many new wells were sunk around Oil City and the AJle gheny River. Immediately after this the production of petroleum grew tre- mendously; "oil fever" struck the speculators as the "gold fever" had in IN I!). Tin demand for oil in 1865 had become so enormous thai the refineries of thai period could by no means handle the heavy business. Rockt feller was our of the lirsi to see the opportunity ahead of the refining business and was also one of the firsl to see the necessity of handling the busi- -.n .1 large scale so as to save expenses in refining. Therefore, in 1867, he united into the firm of Rockefeller, Andrews \ Flagler his own firm and those 129 ISO THE TRUST IN OIL. of his brother and several friends. The cause of this combination as stated by .1. 1). Rockefeller himself "was the desire to unite our skill and capital, in order to carry on a business of some magnitude and importance in place of the small business that each had separately heretofore carried on." The business of this enlarged firm grew rapidly and the Standard Oil Company of Ohio succeeded it. with a capital stock of Si ,()()().()()(). At this time Standard Oil, while being larger than most of its competitors, produced only 4« per cent of all oil refined. Hut at that time the oil interests of the country stretched only from Louisville, Kentucky, to Portland, Maine, and consisted of some 250 refineries. From this point on to 1ST7 the growth and progress of the Standard Oil was so great that its 4 per cent of the country's output increased 85 per cent. During these years its chief advantage in growth was tin 1 ability to get advantageous trans- portation rates — called discrimination. In 1ST1 the famous South Improvement Company had been organized by Standard Oil interests for making contracts with such railways as the Pennsyl- vania. Erie and New York Central by which the Standard should ship 45 per cent of its oil over the Pennsylvania and divide the remainder equally between the other roads and receive in turn from the roads rebates on all petroleum and it> products carried by them, regardless of who the shipper might be. Fur- thermore, the roads were hound by agreement not to charge less than full rates to all other parties who shipped oil by them. The roads even entered into a contract with this South Improvement Company to foster the interests of the Standard Oil and to prevent it against loss or injury by competition. At once great fight arose against such methods. Oil producers refused to sell to the Rockefeller refineries. But the Standard grew fat on its rebate power and steadily increased this by absorbing other refineries, enlarging its capital stock and checking competition as rapidly as possible. In 1872, the form of combina- tion among several refineries was known as an "alliance." In 1882 the Stand- ard Oil Trust was formed. This was not a combination of corporations, but of stockholders, who were able to control business although outwardly the il companies continued to do business as before. In the meantime pipe lines were laid to facilitate the carrying of oil. This became as great an influ- ence for monopolizing the oil trade of the country as the secret railway rebates in the company's early history. In the fights that developed to seize more control on tin part of the Standard Oil and to save the remnants of a collaps- ing business by the independents, rival pipe line companies were organized. At one time the Pennsylvania Railroad carried oil at eight cents a barrel less than cost. In the end the Standard Oil won. THE TRUST IX OIL. 131 In the meantime the people had been rising to crush out this monopoly which had checked all competition in the domestic oil situation. For ten years the Trust existed and the capital controlled increased to $121,000,000. But in 1891 the attorney general of the State of Ohio began proceedings to oust the Trust as a corporation because it had abused its corporate franchises under which it had operated. In 1892, the Ohio court handed down an important ruling that it was illegal for members of several corporations to combine as members and merge their interests in a trust. This, it declared, was in restraint of trade, opposed to public policy and therefore illegal. This put an end to the old form of consolidation and caused the formation of the Standard Oil Company of today, which holds twenty companies which were the offspring of the dissolved Trust. At the time of the new incorporation in 1899 under the laws of New Jersey, which permitted the practical consolidation of all com- panies into one, the following were the reported component parts of the new kind of -trust": Appraised value. Capitalization. Anglo-American Oil Co., Ltd $ 6,91 -'UiW $ 5,000,000 Atlantic Refining Co K,0:il,376 5,000,000 Buckeye Pipe Line Co 7.941,038 10,000,000 Eureka Pipe Line Co 1,547,055 5,000,000 Forest Oil Co 8,528,813 5,500,000 Indiana Pipe Line Co 2,014,953 1,000,000 National Transit Co 2.->.790\712 25,455,200 New York Transit Co 4,999,300 r,,000.000 Northern Pipe Line Co 707,007 1,000,000 Northwestern Ohio Nat. Gas Co 1,396,760 3,278,500 ( ftiio Oil Co 8,260,878 2,000,000 Solar Refining Co 711,798 500,000 Southern Pipe Line Co 8,279,918 5,000,000 Southern Penn Oil Co 8,021,654 2,500,000 Standard Oil Company of Indiana 1,088,518 1,000,000 Standard oil Company of Kentucky... 3,604,800 1,000,000 - indard Oil Company of Ne* Jersey. 1 b,983,94S lo.ooo.ooo Standard oil Company of New York.. 10,77'.', ISO 7,000,000 Standard oil Company of Ohio 8,426,014 8,500,000 Union Tank Line Company 8,057,187 8,500,000 T,,t a l $121,631,804 $102,238,700 since the incorporation of the Standard oil Company in L899, control of many other properties has been gained. Some of these are the Last Ohio Gas Company, the Shawmul oil Company, the Cumberland Pipe Line, the Pacific THE TRUST IN OIL. 133 Coast Oil Company, the People's Natural Gas Company of Pittsburg an. mure oil was produced than there was immediate markel for at the pre vailing high prices. Abroad a similar condition prevailed. Whereas the Standard oil had had a monopoly of most of the districts of Europe and could dictate prices from da) to day without fear of competition, there arose a movement whereby at least a dozen of the largesi banking houses of Europe interested themselves in the oil fields of Russia and elsewhere and began cut tin<^ prices righi and left in order to drive out Standard oil. Thus the Standard found itself up against a formidable rival and in order to hold its BUprcmaCl had to meet in tin righi with weapons of fin same kind LSI 198 THE WAR ON STANDARD OIL. low prices. Foreign interests even began to invade- the oil fields of the United States. And at this point the serious phase of the situation developed in the fact that the Standard Oil Company did not control the oil production of the United States through actual ownership, bul through the purchase of oil from the will owners or producers who leased their output, to the Standard at the prices the Standard was willing to pay. When the Standard began to cut prices there was a wail from every well owner. But the overproduction of oil both in Europe and the Far East continued. This checked the amount of export business of the Standard and, of course, at once worked against domes- tic conditions, where the oil that had been produced for export could not find a home market. Prices fell rapidly; in a very short time it had amounted to sixty cent> a barrel. Of course the Standard Oil officials were alarmed about the prospect of losing profits and they had to curtail. They explained that the price for oil must be regulated by supply and demand. They even stated that unless oil production was lessened prices would go still lower, for only a certain amount of oil could be used at certain prices. Everybody seemed to be pushing the work of production of oil at the wrong time. Prices in Europe fell the same as those in the United States. The actual estimated production of oil in the United States, which was a partial cause for this stress in the oil market, is shown in the following government statistics for 190-4 and 1903: Barrels 1904. 1903. California 29,700,000 24,382,472 Texas 20,000,000 17,955,572 ( )hio 19,062,550 20,480,286 \Y, st Virginia 12,754,005 12,899,395 V u York and Pennsylvania 11,999,055 12,518,134 Indiana 11,315,000 9,186,411 Louisiana 6,800,000 917,771 Kansas. Indian Territory & Oklahoma. 6,000,000 1,071,125 K( ntuckv and Tennessee 1,015,068 554,286 ( lolorado 500,000 483,925 Wyoming, etc 12,000 11,960 Totals 119,157,678 100,461,337 But if the increase in domestic oil production in one year was nearly 19,000,000 barrels, it was even greater over a long period. Indeed, the increase in twenty-five years was 1)9,250,000 barrels. Then, as has been said, the foreign production wras a very great factor in the competition, the prino THE WAR ON STANDARD OIL. 139 pal competitor of the United States being Russia. Following are some of the statistics on foreign production: Barrels. Russia, normal annual production ... .80,584,000 Dutch Indies, normal annual produc- tion 7,275,000 Galicia, normal annual production... 5,235,000 Roumania, normal annual production. 3,975.000 Burma, normal annual production. . . . 2,510,000 Now, all this may or may not have been considered by the people who had been crying out against trust aggression. But as soon as prices began to decline, they charged that the Standard Oil Company was depressing the mar- ket maliciously in order to gain a better grip on its monopoly. The center of the storm was in Kansas and Indian Territory, where the oil production was more than the Standard Oil said it could market and where 25,000,000 bar- rels a year could have been pumped if prices tempted such excessive produc- tion. This, compared with the 80,500,000 barrels a year of all Russia, SUg- gests thi possibilities of the glut in the oil market. The storm broke when the producers of Kansas took their troubles of pro- duction and Ion prices before the state legislature. Charges of discrimination u.re made. The independent producers of the state banded together into a $7,000,000 company to fight the Standard. The legislature practically kicked the Standard out of Kansas, made an appropriation for a state refinery to refine the oil produced in Kansas so as to be independent of the trust, and per- suaded the federal government to make a searching inquiry into the manner in which the Standard Oil conducted its monopolistic business. Hardly had this been done than legislatures throughoul the country, almost as one body, began congratulating Kansas for the fight it had made for fair dealing. State after state pas-, d resolution condemning the practices of the trust. In some stales th.n was an attempt to stop the building of pipe lines- the medium through which the trust h v reason of easy transportation gains most of its monopo|\ p«>wer. The action of the Kansas Independenl incensed the Standard oil Com- pany, which ordered all operations in that stale suspended. This in turn embittered Hie Kansas oil men. .\s Congressman Campbell of Kansas said, "this w&a arbitrarj business. When oil was discovered in Kansas its development was undertaken by the farmers who owned the land. They sank their own well- and whenever one was 'shot' an agent of the Stand ud eras on hand i<> pal the farmer on the back and tell him to go ahead. i to I HI WAR OX STANDARD OIL. They furnished the money in advance, look the oil out al a dollar a barrel, and shipped it to Kansas City, thus encouraging production and stimulating the digging tit' wells throughout the whole Held. Then came the Standard Oil Company's pipe line. The owners equipped their wells, made the necessary connections at their own expense and prepared to ship their oil, with the vis- ions of fortunes at the promised rate of $1 a barrel. Tank cars disappeared, the pipe line became indispensable, and then the price dropped and kept on dropping until it reached 47 cents a barrel. This may have been an old game through Pennsylvania, hut it was a new one for Kansas. The people had been encouraged to spend their money sinking wells and the developing the territory. When the development had reached its limit the Standard Oil Company put down the price, and as there was no other pipe line and no other refinery, there was no market for the product. The Standard Oil Company resorted to tactics that were disreputable and illegal. Because farmers and people dependent upon them asserted their ordinary rights and asked relief of the Legislature they were boycotted and blacklisted by the Standard Oil Company. Mr. Rocke- feller's nun issued an edict forbidding their agents purchasing any oil in Kansas. This resulted in throwing out of employment not less than 1 (),()()() men. Lessees of fully 4,500 wells will be ruined financially unless something is done to curh the monopoly. Flowing wells are going to waste, oil is running over the country and pumping wells, of course, have abandoned operations. Towns which largely increased in population as a result of the discovery of oil, h\ a mere (diet of the Standard Oil Company, have been reduced to a condition of commercial prostration and the people are being thrown upon the streets without employment or capital. The Standard Oil Company is a pretty big concern, hut the people of Kansas and the country at large purpose to find out whether this company can resort to illegal methods to crush out its com- petitors and control the price of its raw material without being punished in the ■al courts." So serious were the charges against the Standard Oil before the Congress of the United States thai in directing the President and the Secretary of Com- merce and Labor to investigate the business of the trust the following resolu- tion- were passed by the House of Representatives: "R< solved, That the Secretary of Commerce and Labor is requested to inves- te the cause or causes of the low price of crude oil, or petroleum, in the * United Stat.-, and especially in the Kansas field, and the unusually low mar- s between the price of crude oil or petroleum and the selling price of refined oil and its by-products, and whither said conditions have resulted in whole or THE WAR ON STANDARD OIL. 141 in part from any contract, combination in the form of a trust, or otherwise, or conspiracy in restraint of trade or commerce among the several states and ter- ritories, or with foreign countries. "It also is proposed to investigate whether prices have been controlled in whole or in part by any corporation, joint stock company, or corporate com- bination engaged in commerce among the several states and territories, or with foreign nations: also whether such corporation, joint stock company, or cor- porate- combination in purchasing crude oil or petroleum by any order or prac- tice of discrimination boycotts, blacklists, or in any manner discriminates against any particular oil field; also to investigate the organization, capital, profits, conduct, and management of the business of such corporations, com- pany, or corporate combinations, if any, and make an early report of its find- ings, according to law, to the end that such information may be used by Con- ss as basis of legislation, or by the department of justice as a basis for legal proceedings." Perhaps one of the severest blows to the oil trust was the action of the Kan- legislature making the pipe line a common carrier — that is, enabling any one to use a pipe line as publicly as a railway for shipping oil across the coun- try. The value of the pipe line to the oil trust is indicated in the statement made by the oil king himself, John I). Rockefeller, before an industrial com- mission. "The entire business is dependent upon the pipe line system,"' said he. "Without it every well would shut down and every foreign market would be closed to us." It appears thai the oil magnates soon discovered, upon embarking in their chosen field of monopoly, that ordinary methods of transportation would not serve the oil trust. In the firs! place the business grew -rapidly as people came to know the use and value of petroleum. It cos! too much l<> pack the ,,j| and ship it across the country, hence the trust devoted its energies to the pipe line construction. Here is Hie ray the oil king describes the conquest ot tli« country's oil business: "To operate the pipe lines required franchises from the stales m which they were located, and consequently corporal ions in those states, just as the railroads running through different slates are forced to operate under separate state charters. ••To perfeci a pipe line Bystem of transportation required in the neighbor- hood of $50,000,000 capital. This could not be obtained or maintained with out .hi in. In-trial combination. The pipe line system required other improve i t>, such as tank cars upon railways, and, finally, tank steamer.. Capital 14£ ////: WAR ON STANDARD OIL. had bo be furnished for them and corporations created to own and operate them." It seemingly had never occurred to the federal government thai pipe lines were in the same class of common carriers as the railroad, and carriers engaged in business on rivers and other bodies of water. Because of this the federal government did not have jurisdiction over the acts of the oil trust in operat- ing it- pipe lines. Signs now point to federal control. Indeed Rockefeller himself testified that this would be the natural trend when he pointed out the dangers of combination which he himself was effecting and the remedies which might be evoked. This is what he said: -The dangers are that the powers conferred by combination may be abused —that combinations may he formed for speculation in stocks rather than for conducting business, and that for this purpose prices may be temporarily raised instead of lowered. Combination is necessary, and its abuses can be minimized; otherwise our legislators must acknowledge their incapacity to deal with the most important instrument of industry. Hitherto most legislative attempts have been an effort not to control, but to destroy. Hence their futility. First, fed- eral legislation, under which corporations may be regulated, and, second, in lini thereof, state legislation as nearly uniform as possible, encouraging com- binations of persons and capital for the purpose of carrying on industries, but permitting state supervision, not of the character to hamper industries, but sufficient to prevent frauds upon the public." All tin turmoil which had been caused by conditions of over production in the oil business, and the cry for the "square deal" brought replies from the Standard Oil Company. From the time the Rockefellers first started business their policy was never to let any one know what they did. Stockholders never knew what the company really earned. The public never knew what oil cost. No on< knew what methods would be employed next to crush out competition. In fact publicity was a word unknown to Standard Oil. No. 26 Broadway, \ York, was synonymous with reticence. It was known only too well by those who did business with Rockefeller. Flagler, Rogers or any of that stamp that to "leak" any information was commercial suicide. As has been shown in the chapter describing the gnat financial party known in Wall street and else a- "Standard Oil," there was never any actual connection with the oil concern called the Standard Oil Company and the many banks, railways, and industrial trusts said to be under -Standard Oil" influence. Still the association of James Stillman, the head of the National City or "Rockefel- ler'* bank, and II. II. Roger-, the right hand man of the Rockefellers in all THE WAR OX STANDARD OIL. 143 sorts of financial undertakings, unfailingly brought the inference that the power of the Rockefellers was back of such projects. It goes without saying that William Rockefeller, who for weeks at a time absolutely controlled the machinery of speculation on the New York Stock Exchange, could not escape from classing, by this very action, great speculative deals in which he and H. H. Rogers, and James Stillman were concerned as "Standard Oil" operations. Such deals smacked too much of the Rockefeller or "Standard Oil" family methods to escape public attention and public branding. Yet when the spec- ulators and magazine writers, among them Thomas W. Lawson of Boston, began laving serious charges of misuse of public savings and abuse of public trust at the door of "Standard Oil," meaning thereby the financial clique of money kings, corporation magnates and speculative manipulators who had gathered around the Rockefellers, the generation of reticence of the Standard Oil Company was broken. No. 2(j Broadway, New York, which, ever since it had housed the oil king, the financial king, the speculative king and his lieu- tenants, retainers and subjects had impudently affronted the public by pur- suing a policy in every branch of industry with the motto that "Business is war," spoke at last. And the statement that had been wrung out of the man who had been impervious to all former attacks was as equivocating as indeed some of the charges had been and was meant apparently to throw dust in the public's i jres. For the statement, issued by S. C. T. Dodd, chief counsel for the Stand- ard Oil Company, was a quibble, attempting by making fine distinctions between the two sorts of "Standard Oil" which we have described here, to lead the public to infer that many of the charges laid truthfully to the door of the financial system called "Standard Oil" had no foundation in fact. Here is tin lir-t answer of the Standard Oil Company to the cry for the "square deal:" "In view of the many false and misleading statements from various sources, the directors of the Standard Oil Company deem it advisable to slate to the company's shareholders and the public that neither now nor at any time has the Standard Oil Company or any of its constituent companies been interested in any business not directly related with ami necessary to the petroleum trade. ••It would be almost impossible to designate in this denial the different classes of business with which irresponsible parties have coupled the Standard Oil Company's name, hut it may not lie amiss to Bpecify copper, steel, banks, railroads and ^as (other than natural gas) as being most prominently men- tioned. With none of these affairs has the Standard Oil Company been at any time connected. l ii THE WAR OX STANDARD OIL. "Individual members <>f the Standard Oil Company have been and are inter- ested as individuals in various enterprises, hut lliis is entirely outside of the business of the Standard Oil Company, which is oil alone, unaffected by other interests in which its stockholders may invest. "Neither is it true tint the Standard Oil Company, -John D. Rockefeller or any officer of the Standard Oil Company has taken part in securing the nomination of an\ of the candidates for office, as is so positively stated. Fur- thermore, it is entirely untrue that there is any 'Standard Oil Party' banded ther for speculation in stocks, ;is is commonly charged. The name of the Standard Oil Company is frequently used by designing persons in the manipu- lation of the stock market, but its use is unwarranted. "The Standard Oil Company departs from its usual custom in making this denial for the reason that the statements being made at this time by newspa- pers, magazines and sensational public speakers appear to be unusually menda- cious and may. to a great extent, mislead the public." This action but drew greater attention to the oil trust and the men who ran it and were a great factor in running the whole financial, industrial and speculative machinery of the company. T. W. Lawson of Boston, who con- ducted a crusade against the Rockefeller party both in the press and in the k market^ of the country, answered the reply of Dodd and set up more and greater charges. We have already referred to the hesitancy of the Board of Mi — ions of the Congregational Church to accept money from John D. .feller for missionary purposes because of charges made that the money was tainted. This action brought out a typical statement by Lawson, which we n produce a-, follows : "It i> a crying shame that the old gentleman, John 1). Rockefeller, is so pestered and hectored at the vintage time of his wonderful career. The head of the greatest hand of ruthless heart pluckers and soul drillers the world has seen, the old gentleman has risen to an eminence never before attained by man, an eminence where all, rich and poor, master and slave, saint and sin- can focus his being between themselves and God's bright sun and size him up from his breast hone to his shoulder blade, from armpit to armpit. The old •man kicks against the sizing up, but he should hear with it, remembering t pat .1 fortitude always have been the heritage of the tribe of Shy- . and that he who dances must in time pay the fiddler. "Tin tribe of 'Standard Oil' has had a long and merrily mad dance. I! eath their feel as they whirled have been thrown countless scores of human rts, brilliant brains, enthusiastic souls, all gathered by the tribe, and many THE WAR OX STANDARD OIL. 145 and many a weary fiddler has faltered, dropped and died, or been dragged .shrieking to the madhouse because he could no longer respond to the old gen- tleman's inexorable 'on with the dance.' "I would give one word of advice to the wise old spokesman of the old gentleman Rockefeller, that wise lawyer who for forty years has shown his great master how to play hide and seek with the lords of his country, who for forty years has shown the tribe of 'Standard Oil' how to keep on the sunny Bide of prison bars — my advice is don't talk; it's a bad habit. When 'Standard Oil" talks the American people listen, and they may get irritated as they listen." The Lawson diatribes, investigations by Congress and state legislatures and calumniation in the press did not disturb John D. Rockefeller half as much as the charges made by Dr. Gladden. Mr. Rockefeller and his son John 1). Rockefeller were great workers in the Baptist church and this assault upon his honor wrung the old man's heart and even caused him to close his home at Lakewood. The Rockefeller endowment of the University of Chicago started by reason of the fact that this great seat of learning originally was a Baptist institution. Furthermore the Rockefeller private life had been what everyone considered highly moral. A well-known periodical — Leslie's Weekly — in speak- ing of his family relations recently said: "Many who greel .John 1). Rockefeller for the first time bring with them much prejudice engendered by the diatribes with which every one is familiar, and are surprised to find in him a man of finest courtesy, dignified, but gra- ciously cordial to all. They leave, charmed at their reception, contrasting the demeanor of the dominant figure in the world'- finance with the imposing grandeur of the little bin- man of their own home town. No man, however unimpressionable he may he, can stand in the presence of Mr. Rockefeller without feeling the repressed power of the man. lie possesses in a marked degree thai force of personal prestige that is the dominanl attribute of every man of distinction in any sphere. In their efforts to fathom the mystery of his power over men, his mosl vociferous traducers have been forced to granl his this quajity. It is through this secrel of mastery of all men or things thai he has kepi the crowd at a distance, and has defeated its purpose to possess, ;I | all hazards, that which he will never surrender which the humblesl citizen of this land claims the right to guard from public BCTUtiny his pergonal privacy. John I). Rockefeller has a kind and generous heart, and i> susceptible lo such influences as govern the emotions of other men, hut the sledge hammer method of winning his affection has never proved successful. The true story of Mr. Rockefeller may never see the light. l Hi THE WAR ON STANDARD OIL. Much of it is written in the hearts of those who come within the radius of his extensive private charities." None of the big captains of industry ever took into their code of business ethics any rule of conduct which was based on "a fair show for the under fellow."* Aii analysis of the character of the "oil king" probably would dis- close the tact thai working on the principle that ''business is war" he had really never understood that in this twentieth century the code of ethics is changing to "a square deal for every man, rich and poor alike." At any rate, two replies to the charges of Dr. Gladden were made in a manner that >howed how deeply Rockefeller felt the taint upon his "home" character as distinguished from his "office" character. One of these replies was by Henry 11. Rogers, vice-president of the Standard Oil Company, business associate of Rockefeller and organizer of many of the companies for which Rockefeller tried to escape responsibility, and great power in the stock market and Wall street. ".Ministers say queer things," said Mr. Rogers. "Dr. Washington Gladden s.i\s that everybody knows that John D. Rockefeller has obtained his money dishonestly. With as much reason I could say that everybody knows that Dr. Gladden would not trust the ten commandments for ten days with the deacons of his church, because they would surely break some of them and bend the rest. "Slavery in certain sections of the United States was legal until President Lincoln's (mancipation proclamation. Rebates on railroads were just as legal until the passage of the interstate commerce commission act. "After an exhaustive examination by the industrial commission, authorized by Congress June 18, 1898, in a review of evidence, the commission reported as follow s : ' 'It has been charged as a matter of general belief on the part of almost all the opponents of the Standard Oil Company that these discriminations in various forms have been continually received, even up to date. On the other hand, these charges have been denied in toto and most, emphatically by every representative of tin Standard Oil Company with reference to all cases except- ing oik, which they claim was a mistake, the amount of freight due being promptly paid on discovery of the error. The Standard Oil Company not merely challenged the opponents to bring forth proof of any case but pro- duced many letters from leading officials of railroads to show that the company had in no case received any favors or asked for them.' " By this time Mr. Rockefeller's feelings were so deeply wounded that S. THE WAR OX STANDARD OIL. 147 C. T. Dodd was called in again to make reply for him, for Rockefeller per- sonally would not do so. This statement was voluminous but because it shows the frame of mind and attitude of the world's greatest monopolist and money magnate we append it at length : "There may well be a difference of opinion on the abstract question whether the Board of Missions should receive gifts unless satisfied that the giver is honest; but all will agree that if he who brings his gift to the altar must come with clean hands, still more should he who ministers at the altar and receives the gift be free from stain. There is no excuse for those who make money dishonestly and still less excuse for those who in the name of religion falsely accuse their fellow men. "The objection to Mr. Rockefeller's gift is based upon the allegation that he made his money dishonestly. This accusation, if false, is vile, and being made by ministers in the pretended interest of molality is doubly vile. The assertion should not be made unless it can be readily established by specification and proof. I have seen no proof and no attempt even at specification, exeepl in the protest of Dr. Gladden. He says, 'In this ease the investigation has been thoroughly made and the facts are known. The legislative inquiries, the records of the courts have given the reading people of this country the mate- rials for a judgment upon the methods of Standard Oil, and there never was a day when their minds were as clear on this subject as they are now.' Then follows the specification: 'Mr. Rockefeller may deny that rebates are now given to the Standard, but the Standard now controls about two-thirds of the railroads of this country, and its power is exerted in establishing classification of freights in such a way that it can kill competition. Rebates are no longer neo ssarj .' "The assertion is not true. No such slate of facts has ever been disclosed by any investigation, nor supported by evidence in any court of law. No such facts exist to be proved. The Standard Oil Companj does not own a share of stock of any railroad company, nor does it control any railroad company. Stockholders of the Standard undoubtedly invest in railroad as in other shares, but stockholders of the Standard are not a majority on the board of directors of any railroad company, so far as I am aware, and there- fore cannot control. "The question of railway rebates and Standard control of railways was investigated by the United States Industrial Commission in L900, and they reported no such facts. Members of the Standard .and of the railways were examined in relation to these subjects. It was shown thai prior to the enact- l is / HE WAR ON STANDARD OIL. nniit of the Interstate Commerce law the rebate system whs universal. Rail- roads made their nominal rates higher than they expected to obtain from reg- ular shippers, and the amount of actual freighi to be paid was a matter of contract. Each shipper made the best terms he could. The Standard did not invent this system; it found it existing, and could not do business, without submitting to it. Like all other shippers, it made the host terms it was able to make with the railroads. Its refineries were located at points where it could take advantage of railway competition. It also strove to give equiva- lents for reductions in freight. It shipped not only carloads, but trainloads. It provided terminal and other facilities, and assumed all risks of loss. Public opinion, more enlightened in these days than in those, may have discovered that this was all wrong; hut at that time the business man who did not accept that method would better have closed his shop. "The -tories told of the immense aggregate of the rebates paid to the Standard were shown by that investigation to be untrue. A large portion of the rebates paid were not discriminatory. They were paid to all shippers who shipped exclusively by rail. It was impossible for any shipper to know with certainty what rates his competitors wire paying. The Standard often found that its competitors had been paying less rates than it paid. Furthermore, the public' obtained the advantages of the low rates received. A reduced price fur refined oil kept pace with reduction in rates, whether this reduction was by way of rebates or otherwise. And the price at which the public for many veais has been obtaining oil would simply have been impossible had not ship- pers forced the railways to reduce their rates, which they did first by rebates and later by open schedule. "The system of rebates has happily received the condemnation of law. The Standard welcomed the change as a beneficial one. But to say now that it should not have obtained the best rates under the old system which its position enabled it to obtain is an impossible counsel of perfection. The evi- dence before the Industrial Co ission shows very clearly to any unprejudiced mind that since the enactment of the Interstate Commerce law the Standard has obeyed it in every particular. The evidence of the Standard managers and freight agents was corroborated by the certificates of managers and freight nts f wh.it are called the *'bi^ six" packing firms thai make Chicago their headquarters. These are Armour & 151 1 52 THE BEEF TRUST. I . Suit't & Co., Nelson Morris & Co., the Schwarzschild & Sulzberger Com pany, the Cudahy Company and the first mentioned National Packing Com- pany. Not all these companies, but most of them, control directly or through affiliated interests or family tics the packing business of America. The gross business of the six companies is estimated at $700,000,000 a year. They control seventy-five auxiliary companies, thirty-three plants scat- RESIDENCE OF J. OGDEN ARMOUR, PRESIDENT OP ARMOUR & CO. I all over the country, and extensive private car lines for handling their products in 25,000 private freighi cars. But when this is said perhaps the true significance of the character of the Beef Trust is not revealed. In the firs! place, the trust — that is those interests working in harmony — has a substantia] monopoly of the beef trade over a large section of the coun- try, particularly in the Large cities where there is little or no chance for com- mon with other concerns. It slaughters over one-half of the annual product THE BEEF TRUST. 153 of rattle in the United States and even dominates the prices at which cattle, hogs, sheep, etc., shall be sold in the principal markets of the world. As for being far-reaching, the Beef Trust calls three times a day on most families of the civilized world for profits on its business investment. It goes across the ocean and collects tribute as readily as it knocks at the door of the home consumer of meat in Chicago. It fixes at its own will the price of every pound of fresh, salted, smoked or preserved meat prepared and sold in the United States — and this often regardless of actual conditions prevailing in the market for live animals. It fixes the price of every ham, every pound of bacon, every pound of lard, every can of prepared soup. It has an absolute monopoly of the dressed and preserved meat export business of the country. Furthermore, it controls the American trade in fertilizers, hides, bristles, horn and bone products. It owns or controls or dominates every slaughter-house worth considering. In one way or another it commands the fruit, butter, egg and poultry markets of the nation. Steam and electric railroads are owned or controlled by it and the interests allied with it, such as the Armour family, control or are vitally interested in such great street car and electric light sys- tems as those of Kansas City, such great railway property as that jointly controlled with other interests in the great Chicago Subway system. It owns factories, shops, stockyards, mills, land and land companies, plants, ware- houses- and some say even legislators and congressmen. A great deal of loose talking has been done about the Beef Trust and Ihe impression has gone abroad that the control of the food supply of the nation by this body of men with headquarters in Chicago is absolute in every respect. This i- not wholly true, for no monopoly ever has been so absolute that Borne competition did not enter into consideration. In view of the import- ance of the field tin Beef Trusl occupies, however, and in view of the fact that the government has investigated the trust's operations, there is good KM! for inquiring into the fads known officially as to what this trust accom- plishes, how it works, how ii is controlled and to what actual degree the public has paid tribute to the men of this great industrial combination. To do this we -hall have to turn to ihe report of Commissioner Garfield who investi- gated the trust for Ihe people through government channels. The cause of this investigation was principally a -real hue and cry thai ,,,,-■ a fen pears ago over the price of meat at retail enters, especially in the .ast.rn cities, compared with what animals cost at that lime on the hoof. Charges were mad. by shippers thai ihe packing house combination worked together in conspiracy to hold down the price of cattle when shipped to P'O ea E ° fe k * 5 £ P. P c — s-H o oi o aj jz e« 3 4 a c ,° ; « I H H ~ s- £ u •w £ o o » Ol O C3 rg - < .5 w to £ rt tf t, to.S £•« eg w o u o C to C C Jj K =~Si2g 3r • H Eh fc O w n 3 ;-. 4J a) o* H | « » _ ±S 8 05 t>>43 O 01 J ft i- > a> ~ C £4, (- fe 4) « J K x; w ■* 4> •- 5 * • i; ~ o ® ft ** o *J 0) M — " . " "O <-> 02^ d~5 W 3^ <_, & o. J; g § 2 " 8 - •h — — (L . M -i o if, r : p, od THE BEEF TRUST. 155 market. This, of course, was so as to get animals as cheaply as possible. At the same time it was charged that in order to hold these prices of live animals down the packers would retire from the market at times, thus glut- ting the supply and causing panic among the shippers. This, it was said, usually brought the live stock men to terms — the packers' terms. When these and other charges had gone to such an extent that Judge Grosscup in Chi- cago issued an injunction against the members of the packing combination from entering into a conspiracy to restrain trade, and when the State of Mis- souri had fined a number of the packers for violating the anti-trust law of that state, President Roosevelt had an investigation started. The report that was made covered only certain parts of the controversy, those dealing with industrial conditions. But these are of great interest. In the hist place this report, with one exception, is the only real light thrown on the methods of the Beef Trust. That exception is the annual report of Swift & Co. The reason the other members of the trust do not make reports is that they are private or close corporations, owned by the families by which they arc run. Swift & Co. for several financial reasons, desire their employes and others to hold their stock, which amounts to $35,- 000,000. Inasmuch as no one likes to buy stock unless it is listed on some stock exchange where its value can be known, and because the stock exchanges demand statements of earnings to be published, these annual statements are issued. Commissioner Garfield's report showed that the stock of the various com- panies in I In- "big six" amounted to over $90,000,000 stock and bonds of Swift \ Co. This stock is made up as follows: Armour & Co., $20,000,000, par value $100, no bonds. Swift & Co.. $35,000,000, par value Sl<)<), $5,000,000 bonds. National Packing Co., $15,000,000, par value $100, $1,820,000 bonds. Schwarzschild & Sulzberger $5,000,000, par value *1<><>, $3,000,000 bonds. Nelson Morris & Co., $3,000,000, par value .*1()<), ,„, bonds. The Cudahy Co., $7,000,000. In view of tbi' amount of business done by these concerns the capital is v< r\ conservative as a whole. Here we find one thing in common with the Standard Oil Company. With the possible exception of Swif'i & Co., this ■ ipitalization is not on the basis of most modern business promotions, includ- ing great amounts of "watered" stock. If we go n little further into the Garfield repoti we find the reason, the ownership is concentrated with the packers themselves and was not scattered among investors. Had the great us THE BEEF TRUST. 157 $500,000,000 United States racking Company been formed, as was planned before tbe efforts of the packers went amiss, we can see bow much "water" between that amount and the present $88,000,000 capitalization would have been sold to the public. The greatest capital, that of Swift & Co., as a matter of course, is found where the stockholders are the most numerous. Even here, where there are 6,000 stockholders, we find that the average held is about 60 shares, but the control of this is with the Swift family. One way of keeping this control is by selling stock to employes. Any one who has worked for Swift & Co. a short time is expected to buy stock of the company. This, of course, always must be voted according to the desires of the management of the company, else the employe could not hold his position. Furthermore the employe rarely dares to sell out his stock to take advantage of a rise in the price, for the company has stated that such action is against its wishes. The other companies in Hie combine also show narrow control. The orig- inal subscribers to Armour & Co. were only three in number and now the stock is closely concentrated. The partnership of Nelson Morris & Co. is of three j» reons, Nelson Morris, Ira N. Morris and Edward Morris. There are only .ight stockholders in the Cudahy company and in Schwarzschild & Sulzberger all but 8,400 shares of stock are held by four individuals. The control of the National Tacking Company is narrowly held, but here is the proof that there is enough of a "community of interest" among the packers to justify the brand of Beef Trust. In the board of the National Packing Company we find as directors J. Ogden Armour and P. A. Valentine, of the Armour inter efts, two of the Swifts and two of the Morris family. The Garfield report lets forth that Swifl & Co. own 42 per cent. Armour & Co. 42 per cent and Morris & Co. interests 12 per cent of this company, which was meant to he ||„ nucleus of the world wide beef combination. The principal cone. ins thai were merged into the National Company when the bigger trust was contem plated were the Omaha Tacking Company, the Hammond Tacking Company, tin' Hutchinson Tacking Company, the Anglo-American Provision Company, the United Dressed Beef Company, the Fowler Tacking Company and the Continental Packing Company. The average number of cattle slaughtered by the "Tig Six" is 12,500,000 a year, or k"> per cent of the total slaughter of all cattle each year. The Garfield report says that, while the margin of profit between the price of live cattle and of beef is low rather than high, "it cannot he emphasized too Strongly that changes in the margin are of little yalue as a basis for judging L58 THE BEEF TRUST. the movement ot* profits. This may readily be appreciated from the mere fact thai on the average only 54 per cent to 57 per cent of the Live weight ittle is retained in dressed beef." A.s in every other sort of monopoly, the Beef Trust gained its ascendency through a special privilege. Of course there was the usual concentration of control of the implements of the business, such ;is buying in many small plants, reducing expenses by operating on a large scale, etc. But it seems to be an MAIN ENTRANCE TO THE CHICAGO STOCK YARDS. Thi> i^i w:is taken during the [ntemational Live Stock Exposition, which is held yearly, with representation from all parts of the civilized world. Here it is that . - stock-raisers and breeders throughout America exhibit the results of th'-ir skill in feeding and breeding stock, judgment being passed by experts, and premiums cordingly. Wished fact that the control of the beef, pork, mutton, poultry, fruit, egg and dairy trade of most of the great centers of the country in the hands of the Beef Trust came about through the private car system. Indeed, investi- ions conducted by the railways before the Interstate Commerce Commission in Chicago brought out evidence of great abuses by which the trust thrived on rebates to a similar degree to that when the Standard Oil Company was THE BEEF TRUST. 159 able to grasp the actual monopoly of the oil trade of the country. The pri- vate car line arose about thirty years ago by reason of a necessity for some means of transporting animal products by rail to distant cities. Two men were prominent in founding this system, which rapidly grew into the refrig- erator-car system known to all people today. These Avere Gustavus F. Swift, founder of Swift & Co., and Nelson Morris, head of the wing of the Beef Trust of that name. The latter for some time tried to freeze meat and then ship it across the country. This was not satisfactory in warm weather. Swift took up a scheme by which a refrigerator car invented by a man named Tif- fany, could be operated summer and winter. This project met with a great deal of skepticism on the part of other packers and prejudice on the part of flie butchers all over the country, who saw the future when the Beef Trust would be able to ship meat everywhere and undermine smaller businesses. This was exactly what happened. People in the East especially soon found that Chicago beef was better, even when shipped great distances, than that which could be procured at home. The result was the speedy establishment of branch offices and markets over many sections of the country. When local butchers tried to fight .by competition the trust simply bought them out if they were of a Bize to be worth while, or lowered prices to such a ruinous figure that competition dwindled and the field was left free to the Trust. Nothing served to concentrate trade and to create a widely diversified business as did this. In a very short time the big packinghouse in Chicago had grown from a simple butcher shop to an establishment with sixty five departments and several side issues. The amount of business of all concerns increased, as will be seen from the following table ranging over fifty years of transactions: No. ofestab- Amt. cap. Cost of value of lishments. invested. materials used. products. 1000 .- 921 $189,198,26 1 $688,588,577 $785,562,438 1890 1,1 is 116,887,504 l«80,962,211 561,611,668 1880 «7'2 $,419,213 803,562,415 1.45,885,894 1870 768 l .l l-'-"i fc,692 61,67 1,02 V 75,826,500 I860 259 10,158,362 23,564,488 29,441,776 I860... ... L85 3,482,500 9,451,096 11,981,642 Of COUrSe greal economies were effected by such M system. Shipments of cattle on the hoof declined and dressed beef shipments increased. Branch slaughtering plants were started in man} sections of the country near the cat tie ranges to save shipmenl as much as possible. This evolution worked revolu- tion elsewhere. .\s soon as it was seen that the refrigerator car could he used HiD THE BEEF TRUST. to ship perishable meat, there was a demand for shipments of eggs, fruit, dressed poultry, etc. With the discovery thai eggs could be kept in cold storage for a year or more without spoiling, and thai poultry could be frozen and kepi as long a time, the packers began to corner the market in these commodities win never and wherever possible. With this development there arose numerous refrigerator car lines. Many of them were independent for a time, hut usual methods soon brought most of them under the control of the MAKING MUSIC STRINGS— STRINGS FOR TENNIS RAQUETS, ETC. The gut strings are spun from the intestines of sheep, and there are two million farmers in the United States who raise forty-three million sheep annually. The use of the sheep this purpose indicates how every part of an animal is used for the henent inkind It is a common Idea that violin strings are made from a cat — hence the word t" is an Italian word, ami really means the inter-breeding of the mountain goat Our own "Uncle Sam" perverted the term, and the govern- ment in i- still lists gut music strings as "cat-gut." Violin and other music «tring« — also strings for the most expensive tennis raquets, etc., are manufactured from |. by a treating and spinning process. They are exported to all parts Id by the rnai. P. F\ Turner. principal packers in the Beef Trust. There are now four principal groups of these trusi private ear lines as follows: our Group — The Armour Refrigerator Line; The Armour Tacking Company; Armour & Co.; Fruit-Growers' Express; Kansas City Fruit Express; routine, ital Fruit Express; Boyd, Lyman & Co.; Kansas City Dressed Beef Line; Barbarossa Refrigerator Line; Tropical Refrigerator Express. THE BEEF TRUST. 161 Swift Group — Swift Refrigerator Line: California Fruit Transportation; Continental Fruit Transportation: Libby, McNeil & Libby. Morris Group — Morris Refrigerator Line; Nelson Morris till was doing business in restraint of trade. This brought about immediate investigation by a federal grand .jury and numerous indictments followed. Agents of the Beef Trust vanished, apparently in the fear that they might be forced to testify against the alleged criminal doings of the tni>t officials. Some of these nun were found in Canada and brought back by detectives. Some of them hastened to Europe and thus escaped the investi gation. The head men of the packing concerns, however, remained in reach. One of the most sensational episodes in the disappearance of documents sup- posed to have incriminating evidence againsl the trust illegalities of the pack ,i was tli.it connected with the Etna Trading Company, alleged to be the clearing house In which the combine sold casings. These casings are made principally from the intestine, of sheep and are used lo cover sausages. It Was charged thai :i < omhiiial ion in restrain! of trade existed in this business and thai the Etna company did the illegal work. The government officials seized lix trunks belonging to this company after they had been placed m the National Safe Deposit Company in Chicago. Suspicion was firs! aroused in this case by the disappearance of the officials of the company and the hur ried abandonment of their offices in the Fisher Building in Chicago. 164 THE BEEF TRUST. B wise of the wraith of the corporations under investigation, it was feared pressure might be brought to bear to la-ad off indictments and convic- tions, eveu though they were merited by the most lenient construction of the law. Indeed, men connected with the packing concerns were warned to keep away from the building where the grand jury had its hearings and even then indictments resulted from the alleged attempts of Beef Trust agents to tamper with witnesses. Testimony was taken for a long period and witnesses from many cities and from the country were heard. The character of this testimony went to show many things in apparent vio- lation of the law. among others: That the packers had endeavored to thwart the government, in its attempts to make an investigation by influencing testimony of witnesses in the employ of the jiacking firms. That employes of the packers were charged with having attempted to obstruct the serving of subpoenas on employes of the packing companies requiring them to appear before the grand jury. That record- seized by federal officials were believed to reveal the existence of an illegal trading arrangement between the Etna Trading Company and the packers in the business of handling sausage casings. That an understanding existed between the packing companies and the rail- mad- subsequent to the Grosscnp injunction and that preferential rates wen given the packers on freight shipments. IN rhaps the most serious fight made by the packers was against the effort to prove that illegalities were common in the relations with the railroads. Here it was Armour & Company and Swift & Company who suffered the brunt of the investigation, because it was through the private car lines owned princi- pals by these concerns that it was alleged rebates were given by the railways. Tin charge that icing bills were inordinate and pressed severely upon the fruit shippers of the country, was met by the reply that, although Armour & Com- pany had practically a monopoly of this business in certain districts, the pri- vate car 1 1 1 1 . _ gjed in the interstate business publicly was not a* public car- rier, but a private business. However, exorbitant icing charges were reduced in tin effort to withstand the tide of public disapproval. Of the other serious complaints investigated with a view to righting exist - . tho-c; which pointed to glaring injustices in the control of the price of meat- were prominent. Generally speaking the Beef Trust was charged with illegally manipulating the market for cattle on the hoof on the n and southern ranges. Evidence showed that repeatedly at the THE BEEF TRUST. 165 great central market of Chicago and at the other markets of St. Paul, Sioux City, Omaha, St. Joseph, Mo., St. Louis. Kansas City and Fort Worth every .sort of means was taken to favor the packers in their quest of low priced ani- mals. In the same markets it was charged that commission men were influenced by the packers to help the trust in an illegal pursuit of trade. It was charged that glaring examples of unfair dealing were found wherein the packers de- r i s AMONG THE CATTLE PENS, CHICAGO STOCK YARDS. This he Stock yards, which are the largest In the world. They com] ire 25 miles of streets and alleys between the pens, 38 miles troughs and .",ii mi linn troughs. Twenty trunk line railroads Berve the , although within the same the association owns its own tracks and charges' toll for their 13,000 pens altogether and when filled will hold 120, hogs, 20,000 cattle 16, Bheep To bring -i year's receipts i<> the yards would require a train almost long enough t" reach from New fork t" Ban Pram pressed prices of animals artificially by their combination one d,i\ bo thai on the next they could buy at their own figures. Cases were cited where men refused to take such low prices and shipped their animals from one city t<> another, only to be met by the same prici It also was charged thai through combination with stock yards and terminal railway companies heavy and arhitrari terminal charges and switching ' 166 THE BEEF TRUST. \w ii exacted from shippers unfairly. Still further the charge was made thai the Beef Trusl illegally controlled the output of finished meat products and that the small butcher or packer in the country was constantly being squeezed out of business 1>\ the combination's evil methods. This combination was said to extend even into the control of the by-products of the packing industry such a- glue, felt, blood, hone and glutenous products. The Chicago Union Stock )'\ which tribute is collected over the Length and breadth of the land until a whole nation arose in protest against the arbitrary power and abuse thereof: Once more we must go back to the family or families of the financial world which we have said find their greatesi asset in the savings of the people — to the money trust, to "Standard Oil." to the insurance trust, to the beef trust and to the numerous financial and industrial affiliations which form the great web of power called "capital" in the United States. It would hardlv be accurate to say that absolute control of the 211,000 mihs o\' railway lines in this country are in the hands of half a dozen men, for history has shown that hundreds of thousands of individual citizens of the country have invested in the securities which own or have a lien on these great national highways. History also has shown how, when the railway magnate is too lax in being a "dummy" director with only a few shares of stock in his actual control, some shrewd speculator has swooped down upon him in a trice and d control of his pit project through a stock market coup. Furthermore, there have been times when through some such shallow agreement as a "voting trust" a railway has been dominated for a number of years by men who really owned so little of its stock as not to be prompted to treat the problems of the stockholders other than selfishly, and then the small and numerous owners of perhaps discredited stock have risen in their right and overthrown the "trust" in that particular road. Hut these are exceptions. If you would know how the greatest of the world's arteries of commerce are controlled, glance at the following table showing the domination b}' six systems of more than half the railway mileage of the country — interests which are so fasl feeling the hand of John I). Rockefeller and "Standard Oil" that before tin- volume appears in print Rockefeller and railways may be almost as sugges- tive as Rockefeller and "Standard Oil": Mileage. V< tinsylvahia 19,000 VandeVbilt 23,000 Hill system 21,000 Harriman 16,000 Gould 20,000 Rod? [sland 16,000 Total 115,000 Total mileage in country 211,000 THE RAILROAD TRUST. 169 Revenue of all roads $1,900,000,000 Revenue of above six . 1,200,000,000 Capital of all roads $12,000,000,000 Capital of above six 8,000,000,000 Already financiers have brought about an interlacing of the boards of direc- tors and stock ownership of these and other railroads of the country until the power of the "Standard Oil" interests is openly recognized, though perhaps it is not yet all powerful, in the management of about two-thirds of the mileage of the country. The road most recently to fall under this group is the Atchison. Topeka and Santa Fe, which for a long time was considered the only great independent system of the country. When "Standard Oil" directors were elected to its board the following roster was made up .showing what roads are influenced from No. 26 Broadway, New York, the home of the Standard Oil company and the Rockefeller party : Mileage. Atchison 8,00:5 Baltimore and Ohio 4,897 Chicago and Alton 91 5 Chicago, Milwaukee and St. Paul 6,682 Chicago and Northwestern 7,365 Rock Island System 16,000 Delaware, Lackawanna and Western 947 Delaware and Hudson SS2 1- Denver and Rio Grande 2,460 Erie 2,556 Illinois Central 4,801 Kansas City Southern 889 Missouri, Kansas and Texas 2.718 Missouri Pacific System 20,000 V , Y..,k Central 11.17s V u York, New Haven and Hartford 2.0:*7 V a York, Ontario and Western 549 Northern Securities 18,920 Oregon Railroad ami Navigation 1,151 Oregon Shorl Line 1,888 Reading 2,1 I I Southern Pacific 9,621 Union Pacific 9,105 Total 181,580 170 THE RAILROAD TRUST, But as yet "Standard Oil" influence, while it is powerful in these railways, finds the family pride o[' the Vanderbilts and the Goulds and the business jeal- ousies oi' inaii\ another rrailway interest of such great importance that alliances, both independent and interlaced, have been brought about with many of them, as is seen above. And just now the alliance of greatest significance is that with Edward II. Harriman, head of the Union Pacific, Southern Pacific, Illinois Central, Chicago iV Alton and kindred roads, and member of the powerful New- York banking firm of Kulm, Loeb & Co. E. II. Harriman had one ambition — that to control all the transcontinental railroad lines of America with the exception of the Canadian Pacific. This ambition ran counter to the plans of James J. Hill, the great president of the itest railway merger to date and the far-seeing developer of the great Northwest. Mr. Hill, as head of the Great Northern system with its outlet on the Pacific Northwest, found Mr. Ilarriman's Union Pacific road encroaching on his territory, and to gain vantage ground bought the Chicago, Burlington & Quincy a- a feeder into Chicago territory. Whereupon Mr. Harriman con- ceived the idea of swooping up the road that paralleled Hill's Great Northern — the Northern Pacific. But Hill saw the opportunity at the same instant, and, with the mighty banking prestige and financial power of J. P. Morgan behind him. bought for control the stock of the Northern Pacific as fast as did Har- riman with his hacking of Kuhn, Loeb & Co. The result was the celebrated panic on the New York Stock Exchange of May 9, 1901, when Northern Pacific stock was cornered and $100 shares sold as high as $1,000. Out of this turmoil in which for a day half the banks and brokerage houses of the country were technically bankrupt, came the discovery that neither Hill nor Harriman could control the western railway map. Then came the arbitration and the formation of the great railway merger — the $100,000,000 Northern ritii - company — with -James J. Hill as president. This was a blow to the prestige of Harriman, for he had to he content with accepting a great amount of the stock of the Northern Securities company to be owned by his Union tic stockholdi rs. But a day came when Harriman was to win, at least in one sense. President Roosevelt coneeiyed the idea that this merger company was illegal. Without so much as warning the railway magnates of this, he instructed the law depart- ment of the government to proceed against the company to ascertain if his jeeture was good law. It was. The United States Supreme Court finally ruled that the Northern Securities company in substance was a trust under the law and hence must he dissolved. THE RAILROAD TRUST. 171 When it became apparent that a dissolution would take place there was a long legal tangle as to whether Hill or Harriman should be the greater gainer in the change. In some things Hill won, but all the time Harriman was work- ing out his ambition to dominate the railways of all the West. There were the Goulds, the Rock Island party and Hill to fight, but already Harriman had put the grip of his Union Pacific on the Oregon Short Line and Oregon Rail- way and Navigation Company, gaining control of the route through Oregon. MICHIGAN AVENUE, CHICAGO, FROM LAKE FRONT PARK. Prom I'i'i i" right the buildings are (1) Auditorium Hotel, (2) Studebaker and Pine Arts Buildings, (3) Chicago Club, (4) Victoria Hotel, ■ .'» \ Stratford Hotel, (6) Railway Exchange Building, <~> Building just erected by popular subscription for the Bole u the 'l'h lore Thomas Orchestra, (8) Pullman r.uildiiiK ninVes <>f the Pullman Car Co., and Headquarters of the United States Army, Department of the Lakes, (9) Peoples Qas Light A Coke Co., (10) Building with tower— Montgomery Ward & Co., ill) Art Institute. He had acquired also for the Union Pacific, the Centra] Pacific and the South- ern Pacific. Then, with the Rockefeller party, he secured partial domination of the one last great independent system, the Atchison, Topeka & Santa Fe. II interest in Northern Pacific from panic times was little Bhorl of control and his purchase of the San Pedro, Los Angeles and Pacific gave Harriman a voice in six out of seven existing Pacific Coast routes in American territory. Indeed, ■ competent authority, the Wall Street Journal once Baid, Mr. Harriman made the Union Pacific "the most stupendous weapon of conquest ever wielded i;j fill. RAILROAD TRUST. Iiv a single financial interesl in this or anj other country." The credit of the Union Pacific, in fact, conquered the West for one man Edward II. Harriman. It made him dictator of all railroad policies on the Pacific Coast from Port- lanil to thr Gulf of California. It placed him in almost undisputed control of all public transportation from American producers to oriental markets. He became the arbiter of the rate situation between Chicago and San Francisco. HLis policy was supreme on over 25,000 miles of the best railroads in the West, ami ruled tin destinies of companies capitalized at more than $1,500,000,000. Ili-— own weapon, past, present and future, was the Union Pacific credit. That credit was fostered by the most careful of financial methods; built up by the most progressive operating methods on the continent, borrowed from J. J. Hill, it is true, but adapted and carried farther; handled, guarded and enhanced by the skill o\' Messrs. Kuhn. I.oeb $ Co.. bankers extraordinary to Union Pacific: and ultimately, guided and controlled by the railroad and financial ius of E. H. Harriman. There were no great mistakes. The decided defeat at the hands of J. J. Hill and J. P. Morgan resulted in turning what was intended to be the capture of Northern Pacific into an investment that later netted a profit of 50 per cent. This was a moral defeat, but an actual victory. The purchase of Southern Pacific and the long period of tremendous expense in building up the Southern, Central and Union Pacific properties, resulted in great and immediate benefits. Tin Harriman policy has been so far uniformly successful. The question of the hour is how much farther the policy is to be followed. The purchase of a large interest in Atchison and practical control of the San Pedro, Los Angeles and Salt Lake Railroad appeared to be the culmination of his plans for expansion of property west of the Great Divide. Since that time rumor has credited the Harriman forces with plans to take control of Chicago and North- western and of New York Central. It i> the prospect of this greater merger which was the bone of contention of the railway financial powers during 1905. The federal authorities had declared thai with the Sherman anti-trust law on the statute books the Northern riti( s combination could not stand legally. Put if there was not one method mother. As yet no law has been framed placing obstacles in the oi actual control of competing railway lines through dominating owner- Th s was the opportunity that was seized by the great railway powers at • opportunity after the Northern Securities company was declared that time there was the interlacing f interests until Union Pacific dominated the transcontinental business of the United States. THE RAILROAD TRUST. 173 About this time Mr. Harriman and the Rockefellers decided the Vanderbill lines were choice plums of the railway tree. Forthwith these interests began forming a fresh set of alliances, until now it would be possible to extend Har- riman-Rockefeller influence from the Atlantic to the Pacific over some 40,000 miles of road, controlling property worth several billions and which originate traffic valued at more than $300,000,000 annually. Let us glance at the fol- lowing table and see what one man's ambition craved: Mileage. Stock. Bonds. New York Central system 3,500 $ 200,000,000 $ 187,000,000 Big Four '.. 2,500 37,000,000 63,000,000 Pittsburg & Lake Erie 200 4,000,000 10,000.000 Lake Shore 1,500 50,000,000 75,000,000 .Michigan Central 1,050 19,000,000 32,000,000 Nickel Plate 550 30,000,000 22,000,000 Chicago & Northwestern 5,576 100,000.000 170,000,000 Fremont, Flkhorn & M. V 1,362 2,000,000 18,000,000 Lake Erie .V Western 900 24,000,000 12,000,000 Omaha Line 1,590 34,000,000 33.000,000 Indiana, Illinois .V Lowa 305 5,000,000 5.500,000 Union Pacific 7,000 264,000,000 331 .270,000 Southern Pacific 9,016 200,000.000 100,000.000 Illinois Central 4.500 76.000.000 156,000,000 K. C.,P.&G S40 9.000.000 is. ooo.ooo Total 40,989 $1 .054,000,000 ^1 ,232.770.000 That a great "community of interests" has grown up in the natural mo- nopoly of railroad business is apparent. How much further it \\ ; ll go remains t<> !)'• Been. Undoubtedly it can go ton far toward one central control in tin railroad affairs of the United States. Beyond doubt the tendency is in that direction not in defiance of law for the law on combinations is not being violated hut in spite of the Constitution and federal statutes and. in a sense. under their din ction and authority . Ami yei we may expeel to see many an attempt to check the movement. Tile practical monopoly c.f tin- Pacific routes I > \ one influence is regarded. Ixitli i ' and Wist, as :i dangerous and revolutionary step. Even the gradual influi in i at work to control the Atchison threatens to bring a hosl of forces linsi Mr. Harriman. ' p 'o the time of the dissolution of the Northern Securities company tin greatest combination outside flu- field dominated by the Harriman Rockefeller interests, and even in Borai degree affiliated in it, was that of the Pennsylvania. It was madi up as follows ; 174 THE RAILROAD TRUST. Mileage. Slock. Bonds. Pennsylvania 10*550 $390,000,000 $285,000,000 Reading Railwav 1,455 140,000,000 96,000,000 ( hesapeake & Ohio 1,561 60,000,000 76,000,000 Baltimore & Ohio 4,368 104,000,000 225,000,000 Vandalia 158 3,900,000 4,100,000 N\u York. Nov Haven & Hartford 2^037 54,000,000 54,000,000 Total 20,129 $751,900,000 $690,100,000 - iid onlv to the Pennsylvania was the combination of lines represented bj the $400,000,000 Northern Securities Company and controlled by the Mor- gan-Hill coterie. This combination as it existed before it was declared illegal, u as as follow S : Mileage. Stock. Bonds. Northern Pacific Co 4,956 $155,000,000 $173,000,000 (in at Northern 5,451 125,000,000 96,000,000 Chicago, Burlington & Quincy 9,000 215,000,000 Total 19,407 $495,000,000 $269,000,000 The Rock Island system, which the Moore Brothers, D. G. Reid and W. H. Leeds haw constructed during the past few years, stands next and is made up about as follows : Mileage. Stock. Bonds. Rock [sland Co. (new) $150,000,000 Rock Island Co. (old) 7,038 125,000,000 $ 75,000,000 'Frisco Line 3,414 110,000,000 51,000,000 1 istern Illinois 738 19,000,000 23,000,000 ( hi. , go & Alton 920 60,000,000 20,000,000 Total 12,110 $464,000,000 $169,000,000 The Gould system stands close to the Rock Island in size and importance and i> made up of the following roads: Mileage. Stock. Bonds. ouri Pacific 5,909 $ 77,000,000 $ 64,000,000 Wabash '. 2,367 52,000,000 90,000,000 Internationa] .V Great Northern 928 10,000,000 24,000,000 8 Pacific 1,684 39,000,000 60,000,000 Rio Grande 1,091 61,000,000 49,500,000 Uio Grand< Western 662 17,500,000 29,000,000 W< st rn Maryland 257 1,000,000 9,000,000 Ann Arbor 291 7,250,000 7,700,000 Total 13,189 $264,750,000 $333,200,000 THE RAILROAD TRUST. 175 In the South the Morgan interests have been actively gathering the rail- roads into allied groups. The largest southern merger may be called the Mor- gan-Southern Railway system, and is stated to be made up of the following lines : Mileage. Stock. Bonds. Southern Railway 6,728 $184,000,000 $174,000,000 Atlantic Coast Line 4,437 33,000,000 30,000,000 Louisville & Nashville. 5,324 60,000,000 111,000,000 Monon Line 546 15,500,000 15,500,000 Georgia Central 1 ,844 5,000,000 49,000,000 Total 18,879 $297,500,000 $279,500,000 Independent of the new merger are what are known as the Rockefeller roads. These may be thrown into the greater alliance with llarriman at any time and may l>«- stated to be the following: Mileage. Stock. Bonds. Chicago, Milwaukee & St. Paul 6,746 $100,000,000 $256,000,000 Missouri, Kansas .V- Texas 2,500 68,000,000 87,000,000 Wisconsin Central 1.047 30,000,000 29,000,000 Total 10.293 $198,000,000 $372,000,000 THE STABLES OP A MILLIONAIRE. CHAPTER XII DANGER IN RAILWAY MONOPOLY. The Railway Is the Mother of Other Monopolies — Efforts to Regulate Hates and Prevent Discrimination in Favor of Trust Combinations as Against Small Shippers — "The Freight Hate is the Life-blood of Commercial Activity" — "The Function of a Government Is to (Free Every Man a Fair ( hanee." That the public has seen with awe and fear the danger of the abuse of the monopoly powers of the Railway Trust is patent from the fact that when Pres- ident Roosevelt in 1904 asked Congress to give the Interstate Commerce Com mission the power of regulating railway freight rates, the public almost as a man applauded the innovation to the echo. Df course there arc always two Bides to a question and the railway presidents argued against a bill that was passed in the House of Representatives until the Senate declined to concur in enacting such a law. Nevertheless the demand for the "square dear'' as against freight rebates, discrimination on terminal, private car line abuses and the like had its cll'ect in stopping practices which gave the big trust better terms than the small shipper. Interstate Commerce Commissioner Prouty, who was a foremost investigator in railway abuses, described some of the dangers of the situation which Presi- dent Roosevelt and the country at large asked to have removed. Here is what he said : 'The typical industrial monopoly is the Standard Oil company, and that corporation has today almost a. perfect monopoly. Bui every independent refinery can attack it in its most vita] point. The maintenance of that monopoly is only at the price of eternal vigilance. '"Take the United Stales Steel corporation. Today it controls half the iron output of the United Mates, and every new furnace, every mill is aiming at the vitalfl of that corporation. Unless tin United Stales Steel corporation has Borne advantage in transportation facilities, or unless it can control the raw material out of which the finished product is made, I doubt if that corporation, with all its enormous power, can retain its monopoly. "Now, take the railroad- toda\ between Chicago and New York. They are 177 178 DANGER IN RAILWAY MONOPOLY. built. No other trunk railroad ever "ill be built to compete with them — at in the near future. Development will be by enlarging and developing - same systems. "The Pennsylvania system never can fall apart. The ownership of that ystem may change; the management of that system may change, but that lous system controls today one-fifth of all the tonnage, one-fifth of all the ss receipts, one-fifth of all the passengers carried in the United States. It system by itself forever. There is another thing. The way in which these combinations have been built up means that almost of necessity this monopoly must increase rather than diminish in the near future. "We have heard in these last years a great deal about trusts. What is the matter with the trust? What is the harm in a monopoly? There are other evils, but the principal evil is this: that it enables the man who has the monopoly to take from the man who requires the service of the article he has to sell more than a just price. "Not only is the railway the greatest monopoly by far of itself, but it is the mother of countless other monopolies. It is well understood that an advantage in the railway rate means life to one competitor and death to another competitor, and the advantage is not of necessity from the payment of the rebate. There may lie. and tin re are, discriminations in the published schedule just as deadly as those which arise out of a departure from the published schedule. The Standard Oil company grew and flourished on rebates in its infancy. The boast of tin Standard Oil company today is that it takes no rebates. It does what i> better than take rebates; it makes the schedule. "Mr. Rockefeller today has a potent influence in the railroad operations of this country. Mr. Morgan has a most potential influence in the railroad opera- tion- of this country. And while the Standard Oil company may not and does not take r< bates, it enjoys advantages in the public schedules which mean hun- dreds of thousands of dollars — I presume millions of dollars — -annually to that company. "Now. here, gentlemen, you have the problem. You have first the greatest monopoly then i-: you have second the discrimination which builds up other lies. Now, what is the remedy for that? The most natural thing in • world i- to say if these combinations have produced that sort of a monopoly stop tin combinations; let us break up the combinations. That is a thing i fan t do. That remedy you can't have. You might like it, you have riven for it in vain. You can't have it. You must find some other remedy, or there can be no remedy. DANGER IX RAILWAY MONOPOLY. 179 "When the Interstate Commerce Commission was investigating the Northern Securities merger I asked Mr. Harriman what remedy a shipper had if the railroad imposed upon him an unjust rate, and his answer was: 'Let him bring suit and recover his damages.' You know that kind of remedy is no rem- edy at all. "'Take the rate in which this whole western country is most interested— the grain rate. That has been advanced in the last six years probably 6 cents a hundred pounds to the farmer of Iowa. It means in the aggregate millions of dollars. How could you apply that remedy? Whose injury? Is it the farmer who raises that wheat or is it the mechanic who eats it? Who is to bring the suit? Clearly, the man who brings the suit must be the one who pays the freight, and the man who pays the freight has not been injured. He is the middleman, who buys and sells on the rate, whatever it may be, and it doesn't make the slightest difference to him what that rate may be if it is nondiscrim- inating. "No, there is one remedy — a just remedy, a remedy approved by the court — and that is this: If the rate is wrong, make that rate right. "And the question now arises, How can you apply that remedy? •\\M1. tli. courts have passed upon that, and what the court says is this— and it is a matter of great importance that you should understand it and keep it in mind in passing in your own minds on the legislation that is now bet ore tin country : "'The function of prescribing a rate for the future is a legislative and not a judicial function. It must be exercised either by direct enactment of the legislature, or by some commission created by the legislature for that purpose.' You will all see that it would he impracticable for Congress to inquire into the remedy. The only practical means is by the creation of a commission which shall inquire into the reasonableness of the rate, and which, if it finds the rate Unreasonable, shall put in its place a rati- that is reasonable. "NOW, that is exactly the remedy the President proposes. II.' takes the Commission which exists, he savs that commission shall he given power iii cas,' of complaini to determine whether the rate in effect is reasonable. It not to determine what rate would he reasonable and to order the carrier to observe thai rate for the future, with the proper right of appeal. "Now, what i> the objection to that remedy? The first is ih.if you thereby take out of the hands of the railroad company the right to manage its own business- that you arc naming pries. "Now, I don't believe the legislature can name the price of commodity, [gO DANGER IS RAILWAY MONOPOLY. and 1 want von distinctly to observe thai when the legislature or when the com- mission names a railroad rate it does not name the prices of commodity. It simply compels the railroad company to carry out the contract by specific per- formance in which it has entered with the public. "When the government gives me the right as a railroad corporation to take your land against your will, to create a monopoly which you must patronize, it Lets in. do that on this condition— a good condition— that I shall render you the service of transportation for a reasonable rate. "The Supreme Court of the United States has said that is the implied con- dition on which every railroad charter is granted. Now, if you and I can't agree about the price of your land when I take it, what is done? Why, we have that to a disinterested tribunal, don't we? The railroad rate is not a com- modity which is bought and sold. It is a public service which is rendered by a public m rvant, and the public may in self-defense compel the railroad to carry out Hie contract into which it entered when it obtained this charter to build its railroad. ••'l'h. y t. 11 you in the next place that there isn't any need of any law. They sai these nun who manage our railroads all are public spirited Christian gentle- men. They won't impose on people in any extravagant rate. A man said to me the other day: 'Do you suppose a man like Marvin Hughitt would extort or oppress?' And I said: 'No, sir, I don't. From all I know of him I don't think there is a man who would be less likely to extort, or oppress than Marvin Hughitt.' "Isn't John 1). Rockefeller a good man? Do you know of any sheriff that i- looking for him under an indictment for any offense? Doesn't he lead a class in th.- Sunday school? Doesn't his heart warm to the heathen; just now espe- cially ? • I~ all that any reason why yon should not pass laws if you can devise them which will prevent tin exacting of the monopoly which he invented and has perpetuan d ? "Tli- n they tell you this attempt to fix a railway rate is paternalism. So far I can understand it. paternalism, .as applied to this thing, means any sort of legislation which i- intended to prevent a monopolist from stealing all there is and keeping all he can steal. "What i- the function of a government? I say the function of a govern- ment i^ to give evi r\ man a fair chance. So long as my brother, if he owns railroads in this country, can impose on me whatever rate he sees fit, there 3 no such thing as a fair chance. The freight rate is the life blood of com- DANGER IN RAILWAY MONOPOLY. 181 mercial activity, and this government has no higher function than to remove every taint from that vital fluid. "Then, they say, this plan won't work because of the incompetency of the Interstate Commerce Commission. Now, if by that you mean that the present members of the Interstate Commerce Commission are incompetent I admit it. And the President has said he is going to remove them and put somebody in their place who is competent, when we have the new law. If you mean it is impossible to select five men or seven men who can understand the question I deny it. It is to me an absurdity that such a board of men should not be able to understand and intelligently decide the questions which come before it. •'There is just one other idea and I am done. I expect railroad net receipts are going to fall off this year. Gross receipts are increasing, but there is one item of operating expenses which is unusually large, and that is the item known as legislative expenses. They are heavy this year. "The railroads are sending out to all parts of this country tons of literature — tables showing the amount of the holdings of savings banks, trust companies, insurance companies, and such like in railroad securities. Now, what does that mean? It means that if the Interstate Commerce Commission had the power to fi\ a raic it would make that rate so low as to impair the value of those secur- ities. Hut so long as the constitution of the United States stands and the Supreme Court does it > duty it is not possible for the commission or for Congress to reduce rates to a point which will impair the value of those securities. "There coin.-, a time when talk will not suffice. It will be necessary to do something. I think that lime has conic. Kansas has spoken. Minnesota has spoken. Chicago has spoken. If you want that sorl of talk to continue, just Continue treating the trusts and monopolies as they have been treated lor the last l grant special rates upon shipments made by contracts engaged in irrigation work. There was no secret about the matter, hut complaint was made by the comptroller of treasury in the effort to keep the law. The matter was referred RAILWAY ABUSES LAID BAKE. 185 to the Attorney General of the United States, who decided that the govern- ment was exempt. In discussing the evident violation of the spirit of the law if not the law itself President Stickney of the Chicago Great Western Railway said before the Senate committee: "Since the injunctions the traffic directors have stopped paying rebates on grain shipments, but in lieu thereof have paid elevator fees, a practice which the interstate commerce commission has sanctioned as admissible under the law, notwithstanding it is evidently a rebate paid to elevator owners which is not available to ordinary shippers. The traffic directors have made secret con- tracts with the traffic directors of large shippers at rates below the schedule rates and, having thus secured the tonnage in advance, they "publish' a schedule containing the contract rates. '•Such schedules are called 'midnight schedules' and have all the effects of secrel rebates. The small dealers are driven out of the market or the small dealers who have made contracts are saddled with losses which the large dealer pockets as profits, and the railway company secures a large tonnage of com- petitive traffic. "These legal midnight schedules can be prevented only by conferring on a government commission the sole power to make such schedules." Other railway men, among them Victor Morawetz, general counsel and chairman of the executive committee of the board of directors of the Atchison, Topeka and Santa Fe, admitted the law is broken constantly by the railways. Mr. Morawetz said thai chaos would ensue if they did not ignore legal restric- tion-. The complaints of discrimination against the merchants of small cities Were frequent. Hut complaints likewise were made by merchants of certain static againsl the roads thai favored cities of other states. A table prepared to show the discrimination between Chicago and Illinois towns and Indianapolis and Illinoi towns, with the rate charge by the Chicago and Alton on first class freight, follows: Tariff, Miles, cents. Indianapolis to Hraceville 1 f|5 ;J"| Chicago to Hraceville (J"| ;}o Indianapolis to Strealor 1 ()() ;',<> Chicago to Strealor <) }. I}.") Indianapolis to Peoria 'ill :5l ( hicago to Peoria 1 .50 \o The Chicago and Alton, in other words, charges Chicago shippers more 186 RAILWAY ABUSES LAID lit HE. money ti> >liip their goods 150 miles to Peoria than it charges an Indianapolis merchant to ship them 211 miles to the same town. Another tabic illustrates the rates charged by the Illinois Central: Tariff, Miles, cents. Indianapolis to Champaign 118 #1 Chicago to Champaign 127 43 Indianapolis to Bloomington 166 31 Chicago to Bloomington 126 43 [ndianapolis to Litchfield 207 37 Chicago to Litchfield 235 47 The railways reply to these charges of discrimination by saying that com- petition rules business and that they must foster the interests of the territory through which they run in order to build up business. They say that the density of the traffic and other conditions peculiar to railway business operate to make it necessary to govern rates according to the policy which will work for profits to shareholders in the railroad companies. For instance James J. Hill, president of the great Northern Securities Merger company in the North- west, told President Roosevelt that he had such good business along the line of the Great Northern Railway that he could lower freight rates 25 per cent. and >till pay 7 per cent, on his stock, whereas his competitors further south would go bankrupt if the government insisted upon rates as low as he planned. Mr. Hill pointed out also that the line of least resistance for export freight business to Europe was by way of the Gulf of Mexico in the winter and by Montreal in the summer. This made it necessary to grant concession to shippers who would use trunk-line shipping by way of New York harbor. It was an open fact that freight could be sent through New York if it was to be exported at less cost than if it was put down at New York to stay in the country. The cheap r rate was granted to shippers in order to get business which otherwise would be lust altogether by the road if it did not offer cut rates. One of the champions of the people's side of the question was Governor La Follette, the man who successfully fought political graft in Wisconsin and who had a law enacted in thai state prohibiting discriminating rates and pro- viding for government supervision of rates. Governor La Follette, who later United States Senator from Wisconsin, in arguing the rate question in the Saturday Evening Post said: "No power other than the government itself is equal to that of the indus- trial combinations which are always in close associatioji and often indentified in RAILWAY ABUSES LAID BARE. 187 interest with railroad and transportation companies. Their tremendous politi- cal influence is shown by the mere recital of the history of the interstate com- merce act, and by an examination of the records of Congress for the last seven years. Which has had the stronger hold upon state and national legislation during the last twenty years, the corporations or the people? Whose interests have been the more safely guarded? Where is the power lodged which has for seven years been strong enough to bar national legislation designed to enlarge the powers of the interstate commerce commission? It is not necessary to charge venality anywhere, but that the public service corporations have been steadily undermining representative government in national, state and municipal legislation, no thoughtful man can question. They come between the people and the chosen representatives of the people. "I would in nowise disparage either the rights or the interests of the rail- road side of this legislation. The question is one of very greal magnitude. The amount of property involved is very large. The owners of railroads, and the holders of railroad securities must be protected in all their rights. They must not be wronged in any way. They are entitled to such remuneration as will enable them to maintain their roads in perfect condition, pay the best of wages to emplo3'cs, meet all other expenses incident to operation, and in addi- tion thereto enough more to make a reasonable profit upon every dollar invested in the business. To preserve all of these rights, they are entitled to the strong- esl protection which the law can afford. •"Hut tin public, each community and every individual, has rights equally precious. Upon the railway companies rendering an adequate and impartial service at reasonable rates all general prosperity is dependent. Deprived of these, every community is checked and limited in its growth: every business of whatever nature must languish and fail. Tin denial of an impartial service at reasonable rate- is the denial of equal opportunity, the denial of a "square deal." "In the long struggle to secure legislation, the friends ( .f the measure have been content to ask little, and they have received nothing. Hut through all of the years of waiting and disappointment, of ruin to individuals and demorali/a tion to the business of many communities, public sentiment has been gathering Force. It is all powerful nrhen once aroused. Unless I mistake the temper of the American people, they will demand the full measure of their rights. They uill not halt or stop or compromise until that demand is fully satisfied. "The abuse of the rat.' making power lie. .,| f he foundation of the trans portation problem. Through this the traffic can be controlled and centralized 188 RAILWAY ABUSES LAID BARE. at railway terminals, business consolidated, and combinations established. Remedial legislation therefore, to be effective, must strike at the root of the evil. It must place the rate-making power where i1 will be used fairly and justli to all concerned. The public has Long permitted itself to be treated as though its interests were of small consideration. The miner, the manufac- turer, the farmer, turn out the products which constitute the traffic of the country. They, and the consumers, are vitally interested in everything pertain- ing to the transportation of those products. The railroad corporation is chartered through the favor of the state to engage in the transportation busi- aess, nothing else. It was created, and given its special powers and privileges, to promote tin general prosperity of all. "It has not been vested with authority to decree that one shipper or city shall grow rich and grea! at the expense of* another. It is presposterous that the corporation, which is merely a carrier, not the producer or consumer of the product carried, should be permitted to stand in such a relation to that product ;h to indicate that its interests are the sole interests to be considered. The carrier should not he permitted to say where the product shall he marketed. If it has authority to dictate rates it can make it impossible for the producer to choose his own market. It can so arrange its schedule of rates, it can so conduct its service, as to force produce, merchandise and manufactures to the market which it chooses to build up. "The making of the rate is a matter of deep concern to more than one party to a traffic transaction. True, the railway company has large interests involved, but this very fact unfits it to be the sole judge in making rates. Rates made by the railway company are made by a party prejudiced in its own interests and, therefore, certain to be unjust to the public. It is disquali- fied and should be barred. It is entitled to be heard; all of its interests must be fully and fairly weighed in regulating its services and fixing their value to the public. Hut its interests are not paramount to those of the public. The producer and consumer are likewise entitled to be heard as well as the railway company, and it is then the duty of the government, standing between, to determine impartially, the rights of the railway company and the rights of the public. "In all of the hearings before congressional committees, those opposed to enlarging the powers of the interstate commerce commission seem to believe that there is something sacred about a railway rate: that it would be a veritable sacrilege for any one outsidi of the railroad management to lay a hand upon a freight schedule. Any critical investigation of railway tariffs, and the RAILWAY ABUSES LAID BARE. 189 advances made in rates from time to time, will convince the student that rate- making is more frequently controlled by the financial management than the traffic department of the road. But I am free to admit that rate-making requires technical, expert knowledge and experience. The railroads are able to secure the services of nun fitted to make rates. Surely, this great government, with all of its wealth and power, with all that it has involved in protecting the interests of the citizen, can employ equally competent men." The complaints made against the owners and operators of private car lines resulted in some good. In this crusade both the railways and the shippers joined, for both suffered. The railroads declared they did not give shippers on these private car lines any rebates, but that they had been forced to make contracts with the car companies for the use of certain kinds of cars for carry- ing live stock, dressed meats, dairy products, vegetables and other articles requiring refrigeration or similar service, paying a certain mileage therefor. As pointed out in relation to the Beef Trust, which owns most of these cars, the companies which are thus paid for the use of the cars make their own charges to shippers for icing, etc., and vary these to suit themselves and grant rebates to favored shippers as they see fit. All these charges practically have been proved before the interstate coin- merce commission. For instance President George U. Bobbins of the Armour car lines admitted that the company had twenty or thirty exclusive contracts with railroads for fruit transportation business and acknowledged a monopoly of that traffic in parts of the West and South. Wherever these contracts applied the producers and shippers had to accept tin- rotes laid down by the Armours. lie insisted, however, that his company was a private one and there- fore not Bubjeci to the interstate commerce law. Il\ its own letters, IK -cent cipher code, and other documentary evidence, the Armour Car Line company was shown before the interstate commerce com- mission to have paid rebates on fruit shipments from California, of discrimi- nating between shippers in the amount of rebates, of charging for refrigeration that is not furnished, and of accepting payment from the Chicago & North- western. Chicago, Milwaukee & St. Paul, and Grand Trunk railroads for rout- ing fruit traffic in Armour cars over those railroads. If. .1. Streyckmans, now a stenographer in a Chicago hotel, and who, from April. 1900, till July, 190k was confidential clerk for W. G. Seeley, superin- tendent of the Armour ear lines, furnished the evidence to the commission, having copies of letters of the company showing its relations to shippers and railroads. li)0 RAILWAY ABUSES LAID BARE. The attorney for the Armour company denounced Streyckmans as a thiol and a traitor, but did not challenge his evidence against the company. When Streyckmans produced a copy of the secret cipher code of the Armour com- pany, its attorneys fought with all their mighi to keep it from being retained by the interstate commerce commission, but failed. The code was a printed hook oi' about 400 pages. Souk of the cipher words and their meaning were: Laughsome — Rebate. Launch — Bitter arrange rebate there. Launched — Burning stock at both ends. Launching — Can make rebate. Laundry — Force payment of higher rebate. Laurus — Pay rebates. Lava- Rebates must be confidential. Lavishment — Working for rebate on — Kinsley — Shade rates a little rather than lose the business. Apelles — What allowance is necessary to secure the business. Jocularis — Divide rate. Jewelry — Rates being secretly cut by all lines. Judiciary — Keep your rates below all others. Junior — Rates must be made which will secure the business. Junk — If necessary to secure business you can make rate to Juvenal — Maintain rate unless Kaeinester — Manipulate rates so as to Kland — Meet rate by voucher. Kalatna — Meet any rate offered. footpath — Interstate commerce commission. Footprint — Avoid service of summons from interstate commerce commission. hoot rot — Meeting of interstate commerce commission at on to consider question of Imprint — Martin A. Knap}), chairman. Imprinted — Judson C. Clements. Imprinting — J. I). Yeomans. Imprison — Charles A. Prouty. Improhitas — Joseph W. Fifer. Improbity — F. A. Moseley. Armour — Arrange this with the utmost secrecy. "The Northwestern railroad billed ice to the Armour company for $1 per RAILWAY ABUSES LAID BARE. 191 ton," said Streyckmans. "On that ice the Armour company makes from 500 lo 600 per cent, profit. The Chicago, Milwaukee & St. Paul railroad pre- sented bills for $2.50 per ton, but accepted a counter claim of $1 per ton from the Armour company, making the net cost $1.50 per ton. The Erie railroad, at Gallon, Ohio, charged $1.25 or $1.50 per ton. At Fort Worth, Texas, the parties furnishing ice charged $3.50 per ton, but the Texas & Pacific railroad remitted to the Armour company $1 per ton, making the price $2.50 per ton." "While you were with the Armour company, did it pay rebates on icing charges to fruit shippers?" asked the commission's attorney. "Yes," answered Streyckmans. '"Did it pay the same rebates to all shippers, without discrimination?" "No," answered the witness. "To certain shippers on what was known as the 'form 141 list,' the highest rebates were paid. Another printed form, or blank, was used for making icing bills to other shippers and they received smaller rebates. "Among the California shippers who received "allowance statements/ or rebates, on form 141, were Frank H. Buck, the Pioneer Fruit company (or- ganized by the Armour company to compete with the Santa Fe), Porter Bros, of Chicago, the Producers' 1 Fruit company of Sacramento, and former Lieu- tenant Governor Anderson of California. "All shippers on the '141 list' paid only the actual cost of icing cars and a car rental of $10 to Chicago and $15 to New York. The tariff from Sacra- mento to Boston was $120. The icing cost $88 or $39, the car rental $20, making a total of $58 or $59, and these shippers received rebates of $61 or ! a car. "Among other shippers not on the "111 list,' who received smaller rebates, were Stevens & Humphrey, S. I. Roper, Schnabel Bros., George 1). Kellogg, and Pinkham & McKevitt, all of Sacramento." The result of this investigation, aside from government action, was a speedy concession to Michigan fruit growers who helped to fighl the private ear combination. Secret meetings wire held by the trust officials ami the Armour line reduced its carrying and icing charges 15 to 30 per cent. Of the many problems brought up by the railway abuses for solution those of the rebate, private car abuses and discrimination againsl localities seem to have called forth the greatest complaints from the public. As regards the solution of the whole matter, according to the judgment <•(' the Wall Streel Journal, there are just four ways open. "The first way," lays thai authority, "is thai of free competition, unre- igg RAILWAY ABUSES LAID BARE. stricted and unregulated in any way. That such competition would operate to the advantage of shippers there can be no doubt. Hut it would make railroad rates unstable; it would make the operation of the railroads at a profit difficult, it' not impossible; and as the prosperity of the railroads and the stability of rates are essential to the prosperity of the whole country, unrestricted competi- tion between transportation companies might he calamitous. There was a notable development o\' the country during the period when railroad competi- tion was most extensive, hut that period was filled with many intervals of depression, due largely to the instability of rates. It is noteworthy that the greatest prosperity this country has enjoyed lias been during the time when railroad consolidations have materially reduced the area of competition. "Another way is that of complete monopoly. At the outset it may he said that while the period of greatest prosperity in this country has been coincident uith a reduction in competition, it has also been just that period in which the most vigorous measures have been taken to prevent complete monopoly. What- ever may be the advantages of a consolidation of the ownership and control of the railroads in the hands of a few strong men, this much may be said with certainty, that the people of the United States will never permit for long the railroads of the country to be completely monopolized. They would prefer even less prosperity to the loss of liberty. "The third way is that of Socialism — that, is to say, government ownership of the railroads. There has been some growth of public sentiment in the United States in favor of such a development; but the administration of the po>t office, which is government business, has not been such as to make the idea of government ownership of the railroads attractive, even if the people were prepared for any such advance toward Socialism. •'The fourth way is that of government regulation, which is the middle road between Socialism on the one hand and complete competition on the other. The only alternative for either government ownership or the wastes of unregu- lated competition is government supervision. There is no other stopping place. We musi either enforce competition to the fullest extent or else the government must buy the railroads and operate them. If we fear the consequences of unrestricted competition, the power of complete monopoly or the results of government ownership, then we must be prepared to accept that policy which, while leaving the railroads to the operation of private capital, shall permit them to secure that measure of concentration which is essential to the largest economical results and stability of rates, and then subject them to vigorous government regulation." CHAPTER XIV THE WORLD'S GREATEST INDUSTRY. The Combined Length of the Railways of the United State* Amounts to About Two-fifths of the Total Mileage of the World -Great Advancement in Railway Construction, Train Equipment, High Speed and Safety Devices — Railroad Building the Foundation of Commercial and Industrial Progress and Prosperity. Measured by the volume of capital invested in it, by the number of men employed directly and indirectly by it, and by the importance of its influence on every phase of commerce and life in the world, the railway may be fairly termed the greatest of the world's industries. From the earliest time to the present, students of public affairs have realized that the control of transporta- tion systems, be they primitive or highly organized, was synonymous with the control of commerce, and therefore of almost every material interest. The Romans wen- great road-builders, and they exploited the world for their profit. Napoleon was a road-builder, and gained much of his strength bv virtue of his roads. The Russians have been road-builders, across Siberia, over the Cau- casus, and into Central Asia. It they had used their roads for commerce and peaceful development, rather than for political and military conquest, tlu\ would be bet ter off today. In the last Century Americans have been the greatest of road builders, and with the development of the railway they have taken advantage of ils possibili- ties to create highways throughout the length ami breadth of their land. Wc have seen how the developmenl of railway systems ami the manipulation of their financial and operating control has made millionaires and has made those mil- lionaires magnates. Lei us mm glance it the material side of the industn to observe some of the picturesqu< fads in the construction and operation of rail way Inns in actual service. 'I he combined length of the railways of the United SImIcs amounts to over two hundred thousand miles, and of the whole world t" approximately five hun dred thousand miles. The increase is.a1 the pate of about ten thousand miles a year the world over. The most able financial organizations, the most skillful executives, and the most ingenious inventors are devoting 'their attention t<> the details of the railway .^ an industry. Constant improvement is recognized as 198 IJH THE WORLD'S GREATEST INDUSTRY. an essential to success. OKI roads are reconstructing their lines, and new ones are built with the utmost care to assure the permanency of their tracks, the economy of their administration and the comfort of their travelers. Heavy steel rails have supplanted the light ones of iron; rock ballast, is used where earth formerly sufficed; steel bridges span the streams and the old wooden culverts are burned at the roadside; curves are straightened; grades are reduced; tun- nels penetrate the mountains where trains formerly reached the summits by slow climbing. All this contributes to the safety, ease and speed of the journey, but it likewise reduces the cost of maintenance and operation, so that the rail- way companies find direct as well as indirect profit from their increasing expend- itures. The elevation of tracks through cities, thus eliminating grade cross- ings, and the perfection of various block signals and safety switch sys- tems, help to give additional safety to traffic and make high speed possible. Train equipment has improved with the increase in travel, and today the railway journey offers comforts and luxuries at a moderate price which are hardly to be found in any but the homes of the wealthy. A modern transcontinental train is, in fact, a luxurious home, with all the details of a splendid club-house or hotel avail- able, while one races across plains and mountains at high speed. Such trains, equipped with palace sleeping cars, dining cars, drawing room and obser- vation cars, a library, barber shop, cafe, card room, music room, electric- lights, and vestibules excluding the noise and dust as one passes from one car to another, with waiters, porters, and a ladies' maid ready to serve the passengers with everything demanded, add enticement to tin prospect of a journey where formerly the destination itself was only reward. It is not alone in the United States that railway construction is advancing rapidly, and luxurious facilities for travel are provided. All over the world OBSERVATION PLATFORM OP A MODERN TRAIN. THE WORLD'S GREATEST INDUSTRY. 195 the same spirit of energy rules, and the effort to connect remote lands by these arteries of commerce never ceases. On our own continent our neighbors to the north and the south are active. One trans-continental line crosses Canada from ocean to ocean; a second is advancing rapidly to completion, and a third has been chartered and financed. In addition to these a railway to Hudson's Bay Is moving steadily northward toward a port on that great inland sea which connects with the Arctic Ocean. In Alaska, railway construction has begun, and now the gold hunter can reach the Klondike by connecting service of steam- ers and railway cars, without a memory left of the hardships of the trail or Less than a decade ago. The Mexican Republic has witnessed the construction of more than 10,000 miles of railway within the last few years, and the country is traversed in every direction by lines which are being extended rapidly. Since Cuba became a Republic a syndicate of American ami Canadian capitalists has united the railway systems of the island, so that today the traveler may journey from Havana to Santiago in a Pullman car, finding branch lines at his disposal by which hi' may reach every important port on either coast. The South American and Central American Republics have joined with the United States in a concerted effort to connect the two continents by railway via the Isthmus of Panama. An international commission has control of the preliminaries and the intercontinental survey has been completed. In South America the Andes range has been a difficult obstacle for transcontinental lines to overcome, hut already the mountains have been penetrated from the Pacific coast by several lines, and the railway from ocean to ocean is a thing ot the near future. The heart of the continent is reached by numerous Lines in Argen- tine and Brazil, lines which afford outlet for the immense production of the interior and novel journeys for the inquiring traveler. In Asia lh«' whole political and military situation has been affected by the const ruction of the Trans-Siberian Railway, built by the Russian Government Extending as it does all the way from the European provinces of the Empire, across the whole of Asia, to a terminus on the Pacific Ocean, it offers a new way around the world, with scenes and conditions of invariable interest to meet the traveler at every turn. The entire length of this wonderful railway, from the Ural Mountains to the Pacific, is nearly double that of an American trans con tinental line, or more than (;,<><>(> miles, and it was constructed at a total cost, including all incidental expenses, of over $400,000,000. from a European port .>., the Atlantic, Havre, for instance, it is therefore possible to go by con- tinuous connecting lines „f railway, a distance of nearlj 10,000 miles, right across the two continents or almost half way around the world. The Siberian 196 THE WORLD'S GREATEST INDUSTRY line was not begun until 1891, and the completion of it in eleven years, across the Steppes of Siberia, the greal rivers which flow through Asia into the Arctic in, the mountain ranges, and the wilderness, is the mosl ooteworthy achieve- ment in the historyof railway construction. Trans-continental trains on the Siberian Railway are equipped as our own railway- in America are, with sleeping cars and dining cars of Russian patterns. In addition, they have bath-rooms, a gymnasium, and a church car which travels with the train at times, where priests hold services for the benefit of the faithful while they arc speeding through the heart of Asia. SCENE ON THE UNION ELEVATED "LOOP," CHICAGO. The problem of rapid transit in large cities Is apparently Bolved by its elevated rail- . with station- ntervals. At this point six separate systems of trains, reaching parts of tli«- city, pass at the rate of about one nam per minute during the morning and evening hours when people are coming to or an- returning from their days laboi • iken for the safety <•!' passengers. There is a complete modern :n of interior-king switches, which are controlled by levers from the signal tower m the ture. CHAPTER XV JUGGLING WITH DOLLARS, OR HOW SPECULATION IS CARRIED OX. Speculative Fever is Inborn — Speculation Means to Spy Out — Before the Advent of Instantaneous Communications by Telegraph and Telephone, Business Carried on Between Distant Communities was Speculative — Modern Speculation is Gambling on a Basis of the Element of Time and is Considered Injurious to the Morals and Interests of the Public — Barom- eter of Business. Everybody at sonic time speculates in some form <>r other. It is probable there never was a greal fort line accumulated without a great deal of specu- lation. Of the thousands of millionaires of the country and. of the whole world, those who did not inherit their wealth doubtless accumulated it through Diethods in some degree speculative, and even those fortunes that have been inherited very likely had their foundation in this sort of business. But there are a great many wrong conceptions as to what speculation is. The word speculation comes from Latin origin and means to spy out. In its simplest form in a business sense it mean-, to spy out an opportunity to make a profit through a business transaction. Today it means the buy- ing and selling of property with a view to securing profits through changes in the price of thai properly. \, for example the products of agriculture, it is generally held thai the distribution of the commodity should be as Dearly equal to the demand as possible equalizing the price so that one year there will not be famine or famine prices and the next year Buch a glut that the producer will have t«> allow his commodity to go to waste. A class of people who make a business oi studying the question of supply and demand, endeavoring to buy Buch commodities when they are abundant and cheap in order t<> sell them when the price advances serves to bring aboul Mich a distribution and thus renders an important social service. In other lines of business, such as iron and steel, fluctuations in price- frequently are very wide. The consumer in order to guard against loss often makes contracts with producers for the 200 JUGGLING WITH DOLLARS. futun delivery of the product at a given price. This in most quarters is not considered other than highlv organized business. Bui nevertheless it has all the elements of speculation. Business risks of this character, therefore, arc insured against by what i- considered legitimate speculation. Often, however, the speculator, through shortsightedness, mistakes condi- tions as they exist and does not calculate closely enough as to the future supply ami demand. When such a thing happens it is often that the speculator causes greater evils than those which he is supposed to overcome through his usual functions. Thus for a time speculation may serve to keep prio- abnormally high, only to cause such heavy overproduction in a suc- ceeding period that prices may fall to an exceedingly low point. Specula- tion thus may bring about a panic or crisis, with hard times and business stagnation following after. It may 1» conceived readily enough that where, through the risk of capita] and the exertion of wisdom and experience, liberal profits follow speculative activity, a great many persons ignorant of business methods and market conditions are tempted to speculate. Among people who are bent upon making profit- it also is but natural to find unscrupulous persons who will take advantage of such ignorance to spread false reports or otherwise play upon the credulity of ill informed speculators. This often brings ruin to individual- and in the long run works against the welfare of the public. While every business which has in it any sort of considerable risk is strictly -peaking, speculation, this phase of commerce finds its most highly organized machinery in the boards of trade and stock exchanges. Real estate also lends it-elf readily to speculation, some of the greatest fortunes having 1m en made through the purchase of timber lands in anticipation of future ds of the community for lumber, etc. It would be difficult in a work of this character to give in detail every influ- wrorking for -peculation. But we have seen that primarily speculation is a ri-k of capital to secure profits. Therefore money itself and the rates of interest are prominent factors. This necessarily brings the bank, the trust company, the life insurance company, the individual capitalist and any one who exerts some power on money as a direct or indirect factor in speculation. T money seeking an investment plays a part even in affecting mere gam- bin - <•)' speculation. In a similar manner anything affecting pros- perity, such as earnings of corporations, the yield of the cotton, wheat, corn, -. barley, coffee, tobacco, hay or other crops, the condition of live stock on the great western ranches, rainfall or drought, labor trouble- and great JUGGLING WITH DOLLARS. 201 fires or similar calamities work some change in speculation by affecting values of the commodities speculated in through increasing or decreasing supplies. This of course influences prices, and speculation deals with prices. Even, then, if there were no stock exchanges or boards of trade, as care- fully organized as such institutions are today, time and the news of great events would be great factors in speculative markets. Much more so is the case today when this business has been developed to the fine art it has attained. We may, therefore, expect to see every contrivance imaginable which will eliminate time in actual operation in the speculative markets today; and that is the case. In the first place, there are the electrical devices such as the telegraph and telephone to bridge space and time. The cable also is brought into constant service to tell domestic operators the news of the foreign markets. In the great market centers special devices have been evolved, such as the stock and grain "ticker" — a little electrical machine which prints quotations of the market or Dews of the trading which will affect the trading. This machine prints upon a narrow ribbon of paper whatever is sent by telegraph from a distant source of news. This paper is called the "tape*' and it is eagerly scanned during trading hours by speculator and broker. Then there are news agencies which, while using some form of ticker to transmit news or quotations, also give out small slips printed with news of value to bankers, speculators, brokers, etc. The daily papers also are of great service in speculation, for they disseminate the news which affects prices some- times very markedly. It \\a> recently estimated by the New York Times thai tin' commercial and financial articles and market reports published every year in all the daily, weekly and monthly publications of the country would make nearly two hundred and seventy-one million books of the size of the ordinary novel. Private telegraph and telephone systems are called into service by broker age firms doing hiisiness in many cities. Thus a firm may have headquarters in NVh York or Chicago, according to whether its principal business i-, slocks or grain, or m New York or New Orleans it' it deals principally in cotton, and from any of these trading centers may string out thousands of miles of wires Connecting hundreds of other cities and towns where branch offices are main tained. A private telegraph wire is necessary because secrets of great impor tance might be stolen from the wire if it was in general use. Such a privatl wire between Chicago and New York cost, aboul $15,000 a year. Some houses sp.nd over $150,000 a year connecting Chicago, New York, Boston. Milwaukee. •.'i»: JUGGLING WITH DOLLARS. Vu Orleans, Denver, San Francisco, St. Louis and other cities in one great speculative system. With such devices it is possible to flash a piece of news of greal speculative value over the country in a few seconds. Some offices which relay quotations, say of the Chicago grain market, to hundreds of out- lying cities have the quotations written on a huge blackboard in front of the telegraph operators, who can see a change in price as soon as it is made and can transmit it to branch offices without waiting for the delay in handling THE BLACKBOARD AND TICKER. This is a familiar scene in a broker's office. The ••ticker'' is an instrument by which supplied Instantaneously, almost, to brokers nil over the country. As these i they are put on the blackboard. Men either at these phiees during hours and watch the fluctuation in the price of stocks and commodities. For- tunes are sometimes made and lost within a tew hours. messages. In such a telegraphic system for speculators and investors one of the principal services is the transmission of "gossip" ahout the markets, such a- i- given out in the large cities by the ticker agencies. It is the opin- ion of certain authorities that, while such a complete system of news gather- ing and dissemination may increase speculation, it also gives such instant noti- fication of any changes in the financial, commercial or political world, that its tendency is to diminish the effects of commercial panics and crises. JUGGLING WITH DOLLARS. 120:} New York Stock Exchange. Undoubtedly the greatest development in the machinery of speculation has been seen in the history of the New York Stock Exchange. This is an unincorporated institution today, with a limited membership of 1,100 men who own what are termed '"seats" on the exchange. The "seats" or membership have sold for as high as #88,000 each in times of active speculation, suggest- ing the value of such an association to the broker who executes buying and selling orders in stocks and bonds on the floor of this exchange. The objects of this association are to furnish exchange rooms and facilities for convenient transaction of the business of the members, to maintain high standards of commercial honor and integrity among its members and to promote just and equitable principles of trade and business. While there is much manipulation on this exchange, when a member is found guilty of a breach of the stringent rules he is expelled. In order to transact business on the exchange of course there must be .some- thing to trade — that is stocks or bonds. It is impossible to buy or sell secur- ities which have not been formally admitted by a governing committee to the trading. By reason of the fact that this exchange is the greatest market place for securities in America, the corporations which must finance their bus- iness through money raised by the sale of stocks or bonds "list" their issue- with the exchange. There are two principal departments on the exchange, "listed" and "unlisted." These include stocks and bonds that are admitted to trading, those in the former differing from those in the latter only by the character of the financial reports which the exchange compels the corporations to publish from time to time. ]\\ means of this publicity the exchange has the power of placing before investors needed information as to the soundness of corporal ions. About $15,000,000,000 of securities par value are thus admitted to trad- ing on the New York Stock Exchange. This is a very considerable pail of Hh wealth of the country, but frequently the total capital stock of some com panies, through manipulation or speculation, are turned over ten to thirty times a year. Indeed sales nt' stocks on the exchange during 1 1)01 were valued at $25,272,329,220 par Value. Ordinarily about 600,000 shares of slo, I .are bought and sold each day, hut often more than 2,000,000 shares havi changed hands in the five hours of trading while on some days the business has exceed,, | 3,000,000 shares involving perhaps $25,000,000. Bond sales frequently exceed $5,000,000 a daj and sometimes reach $11,500,000. 204 Jl OGLING WITH DOLLARS. This grea1 trading place for securities is In the heart of the financial tricl of Niw York called Wall Streei and has one entrance on Wall Street prop.r and the main entrance on Broad Street, with another on New Street. The building which houses this exchange is a beautiful new marble structure with every conceivable convenience for trading. Thousands of telephones are connected with it. On two walls of the great board room are 1,100 electrical enunciators, or signals, which warn a member that he is needed at the tele- phone or elsewhere. Even the air which the members breathe is filtered through great cloth sieves in the basement, and as much as fifteen barrels of water have been extracted from the air that enters the building on a warm, humid dav. When a visitor enters the public gallery of the exchange the first thing that he sees is groups of loudly shouting men gathered about sixteen posts erected at regular intervals on the floor of the board room. The posts are numbered and brokers or traders transact their business according to the allot- ment of specified stocks at certain posts. Thus, if a trade is to be made in United States Steel stocks it must be at Post 1. On this post are the names of all the stocks allotted to it, as well as figure indicators which the members move ti> record the number of stocks sold each day. So important i-- the immediate knowledge of the price at which securities are selling that a complete system of recording and transmitting prices over the country ha- been devised. Between each four posts is stationed a tele- ph operator to whom are brought by reporters as fast as possible records of all transactions. The sales are at once ticked off' on the instruments and relayed by "tickers" all over the world. The visitors may ask just what is being done in the noise and tumult below him and a detailed answer may be worth while. We have seen in this and preceding chapters what enormous amounts of capital are invested in the secur- ities of corporations. Today as never before business is done through co-oper- ation of many small capitalists, although the gnat kings of finance dominate. These hosts of smaller capitalists furnish, funds by means of investing in stocks or bonds. It is a matter of history that in 179^ during a financial stress the federal treasury came to tin- relief of the money market by paying out $50,000. Some time ago E. II. Harriman said in the presence of the writer during the famous litigation over the illegal Northern Securities merger that a deal involving $60,000,000 was not of very great moment, And it is well known that J. I\ Morgan found little trouble iii financing the great United States - 1 Corporation with over a billion dollars of capital stock and nearly half JUGGLING WITH DOLLARS. 205 as much bonded debts. Now, to float Mich gigantic undertakings the small investments of the public- are needed and the machinery of Wall Street and the stock exchange i> necessary to the fulfilment of such great financial schemes. Let us watch the ••unloading" process, the method of marketing these stocks to the public. We have -opposed that the promoter who conceived the idea of the cor- poration has done his work of getting a financial backer — moneyed interests who approve the scheme — and that the corporation lawyer has drafted the charter and bv-laws of the company under the friendly wing of such an incor- poration law a- that of New Jersey. West Virginia. Delaware or Maine, where most trusts thrive. The next thing to do is to get an immediate purchaser, or guarantor of purchase for the stock. The banker who has approved the scheme perhaps is not willing or able to advance all the money. The natural thing to do is to organize an underwriting syndicate. The banker generally is a principal of this syndicate and several prominent cap italists, in some cases many of them, may be called in to a-i-t. The syndicate agrees to buy the stocks or bonds of the company, or both, and to pay for them on the installment plan as the company may need the money. Generally a certain percentage is to be paid down at once to aid the company m pro- ceeding with its regular business of manufacturing or transportation or what ever it may be. From time to time thereafter certain "assessments" may be called from the members of the syndicate to supply the company with money. thai is. in the event that the -ale of the securities by the syndicate does not progress well. In the end the company has all its securities taken off its hands and the syndicate is paid either a commission, or is to get its profii between the reduced price at which it bought the stock and that at which it old. About this time the public has been notified thai the company's securities an for sale. The manager of the underwriting syndicate may decide at once to have the securities listed on the New York Stock Exchange to facilitate in marketing them, or he may postpone this until .1 more opportune lime. At M \ pate, about this juncture bits ,,f information favorable to the stock are heard. The syndicate manager calls in the newspaper men or tickers' agenc) reporters an. I gives them news of big earnings, actual or prospective. Then favorable rumors are heard about the stock or bond in question. At this point .in actual market price for the stock must be established somewhere. If it has been admitted to trading on the exchange sales are made there: if not. I usinei • musl be transacted on the "curb.' Tl i manipulation of 206 JUGGLING WITH DOLLARS. prices now begins. The commonest method is for the syndicate to hire a manipulator, such as did the United States Steel Corporation management Inn J. P. Morgan secured the service of the great market trader .lames U. Keene to market the Steel stocks. Naturally the puhlie knows nothing about a new stock and is loath to buy it. Therefore the manipulator "matches" orders or makes some "wash" sales. The former is a transaction where an operator gives orders to two brokers or sets of brokers for identical amounts of stocks to be bought and to Ik- sold at the same time. In the end he has neither increased nor diminished his holdings, but he had created the impression with the public that there is great activity in the new stock and hence that the public is becoming interested in it. This of course gives a fictitious value to tin- stock and may attract genuine buying by investors. Manipulation by "wash" saKs is where two brokers conspire to make a pretended sale, simply in order to make a record price for the stock. Such methods are of course contrary to the aims and rules of the exchanges, but they are used almost without limit when unloading stocks is desired, either with new or with old irities. When a semblance of demand for a stock has been brought about the active speculator takes up the matter of temporary investment. Now, throughout the length and breadth of the world there are many people who make it their business to buy securities for the time being, speculators who expect to sell later when the price has changed to their profit. These are men who study conditions and are expert enough to understand values. They fill the func- tion of equalizing prices, of buying up supplies when there is a small demand and of selling to fill the demand when the outstanding supply is short. In times of panics it may be the great capitalists who are the speculators, taking up great reams of securities at low prices and holding them until the trouble has blown over. When the manipulator has been successful in attracting the speculator to the neu stock which the underwriting syndicate may wish to dispose of, it mav be all the stock can hi- sold at once to this class. Or the investing public mav as^i^t at this time. Let us look at either case. If it i> the investor who comes on the scene all we have to do is to watch him give his broker an order to buy the stock, for which he pays in full in - ,. plus a commission of one-eighth of one per cent. The broker himself mav go to the exchange and transact the business or he may have an agent do it. If we watch this phase of tin business from the gallery of the exchange we -ee two men meet a moment at one of the posts; one offers a certain price for a certain number of shares of stock, the other accepts or names another JUGGLIXG WITH DOLLARS. 207 price. It is much the same as a horse trade, only on the stock exchange the stock certificate does not change hands. The brokers simply make an oral agreement and take a memorandum of the trade. Later the transaction is completed by clerks delivering the shares at the purchasing broker's office and getting a certified check in payment. All the business on the stock exchange is done in this simple, trusting manner, yet in active business the haggling of prices makes such a din that it can be heard all over the building and even outside of it. The trading of the speculator is not so simple. He trades almost invari- ably on margins, that is, he buys, say, $100,000 worth of securities and pays perhaps $5,000 or $10,000 for them, having an incumbrance of the balance on them. The reason he chooses to do this is that he can employ a smaller amount of money to a greater advantage than by paying in full for the stock. The speculator can always borrow money from the banks or trust companies or from his broker on the stock, for unless it is a time of panic securities are generally good collateral at the banks for loans. This speculating class may be divided into several kinds of traders: the "room trader" who is a member of the exchange, always ready to take a position on the market at a moment's notice; the average speculating public who buys or sells for profits and no1 as an investor seeking an income, and the "professional" speculator who also may be a "room trader." The onlooking public does not understand the difference between such speculation as that of the "room trader," who always is in the market, and ordinary gambling. The difference Btrictly speaking generally exists, hut sometimes, even often, does not. Because the fluctuations of prices appear to be uncertain, and indeed are so from day to day, the machinery of specula- tion ser\es the purpose of gambling quite readily. The bucket shop, which is simply .hi imitation of a true brokerage office, thrives on pure gambling. The speculator, however, does his business as scientifically as any business is con ducted. It is the speculator's business to know conditions; he may make mis takes in judging of values and their relations to prices, but so does every business man some time or other. The greatest benefit the professional Bpec ulator Serves is to discount the future, as w . have suggested. When he sees popular sentiment overrunning itself, he checks it b\ selling stock "short." If the public is getting drunk with a boom, or by taking up slocks thrown over by the frightened public in times of panic, this process serves ; ,s a balance wheel on investments and on general business ; .s well. It may be set down, then, as a fair nil.' that the man who speculates on JUGGLING 11777/ DOLLARS. Mind chance with the hope thai prices will go as he wishes is a gambler pure and simple. The man who judges of conditions and acts with this judgment is one who makes speculation his Legitimate business. One other rule, perhaps, should hold good: that the professional speculator, while appearing to do a greal business on a relatively small capital, does in fact measure his means with greal care, whereas the casual speculator who may he a gambler in spirit frequently makes speculative contracts beyond his means and by not being able to protect his transactions is "wiped out" on a small turn in the market. Chicago Hoard of Trade. A- the >tock exchange serves the investment and speculative community in securities and aids corporations in securing money from stock and bond issues with which to conduct their business, so the cotton exchanges, the coffee exchanges and the boards of trade and produce exchanges serve the farmer, the miller, the elevator man, the spinner, the roaster, and the speculator in their respective commodities. And for the purpose of considering the methods of these exchanges let us take as an example the Chicago Board of Trade, in which centers the principal grain and provision trade of the world. This institution is chartered under the laws of Illinois, not to do business itself, but to maintain an exchange hall and to regulate the action of its members, who number about 1,800 persons. Memberships on this exchange are worth about $3,500. One of the principal functions of the Board of Trade is to raise the standard of commercial honor as conceived under the present commercial and competitive system, to establish grades of grain which shall be deliverable on contracts and to discipline members who do business in an illegitimate manner. The machinery of speculation on the board of trade is not unlike that on tin- stock exchanges. Instead of "posts" at which trading is done, this board i- equipped with what is called "pits." These are octagonal platforms in the shape of ascending and descending steps surrounding an open space. Pos- sibly more accurately the pit is the open space surrounded by these steps. On these steps and in the pit the men who have transactions to make congregate and "hid*" and "a^k." There are four pits on the Chicago Board of Trade, oik- each tor wheat, corn, oats and hog products. The rise to importance of this board came with tin rise of Chicago as a great shipping center. The city occupies a strategic railway and lake posi- tion. With the development of the great live stock and packing industries at its stock yards and of the business of sending grain through it to mills or JUGGLING WITH DOLLARS. 209 to foreign ports, an intricate machinery to handle business in many of these food products of the world found growth on the Board of Trade. In time the "future" contract was found to be serviceable and speculation was fostered. But lest the reader gain wrong ideas of the magnitude of speculation in grains and provisions compared with direct cash business in these Commodities, let it be said that in a good year Chicago receives 27,225,000 bushels of wheat and TRADING "PITS" Or TEX CHICAGO BOARD OF TRADE. Traders are divided Into two groups known as "bulla" and "bears." Any man holding mmodity and wishing t" sell It, or holding ;> future privilege to call foi M at :i fixed price, naturally desires to see t J i * - price of tiiis commodity rise, and devotes ins energy t" hoisting tii'' price in any way possible and in therefore known at a bull. The bear i one who wishes i" buy a commodity, or who has an outstanding contracl to delivei Axed price at a future time, thai which he h:is not now In hand, and his interest then ■ depreciate the price, it is tins condition that makes the eternal quarrel between 1 1 » • • lements on t he market. ships out as much) and handles in the Bame manner Borne 9,000,000 barrels of flour, over 1 ()(),()()(),()()() bushels of com and nearly as much oats, while its li\<' stock and packing business, pari of uliidi enters into the business on the board, runs up to $600,000,000 annually. Prior to trading in "futures" Chicago largely was a cash market. This broughl all sorts of* uncertainties. If a farmer ordered an agent in Chicago 210 JUGGLING 11777/ DOLLARS. to sell a certain quantity of grain he had in his farm bins it often proved on delivery thai the grain was not good standard. On the other hand, the fanner almost .dwavs waited until his grain was harvested before taking advantage o\' the market. Today, however, the farmer knows just what is standard grade deliverable on contracts on the Chicago Board of Trade. Either he or the grain dealer at the small country city, by means of the "future" contract, can sell grain which has been stored away to dry without waiting. He insures his profit against a change in the market. But if he did not take advantage of these methods, which minimize risks, and waited for all the changes in the market up to the time he could deliver his grain, he would be speculating more than otherwise. Millers do the same thing by buy- ing wheat for future delivery on the board of trade, thus insuring themselves a supply to make flour with when the given day comes around. This enables both farmer and miller, as well as the middle grain man, to equalize supply and demand and to reduce risk in their business. It is all done scientifically and smacks of speculation, but in no wise is it gambling. But there is some one who does do the speculating and gambling. Of the latter it may be said conditions in the grain and provision market obtain as in the stock market. The distinctly gambling operations are those done on blind chance, with little science and often with limited capital, so that the intention of the speculator evidently is to gamble simply on the changes in prices. The speculator in grains, as in stocks, is a man of a class who studies conditions of supply and demand, flood and drought, etc., figures scientifically what commodities are worth, and trades accordingly. But let us take the finding of the government Industrial Commission of 1898, appointed to report on speculation in agricultural products, as judgment of the position of the professional speculator in the grain market. That report says: "The first fact to be recognized in the survey of the American system of distributing farm products is that it is essentially a speculative system from beginning to end — speculative in a sense that after the products pass out of the producers' hands and until they pass into the consumers' control, there is not a moment nor a stage in the distributive movement during which the one who has legal control over the property in question does not run the risk of a rise or fall in the value of the property. With the growth in the volume and scope of production and in the variety and the complexity of operations involved in the marketing of the product of the farm, there have grown up gradually classes of men and commercial methods peculiar to the purposes and conditions which call them into existence; but in the vast army of men JUGGLING WITH DOLLARS. 211 and in the infinite variety of methods there is not a single responsible agency engaged which is not in some way required to assume liability for loss or gain from changes in value occurring in the course of distribution from the pro- ducer to the consumer. In brief, the risks of distribution are shifted by both producers and consumers upon the distinct class of speculators known as dis- tributers, who make it a business to take such risks and to divide them up among themselves on the basis of net profit on capital and cost of business capacity. This, in the final analysis, is the underlying factor in the svstem of distrib- uting farm products in the United States. "Stated in the form of propositions the distributive system presents itself as follows: "First — The existing system of distributing that portion of the surplus farm products which is required for domestic- consumption is the necessary outgrowth of the fundamental division of labor between town and country in our national development. "Second — This distribution of surplus farm products, regarded as a com- mercial system, is a development out of the constantly widening distance between the areas of surplus production and centers of consumption arising from the territorial expansion of the United States. "Third — The distribution of the excess of surplus farm products among tin- deficit nations of the earth — that is, the distribution of that portion not required for domestic consumption- involves so many elements of risk to cap ital and labor as to make this world-wide service to society a distinctly spec- ulative business of an altogether too hazardous character for producers or consumers to render without subjecting society to still greater risks of pro (riding a regular food supply. "Fourth- These speculative risks, inseparable from the national distribu tion of surplus farm products, have inevitably reacted upon producing and Consuming nations in such a way as to develop a new division of labor, thai of capitalist speculator, whose function it is to relieve both producer and con Burner of the hazards of distribution, so that the surplus of one portion of the • arth may regularly be supplied to the deficient portion at such a price as in the long run will a little more than balance the gains ami loss, -, of this species of commercial enterprise, without unduly enhancing the cost to the consumer or unduly depressing the margin of profit to the producer. "Why has commercial distribution in the United States become so large|\ identified with .1 speculative class of trading capitalists? The answer is th.it it has been found best for the producing and the consuming interests of the 218 JUGGLING 11777/ DOLLARS. community thai the risks of distribution should be localized In a separate commercial class, whose members are in a position to inform themselves as to all the factors, past, present and prospective, affecting the future course of prices. If the risks of distribution fell upon the farmer, it would increase materially the risks of capital required and thus raise the rate of interest he should have to pay as producer, because increased risks always raise the rate of interest. This would increase the cost of production and consequently tend to reduce consumption by rise of price to consumers. Such rise of price beyond a certain point would reduce the volume of trade. "If consumers assumed the risks of distribution there would be very inade- quate provision for the future. Irregular supply of subsistence soon breaks down the economic efficiency of consumers, besides impairing their regular con- suming capacity as customers of the producers. Hence the community — pro- duct irs, traders and consumers — all suffer together. Regularity in supply of the means of subsistence is a great desideratum in economic welfare, but it is so automatic a process that we really do not notice how it is accomplished. The work is done through the medium of a market price: a higher price brings forth more, a lower price brings forth less. Now, it is the speculator who has to decide in advance on the price at which a regular supply will, in all probability, be forthcoming from producers in sufficient quantity to meet the regular requirements of the consumer. One speculator might place the future market price too high, another too low, but as a class they correct and check one another. It is to their interest as distributers to call forth all that the consumer will take, and no more. "Speculators as a class, therefore, are interested primarily in a correct judg- ment, as much so as is either the producer or the consumer of the product in which the trader speculates. If, for instance, the Liverpool wheat specu- lator should, through an error of judgment or calculation, set the price of May wheat 10 cents below the correct world price, the surplus stock would meanwhile be distributed elsewhere until the shortage in the Liverpool supply hi came evident from a rise in price paid by consumers. This would bring some of the misdirected shipments to Liverpool, but not so much as if the blunder had not been made in the beginning; other places, whose speculators more correctly anticipated future prices, would supply themselves more fully than usual. Thus the volume of trade at Liverpool would be reduced by a valuation too low to bring an adequate supply; the consumers' customary demand would be inadequately supplied at the undervalued price, and the total expenses of distribution increased by the defective judgment of the speculator. JUGGLING 11777/ DOLLARS. 213 "These two kinds of service are peculiar to speculative distribution the service of assuming the risks that arise from changes in the relation of demand and supply and the service of giving the right direction to the commodities available for consumption. Even in famine-stricken India the government regards speculative distribution of supplies as on the whole far more efficient than any bureaucratic distribution could be. Without this modern markets would be deprived of a very great share of their efficiency in serving pro- ducers and consumers. In fact, those who have thought out the subject more thoroughly have found in this directive work of speculation the chief justifies tion for its existence. Where government has assumed even part of the risks of crop distribution, as in Russia, piles of wheat rot in one section, while people starve in the next." The Barometer of Business. Most people, when they hear of Wall Street or stock speculation, think first, and often only, of the gambling phase of the markets. There is. however, a very differeni view of what is taking place in the gnat marble halls of the New York Stork Exchange and the other bourses of the world. For. in a word, the stock market is almost the infallible barometer of business conditions. Frequently you hear a banker or railway president, perhaps, and often the newspapers say thai Wall Street is the only blue spot in the country, that the panics on the stock exchange amount to nothing and that the changing of hands of untold fortunes or the advance or decline of stock prices mean noth ing. Then just as surely as the seasons rotate you will find business conditions change according to the forecasts of the stock market. I-Yu people understand how far the market in stocks reflects conditions that exist in general business or to what an extent the investment of capital in other avenues than those of the corporate underakings is directed In it. often it is said the merchant, the manufacturer, the real estate dealer or the like need pa v no attention to what is going on in Wall Street. But this market for stocks reallj is the market for all uninvested capital; it guages the am. >nni of the supply and tests accuratel} the demand for it. When prices of stocks are high the suggestion is thai some one must be anxious to own them that, indeed, they must be earning good money, for capital seeks invest ment where it can earn good money. When Btocka are high it is readilj jeer that those who arc- operating business in corporate form will be encouraged t,, start ne* enterprises which shall be operated by ne* notations of cnpitfll SI 4 JUGGLING 11777/ DOLLARS. stocks. For n demand for stocks, like anything else, will find some one meet- ing the supply. When there is abundant fruit of prosperity visible in the form of idle money in the savings hanks or elsewhere the owner of this money generally wants to invest it. This was seen in the accumulation of wealth after the hard times of 1SJ):5. People in great number sought investments. They began to buy freely of stocks and bonds as well as of real estate and other forms oi' wealth. They paid off their mortgages, if any encumbered their properties. The great captains of industry saw that there were not enough supplies of stocks and bonds to absorb all the money that was accumulated and they also saw it was an auspicious time to start new enterprises which were to be started by the flotation of issues of stocks and bonds. The active demand for stocks in the boom after President McKinley's election ran into a craze for speculation and this caused such zealous promoting by scheming capitalists that they overdid the thing. But the great boom in stocks showed what were the sinews of strength of the nation and was a fore-runner of the great com- mercial boom in which the business of the United States was the greatest in history. Hut when the ovcrspcculation had caused great risks to be taken by the people in buying watered stocks, etc., there was a time when the stock market called a halt. This was in the fall of 1902. For over a year there was a state nt' semi-panic in the stock market with prices of investments in stocks and bunds going down almost constantly. Then it was that people who did not understand said Wall Street was nothing but a nest of gamblers. Wall Street, however, knew how the capitalists had issued too many stocks and bonds' — indeed so many that the public would not buy them and J. P. Morgan called them "undigested securities." While this had been going on the busi- ness man who was running his affairs on money raised or to be raised through the sale of securities had been building so many factories that pretty soon there were more than could be used at the time to a good advantage. This was true (specially of iron and steel mills. Such a condition, coupled with the condition of "undigested securities" set the stock market men to thinking. They could sell no more stocks to the public and they were afraid the new factories and mills could not be kept busy enough to earn money on the stocks and bonds by means of which they had been erected. This made the stock market speculator begin to sell stocks "short" — stocks he did not possess, with the idea that when the price of securities was forced down he could buy in enough to cover his "short" contracts at a good profit. Soon all stock specu- JUGGLING WITH DOLLARS. 215 lators were working in this manner. This frightened the public. No new stocks were bought by investors save at lower prices mid many old ones were sold out. About this time some of the railway managers needed to buy new rails, cars, locomotives, etc., in order to improve their facilities for transportation in the recently increased business field. They wanted to sell stocks or bonds with which to do this but no one would buy except at prices too low to consider. At the same time people began to feel panicky and wanted to hold their own money. This made money rates high and contributed to the stringency caused by recent overspeculation. Therefore, the railway managers could not keep steel mills busy with their orders. With business in steel and iron decreasing rapidly companies in this business could not earn money enough to pay all their dividends. So this in turn hurt tin- prices of stocks. After a time banking business fell off and railway earnings declined because of decreased general business. It was only when this process was carried to the extent that money, which had been secured from selling stocks, from stopping work here and there and otherwise had begun to accumulate that the people began to realize that there was wealth enough in the country to start business ahead once more. Then it was again the stock speculator who first discovered this. And at once he began to advance the price of stocks, which foretold the revival of business again. For as soon as stocks and bonds could be absorbed by people with idle money once more, the railway managers sold new issues and with the proceeds bought new rails and other equipment. The steel and iron mills began to hum with industry again. They earned new dividends and in turn this helped the price of -stocks again. BecaU8e of the fact that shrewd business men regard Wall Street as a good prognosticator of future busings events, Wall Street naturally is always looking ahead some months. Frequently when prices are booming in the -lock market conditions are being developed which shortly may hurt business. Then Wall Street lakes I he other tack, and the business world wonders what Wall Street possibly can see ahead that suggests danger when everything seems to he going along so swimmingly. On the other hand, when things begin to look the bluest in general business Wall Sheet frequently i- the first spol to reflect brightness. In this business of discounting the futur< Wall Sheet takes accounl of tie crops. Will they be good or bad? Wall Street must know, for if the} an to be good it means more dividends to the stockholders of the railways which carrj the big crops; or if thej are bad it means lessened earnings. STATE STREET, CHICAGO. 'the greatest ^^ ^TSZtelt^X™ fc'sfew!:; k »'.'it.wSnrth...r w£ *<>ng during any hour of the day. CHAPTER XVI DIFFERENCE BETWEEN SPECULATION AND INVESTMENT. ./ Majority of the American People are Speculators — Invest Their Money Blindly in Securities — Do not Know the Difference Between Saving and Speculation — Real Estate the Real Safe Divestment. We have already seen in the chapters on the Money Trust and tin Insurance Trust where the greater part of the savings of the people are placid. We know that in the savings banks alone there are deposited over $3,000,000 of the >avings of the people of the United States, representing over 7, 000, 000 depositors. And the life insurance companies hold assets to the amount of over $2,500,000,000. It has been estimated, that by reason of souk people holding more than one insurance policy and some people having more than one savings bank account, the savings in these two principal savings mediums are controlled by about 8,000,000 people — or about one-tenth of the inhab- itants of the country. In the chapter on the world's savings bank deposits ire saw that, while the United States stood at the top of the list of countries for the amount of money saved, it stood fifth in the matter of the number of savings bank depositors. Therefore we learn that in proportion to the num- ber of inhabitants of the country we fall behind Germany, France, the United Kingdom and Japan in frugality. \ou, what a nation saves constitutes a nation's capital. It is a good prin- ciple to save, but it is unwise for a nation to become miserly. Therefore that which will promote the greatest enterprise and general well being is the best thing for the country. This comes through investing savings wisely so that many small simis of money will go toward strengthening a nation in its work of progress. The people of France have long been known for their saving ability and the habit of investing their savings where llu\ will do the most good as a whole. Prance is one of the richest countries of the world and her financial power is enormous on account of the frugality and aggregate savings of her people, yet the amount of her deposit-, in savings banks is even less than those of Austria and Compare with the United Slates as S to 80. Hut the French people are b class of small investors in securities. While the} Ml 7 218 SPECULATION AND INVESTMENT. may have suffered severely at times because of misplaced confidence, as threat- ened to be the case in their holding great amounts of Russian bonds during the Russo-Japanese war. there can be no doubt that on the whole the people of France are much better off because of their habit of investing directly in securities. Here in the United States we stand the richest, people of the globe and also the most prosperous. Hut this is not because of our savings. Rather it is because of the great wealth of the country that our savings arc as large as they are. The savings of this country arc given over to other people like the banker and life insurance manager in trust to control, well if possible, badly frequently. It is believed by many good and competent judges it would add much to the welfare of the country, and also would help to check concen- tration by a few men in the Money Trust and in the Insurance Trust, if the people as a whole would make intelligent investments of their savings in secur- ities This is not intended to discourage life insurance, for that is a great factor for laving up something for old age or in the case of death. Nor is it desired that savings in the banks of the country be discouraged. Rather it is to be desired that more saving be done and that in such a manner as will tend to distribute more widely through the people the ownership of the great producing and distributing agencies of the country and to a large extent to bring these agencies under the more direct control of the people instead of concentrating them in a few hands. The trouble in making investments is that the average person does not know the difference between this form of saving and speculation. It may be said what is one man's investment in another's speculation, and what is one man's speculation may be another's business. It has been shown how specula- tion is a business transaction for profit which involves risk. To invest pri- marily is to lav out money with the view to making profits with a small amount of ri^k. Furthermore investment suggests a more permanent use of capital a- opposed to speculation. Thus the principal laid out in investment is ex- pected to remain intact and to bring in a regular income, whereas speculation risks the principal for a short time in the hope of a large profit. In the stock market it is customary to speak of an investment as being the purchase of high class securities which yield a low rate of income, these securities to be paid for in full and put away for permanent keeping. Speculation in the ^tork market is regarded as trading on "margin" in a large amount of stocks and with a small amount of capital, with a hope of closing out the transaction soon with profits. Here it is merely the fluctuation in price which is considered SPECULATION AND INVESTMENT. 219 in speculation and it docs not matter much for this purpose whether the securit}- has an income or not. Thus, it is seen, what may be the relative difference between permanent investment and quick speculation, between a transaction that calls for security and one that necessitates risk. • But many so-called investments, especially if they are made with poor judgment, are less permanent and more risky than speculative transactions. The man who makes it his business to speculate in stocks may risk less than many people who are not expert may lose in investments. To such a trader speculation is, in a large degree, an investment — an investment in his regular business. A person who has devoted a life time to the study of mining properties might put his money into a mining stock with such knowledge as to make the transaction an investment; while for the majority of people this would be a speculation. What might be considered an investment by a business man would be a speculation in the case of a woman or the guardian of trust funds. Now, it is of greatest importance to get a clear idea in regard to fhis matter if one has money to invest. The first thing he must decide is whether he really wants to invest or to speculate. If the latter he must choosi deliberately to accept great risks for the chance of making possible great gains. For instance, if some big railway project is to be started which needs funds, it may be some time before the road would earn money enough to pay dividends on its stock regularly and thus make it an investment. Vet it would be perfectly legitimate for one to put money into the enterprise if one believed profits eventually could be made out of the transaction. Such a deal is nothing hut speculation; though to the man who knows all the details and weighs all the risks and chances it may appear as clear as an investment as government bonds would to a hanker. Indeed, the great railways and industrial enterprises of the country were built upon just such risk Ip .illation. If a man wants to make an investment he must decide uhal kind he will niter. If it is an investment which he has the time and intelligence to watch, keeping track <»f e\erv changing condition of business he can afford to put his money into securities which yield a comparatively high income and it is a rule in finance that wherever there is " high rate of income there it .T$ is a u oi a, -3 c'?£" l^z% Tip, o <= +3 -• (- x cs 5 * •" -§3i! P ogc c C ^~ o O * 0/ c ta,£.o o o M E *> EH o'gf'3 Sec,;" < O Fh ** 2 ^ c « o ".So >««■§ C « o p w (4 OT3 g hH '■? a '? 1 £ 91 £ E M° M 0^-H >1 o c - P — 5 w £ u *j 3 C C w o Bi"*i to h 53 £ 0) li Fh " J3 u ** O a^'Z W •t-i O C to u * "Z o w g - C 1> H w & g.t3« m c F E't) O be pq od >. hi < ? E £ »' ~ X be M Fh -"• 53 O m S « W 53 - _, J rt *H ^5 a 6 < "5 O W c «- tC 53 dJ 0> 9i 1^ ■cajS <-> c a w '5 3 £ C rt BO irt"2 P»«§ *»•*■(( « E ® ° Q< r; .C _. Oj +-"r* t^ SPECULATION AND INVESTMENT. 221 rule really applies to the majority of people; certainly those whose capita] consists of savings from small wages. Yet it is exactly to this class of investors that the promoters of the wildesl schemes of finance appeal. It is exactly this class which is most fascinated by wild stories of impossible dividends amounting to 50 per cent, 100 per cent or even 500 per cent a year and other "get-rich-quick" propositions. Some- times schemers bring all sort of arguments to hear to fleece the people of their savings. Often circulars are sent out making fun of the old financial adage that "anything which pays more than the 4 per cent paid by savings banks is risky." Arguments are made that if this he true it must lie risky to put money in the savings banks, because the only use the hank has tor the money is to put it into some earning more than 4 per cent. Such contention often goes on to say that when a person accepts 4 per cent from a hank he virtually pays that bank four to six per cent of the earnings of his money for the use of the bankers' judgment. Now this sounds plausible and doubt- less it brings many dollars to the schemer, dollars that doubtless ought to be put into savings banks because their possessors have not the intelligence nor the time to invest for themselves. In reality it is deceitful. The law which rigidly restricts the investments of savings banks shows what experience has demonstrated as being the only kind of investment a certain class of people should enter into. It would, however, be absurd to restrict a business man to an investment of a savings bank character. He wants something that pays better, and he has the capacity to look after it. Vet even he may keep a certain reserve in a low-income investment, in order to obtain thai safetj which is the only protection against the approach <>f disaster. Recently the Equitable Life Assurance Society, in speaking of its method of invesl ing trust funds, said : "There is one way in which dividends to policj holders might be largcl} augmented, but it is a way which will never be countenanced b\ the managers „f the Equitable. That way would be to invesl in speculative ventures. The income from the Society's invested funds might be greatly increased If 5UC h a course should he followed for it might result in a large temporary increase in dividends to policy holders, but deterioration would be the inevitable consequence, and the Equitable would cease to deserve a full measure of public conlidei.ee. What is true of individual investments is equally true of the aggregate investments of a gnat organization. High interest suggests possible risk to principle. A moderate rate indicates security." A well known authority commenting upon this publication Bait! it might SPECULATION AND INVESTMENT. have been written for the guidance of every trustee of funds in the United States, and continued : "It is ;i> true oi' the individual investor as it is of the Equitable Life. The real investment fund put into speculative issues must ultimately deteriorate. The less the speculative element, the greater the stability, and stability is the great desideratum of investment. This statement does not apply to the business operations of business men. Business itself is speculation. But the business that is not conducted by business men, understood by the men that run it. carefully watched and guarded, is a speculation that is headed straight for ruin. What would one think of the trustee who put a woman's fund, for instance, into a commercial enterprise with the management of which that trustee was not familiar; the credit of which was not beyond all question sound; the sole recommendation of which was the fact that profits were large? "To put funds into the bonds or stocks of any corporation is to become a partner in that corporation. No man, not imbecile, will knowingly become a partner with knaves or incompetents unless he intends to keep most careful watch upon his partners. Yet thousands of the intelligent citizens of the United States will each year blindly buy the stocks and bonds of companies whose managers are both knaves and incompetent — merely because the divi- dends look large, perhaps, or because the prospectus of the company is pretty to look at, promises many things, and, on the whole, is comforting. To this great innocent investment class it must come as a shock that the huge 'Equit- able' is afraid, actually afraid, to touch the securities that are fed out in millions to the public. The 'Equitable' has the best financial advice in the world. Great financiers and bankers sit upon its board. The combined invest- ment wisdom of Jacob H. Schiff, E. H. Harriman, J. J. Hill, August Belmont, H. 0. Frick, Sir William Van Home and a dozen other such, is at its call. Yet the 'Equitable' dare not, with all this market wisdom at its command, take the bonds and stocks that are sold daily into the small safes of the country parson, the backwoods lawyer, the widow of the petty tradesman in New England. Daily, the widow's life insurance legacy is sunk in stocks and bonds the 'Equitable' dare not buy, because it feels the risk is far too great. There is a grim humor in this paradox of the investment world. It is to-day as true as when it first was written: " 'Fools rush in where angels fear to tread !' " SPECULATION AND INVESTMENT. 223 How $1,500,000,000 of Bonds Change Hands Era;// Year. It should not be taken for granted that because the New York Stock Exchange and some of the other exchanges of the country make a business of creating a market for investments, all the stocks and bonds of the country are sold on these exchanges. In the sale of bonds the greatest factor is the group of banking houses in Wall street which have branches or close con- nections in other domestic financial centers and likewise' in the great markets of Europe. Indeed, these houses do a business which often equals and some- times even excels the tremendous stock speculation on the New York Stock Exchange, for bonds representing about $1,500,000,000 are marketed through this medium almost every year. We have seen that merchants, manufacturers and other capitalists who do business in corporate form frequently borrow money on which to extend their facilities. This frequently is done through issuing bonds secured by a mortgage or other lien on the property of the capitalist. In times when a great expansion in general business is under way — when prosperity smiles brightest — there are a great many bond issues for sale. The principal buyers of bonds are the insurance companies, banks and small investors. Insur ance companies with their gross incomes running in excess of halt' a billion dollars every year naturally must find some place to put the money so that it will earn interest for the policy holders. When expenses are paid frequently $200,000,000 is available for such purpose. Of the banks the saving institu- tions can be counted on to take up something like $150,000,000 and the I nisi companies and national banks absorb about the same amount. The millions "I' investors, large and small, domestic and foreign, take up the remaining billion. Then- are two principal classes of bond dealers who make il their business of transferring these bonds from the corporations which issue them to their final lodging place with the investors. These are Hie great national hanks, trust companies and private banking firms which make up the principal under writing Byndicates; and the private bond houses, which though sometimes members of these big syndicates, generally dispose of their bond offerings through private correspondence to the minor yel all important investing public. Of the fir-t clasa we find such great institutions as the National City Bank, first National Banlc and National Bank of Commerce of \. u York Cjty; the Illinois Trust and Savings Hank and the Firsi National Hank of Chicago and similar big concerns. Of the big private institutions which manage greal gg* SPECULATION AND INVESTMENT. financial underwritings there are a half-dozen principal houses such as J. P. Morgan & Co., Kuhn, Loeb & Co., Speyer & Co. It is the business of these firms to be able to float at command any amount of bonds and to be able to secure money to any fabulous amount almost in an instant. For that reason the members of the private banking firm and the directors of some of the great banks are one and the same. This power is carried even further. As we have shown in the chapter on the Insurance Trust members of the firms often are directors in great companies which need to sell bonds and stocks from time to time, and besides being thus actual seller and seller's agent, these bankers frequently are on the board of directors of some insurance company or trust concern which in turn will buy the securities offered for sale. Thus they become seller, seller's agent and buyer-in-trust for the people whose savings may be deposited with them for safe keeping. As a general thing these big private banking firms each can dispose of $100,000,000 to $300,000,000 a year, and where the business of being both buver and seller is often easily regulated the profits of a house of this char- acter may be anywhere from $2,000,000 to $8,000,000 a year on this business alone. It is largely because these firms have such great facilities in connection with friendly banks that they get the great business they command. Some- times they are expected to obtain money when money is very hard to get. If tin occasion warrants it the house will ransack all the financial world to get the de>ired funds. Even the government has had access to them in order to sell its bonds when hard times pressed. For several reasons great railways and other corporations have a special financial interest in some one or more of these banking houses. In the first place the close relationship of private and national banks in Wall Street and the interrelation of directors of these con- cerns in the great corporations of the country dictates such relationship. For instance, just now there is close relationship between the firm of J. P. Morgan «\ Co. and the First National Bank of New York. We generally find then that this interest, principally the house of Morgan & Co. acts as fiscal agent tor >uch companies as it is most closely allied with. Mr. Morgan was the great genius in forming the United States Steel corporation and he almost owns the Southern Railway. Therefore, we find these companies among his closer business ties, together with such others as the Erie, the New York Central, the Hocking Valley, the General Electric company, the Lake Shore Road, the Atchison and Northern Pacific. On the other hand the great influ- ence of the National City Bank, the Rockefellers and the Harriman interests SPECULATION AND INVESTMENT. 225 arc associated more or less definitely with Kuhn, Loeb & Co. This firm generally acts as fiscal agent for the Pennsylvania Railroad, the Baltimore & Ohio, the Norfolk & Western, the Union Pacific, Southern Pacific, Illinois Central, etc. Such roads as the Rock Island, Mexican Central and some others and several foreign governments like Cuba and Mexico use Speyer & Co. Much of this sort of selling, however, is into smaller bond concern-. which in turn sell to the investor who keeps his bonds for good. There are hundreds of these bond houses and nearly every bank does a business of buying and selling bonds to some extent. There are many rich people in the United States of whom the newspaper reading public never hears. These people have money to invest and are eagerly sought out by retail bond houses. The big syndicate houses we have described more properly are in the wholesale business. Though the bond firms may do a retail business, they often handle very great transactions both in single amounts and in the aggregate. For instance, some of these houses have list of investors on their books running from 5,000 to 25,000 names, representing all localities of the country and even some foreign countries. One bond house in Wall Street has a list ol 22,000 names, each of which represents an average yearly purchase of $5,000 of bonds. This means $10,000,000 business a year. With such power and ready ability to place securities with the public such a bond firm would not fear to Bubscribe itself to as high as $20,000,000 of good municipal, county or -ail- road bonds, for it could find a market for them at a profit with no trouble. Of course the reputation of a retail bond dealer is very important in bond transactions. The average small investor buys securities because they are recommended to him, not because he knows definitely of their value. For this son the bond house must he able t<> advise as to the character of invesl ments offered for sale. If these were to turn out badly the customers of a firm would lose nionev and the firm would lose its patronage. This necessitates greal care and investigation on the part of the bond firm, and indeed, there are i,u house, hut thai can boas! their customers have not lost monej through investments advised by them. It is generally the "gel rich quick" swindler and ,,,,( (I,,, reliable bond dealer who robs the public. The.e bond firms employ a -real many salesmen, some of them as high forty. Wall Street alone has about 300 such men. and Chicago, Boston, St. Louis, San Francisco, Denver, Ne* Orleans. Minneapolis, SI. Paul and other big cities send out men over the country to both buj and sell securities. These nni, are almost all experts in bond values and some receive as high as $10,000 »" $15,000 a y< ar compensation. San the arts rom tion the cting and lent p hem f :omple than eonne miles ompoi eets t the c more O jj o tj .T) C <-> O P C « 1- rt aj.£ ft m - 0) lofn 3J1 Oo t-r;" £ m" — CA V ^ 3 « * O « . o .Si -3 ,5*3 m *j ■•^ (-. —• s* ft Ifl fc a +j .Mo H i u to a« K o 3 o c^- T 1; o C o n S rt a; oj > 5 6h "3.3 s- rt < S 3 L 3 fe s- .fi rt a) "+-■ a 4* 'rt *"** S ■".S" >- ofl H Y> n. 4i Si ID l£ ft 0< ^J ^-r-< n > 4) W 3 a 0> ■" ID bfi 3 C £ -p O "2 W ptri rt-3 3 rt r vi v 1 a a be '~ "i Hi C 4) *> o£ ^S£ 3 K OJ 3 « w,c as fc E » « ft-" a- ^ » he _ > r * c qj £ ft^ rt -rt „ s w ° ■= in - a: be 4- a State our is t triple : The the he messa of the SCg2'S - «> rt £ p ^ rt ^ rt 1 § XJ 4) o a, not morally competent to make such profits and such profits morally belong to the company because they attach to the official position and not to the indi- vidual. If this reasoning is correct, and I see no escape from the conclusion, it i-, evident that in the broad sense of the word, 'insiders' are not morally com- petent to speculate in securities in Wall Street for their own individual profit. By reducing the Bduciary relationship represented by an 'insider' to its simplest form of trusteeship, namely, that of one individual to another, the case is evident. Thus, the moral competence of a large section of the Wall Street MORALITY IN WALL STREET. 231 community to speculate in securities for individual profit is very decidedly re stricted, to the extent that the Wall Strict community occupies a fiduciary position in relation with the public. What is the practice of Wall Street in this respect ? "I dislike to bring a general indictment against a person or a community, but the plain fact is that in Wall Street speculation by 'insiders* for their own exclusive personal profit is the rule. The proverb that 'the tape tills the story* has quite common use because of the generality of the practice. My observation compels me to the conclusion that the 'insider* who does not use his official position for his personal profit by means of speculation is extremely rare. Furthermore the Wall Street community cynically expects him to do mi. and in no way blames him when he does it. I fear no contradiction on this point from any one possessing even a limited experience in the street. Thus as regards the first of the principles governing the case we are compelled to the conclusion that, so far as the speculative public is concerned, a very large proportion of people who speculate are morally incompetent to do so, because they risk money that tiny cannot afford to lose, and so far as the Wall Street community in particular is concerned a large part of the speculation i> con- ducted by people who have no moral right to do so, because they are aiming to derive personal profit from fiduciary relations. I do not want to say that the majority of speculative' transactions are made by people who are morally incompetent to make them, but it is very evident that a large part of them are so made.** CHAPTEB XVIII LYING TO MAKE MONEY— HOW WALL STREET THRIVES ON FALSE RUMORS. "Fedce" Quotations — Gambling on Rain or Sunshine — Government Weather lit ports Eagerly Sought and Often Perverted — How Fortunes are Made and Lost on Humors and Canards. W.u.i. Smii t has been busy these many years trying to live down a bad reputation. Competent judges say that in this great money-center of America the old proverb "Honesty is the best policy" is the rule of conduct. Nevertheless there is an element in Wall street that makes it pay to lie. This element i- made up of such speculators or big moneyed men who circulate rumors for the effect it will have on the prices on the stock exchanges of the country. To the uninitiated in the matter of this feverish business of hazarding wealth in order to gain quick though doubtful profits it should be explained that the rumor or canard often plays an important part in speculation, or rather in that phase of speculation which most nearly resembles gambling. When prices of securities are moving rapidly up or down on the stock ex- change, every speculator, or investor for that matter, wishes to know the cause. To the investor who owns stocks or bonds that are appreciating in price this information may hi' of the greatest value. For if the higher price, for Instance, i- based on the knowledge or belief of other investors that the property represented by the security is increasing in value, presumably the holder of the -forks would desire to retain his holdings in order to participate in the better earnings to he distributed in dividends. On the other hand, if there were no special reason why the stocks should be advancing save because of the manipulation of speculators, the investor might desire to sell out at this r figure. In like manner, the speculator desires to know the cause of price fluctua- tion-, for it may mean an opportunity to risk his wealth in an enterprise that promises to earn him new wealth. And the gambler desires to know what is going on in order to bet on the probable winning side. 232 LYING TO MAKE MONEY. 233 Since explanations of "booms*' and "flurries" must be found to appease ilie appetites of those of Wall Street, rumors of some sort generally accom- pany such movements in stocks. Some times they come to notice after a movement in prices has already started; sometimes they precede the move- ment and cause it, and sometimes they both follow and accentuate the price changes. It is safe to say that 99 out of every 100 rumors are the purest fiction. However absurd a rumor may be, if it is circulated extensively enough it always has some effect upon the market. The writer recalls an incident in the stock market panic of the summer of 1903. Wall Street was experiencing a money pinch and feared hard times. Too many hanks and trust companies had invested the people's savings in the stocks and bonds of heavily "watered" corporations and hence were in a precarious condition. In the midst of a panic one day several banking concerns of Baltimore suspended business. Then, presumably to add to the slaughter, some ••hear" who wanted to see stocks go down still further, started the report that the Northern Trusl Com- pany of Baltimore had failed. This, on top of the other failures, suggested to Wall street speculators that affairs in the Maryland city were in a fright- ful pass. By the time the writer telegraphed to Baltimore for particulars and Learned there Was no such hank in that city and that the report was a lie, the damagi had already been done and stocks had been lowered to the satisfac- tion of tin "hears." T'sualU it i-, easy to trace a rumor that has been started for a purpose. Sometimes the source of such a rumor is not located, but generally the falsity of a rumor Is made apparent very quickly. Probably most lies start from '"pooh" which are operating in the market to raise or lower prices artificially. When this is the case the lie is a lie morally but often is carried without being a lie other than in action. For instance, such a "pool" or syndicate must employ man} brokers i«> carry out its orders on the exchanges. When the manager of such n "pool" gives his orders to a broker it i- very easj to maki nificanl but somewhat ambiguous remark. The broker repeals the remark, generally expanding it, to some other broker or customer. With this start* the rumor may gain rapid headway. This entices speculators in the Rto erally to buy it in hopes that it will advance rapidly. Before Hie rumor has got will under wi\ the "pool" has begun operations in the stocl and this attracts market attention. Tin- prepares the public mind to accept an\ rumor thai In hum Cases out of I, I, a good dial of biixiii I by the rumor .and j ,| l ) ING TO MAKE MONEY. when tlus is accomplished the "pool" has sold some of its stock, probably at a good profit. The strange thing about rumors and canards is that very few members of the stock exchanges believe them when they hear them. Yet they fre- quently speculate on their influence because such "tips" frequently have their desin d effect. The author quoted in the foregoing chapter on the morality in Wall Street says falsehoods are either deliberate or suggested or arc of the truth sup- pressed. **(a) In the matter of suggestio falsi the commonest form is that of the plain lie, as when- some one desiring to sell stocks starts a rumor that a dividend is to be increased or a deal of some kind made whereby the value of a stock will be materially enhanced, thus inducing others to buy the stock that he wants to sell: or conversely where some one desiring to buy the stock starts a rumor of receivership or reduced dividends, thus inducing others to sell the stock he wants to buy. This is the simplest and grossest form of decep- tion, and descending from it in the scale of deception may take innumer- able forms, all designed to play upon the speculative spirit of others, inducing them to buy or sell as may be desired. There is, for example, the practice of 'washing sales' by means of 'matched orders,' the object of which i> to create a general impression that a genuine market exists, and that the prices recorded are genuine prices reflecting real and bona fide transactions. A 'wash sale' i- a transaction in which one person will arrange with another to buy from him securities at a certain price, thus establishing a 'quotation,' although buyer and seller are one and the same person. "The Stock Exchange rigidly prohibits such transactions in that it will not allow it- members to make them knowingly. It will not allow A to pre-arrange with B to buy from him or sell to him the securities which he openly offers or bid- tor on the floor of the Stock Exchange. It forbids these transactions because the resulting quotation is, in common parlance, a 'fake quotation,' the ultimate object of making which is to deceive some one else into buying or sell- ing the security. Unfortunately the " regulation against 'wash sales' cannot possibly and in practice does not prevent, for instance, C from giving to A mi1> rs to sell and B orders to buy an equal quantity, neither A nor B being aware of the other's orders. A goes on the floor and in good faith fills his order, B in equal good faith selling the stock to him, and C thus accomplishing hi- object — namely, making a 'fake quotation' with intent to deceive some one ela . The Slock Exchange cannot stop this kind of thing, because it cannot discover where it i- done. Tlii- latter operation is sometimes called 'manipula- LYING TO MAKE MOXEY. 235 Hon,' and to the extent that deception is intended and practiced it is morally indefensible. For unless we are to hold that the 'end justifies the means,' a maxim most correctly reprobated in theory, but somewhat widely practiced, we must hold that direct deception of any kind by the suggestion of that which is false can never be right under any circumstances. "Without further multiplying instances we may ask how does Wall Street stand on this matter? To what extent is the lie in its various forms a part of its daily activities? To what extent are its quotations manipulated with intent to deceive? As everybody knows, Wall Streect is the land of rumor. To what extent is it guilty in a moral sense? "There is manipulation, manipulation with intent to deceive, and plenty of it. Still on the whole, I think I am strictly fair in saying that everything considered Wall Street is not nearly so black as it is painted in this respect. To begin with, it is difficult for people who have not direct experience of the Wall Street community to realize to what extent the seething mass of rumors which constantly fill the street is the result of a kind of spontaneous generation. In Wall Street the speculative imagination is apt to run riot on very little provocation and to generate stories from the most elementary of materials. The 'guess' of one man expressed to a second becomes the 'believe' of the second expressed to a third, and when the third man comes to pass the story along it becomes the 'I know,' and none of the three really intends to deceive. After a good many years of experience as a newspaper man in Wall Street I am convinced that the large majority of the rumors which get into circulation in speculative circles are horn out of pure conjecture rather than a deliberate attempt at fraud. Unfortunately this is not always true. The kind of varus that will be put into circulation by people conducting speculative pool opera tions and put into circulation by a complaisant and more or less corrupt 'court circular' press are plain lies and constitute the kind of deception or fraud thai morally vitiates a contract. While there is nowhere like the amount of this sort of thing done in the press of today that was done in the press of twenty yean ago, there is -.till far too much;- hut let us look .at the other side of the "'The principle of publicity has made enormous strides in Wall Street in the last feu years. Publicity is fatal to deception as sunlight is fatal to germs of disease. In my relatively short experience I have witnessed a wonderful growth in Wall street of a spirit id' frankness, on the part of those who make the news, towards the public in general. \ol only is this the case in the mat ter of telling the truth, hut it is the case in the matter <>f telling plenty of the / ) ING TO MAKE MONEY. truth. I am proud to say tliat nowadays I find it safe in Wall Street to go on the principle thai men in their direct statements tell the truth. I rind it safe in ni\ work as a newspaper man to believe the greater part of what I am directly told l»v people in official positions. It is true that the 'official denial' is -still with us. I am going to that in a moment. Nevertheless, speaking from niv own experience in Wall Street, I have no hesitation in saying, first, that nun a- a ride speak the truth in Wall Street in speaking of that which they know, and second, that there is wider dissemination of essential truth in Wall Street and a better general understanding of that truth, so far as facts and figures bearing upon securities are concerned, than there is in other commercial and industrial communities with respect to their characteristic products that are bought and sold. ••(1») A- to the suppressio vcri form of deception we understand it to mean concealment by one party to a contract of something vital concerning the mat- ter of the contract which the other party has a right to know. Of course, the principle of publicity is directly opposed to this form of fraud. Twenty years ago concealment of essential facts was a common form of deception for specu- lative profit, or at all events very much more common than it now is. As I have already pointed out, corporation officials in recent years have come to rec- ognize the legitimacy of the public's demand for information with respect to corporate affairs and have freely complied with it. As a result, it is as a rule relatively easy to ascertain the truth respecting financial developments in Wall Street except important negotiations actually pending which would be ren- dered futile by general knowledge of what was in progress. It is in such cases that the 'official denial' is mainly to be met with today. The phrase 'official denial' has come to be something of a proverb in Wall Street owing to the fact that its use is practiced in an emergency. Many people consider it to be justifiable. Within a few weeks a leading banker admitted to me, on my put- ting the question to him plumply, that if it were necessary to prevent me from obtaining information which would prejudice an important operation which he had in hand, he would officially deny something that was true. His excuse was that it was not fair that anyone should be placed in a position where he was compelled either to affirm or deny something presented to him in the form of a question. The argument was that as a result of modern newspaper enterprise, which has deprived people of their just privacy, refusal either to affirm or deny has come to be regarded as equivalent to a confirmation of the report in ques- tion. Consequently, from his point of view, there would be nothing for it but to deny at the expense of truth. LY1XG TO MAKE MONEY 237 "Of course, there can be no moral jus- tification for the 'of- ficial denial' in such a case, but there may be some excuse or at least there may be extenuating circum- stances, and in prac- tice I can testify that the cases of false 'official denials' arc rarer than they were and such cases as arc met grow out of what may fairly be called ;ui emergency. I claim, therefore, that on the whole in the mutter of the three principles governing speculative contracts Wall Street's stan- dard of morality is a good deal better than it was and 18 a good deal better thanmany people BUppOSe it tO be and that ii IS im- pro\ ing all the t inn >. I wish to insist some w hat strongly on thifl point, because while Wall Street has many sins of its own *(> answer for, it is not marly so guilty on this score as the jury of the public 1" liev< - it to be." V ~ ~ v. ~ — > - — i i so ._•-__ ■_ -m fc. w - ?i » ii ~ a CD • _; *** s z g * B : -•- > -~ £ W « o o H ■2 "2* -■ - •— . — - c a; d < ^5 * a o C aJ « a c * s c m — " ■•- — o 2 . ■j. ■i. • 5 ~ C 5 fc-_^ . _cx S fc- C— 4) fc. c g ___ JAMES B. FOBGAN, President of the First National Bank, Chicago, and a director of the Equitable Life Assurance Societv. MARSHALL ?IELD. The Famous Merchant and Financier, JOHN M. HALL, A prominent New England railroad magnate. PAUL MORTON, Secretary of th<- United States Navy Depart- tnent; formerly of the A. T. & s. Fe Railroad. CHAPTER XIX WHAT'S WHAT IN BUSINESS. A New Business Dictionary — The "Lingo" of Wall Street — A Comprehensive Explanation of All Technical Words and Phrases Used in the World of Finance and Speculation. What is a trust? The popular conception of a trust is a corporation or combination so large that it is powerful enough to compete successfully in its chosen field. Mere bigness, however, is not a trust in the proper sense of the word, even though this use is general both in every-day speech and in much that is writ- ten about such combinations. The best definition given, that acknowledged by Standard Oil, embraces "the intent, power or tendency to monopolize busi- ih -s. to restrain or interfere with competitive trade, or to fix, influence or increase the price of commodities." What is monopoly? Monopoly briefly is the absorption or control of the source of supply. In its strictest sense it is a grant from a government of an exclusive right to carry on a business or' traffic. In the modern sense monopoly suggests the control of such a preponderating proportion of a market for any commodity or service that the price then for can he fixed arbitrarily and regardless of a level that could be maintained by free competition. How many kinds of monopolies are there? Three: (1) Natural, based on the control of some element of nature through the ownership of laud, such as coal, water, gold, lumber, etc., or the exclusive right to natural facilities for transportation, such as a toll road. railroad, water-way, etc. ('.') Legal, an exclusive governmenl grant to do business, to control traffic, etc. (■'») Capitalistic monopolies (trusts), which fold pric.s at arbitrary figures, or have the power so t<> do. through enormous capital, thus <;i\in) The corporation oi artificial person created by law. Has a corporation citizenship? To the extent that it may sue or he sued in the federal courts and in a proper case remove its case from a state to the United States court. Othcr- w i-t tin United States law does not deem a corporation a citizen of a state ami it follows that a state may impose an\ terms on a foreign corporation as a condition of doing business within a state. This condition, however, must not interfere with interstate commerce or rights under the constitution. What is stock? The rights or interests of members of a corporation in its assets, legal privileges, managements and profits. What is capital stock? The amount fixed by law to be paid into the treasury of the corporation for use in its business operations. What are shares? 'flu division of the total capital stock of a corporation, represented by certificates which are distributed to members of the corporation according to the amount of their subscriptions. How are shares of stock divided? In any amounts desired, the par value or full paid amount, being fixed by dividing the number of shares to he issued into the total amount of the capital :k, usually par valut is si 00. hut shares for other sums, as small as $1 and in some cases even less, arc issued. Must stock be issued at its par value? Not always, though many states make this the law. What is treasury stock? res not -old to subscribers, hut held in the treasury of the corporation to be realized upon when necessary to raise funds. What is preferred stock? That class of stock which by law has preference in receiving dividends. WHAT'S WHAT IN BUSINESS. 241 Generally the amount to be paid in dividends on preferred stock is fixed at a certain figure. Alter that amount has been paid other earnings must go to the common stock. What is common stock? That class of capital stock which is not preferred stock. What are dividends? Tin- profits lit' the business of a corporation divided among its stockholder-. What is "cumulative" stock? That class of stock, generally preferred, on which dividends accumulate perpetually, which charges, in the event of any postponement of payment, must be made up later, before profits can be paid on the common stock. '•Non- cumulative"* preferred stock does not accumulate this debt. Example: If an 8 per cent cumulative preferred stock does not earn enough to pay more than 4 per cent in a given year, the deficiency of 4 per cent must be made up later. Some corporations have owed as high as 10 or 50 per cent back dividends which had to be paid before the common stock could receive profits. Can shares of stock be transferred? y ( 5, u pon proper endorsement ; and a great business of selling stocks i- done on t he St< el. exchanges. How are dividends paid? The name of each person to whom stock i> issued is recorded on the books of the company. Such a record owner of stock is termed a shareholder or stockholder. Dividends are paid to the owner on record. It may be. and ol'li n docs happ< n. that dividends are paid to a record stockholder when some one else actualh has Hie certificate of slock in bis possession. This may be due to Hi. I.,.-, of Ik, certificate or to the sale of the stock after tin dividend is due but not paid. What are securities? Generalh speaking negotiable instruments or property making secure the eiijovniini or . nforceiih nt of certain rights. Under this definition comes note>, checks, stocks, bonds, mortgages. What are bonds? Bonds are a special form of contract under which an obligation is made. generallj to paj a certain nun of money under specified conditions. The most common form of bond is a promise to paj borrowed money under the ;rit\ of a mortgage upon certain property. 243 Willis WHAT IX BUSINESS. What are the different kinds of bonds? (1 ) Government. (In the United States, federal, municipal, state, county, school, water, council, etc. ) (8) Corporation bonds, which arc generally secured by a mortgage on the property of the corporation, under which the bondholders may fore- close upon default of payment of principal or interest to satisfy I heir claims. What are some of the classes of bonds? There are all sorts of bonds and the different classes are so mixed and complicated as to be bewildering. Some of the principal kinds arc: (1) First mortgage bonds, which have first lien on the property of the corporation in the event of default; (2) Second mortgage, which rank after first mortgage; (S) Collateral trust, which are secured generally by the deposit of stock of another corporation; (4) Income bonds, which simply are a sort of extra preferred stock, being entitled to interest or other payments if earned only after preceding bonds are satisfied; (5) Prior lien bonds, which as the name suggests are placed ahead in the matter of preference of some other definite issue; (6) Convertible bonds, generally a first mortgage bond which has the privilege of conversion into stock of the company at a certain price; (7) Underlying bonds, which are generally first mortgages against the property of a company which in turn, through being the property of an- other company, has its bonds guaranteed by the parent corporation; (8) De- bentures which are of various sorts below a first or second mortgage bond. Many other kinds of bonds have special titles because of some peculiar sort of security hack of them. What is the distinction between stocks and bonds? Stocks represenl ownership of the corporation; bonds represent a debt _ linst the company. Stockholders manage the company, vote to elect officers,' etc., and divide the earnings. Bondholders have lent the corporation money and have taken a mortgage against its property, which if not paid, or the interest thereon, will go to satisfy claims of the bondholders. What is interest? The value given in return for the use of other value, generally a stipulated percentage in money on money lent out. What is a mortgage? An instrument which provides for legal measures by which property may be sold to satisfy the contract under which the mortgage was given and which the property in question was to secure. WHAT'S WHAT IX BUSINESS. 2-t3 What is foreclosure? The process by which property under mortgage is seized and sold in order to raise funds to pay a contracted debt or forfeit. What forms are bonds issued in? Usually in amounts of $1,000 each, although they are sometimes issued as low as $100 or $500. What are registered bonds? Those whose interest is payable only to bondholders on record on the books of the corporation. What are coupon bonds? Those bonds which are made out with small tickets or coupons attached and whose interest is payable to the bearer who presents these coupons. From this has arisen the phrase "coupon cutting," suggesting riches by rea- son of clipping off the coupons to present for payment when due. These may be payable at a bank or at the office of the corporation. What security is back of government bonds? Often none, but the confidence of the people, for a state or the federal government cannot be sued. Several states have defaulted on bonds. In minor subdivisions, such as cities, school boards, etc., the credit of the issuing body is preserved by Limiting the amount of bonds to be issued under law accord- ing to the amount of taxes collected. What is a stock exchange? A market place when- investments are boughl and sold. In Vienna and Berlin Buch a market !s called a boerse; in Paris, St. Petersburg and numerous other foreign cities a bourse. How are investments bought and sold on the stock exchange? By the transfer of the certificates of stocks or bonds for a consideration from a stockholder or bondholder to a purchaser, who Hun becomes Hi. slock holder or bondholder. Only members of the slock exchanges, which are private corporations generally, have the right to do business mi the exchanges. Their business i- generally thai of agents to bin or sell investment certificates for customers. For this they charge ;i commission generally our eighth of one per ci nl for each I PS ns.ict ion. What is a broker? In this country a broker is anj one \\h<> transacts business for another for "brokerage" or commission; but generally speaking it pertains to mem- £4 i li //// 'S M //./ T IX BUSINESS. bers of boards of trade or stock exchanges, who do business on such boards or exchanges for the public. What is a board of trade? A board of trade is very much like a stock exchange; a private corpora tion of limited membership which constitutes a markcl place for the selling of inaiix commodities, generally produce, such as grain, hay, cotton, hog products, coffee, butter, eggs, etc. What is speculation? In its broadest sense speculation is the taking of any risk in business in the belief that embracing a certain opportunity will return good profits. A man who buys up a Large tract of timber land, believing that in a number of years lumber will he scarce and that he can cut his timber to a good advan- tage, is a speculator. The same i> true of a man who, knowing that a rail- way will come through a certain section of the country, buys up a tract of land in the belief that when the railway has been built it will enhance the value of the ground he has purchased. Generally, however, the public when it speaks of speculation refers to buying or selling of stocks or bonds or grain, provisions, etc.. in the hope that changes in prices will bring profit. In this kind of speculation the stock exchanges and boards of trade lend themselves mosl freely because of their highly organized machinery for trade. What are futures'? Futures are contracts of any description, but generally those on the board- and exchanges, which call for the sale or delivery of certain described property at a given time, place and price in the future. What are margins? Margins in the technical sense are deposits of money or securities of wealth which are part purchase money of a contract on an exchange or board transaction and which are guaranty of good faith in the transaction. Generally, though not always, a margin is from 5 to 10 per cent of the amount of the consideration in the contract. Property purchased on margin must be paid for by some one acting as broker or agent; in that case the differ, tie. between the amount of margin and the purchase or sale price is practically a mortgage on the property bought or sold. If the property changes in price enough to threaten the safety of the money the broker has advanced, he calls for further margins from the customer. In the event of default or refusal to pay. the broker completes the original transaction by WHAT'S WHAT IN BUSINESS. 245 selling or buying the property in order to reimburse himself. If there is any balance left in margins, that goes back to the customer, just the same as in the foreclosure of a mortgage. If there is a deficit the customer is legalh liable, though often it cannot be collected. How can a speculator sell something he does not own? Any person can make a contract to do a certain thing at a future time, such as to deliver steel rails to build a railroad, brick to build a house, coal to burn next winter, etc. So may one contract to deliver thousands of bushels of wheat next year. Warehouses are full of grain and the con- tractor for future delivery knows he can buy warehouse receipts for grain thus stored at any time by paying the current market price. Hence he may make a contract to deliver wheal, corn, oats, cotton, coffee, pig iron, steel, or stock or bonds, though he does not own any, for, provided he does not have the commodity he sells when the contract falls due, he can purchase the when withal to fulfill his contract in the open market at that time. Why are transactions of this sort made? Largely for speculation, but also largely to insure the contractor against loss. Example: If a fanner is raising a crop of wheat and he has reason to beHeve he will have a big crop (which ordinarily will bring low prices) and current prices for contracts due at the time when his crop can be harvest,, 1 are high, he wants io sell at a good advantage. Therefore he makes a contract for future delivery. If his crop matures he delivers the wheat and secures his price. If it fails, he has to buy from those who have wheat, enough to fulfil] his cont ract. What is a bull? In speculative terms a ••hull" is one who believes conditions in the market of an\ commodity or security warrant higher prices. If he is active in the market his efforts are to advance prices, so that later he may sell his holdings or contracts at a profit. What is a bear? A "bear" in a speculative sense is the term applied to a speculator who believes conditions warrant falling prices. Therefore he speculates to depress prices in order to secure profits by selling something he does not possess with the expectation of being able to buj in the ope,, market at low price, the com modi l v with which t.» till his future contrad wld at a higher level, What is a corner? I,, ., supposition ncr" i^ the state of a market when a speculative 246 WHAT'S WHAT IS BUSINESS. party has bought up contracts for delivery of the entire visible supply of a com- modity, or has all the actual supply of the commodity in its possession. Actu- ally there are few "corners" save in property thai is very limited in extent. The purpose of a "corner" in speculation is to acquire this control of certain property and create a demand in excess of this supply; then the price of the amount controlled can be raised to an arbitrary and even highly fictitious level, at which the speculators sell to the consumers. In creating such a condition speculators generally rely upon other speculators making contracts to deliver something they do not possess, and then force such a seller to settle his contract at high prices or he in default. "Corners" are the dread of exchanges and boards of trade and such a violent dislike to such speculative tactics has arisen that fre- quently such deals are taken to court rather than to submit to money bleeding. What is long? When a speculator is "long" of stocks or grains or the like he has made a purchasing contract and is the legal owner of such property. Generally this term is used to indicate purchases on marginal accounts and not property owned outright on which there is no obligation outstanding. What is short? To be "short*" of stocks or grain or other speculative property indicates that the speculator in question has made a contract to deliver the property at a cer- tain date when he does not possess such property. In other words he has sold something which he has not. What is covering? A speculator "covers" when he buys in the property with which he fulfills a "short" contract. What is liquidation? Liquidation is turning property into liquid or cash assets: the closing up of a business deal. When liquidation is said to be in process in a speculative mar- ket "longs" are selling out their property. "Realizing" is another term that means the same thing, though "realizing" generally suggests simply selling out something in which the speculator has made a good profit which he is willing to take, and "liquidation" suggests selling under necessity to prevent loss, or the like. What is stop loss? When a broker i-* transacting speculative business for a customer on mar- .1 account and margins are running out — that is the market price is going contrary to tin speculative contract and a loss seems imminent — more margins WHAT'S WHAT IX BUSINESS. o-il may be called for. If the further margins are not forthcoming, the broker is empowered to close out the contract in the market at the best advantage pos- sible. Generally such an order placed in the market is called a "stop'' order that is, it is intended to prevent any further loss. A "stop loss" order, how- ever, may be put in by the speculator himself to save himself against loss beyond a curtain point. A "stop" order even may be put in the market when there is a good profit in a transaction, so that if the price begins to go contrary to the deal all the profits will not be wiped out. In "stop" orders a specific price is named at which to "stop" the deal, but if the price continues to go against the deal before all the order is closed out the customer must stand the loss. In a bad market it is not uncommon to see price of a stock fall $10 a share when the stock is being sold on a "stop loss" order. What is a pool? A pool is an association of men or corporations, bound by some understand- ing or agreement, to act in concert in a business enterprise generally for tin Bake of profits, which usually are divided proportionately among them. In railway traffic a pool is a number of companies which may agree to maintain certain freight rates in a given territory, each road to share a certain amount of the returns. In iron and steel products there are pools which agree to main- tain prices at a given level; sometimes they agree as to the amount of tonnage each member of the pool is to receive. In speculation a poo] is made up of a number of speculators, banks perhaps included, which may buy, say, a given amount of stock of a corporation for the purpose of advancing the price. In manipulation or otherwise, and afterwards sell out and divide the profits. What is a syndicate? A syndicate in the speculative sense is a little different from a pool. Usually it Indicates great importance and magnitude. The term is most frequently used in connection with underwriting the securities of a company. The pur pose of Mich a syndicate or pool is to agree to underwrite the securities at :i given price and to sell them to the public. Such a syndicate usually gets .ill tin stocks or bonds of the corporation that are to be -old and in a ua\ is the company's official representative. What is underwriting? When a corporation needs to raise money it usually does so by selling stocks or bonds. Bankers and brokers who arc in the business of marketing securities • '■in sell these stocks or bonds to the besi advantage. Therefore the corporation agrees to turn over to a syndicate the securities t<> 1" Bold ;it a certain price. :is WHAT'S WHAT IX BUSINESS. This is called underwriting. The syndicate sometimes is made up of many members \\ lu> agree to turn over to the corporal ion certain amounts of cash for the stocks or bonds as called upon to do so by the corporation. Then the syndicate, which i^ managed by sonic big bond, stock or banking house, markets the securities and divides the profits, or it' the venture is unprofitable, divides the loss. What is an assessment? When a syndicate or company needs funds which it lias a right to call from members or stockholders, such a call for money is termed an assessment. What is a company reorganization? Frequently corporations find themselves in danger of bankruptcy because earnings arc not great enough to pay such expenses as interest on the bonded indebtedness, or the like. When this is the case there is usually some attempt at preventing bankruptcy. The first thing needed is money to place in the treasury of tin- company. If the prospects of the company would be improved enough more by advancing such cash to tempt financiers to supply the needed funds a reorganization of the company's finances is usually undertaken. Often this process includes inducing the capital stock of the company already exist- ing, or perhaps wiping it out altogether. Then certain securities may be issued to those men who will advance money to keep the corporation in working order. Such a reduction of stock or bonds usually is called "scaling down" and the money if raised by order of, say a majority of the stockholders, is found by ssing" the stock. What is a merger? A merger in the present-day sense of the word is the joining of two or more companies, or business concerns, to do business under one head. Usually this i> applied to the junction of corporations. What is a holding company? When government regulation declared against pools or agreements between certain concerns in the same industry working "in restraint of trade" 1 - -in short, ruled against trusts — corporation lawyers discovered a method of bringing these concerns together legally by incorporating a company which should buy up at least a majority of the stocks of the corporations which desired to work _ -her. This i-> called a holding corporation. Its business is to collect the profits from the earnings of the other corporations it owns through dividend payment- and to pay dividends from funds thus collected out to its own stock- holder-. The other companies are called "underlying" corporations. They are WHAT'S WHAT IN BUSINESS. 249 supposed to manage their own business, hut the managers of the holding com- pany really exert a great influence on this business, because, being in control, tliej can appoint managers to do their bidding. Legally an "underlying" company is separate from the holding company. What is a gentleman's agreement? A compact between railway managers or similar corporation chiefs not to cut rates or to carry on wasteful competition. What is a community of interest? The method of harmonizing competing interests, especially in railway bus- iness, whereby perhaps directors of several concerns will join the directory of our common company and through that company carry out agreements to prevent serious competition. The Union Pacific railway company has been a remark- able example of such an alliance; at one time Ilarriman, Rockefeller, Gould and Vanderbilt interests were represented on tins hoard. One method of carry- ing out practical communities of interests is an exchange of dividends, which makes all parties conserve the common interest of the community. What is a lamb? In the vernacular of speculators, a lamb is one who ventures to speculate for the first time or who is possessed of so little information that he is likely I" become victimized by unscrupulous men. A lamb is "sheared" when. he loses his money. What is kite-flying? Extending one's credit in business to a very dangerous point. This often suggests illegal measures, such a- issuing fictitious checks or the like. What is a blind pool? In speculative terms, this i- .1 pool, all the members of which are ignorant of its operations, except the pool manager. What are privileges? Options bough! or sold in speculative markets requiring or granting the privilege of accepting or delivering a certain commodity within h given period ,ii .1 stipulated price What is a put? A privilege to deliver on a cohtrad within a certain period at a given price. p OT instance: if a speculator has boughi a "put" tor 100 Bhares of United Staler St..l ,„■, f, rred at par good for thirl v days, he has an option to deliver these shares a1 $100 each any time' before the thirty days expire. It the price of Steel preferred falls to 95 while he has such a privilege he can WIIATS WHAT IN BUSINESS. make the profit between these prices. Often one who has cither an invest men! or a speculation on the buying side of the stock market will buy "puts 1 ' at a nominal expense in order to protect himself against a falling in prices. The seller of a "put" on a stock or other speculative commodity evidently be- lieves in the value of the commodity at the price at which it may be "put" to him. What is a call? A call is almost the reverse of a put. That is, the buyer of a call has the privilege of calling upon the seller to deliver the commodity stipulated within the given time and at the price agreed upon. In this case, if the market price has advanced, the holder of a call is privileged to demand delivery of the com- moditv ai the lower price and of course he could sell it at once at a profit in the open market. What is a spread? This sort of privilege is an option by which the holder either can call in the stocks, grain or the like at one figure or put it out at another. All these forms of contracts mentioned as privileges are virtual bets on the market price, but they also serve as a sort of insurance against losses in heavy obligations by the man who is in the market all the time. The seller of privileges makes, his profits when the market fails to move against the privileges he has put out. What is a capitalist? In the narrowest sense, a capitalist is one who deals in cash or investments of a character that suggests the man has retired from business. More broadly speaking, he is the one who furnishes the means — such as working capital, tools, fixed capita] or machinery, etc. — which when used by labor produces any wealth. What is labor? This term in its narrowest sense means the output of physical effort to pro- duce something. In a broader sense, however, labor is the expenditure of any sort of energy to produce something. This may be physical or mental or both. In present day discussion of labor and capital there is frequent reference to the managing director. This is the representative generally of the capitalist who has his money invested in an enterprise. He also is a laborer in the sense that he is the active head or leading executive who guides the workmen in their efforts for production. Often the managing director is interested financially in the business. He may even be the capitalist and head workman combined. WHAT'S WHAT IX BUSINESS. 251 What is manipulation? Generally this is a speculative term meaning artificially changing the prices of stocks, grains or other commodities for the purpose of attracting other speculators to speculate on what appears to be developing in the market, hut which generally is otherwise. Methods of manipulation are various. A "rigged" market suggests manipulation so flagrant that any one can readily discern it. '"Washed sales" are fictitious sales made between the principal .and his broker, or brokers, for the purpose of establishing a false but official price. A "matched order" is a similar device of manipulation where an order to buy a certain commodity is put in at the same time that an order is put in to sell by tin same person. What is a bucket-shop? A bucket-shop is an establishment got up to imitate a reputable broker's office. All the devices and machinery of regular investment or speculation seem to be present, but in reality the bucket-shop is got up solely to gamble with. The keeper of the place almost never is a member of the established exchanges. The salient feature of bucket-shop methods is that when an order is put in such a place to buy or to sell something the order is never executed. If the trade is profitable for the customer the bucket-shop itself pays the loss until the loss becomes large; then the concern goes into bankruptcy. If, on the other hand, the imitation market transaction is a losing one for the cus Joiner of such a dive, the bucket-shop keeper rakes in the profits. One of the features which attracts people to these gambling places Is the fad thai this so-called "speculation" can hi' done in very small amounts. Hut this feature is one which reaps golden harvests for the crook. For small deposits of cash mean small margins. If small margins are put up they will he the more readily wiped out by the most trifling fluctuation in prices. Winn there is in active advancing market in stocks many ignorant or innocent people flock In these bucket shops. Oddly enough, it is in such a time that manv hucket shops fail, for the reason that the public always prefers to buy rather than to Bell in Speculation, and if the public strikes the bull movements in the market cor reetlv the bucket shop must suspend to save itself. What is a partnership? That relation resulting from an agrcemenl between two or more competenl p< rsons to join forces of capital, ability, or labor, or all. m some enterprise and to divide the profits. This is the same thing as ; i copartnership. Sometimes the partners are referred to as the "linn" or the "hou 25S WHAT'S WHAT L\ BUSINESS. What is b limited partnership? \ special sorl of agreement under special laws of certain states whereby, for reason of the investment of a less sum than general partners, the special <>r limited partner is liable only for a stipulated amount of debts; whereas in a genera] partnership each member of the firm is liable for all the debts. What are the liabilities of a corporation? Under the common law the members of a private corporation were not liable for corporate debts or obligations. In case of bankruptcy they would lose all their investment in the stock. This holds generally true now, save where special charters are granted which make stockholders individually liable for all debts of the corporation. Usually, however, the stockholder is liable simply for an amount equal to his stock. This particularly is true of national banks, where if a stockholder owns $1,000 worth of stock and the bank fails, the stock- holder is liable to the extent of another $1,000. What is the curb? This is a term used to indicate a place where speculative trading is done other than on a regular exchange or board of trade. Apparently the term arose through the making of transactions on the street curb near the exchange. In New York the curb market is actually in the middle of Broad Street, where, rain or shine, brokers fill orders without cover. In Chicago the curb is any place off the exchanges where bona fide transactions are made. What were the first banks? The first banking institution of modern times was the Bank of Venice, organized in 11 57* and made up of a number of wealthy men of Venice who for lending money to the government were allowed to do a banking business. It went out of business in 1808. The Bank of Amsterdam was a model for many modern hanks: it was established in 1609 and failed in 1790. The great Bank of England, the greatest in the world, was established in 1694. It grew out of the necessities of the English government to raise £1,200,000. By fur- nishing this sum the incorporators were allowed to issue notes. The Bank of France was organized in 1800. The Imperial Bank of Germany was estab- lished in 187-"), but it had done business as the Bank of Prussia as early as 1765. The first savings bank was established by the Reverend Henry Duncan at Rothwell, Scotland, as the Savings and Friendly Society. The Bank of North America was established Dec. 31, 1781, by the Continental Congress, and the several states were forbidden to establish a rival during the Revolu- tionary War. Tin first bank of the United States was incorporated at Phila- WHAT'S WHAT IX BUSINESS. 25J3 delphia in 1791 and it was the cause of a great deal of financial and political discord. Application for a renewal of its charter in 1811, in spite of its good services to the government, was refused. The second bank of the United States was organized in 1817 for the principal purpose of aiding the government in raising money without charge. This bank was finally put out of business by 1 'resident Jackson's vetoing its extension of charter, and the stockholders lost |28,000,000 by its expiration. THE LABGEST AND BEST APPOINTED RETAIL STORE IN THE WORLD All three buildings In the photograph are th< ill Pl«U ■ igo. The magnitude of the buildings, the volume of 1 iui'iitl> .hi idea of thi >f < mploj e i equlred to ' rom the i.i. i thai the n entire ell y block on 6 treet, hall a block on Randolph street and thi mount ol space on li :i venue. BARON ROTHSCHILD, LORD NATHAN ROTHSCHILD, i the leading financiers of the world and Head of the English ^branch of^the famous of the banking firm of N. M. Rothschild & Sons. Rothschild banking firm. CLAUS SPEECKLES. Multi-millionaire Sugar Refiner. HENRY O. HAVEMEYER, Of American Sugar Refining Co. fame. CHAPTER XX THE SENATE OF AMERICAN FINANCE. The Directory of Directors— Extreme Concentration of Corporate Organiza- tions—Ninety Men Control the Purse Strings of the Country — Fifty-seven Members of the Money Senate — Abuses in the Directory System. Wi. have already seen how twenty-three men in the National City Bank board of directors represent interests that control about one-tenth of the wealth of all the United States. We have seen how Standard Oil influences have domi- nated billions, and how the interlacing of the powers hack of the greal insur- ance and railway organizations, while competing with each other, arc friendly enough to mass together for common interest and protection when the need arises. It still remains, however, to link all these main influences of finance, commerce and industry which commonly are termed trusts into one big family in order to show to uh.it position the tendency of extreme concentration has brought the wealth of the United States. In the principal financial centers of the country one can find a volume called the "Directory of Directors." That of New York City is the largesl because the greatest financial interests of the country center there. In this hook will he found a list of all the men who occupy positions upon the hoard of directors of any corporation in that cit\. A short perusal of this volume will show some marvelous things, among others that there is a business oligarch j as definite and powerful as any political machine that ever ruled modern affairs or any old world royalisl regime that crowned a puppel king. One competent authority likens this modern body of representatives of the people's wealth to the highest representative body in American politics and dubs it "the senate of American finance." Ami in speaking <>l the power of this clique or husim 98 oligarchy the Wall Street Journal has said, "It would nol be too much to Bai that they an- more powerful 1 1 1 .- 1 n the ninety men who constitute the senate of the United State., for thej who control the purse-strings of the country its productive and distributive energies control the country." Now for a few detailed facts. If we run through th< "Directory of '.'.V, THE SENATE OF AMERICAN FINANCE. Directors of V\\ York" we learn thai it is common custom for one man to serve in many corporations in the capacity of director thai is, to be 1 1 k- active managing overseer and careful judge of the investors of the country who put their savings in the securities of these corporations. If we watch closely enough «i' find that in hundreds of cases the names of the directors arc those of clerks in the office of some trust company which does business for the corporation in question, or of those in the office of one of the big money or industrial kings. Such are "dummies," paid to direct at the dictation of the masters, to vote on great and momentous questions at command and to run at the heck and call of those in control. It is not of these that "the senate of American finance" is made up. If we examine a little further we find names that recur again and again in most of the big companies of the country, names that to the ear are familiar. We see by comparisons that these are they whose hired servants act as "dum- mies." If we compute the Dumber of places on the board of directors of each of the principal corporations of power in finance, commerce and industry — concerns that hold one-fifth of the wealth of the country in their power — we find the total to fall short of 1,500. Now, it does not follow that all these places arc tilled by separate men. That is decidedly what does not happen in this age of concentrated power. On the contrary, about 1,000 men are the representatives of the ninety-two principal corporations and partnerships hanking houses, hanks, trust companies, life insurance companies, railways and industrial and miscellaneous concerns — which we have under examination. Nearly one-third of these directorships — 4-10 in number, to be exact — are filled by 72 nun. Not one of these men holds a place on less than two boards of directors and many of them hold 10 to 25 positions, testifying to their widespread influence. Let us sec what interests these seventy-two men dominate. Among financial houses and companies they wield almost entire control of: .1. I'. Morgan & Company, j Who are hankers extraordinary to Kuhn. Lo.h .V Company, \ the Money Trust, Railway Trust, Speyer & Company, ) Life Insurance Trust, etc. Mutual Life Insurance Company, of New York, Equitable Life Assurance Society, \. v, York Life Insurance Company, Metropolitan Life Insurance Company, Prudential Insurance Company of America, Provident Life and Trust Company, "Big Six," or Life Insurance Trust. THE SENATE OF AMERICAN FINANCE. 257 National City Bank, New York, First National Bank, New York, National Bank of Commerce, New York, National Park Bank, New York. American Exchange National Bank, New York, Hanover National Bank, New York, Chase National Bank, New York, Corn Exchange Bank, New York, Chemical National Bank, New York, Fourth National Bank, New York, Citizens Central National Bank, New York, Seaboard National Bank, New Y^ork, Manhattan Company, New York, Bank of New York, First National Bank, Chicago, Continental National Bank, Chicago, Commercial National Bank, Chicago, National Shawmnt Bank, Boston, Philadelphia National Bank, Fourth Street National Bank, Philadelphia, Third National Bank, St. Louis, United States Trust Company, N<\\ York, Union Trust Company, New York, New York Security and Trust Company, Morion Trust Company, New York, Guaranty Trust Company, New York, Farmers' Loan and Trust Company, New York, Central Trust Company, New York, Mercantile Trust Company, New York, Illinois Trust and Savings Bank, Chicago, old Colony Trust Company, New York, Union Trust Company, Pittsburg, Industrial Trust Company, Providence, R. [., I The Money Trust of America. Consolidated Gas Company, New York, J Brooklyn Rapid Transit C pany, New York publi< [nterborough Rapid Transit Company, ' ut Hit ies t rust. »58 THE SENATE OF AMERICAN FINANCE. > The Railway Trust. Pennsylvania Railway, \, w York Central, The Erie, Delaware, Lackawanna & Western, Lehigh Vallej . Delaware & Hudson, Baltimore & Ohio, The Reading Company, Chesapeake & Ohio, Louisville & Nashville, Atlantic- Coast Line, Northern Pacific-, Union Pacific, Missouri Pacific, Great Northern, Atchison, Topeka & Santa Fc, Chicago, .Milwaukee & St. Paul, Illinois Central, vVabash, Southern Pacific, J Armour & Co., Nelson Morris & Company, National Packing Company, Swift & Company, United States Steel Corporation, Standard Oil Company, American Sugar Refining Company, American Telephone and Telegraph Company, American Tobacco Company, Central Leather Company, International Mercantile Marine, International Paper Company, International Harvester Company, General Chemical Company, Pullman Company, National Biscuit Company, Associated Merchants Company, American Smelting and Refining Company, Following are the names of the members of this "senate of American finance": James \Y. Alexander, John Jacob Astor, Oliver Ames, Geo- F - Baker, J. Ogden Armour, August Belmont, Great industrial trusts of America. J THE SENATE OF AMERICAN FINANCE. 259 E. J. Berwind, Cornelius X. Bliss, A. X. Brady, A. J. Cassatt, John Claflin, Duinont Clarke, T. Jefferson Coolidge, F. Cromwell, Chauncey M. Depew, J. F. Dryden, Marshall Field. Louis Fitzgerald, II. C. Frick, Geo. J. Gould, F. II. Gary C. A. Griscom, James J. Hill, E. II. Harriman, Edwin Hawley, H. L. Higginson, J. H. Hyde, H. (). Havemeyer, G. G. Haven," E. C. Hoyt, Adrien Iselin, Jr., A. I). Juilliard J. \. Jarvie, John S. Kennedy, Charles Lanier, J. A. McCall, R. A. McCurdy, I). (). Mills. \V. H. Moore, Levi P. Morton, J. Pierpont Morgan, E. B. Morris, John J. Mitchell, W. G. Oaknian. A. E. Orr, Daniel O'Day, Geo. W. Perkins, M. Taylor Pyne, C. A. Peabody, C. M. Prevost, John 1). Rockefeller, Win. Rockefeller, H. H. Rogers, Thos. F. Ryan, Norman B. Ream, Samuel Rea, S. R. Shipley, James Speyer, E. T. Stotcshury, J. H. Schiff, Samuel Spencer, Charles Steele, James Stillmaii. Samuel Sloan. 1.. F. Swift, II. McK. Twombly, W. K. Vanderbilt, F. \Y. Vanderbilt, P. A. Valentine, .John I. Waterbury, W. S. Webb, Henrv Walters. Even this hiisim ss oligarchy can be reduced in number by eliminating some of the names which represent important interests and still the domination "l American industry would he practically as <• plete, for these great interests till would he largely controlled by those remaining. If "<• "mil some of the actual heads of the Beef Trust and other western magnates we can reduce the number from Beventy two to fifty Beven. And even in the list of fifty-seven directors representing nearly 1. •"><><) directorships, eleven men erv< 568 times as directors, or on an average of over fifty each. The preceding list brought down to the more exclusive hod v of fift\ Beven members of the "senate," with THE SENATE OF AMERICAN FINANCE. tlu- lowest representation numbering >i\. the highest seventy four, and the aver- directorships filled by each aboul twenty five, is shown in detail, with the number of positions filled as follows: .lam. - \\ . Alexander 1 8 John Jacob Astor 16 1 1. orge F. Baker t2 August Belmont 25 E. J. Berwind 26 Cornelius N. Bliss A. V Brady 17 John Claflin 16 Dumont Clarke 24 1'. Cromwell 17 Chauncey M. Depew 74 J. 1\ Dryden 10 Adrian [selin, Jr 27 II. II. Rogers -25 Thomas F. Ryan 27 .!. II. Schiff. 17 Samuel Sloan 31 Samuel Spencer 2-1 James Speyer 17 Charles Steele 32 James Stillman 55 E. T. Stotesbury 31 II. MeK. Twombly Hj \Y. K. Vanderbilt. 56 F. \Y. Vanderbilt ft .John I. Waterbury 16 \Y. S. Webb ' 19 Henry Walters 15 .J. S. Kennedy 1-1 Louis Fitzgerald 7 George J. Gould 52 E. II. Gary 41 ('. A. Griscom l(j James J. Hill 12 E. II. Harriman 1!) Edwin I law ley 26 James 1 1. I [yde 47 Havemeyer 13 Haven. 29 Hoyf 6 daivie 12 Charles Lanier 18 John A. McCall 11 R. A. MeCurdy 15 D. O. Mills. . .' 33 W. H. Moore 11 Levi P. Morton 10 J. Pierpont Morgan. 39 W. G. Oakman 27 A. E. Orr 29 Daniel O'Day 24 George W. Perkins 11 11. (). G. G. E. L. J. \. c. M. A. Peabody . . Taylor Pyne. 19 25 Norman B. Ream 30 John 1). Rockefeller 8 Willi Rockefeller 31 Without #oino; into a long discussion of the merits of such a business sys- tem as permits this concentration of Imsiness trusteeships in the hands of such a -mall number of men, especially in this day of stock market manipulation, it may be -aid that the question has been asked more than once whether it is right that temptation- of this sort he placid before men. To be sure, gener- ally speaking, the name- here mentioned are considered of the highest in the land. Hut the authority quoted previously ask- pertinently, "Does this exhibit mean anything? It may be taken for granted that every one of these men i- amply qualified by his wealth, his business training and administrative abil- THE SENATE OF AMERICAN FINANCE. 261 itics to serve as director. Their names are a tower of strength to any cor- poration, a fine advertisement to it. These men do not belong to the class of 'dummy' directors in the sense of being mere pawns for the real owners of the properties, mere machines responding to the call of an electric button. They are great capitalists, masters in the financial world. But is it right that there should be eleven men serving 553 times as directors, and fifty-seven whose aggregate' directorships are 1,460? Is it possible that any one man can direct, really direct, twenty-five to fifty corporations situated in different parts of the country and engaged in different kinds of business? Can he ever in any true sense serve as advisor for so many different institutions? "James J. Hill recently refused to serve on the committee to investigate the Equitable, stating that he was too busy. A reference to the foregoing- table shows that .Mr. Hill is a director in only twelve companies, a modest employment for a man of his prominence. Yet E. H. Harriman, who is a director in forty-nine different companies, did not hesitate to accept a place on this committee, and would no doubt have taken upon himself the respon- sibility of acting as its chairman if he had been asked. Mr. Harriman has the time to serve as director of about thirty railway companies, four or five electric traction companies, ;i half dozen steamship companies as well as o\' banks and trust, insurance and telegraph companies. He has interests in nearly every state of the union, and is credited with haying such power over the politics of \eu York as to be able to dictate the re-election of Senator Depew. Yet he finds time to reform the Equitable! Mr. Depew has so much time left on his hands after looking after the seventy four corporations of which In' is director that he is able to represent the slate of New York in the senate. "There i> evidently something wrong in this stale of things. It is a per- version of the director system. II is liable lo grave abuses, II is a convenient method of concentrating power, but il must result in directorships being used, P. a dangerous extent, fo] personal gain, instead of being a trust for others. It is absurd to saj that an\ man. however great his ability, can in anj true sense serve ae a director in a many as fifty corporations. This is one of those developments of the past twentj five years which by revolutionizing the condi tioiis under which great business is conducted have produced mu problems | () b, wived." t* HI ■" T3 « 1 C C _ •« -o «i >J o *•* „ (D C rt c I- !>0 '5 u ', SSS 2 rt ° « .£ c (_ £ > 3 d ,«> CHAPTER XXI THE BIRTH OF THE TRUST. Horc Great Combinations of Capital Have Multiplied — The Harvest Time of the Promoter and the Manipulator — Dummy Directors and Trust Nur- series — The Nation Becoming Aroused to the Facts. While the Standard Oil Company was organized in 1885 and the American Sugar Refining Company in 1887, thus marking the beginning of the trust movement which has made this age epochal in the history of the world, and the great impetus to industrial combination was given then, the Trust Period may be dated from 1898. In fact, in the three years between that date and the close of 1900 one hundred and forty-nine large industrial combinations were formed, having a capitalization of over $3,000,000,000. Since that time the capitalization of trusts has been doubled by new combinations. Presumably the movement would have begun to take on its destined form earlier had it not been for the panic and hard times following upon the failure of the great English banking house of Baring Brothers in 1890, which left results that were felt for several years. It was not until after the revival of business, which began with 1897, when the free silver scare had died out and President McKinley had taken office, that shrewd business men began to take advantage of lessons they had learned from some of the earlier industrial com- binations. By 1898 business was in good shape.' The investor who had been frightened away from stock markets came out again looking for bargains. Railways increased their earnings remarkably and the demand for securities to share in abundant dividends attracted general attention. The time was ripe for new projects and the promoter seeing opportunities to merge many sepa rate businesses or manufactories of one trade into a single large corporation set to work with a will to gain profits through the establishment of* numerous monopolies. There had been a cause for this, however, aside from the attraction that profits had for such geniuses of promotion as J. P. Morgan, \Y. H. Moore, and others. For one thing, captains of industry desired an end to costly competition. This had been shown in the < volution of trade methods before the greal trust period sel in. In the iron .and steel industry, where the S63 264 THE BIRTH OF THE TRUST. greatest number of minor trusts had been organized, there had been great warfare. This industry naturally grouped itself about Localities where good transportation, proximity to coal fields and ore districts and kindred natural advantages permitted of economical production. Certain companies ruled VIEW OF ONE OF CHICAGO'S NEWEST AND HANDSOMEST PLAYHOUSES. This is one of two theaters in Chicago belonging to the so-called theatrical trust, it has been shown in the evidence given in a suit al law brought against the trust, that the combination controls sixty-five first-class theaters in every pari of the country. As far as is known upon face it is claimed that the trust, through its monopoly of the theaters of most of the principal cities, has been able to prevent great dramatic stars, who are not under its management, from appearing in first-class houses, without extortion, etc. given territories and were jealous of that influence. Distance from market checked severe competition to a certain degree, but some of the great coin- panics were so well located that frequently they were able to compete within THE BIRTH OF THE THE ST. 265 the territory of other concerns. In order to get business it happened some- times that a great concession in prices was made. For instance, in 1899, prior to the organization of the United States Steel Corporation, steel billets which were quoted at $34 a ton actually sold at $16, and steel rails, nominally quoted at $32, were sold at $16. Not only in this line of industry but in many others there was competi- tion which was good for neither producer nor consumer. Wide fluctuation in prices of any commodity upset calculations. "Competition might be con- sidered the life of trade, but at the close of the last industrial depression it was regarded as the death of profits," says Professor Meade. "It was highly desirable from the manufacturer's point of view to stop, or at least to abate, this struggle, which benefited nobody save the consumer, and which even in his case, in the field of production goods, had to be straightway passed on to his customers. The producers were tired of working for the public. They desired a larger profit without such an effort to gel it. and they wished to have that profit available for distribution and not locked up in plant and equipment." One of the logical methods of regulating competition before the advent of the trust had been the formation of pools, or voluntary associations of pro- ducers to secure profitable prices by means of limiting supply through restrict ing output and by maintaining prices to the consume]- withoul competitive concessions. These pools, while contrary to law, exist today in main Indus trie-,. Before the Trust Period, and even today, the essential weakness of the pool lies in the inability to enforce agreements. As has been staled, the pool is a voluntary association and from this organization numbers , ( | any time could withdraw. In times of prosperity some members selfishly desired more than their allotted share of business and profits, and they frequently broke contract-. In times <>f depression self-preservation prompted similar tactics. When pooling agreements were found to be unsatisfactory the trust movemeni was well under way. 0n< kind of trust consisted of an agreement to deposit the stock- of cer tain companies in trust in exchange lor trust certificates which entitled the holders to .-i division of profits through dividends. The trustee-, thus managed thi- various companies and through permanent centralization and Belf-sceking rather than compel it Ion were able to restrict trade belter than had been the undei pool agreements. The fact that in 1890 Congress passed the Sherman AnliTriisI I.au which declared 'hat "ever} Contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or com 266 THE BIRTH OF THE TRUST. merce among the several states, or with foreign nations, is hereby declared to be illegal," and that a populai outburst developed against trusts, did not retard the trust movement. In 1892 the Standard Oil trust rode around the law and inaugurated the principle of community of interest. New Jersey was the instrument used. In 1889 through the efforts of the lather of the trusts. James B. Dill, the corporation law of that state was changed so as to permit a corporation organizing for the general purpose of owning stock or prop- erty of other corporations. Here was the solution. If a combination were desired so as to gain the necessary monopoly to regulate prices it was simply a matter of forming a holding company to acquire the stocks of other corporations. It was an easy matter to accomplish this, for the law required only a small fee and annual tax ; the maintenance of a "principal" office in the state with a conspicuous sign indicating the local of such office, a legal representative and stock trans- fer books: an annual report to be made to the secretary of state; annual meet- ings to be held inside the state, and one diretcor a state resident. Aside from thus giving impetus to the trust movement, officials of the state aided in the formation of numerous trusts and even founded a trust company to act as trustee and legal representative and to drum up business in trust formation until New Jersey became known as the home of the trusts. Indeed so bent upon making money by this method were the state and its officials that they carried the thing to farcical extremes. One trust company in Camden displays on a small sign board at its entrance the names of some 800 corporations, indicating that this is the "principal place of business'' of these concerns, most of which are doing business in other states. An employe of tins trust company acts as the New Jersey "dummy" director of hundreds of these corporations. Watered Stock: The Promoter's Fee. Wh.ii it became apparent to many business men that in combination there was a great economy to be effected, especially if the combination could bring about anything like the monopoly desired to make the trust the regulator of prices in the market for its given commodity, there was a number of per- - who arose to take advantage of these conditions and to do the active work of forming the trusts. These were the financial middle men or promoters, and generally -peaking, their fees for establishing the trusts which now dominate business America, was "watered" stock, which also was paid for by the "dear public." It would b< beside the facts to say that the promoter even of the trust does THE BIRTH OF THE TRUST. 267 not perform a good and specific service for the community at large, lint let us see what this service is and try to determine whether it was overpaid. We have seen that in any period of very serious competition there is a tendency for wide fluctuations in prices of any commodity. This is bad for business. A man would rather be sure he could earn a moderate and steady profit than a great profit one year and none the next. Therefore we know that it was the desire of the great commercial concerns to avoid this excessive competition and to do it by consolidation. But aside from the combination, which was es pected to control such a great percentage of business in a given line that there would be no serious price cutting and loss through competition, rather there would be the power to force high prices on the public, there were other sa\ ings. A great organization could buy its raw materials in the lowest market. It could force great concessions from the railways in the matter of rebates, prompt deliveries or kindred favors. Consumers who were inclined to drive hard bargains successfully under competition or who were in a great hurry to have their orders filled, could be held in line without fear of losing their trade. Pressure could be brought to bear upon retailers by manufacturers not to cut prices. And finally, though the great growth of copartnerships and com paniefl before the Trust Period had been accompanied by the growth of great labor unions, the trusts found greater power in fighting the laborer's de mand for shorter hours or higher pay through combinations than otherwise. With all these advantages of cooperation among manufacturers at the dawn of the Trusi Period there were numerous eases where consolidation was greatly desired by competitive interests, which could not lie gratified l>\ tin- formation of a trusi for several years just because the promoter could not attend to the business a1 the time. This suggests that the promotion of trusts wa- a difficult task, and so it was. In some cases, of course, where several big concerns were to be broughl together, the owners of each individual plant had high ideas about the value of their property. Souk times they were the strongest men of the trade and were not particularly desirous of combining, while many smaller men wished to see the combination broughl about. Here was a hard task for the promoter, for without tin biggesl men in the com lnn.it i r > 1 1 the trust would not approach a monopoly of the incjustry and would fail of the desired results. There ton one thing Deeded bv tin promoter was a greal dial of tact in order to gel all sides interested enough in the work of combining to agree to anj terms at all. Hut let us suppose that the pro nioter has arranged something of an agreement with most of the competitors, what is the nexl thing? !68 THE BIRTH OF THE TRUST. Of course the price or inventory of the plants is all important, hut also the maimer in which the price is to be paid. It docs not matter quite so much it' the biggesl man demands more in proportion than is due him for his plants, for this can he offset perhaps by threatening to leave some small con- cern out of the fold and thus forcing him to come in at a price low enough to balance. Hut with the completion of this delicate work which the promoter must perform, that of providing the money to carry the trust to completion is perhaps more arduous. In the first place, the promoter generally has banking associations which will advance money on a good proposition. This, perhaps, the individual members of the proposed trust could not secure unaided. Then BIED'S-EYE VIEW OF A GBEAT PENNSYLVANIA STEEL MILL. there is a great deal of figuring to he done to ascertain whether stocks and bonds of the trust can he marketed to the speculative and investing public on terms enough good to carry the deal through. Next, the merging interests must he coaxed into taking some of these stocks and bonds in payment for their plants, for if the men who are forming the trust themselves do not think well enough of the trust to invest in its securities, the public surely will be skeptical. After these plans are roughly sketched out the promoter finds himself in this position: He has options by which he can purchase all the plants in a THE BIRTH OF THE TRUST. 269 given industry at a certain figure; he has interested certain bankers or an underwriting syndicate to assist him in finding a market for stocks and bonds, and he has secured agreements from the plant owners to take part payment for their share in the trust in securities. Before this he has figured out just what he is to pay, but let us see how he pays and where the money comes from. In the first place the plant owners have not consented to come into the scheme except at a satisfactory price, which, of course, means a high price. The plants now may be running on a profit of 10 per cent to their owners; but the prospect of controlling the market, of saving money through absence of competition and holding the market price level, to say nothing of the other power gained by bigness, suggests that this profit can be raised to 20 per cent. Therefore the promoter figures the 20 per cent income as the fair basis for capitalizing his trust. If the companies or plants which separately earned 10 per cent were valued at $5,000,000, the trust would hi' considered worth at least twice that amount. The difference of $5,000,000 does not repre- sent value invested, save in the fact that combination is of value. When actual cash lias not been paid in for the stock of a company at 100 cents on the dol- lar, or at par, it is said the stock is "•watered."' In this case the ••water" in the stock is $5,000,000. Now. the way the plants are paid for are several, but a typical case would be for the promoter to organize the new trust with a certain amount of bonds, some preferred stock and some common stock. Bonds must be stricth limited, especially in a manufacturing company where profits are big one year and small another, for interest must he paid regularly on bonds, whereas profits can be divided <>n slock as they are earned, and of coins, are not divided if not earned. Some trusts formed did not put out bonds at all. and in thit case there was no debt againsl the company to cause prospective inves tors to doubt the value of the stocks. In some cases, however, the men who -old out their plants, as Carnegie did to the United States Steel corporation, were in a position to insist upon getting bonds, which constituted a mortgage on the trust. If it was not bonds, the plant owners ,il [east insisted upon pre ferred stock, where they had first show at the dividends, generally the dividends were made accumulative so that those that were not paid one year would be paid up another and thus insure the old owners seemingh at least ; ,s good in vestments as they had had in their own businee The method of Capitalizing the trust was Usually on the basis of actual value of the plants for the preferred stock. That is. if $5,000,000 worth of plants were being merged into a trust the preferred capital would be at hat 870 THE HI Rill OF THE TRUST. tins amount It might be the men combining drove a hard bargain and wanted a greai deal in cash for their plants, in which eveni some bonds might be [nit out or the preferred stock increased. Then, as we have seen the monopoly value of the trust and the force of the combination would promise doubled earnings, something like $5,000,000 of common stock would he issued. From this several persons must get their shares of the profits of consolidation. Generally the plant owners want something besides the face value of their plants. So they get a homis of a few shares of common stock. But it is presumed that the new concern will have to have a greatly increased cash sur- plus, perhaps improved plants, to do business as the trust, and for the time new working capital is necessary. The promoter must see to this and in that case the capital stock must he increased. Then the promoter himself must get his pay and it is big according to the size of the project. So the stock must be increased still more above the face value of the original plants. By this time the trust's capital may have swollen to $15,000,000. There is something of a good reason, possibly, for this. The organizers know that the public will not pay full price for the stock until the company lining on its new capitalization, hence the promoter figures on selling the common stock at about 50 per cent of its par value. And even here he has to call in the underwriting syndicate to advance money and take the stocks of the trust in payment. The underwriters generally want not only profits but i commission besides for selling the stocks later to the public. All this shows that while there may be economy in the great combinations, it is so great an undertaking to bring the competing interests together into a trust, that big compensation is demanded and given to the men who merger the companies. All this would be well enough, perhaps, if the earnings of the trusts as estimated for the basis of capitalization would pan out up to promises. The public, knowing little of the real financial conditions of the great combinations, believes dividends started in order to make the stock look attractive are to i ndure for all time. But the promoter has judged of the effect dividends would have on the investing public and insists upon the payment of them when earnings should have gone to pile up needed capital with which to operate the company or to accumulate a surplus for future needs. This draws the investor speculative stocks and when, because of the enormous amount of fictitious pital in tin trusts and because of the decline in business that comes period- ically, earnings fall to the point where dividends cannot be paid, the innocent •md ignorant investors are the losers of their invested capital to a great degree. It i> the sin of "watered" stock, that has brought out perhaps one of the atest complaints from the public at Large against the trusts. CHAPTER XXII "GOLD BRICKS"— FRAUD UNDER THE GUISE OF SPECULATION. lii'iico Games in the World of Finance — Traps Baited with Promises of Big Dividends — Typical "Get-Rich-Quick" Schemes — Fake Banks and Fake Credit Agencies and References — The Work of the Bucket Shop — The Rule for Safety. It WOUXD seem that nearly over} 7 bunco game conceivable had been exposed long ago and that people having money to invesi could have Learned the les- sons taught by the experience of those who have bought "gold bricks." But everv day turns up some new scheme by which the man with a few dollars is relieved of his property with speed and deftness. The device perhaps most in use today to part a man from his hard-earned savings is that which mas- querades under the guise of speculation. The man who has laid by a few dollars after years of hard work desires to "make his money work." Undoubt- edly this is wise. The principal basis of modern business is credit and those who have accumulated capital always should be able to make that capital earn them an income. But the investor who knows little or nothing of the wuvs of investment hears the tales of how the kings of finance have made fabulous fortunes in a f< u years <>r even months through some great specula tive venture and they would emulate their examples. Such a prospective investor i- ripe fruit for the plucking by the first unprincipled knave thai comes along. The first thing that is offered the guileless possessor of money is a big ilivi dend. Bright and gilded prospectuses of some far away gold, silver or cop per mine, oil well, rubber, sugar, or pineapple plantation or what-not are gent to people who are known to have a little money to invest. These pros pectuses always promise "safe investment" and the "largest possible dividends." Some of them go so far as to "guarantee" dividends on stock which at best is "watered" several hundred fold. Beside using the mails to send out tin-. pamphlets to tin unsuspecting public, the robbers who represent themselves to be iii.iii.ium~ of legitimate business corporations often advertise at great length in the newspapers of the country in order to catch the eye of their victim. The dividends promised are almost always so enormous that the most ignorant 271 /"/,' WD UNDER GUISE OF SPECULATION. person should have his suspicions aroused. Ten per cent is generally the Kast promised and mosl frequently the immediate prospeci held out is for to SO per mil or more within a few years." We quote from one typical advertisement of one of these "gel rich-quick" scheme advertisements: "The certificates can lu- purchased for cash or on the installment plan to suit the subscriber. Dividends will he begun at once and will increase rapidly each year until an annual payment of l M) per cent or more is paid. If //our earn- ings are small it is all the more reason why you should invest them where the greatest possible dividends will be earned." Now. it happens frequently that just such concerns which peddle stock to ignorant investors on the installment plan are legally organized and upon investigation can prove that the stock with which they are swindling the public really does own some property somewhere, which will be improved or cultivated or made to earn profits for the stockholders. But these investment frauds nearly always are stock juggling schemes of the worst sort. At best such companies are organized only with "prospects." The savings bank pays 3 per cent interest on savings deposits. This is the measure of safety by which ignorant investors should judge investments. Consider then the fine promises of ten, twenty, thirty or even 100 per cent income. The stock peddler of the illegitimate sort points out. that Calumet and Hecla Copper shares once sold for a very low price, that this or that plantation reaps great rewards for investments made long ago. True. Today there is as great wealth to be made in such enterprises as at any time in history. But the point to be dwelt upon is thai the legitimate enterprise based upon sound management, financial methods and honesty at best is a venture. And the legitimate venture is none too secure to the investor who is not personally informed of such matters as managemi nt and finance. It is not an unusual method of the schemers to organize papers which purport tf> be legitimate financial journals in order to foist their bogus or "watered" securities upon the public. When this scheme is adopted the bogus "financial journal" usually contains a coupon which reads something like this : Investors Should Not Speculate or invest their money in any proposition without a full knowledge of its value and dependability. Not one third the enterprises offered the investing public arc reliable. So far as we are able we will be pleased to be of .service to our readers who make use of the following blank: FRAUD UXDEH GUISE OF SPECULATION. 273 Editor Chicago Daily Financial and Industrial Bulletin : Dear Sir: — Please give me your opinion concerning (Full name of company) (General Offices) No charge made ] Name for information if > Address stamp is enclosed. ) City and State This sort of bunco game embraces sending the "financial journal" to people who have been approached with a certain "get-rich-quick" stock scheme, or who will be approached. If the investor is ignorant of such practices he may fill out the blank requesting information. Invariably he receives an immediate reply approving the stock. Or an advertisement appears in the paper which courts investigation for the stock. Sometimes the "financial journal" is an independent blackmail sheet run for fraudulent purposes and in that case it will approve of any bogus concern which will divide the spoils. In order to make the paper appear genuine some companies are attacked. Financial gossip is copied from other papers to give the sheet a genuine appearance. Such papers frequently demand advertising from men who are running small but legitimate mining or plantation stock companies and who wish to sell stock to increase their business. If the advertisements are not given, the paper generally threatens to "expose" the managers for running a fake or shaky concern. These papers, which exist even in Wall Street, arc filled with favor- able "write ups'''' of stock companies which are prepared to rob the people. 'I'd -how to what extremes some of the swindlers will go we print on the next page a typical advertisement of a slock "get-rich-quick" scheme. When the speculative swindler is not at work on stock jobbing schemes he is running a blind pool in wheat, corn, cotton or some other commodity which makes alluring bait for the unwary. Circulars are mailed broadcast to people in the country districts, telling of great fortunes made by the big -peculators and setting forth the "secrets of success*' in speculation. In short, they ask thai the reader send almost any amount of cash to be put into a pool which will operate in -lock- or cotton or grain or provisions — it does not matter much what and the profits will be divided. Figures are given to -how how much can be earned, [mmediate dividends al fabulous rate- are promi-ed. The swindler- rent an office lor perhaps a month, collect money from as many gullible people as possible, and. if the dupe- come in greal enough numbers some of their money will he returned at once a- "divi dends." This, of course, serves as a bail to attract more suckers. The news - j. FRAUD UNDER GUISE OF SPECULATION. SEND IS $10 TO INVEST FOH YOU IF YOU DARK AFTER YOU HAVE READ EVERY WORD OF THIS ADVERTISEMENT. We begin sending returns in 8 to 12 days after receipt of your remittance, and from that on every one who approves of our plan is an enthusiastic advertiser for us. We judge from present indications that our interests in the TWO GREATEST AND RICHEST PRODUCING GOLD MINING CAMPS IN THE WOULD, CRIPPLE CREEK AND GOLD FIELD in addition to our Copper Mining and other interests, will make every si 0.00 sent in answer to our "dare" advertisements bring the sender hundreds, perhaps thousands, of dollars, even though we promise nothing. THANKS! THANKS! THANKS! are coming in from every direction. We could fill a large volume with letters of thanks, for the returns we have sent, from good people, giving us their consent to use their names as references. But we gave THEM no references. THEY took the leap absolutely in the dark, and it would not be fair to bother them now to answer letters of inquiry from others. When you send us $10.00 to invest for you, we assign to you, absolutely free of charge (aside from the returns we send you in 8 to 12 days), an interest in the . With the first returns we send full particulars and conditions of thi> assignment, and propositions for larger investments that will surprise you, but it is not necessary to invest any more in order to hold your interest in the , nor does that interest place any obligation on you whatever, but it means an interest in all the companies named below, and of course the more you invest the greater your interest will be. And we EXPECT to see the interest of each one increase in value to hundreds, perhaps thousands, of dollars. The is the only concern in the world that is oper- ating on the plan of "nothing PROMISED, but DO something." If you have sent money to the "Big PROMISE fellows*' and got nothing but loss and disappointment, just send $10.00 (while you. have a chance) where nothing is promised, and it will be no trouble to decide where to send your money hereafter. We believe we are in a position to make larger returns than the "Big Promise" fellows ever do make, to say the hast. Our prospects look more flattering than they ever did. We do no coaxing, but we would advise those who contemplate sending us $10.00 to do it NOW. FRAUD UNDER GUISE OF SPECULATION. ^75 that Mr. Soandso is getting $5 a week on an investment of $100 spreads in many communities. When enough swag has been collected to make it worth while, or if there are signs that the government will discover their nefarious business, the swindlers close their offices, and fade away. With these concerns as with the fake stock proposition the fake financial paper is a ready assistant. Furthermore, fake credit agencies and hanks arc organized to aid in the robbery. The moment the prospective dupe is senl a circular promising gnat and quick wealth, a credit agency slip is sent out soliciting the business of making reports on the condition of speculative con cerns. If the dupe is tempted to "invest" his money, he may stud a request to the bogus credit agency, asking of the status of the blind pool concern. Invariably a favorable reply is returned, sometimes with the reference of a bank enclosed. Sometimes a legitimate bank is fooled into giving references in these swindles, but more often the bank is a bogus concern in itself. Every now and then these "get-rick-quick" concerns operate with such boldness that the whole country is startled with the magnitude of the thefts. In 1899 W. F. .Miller ran what was called the Franklin Syndicate for a year. offering 520 per cent profit on money invested in it. In that time this syndicate distributed $1,500,000 in "interest" back to investors. To show how the scheme worked, however, in twenty-three business days toward the close of the swindle Miller took in cash deposits and mail remittances of $931,000. His expenses were $138,000. The net profit on tin., weeks' trade was $793,000. He had 17.000 depositors. In recent years dozens of similar concerns operating in Chicago, Philadelphia, Cincinnati, Buffalo, Charleston. Boston and elsewhere have operated with success to fleece Ig aid persons whose heads have been turned by stories of speculation. Probably „orie of these swindles has raked in less than $75,000 to $100,000. The most recent exposure of this sort was that of tin Storey Cotton Company which dosed with assets of only $30,000 and liabilities up in the millions. It is supposed the principals in this swindle gol awa\ with Si .000. 1100. Closely allied with this sort of swindle is the bucketshop. Primarily this is sinipK a gambling place under the guise of a legitimate brokerage office. Actually, however, the bucketshop is a swindling concern, because it is organ i/.ed solely for the purpose of taking money from and not giving it to people who become their "customers." This counterfeit speculation is transacted by making imaginary purchases or sales of a speculative commodity accord ing »,, the prices made on bona fide exchanges. There i^. however, no pur chase or -ale of anything. Therefore if a profit is to be maele> by the "cus 876 FRAUD UNDER GUISE OF SPECULATION. tomer" it must come by chance that later fluctuations will be in his favor and the money must come from the bucketshop. On the other hand if the bucket- shop win- it is at the expense of the "customer" invariably. When the buckct- shop loses too much to be convenient it fails. There art' all manners of other swindling schemes done in the name of legitimate business. One of the most sensational affairs in recent history was that where Mrs. Cassie L. Chadwick by presenting forged notes in the name of Andrew Carnegie, the steel magnate, and other bogus or worthless "security collateral" was able to secure enormous loans from numerous bankers. Expo- sure of these transactions developed the fact that the bankers in question had been tempted by big commissions for the loans. Generally these commissions were for the personal benefit of the bankers, while the money lent upon the worthless collateral was that of the bank's depositors. This was nothing but "graft" and was dishonest. Shortly after Mrs. Chadwick was imprisoned Frank G. Bigelow, president of the First National Bank of Milwaukee, defaulted to the extent of nearly $4,000,000. This man had been trusted and prominent in banking circles, had even been president of the American Bankers' Association. Bigelow had been a heavy speculator in all sorts of enterprises and had made a great deal of money at times, but finally he lost it all and more besides. The directors of the bank made good the loss. Following are some of the big bank defalcations of the last twenty years: 1 ss t Ferdinand Ward, head of Grant & Ward, bankers $6,000,000 L884 — John ('. Eno, president Second National, New York 3,000,000 L890— P. -I. Claassen, president, and G. H. Pell, Sixth National, Lennox Hill and Equitable 1,000,000 1891- Gideon W. .Marsh, president Keystone National, Philadelphia 1, ()()(),()()() L891- .John T. Hill, president Ninth National, New York 400,000 1894 — Samuel C. Seeley, bookkeeper Middlesex County bank, Perth Amboy, N. J 354,000 11)00 — William Schreibe'r, trusted clerk Kli/abet hport Banking Com- pany, Elizabethport, N. J 100,000 1900 C. L. Alvord, note teller First National. New York 700,000 1900— Frank M. Brown, assistant cashier German National, New- port, Ky 200,000 11)01-- -Henry J. Pleischman, cashier Farmers and Merchants' bank, Los Angeles, Cal 150,000 1902 — Frank C. Andrews, vice-president City Savings bank, Detroit, Mich " 1,500,000 ^1 o 5 ** .i2"S« < : . - > h f w . - r - . S ■='0 - O - _ - E - r r o : S6 _ — i v. - - ^ - ■_ : > "- w £ gj C c2* - : - — : i E - : "N -* '.■— z *■ gg ■ _ S « * o «j « a) c d - : c* « r ~ W r ~ ~ m r / -"- H • c r c K t< - C j. : I _ W g » ho 5 5 N O - " - s a .- z. — v. • - — W t* : O OS 2 w M « ? H . • - E ? to I B s CHAPTER XXIII THE STEEL TRUST— WONDERS OF THE INDUSTRIAL AGE. Sufficient Natural Resources in the Earth to Promote the Happiness and Pros- perity of all Mankind — The Universal Demand For and L'sc of Iron 0>\ Minnesota, with Ranges Opened as Late as 1892, Supplies More Ore Than Any Other Section of the World — How it is Converted for Use in the Arts and Trades. Greatest of all the industrial companies of the world is tin- United States Steel corporation, known as the Steel Trust, with its authorized issue of $550, ()()(),()()() preferred stock, $550,000,000 common stock, $298,000,000 collateral bonds, $153,000,000 second mortgage bonds and $100,000,000 of guaranteed bonds of subsidiary companies. And yet this corporation in the absolute mum of the word is not a trust, for while it is so powerful through its financial con Elections as to dominate the market, it controls only about half the iron and steel business of the country, and in order to maintain prices often has to swing its power in connection with its largest competitors. ral things stand out conspicuously to draw the attention of the world to this biggest of all the industrial trusts, so called. One thing is its capital of more than a billion dollars. Another is the fact that its employes number in the thousands and are scattered all >>\er the country from the Mississippi to thi Atlantic. Still another reason is that the stocks of this corporation perhaps were the most widely distributed of an} securities of tin Trust Period in which the ignorant investing public lost money because of "watered" stocks, whereas the "insider-," the big steel men, made millions over night. Then. too. the employes of the corporation weii- sold preferred stock on the installment and profit sharing plan, which at limes looked [ike a very foolhardy and danger oils policy for .i great corporation to sponsor, 1ml which .-it the moment ap pears \m\ profitable to the employes who stayed l>\ the scheme. The Steel stocks also for a long period wire the barometers of the stock markets, and because they fell in price when the steel and iron industry was had and the dividend on Steel common stock had to be passed, causing great hardship and ultimately injuring business in many parts of the country, business men watched the coursi of the Steel Trust with great interest, . . . i 880 THE STEEL TRUST. Necessity was the mother of this trust. Like many others the steel in- dustry was shot full of jealousies, competition and strife among the biggesl producers. Then' had been many minor trusts formed among the steel pro ducing companies with much "water" in the stocks. This should have been squeezed out, dividends passed and large surpluses acquired in order to bridge the gap when steel and iron, the "prince or pauper industry," ran into bad business. But to squeeze out water was what the trust owners did not want to do, and they con- tinued to pay dividends when such action was dangerous. At the close of 1900 some of these concerns found themselves in a position which invited attack by strong competitors. Business had found a reaction early in that year, trade had to be adjusted to smaller margins of profit if there was compe tit ion and the forces which had been held back during the season of pros- perity were let loose to threaten bank- ruptcy in some concerns. One great steel corporation, the Carnegie com- pany, had risen to a point where it could dominate the trade of the country in a dull season. Dividends were a matter of secondary consid- eration. Efficiency was everything and in the years 1898-'99 it was said its profits were over $70,000,000. Now, the house of Morgan and the western promoters of steel trusts, William and J. II Moore, were interested vitally in many big steel concerns. The Carnegie company could get along with the National Steel company, the National Tube company, the Federal Steel company, the American Steel and Wire company and such other concerns during prosperity. These rivals were J. PIEEPONT MORGAN. Ih'- world renowned broker and financier. THE STEEL TRUST. 281 not independent of the Carnegie company, indeed they had worked together in harmony much of the time. But finally the situation narrowed down to a contest between the big and the smaller companies for industrial independence and none had any intention of submitting to a loss of its markets. In the West tin Federal Steel fought for supremacy with the companies which had been buying products from it but which were now making their own supplies, while in the Pittsburg dis- trict the same trouble confronted the Carnegie concern. The latter company even went to the extent of preparing to secure an independent railway line to the xVtlantic seaboard. When competition threatened disaster to the business of the companies and thereby to hurt the stock market through the slump in prices of all the iron and steel stocks, the big financiers sel to work to si ve the situation. These men, greatest of them J. P. Morgan, were desirous of Moating many new trusts in the big bull market for stocks, and therefore the} saw the necessity of patching up the steel row. This was to be done in only one way — to unite conflicting interests into one company. And this was done. The subsidiary companies of the Steel Trust are: Capital. The Carnegie Company $160,000,000 Federal Steel company 99,700,000 National Tube company 80,000,000 American Steel and Wire Company 90,000,000 National Steel company ' .-)!).()()().()()() American Tin Plate company t6,325,000 American Steel Hoop company 88,000,000 American Sheet Steel company 1)9,000,000 American Bridge company 62,800,000 Lake Superior Consolidated [ron Mines 30,000,000 Shelby Steel Tube company 13,000,000 Union Steel company ' 45,000,000 Troy Steel Products Company 1,100,000 Clairton Steel company 13,000,000 These companies have not losl their identity in the Steel corporal but operate as individual concerns. Indeed many of them arc composed of other companies which also work independently. While this is true, many of the greal properties of the several companies have been merged under one head This is the case with ore and transportation. Coke interests, the export de puh, miiI .Hid certain other branches are also grouped under a single head, etc. The two greatesi criticisms against the Steel Trust have been thai the public suffered through curtailed dividends on the common stock and the sug THE STEEL TRUST. gestion that the employes were being taughl to speculate through buying stock on the installment plan. Of the first criticism it musl be said there is good foundation in fact. It is a notorious fad thai the trust was floated with abundant water. Mr. Carnegie was paid $447,416,640 for his company, an outrageously high price for a concern which though it earned $40,000,000 tl u . y ear f the trust formation, had shown nei profits of only $6,000,000 in 1896. Elsewhere the same watering process obtained. When poor times fell upon the iron and steel trade, as fall they always will, earnings declined from as high as $18,000,000 a month to around $3,000,000 a month. Had there been less -water" in the stock, the stockholders who had bought shares with the belief that dividends could he continued would not have lost their invest ments. Of the other criticism there is less to he said. It is the policy of the trust to set aside preferred stock for employes on something of an in- surance basis and those who have continued steadfastly with the plan thus far have lost nothing and have promises of good investments. Tlu public interest in great industrial combinations seems to run in cycles, although Hk cycles are sometimes as short as the proverbial nine days which measure the lively interest in any subject. At one time it is the Ship-Building Trust, at another the Coal Trust, at another the Railway Mergers, at another the Beef Combine, and again the Steel Trust that arouses most general attention. Steel i- the material from which this industrial age builds its marvellous machinery, it great buildings, its railways and its steamships. Steel it is, on which many of our multi-millionaires have built their fortunes, fortunes which ; all wealth in the history of the world. The Steel Trust it is, the formation of which ha- done more than any other single influence to draw the attention of the people at large to the enormous consolidations of capital for the dom- inance of the industrial world, not alone in America but all over the globe. So it becomes of prime interest and importance to observe the progress of the industry and its products from the mine to the consumer. There i> a wide distance between the primitive miner and moulder of pre- historic time-, with his rough furnace, his rude appliance-,, and the customers of hi- neighborhood, and the remarkable organization of mines, transportation facilities and manufacturing plants which now unite to form the great iron and steel interests. The United States Steel Corporation, as the Trust is officially entitled, with it- capital of $1,100,000,000, is by far the greatest organ- ization in the world. And yet it does not include by any means all the branches of th< industry in America and in foreign fields, in which other great organiza- tions exist. Organized by J. Pierpont Morgan as prime mover, and including THE STEEL TRUST. 283 such stockholders as Andrew Carnegie, John D. Rockefeller, Marshall Field and other national characters, the very volume of its capital and the diversity of its interests have made it world-famous. Its first president, Charles M. Schwab, was reputed to receive one million dollars a year salary, although it may be doubted whether this information was accurate. The functions of this corporation include the mining of iron, the transporta- A LAKE SUPERIOR REGION IRON MINE. N*" other section of the United States and no other district In the world has shown such marvelou pment "i produced si. much ore as the region embracing parts of. Northern Michigan and Wisconsin and the northeastern portion "i Minnesota whether me extenl "i terrltorj elsewhere there may or mas "" , be largei deposit "i mm ill;. .1. Irable composition cannol i»- asserted, i"i ii is \>\ development that these properties havr become known and their reserves approximate^ determined This region Is unique in thai Its location is such that ore can i"- delivered t" furnaces In a popul .1 mi ii..- country, and there i i a cheap fuel supply; In othei words lis market facilities are unexcelled. It has been this which has chiefly encoui nomcnal development. • ion of it to its own milk of in.iny differenl kinds and in many locations, and tin manufacturing of it into almost ever) product of iron and steel thai i- demanded on a large scale, particularly railway rails, structural steel, bridi armor plates, tin, sheel steel ami tubes. It is readily sun thai the ramifications «d such an industry become world wide, -M THE STEEL TRUST, The processes of iron mining where ore is produced on a Large .scale differ materially from those of coal mining or the mining of other metallic ores, such as gold, copper, lead or zinc. The most noteworthy iron region of the world i> that around Lake Superior, in which the three states of Michigan, Minnesota and Wisconsin yield 76 percent of all the 36,000,000 long tons of iron ore produced annually in this country. Minnesota alone contributes over 15,000,000 tons ot' the product, and Michigan follows with over 11,000,000. Alabama is' the third state in production, yielding more than 3,500,000 tons annually, and then follow in succession Virginia and West Virginia, Tennessee, Pennsyl- vania, Wisconsin and New York, ranging from 1,000,000 tons down to 555,- 000 tons. The other sixteen states where iron is found commercially yields a total product, among them all, of 1,695,000 long tons. Comparing this prod- uct with that of other great iron ore producing countries, we find that our neaivsi competitor, Germany, produces hut 18,000,000 long tons of iron ore annually and Great Britain 1:5,500,000 long tons, the Lake Superior region alone pro- ducing more ore than either of these countries. The remarkable iron ranges of the Lake Superior region are peculiarly available because of their proximity to the great lakes, by which the product may be shipped directly and cheaply by large steamers to the manufacturing regions of Ohio and Pennsylvania where abundant coal is found and where great mills have been built. Three distinct iron ranges in Michigan have been recog- nized, all in the upper peninsula and trending east and west. These are the Marquette, Menominee and Gogebic ranges. The first shipments from these deposits were made in 1856. Bessemer, Ironwood, Hurley, Republic, Cham- pion, Ishpuning, Negaunee and other towns in this part of the state and in the of Wisconsin have become famous the country over for the remarkable mineral wealth they have yielded. Escanaba, Manistique, Marquette and Ash- land are the shipping ports on the great lakes, from which this product is sent. Two iron ranges in Minnesota, the Vermillion and the Mesabi, lying north of Duluth, furnish the iron from this state. The most important mining points are Ely, Tower, Virginia, Hibbing, Eveleth and Biwabik. Their shipments are made from Duluth and Two Harbors. Most of the iron ranges of the Lake Superior region can be worked by strip- ping of the surface deposits and useless vegetable mould and worthless mineral substances, and then digging the available ore from the open pits. This becomes quarrying rather than mining, as the word is generally understood, but though it may lack some of the more picturesque features of mining deep in the earth, it is much more convenient commercially, and makes the cost of the product far less than it would be by way of shafts and tunnels. THE STEEL TRUST. 285 The brown ore is carried down to thu Lakes from the mines in an almost end- less succession of trains, and dumped on ore docks or loaded directly upon ves- sels waiting for it. Scores of great cargo carriers ply from these ports on the upper lakes down to Lake Erie, carrying their store of Lake Superior iron ore for the Pennsylvania and Ohio furnaces. This single industry employs a very large proportion of the fleets on the great lakes. At the other end of their route they deposit the cargo once more upon the docks of the manufacturing town or into the railway cars that are to carry it inland to smelters and blast From the United States Department "t Commerce ami Labor Reports. MOUNT IRON MINE, MESABI RANGE, MINNESOTA. The Vermillion range in Minnesota was opened in 1884 I not- withstanding Hi'- fad ih. it tin- ranges are farthest removed from the principal pig Iron producing centers, tin- state contributed i;< 1902, 16,137.650 long tons ol ■ " • r amount than was produced by tin- entire country according to the previous c< The photograph shows two stripping ami thr »re levels. Thi "i steam . ,i directly mi Iron ore cars, in which it is hauled to the docks Tims Immensi quantities "i ore ■>><■ cheaply and easilj obtained Th< irger pro- n pei emploj e t nan those "t anj othei furnaces. Tin processes of loading and unloading these cargoes between Bhip ami train have become bo pert'. ded by tin- use "f mechanical appliances, thai thousands of tons maj b< handled within a \er\ feu hours. Th< iron and steel industries of Pennsylvania -<> far lead all others thai a vieu of them will Berve i<> characterize the whole country. Annually the K>\ stone -late produces sixtj per cent < no logical reason why, in time, it could not have assumed -i large amount of additional '"water" in the shape of new capitalization, and \- = - - * •- > 1) 1) a 5 .8 rt '.- . " S|55a c •= i. = - - . — - e •■/. — i i. - - - miia : ~ - C - gg - § i . — c — < s H - • is c -: M . ^ - •■ - - j. 3 - > J - '■ C - — — -■'£ - o ~.~ -z h « ■O "J! w = iT 9 ■i J. - 2 o — |jj ~~ c/3 £ >-c Q A ~z - - - a - - N 5.~£ b A < - s j: £ '- ~ » u S w a >. - P3 _ = < M a § r B ■ --- H 35 -T B 4 ;>■ „ r u - * — V- L - CHAPTER XXV SOME OTHER BIG TRUSTS. Tobacco Merger — Whisky Trust— Peoria County, Illinois, Pays One-fifteenth of All the Government Expenses in Internal Revenue Tax Some Trusts That Went Wrong- The Ship-building Bubble — Men Who Fail 117/// Men Fail ( (ml Mining. Tobacco.— When trusl promoters and financiers try to monopolize a business in which it jn easy to start new competition tin- trust in thai industry musl do one of two things, either absorb all the competing plant's as they spring up, or settle down to do business on the competitive basis. When tin- trusl starts out with a great deal of "water" in its stock it Is pretty hard work to do business on the latter plan. This has been the keynote in the history of the Tobacco Trust. '•Watered" from the beginning, this trusl has been forced to absorb competitors as fast as they arose 01 else lose its grip on the tobacco monopoly both in America and Europe. Hut once having secured about *)i) pei- cint on the trade in American and about 50 per cent of the foreign tradi the Tobacco Trust has been able to go on raising prices and paying divi- de ods at such a liberal rate that in fifteen years it has been able to in- crease it> capital from about $£5,- 000,000 to about $600,000,000, much of it •"water." Thi' parent company of the To- bacco Trust i- tin American Tobacco company, organized in 1!)()l- for the purpose of "cutting i Inn." or ad ding about $34,000,000 "water" t<> tin >tock of the trust which had formerly been cont roll* d by other companies, and incidentally of merg ing several of these companies into one concern. Before that lime the principal companies of the trust were the Consolidated Tobacco company, American Tobacco company (old ), ( lontini ntal Tobacco company . Am' i ii A CORNER Or A VAULT STORED WITH RETIRED BONDS OF THE TOBACCO COMPANIES ENTERING INTO A MERGER UNDER THE NAME OF THE AMERICAN TOBACCO COMPANY. EACH BOND REP- RESENTS A VALUE OF $1,000. SOME <>TlIl-:i{ BIG TRUSTS. it- in Cigar company, American Snuff company, Havana Tobacco company, British-American company, Ltd., American Stogie company, International I gar Machinery company and United Cigar Stores company. These different companies handle different branches of the trade, such as plug tobacco, cigar- ettes, snuff, cigar making and retailing, etc. The path of the Tobacco Trust organizers \\a- by no means an easj one. A-* had heen indicated, many companies entered into competition in order to in Harper's Weekly. Copyrighted, 1904, by Harper ^ Bros. CLERKS AT WORK ON THE DETAILS OP THE TOBACCO MERGER CARRIED THROUGH BY THE MORTON TRUST COMPANY. i .it work <'p the details of the merging of the Consolidated Tobacco Company, Tobi lompany . nental Tobacco Company, into a compact corpora t i < i n under the name of the American Tobacco Company, :it the offices of the Morton Trust Company, New York, whose president is Levi P. Morton, former Vice-President of the United ties of this corporation amount to the enormous sum of $115!). 000, 000 :es, which would be awkward in cases involving millions of dollars, ; i tl rough at least a dozen hands and processes of verification Every o i oi bonds and stock had to bear the authentic signature of Moi Trust Company. These signatures to the 314,756 bonds alone, at nil .!•■. making 360 per hour, a working-day of seven hours of stead] work uninterrupted would permit oi the signature of 63 seipts and the entire job i in about two and one-half months. This represents, however, only a required, for if did not Include the 2,000,000 odd shares of todk and preferred stock nor the final signatures on the new stock Issued. tore the trusi to buy them out at a fancy figure. From a'modest combination of eastern manufacturers the trust grew until it encountered foreign opposition. The trust's foreign company went so far as -to offer its entire foreign profit up to $1,000,000 a year to foreign retailers if they would buy its goods for four years. This was made to counteract offers of bonuses by foreign con- SOME OTHER BIG TRUSTS. 299 cerns to such foreign retailors as would undertake not to sell American goods for a term of years. The outcome eventually was for a settlement whereby the Tobacco Trust dominated the trade of nearly all the world. The differ- ence between the Tobacco Trust and the so-called Copper Trust is that the former has carried out its program and the latter has not. Sugar. — Of all the trusts there is non< unless it be Standard Oil th.it is run on more of a "this-is-my-business" sort of a program than the Sugar Trust. And well may it do so, for its affairs are so closely woven with national politics that it can gel almost any favor it likes from Congress. Moreover, in addition to these special privileges of high tariff, it has a strong enough element of natural monopoly in the control of raw materials to dominate some say. as high as 90 per cent, of the sugar trade. This trust is known officially as the American Sugar Refining company, dominated by Henry (). Havemeyer and capitalized at $90,000,000. This is the successor of the Sugar Refineries company, and though it does not control absolutely itself the monopoly in the raw sugar, refined sugar cane and beet sugar, through its many ramifications it practically accomplishes this end. This trust was not without its competition also. In 1889, shortly after lie formation of the Sugar Refineries company, Claus Spreckels, of Philadelphia, Arbucklc Hros. and Claus Doscher of New York and others began to fight for a bigger percentage of the sugar trade. Prices were cut again and again l<> below co>t. Eventually consolidations were effected. Later, when beet sugar began to be manufactured extensively the American Heel Sugar company aro C in hy conclusions with the trust. For several years it operated as a rival, but the trust soon bought it up. The Sugar Trust has been eminently successful in the matter of paying dividends. Hut it has been the policy of the company never to issue state merits of its business. In Massachusetts there is ;i [aw which forces anj com I>.iii\ doing business in that state to present a ycarlj balance shed, and this tin Sugar Trust does. This concession to tin fan- er\ for publicity b\ corpo rations which are operated upon the savings of the public discloses little. ! ' i < I • ill Havemeyer objects to giving information to his stockholders at I u on tin exact financial standing; of tin trust from time l<» time, lest it be "giving to competitors information about corporate affairs." s-i i tMSHip Trust. One of the sorriest examples in trust financing is thai of J. IV Morgan's attempt to secure a monopoly of tin sea transportation between America and Europe. In 1902 just at the culmination of tin period of most successful stock "watering" and trust making, Morgan and his allies 300 SOME OTHER BIG TRUSTS. incorporated the [nternational Mercantile Marine company with authorized capital and bonds of about $195,000,000 par value. This company was formed as a consolidation of the six principal transatlantic steamship lines, the White Star Line Red Star Line American Line, Atlantic Transport Line, l.e\ land Line and Dominion Line. The intention was to absorb the Cunard Line, one of the most progressive of the steamship companies, hut this failed. Here was a weak spot in the Morgan plans. At once the Cunard Line took measures to protect its business against the Morgan combination. Plans wire set on foot to form an anti- Morgan combination including prominent British lines. On the other hand Morgan reached out for the German lines. Then the Royal Mail Steamship Company started to affiliate with the other British lines against Morgan's project and a Canadian line was planned, hacked by the Canadian Pacific rail- way, looking toward the same end. About this time there arose in England a great hubbub over the effect the trust would have on independent lines like the Cunard. As an outcome the British government gave the Cunard Line a ship subsidy of $750,000 a year. Suhsidies had already been given other British lines in the trust hut the British government gave notice of discontinuing them. Then the Cunard Line, which had been party to a passenger agreement before the incorporation of the trust, cancelled it. At once there arose a war of rates which was carried on for some time. In the meanwhile, even before the underwriting syndicate which took charge of $50,000,000 of the trust's securities had finished its work, the prices of the Mercantile Marine stocks and bonds began to fall, therein' causing great dis- content. The work of the underwriters was a flat failure because of the approach of financial stress in the stock markets of the country. Indeed the $170,786,000 <-f securities issued fell in price to about $70,000,000, showing a decrease of $100,000,000. What the outcome of the Steamship Trust will he is problematical; much depends upon whether the Morgan plans, which obviously were not carried out to their logical conclusion, will he revived with better results. At present the -real fault with the trust is its lack of monopoly in special privilege. Trust Under this title are embraced interests capitalized at about $800,000,000 which treat ores, lead bullion and copper bullion, operate mine., linseed oil works, white lead works, etc. The Standard Oil party is rn-eath interested in th( trust, hut outwardly the great family of Guggcnheims tin leading spirits. Chief of the companies which make up the Smelting SOME OTHER BIG TRUSTS 301 Trust are the American Smelting and Refining company and the American Smelters Securities company, both officered principally by the Guggenheims. These concerns operate the principal smelting plants, shot towers and similar works in the country, besides controlling vast mineral resources now under development. Closely affiliated with these are the American Linseed company, whose business is the manufacture of linseed oil, raw. boiled and refined varnish, oil cake, oil meal, and crushed flaxseed. Working in harmony with the fore- going are the National Lead company and the United Lead company. The history of the Smelting Trust shows excellent profits in many of it- branches. Here, as in many other trusts, there was the attempt to discount the future by piling up the capitalization to unreasonable heights, but in view of the fait that these concerns control the industry almost to the point of monopoly, their position is changing. It is believed now that it would take a very powerful combination to enter the field of the Smelting Trust with any degree of success. Whiskey Trust. — Like the Tobacco Trust, the Whiskey Trust has seen a great deal of competition and in order to secure anything like a monopoly in its field it lias had to buy up man\ competitors. Today the corporate form of the trust is the Distillers' Securities corporation, with $32,500,000 stock and .-1 \.:>() 1.000 bonds. This company controls 5)0 per cent, of the stock of another concern the Distilling Company of America, which in turn controls the several companies engaged in the manufacture of spirits. The secondary company is well loaded with -water." having out over $75,000,000 of stock and $2,580,000 bonds. One of the reason- why the Whiskey Trust has a moderate monopoly in its field of business is that it has certain tariff benefits. To ; ,|| appearances these benefits com.- because the government gets much of its revenue from taxing whiskey, spirits, alcohols, etc. [ndeed, Peoria County, Illinois, where si\ great distill. ii. > of the trust are local, d. hands over from $3 f. 000. 000 to $36,000,000 yearly to the government on infernal tax payments. This alone pays about one-fifteenth of the business expenses of the United - Peoria County pays the government enough monej to build a warship even month. The county also pays enough to cover the expense of all river and harbor improve inents. Its contributions form a highly important and essential pari in the matter of Uncle Sam's receipts and .nabl. the government to make a satis! tory showing on the income sheet each year. Tin largest distillery in this count \ i> the Great Western Us capacity is 65,000 gallons of spirits a day. To <>p, rat, this on, distillery necessitates the use of the corn from four hundred ici of land. lo bushels to the 308 SOME OTHER BIG TRUSTS. acre. It' all six of the Peoria distilleries run at one time, it takes the rut ire product of 1,000 acres of farm land to supply a single day's material. An average of 2,000 barrels of whiskey i> made each day, and two trainloads are shipped out each evening. Probably but a quarter of this amount is disposed .it' by saloons at retail, as thousands of barrels of spirits go into the manu- facture of smokeless powder. Immense quantities also arc used for compound- ing patent medicines, for extracts, for essences^ in the arts and by colleges and schools for preserving specimens. .More gin is made in Peoria than at any other place in the world. Juniper berries are imported, distilled with spirits, and made into oin in immense (piant ities. Whiskies are "aged" in short order and are "blended" in many ways. In fact, anything in the" drink line can be made there, but the basis is always honest Illinois corn. In one month the rectifying establishments can turn out whiskey that purports to be "SO years old." Some Other Trusts. Capital and Bonds. lian-Weber Piano and Pianola Co., "Piano Trust" $ 1(),()()(),()()() American Agricultural Chemical Co., "Fertilizer Trust" 40,000,000 American Brake-Shoe & Foundry Co., "Brake-Shoe Trust" 5,446,000 Allis-Chalmers Co., ".Machinery* Trust" 50,000,000 American Can Co., "Tin Can Trust" 88,000,000 American Caramel Co., -Caramel Trust" 2,400,000 American Car & Foundry Co., "Car Builders' Trust'" 60,000,000 American Cement Co., ''-Cement Trust" 2,825,000 American Chicle Co., "Chewing-Gum Trust" 9,000,000 American Cotton Oil Co., "Cotton Oil Trust" 37,799,400 American Fork & Hoe Co., "Farming Tool Trust" 4,800,000 American Glue Co., -(due Trust" ' 2,400,000 American Graphophone Co., "Phonograph Trust" 5,500,000 American Grass Twine Co., "Grass Twine Trust" 25,025,000 American Hide & Leather Co., "Upper Leather Co." 42,837,000 American Hominy Co., "Hominy Trust" 4,271,000 American Ice Co., "Ice Trust" 41,970,000 American Locomotive Co., "Locomotive Trust" ."".... 51,237,000 American Pneumatic Service Co., "Pneumatic Tube Trust," 16,600,000 American Malting Co., "Malt Trust" 33,810,000 American Radiator Co., "Steam Radiator Trust" 10,000,000 American School Furniture Co., "School Furniture Trust" 11,500.000 American Seeding .Machine Co., "Seeding Machine Trust" 15,000,000 American Sewer Pipe Co., "Sewer-Pipe Trust" 9,533,000 American Shipbuilding Co., "Great Lakes Shipbuilding Trust". 30,000,000 SOMi: OTHER BIG TRUSTS. 808 American Stove Co., "Gas Stove Trust" 5,000,000 American Thread Co., "Thread Trust" 18,000,000 American Type Founders Co., "Type Foundry Trust" 6,900,000 American Woolen Co., "Wool Trust" 65,000,000 American Writing Paper Co., "Writing Paper Trust" 42,000,000 Associated Merchants Co., "Dry Goods Trust" 20,000,000 Borden's Condensed Milk Co., "Condensed Milk Trust" 25,000,000 Butterick Co., "Paper Pattern Trust" 12,600,000 Casein Company of America, "Milk Sugar Trust" 6,500,000 Central Leather Co., "Leather Trust" 125,000,000 Central Foundry Co., "Soil Pipe Trust" 17,868,000 Chicago Pneumatic Tool Co., "Pneumatic Tool Trust" 9,800,000 Cnn Products Co., "Glucose Trust" 89,612,000 Diamond Match Co., "Match Trust" 5,250,000 Distillers Securities Corporation, "Whiskey Trust" 1(6,761,000 General Chemical Co., "Chemical Trust" 25,000,000 General Electric Co., "Electric Supplies Trust" 50,000,000 Great Western Cereal Co., "Oatmeal Trust" fc,200,000 [nternational Harvester Co., "Harvester Trust" 120,000,000 International Nickel Co., "Nickel Trust" 34,000,000 [nternational Paper Co., "PrinI Taper Trust" 62,000,000 [nternational Power Co., "Compressed Air Trust" 125,000 International Silver Co., "Silverware Trust" 26,000,000 [nternational Steamship Co., "Steam rump Trust" 36,000,000 National Biscuit Co., "Cracker Trust" 56,000,000 National Candy Co., "Candj Trust." 10,000,000 \ tional Carbon Co., "Carbon Trust" 10,000,000 National Car Wheel Co., "Car Wheel Trust" l.lol.ooo National Enameling and Stamping Co., "Stamped Ware Trust". 32,000,000 National Fircproofing Co., "Terra Cotta Trust" 12,500,000 National Glass Co., "Glassware Trust".... I o.ooo.ooo National Novelty Corp., "Toy Trust" 5,000,000 Otis Elevator Co., "Elevator Trust" ■• l^oo.ooo Pullman Co., "Palace Car Trust" ", ..oou.ooo Quaker Oats Co., "Cereal Trust" 3,000,000 Railway Steel Spring Co., "Car Spring Trust I ^00,00 Royal Baking Powder Co., "Baking Powder Tru t" 20, 000,000 Standard Milling Co., "Flour Milling Trust" ' ^00,000 Union Bag& Paper Co., "Paper Bag Trust" ... . noo.ooo t- • nn t c ~'\\ Mu.it, ,• Trust" 20,000,000 I iiinn I \ pew nter < o., I \ pew ritci i i u»i United Bo: Board & Paper Co., "Strawboard T 31,000,000 United Fruii Co., «F rail Trust" £00,000 United Shoe Machinery Co., "Shoe Machine^ TniHt" 25,000,000 United Stati « Casl Iron Pipe and Foundry < ...... :1 1 ..iOII.ikh) I rust :;,»i SOME OTHER BIG 1 RUSTS. I. S. Envelope Co., "Envelope Trust" 7,228,000 I S. Gypsum Co.. "Gypsum Trust" 8,500,000 l' S. Realty & [mprovement Co., "Skyscraper and Building Trust" 60,000,000 !'. S. Rubber Co., "Rubber Shoe and Goods Trust" 50,000,000 I . S. Bobbin & Shuttle Co., "Bobbin and Shuttle Co".. 2,000,000 \ irginia-Carolina Chemical Co., "Phosphate Trust" 64,500,000 VVestinghouse Properties, "Electrical Supply Trust" 48,000,000 Some Trusts that Went Wrong. There arc many examples of trusts that have not been successful because they did not have enough of the monopoly in their particular industry or a special privilege of some kind great enough to insure profits on the great waves of "water" that were injected into the capital stock. Some of these so- called trusts have been forced to reorganize time and again. Recently several of these were put through the process of "scaling down" their stocks and bonds, that is squeezing the "water" out of the inflated capitalization, in order to exist at all. Among these a recent example is the United States Realty and Construction company, or the Realty or Building Trust, which builds and own- many great skyscrapers and which had to reduce its $66,000,000 of capital, which sold as low as $16,000,000 in the market, down to $1 6,000,000 stock and $13,000,000 bonds of a new company, the United States Realty and Improvement company. The American Malting company, or Malting Trust is another example. It started out with about $25,000,000 stock, and later increased this, paid dividend^ when they wen- not earned, piled up a big debt which was hidden for a time by alleged erroneous entries in the company's books and eventually, through suits by stockholders, forced directors to repay the dividends im- properly declared. The Genera] Asphalt company or Asphalt Trust, celebrated because of its political troubles in South America where it controls great asphalt beds the ownership of which is disputed by South American politicians, is another trust that went wrong and had to !>.• reorganized. This trust started out as the Asphalt Company of America with $30,000,000 stock and $30,000,000 bonds and with glowing promises of big dividends. This company was to take over ;i number of prominent asphalt and paving concerns which bid fair to do a d busing undo- the consolidation. Hut the American company could not pay ;ill its bond interest, to say nothing of dividends. So the National Asphalt Company was organized to acquire the Asphalt Company of America and other SOME OT II EN BIG TRUSTS. 305 concerns. This company had $6,000,000 bonds and $22,000,000 capital. This, however, was not profitable and the companies went into the hands of a receiver. This crash was due, it is said, to a loss of Large paving contracts in several cities and to the expensive war waged for the pitch lake in Venezuela known as La Felicidad. Under the receivership it was learned thai enormous overvaluations had been placed on various plants absorbed by the trust in order to "water" the stock. In one case, the Columbia Construction company, which cost $250,000, was paid for with an issue of $2,000,000 of bonds. Much litigation followed, but ultimately the Genera] Asphalt company was forced to hike over the other concerns, squeeze out "water" and try it all over again. The capital of the new company, par value, is $31,000,000. Of all the recent financial bubbles blown and burst that of the Shipbuilding Trust, of the United States Shipbuilding company as it was Legally known, was tla most calamitous. The ostensible object of this company was to buy up the principal shipbuilding companies of the United States economically and earn great profits. It appears, however, that the real object was to sell a flood of '"watered" stock to an unsophisticated public, wreck the trust and Live serenely ever after with the wealth thus made in a night. The charges and countercharges made against the promoters of this trust when it went into the hands of a receiver sullied some of the proudest nanus in American finance. Briefly, the company started with $20,000,000 capital and $9,000,000 bonds to acquire plants which other promoters had figured on capitalizing a' $63,000,000. Thus il appeared thai the financing was conservative. Bui il was not. Very soon il was announced that the company would bu\ gnat Bethelehem Steel company, owned by Charles M. Schwab, protege of Andrew Carnegie and first president of the Steel Trust. This plan necessitated new capital. This Bethlehem Ste.l company was capitalized at $15,000,000, pai- value $50 of which only $1 a share had been paid in. Il guaranty per cent, on $7,500,000 of the stock of Hie Bethlehem tron company, which it had leased for 999 years. This Bethlehem Steel company owed al the time the Shipbuilding company purchased \\ ,000. This indebtedness the Shipbuilding company assumed and then paid for the Bethlehem company 1,000,000 in stock and $10,000,000 In bonds. This brought the trust's capital up to nearly $80,000,000. In a very short time it developed that thi Ti i pan} of the Republic of New York City, which was the principal underwriter of the bond- of the company offered for Bale, had to fail. Thu : to b< due to the failure 906 SOME OTHER BIG TRUSTS. of French subscribers to the bonds to stand by their purchases. Hut shortly ;t appeared thai the trust could not earn wli.it it had said it could. In order to secure the Bethlehem company Schwab had been given the right of voting on the $10,000,000 bonds paid him besides the voting right of $20,000,000 stock. The total stock issue of the trust was $45,000,000, so that Schwab had gained actual control of the whole company when selling his Bethlehem plants. Now. the trust depended upon the Bethlehem plants to earn money and pa\ it over in the shape of dividends so as to net the trust a profit. What actually happened was that Schwab's agents in control of the Bethlehem com- pany, through being in control of bonds and stocks of the trust, made great special expenditures and refused to pay dividends when demand was made upon them by Lewis Nixon, president of the United States Shipbuilding com panv. Collapse came very soon. All sorts of exposures came when the trust went into the hands of a receiver. Among other things it was charged that the prospectus of the company when' its securities were floated was misleading, to say the least. Seven plants alone on the books of the trust when they were opened, vain, d at $3,278,798, were revalued at $1,828,431, every plant showing a reduction and all showing a reduction through, overvaluation of $1 ,45(),Jifi7. The Bethlehem Steel Corporation eventually succeeded the bankrupt trust, having $30,000,000 stock and $3,000,000 bonds. At the time of the receivership of this trust the New York Evening Post printed two editorials which expressed public opinion at that time quite accu- rately. One wound up with this rebuke: '•Th> question i-. whether paper inflation of this sort was the kind of busi- ness in which the gentlemen had any right to be engaged. As the affairs turned out, effort- to foist the shipyard shares on the public very generally failed. It did not. however, fail for the want of false statements to the pub- lic. What we feel bound to ask is, what Mr. Schwab would have done with his sl o.ooo.OOO common and $10,000,000 preferred if the fish had swallowed the bait. Let US imagine the simple public bidding for shipyard stock at a valuation fixed by belief in the organizers' prospectus; what then? To us the • serious- thing about the whole financial scandal is the easy conscience which it shows financiers in places of great trust to have possessed in their attitude toward the public. It is conceivable that Mr. Schwab, like many others of our newly made 'multi-millionainw', shares in the lite delusions regard- ing paper capital and really believed that riches could be got overnight, with- out hurting anybody else by merely substituting thirty for nine millions in a SOME OTHER BIG TRUSTS. 807 balance sheet. But this, we must confess, is a sort of simplicity which we should greatly regret to see in the practical leaders of American industry." The other editorial was a comment on the career of the late Whitaker Wright of London, who had robbed the public right and left through stock jobbing methods and when sentenced to imprisonment had committed suicide in the courtroom. This comment ran: "No man who examines his career can resist the conclusion that he was guilty, first of dishonesty, secondly of being caught. He obtained money for what was worth little or aothing, and he was overtaken by the detectives from Scotland Yard. In point of essential morality, however, his case differs in no respect from that of the promoters of the Shipbuilding Trust — to take one striking modern instance. That buccaneering cruise into the sea of public credit began with a prospectus, which, like Wright's, was stuffed with lies. The capital, as in Wright's companies, contained much water; that is paper certificates, entitling the holders to their portion of nothing. The promoters wire, as iii Wright's corporations, to receive a lion'- share: and hard and fast agreements were drawn to enable the insiders to pocket their profits and clear out earlv in the game. The Shipbuilding Trust, like the London and Globe Company, relied upon names of nun who were supposed to embody our highest commercial ideals. Hut there is one vast difference between the case of Wright and that of some of our leaders of high finance; he was amenable to the severe English Companies' law. He transgressed it. lie paid the penalty; and a thou- sand preachers will use hi-, fate as a text. Our transgressors of the same moral law walk in the \'\-(f air. lavish in their philanthropies, lauded from the pul- pits as examplars for our youth." Men Who Fail. It i^ a pel saying in commercial circles that 95 per cent of all nun who embark in business fail. This is not correct. ,\ great mam people do not make a SUCCCS8 of their hi|sines> propels hut people who fail, that is Fail lo pay their legal debts, in ••! period of 25 years never amounted to more than 1' per cent of those in business. Sometimes the a\ a a- lov nthfl of mie per cent of those in busi The following figures compiled l»v Bradstreet's Journal arc the proof: Numb< r Number Per < '< nt . in husim failing. failii 1903 1,273,000 9,71 i '.)<>■• i. 9,971 .80 1901 l.'' I<>. i. ,88 $08 SOME OTHER BIG TRUSTS. 1900 1,161,000 1899 1,125,000 L898 1,093,000 1897 1,086,000 1896 1,080,000 1895 1,054,000 1894 1,047,000 1 898 1 ,050,000 1892 1,085,000 1891 1,010,000 1890 989,000 1889 978,000 1888 955,000 1887 933,000 1886 920,000 1885 890,000 1884- 875,000 1883 855,000 1882 820,000 1881 780,000 1880 733,000 1879 703,000 The kind of failure which means failure to succeed in business is not so accurately tabulated. But the same authority shows that in 1803 there were 284,893 names erased from Bradstreet's record while 322,006 new names were added. Some of these that retired doubtless failed outright; others failed to succeed, and others probably branched out in the new business reported. The significant thing about these business failure statistics, however, is that the old commercial proverb quoted above is proved erroneous. Why Men Fail. All business men watch with a great deal of interest the figures that are announced from time to time by credit guide companies concerning the failures of business nun or corporations. This is one of the principal guides to sound business, for in the aggregate these figures show the tendency of business con- ditions tt) improve or decline and individally they show what men have failed and what localities are suffering most from bad business methods. When it is said that during 1904 there were 10,417 individuals, firms and corporations who suspended business owing to outside creditors and who owed more than they could pay and that these businesses had $75,691,332 of assets and almost double 9,913 .85 9,634 .85 1 1 ,638 1.06 13,099 1.20 15,112 1.40 13,012 1.23 12,721 1.21 15,560 1.50 10,270 1.00 12,394 1.22 10,673 1.07 11,719 1.20 10,587 1.10 9,740 1.04 10,568 1.15 11,116 1.25 11,600 1.32 10,299 1.20 7,635 .93 5,929 .76 4,350 .60 6,652 .94 SOME OTHER BIG TRUSTS. 309 the amount of debts, or SI 43,648,35] . it will be seen how important a matter is up for consideration by the business man. The authority quoted in foregoing says there are eleven separate and dis- tinct causes for failures, grouped under two genera] classes. Under the first classification are those failures the causes of which are traceable directly to those failing; under the other, the causes over which the suspending trader could not have exercised absolute control. Following is the summary : A. — Due to Faults of Those Failing. — (1) Incompetence, (irrespective of other causes); (2) Inexperience, (without other incompetence); (:}) Lack of capital; (-i) Unwise granting of credits; (5) Speculation, (ontsid,. regular business); (6) Neglect of business, (due to doubtful habits); (7) Persona] ex travagance; (8) Fraudulent disposition of property. B. — Not Due to Faults of Those Failing — (9) Specific conditions, (dis aster, etc.); (10) Failures of others, (of apparently solvent debtors); (11) •Special or undue competition. Coal Mining. Not only does the mining of mineral wealth in this and other countries pro- duce great wealth but it is one of the principal occupations of labor. Of coal alone the world's production in short tons is about 850,000,000 tons annually. Let us follow some of the processes of mining. Coal having been located in paying quantities by prospecting and geological surveys, the nexl step is to extract the coal from its "seams." There are mam different methods all looking to securing the greatest amount of marketable coal with the least expenditure of labor and other expense. Generally speaking, however, there are two kinds of coal mining: open and closed. Open working i- used when there is no over "burden" of rocks or barren earth, or where it is so small that it can he removed easily, disclosing the coal veins. Then the work is really only quarrying or open excavation and machines for tins kind t )\' work are used. Closed working is used where the "burden" of rock and earth is so heavy that the work has to be done underground. This is the kind most generally known. The first thing to be done is to gain access to tin coal "m ams" by means of shafts, slopes or tunnels, shafts are vertical openings from the Burfaa ■•(' tho ground to the "seam." In this country shafts mostly are square and lined with timber work. In Europe many of them are round or oval and lined with brick. iron or masonry. The number of shafts depends upon the characti r <>t' the mine, .C to SOME OTHER BIG TRUSTS, an hut usually each shaft has two or more compartments in each of which is fitted an elevator for lowering and hoisting coal-cars to and from the mine. In deep mine> fewer shafts are sunk than in shallow mines. One of the Largest coal-mine shafts in the world is situated at Wilkesbarre, Pa., and is 1,089 feet deep, 12 x 52 feet in size and has five compartments. Slopes are openings begun when the coal seam crops out in the shaft from an inclined direction. These also generally have several compartments, most often with three, two for hoistways and a third for a traveling way, piping, etc. From the L'nited Stati Departmi m.i Labor Reports TROLLEY ELECTRIC LOCOMOTIVE IN COAL MINE lO m R< ii. nil i. lating i hal 1 1 ■ and .Mill '"iilt Mod< in m ding to Up- work 1 1 ■ and theli . : ' "in i s Ini hea to i Slopes sometimes use cages and usually are lined with limber. Tunnels nearly horizontal passageways extending vini.dU from a hillside into the earth t., meet a scam of coal. These are built much like railway tunnels. The timber work in minis needs to be watched carefully, for sometimes it breaks without warning and buries the miners alive. Often th< timber used is treated with some preservat ive. W" Ik m ■ secured to the coal il methods of working them. Th< bc are called, long wall, room and pillar, pillar and chambt \\ SOME OTHER BIG TRUSTS. From the United States Department of Commerce and Labor Reports. ELECTRIC COAL CUTTEB. The evolution of the chain machine for coal-cutting was one of the most notable steps- - practically the final step in the development of a successful mining machine. the i with which it can do its work seems in, ,.,| i hie. One of these machines has a record ..... squ; .. feet in nine and one-half hours, a fair average for such a machine . cu tting • of coal every eight hours. Then, is a saving of 26% cents per ton of machine mining for pick mining in rooms. As the height ot the ma- ■ it can be operated in very thin veins. board-and-pillar, etc. The two principal methods are mining along the wall of the seam, taking every bit of coal out and allowing the roof to settle down, and that of cutting out rooms or chambers and leaving pillars of coal to support the roof. In America machinery is used extensively, although there is much cutting by hand. There are four principal styles of machines, pick, chain- cutter, cutter-bar and long-wall machines. Pick-machines are similar to a rock-drill. Chain-cutting machines are devices by which a chain hearing cutting th i- run; this i> worked by a motor against the wall of coal. Compressed air and < lectricity are used to operate machinery in the mines, and mechanical ventila- tion by mean- of fan- and blowers is employed to free the mines of gases. In order to get the coal to the surface there either is a hoisting engine that lift- the coal in a cage regardless of any balance or a device by which the car then going down into the mine helps to lift the ascending cage. In the mines SOME OTHER BIG TRUSTS. 318 animals, generally small donkeys, are employed to haul the coal cars which run through the tunnels, though machinery here also is used to sonic extent, such as locomotives operated by steam, compressed air, electricity, gasoline, etc. The excavations for coal mines run to an extent almost inconceivable. Almost tha whole city of Wilkesbarre, Pa., to say nothing of Scranton and other places, is undermined. The mines even go under the beds of rivers. When the coal is brought out of the mine-, before it can go to market it musi be prepared by being screened over bars and through revolving or shaking screens. ( >ften it must be broken over heavy rolls to make it the desired market size. When the coal contains much sulphur it is washed. Often Lumps of slate appear in the coal and to remove this and similar impurities boys and old men are em ployed to sit along the chutes leading to bins and pockets and separate' this refuse EProm the United State Department of Com mi i iboi Re| ELECTRIC DRILL AT WORK IN A MINX. >a1 mlnln mmon, and app< I horoughl ■ d foi i"" Ing the coal foi shooting it down aft been undercut n be ■ i at iii/,.. illy hi horizontal!) 31 1 SOME OTHER BIG TRUSTS. from the coal by hand. The coal districts of the country arc operately largely 1>\ foreign labor and they have been the scenes of much of the most sanguinary labor disturbance with which the history of trade unionism is marked. The great anthracite coal strike of 11)01 and 1902, settled by the intervention of President Roosevelt, was one o\' the most remarkable of these disturbances. Iron mining is another greal industry of this country, in 1902 the production of iron ores in the United States being about 32,000,000 long tons, with Minne . Michigan, Alabama and Pennsylvania the principal producers. The Lake From ' I States ] epartment of Commerce and Labor Reports. TWO 250-VOLT ELECTRIC LOCOMOTIVES IN COAL MINES AT KINGSTON, PA. Thus far the subjeel of mine traction has I n considered from the point of locomotives ■ ■ . ,i or underrunning trolleys, or by a third rail, with current from a dis- i point y. It is possible, however, to .■mplny sHi'-piopHlum m- ;iutumni,ii, i., pped with storage batteries, so as to dispense entirely with the dan is and wires charged with exposed live current. Several types ise. Superior region is rich with iron ore and the Mesabi and Vermillion ranges are the mosl productive of the world. One mine in Minnesota alone has pro- duce.! 1,681,000 tons in a year. Mosl of this ore when mined is shipped by rail to ports on Lake Superior or Lake Michigan and thence by lake steamers to manufacturing cent< rs such as Chicago, Pittsburg and Cleveland. In mining of metallic ore or minerals th< methods used do not differ much from those used in mining coal. When there are surface deposits open mining calls for stripping the overlying worthless material called the "burden." This SOME OTIlVAi BIG TRUSTS. 315 may be removed by pick, shovel and wheel-barrow or by tram-car and steam shovel. When the ore is exposed to view there are several methods of Loosening it. The most desirable position for the ore is on a hill side where the pit will drain itself. One form of surface is of particular interest — hydraulic mining. This is used mosi frequently in mining gold. Water is brought a gnat distance with a heavy fall and is directed by means of great nozzles against the ore body, tearing it loose and separating gold from rock material. One can hardly imagine the destructive power of a stream of water thus used until he sees it in operation. A NEW WAY OF LOADING COAL ON CARS. The coal la hoisted rrom the mine to a system of chutea through wl ns, so that four ralli Willi ;i Mitt- "1 COal. Underground work i^ mosi common in metallic mining, because mod ol the ore deposits come in irregular places. The mines run i<> grcal depths and havr man} cross sections. (Se< description of Calumet and Hecla mini ). Th. extraction of salt from the earth nearl} approaches the mining pro* and. in fact, where rock sail is obtained deposits are worked bj actual mil methods, rach as the use of the customarj shaft, chambers, bn alters, si parati etc. The simplest method of obtaining salt, however, is l»\ evaporation of 316 SOME OTHER BIG TRUSTS. water. This Is used seldom save where no subterranean supplies of brines or rock sail exist. Tliis method consists simply in exposing the sea water in tanks to the sun's rays. Brines from below the surface of the earth are pumped up through drilled wells, after the manner of boring for oil. Attn- one tube has been driven down into the earth another and larger one is sunk outside of it, extending to a lower level. Water is then forced down between these tubes, dissolving the rock salt, which comes up in solution in the inner tube. After it is brought to the surface this brine is taken to settling tanks where suspended clay is allowed to settle. Then the brine is pumped to evaporating vats. These are either placed under a movable roof, so as to be subjected to the sun's heat, or are near furnace-; or steam pipes which evaporate the water by artificial heat. The latter is the usual method. ENTRANCE TO THE CHICAGO RIVER FROM LAKE MICHIGAN. T'ntil the C Drainage Canal was bulll by the City of Chicago al a cost of about 0, this river was supposed to empty Into Lake Michigan and carry off the sewage A strong wind from the easl or northeast, however, would change the current of the river, driving ii backwards. The I>rainage Canal has caused a continuous current inland, purifying the river water. The View also shows lake boats which carry both pas- From the United Bta1 INTERIOR VIEW OF MARBLE QUARRY. PROCTOR. VERMONT. K? d c U e C n ? g of 8t ?h e e 8 oS?pu? and dei orative work. CHAPTER XXVI THE HARVESTER TRUST. .in Estimated Profit of Forty Million a Year Save the Wheat Fields- Wealth of Agriculture— Improvements in the Implements of the Farmer — Immense Hay and Corn Crops. When it is considered thai the chief characteristic of a trust to be profitably organized, is as nearly a total monopoly of the field of industry which it fills as possible, the Harvester Trust can be said to be typical of all that is aimed at in trust organization. In the first place the field of this trust which in its cor porate title is known as the [nternational Harvester company is as rich as ran be imagined. Kadi year the production of the American farms in round numbers is $4,900,000,000. This is about eight times the receipts of the government in one year, is more than all the savings hank deposits in the United States, and is almost three times the gross earnings of all the railroads of the country. It is six times the Capital of all the national hanks and four times the output of all the mines gold, silver, iron, copper and coal. Naturally to produce this annual crop the farmer must spend a great ileal for machinery, implements and tools. This amounts annually to about $100, ()()(),()()(). It was for the purpose of controlling the business of manufacturing this farm tool supply that the Harvester Trust was formed in 1902. That the field has been lucrative and that it has been controlled is testified to by the olii cial slat, ineiits of the company claiming thai '.):) per cent, of the harvi machines Bold in this country are of the International Harvester Compa manufacture. It i^ estimated that this trust makes about $40,000,000 h ,„ii of this business of manufacture. In order to conduct this business the trust organized with a capital slock of $120,000,000. The component parts of the trust before the incorporation which con Bolidated five independent concerns into a centralized monopoly were the Mc Cormick Harvesting Machine Company, the Decring Hai I ompany, the Piano Manufacturing Company, the Milwaukee Han I ompam and the Warder. Bushnell .V Glessncr Company. At the time of the tru ition these were private or close corporations, controlled h\ tin Families which had found, d them, principally 03 the Met n the trust - nized 819 ;-;,» HARVESTER TRUST AND AGRICULTURE. it was announced officially thai no stork would be offered for sale to the public, for control was to be held l>v those who conceived the idea of monopolizing the THE MANUFACTURE OP BINDER TWINE BY MACHINERY. ei Industry whereby the Introduction of labor-saving machinery '"ff •' ■ mand for labor, for had not the self-binding reaper been invented, ■ demand for the twine. Most of it is made from Manila hemp, which from tb^- Philippine islands. Chicago is by all odds the greatest twine producing cen- irld and distributes its output from Oiina to Peru. One Chicago manufacturer -ii binding twine every working day In the year to reach half way around }„, , *;""'"• .The capacity of his two manufactories is eighteen miles every minute, or about ?,,Z',\. 320 miles a yar. HARVESTER TRUST AND AGRH ULTURE. :i l 2i farm implement trade. Later the McCormicks gave the employes of the Mc- Cormick plants an opportunity to share in profits by taking some of the -lock. and elsewhere sonic stock was distributed in small amounts. Besides having almost a complete monopoly in its chosen field and hence able to raise prices of its machinery considerably before independent concerns can cut into its business to a great extent, the trust is favored by the government in tariff benefit'-, patent rights, valuable trade marks, etc. The trust also controls great iron mines, coal mines, steel mills, etc., by means of which it is able to manufacture more cheaply than the independent concerns. Further- more it controls railways, steamships, ropeworks in .Manila and other industries which enable it to invade Europe, Asia. Africa, Australia and South America with its products. This foreign business is supposed to clean op about $21,000,- 000 a year and most of this business is done at a lower rate than that given the American farmer. The reason advanced by the trust for this discrimination against home buyers is that it is surplus that is shipped abroad, and anything above a certain amount is char profit. The farmer, however, is asking, "How does the 'square deal' enter this proposition.-" In fact >o sharp was the crj against the practices of the Harvester Trust that an attempt was mad.' in Min nesota to start a state factory for the manufacture of farm implements so that more active competition against the trust could be organized. Save the Wheat Fields. Today one of the greatest problems ahead of the American farmer is, Must the people of the I'nite.l Stales buy its bread of foreign nations? Few people nali/.ed that such a question ever could come up until in 1904 the United States government was forced to grant a rebate on the custom duty on wheat imported into this country so as to prevent the great export flour hide of the United States from going into ruin. This came from the verj poor crops of wheat that year, which iii turn made the supplj for flour -<> small thai we imported wheal from Canada to mi\ wiih the d »tic supply al the mills. Thus we found ourselves confronting the humiliating fad thai our noble rank among the nations as purveyor of breadstuff's for the world; as the granny f the world in fact was threatened. In our (lour trad, will. England Ireland, Russia far outstripped us. Of course some people al this down -'is simp|\ a CTOp failure which is bound to com- one. in a ulnL Bui no [ess authority than James Wilson, - tar} of Agriculture in President Roosevelt*S cabinet, judged the difficulty to I„ fundamental. The estimated product™ capacity of th< ipring and winter wheal HARVESTER TRUST AND AGRICULTURE. 823 is about 750,000,000 bushels, ami uearly thai much has been raised in a year of bumper crops. There is no question that there is Land enough to raise all the wheat this nation needs to consume, but in 1904- the total crop was less than 550,000,000 bushels and the consumption was about fi 1 - bushels to each inhabitant or about what was grown that year. It is a fact that Americans are the greatest wheat eaters in the world and consumption LS increasing. The world also is calling steadily for more wheat. Something, then, is seriously the matter when we learn that during the government year which ended dune 80, 1904, this country exported in wheat and wheat Hour only to the extent of 120,727,000 bushels, compared with 202,905,000 bushels the previous year. Furthermore since that time exports fell off to a greater degree, in the seven months following the exports being equal to only 27,927,000 bushels compared with 93,083,000 bushels in the corresponding seven months of the previous year. This points to two things, the increased home consumption and the poor crops in recent years. At once the question is asked, What is the trouble? Authorities answer thai the farmer is robbing the soil. Year after year the soil has been given little or no rest. Crop after crop has been grown and has used up much of the nitrogen, or plant food, in the earth. It is the law of nature that the land must have a rest or else musl be given other means of accumulating the life giving properties that will grow good wheat. Certain vegetables if planted in the place of wheat for a seaxni or two help the fulds. Hut scientific fertilizing is one of the best methods to Urd the land. Iii a little over twenty years the agricultural productive power of tin- United States has nearly doubled itself. In 1880 the wealth of the principal crops measured roughly was aboul $2,212,500,000. In 1900 this wealth had been increased to about $3,764,000,000, in L904 it passed the $4,000,000,000 n and now is steadily gaining on the goal of $5,000,000,000. Pria s <>\' commodi ties change from time to time, but the following table will indicate approximately tin yield and market value of the harvests of 1904 \. ki M.l . PRODI < PIOW, m -ill l s. VALUE. Corn 92,231,581 2,467,480,934 $1,087,461,440 Winter wheal .. .26,865,855 146 Spring wheat 17,209,020 219,464,171 184,878,501 Oats 27,842,669 894,595,552 1,900,013 Barley . . 5,1 t5,878 139,1 W,958 Rye ' 1,79 !,6 .'.; I. :.(!". 18 ' Buckwheat 15,008, 150,768 Flaxseed , I ,400,584 ,758 i J t HARVESTER TRUST AND AGRICULTURE. ACREAGE. PRODUCTION, BUSHELS. \A1.UE. Kiev 662,006 81,096,088 18,891 ,428 Potatoes 8,015,675 882,880,800 150,678,892 Hay 39,998,602 60,696,028 529,107,625 Tobacco 896, 169 t660,460,7S9 53,882,959 Other grasses, etc 700,000,000 Cotton $13,500,000 441, 250,000 Fruit, etc 200,000,000 Wool (scoured) {82,000,000 16,000,000 Total, 1004 $4,371,533,002 Total. 1000 3,764,000,000 Total, 1890 2,460,000,000 Total. 1S80 2,212,500,000 ♦Tons f Pounds. f Bales. From the foregoing table it will be seen that corn brings the most wealth to the country. If hay be considered separately and not figured in with other grasses such as alfalfa, etc., these other grasses come second in the list. Then comes hay and closely following are wheat and cotton. In considering the great wealth derived from agricultural pursuits of the country the public often looses sight of the value of hay and grasses. When a failure or partial failure is reported in the corn, cotton or wheat crops, great concern is expressed over the loss thus occasioned. But almost always the grass and hay crops make up in great measure what is lost through the other misfortune. Grasses, generally speaking, number something like 3,500 species and range in size from less than an inch in height to the 100 feet or more of the gigantic bamboos. They are distributed over nearly the whole world, some being charac- teristic to the tropical regions, others to the far north or south in the vicinity of almost perpetual snows. Some nourish in dry and sterile soils while others abound in rich ground with abundant moisture. Some are peculiar to marshes, stagnant water or slow streams and some grow only along the seacoast. Many grasses are provided with peculiar adaptations to protect them against drought and hot winds. Between the veins on one side or the other are large, thin-walled cells that keep the leaf expanded when normal conditions are present. When a dry wind blows they collapse and the leaves roll up, preventing too great evapo- ration. When rain comes again the cells swell out and cause the leaves to return to normal shape. Some of the principal grasses, many of which make good hay, are pampas grass, buffalo grass, timothy, sweet vernal, Kentucky blue grass, grama grass, rough leaved grass, red-top, brome, blue-stem, mesquit, etc. Grasses c — c - X 4i f = M - ■ -aj O -V. s . £ St a I 2§! w w 5* M .£7 . z « R p R o < 826 HARVESTER TRUST AND AGRICULTURE. ot uianj kinds are used for pasturage, for soiling and for hay. They constitute a very important group <>t' feeding stuff for all farm animals. The value of grasses for feeding, however, is greater in the 1 forms of hay, or cured crops, than in green grasses. This is because hay contains more nutritive materia] in proportion to its hulk than the green crops, for it has been con- centrated by the evaporation of a Large amount of the water originally present in the grass. The different sorts of hay are very important feeding stuffs for farm animals because they not only contain nutriments but because, like all coarse fodders, they furnish bulk in the ration. In early times hay alone was used as the winter fodder for animals. Experience, however, lias shown thai:, although animals may be maintained without other feeding stuffs, where abundant milk supply or heavy weight is desired grains or other food must supplement hay. Most important hays arc made from such grasses as timothy, meadow fescue, meadow foxtail, brome, etc. Hay also comes from such legumes as clover, alfalfa, etc., and from cereal grains such as rye, oats and barley. Generally speaking hay should be made from grass cut before it hears fully ripened seed, as the nutritive value increases up to this time and decreases thereafter. Corn is a kind of grass. It is a universal crop to the United States and is grown on many different kinds of soil, but for its best growth a well-drained, rich, sandy loam, which does not hake during dry weather, is required. The bulk of the world's corn crop is produced in the northern portion of the Mississippi Valley, where it matures in about five months. It is planted from about May 1 to the twentieth of that month. In other latitudes planting is done late enough to escape late spring frosts. The "corn belt" of the upper Mississippi, as it is termed, is made up principally of Illinois, Indiana, Iowa, Kansas, Nebraska and Missouri. These states produce about three-fifths of the corn crop of the United About fifty bushels to the acre is considered a good yield, but the average yield for the whole United States is about 25 bushels to the acre. Tlie largest yield of corn on record, 237 bushels an acre, was produced in South Carolina. The time of harvesting corn depends to some degree upon the use to which the crop is to be put. When fodder i^ the purpose corn is cut when the kermis begin to glaze and the lower leaves begin to dvy. The cut stalks art' put up in shocks and ht't to cure in the field. When (\vy, the ears are removed and the stalk- are used at once for feeding or are shredded and then U(\. Corn grown for grain is cut when it is fully ripe. The ears are gathered, husked and stored m >iat cribs, through which the air passes iii drying the corn .and preventing attacks qf mold. The nm-l common disease to which corn is subject is smut". This diseasj i- not well understood. Rust does no material injurv to corn. HARVESTER TRUST AND AGRICULTURE. 327 Because of its value a* a i'ood for the human being and for its ready adapta- bility into many tonus of food, wheat is the best known and most valuable of tlie- grains. The original home of wheat is unknown, but probably it was first a native of western Asia. When wheat was first used is not known, for in most ancient monuments wheat lias been found, proving that before history was written wheat bad been used as a domestic food. It was not grown in America before Columbus's discovery. Wheat needs a fertile and well-prepared soil. It grows best and makes most of its growth during tin- cool part of the year. Therefore, it should lie sown as soon as conditions will permit. A moist soil at sowing time is tbe desirable condition, provided it is not so moist that it cannot be properly worked. Wheat is generally harvested before it is dead ripe in order to prevent the grain from shattering during the different processes from the time it is cut until it is stacked or threshed. This, however, is not the case in California. The time of harvesting wheat, like the time of sowing, varies with the latitude. There is a tide of wheat harvests that sweeps over the United States from May until August. This tide begins in Texas, where the wheat is sown firsl and where naturally it matures first, and ends in tic late summer harvesting in the greal spring wheat country of the norl hues!, m states. Harvesting time on the American farms is an interesting and critical period. When the work of cutting and shocking is done, the sheaves are hauled and stacked, remaining so until threshing time. The principal thing to do in stacking wheat is to see to it that the outer tier of sheaves slanis so that the rain may be shed from the grain. In this country the threshing i* usually completed in the fall. The wheat crop of the world in 1900 was 2,586,025,000 bushels. Europe supplied 1,475,472,000 bushels of this and the United States about half as much. The principal wheal growing stales id' this countrj are Minnesota, North Dakota. Ohio, South Dakota. Kansas, California, Indiana. Nebraska, Missouri, Iowa. Washington, Pennsylvania and Michigan, the yield of wheal running proportionately in the ord< r of states named. During no period has the development of harvesting crops been so marked as during the last half of the nineteenth century. In olden times fanners used the singli handed sickle and two handed scythe and for a Ion-;- time these were the onl\ implements for cutting grain. The cradle is a much more receni invention which consists id' a scythe, to the handle of which is fastened a se| of three or more fingers of lighl wood as long a- the blade. Use of this caused the stalks of grain to be piled up neatly as they were cut down. The gleaner was ;1 feature of olden time harvest ing. This person w en! along after the reapers who gathered • d. ■ I , »t» ■'i'lfeH o'S ■C c O o ft CO +■»© m o o 32 "J o Celt £ ■ 0/ *.C a .{3 o ,2 — o ■I. 0J.X4 O C __ a x " = 5 - ca^ — . *; o « o cs t.© 5 «oo O/ p w h C w bo bJ>H «H c S* S w n w 5 in o ■ChS y a- -3 £ - ^ o & * ie o < ^H5 * S 0j £ £ S the building of a road to the Pacific, but it was really RISE OF A GREAT NATION. tlir war which resulted in the construction of the Union Pacific and the Central Pacific railways, begun in 1865 and completed in 1869, and which broughl rail connection between the Atlantic- and Pacific Oceans. Indeed, at the close ,,f the war there were only 85,000 miles of railway track in the United Stat,-: for all practical purposes there was not a mile of road west of the Mississippi River. Today the railways of the United States measure 211,000 miles in extent. While many patriot- in the days of Polk, Taylor, Fihnore, Tierce and Buchanan argued for the construction of a transcontinental road for business purposes, it was military necessity that broughl about actual rail laying in 1865. The agents of the Secession had been active in California in 1861, and one of the impulses which secured legislation for building the road was the fear that if direct and quick communication between the Pacific slope and the rest of the country could not he obtained soon a movement for separation might gain headway in the far west. Hardly had the Union Pacific and the Central Pacific joined rails when further great impetus to railway building, also a result of the war, was given and the second of the great transcontinental roads, the Northern Pacific, sprang into existence. On this road construction work began in 1870. Jay Cooke, the man who floated the bonds of the United States government during the war. headed the project, hut the panic of 1873 swept him off his feel and the work on the road was suspended until Henry Villard seized the opportunity and pushed the road to completion in 1883. These two great roads and the Southern Pacific, the Great Northern and the other trans- continental roads threw open the trans-Mississippi West to settlement and incited a population expansion without parallel in the previous history of the country, or, indeed, in the history of any other part of the whole world. During the Civil War for the first time since 1818 the railway construction of the United States had fallen to below 1,000 miles a year. In the suffering - :-hi:md building practically had ceased. The ,'35,000 miles of track in 1865, expanded to 52,000 miles five years later, the North and West being practically the sole gainers thereby. Industrial expansion below the Mason and Dixon line was to begin later. The 52,000 miles of roadway of 187;) became 93,000 miks a decade later; in 1890 the mileage of the country amounted to 166,000; in 1900 it amounted to 194,000 miles and at the beginning of 1905 if amounted to 211,000 miles. This increase of railway mil, fair index of the financial and industrial growth of the country in the forty years since the close of the gnat war of the rebellion. With the removal of the one great bone of contention between the North and RISE OF A GREAT NATION. l .m the South in the abolition of slavery, the inhabitants of not only this country but of the whole world saw golden opportunities ahead of this nation in a glorious era of peace. More capital for industrial investment was sent to this country in the five years immediately after Appomattox than in any fifteen years before that time. The immigration into this country which had dropped to 89,000 people in each of the two years of 1861 and 1862 leaped to 247.000 in 1865, and was :387,000 in 1870. Two years later fo? the Hist time in history it crossed the mark of 400,000. In 1881 it crossed the 600,000 mark and one year later another 100,000 was added to the yearly influx. That was the maximum annual immigration until 1 1)0:3 when it reached 857.000 people. Signs now point to the million mark being reached in 1905. Very nearly three times as many immigrants have landed in the United States in the forty years since the end of the Civil War as came here in the previous seventy-six years since the first inauguration of George Washington as President. Railway building and phenomenal immigration could result in but one thing politically- tlii' addition of territory to the country in the shape of new states added to the Union as rapidly as population warranted. At the end of the will' there were thirty-six states, three of which had been created since Lincoln's first election as war measures. These were Kansas, admitted in •January, 1861: Wesl Virginia, admitted about the middle of the war and Nevada, created .just in time to take part in the presidential canvass of 1864. The firsi state created after Appomattox was Nebraska, which was let in in 1867. Colorado succeeded in getting into the Union in 1876 and became the "Centennial State.*' Then thirteen years elapsed before any more stars were addd to the flag. This time a large bunch of states came in. The railways had been building up the country wesl of the Missouri River. The Northern Pacific and other great lines had carried people over into the shadow of the Rocky Mountains and beyond them mure quickly and more cheaply than the} had gone from the western border of Pennsylvania over into Ohio in the days of President Jackson. The consequence was the admission, in 1889, of North Dakota, South Dakota, Montana :ind Washington and a few months later Idaho and Wyoming came in. This completed the roll ;i> it stood in 1905, with the exception of Utah which was admitted in 1896. Thus the thirty sj\ states of L865 became the fortj li\«' of today. Although tin great increase of wealth, population and prosperity in the North and West came through the tenihii.it ion of hostilities between the North and South, the latter, perhaps, w;is the greater gainer in some things thereby. Population and wealth, :i> has been stated, tell oil" during the great conflict. *- >. bo 5*fi &5 "-• 03 o Ofc§ «*8 • So in ho j .si — ™ 93 ~ £ tg 3 « ,h w aJ 3 o « Cb= 3 «n Co C < .2g"5 to CJ 0) c 3 ^ rt ■ghE 2^ p W a *'" «! c^-o M £ O K 4) 0i CO > fc ^ C8 C O eS CO 58 o H o 2 * c oto.2 oca O h JH co 0/ ^ to" 6 fi . Ss j= S * 5 — Cy £ ■5 Safe Si o a>'> "O En a* -• „ to o ^ § O w-o Cm » .C o o X ^_, +J o •- w c o 2 o>-" o u, bo 0) to " u S p 0, rr; g, .~ S a ^E o" ^I'll o »+>«-« O) S CO M b '"«dO iTki >.~ +2 _ *J CS Ml u >> CD £ s* 1 a 3 • © M .r c U RISE OF A GREAT NATION. 335 Had a census been taken in 1865 it probably would have shown fewer people in the eleven ex-Confederate states than there had been in I860. For a time political intrigues, such as "carpet bagging," worked against the South in its reconstruction by piling up debts. But the greatest difficulty which beset that section of the country through the voting power granted the negro was gradually overcome and in 1877 reconstruction was practically completed by the withdrawal of federal troops from South Carolina and Louisiana. But even while the political troubles of the Southland were at their highest, the natural resources of that section of the country began to attract attention. West Virginia, Tennessee, Alabama and other states were rich in coal and iron deposits, which before the war had been unthought of. and these have been utilized in an increasing degree in the last twenty-five years until the Birming- ham, Ala., iron and coal district is now celebrated around the globe. The United States for a long time was far down on the lisl of coal-producing countries. Not until 1900, indeed, did this country pass England, which then led the world in this respect. Today we now -land at the head and produce JJ7 pel- cent of all the world's coal. To this gain the South has made a large contribution. In iron it has been almost the same tale. In 1SS0 the pig iron production of this nation was 3,800,000 tons. It was 18,000,000 tons in 1!)!):} and in 1905 signs pointed to a total of 21,000,000 tons. Here the South has made an important contribution to the sum total of the country's expansion. The Birmingham district now rivals that of Pittsburg, and even has advantages Over the latter in having the coal, iron ore and lime stone nearer than in the Pittshurg (i. Id. Hut the great - 1 ; 1 1 > 1 < - of the South is cotton: indeed, this product [s ignized as distinctly American in the international trade of the world as this country's cereals. In 1904 the South raised the greatest crop ^\' tin staple in history, gathering very nearly 14,000,000 bales of 500 pounds each. When our takes into consideration the fact that in I860 the cotton crop of the South was of world wide reputation ami value and yet was only 1,800,000 hah., or about one-third that of 1904, it will be seen how our great influence has worked for expansion and prosperity of the country. [ndced, even sine. lsso. when the South's first real progress since the war began, the cotton crop has much more than doubled in size measured by the 190-J duct ion. lint l.i us go a step further. The United Stat., has a monopoly on the cotton production of the world, raising about three-fourths of the cotton the whole world. And all the American crop is rais< I in the South. Nor RISE OF A GREAT NATION. is this connection of the South with cotton restricted to raising the raw material, for the old slave states now have caughl up with the North. In 1880 the South manufactured into textiles only 221 hales of cotton. Today aboul half the 1.000,000 bales retained for consumption in the United Slates and manufactured into articles, arc put through Southern home mills. If* con ditions warrant, this progress can be furthered remarkably. With the near- ness of it- supply of raw material, with cheap labor and with low rents, GOLD PROSPECTING IN THE YUKON COUNTRY. Southern manufacture could surpass that of the North. As for cotton pro- duction, with the waste lands of the South once cultivated, the bumper crop of 1904 probably could be doubled. Great Production of Gold. Production of gold today is at a greater rate than ever before in history. In 1904 the known new gold brought into commercial channels from the mines was $550,000,000 in round numbers. Before the year 1905 is passed it is possible there will be added another $400,000,000 to the world's gold supply. RISE OF A CHEAT NATION. 337 So rapidly indeed is gold increasing that political economists are now refer- ring to the increase as the "'golden flood." Whereas it was an overproduction and abundance of silver which caused great perturbation among financiers a decade ago, now it is the standard metal of money the world over which is Prom Lh« Unit Departmenl ol Commerce and Labor Reports. STOPE, WEST DRIFT 2,000 FEET FROM LINE, ANCHOR MINE, NEAR PARK CITY, UTAH. The production ol sold and Bllver antedates the da* - of written history The Bearch foi the precious metals prompted the discovery nt new continents and stimulated the effort alchemists, thus Indirectly leading to the development of scientific chemistry JTel It is only ni. ik <epa ii in Rep INTERIOR OF MILL Or THE UNITED GOLD MINING, MILLING AND TUNNEL COM- PANY, IDAHO SPRINGS, COLORADO. The extraction ol tl from thi i was In th< od not differentiated from mining. 'Mm ii... i nutural method which suggested Itself to the human mind foi dealing with the gold-bearing rock was to reduce it to thi luvial deposits were ,i and I" separate the •! 'i particles ol gold from the pulverized mass by the ram II lar method of washing The advent of the stamp-mil but with the progress of gold mining .i poinl hed where it was round Inndequnti The probh m !,. ii lulls solved uiiiii the process "f concentration was Introduced Onlj rifh ores could bear the i ido refractory ores wl could nol i" i' thrown awaj The new i ation, which roduci the volume "i ore i" be shipped and treated wni tantamounl to a of new gold mines. CHAPTER XXVIII MONEY. Chinen the First to Coin Money Sourer of Paper Mom// The Modern Bank-note Regarded as a Swedish Invention. Whatf.vkk fills the functions of .1 medium of exchange and a measure of value, however crudely, is money. In the early times the exchange of com- modities was carried on by barter or trade. Homer, in the Iliad, says that when 1 rom Lemnos Isle a numerous fleet had come, Freighted with wine All the other Greeks, Hastened to purchase, some with brass and some With gleaming iron; some with hides, cattle or slaves. Such a method, however, was very slow and cumbersome. There were two great objections to it. Those who wished to buy might have nothing which those who wished to sell, cared to take in ex- change. Furthermore, much time was w asted in trying to decide the relative value of the different articles traded in. There- lore, gradually, certain objects were fixed standards of value which might not be used themselves, but were accepted in order to exchange again for something more desirable for use. Among other things that have been put to this service have been fin-. >kins. leather, sheep, cattle, early Chinese pu (SHIRT) money. B C 700 wampum, cowries, grain, olive oil, salt and many metals. The use of cattle in ancient Europe for this purpose resulted in the Latin word for money, "pecunia," from pecus, cattle. In our own lan- guage the word ••chattel," or "cattle'* has come to include all property. On the whole, pieces of metal were found to be most convenient for use as money. They could be divided and weighed easily, were easy to carry and were readily indent ified. Therefore the names of weights soon came to pass tor the names of coins, as the pound, the shekel, the livre and the lire. 340 MONEY. 341 The metals most generally used have been gold, silver and copper. Iron is said to have been used in Sparta and among the ancient Britons in the form of bars. Tin coins are reported to have been struck off in ancient Syracuse and Gaul. Glass also is said to have been used in Egypt and Sicily. One of the most remarkable illustra- tions of the passage from the state of bai- ter to the use of money is to be found in the history of Chinese money. In ancient China knives and pieces of cloth long had been used to a certain extent as a standard of value, almost as gray shirting now is used in India. About the twelfth century before Christ the Chinese government tried to substitute coins for various objects in common use, such as knives, pieces of cloth, hoes, sickles, spades, etc., and made small metal models to represent the objects them- selves. The two chief coins of this -oil were tin "pu" coins, roughly representing a shirt, and the "tao" or kmfe coins in the form of a knife. The word "pu" means cloth and "tao" means knife. These forms were very inconvenient and gradually the blade <>f tin knife was shortened, while the end ot the handle, which was pierced by a hole so that the coin- might be strung on a cord, was enlarged. Finally the blade disappeared and tin' circular end of tin handle alone remained with a hole in the middle. The Chinese said, in explanation of the evolution l<> tins round tribute money silver shaped coin, that money which is meanl to roll T|ii . .,. *;, *:„™'™; ,,,.,, ,,, ln around the world should itself be round. This V'i.,/'," bJ Bt j2S when* change occurred about the second century before %\™\ ^M hhHn 1 i!i. w < U- , I i. i • ,i ,• I "Shiu up the tribute money." irwt, and resulted in Mm form known as etc., etc. St. Mathew, xxli. L5. CHINESE KNIFE MONEY. About B. C 300. \ \-: MONEY. "cash," now m general use in China and very common in bhis country because the Chinese attach it as a lucky charm to articles sent for sale to this country. M;m\ of these coins bear a mark like a new moon. This originated in a characteristic Chinese accident. About 620 A. 1). a model in wax of a proposed coin was brought to the Empress Wentek for approval. In taking hold of it she left on it the imprint of her thumb nail. For hundreds of years this mark has been on Chinese coins and ha- even hem copied on the coins of Japan and Corea. There have been many other very peculiar shapes of money. In Persia scimiter-shaped pieces of metal were used as money. Some- times rin^ were used, as in Ire- land down to the twelfth century, and in the interior of Africa today. In other cases money was in the shape of bricks or ingots. These gradually came to he stamped ,n order to verify their weight and fineness. Some countries seem not to have known coins at all. This appears to he certain in the case of those who erected the Pyramids, the Sphinx, the temples of Karnac, Babylon and Nineveh. The word money implies coin. One explanation of its origin comes from tin fact that it was in the Temple of Juno Moncta that early Roman coins w.ic struck off. Cicero says Juno re- ceived this name from the Latin verb moneo, because she advised the Romans to sacrifice a sow to Cyble to avert an earthquake. It is probable that the Lydians were the first of all nations to intro- duce the act of coining gold and >ilver. Generally the right of coinage had been a prerogative of the government. Until 1561 coins were made by heating CHINESE KNIFE MONEY. 7-22 A. D. The blade was shortened for convenience. CHINESE CASH. 680 A. D. MONEY 34:3 spherical pieces of metal and punching them with a die. In that year the mill and the screw were invented and a century later the improved method of minting was generally accepted. The use of paper money as currency and an instrument of credit dates back presumably to the Carthaginians. This people used a sort of stamped leather as money, and it passed as a representative of specie, but outside of Carthage it was of no value. Some historians regard paper currency as having originated in China late in the second century B. C. The explanation of this origin has it that when one entered the presence of the Emperor it was customary to cover the face with a piece of skin. It was first decreed that the skin of a certain white deer kept in one of the royal parks alone was permissible for this use. These of course sold at a high price, hut though they may have passed from one aobleman to another it does not seem that they were gener >' ally circulated. Travelers in China as early as by order of Pontius J ' Pilate, it bears the name Ti- Iggg reported paper, or rather cotton, money in berius on one side, and on the £ * reverse, three ears of corn Um ._ \ r account of their use says that SO much bound together. money was put into use about 1822 that the value of the notes fell until it took $15,000 worth to buy a cake of rice. The modern hank-note is regarded as a Swedish invention. In 1().".(i the firsl bank in Sweden was founded by one Palmstrucls and this i^ said to have issued bank-notes in 1658. It does nol seem clear, however, that these were bank-notes in the present day sense, and the first real issue probably dates with the foundation of the Bank of England, whose charter was signed July 27, 1694. The first reference to a note of which the amount was printed, is found in the minub - of this institution of May 1 and 2, 1695. The first note-, printed from copper plates were issued in 1725. THE "WIDOW'S MITE." Two of them went to a "farth- ing'-" This coin was si rmk in the k~U/ p#4e <*** CS Ol" D o d ■/. C S *• *j 4> c rt.r.- o ~to toe p £ a ,c to 5 c g H § c sd - 4) [0 . ••- 4 > C a! C 0«H a : c», 11 S> -.a. I cq v. « : ! J* 4, 4 h £ ffl — ° s O O-m 4 +- ^>w g . t. - cS esH 4 ^> M [;:" = '- OS = « fi ©S?Sl ii 4 « 5 £ S 5 4 2 r/ - - £ : _-_ G t- ^< ~ *' r; 4 C s. i5« ~ to— csjn^ 443^. ^Oo^C C G.O.fl r — 4 3+J — r rJo t ai,«, i. r 4 — " ■" 4 C C C £ 4 £ a rt >.o o k K O — g 8 J--i»5s*IJl ft E» — — ^.0405*-— C - S 4 «C ^ hfj S- 4 4 4 »i Sjr-I , . r- 1 b£ a . Z If. o ■ y. — k •^.~4^4»- 4 +j g 4 a »•• a M > c^.j~r:^*'4£*.4 u > to r* ,_: c 4 o> cd S 4 tfl 4 4» CHAPTER XXIX THE GOLD SHIP— HOW A NATION PAYS ITS DEBTS TO FOREIGN COIN TRIES. Xot Enough Actual Money in the World to Conduct its Business on a Cash Basis for- a Single Day — How the Exchange of Commodities Equalizes Everything — Explanation of "'Balance of Trade" and Foreign Exchange. Every ykak millions of dollars' worth of products of the soil, mints, factories, etc., are shipped from this country to other countries of the world. In return other countries send to the United States millions of dollars' worth of their prod- ucts. This is foreign trade. The reason why this trade exists is because we are able to offer foreign people commodities that we produce on better terms than perhaps they could produce them; while in return foreign people have certain commodities which we need hut perhaps cannot produce to as good advantage as the people of other countries. In an ideal state of foreign trade sales would just balance pur chases, for then it would he apparent that we were exchanging what we did not need for just what we did need. This, however, is not always the case, although over a long range of years imports may almosl balance exports. When exports are in excess of imports the balance is said to he in favor of this coun try, for it is generally supposed that it is better to sell than to huv. This, however, is reaHy not good logic, for business is reciprocal that is. there i- never a buyer without a seller. Therefore if a country did not expect to take something in return for its exports of commodities it could not expect other countries to buy of it. Now, for years the United States has enjoyed ••• great excess of exports Over imports in its foreign trade. This has been due almost wholly- to the fact that this country has been considered the granarj of the world and that other countries depended largely upon our grain to \'r, t \ themselves and to a similar ixfcnt upon our cotton to clothe themselves. Eliminating these food products and raw materials from consideration, it will be found by comparison that the government statistics of imports and exports for ; i number of years do almost 346 THE COLD Mill'. balance. For instance, during the government year of 1903, while our exports to foreign countries amounted to the enormous sum of $1,892,231,302, hut deducting the amount of agricultural, mining, forest and fishery products, the amount exported was $413,955,747. On the other hand, that year we imported a total of $1,007,960,1 10 worth of commodities, but by deducting $595,691,586 for crude materials, li\i animals and food it is seen that the imports were $412,- 278,524, or almost the exact balance of the exports. Further examination into statistic would seem to point definitely to the existence of a law of equal exchange. This law apparently rules that if we expect to sell we must expect to buy in return. We may tap new markets for a time or develop trade in China or South America, but the tendency cannot always be in one direction. There are times, however, when the country as a whole may be a great cred- itor or a great debtor nation to other countries of the world. The phenomenal growth of wealth in the United States has tempted foreigners, especially Euro- peans, to buy heavily of stocks and bonds in the great railway and industrial companies of the country. When the great industrial boom began after the election of President McKinley, much of the funds which went to build up this boom came from Europe. Indeed, at one time Europe loaned as much as $500,000,000 to the business interests of this country, ami it was largely due to the desire of European capitalists to get back the money on these loans that brought about the great stock market panic during 1903. At a time when this country finds it has not enough cotton or wheat or corn to ship abroad and exports in such commodities fall materially the balance of trade is said to be against the country, for imports into the country may exceed exports out of it. There is a constant stream of business transactions under way to equalize the balance of trade. This process is what may be termed international, or foreign exchange and is conducted by international banking houses. If the big packers at Chicago ship great quantities of beef to Europe, they person- ally, of course, want money in payment. But the wine merchants of France, the carpet manufacturers at Brussels or other foreign business men have sent t quantities of their goods to this country and they desire money also. Souk times gold, the money of the world, is exchanged, but it costs so much to ship it that unless it is needed more than anything else the foreign exchange bank* rs try to make the amounts due from the shipments of beef cancel those due from the imports of laces, carpets, wines, etc. And this is foreign exchange. Of course what takes place j> not the actual cancellation of shipments against THE GOLD SHIP. 847 imports, though it amounts to that in the long run. What docs take place is that the Chicago packer draws a bill of exchange against the European pur- cliaser, due probably in London, the money center of the whole world. This bill of exchange is made transferable and being good for a certain amount of money is sold to an international banker at a slight discount for the trouble of collecting. Now, possibly in Chicago, some great dry goods man like Marshall Field wants to pay for a bill of goods he has received from Europe. He seeks out to find just such a bill of foreign exchange as the Chicago packer has sold to the banker. This lie purchases at perhaps a slight expense for the trouble to the banker for arranging the transaction and may send it to his European business associate in payment for the goods he has bought. Sometimes capitalists wish to lend money in another country, and then rather than ship gold over to that country they will simply sell lulls of exchange on that country, which is equivalent to placing credits there. Most of these bills are on London bankers or their correspondents and the result is that event- ually they balance through the banks of that city. When, however, conditions are such that more money is needed in Europe In pay what is owed from this country, gold actually has to be shipped. The cost of money— that is, the interest rate- is a considerable factor in such nego- tiations. Sometimes money may be scarce in one country and interest rates high. Then the bankers of another country see an opportunity to make good interest by sending money or credit — to that country. This may be done by selling bills of exchange, but sometimes the actual gold is shipped. When this is done it i> almost always the case that the balance of trade referred to here is iii favor of the country receiving the gold — that is that country has sold more commodities abroad than it has purchased. (iold shipments are among the most interesting money movements known to banking. In tin first place there i-> considerable risk is shipping the money. The ship may In- lost in a storm or be burned at sea. The shipments are g.n erally in large amounts, for unless conditions warrant a pretty steady flow of gold from one country to another for at least a short period, foreign exchange banker8 will take the ri8k <>t selling bills "short" g sort of speculation in the hope thai conditions will change soon and the} ma\ "cover" the bills at a profit h\ buying bill- offered l>\ some one else it a profitable figure. The risk ol these shipments can readih be seen when it i- known that early in 1905 the French liner "La Champagne" carried from New York over $9,000,000 in gold in one shipment destined lor Paris to furnish the French :;i,s THE GOLD SHIP. bankers with money to supply Russia with funds with which to carry on the great war with Japan. Thai amount was only a little less than 1 per cent of all the gold in circulation in the United States. Hut this, while it costs much for insurance against outright loss, docs not worrv the bankers nearly so much as the Ions of metal by abrasion. It is well known that when coins are carried for a long time they wear very thin. In >uch metals used for money, as silver and copper, (his is not so serious as in gold, for gold goes by its weight everywhere, and other coins arc only repre- sentatives of tlu' actual money, just as paper generally is the representative of gold money. Now, with gold wearing down at this rate, it is a fact that a big shipment of the preeiou> yellow metal will cause enough rubbing together to wear away a visible amount of gold, measurable in dollars and cents lost. In order to save as much loss ;l s possible, for such a loss is a dead one, the hankers generally ship gold in the form of bars, secured in this country principally at the New York assay office. When the supply of these bars runs out, as it docs sometimes, the actual gold coin is shipped. This is usually called a specie si ipment. Such was the nature of the $9,000,000 load referred to here. In this case if the ship had been lost at sea every man. woman and child in the United States would have had to get along with 11 cents less money in circu- lation. But besides these risks and losses there is that of interest. When money is on the water it cannot do anyone's bidding to earn more money. This loss is considerable. Indeed this special shipment to Paris, one of the largest in history, by the way. cost about $!58,000. And yet the foreign demand foi gold for Russia and other needs was so great that foreign bankers paid interest on the money while it was in passage. The serious question now with bankers is whether it is worth while to risk so much of tin' world's wealth in shipping it across the ocean. If there should be some great amount lost in transit, probably some readjustment would be made so that this transfer would cease. Certainly it seems that in this great twentieth century of time saving and labor-saving devices, the commercial Ms of the age OUght to be able to establish some system of international finance that would reduce to a minimum these shipments of gold across the Atlantic and Pacific oceans. It is. as a general thing, during the spring that gold is sent from this coun- try to Europe, for frequently we are then paying for purchases made abroad, while in the fall Europe generally sends us gold, for then we are shipping great quantities of grain and cotton and Europe is paying for them. THE GOLD SHIP. 349 What the World Drinks — Millions of Gallons of Tea, Coffee and Alcoholic Beverages Consumed Each Year by the Nations of the World. When a person sits sipping his or her coffee, tea, wine or beer quietly at mealtime, little consideration is given to the total amount of these beverages consumed each year by the peoples of the world. But the industries of placing these beverages before the consumers is of great magnitude and the con- sumption is of almost fabulous proportions. The United States government has prepared statistics on the question and the figures show that the United Kingdom of Great Britain and Ireland is first in the consumption of tea; the United States first in coffee-drinking; Germany first in the consumption of beer;. Russia first in the matter of drinking whiskey and other distilled spirits, and France first of the wine-drinkers. The other countries compared were Spain. Italy, Austria Hungary, Portugal, China and Argentina. Tea consumption in the twelve countries named aggregated in 1904-, over 510,000,000 pounds. Of this, the consumption in the United Kingdom was 256,500,000; Russia, 127,333,000; United States, 109,666,000, and Germany, 7,000,000. Of coffee, the world's consumption is approximately 2,250,000,000 pounds. In this the United States, as already indicated, holds the first place, with a total consumption in 1901 of 961,000,000 pounds; Germany second. 397,000,000; France third, 168,000,000; Austria-Hungary fifth, 108,666,000; Italy sixth. 89,000,000, and the United Kingdom seventh, 29,500,000 pounds. The statistics of beer consumption are available for only eight countries, with a total of 5,753,000,000 gallons annually. Germany had a total consump tion of 1,783,000,000; the United Kingdom, 1,501,000,000; the United States. 1,494,000,000; Austria, 192,000,000; frame, 289,000,000; Hungary, :5s. 888,000, and Italy, 6,750,000. Tin- consumption of whiskey, brandy, and other distilled spirits in the eight countries for which statistics are available amounted to 687,000,000 gallons — ih.it for Russia being >j 1.000,000 gallons of wine annually; Portugal, nearly 72,000,000; the United States, tS,883,000, and the United Kingdom, 16,666,000. The per capita consumption of the various beverages in the principal coun- tries presents some sharp contrasts. Thus, in the per capita consumption of tea the United States is credited with !>ut 1.84 pounds as againsl six pounds for the United Kingdom; while in the other countries presented the annual consumption per head of population is in each ease less than one pound. In the per capita consumption of coffee the relative rank of the countries named is: United States, 11. 75 pounds per head of population; Germany, ().()."> pounds; France, L29 pounds; United Kingdom, 0.69 pound, and Rus- sia, 0.15 pound. Of beer the per capita consumption iii the latest available year was as fol- lows: United Kingdom, 35.42 gallons (thus exceeding Germany with her 30.77 gallons); Austria-Hungary, 20.36 gallons; United States. 18.28 gallons; France 7.41 gallons, and Russia, 1.08 gallons. The United States (1.48 gallons), United Kingdom (1.38 gallons), France (1.85 gallons), and Russia (1.26 -gallons) differ little in their per capita con- sumption of distilled spirits. In wine, however, the per capita consumption varies greatly among the various countries, from a minimum of 0.39 of 1 gallon in the United Kingdom to 34.73 gallons in France, while the other countries, arranged in the ascending scale, stand, United States. 0.53 of 1 gallon; Ger- many, 2.08 gallons; Hungary, 3.75 gallons; Austria. 5.85 gallons; Portugal, 14.12 gallons: Spain 17.N2 gallons, and Italy, 28.06 gallons. CHAPTER XXX TOIL VERSUS LUXURY. Millions Wasted by the Rich in Shameful Extravagance, while Children of tlic Poor Work for Nine Cents a Dan — A Fifteen Million Dollar House — Evils of the Sweating System in Large Cities. Ii there is any one thing which is causing thinking people to pause in their busy modern lives to consider in this day of the "square deal" it is the great disparity between the rich and the poor, between those who toil in the endless struggle to gain a hare existence equal to that of the lowest animal and those who daily squander immense fortunes in extravagance and luxury. That the saying "the rich are growing richer and the poor, poorer" is only too well founded in fact is apparent to those who consider tin lives of the multimillionaires and those of Mr victim- (if the evil sweatshop system. Governmenl statistics alonethrow a great light on this condition. The Bureau of Statistic- iii a bulletin showing importations into the coun- try classed "luxuries and article.- of voluntary use" reports these imports in 1890 a1 $129,1 1-7,547 and in L904 .it $187,099,554. In the in- terim the value went a- low a- $78, 541,889 in 1896 and .,- high a- THE WORLDS LARGEST CAMERA. Today photography is recognized ;iiii an Industry, :i science, and an art. The public dema mis i ■ . Musi ra i ions for its books, remaining no longer contented with Imaginative views, The camera shown meas- '.:iii by four and one-half feet, and one nsltlve plate for ■■> single photogrnphlc S 1 II .'H I .:' ' : in MM».>. but between eon i - n , n .,i foi birdaeye . . . views of cltioi I id n i huh - tin year at the beginning <>l tin facturing plants, etc Some of the photographs in this booh were made by It. period and t hat at t hr end I here w as an increase of less than $8,000,000. In tin meantime there \\as no doubl an advance in the consumption of Buch article- that more than kept pace with the increase in population. Tin- necessarily denotes more than a proportionate increase in their production, it home. During the period of fourteen years :5.~)l TOIL VERSUS LUXURY. * • In importation of articles classed as "manufactures ready tor consumption" idvanced only from aboul $150,000,000 to $158,000,000, while the importation of manufacturers 9 materials, raw and partly manufactured, advanced from $28 1,000,000 to $478,000,000. From these materials luxuries and articles of voluntary use, as well as articles of necessity and comfort or convenience, were made. Diamonds were one luxury of which the importation increased from $1,500,- ooo in 1890 to $23,750,000 in 1904, but we do not produce diamonds. Of those imported last year, $1 0,000,- 000 worth were uncut and were in i sense the raw material for labor and skill. The value of jewelr}' and precious stones other than diamonds, imported from abroad, fell from $10,189,202 in 1896 to $5,548,224, but the domestic production of jew- elry has largely increased. The cen- sus shows that the capital employed in the manufacture increased from $11,000,000 in 1880 to $22,000,000 in 1890 and $28,000,000 in 1900, while the advance in the value of the product in these two decades was from $22,000,000 to $34,750,000, and then to $46,500,000. Practi- cally all of this was for home con- sumption. There was a still more striking advance in the production of silks, for which the material is all imported. Our importation of silk manufactures fell off from $41,085,- 990 in 1890 to $31,030,522 in 1904. Again taking the census years, we find that the number of establishments engaged in silk manufacturing in 1880 was 3S2, and the value of the product $41,000,000. In 1890 there were 472 estab lishments and a product valued at $87,299,454, while in 1900, with 483 es- tablishments, the product had increased to $107,256,258. This too, was practically all for home consumption. In the last four years, from 1900 to 1904, the importation of raw silk increased from 8,209,818 pounds, valued at PHOTOGRAPHING PROM HIGH IN THE AIR. This is a photographic tripod 200 feet high In making birdseye views of manufac- turing plants and small towns. Views includ- ing thousands of men and women, actually izable by their friends, can be made when occasion demands. The tower is tele- scoplc in construction, of seven sections of :_■ feet each. The tower is held erect by 24 stf-el cables. TOIL VERSUS LUXURY. 853 $31,790,531, to 16,578,005 pounds, valued at $54,879,276. The importation of wines in 1890 amounted to about $10,000,000 and had increased but slightly in fourteen years, hut domestic production increased from $24,000,000 to $38,- 500,000. If these figures mean nothing to the average reader, let us turn to observe some of the many luxuries about the many $5,000,000 homes of our million- aires. With the tremendous growth of private fortunes in recent years it Is not surprising millionaires who have nothing else to do with their money should spend it upon palatial residences. Nowhere in Europe can such extravagance in this direction he found as in the groups of residences of the well known finan- ciers of New York. Twenty-five years ago $1,000,000 was supposed to he the limit of expense for a private dwelling, hut today the million-dollar mansion is somewhat commonplace. Andrew Carnegie's Fifth avenue house is said to have cost $2,000,000 and that of Charles M. Schwab $3,000,000. But that of Senator William A. (lark, lately of Montana, so far outshines everything else as to cost somewhere mar $15,000,000. To give an example i^i' the luxury in which tin- modern millionaire lives it may he worth while to describe some of the appointments of this most luxurious of private palaces of the world. About $5,000,000 will he spent on Clark's house itself, while interior finish- ing and furnishings, art work, etc. will come to about $10,000,000 more. Then will he 120 rooms in the house when it is completed, to say nothing of twenty bathrooms. It will have accommodations equal to those of a great public build ing. Inside this palace will he three distinct domiciles, entirely apart and sepa- rate from the main establishments, each with its private dining room and inde- pendent communications will: the kitchens. Thus three families may stay in the palace ;'-- guests -it one time without rubbing elbows. The lining of each bathroom is of Carrara glass and this costs $2,000 each, or $30,000 for the fifteen private hath--. In the basement a fully equipped Turkish hath is found, lined with the same glass, with seats and benches of marble and with a vaulted ceiling tiled in mosaic. Here there is a "plunge'" for swimming, which is sup- plied with flowing filtered water. Numerous attendants are always at hand. Aboul $250,000 worth of bronzes are used in the building. Senator Clark had to establish or buy six bronze and marble works to (il up his palace with lux urious •' ppointments. Hut Buch needless display of wealth i-- not the only shocking contrast with the poverty of our congested cities. The manner in which the rich indulge in luxurious pastimes and dress i- i striking commentary <>n the shameful misuse of wealth today. \f Borne of the fashionable entertainments <>f the rich the : ;m TOIL VERSUS LUXURY. "souvenirs" by waj of noveltj are stacks of chips worth fifteen dollars each ;it some exclusive gambling resort. It is recounted thai at a dinner given by a prominent speculator at the Waldorf Astoria bote] in New York, neatly tucked in the napkin of each guest were four shares of United States Steel stock as sou- venirs. The tables of these spenders of billions arc adorned with solid gold or >il\cr plate and some families boast of china costing three or four thousand dollars a do/en. While thousands of the poor go without" shoes on their feet there are people who wear shoes costing $500 a pair. The jewels that burden the wives and daughters of the wealthy sometimes cost as high as $100^000 for one woman. A "simple" gown costs $800 or so, and a "decent" toilet $5,000. It is not uncommon for a woman to carry a fan costing $2.50, and articles of this nature are frequently given away as souvenirs al great dinners. Parasols cost more, running often to $500. As for bonbons ami candies, a box holding a few pounds often sells at $50. To contrast these phases of luxury with some of those of penury and toil an example is found in the sweating system. This is the practice pursued by- certain manufacturers, especially in the clothing trade, of giving out work to be don. at home and at starvation wages. This exists principally in large cities where many poor people are housed in unsanitary tenement houses, and in order to get any work at all so as to keep soul and body alive accept what- ever wages are offered. The system now has been changed greatly from what it was at one time, largely through the insistence of the trade unions. The term "sweater" was first used by tailors of London who worked long hours. Today the system embraces the fag ends of many industries where low wages and bad conditions prevail. The work is always of poor grade and the labor- ers are of a very low class, generally working under Jewish suhcontractors. Cheap cigars, bread, candies and garments are the principal products of this _ ,1, d sort of toil. The evils of the sweat shop are many, chief of which are the long, tedious and irksome hour-: the packing of both SCXCS in hordes in small rooms, to labor, and the unsanitary condition- that invariably obtain under such surrounding-. Often the sweaters work eighteen hours a day with little air. light or heat. Child labor abounds in the system. Women about to give birth to children have been known to keep at their drudgery until the moment of delivery and then the only privilege granted was the stretching of a curtain across one corner of the room while tin- child was horn, with the meager assistance of a woman associ- ate in the sweat shop. Students of conditions which have made tuberculosis the at white plague" have shown how conditions such -as surround these places TOIL VERSUS LUXURY. 355 kill ptf the working people in great numbers. Some of the principal causes for the sweating system and its evils are the excessive supply of unskilled labor, the great saving to the employer by grinding down the poor and avoiding rent, and the indifference to the evils of the system by employers and the public. Many remedies have been proposed, among which are severe legislation, which fortun- ately is now becoming the rule, co-operative production by the workers, trade- unionism, public workshops, restriction of immigration, etc. While the sweatshop is one of the great evils attendant upon modern char- itable business methods, it is not the only one. In the South the gnat bane of labor is the factory evil. A committeee appointed to investigate child labor reported that of those employed in the cotton factories from 1870 to 1880 the number of men over Hi years of age increased 92.8 per cent, of women over sis teen 77 per cent and of children under sixteen the increase was 140.9 per cent. In tiie next ten years the increase was 21.8 per cenl for men, 269 per cenl for women and 106-5 per cent for children. From 1890 to 1900 the number of men increased 70 per cent, women 158.3 per cent and children °,70.7 per cent. Of a total of about 45,000 textile workers of North Carolina in 1001 about 8,000 were under fourteen years of age and the average wage that year was decreased from 32 cents to 29 cents a day. The daily wage of the factory children of the South is often as low as 15 cents; it is sometimes as low as i) ci nts. The "Sand Rat" Tin- Must PerUowt Work In The World. Imagine yourself imprisoned in a floating tomb working at the bottom of river in search for a -olid foundation in the sand of the river-bed on which I,, erect a bridge and you will have a faint idea of the work of the "sand rat", the most perilous work in the world. The "sand rat," who is generally a union man. is well paid, but when one thinks of high wages he need not Ibink it is a "p.-i\ ing job," for the laborer is selling his time a1 a low figure considering the fad thai daily almost human lives arc sacrificed up to the demon Death who claims his victims as the price of the onrush of civilization. Thai the loss of life in this work is not greater is really miraculous. Rcccnth in the Mississippi River, near Thebes, III . five caissons were sunk uith the phenomenal record of not a life lost. Bui this was exceptional. These caissons are like huge dry goods boxes, and usually they are built on "ways" and launched in the river like a Bhip. Then the) are floated to the position they are to occupy over the river bottom on which the bridge founda- TOIL VERSUS LUXURY. tion is to be built. Sometimes these caissons are as large as JW oxNii' ._. feet. Tin v are calked with oakum so thai not a drop of water can Irak through them and a tVu feel up from the bottom edge of the box is a scries of steel arches running crosswise and secured to the sides of the box. The box has a ceiling of concrete and below this is a greal air chamber in which the "sand rats" work. Near the center of the concrete ceiling of the caisson are set steel Upwards of 4.000,000 sheep arrive at the Chicago Stock Yards annually — which means that there is also that number of pelts — one of the most valuable parts of the animal, to ken care of by proper processes. The fleece is spun into yarn for making our clothes, while the skins are tanned into leather and used for various purposes, one being the binding ■ ks. tubes running down into the air chamber. One of these is arranged so that a stout man can get into and out of* the air chamber. Others are to permit the removal of* dirt and stone excavated and to admit material for construction of tin foundation work. Each of these tubes is equipped with an air lock, so thai man or material may he lowered or taken out of the threat submerged bos without the escape of compressed air which the caisson should hold all the time. TOIL VERSUS LUXURY. J357 When the apparatus is ready for work, the caisson is floated into position, the air is pumped into the air chamber and on the top of the caisson masons build a huge stone pier. The weight of this masonry soon sinks the caisson to the bottom of the stream in the position it is to occupy for building the founda- tions. So carefully has the mason-work been constructed that the huge box does not topple over, but settles slowly and evenly and the great weight anchors it firmly to the bottom. Then the work of the "sand rats" begin. They have descended through the tubes into the air chamber and they dig into the sand a great excavation just large enough to permit the caisson to fit snugly into the ground. The men live in this caisson practically till the pier has been fixed to the earth. The task they perform is done under much the same conditions a- that in a diving bell. They can cut rock and blast it and dig up the sand. All the time they Mini unmindful of the great peril in which they exist. STEAM TRACTION ENGINE PLOW. CARROLL D. "WRIGHT, United States Commissionei of Labor. JOHN MITCHELL. President United Mine Workers of America. SAMUEL GOMPERS, lent of the American Federation of I^abor. FRANK P. SARGENT, United States Commissioner of Immigration, Cormerlj Grand Master iirotherhood ■ i Locomotive Firemen. CHAPTER XXXI MUSCLE AGAINST MONEY. Where the "Square Deal" Doctrine Should Rule at All Times Growth of Organization in the Industrial World — Labor Legislation— Child Labor and the Laic. The War Between Capital and Labor. Today the most glaring examples of a situation where the true American doc- trine of the "square deal" should be the rule of practice, but almost invari- ably is absent, arc to be found in the remorseless, bloody and incessant struggle between money and muscle, in the war between capital and labor. It was Impossible, when evolution in business was bringing forth monopoly in cap- ital and legalizing it through giant corporations, mergers and trusts, that a similar process should not he taking place among those who had only human strength to sell and the sweat thereof— labor— instead of the capital of the growing captains of industry. So slow, however, was the growth of organized and systematic labor co-operation, until recent years, that the capitalist paid little attention to the signs which indicated Mich concentration of power in the hands of labor leaders as might he dangerous in case it were put to arbitrary use. Rather the capitalist proceeded in hi- own quest for power through monopoly and trust aggrandizement, now and then throwing some sop to the struggling working man. until trade unionism the Labor Trust had gained such headway, through organization, public sentiment and legislative reform-, thai further usurpation of power or demands by labor for n«w concessions brought a systematic organization l>\ capitalistic fore- to combat ever} movement made by the opposing side. This call I" arm- came in the summer of l!)<>:') and resulted in the I'onna lj (M , f the Citizens' Industrial Association "I' America. And it is this alii ..,,,,.,. ,,)' more than 500 business men's organizations, reaching from New York to San Francisco and from the Gulf of Mexico t<> the Great Lakes, that now is confronting the American Federation <»t' Labor with its million and more members to fight out the battle of the classes. n,,t let ii- take the matte,- up nearer the beginning. This might} struggle 359 360 MUSCLE AGAINST MONEY. apparently had it- cause in the foundation of things. There was a time when it was characteristic of certain writers on economic subjects wholly to ignore labor as a factor In the production of wealth and to ascribe ;ill importance to that portion of capital accumulated in precious metals. Even more impos- sible conceptions existed when slavery was tolerated as good morals. As a matter of fact slave labor was a basis for all the early known civilizations. Then might was right, and a conquered race of human beings or prisoners of war labored, while the ruling class, inevitably drawn down into degeneration by its lusts, extravagances and supineness, was eventually overcome either by new and more vigorous races or by its own slaves. From time to time there were more or less definite struggles for such share of the "might" by the laboring class as would give them some new ••right.'" In the middle ages, and even in a certain degree in modern Europe, the slave system of labor was known as serfdom. The serf, while being bound to the land and compelled to obey his feudal lord, had certain privileges which the lord respected. While such a system thrived under conditions that existed in olden days, it was ill suited as one of the agencies that was destined to bring forth the great indus- trial age. Therefore it gave way to the system of free labor. England was the first to profit thereby in the fifteenth century; France and Germany followed, and Western and Central Europe was freed from serfdom by the early days of the nineteenth century. Russia did not submit until late in the nineteenth century. In America the new form of negro slavery was a potent, factor in the early development of the South, but this proved as intolerable as serfdom and culminated in the civil war and the Emancipation Proclamation. Though thi' freedom of the laboring class from legal slavery generally was not effected until comparatively modern times, organizations for the better- ment of those who were working independently began with the journeymen clubs and guilds of the Middle Ages. The nucleus of modern trade unionism was seen frequently after the fourteenth century, when bodies of workmen maintained somewhat continuous existence and regulated apprenticeships, paid benefits and struggled with employers in a manner that suggested perhaps the modern weapons of the strike and boycott. While this development seemed steady it was not marked so lon<4' as employees and employers were so closely allied a- to live in the same house. Indeed, the trade union as we find it today was largely, if not wholly, the result of the modern factory system and the sharply defined division of labor. Therefore, we may expect to see trade unionism beginning to flourish about the latter half of the eighteenth century or early in the nineteenth century. This, in fact, is what is found in history. MUSCLE AGAINST MONEY. 361 And it was a struggle against great odds from the first on the part of the laboring class — that is, the wage-earning class as distinguished from the wage-paying class; the latter may be distinctly of the class that works, yet gains its recompense by profits rather than wages. In England Parliament was hostile to every early combination of labor. Laws regulating wages, apprenticeship, etc., were enacted and the trade unions largely bent their efforts toward having these laws obeyed — a thing which the INTERIOR VIEW OF A MODERN MACHINE SHOP. Manufacturers discriminate as much in the employment of labor .is .in the great fln Institutions, in this photograph you will note the Indelible mark ol Intelligence on every man's face also the general air of cleanliness and prosperity. employers frequently found il profitable nol to . Al one time laws in England prohibited every kind of combination, whether of laborer or employer, \. q matter of fact these laws largely were aimed againsl the laboring class alone, and for nearly twenty live years unions were driven into hiding. Then in 1824, tin- Combination Acts were repealed, and although shortly afterward fresh restrictions were enacted, labor was allowed to combine to regulate wa or hour- of labor. Hut with this opportunity for organization came the ,i natural result outbreaks of strikes thai were as costly as they were :;<;- MUSCLE AGAINST MONEY. i . 1 1 1 \ unsuccessful. In 1880 there began to spread a socialistic movement which had for its basis a hazj idea thai the wage system should be abolished and be succeeded l>\ some scheme of co-operative production. This move- ment gained greal headway, within a few weeks the unions gaining half a mil- lion members. From time to time the movemenl toward uplifting the masses of laborers one way or another changed form. At times it took on political aspect. Eventually the English labor leaders who were most successful tried the method of organizing the unskilled workers of the large cities and, by the forces thus gathered, to compel concessions. This method gained its early visible anil far- reaching victories beginning with 1889, when the famous Lon don dock-laborers' strike, under the leadership of John Burns, was granted public support. In most of the struggles at this time the points at issue were such tangible questions as the plea for an eight-hour working day, san- itary factory regulation, etc. The movement in the United States patterned largely from the example of England and developed simultaneously with it. As in that country from time to time demonstrations of a political character were seen. Here the early history of trade unionism at times was marked with attempts at socialism. Here also the exclusiveness of the union, which was regulated principally for individual trade-, was considered too narrow a policy for success, and eventu- ally this gave way for wider movements and federations of national scope, such as the National Labor Union, which was followed about 1872 by the Knights of Labor. Recently formed general unions are the American Fed- eration of Labor with something like 27,000 local unions and about 1,500, 000 individuals under its control, and the American Labor Union. All the time labor was perfecting its organization, until it could wield such power as that of the closely knit American Federation of Labor, there had i a constant fight going on for labor legislation. We know today what influence is to be found in politics from the labor vote. And former history not wholly unlike that of today. While the steps taken by labor organ- izations to secure laws which would redound to the benefit of all society are • t greal inter,.), it must suffice here to point out a few of the things that trade unionism has fought for successfully. In the main this legislation in the United States i> embraced in four movements- those for the regulation of the hours of labor, the protection of health, the payment of wages and the liability of the employer. Today many of tin' existing laws are conceded to be wholesome and for the orood of ;ill concerned; but the enactment of MUSCLE AGAINST MONEY. :3(*3 these laws was secured only by the hardest struggle . against the lobby of employers. In the matter of hour- of labor there are few laws regulating the time of work of the adult male. In April, 190"), indeed, the United States Supreme Court ruled against a law of the state of New York which had attempted to limit the hour- of labor. On the grounds of public health and morals a law- had been enacted which would not permit work in such branches of labor as baking more than sixty hour- a week. The court, however, found the law to be unconstitutional and rendered the verdict in these words: '•There is no reasonable ground for interfering with tlie liberty of per- sons or the right of free contract by determining the hours of labor in the occupation of a baker. Bakers are in no sense wards of the state. Viewed in the light of a purely labor law, with no reference whatever to the question of health, we think that a law like the one before us involves neither the safety. the morals nor the welfare of the public, and that the interest of 'the public i- not in the slightest degree affected by such an act. ••It is a question of which of two powers or rights -hall prevail — the power of the state to legislate or the right of the individual to liberty of person and freedom of contract. The mere assertion that the subject relate- to the public health does not necessarily render the enactment valid. The act must have a more direct relation a- a mean- to an end and the end it-elf must be appro priafe and legitimate before an act can be held to be valid which interferes with the general right of an individual to be free in hi- person and in his power to COntrad in relation to hi- own labor. We think the limit of the police power has been reached and passed in tin- case. -The employe may desire to earn the extra money which would arise from hi- working more than the prescribed time, but this statute forbid- the employe! from permitting the employe to earn it. It necessarily interferes with the right of contract between the employer and employe- concerning the number of hour- in •which the latter may labor in the bakery of the employer. The general right to make a contract in relation to his business is pari of the liberty of the individual protected by the fourteenth amendment to the federal constitution. Under that provision no state can deprive any person of life, liberty or property without due process of law. The right to purchase or to -.11 labor i- part of the libertj protected h\ this amendment, unless there are circumstances which exclude the right. ••It seems to us that the real object and purpose was simply I" regulate die hour- of labor between the master and hi- employes, all being men sui S64 MUSCLE AGAINST MONEY. generis, in a private business not dangerous in an_\ degree to morals or in any real and substantia] degree to the health of the employes. Under such cir- cumstances tlif freedom of master and employe to contract with each other in relation to their employment and !n defining the same cannot be prohibited or interfered with without violating the federal constitution." If such was the case with men. however, it was somewhat different with women and children. For years children as young as rive years of age were worked at tasks that should not have been permitted. In the South today man} cotton mills employ children even to work all night. The fight, prin- cipally by the trade unions, has abolished much of this and today laws exist in most >tale^ prohibiting the labor of children in factories, workshops and mines In ton' a certain age is reached. This age differs, some states ruling ten years a suitable age to begin drudgery and others twelve or fourteen years. Restric- tion are generally placed on the amount of work that can be done by children of these ages. Even with these laws child labor still abounds in the United Static to thi' impairment of the physical, mental and moral health of the community. Inasmuch as the employing class is permitting such abuses obvi- ously it depends largely upon the stronger portion of the laborers — the organ- izations — to check them. Tin case of the woman laborer is somewhat less hopeful than that of the child. Absolute prohibition of female labor in mines is found in some states, and restriction as to the number of hours a woman should work also is found in legislation in some communities. Generally, however, regulation is meager. In spite of all the abuses seen today in the sweat-shops and other vile and foid surroundings in which human beings are compelled to work, progress towards sanitation has been remarkable since the labor organizations began insisting upon reform. In every state some sort of regulation has been enacted into law. Some of the acts provide for a given amount of air space to each workman, for protection from fire, dangerous machinery, etc., and for fans to remove poisonous air, vapors or dust. Some laws go so far toward the pro- tection of human life as to prohibit the sale of goods made in sweat-shops — particularly clothes made up in unsanitary dwellings or tenement houses. Akin to these health laws are those which make the employer liable for damages when an employe is injured by accident other than by negli- gence while actively under his employ. This sort of legislation has been fiercely combatted by corporations, especially by the railways, and in many instances have been all but nullified by other laws which exempt the employer in case the accident i» the fault of a fellow workman. Efforts now are making to place the MUSCLE AGAINST MONEY. 365 burden of the responsibility of accidents upon the employer, and generally that is the case now with railway companies. Legislation looking to the regular payment of wages at stated intervals has been invoked in a few states, but the question of its validity has been raised. More general is- the law specifying that actual money and not commodities shall be paid in compensation for labor. These laws, of course, are not by any means all that have been enacted in behalf of labor. In their wake have fol- lowed acts for factory inspection, employment bureaus, and many other func- tions of government, which, however, in turn have been accompanied by adverse labor legislation providing against such specific weapons of the trade unionist as the boycott, the molestation of private business by pickets of the unions, etc. The Labor Problem. Obviously not all the concessions desired by organized labor through its various agencies could lie secured by the enactment of laws. Statutes that were as Loose as the eight-hour law of New York would be declared unconstitutional as fast as they might be made. Therefore the wage-earning class had access to other mean- I., solve its side of a knotty problem. And before we go further in this matter we may as well point out on..' or two fundamental questions which lie at the basis of what is termed the labor problem. Generally speaking, the principal stumbling block to amicable relations between the employer and employe, between capitalists and laborer, has been the matter of the equitable distribution of the results of the combined forces of capital and labor in other words, the question of the division of the wealth produced. Hut while this has been one of the main questions for dispute, it has been founded in something perhaps even more fundamental the conception on the pari of the workman thai he has a birthright, bj reason of hi- very existence, which calls for not only tolerable existence here on earth but some of the positive good things of life. Perhaps the majority of organized laborers themselves do not definitely understand the instinct which surges within them, working toward the evolution of a high) r t \ pe of man. Hut this instind exists, it seems, in a gnat measure, and appears to be growing into almost a sixth sense witli those who are finding greatest difficulties to attain to something of a higher developmenl which the Ian of evolution demands. [Jndcr these circumstances there has developed apparently without unnaturalnesa an intuition to "fighl for the cause." The trade unionist says that the moment wage- are raised to meet a demand of j. ,!„„., th« price of the commodity produced also is raised, thus cancelling the 866 MUSC1 E AGAINST MONEY. first gain. It shorter hours of work are granted the concession is offset in some similar fashion. The development of the class instinct with the capitalist is identical. The righl of free contract has been guarded with such jealousy that any attempt to infringe upon it meets with such force as is available to the allied millions of capital's wealth. The Capitalist says he cannot continue to operate a busi- ness unless there is a given amount of profit in the business to him. He threatens to retire from business if "labor becomes too exacting," and he fre- quently carries out his threat. But labor replies that today, with wealth con- centrated in the trusts, a concentration effected with the people's savings, busi- ness no longer is a private affair of the employer, but is a matter of general welfare. This brings up the idea that the workman has a right to work at bis chosen calling and to be, in a considerable measure, the one to decide on what terms of hours, wages, etc.. he shall employ himself. The capitalist class, how- ever, combats this theory as unstable. The employer insists that just so long a- he has command of the tools of production, such as money, land, etc., he will lam his '"own business" as he "sees fit." It can be seen readily enough that the lines on which these two great forces work run parallel with each other at best, and never really approach each other. It is little wonder then that we see actual war and bloodshed between these classes, with riot, arson and mob rule on the one side and the adroit resort to bribery, legislative corruption and legal oppression on the other. On the part of the employer frequently there is arrogance and stiff-necked pride against submission to the demands of labor. On the part of labor frequently there is the unwise conception that it may be illegal to break statute laws, but that, just as this was done at the Boston Tea Party and at the Declaration of Independ- ence, in order to enforce a moral law. so today the oppression of modern George tin Thirds may call for extreme measures. And now of one party and now of another, and often between both upper and nether millstone, there is a mass of people who demand that evolution come by peace and not by revolution. I *J© 05 G 3 e v i * ? i w bi _ 3 go Ci- a - z z - **■%. ** 4) « C-" ft" g 3 o, 00 ft S - — - ~Z l"»s £! K DO K '•/• OrtlS a -~ c. K ~ £ - ~Jj- •- « ST - |||-3c ; =>" So .i '- — - £ ™ § -2 - = 5 2"" on p.j'jjt o ■E r 3 =2 o§ft ft {- fe +3 ed O - 3 H £ - w o s c *r W *• WSs w £ a ■= ■ % M 'J "o «. a ' _ r> SVGA'S Pol- O ft » « c o t >^~ rj OB 2 ft£ ri '_ 01 . >■ - O § w 2 « w gd J- W W 8 B v - < i-j "C 03 JO B •- o a. ai J r a c £ ~ CHAPTER XXXn WEAPONS OF THE LABOR TRUST— THE STRIKE AND BOYCOTT. The Arms and Ammunition of the Conflict — Skilled versus Unskilled Labor — Some Historic Strikes and Their Attendant Disorders — Methods of Attack and Defense. Having organized with an idea more or less vague of gaining and maintaining a higher standard of living, the laboring class under the trade union regime perforce needed weapons with which to force their conceptions of right upon the employing class. Unskilled labor always is in such plentiful supply that the employer thought little of making contracts with this sort of workmen. The skilled workers, such as printers, carpenters, machinists, etc., possessed a knowledge required and needed by the employers and the men gradually were able to get agreements from employers. And yet both skilled and unskilled men found that they must work in unity for their common welfare, if they were to achieve their desired ends. In this position two methods of offense and defense developed spontane- ously: the strike and the boycott. The former weapon is the cessation of work on the part of a large body of Laborers, acting in concert to enforce >onie demand made upon employers or to resisl some encroachment of rights of labor by the employer. The boycott is the concerted action by a body <>f workmen to refuse to patronize an employer who is considered "unfair" to labor and to prevent as far as possible any one else from patronizing him. The immediate weapons in the hands of the employers which correspond to the strike and the boycott are the lockout and the blacklist. The lockout is the peremptory dis missal of a large body of employes by .in employer, either to force a demand or to forestall a threatened strike. The blacklist is the list kept l>\ employers containing the name-, of workmen obnoxious to a certain class of employers, because of activity in strike leadership <>r some similar action. Men on the blacklist find it almost impossible to gel employment anywhere, tor the list is circulated widely, and once having been blacklisted a workman's reputation follows him .all over the countrv. Underlying causes of strikes, according to tabulated statistics, run largely to WagCS, hours of labor, recognition of the trade union bv capital to the OXclll- 369 .5 O s. U) 33 is tc.2 c O o * P t- ~- 0/ c 5 fe ° "3 0/ 03 O ^ U p t- O) -a aj5 ft W *E^ OJ r- .0.5 CB O >i .J* *- o) t: 0--O > ,25fl ■m ? c c tt a/ v/ t- Si tn o) S a 0/ rt~ rt 0/ ff. to O 7; bi C to tO n> - - c c 1- 2 >- J 5 s o ■- ■§"3.2 -a *J a, v- a: ? 3s ^ O- _ rt » ■ *" 0/.„ WEAPONS OF THE LMiOli TRUST. 371 sion of non-union labor, good sanitation, etc. Indeed, the history of legislation in favor of better conditions for the working class has been followed somewhat closely by strikes and boycotts based on demands for such reform. Gem rally speaking, the demand for higher wages comes when there is prosperity, and the resistance to decreased wages comes with times of depression. In the nature of labor organization the union tries to monopolize the forces at hand, and hence may be said primarily to be selfishly inclined. We find, therefore, that, since the whole capitalist class is allied against the encroach- TAILOR SHOP. in Hi.- making <-i fine garments male labor Is employed aln lj and the part ol tin- work is done by hand. in' nt <>f the laboring class, the Btrikc and boycott are used even I'm- the forcing of demands greatly removed from original causes. Thus there i» the sympn Untie strike, by which unions allied will: eacli other <|uil work in order to sup l'oi-i one of their members, after tin fashion of an offensive and defensive alliance between greal nations. While many evils have been laid at the door of tin' trade union because of riots and disorder which have attended ■strikes, it. -"in- that as organization becomes better defined and leaders of unions work along more definite lines to obtain definite ends tin- strike becomes more sue- .Cm C 60 C « m a m .2 — bOrtc M O " d c he « 0) Ctf B S M •! r- i- o I i « to *^ tO O !r?£ ~ 8- CO. CO; t/j ■1| p5 s WEAPONS OF THE LAliOR TRUST. 378 cessful as a weapon. In order to attain success the strikers almost invariably depend upon public sympathy. The better organized and better led associations of laborers recognize this principle and they realize that the violence attendant upon strikes almost always is blamed upon the strikers, whether it comes from a semi-criminal floating population or from the unions themselves. The public for a time will put up with inconveniences caused by cessation of industry if some great principle is at stake, but when violence or great waste of wealth results in widespread suffering, public opinion often steps in to put a stop to the strike. Under circumstances which may lead to such public intervention the labor leader is coining to understand more and more that tact and preparation to carry out labor's side of existing agreements must be rules of conduct in strife for such rights as labor demands shall be recognized. Therefore majority rule generally obtains in the ordering of a strike. It is asserted often by anti-labor interests that workmen are forced to quit work when they do not wish to. This not infrequently is the case. But labor's explanation is something after this wi>i ■: all labor benefits by the granted demands of collective labor, hence all workmen should band together in the demand for such things as the majority shall deem wise. To put the matter in political terms, the laborer who is forced to go out on a strike against his immediate desires is in the same position as the citizen who, being of one political faith, is forced by the majority rule to live under the administration of a party of the opposite faith. Naturally being of nearly a single type or class, the w orkingtneii manifest a great loyalty to each other and to their cause. They believe it would be for their interests to be banded closely together in order to enforce what th.\ con sider their rights, just as capital has used the great forces of combination to bring about the trust. Each side is lighting for the biggesl share of the wealth of the world it can get. In partisanship the trade unionist goes to the extent of supporting men out on strike from a general fund made up by assessing union members at work. This partisanship goes even farther: it practically Ostracises the man who takes | he place of the striker. This man. known gen erally by the opprobrious epithel ••scab," in the eyes of the unionist is frus t rating the best interests of labor as a class. The "scab" is often, not always, lower down in the human scale than the union man: hence, argues the unionist, he should work for his own uplifting in harmony With the union man. The lb," according to the union man, trails along on tin skirts of unionism, eraining what the union gains in prosperity and success, contributing nothing to the genera] advancement of the working class of which he is a member and WEAPONS OF THE LAHOH TRUST. 375 never sacrificing himself when a great crisis demands his aid. "The scab/' says the trade unionist, "is like unto the man who will not go to war when his country calls, yet who reaps the benefits bought by the blood of his fellows." This conception of the loyalty and partisanship to the organized labor move- ment is necessary to the understanding of some of the great underlying causes which result in violence during strikes. America has seen some greal historic strikes. In 1S77 one developed on the Baltimore and Ohio. Pennsylvania and other railroads which resulted in great A CABLE ENGINE. I mo Mar. leal Ingenuity has always been devoted t>> the search i"> lm] n the application of mechanical power. We show cables passing "\ which move ;in«i Btretch them. In the meal packing Industry, the ca rled on thesi endless cables, passing in turn skilled laborers who perform ■ < certain duty. damage In property and which necessitated the calling mil of the troops. In 1892 Hi"' Homestead strike at the Carnegie Steel Works was perhaps as blood) a conflict as has been recorded. In this strike an actual battle took place between Pinkerton detectives lor the employers and armed unionist-. The Chicago sirik< <>f [894, which grew out of an efforl of flu American Railwa) I iii*»ii. under the leadership of Eugene V. Debs, to boycott Pullman cars to aid the strikers at the Pullman car works, caused loss of lid. tin burning of cars and the calling of the national troops to quell disorder. The great anthracite S76 WEAPONS OF THE LABOR TRUST. coal strikes o( 1900 and L902, the latter the one which was settled by the deter- mined intervention of President Roosevelt, caused great loss of property and misery in many places because of the scarcity <>!' coal during cold weather. In the recent miners' strike in Colorado, which was in charge of the Western Federation of Miners, the struggle was marked by the most serious kind of rioting, dynamiting, and civil war which martial law quelled only after whole- sale arrests, imprisonments and trials, burning and confiscation of Laborers' property and deportation of unionists from the state. In 1905 Chicago was the scene of a troublous strike, one of a series of difficulties in which teamsters fought in a systematic strike against what they said was ,-i systematic effort on the part of tlu employers to put an end to all trade union principles. Here riots and killings occurred with great frequency. II 2« I- W O 4> X V. bJ32 3 tr H o +- 1 5 fc^l t-. 4/ be id i-H £ s- a> 4.S 4< O+j £ 5 o a. fc a, I 2 ■" CHAPTER XXXIII THE CRIMES OF LABOR— STRIKE VIOLENCE AND ITS CAUSE. The Rights of the Individual — Union and Non-Union Laborers — The Suffer- ing Publie Between Two Fires — The "Picket" and the "Scab" — Epochs in the Long War — "Bleeding Colorado" — The "drafting" Labor Boss — Bribe and Blackmail — Who Is Responsible for the Disorders that Accom- pany Strikes? "While the right to enter upon a strike is and must be conceded as a right belonging to the personal freedom of the working men, this much must ever he demanded, and in the name of the same principle of freedom under which the men act who refuse to work: that they should cease to work must in no way interfere with the liberty of others who may wish to work. The personal freedom of the individual citizen is the most sacred and precious inheritance of America. The constitution and the laws authorize it. The spirit of the coun- try proclaims it. the prosperity of the people, the very life of the nation. require it." — Archbishop Ireland. While the trade unionist sees advantages to be gained in organization and finds the necessity of combatting the greed of organized capital by means of the strike and the boycott, public opinion, which is the final arbiter in all strife, runs \ the men who -truck and lo-t their Wages? \ol a bit of it; they won the battle. Park- pocketed the spoil-, though sometimes he -pent it liberally 'setting up' for hi- friends at near by bars. I heard a hoUSCSmith Say: 'Sam Park- i- good hearted all right ; if he takes graft he spends it with tin- boi Copyright, 1900, by Detroit Photographic Co. SCENE IN A POOR QUARTER, NEW YORK CITY, ON A MARKET DAY. nee are common in a metropolis even on the most ordinary shopping days. The immigrants who come to America generally choose to settle in communities i In cities. This vi^-w is remarkable for Ite fidelity in depicting an ordinary day in such a <££££: Note how the streets are filled with vehicles of all descriptions In this small district there live as manv people as would be the population of a small-sized city. Che necessi ties of life ar<- brought to their very doors for sale or barter. CHAPTER XXXIV CAPITAL'S ANSWER TO LABOR— NO "SQUARE DEAL" FOR THE PUBLIC, Hou- Employers' Organizations Have Multiplied — Radicals and Conservatives //:> and formed the Citizens' Industrial Association of America. Several influences worked to bring about this association, but principal among them were the sudden recognition and fear of the expanding power of unionism even when used by sane leaders, and the fear of the power of unionism when led by ignorant or vicious bosses. The writer was present at the convention of the professional organizers ot these business nun's associations which banded into I he Citizens' Association and the impression gained after hearing impassioned speeches by such men as David M. Parry of Indianapolis, dames C. Craig of Denver, Frederick W. dob of Chicago, and others, is that, while these men profess no desire to down "honest and „ risible unions," practically the effect, if not the desire, is to combal all unionism of labor by unionism of capital. In other words, it is a struggle for supremacy. Some of the first fruits of active efforts to wipe out trade unionism as such were grown in the methods employed by the Chicago Employers' Asso ciation in the teamsters' strike of 1905 in Chicago, where the practical motto of th. employers was, "We believe in unionism, bul damn the un ." "G I unions*' are welcomed, but invariably this means "mi union." In considering such a question it is nol within the province of the writer t () justify the bad actions of either part} to such controversies as are seen ,s,i , IPITAVS ANSWER TO LABOR. daily iu the history of American industry. The stand taken here is for the "square deal" for ever} man. II lias been shown previously what grave charges have been laid al the door of the union. bu1 lei us look al some of the methods of the now actively organized employers in not arbitrating the questions a1 issue, bui in fighting. In the first place these employers' associations use the boycott— the weapon which they cry down as un-American — as shown in the attempt to discipline papers in Colorado which dared side with the opposition. Here is a resolution passed by the Citizens' Alliance of Denver, October 18, 190S: "Resolved, that we, as a body, urge upon the Denver Advertisers' Associa- tion the importance of* co operating with us in this effort, and request such association to so place its advertising matter as to assist in upbuilding instead of tearing down business interests, to the end that a .just and conservative policy may be adopted and advocated by the daily press." Incidentally it may be said the right of freedom of the press was infringed upon in the Colorado strikes by capitalists destroying union newspaper plants. In the next place these employers make just as vigorous use of the sympa- thetic- lockout as do the unions of the sympathetic strike. Frequently where labor difficulties arise the organized employers take every measure to affront the union still further, bent upon the annihilation of the union rather than the granting of the slightest concession. Presumably this is based upon the fear that if any concession is granted more will he demanded by the union the next time. And vet the employing class with its greater intelligence and advantages is better equipped to he charitably inclined than the plodding, working class. Organized employers indirectly have access to slugging methods which are just as reprehensible as those of the bad labor unions. For instance, in the Chicago teamsters' strike in Chicago in 1905, the employers in their demand not for the "square deal" for the general public hut for the active operation of their business during strike when the union leaders were asking arbitration (whether right or wrong is not the question) brought into Chicago hundreds of vicious South, rn negroes of the criminal class, armed them with rifles and revolvers and instructed them to shoot at the first suggestion of interference of their work as teamsters. The direct and infallible result was murder. It is true the employers in this struggle set forth at length that they insisted upon the "right to run private business" as they should dictate. But here is the indictment made by pne of the greatest employing interests in Chicago who endeavored to keep out of the fight: "Chicago will see disturbances just so long as both sides to these disputes CAPITAL'S ANSWER TO LABOR. 387 arc stiff-necked and stubborn. The employers as organized arc not a whit less responsible than the unions, excessive as are the demands of some of the labor leaders. It is my firm conviction that the employers are organized to fight, not perhaps just for the sake of fighting, but at least to be supreme over the trade unions." And if we wish to uncover dastardly deception let us turn to the following copy of a circular distributed in the South to induce ignorant men to come to Chicago to risk their lives in "breakine" a strike: "To all colored workmen: He free! Your freedom is ham pered in southern cities. Chicago is a haven of freedom and prosperity. Big wages and short hours prevail. Labor is scarce and the negro is welcome. Colored teamsters are employed exclusively by the large employers of labor, and an unlimited number of .jobs are waiting for strong colored men in that city. Our race is shooting down white strikers under police protection, and at last freedom for our race is assured, and the colored laborer will assume a responsible place in society in that northern city, upon equal terms with the whites. "The employers have decided to uphold our people by the use of the shotgun if necessary. Be free men! Come to Chicago, one and all. Come quick. Homes and the necessities of life await you upon your arrival. Agencies are established in all parts of the city to protect and care for you. Start at once.*" This action was denounced by the Colored Men's Business League of Illinois. Another weapon of the employing class is the injunction from the courts which prohibits interference of pickets or others in the affairs of lb.' employers or with nun union nun .it work. While unquestionably this has hern necessary in many instances, -till the effed upon the union man is as a va\ rag before a bull. The principal strife just now between the employers' associations as a whole anil the trade unions is on the matter of the "open shop." This term is used to indicate an establishment where either union or lion union nun ma\ be em ployed without discrimination. The opposing term, the "closed shop," indi catea an establishment when- none hut union help is employed. As has been suggested previously, one of the fundamentals of unionism is to establish as 1 1< ,-i rl \ .-i perfect monopoly in labor as possible. 111 order the better t<> meet capitalistic monopoly. For this reason principal^ the union seeks to combat the principle of the "open shop." The unionist maintains that the workman .ss ( .//'// II rs ANSWER r<> i ..num. is tin- better judge of the conditions in winch he should work and for that reason also dour- to restrict the number of apprentices each journeyman worker shall have as assistants. These and kindred principles the employer resists on the pica that his business is his own. While it appears that those employers' associations mentioned thus far work EXCAVATING A CHICAGO TUNNEL, FORTY PEET BELOW THE STREETS. The difficulty of the engineering feat of building these tunnels can be imagined when it Is known that the business portion of t lie city rests upon what was once and still is to erable depth muck or soft clay, Chicago is the first city in the world to make the departure of establishing a system of subways under the streets for the handling of its t traffic. Other cities have built subways for passenger traffic in order to relieve stion of the streets. But by the Chicago system the passenger traffic will still he in tb< dut will not be hampered by the thousands of teams and heavy trucks which .mpede car traffic. to an end which seemingly always antagonizes labor, there are associations which make it a business to meet organized labor half way, which take the stand that neither side can always be in the right and that contracts and agreements an- saving of much worry and considerable bloodshed. What the end of the conflict between those who do not work on the "square deal" plan will be can- not be conjectured. This Bummary of the situation, however, as made by Ray Stannard Baker recently, is impartial and worthy of consideration: CAPITAL'S ANSWER TO LABOR. 3S9 "1. Both sicks have an equal right to organize. "2. Employers' associations cannot refuse to the unions the same rights and the same methods of righting which they themselves exercise, and vice versa. If one side boycotts and 'slugs' and uses injunctions, the other side will use the same weapons. If one side DEALS FAIR it will get fair dealing from the other side sooner or later. "3. Absolutely stable and continuing conditions are not possible in indus- try any more than in any other department of life; both sides must lie pre- pared for constant readjustment and for the attendant concessions. "4. The condition at present most favorable to industry would seem to be one of -trong. well-disciplined, reasonable organization on both sides. A great disparity of strength always means the abuse of power by the more vigorous organization. "5. Organization always presumes a fighting force, as each nation has its standing army, but the prime object should be peace. "(J. The same qualities of fair-dealing, honesty and personal contact re- quired in business generally are equally necessary in buying ami selling labor — a transaction which is. after all, neither sentiment, nor warfare, nor speechify- ing, but business." CHAPTER XXXV SOCIALISM. > Theory of the Industrial Millennium and the Tendencies in tJiat Direction as Hastened by the Abuse of Monopoly in both Capital and Labor Classes — Tin Municipal Ownership Movement an Evidence of the Growth of Socialist Principles. During the Investigation into the railway rate evils which aroused Presidenl RooseveH to insist upon government regulation of the greatest of industries the President was quoted as having said to several railway presidents that unless concessions were made to the people at large, unless something nearer to a "square deal" could be granted than the public had experienced before, the country was destined to see social democracy. About the same time Vice- President Frank A. Vanderlip of the National City Bank stated that the growth • if socialism in Europe threatened to gain great force in America; that there were visible prospects of a definite alignment of political forces with this issue a-* the dividing line. Shortly before this nearly 500,000 votes were cast for E. V. Debs, the candidate for President on the Socialist ticket and the man who had led the American Railway Union in the great Chicago strike of 1894. So definite has the tendency been toward increased agitation for Socialism in recent times that the capitalists have raised a great cry against what they believe to be its dangers, principal of which is said to the encroachment on the individual rights of man. The press has teemed with expostulations against the possible overthrow of the prevailing systems of industry. Just as emphatic statements have conic from the direct representatives of the capitalists who definitely leagued themselves together to crush out trade unionism. Here is what D. M. Parry, ex-president of the National Association of Manufacturers and president of the Citizens' Industrial Association of America, says on tin- subject: -The agitation for supplanting private control over capital appears to dis- close two distinct methods for the accomplishment of its objects. One is that of confiscation — tin- passage of legislative enactment and the adoption of other means to reduce profits and to limit private management of capital. The other 390 SOCIALISM. 391 is that of acquiring government control through purchase from the present individual owners. That form of socialistic endeavor which seeks government control of capital by purchase is at present limited to the acquirement of public utilities. Attempts in the line of municipal ownership have for the most part resulted unfavorably to the claims made by its advocates. Government cannot manage capitalistic enterprises as economically or as efficiently as private owners. A large increase in the number of its employes is certain to threaten the domination of our democratic government by an officeholding class, and the corruption of politics under private ownership of corporations would be as noth- ing compared with the corruption that would most likely exist under govern- ment ownership. "While the enlargement of the scope and power of government by the pur- chase and management of certain enterprises has found considerable support among the people, vet I believe the sentiment favorable to socialistic measures involving the confiscation of profits and the limitation of private management of capital is the more widespread an. I dangerous. Without making special ref- erence to the aim of the avowed socialist, we have organized labor and its sympathizers supporting the idea that organizations of men may dictate to a large extent the management of enterprises which the\ do not own. determining the rate of wages and fixing the hours of employment. Another illustration of this kind of socialistic sentiment is manifested m the present agitation to have the government fix railroad rates." On the other hand the Boston Herald, confronting Hie tact tlial Socialism is based on the desire to abolish all parties save one. I li.it of all society in liar monioUS act ion, has t his to saj : ■•Denunciation of Socialism, which i. inspired l,\ the misunderstanding and selfishness of those who have wealth, will not put it down. On the contrary, it will breed Socialists and make them bitter and desperate. The\ ma\ be in error as to fads and the right cure for tin evils the} feel; but thej cannot be made to change then- minds by .im\ course that damns their ignorance and their 'motive. As for then- motive, it is quite as generous, as patriotic, and moral as that winch actuates those who cherish a conceit of superiority. Bishop Potter, Carroll I). Wright, Washington Gladden and man} others who have had much to do with the settlement of controversies between employers ami employed, have testified emphatically that in their experience the workingmen were not the least intelligent, reasonable and fair-minded to the controversy under consid erat ion. Socialism as ••' theori of government mi\ hi subject to nianA serious objec SOi It I. ISM. tion^; luit plutocracy and monopoly are more objectionable on many account's, and vastly more hostile to everj genuine ideal of a democratic commonwealth. Hence they are aiore to be distrusted b\ the Christian and the sagacious patriot. Those whose fundamental aim is to promote essential equality of con- ditions and opportunities, of work, privileges and responsibilities are not neces- sarily the mosi dangerous class of citizens, nor is there any prima facie reason for regarding them as the mosi incapable, immoral and fanatic. At any rate, they are not already conspicuous for dishonesty in business and dishonor in politics. The corrupting bribers and grafters do not come from their ranks. They are not to blame for a situation which makes Socialism seem tolerable to many serious minds as a correction of wrongs which grind the poor and make the future seem hopeless of betterment." Hut simultaneous with these cries of warning one of the greatest weaves of feeling of socialistic tendency swept over the city of Chicago and resulted in the election of Mayor E. F. Dunne on the avowed platform of immediate municipal ownership of the street car lines of the city, which had been noto- riously hadlv run. which had been the means of mulcting the investing public of tlu city of millions of dollars and which at last had been turned into the bankruptcy court. Here was a demand for some improvement upon capi- talistic- methods, with the belief that any change would be better than the intolerable service given the public at that time. Nor was this tendency foi municipal ownership and governmental control of public utilities confined to Chicago. It was seen in the cry for railway rate regulation, in the Kansas Legislation for state oil refineries to supplant those of the Standard Oil whom Kansas had kicked out of her borders, in the investigation into the evil prac- tices of the Beef Trust and private car lines and in a hundred other phases. A New York paper in commenting on the assemblage that attended popular lecture- at Cooper Union iii New York City says: "After a lecture a few days ago in which the Socialist cheering had been unusually vociferous till it seemed to characterize the whole gathering, a little in the form of a standing vote was taken. It appeared that out of some 1,200 people there were only fifteen or twenty Socialists. Three persons expressed themselves as entirely satisfied with existing industrial conditions. When, however, it was asked how many believed that 'the time has come for the community to asserl a larger control over public service enterprises, such a> trusts, railroad-, gas, etc.,' apparently the entire audience rose. Here was clearly an audience which, however much one may choose to call it Socialistic, had nothing wild, theoretical or essentially impractical about it. It was com- SOCIALISM. ;39:J posed of men and women who had come into close contact with facts, and who were drawing their theories out of their facts, not trying to make their facts fit theories. It was a typical audience; typical of the good old practical methods by which Englishmen and Americans have solved their historic prob- lems and built up their progress; typical of the public opinion of this country today as it reflects on evils and seeks remedies. It is not improbable that almost anv general audience of 1,000 men and women in any part of this country would show much the same proportions of sentiment." At once there arises the question as to why and how sentiment i> rising to change the whole existing scheme of industrialism under private ownership ami to make it co-operative in the hands of all society. Both method and cause are explained in part by a demonstration which developed coincidently with the teamsters' strike of 1905 in Chicago, an incident which is now bo- come common to many such disturbances. This was the active soliciting of laborer- to forsake trade unions — which the Socialists consider but a make- shift and incentive to constant war between classes of labor and capital — and to join in the Socialist movement to change the whole system once for all. This effort to socialize the union man is seen in such a statement as the follow- ing by William Mailly, who conducted the Debs campaign of 1904: "The supremacy of the working class is inevitable. It is just such con- flicts , ( s this teamsters' strike that proves to wage workers that they must control the powers of government if they would get justice. Should the power of wealth and government, in the hands of the capitalist class, defeat the magnificent drivers' organization the day when the working class will abso- lutely control the entire affairs of this city and of the nation will be brought nearer. When unions are defeated in strike efforts they are in a position to s,e clearh that they must vote themselves into power and conduct industry entirely for the benefit of all tin- working class." In. the following by Charles II. Kerr, an active Chicago Socialist leader, is typical of the attitude of the organized Socialists to accomplish proselytes of the trade unionists .lining the teamsters' sinke: "Naturally, being the party of the working class. we are on the side of the union-. This does not mean that we indorse every -Mail of the unions' methods of fighting, but we recognize that the class war is on, and the laborers must fight as they can, with the means at their disposal. «Ia ji true that the Socialists are taking advantage of the situation to -i inn ron\ i H - ' ••It ccrtainh is. When we bcc a union man indulging in profanity be- .;.)( SOCIALISM. cause 1 1 u policemen are riding on the 'scab' wagons, we ask him, 'Isn't that what you voted for?' ••\low do the unionists receive the Socialist organizers? "There is a marked change in their attitude. Nut so very long ago a Socialist would invariably be hooted dowji or refused the floor at a union meeting; now the union men almost invariably seem anxious to hear what our speakers have to say. "What effect will the strike have on the growth of the Socialist party? "It will undoubtedly bring us an immense increase in our vote. We have constantly pointed out that the old parties represented capitalist interests, and that the only rational course tor the laborers was to vote tor the Socialist partv, the party of their own class. In ordinary times this is no! so easy to see, hut the action of the employers in handing together against the unions, and using the police and the courts as weapons, has made it evident to the great body of union men that we are right. If the employers succeed in crushing the teamsters' union, the result all over the city will be like the result in the stockyards districts last fall. The packers won a glorious victory over the union-, and the unions responded by sending two Socialists to the legisla- ture. Union crushing on a larger scale will result in drawing class lines more clearly than ever before, and when class lines arc drawn it will be evident that the people who live by working have more votes than the people who live by owning. Then the laborers will elect their own city officers, and proceed to run the city to suit themselves, without regard to the 'business interests' of the capitalists."" Thus far it has not seemed advisable here to define that industrial move- ment which we are discussing. There have been many sorts of doctrines held by tho>e who have claimed the title of Socialists. It is not intended here to -et forth the numerous different creeds that have existed in the name of Socialism or which still exist. Suffice it that there are those who sec or think they see a tendency toward an industrial millennium where men shall not be at war witli each other, where the "square deal" shall be a rule of every-day con- duct. These men believe that the most effective methods of producing wealth have been found to exist under CO-OPERATION. The great desire now is to effect a more just DISTRIBUTION of wealth produced through similar CO- OPERATION. They point to the fact that the trusts have grown so large that apparently the next step is to make the whole country one trust in which every citizen shall be practically a stockholder. How this is to be accom- plished none of them knows. Indeed the disciples of Socialism say it does not SOCIALISM. 895 mutter just what the ways and means shall be. They point to the very serious problem of slavery which confronted this nation with apparently no solution. The freedom of the slaves no doubt worked great hardship to the southern planters, but, say the Socialists, this was inevitable and the means finally developed almost spontaneously. So, they say, will come the change, NUT bv which every person shall have an equal share of the goods of the world, but by which the means of production shall be OWNED BY ALL SOCIETY, and thus shall be used to promote GENERAL WELFARE instead of frequent .MISERY and WANT. That this tendency toward Socialism is growing is suggested pointedly in this warning to capital by the leading financial paper of the country and organ of the moneyed interests, the Wall Street Journal: "We have believed for a long time that Socialism was bound to become more and more an issue in this country, an issue which the conservative forces in politics and in business would be obliged to meet, and which tiny might find it difficult to overthrow. The best way of combatting Socialism is to remove those conditions which are favorable to its growth. Competition and Socialism represent the two extremes of economic theory and practice. The hope of the Socialists is in a complete breakdown of the competitive system, and hence it is that they welcome the growth of monopoly. They believe that the capi talists, who are building up the great corporations, and concentrating the control of the productive and transportation interests of the country into a few hands, thus steadily reducing the area of active competition arc doing the preparatory work for Socialism. Let the forces of capital, tin \ Bay, build up the monopolies, thus overthrowing competition, and then the people will Step in, overthrow the monopolies and establish the regime of Socialism. "There seems to be no escape from the logic of this statement. Monopoly j, only tin advance ageni of Socialism. What, then, should be done to unci this condition.' It seems to us as if some of our gnat industrial and financial leaders are either strangely blind to the signs of tin times, or else exaggerate their own strength, trusting in their ability to defeal Socialism in any square t • — t that may develop in the future. They are, ai any rati, as a class, steadik resisting any movement intended to enlarge the area of competition, to hunt the power of tin corporal ion, to extend the scope o| publicity, and to bring interstate commerce more and more under reasonable government regulation. These measures are the onlj ones which appear at this linn like|\ In cluck the spread of Socialism iii this coiuitr\ l>\ preventing the further progress of monopol \. ; : i ( ; SOI I il ISM. "There are onlj three possible alternatives: "Firsl A further concentration of the control of production and com- merce in this country, so as to produce a condition in which competition shall In reduced to a minimum. "Second — Socialism, the seizure of the machinery of production and trans- portation in the name of the state, the establishment of the collective common- wealth. "Third — A system in which capital shall have the liberty to combine in corporations, but shall be subject to a law of publicity, compelled to account for its acts to the people, and held under reasonable government regulation, so that a proper balance shall he preserved between concentration and com- petition." CHAPTER XXXVI GRAFT IN AMERICAN CITIES. The Plundering of the Private Citizen- Public Conscience Aroused Phila- delphia Corrupt but no Longer Contented Signs of Hope for the Future. There is a word which was originally innocent, hut which of late years has come to have a meaning so offensive and so tainted that the very sound of it has become a stench in the nostrils of honest nun. It is the word "graft," which by an extrusion of applications has come to mean almost every phase of public and private dishonesty outside of the lines of statutory crime, and. indeed, often crime as well. In the earlier days the use of the word was limited to the thrifty and wholesome science b\ which horticulturists modified and improved the fn.it trees under their care. This involved the draining <»f the .a,, from a parent stalk into a limb from another tree which would therein be mi, .ported by tin borrowed nourishment. The parallel Is a plain one. Graft today means the draining of the suste nance from on.- source into a parasitic personage who seeks to obtain profit, not out of hi> industry, hot out oi the thrift of someone else. Sometimes it might be characterized as blackmail, sometimes as bribery, and sometimes as thinh veiled theft, but always it is predatory upon private ami public resources. II is quite possible that the thin- itself has always existed in some form or other, but apparently, of late years, there has been a., extension I i practice into channels heretofore f <« - from the offense. In greater or less degree it [g to be found in everj country, but here in America, where we hav< free insti tutions that we prize, and a pride in our national thrift, vigor and honesty that amounts almost to braggadocio, the offensive .mouth las waxed more siurdilv than in any other country which is blessed by Western civilization. The redeeming fact is that with the growth of the evil there seems to have come a corresponding growth of appreciation and realization. Today the forces of decencj and honesty an- bestirring themselves as never before, to exterminate the vicious practices that are lump., I together under the general tainted titl. of "graft." The press is thundering at the malefactors. Public speaken in all walks of life a,-, devoting attention to lb.- same Bubject. :W7 ;:>s GRAFT IX AMERICAN CITIES. The people indeed are becoming aroused to the just indignation that should be visited upon the evil doers alike in high and low places. The ramifications of the spirit of graft are manifold. They crop out as definitely in private enterprises as they do in public affairs. Hut inasmuch as the public in concerned chiefly with public interests, let us first survey the facts that have been developed iii certain investigations where the grafters were preying upon the public welfare. No writer can discuss this general sub- ject fairly without expressing a debt to the noteworthy work done by Lincoln bteffens in McClure's Magazine, through which publication lie gave utterance to discoveries perhaps the most significant that have yet been made in this line. With the temperament of a judicial observer, Mr. Steffens sought the truth wherever he could find it, and wrote without fear or favor the facts as saw them.. But neither Mr. Steffens nor any other writer could discover or tell all of the truth, for the facts are continually developing, and graft is is truly progressive as is any other industry. Let us take an example which will at the same time illustrate this point and also show the shamelessness ot the grafters and the hope of honest men. One of the most conspicuous of Mr. Steffens' disclosures related to Phila- delphia, which he characterized as "corrupt and contented/' Even while this volume is approaching a conclusion, new developments in Philadelphia show conditions which have arisen of late, quite as bad as anything disclosed in the investigations of 1903, if, indeed, not worse, and at the same time a revolt has 'n. i u stimulated which promises to lift Philadelphia out of the mire and raise it to the proud estate which it ought to occupy. For many years all of the larger American municipalities have pointed at Philadelphia as the worsi governed and most thoroughly corrupt city in the knd. This fact has been almost universally admitted, and it has been doubly significant because this is the most American of all the large cities, having nearly one-half of its population of genuine American stock, native born, of native born parents. Furthermore, Philadelphia is a prosperous city, a city of homes without crowded slums of the worst sort, an aristocratic city, and .« historical city with American traditions and a place in the American fight for freedom from British rule And yet in spite of all this the political and civic corruption of this great American city has stood at the very top of the dis- graceful list and the hones! people of Philadelphia have rested in complacency, doing little to emancipate themselves from their slavery to corruption. l',\ unquestionable evidence we have it clearly proven that the control of the polls in Philadelphia for years has been absolutely fraudulent, with little pro- GRAFT IN AMERICAN CITIES. 399 test against the offense. The profit of graft and fraud in such a city cornea from thievery in public contracts. The various systems and contracts In winch the civic conveniences arc furnished, such as water, light, paving, transporta- tion, order and safety, have been farmed out to the leaders of the political rings by methods in which apparently every department of the municipal gov- ernment, including the judiciary, participated in the frauds. It is impossible bo charge any particular political party, or church, or nationality, with sole guili in this matter, for apparently people from every circle haw participated in the plundering processes. Furthermore, the local leaders have been in partner ship or subordinate to the state leaders, so that the graft ramified into state and even national politics. It is almost futile to name individuals as chiefly responsible, when as a matter of fact even those who control the operations are hut part of a system for which every citizen shares the responsibility. It does nol seem unfair to say, however, that such national figures as the late Senator Matthew Quay, and Samuel H. Ashbridge, who served as mayor for four years, have hem involved in the severest charges, the former even being Indicted. The Municipal League, which is an organization in Philadelphia striving for civic decency, published the following summary of the career of Mayor Ashbridge, when his term ended in the spring of 190:5: -The four years of the Ashbridge administration have passed into history leaving behind them a Bear on tin- fame and reputation of our city which will , long time healing. Never before and lei us hope never again, will there l„ s UC h brazen defiance of public opinion, such flagranl disregard of public interests, such abuse of powers and responsibilities for private ends. These are not generalizations, hot each stateraenl can be abundantly proved by numerous instanci The charges included in this report involve such things as attempted intimi dation of citizens, the introduction of gambling into the public schools, the charging of school teachers for appointments t<> positions, and manifold pari nerships with vice of the grosscsl forms. Perhaps the most conspicuous detail in the Philadelphia fighl was ihe affair of ihe street car franchises, which were passed hastily, almost clandestinely, by a collusion of the state legislature .owl the cii\ council, Governor Stone and Mayor Ashbridge, and various political leaders of the ring. Without remun eration to the citv these franchises gave away rights to the streets of a tic mendous value I,, the efforl to bloc* the scheme. John Wanamaker made a formal offer of s'.\ 500,000 for the franchises which were being give. away. too GRAFT /.V AMERICAN CITIES. i| 1( ni;i\or threw In- letter into the street unread, and the offer was refused. Next Hie state legislature passed a ridiculous law manifestly intended to tnuz- sle the press, and all honesl critics of the corruption thai existed. Then came the election of a new mayor named John Weaver, chosen by the ring, but apparently promising to stand by the people when frauds should be attempted. It is interesting to note that for two years his administration did little to justify the hope that had been placed in him. Hut in the spring of 1905 came his opportunity to prove his good faith. A measure was before the city council by which certain gas franchises were to he given away, as lightly as were the street railway franchises two years before. At last the city seemed to be roused to some realization of what was going on. M;iss meetings were held everywhere to attack the nefarious scheme. Citizens at- tended the council meetings, and dangled ropes with nooses at one end, over the gallery railing. Savs one dramatic account of the uprising: "Philadelphia has at last responded to the rising national tide of civic conscience and civic conscious- n< ss. The gnat, dumb, comfortable mass of small-incomed families was moved. A machine morning paper, which after some days of silence incautiously espoused the cause of the machine on a critical morning, had nearly five hun- dred postal cards stopping the paper the next morning, and it never spoke again. In schoolhouses after school hours the children of councilmen who had voted for tin lease went crying home, because no child would play with the sons and daughters of a gas thief. Councilmen in grocery and provision stores found their patrons suddenly gone. .Men were expelled from clubs and benefit orders, and warned to resign from ward celebrations of Memorial Day. One blatant supporter of the lease in the council found his ward placarded with his picture, his house, his political headquarters and his business place. The ts he passed over daily were noted, the hour given, and every citizen asked in stop him and say, "Why did you vote for the gas lease?' This and noth- ing more, men did, by the dozen and the score. For one day he was brutally defiant, for another irritably bellicose. Hut no man can stand being asked why he is a thief bv everybody he has known from childhood, and by the third or fourth day he had capitulated, sought the mayor, and agreed to support his veto. This uprising from below of tin- great throng, would, after all, have failed without a Leader. For two years Mayor John Weaver had been a man numbed by hopeless conditions and under the personal influence of a shrewd. masterful boss. Hut he was a man of principle, and he was treated with stud- ied insolence by men who despised his principles. When the hour struck he GRAFT IN AMERICAN CITIES. 401 acted, and, as with all nun who act, the citj rose to him as one man. Sud- denly in a wick Philadelphia knew itself. The dumb driven city became a sentient thing. The council which had passed the lease collapsed. The machine was smashed." Of course not all of this successful fight against corruption in Philadel- phia was carried to a conclusion without temporary defeats and hard strug- gles. Nevertheless, the fact that the glaring $25,000,000 gas -teal aroused the citizens of Philadelphia to he no longer contented in a state of corrup- tion, of which they were victims and for which they were largely responsible, i- an evidence of what can be done in other cities where graft ha- been hardl;. It ss shameless. The very title- of the chapter- in Mr. Steffcns' quest are significant of the form the fight has taken — "Tweed Days in St. Louis," "The Shame of Min polis," "The Shamelessness of St. Louis," "Pittsburg a City Ashamed," "Philadelphia Corrupt and Contented," "Chicago Half Free and Fighting On," — these are characteristic titles under which some of the disclosures have been published to the world. In each of these cities there have been characteristic facts peculiar to the place itself. For instance, St. Louis was struggling against the corrupt awarding of municipal franchises. In Minneapolis the trouble was a foul partnership between the corrupt city administration and the worst haunt- of vice, in which the profit- of the vice were divided with the officials. Pittsburg u.i- cursed with more or less of both of these troubles, when the citizens roused themselves to attempt a betterment of thing-. In Chicago, as in St. Louis, it ua- a dishonest council with which honesty had to contend, but those condi tions havi been corrected in large degree by an awakened civic sense, led l>\ an organization called the Municipal Voters' League. \Y have used Philadelphia as an example of corruption and an example ol id,, effort to reform, -impl\ because it stands today so conspicuous in the list. V fertheless, strange ;i- it ma) seem, little has been accomplished in <>ne eit\ by holding up fh<- example of another. Each comniunit} has had to work out own salvation, and some of thru, are -till backward in accomplishing this or n in attempting it. Furthermore, it is not the great cities of our countr} Lhat have a monopol} of vice in the form of graft. All the waj up from tin country village l<> the metropolis, th< same chain can he traced, differing chicfh in the magnitude of the plunder available in the larger cities, but dif f< ring not at all in kind. Nor i- the offense of graft confined to thi cities of large foreign populn MS GRAFT IS AMERICAN CITIES, lion, or those in the older and more thickl) settled parts of the country. In the waterworks steal at Grand Rapids, Mich., facts just as disreputable were developed as in the worst phases of the Philadelphia affair. Even now Bos ton is just passing through a conflict over its gas franchises which promises to \u as vital to the citizens of thai historic center of liberty, the site of Faneuil Hall, as that other fight in Philadelphia, under the shadow of the room where the Declaration of [ndependence was signed. In Boston the good citizens have rallied together to support the move for civic decency, but strangely enough they have not had the support of the pub- lic press to the degree that t he v should have had, thanks to the fact that the element opposed to them had command of large sums of money, part of which went to the newspapers in the guise of payment for advertising. It is not alone in cities, hut in states as well, and even in the nation, that the serpent of graft raises its head. In the State of Illinois for years the good citizens have had to tight against the dominance of corrupt political rings between which there was hardly any choice, although they wore the political labels of the two great parties. There is no partizanship in political graft, , scepi as the party label assists in the game. The grafters are never troubled by tin ethical principles involved in political controversy. To them the gas fran- chises, the street railways, and all sorts of public contracts, are legitimate ave- nues for profit by plundering the public. In Illinois the park boards, the san- itary hoards the drainage canal system, the insane asylum and the peniten- tiaries even, have been preyed upon by republican bosses and democratic bosses alike, through a system which involves in its organization the federal influence in the state, the state administration itself, and as junior partners the county <.f Cook and the city of Chicago, with business men, hankers, and public men who pretend to he worthy citizens, controlling the details and sharing the profit^, either financial or political. \\ , find tin- same thing true in Wisconsin, where for the last few years there has been a most picturesque fight between the people on one side, with Governor Robert M. LaFollette as their leader, and the railways on the other side, with the federal power in the state in close alliance. In Missouri another governor has arisen to fight the battle of the people, in the person of Joseph W. Folk, who has done more to terrorize the rich and powerful boodlers of that commonwealth than all the other powers that have ever been brought to hear upon them. As district attorney in St. Louis, Mr. Folk was able to indict, convict and send to the penitentiary or drive out of the country as fugitives from justice, a score of the richest and most influen- GRAFT IN AMERICAN CITIES. *03 tiul men of the city, some of them reckoned as merchants and financiers of the highest standing in the community. In doing this he broke up a gang- that had been plundering the city and the state for years, and now as a reward for his sincerity he is serving as governor and continuing the good work in broader channels. Thus it is that we feel justified in saving that there has been a real awak- ening of the civic conscience in late years, and that there is a prospect for a constant betterment of conditions. Wherever we look we see a brighter out look in the situation. Those spoils politicians of Philadelphia who cherished the belief that the reform wave would expend it- strength in a short space of time, must be considerably exercised over the increasing strength of the move ment. There is a pertinent utterance on the subject in the letter written by Grover Cleveland accepting his appointment as one of the trustees of the Equi table Life Assurance Company. In the letter which tendered him the trustee ship, Thomas F. Ryan, who is now the dominant figure in the Equitable, said: "The duties of the trust will be light, as in the nature of things when a satis factory board is once constituted, there are few changes and all the clerical and formal work will be done by the official force of the company." Mr. Cleveland does not seem to be particularly impressed with the desira bility Of having his duties as trustee lightened for him. He accepts on "th( express condition that the trustees are to be absolutely free and undisturbed in the exercise of their judgment." In electing directors to represent the policy holders th.y must be permitted to follow faithfully Up policyholders' real wishes. By way of making his attitude still clearer Mr. Cleveland makes some pointed remarks about "the madness () f inordinate busi ffeSS scheming" by men handling trust funds. He closes by saving: "W< Can better afford to slacken our pace than to abandon onr old simple American standards of honesty, and we shall be safer if we regain our old habit of look lug a t the appropriation to personal uses. f property and int. rests held in trust, in the -one light as other forms of stealing." Stealing is a crude, coarse word, which will shock some modern financiers, but his use of the term shows that Mr. Cleveland has .-, Iiv,|\ sense of the needs of the situation. That trusteeship, he wants it understood, will be no sinecure while he holds it. There will be no dummy directors and no specu lative deals if he knows it. and he thinks he will know it. In short, as a trustei he promises to be as active as the controlling spirits ,,f the Equitable could wish, and maybe a little more BO. It is this sort of a jpirit that wrices the hope of the nation to eliminate the M)4 GRAFT IN AMERICAN CITIES. poison of graft thai has been permeating the entire national life. Every man is a trustee for himself and his neighbors to some degree, and only by the realization oi each honesl man's obligation to be on guard and alert to proteel the right even when he is not himself immediately and personally concerned, can we teach the highest point of national vigor, honesty and success. CHAPTER XXXVU THE GRAFTER IN BUSINESS. Private and Public draft Work m Close Partnership— Business Men as Hood Vers- Juggling With Life and Safety The Labor Boss and tin Capital Boss Strikes and Strike Settlements for Side Higher Standard:. A , eded. It ls hardly worth while to speculate as bo whether the widespread exten sion of systematic graft in the political world and in city, state and national affairs, has stimulated the growth of the same method of theft, petty and otherwise, in private affairs, or has been an outgrowth of what might be termed private graft. However that may be, it is certain thai of late years the two systems have grown up side by side, with little l«» choose between them as to the energy with which they ply their nefarious trade. Graft in business begins with the pettj practices of the dishonest pur chasing agent who draws commissions from dealers upon all the things he hu} for hi-- employer, thereby profiting the more, Hie higher prices he pays, and the greater the consumption of materials. This is in no \\a\ different in mor als, though ii max he different in law, from the disreputable practices that were unearthed in the United States Postoffice Department onh u year or two ago, when it was found that the most trusted of the officials were the worst of tin plunderer-, and some of them were sent to the penitentiary lor their mis deeds. Even before that, we had seen the astonishing spectacle of a trusted official .sent to Cuba to organize tin postoffice of the young republic, where the oh! tion was upon him to In exemplan to the highest degree, violating hi- trust and abusing the confidence of Americans and Cubans alike. With these exam pics before us we do not need to he surprised when we find the same th going on in a smaller way, because the opportunities an- smaller, in man) other qua ii ers. It is difficult lo differentiate sometimes between private and public graft, and often one part) to the offen e i in public service while the other is in pri x air ho in. I ! nupli of tlii ..ii ii in iln manipulat ion of i when professional "tax-fixers" l>\ virtue of son* strength, necessarily illej 1 1 it; THE GR iFTER IN BUSINESS. mate, obtain a reduction of assessments for their patrons, of course al a price. Building and fire-escape inspectors wink at violations of the law for a bribe, waiving safety appliances that maj cost a multitude of lives by their absence. Hut the manufacturer who puts iron filings into life-preservers because iron i> cheaper than cork, as was sadly proven in the burning of the "General Slo cum," is no better ami no worse than the inspector who passes then) and shares the profits. The mental attitude of some of our "best citizens" on these and kindred points i- sometimes a surprising one. They are often quite unable to see that tile man who gives a bribe is as bad as the man who takes it, even if the giver is literally laid up to pay for :i legitimate object. The w liter lias in mind the position taken by one business man who is prominent in mercantile and manu- facturing circles in Chicago. lb' ueeded a switch and side-track to a certain fac- tory, in a place where such conveniences wire proper, and recognized as neces- sities. An ordinance was required and he was quite prepared to pay the city's price' for the permission, whatever that might be. Hut the ordinance was "hung up" in committee, week after week, with no sio-n that it would ever be reported. Finally the fact was hinted to him that he needed to sec the chair- man of the committee, which he did, receiving the information that compensa- tion to the city was unnecessary, but he must pay the price for putting the mat- ter through the council. lie did this, and in conversation justified himself for doing so by the fact that his request was a legitimate one, his need imperative. the delay disastrous, and he had to do as others did. To the suggestion that ho should have fought the matter to the end for an honest solution, he answered that he could not afford the cost in time, publicity, enemies, and the resulting troubles, and that it was none of his business any way. Manifestly just as long as men who claim to be worthy citizens take that attitude, we cannot i sped much in the way of improvement from the professional boodlers and grafters. It js a stern arraignment of the American '•business man" that Mr. Stef- fens makes jn one of his utterances. After dismissing what lie terms "the hypocritical lie" that the foreign element in our population is responsible for our erraft and corruption, he says: "Another conceit of our egotism is that which deplores our politics and lauds our business. This is the wail of the typical American citizen. Now the typical American citizen is the business man. The typical business man i- a bad citizen: be is busy. Tf he is a 'bio- business man' and very busy, he does not neglect, he is busy with politics, oh, very busy, and very business-like, T found him buying boodlers in St. Louis, THE GRAFTER IX BUSINESS. 407 defending grafters in Minneapolis, originating corruption in Pittsburg, sharing with bosses in Philadelphia, deploring reform in Chicago, and beating good government with corruption funds in New York. He is a self-respecting fraud, thi> big business man. He is the chief source of corruption, and it were a boon if he would neglect politics. But he is not the business man that neglects politics: that worthy is the good citizen, the typical business man. He is too busy, he is the one that has no use and therefore no time for polities. When his neglect has permitted bad government to go so far that he can be stirred to action, he is unhappy and he looks around for a cure that shall be quick, SO that he may hurry hack to the shop. There is hardly an office from United States Senator down to alderman to which the business man has not been elected, yet politics remains corrupt. The business man has failed in poli tics." Again, after relating the story of the regeneration of the city council of Chicago, where important reforms to honesty were accomplished and are not yet appreciated throughout the country. Mr. Steffens says: "How do the 'big business men' like it in Chicago? They don't like it at all. I spent one whole ton noon calling on the presidents of hanks, great husines > men, and financiers interested in great public utility companies. With all the evidence I had in other places that these men are the chief sources of corruption, I \\;is unpre pared for the sensation of that day. These financial leaders of Chicago wen 'mad.' All hut one of them became so enraged as they talked thai they could iot behave decently. They rose up and cursed reform. They said it had hurt business, it had hurl tin town. 'Anarchy,' they Called it: 'socialism.' Thev offered me facts and figures to prove that the city was damaged. 'Hut isn't tin reform council honest.-' I asked. 'Honest! Yes, hut h '* 'And do you realize thai all you sai means that you regrel the passing of hoodie and would pilfer to have back the old corrupt council'' Thai brought .1 curse of i shrewd smile, or a comical laugh, but th.it tiny regretted the passing of the old boodle regime i- tin fact, bitter, astonishing hut natural enough. Wi liavi Been those interests at their bribery in Philadelphia and St. Louis; \v<- have -'Mi them opposing reforms in every city. Here in Chicago we have them cursing reform triumphant, for, though reform may have been a benefit to the cit\ a- a community of freemen, it 1- r«all\ bad; it has hurt their busi- ness !" It fa the -oil of -in influence the tremendous growth of pji ift in politic and iii business, with the resulting callousness upon ih> eon cienci ol Hie mul titudes who participate in it. that is manifesting itself afresh in other field* of W8 THE GRAFTER l\ BUSINESS. endeavor. Employer and employee alike, in varying degree, musl share the responsibility for the shocking things thai are alleged and developed as to graft in the industrial world. The lionesl workman cannot shift to his busi ness agent or walking delegate all the blame for the corruption that creeps into the union movement, anj more than tin honest business man can escape hi- share of guilt in the lawless methods that may hi' used by the lawyers or its employed by his association and paid from the treasury to which he contributes. It is no part of the writer's duty to strike a balance here between employer and employee, or to determine where the greater blame lies for the evils that an- perpetuated in the war between capital and labor, in which the public in the mas-, always is I he sufferer, and always in the end pays the hills. Every candid man knows that there is enough of blame on either side, and merit at times in the contentions of both parties to the conflicts. Ali we can do here is in relate some of the phases of the conflict in which the characteristic American evil of graft has played a part. The peculiar power placed in the hands of the trusted business agent of a union and the manager of an employers' association, with the obligation they seem to fee] to win every contention at all hazards, has stimulated and made possible much in the way of improper manipulation of the money and the authority of command. The organizations have been less curious about the methods employed and the disposition of the money expended, than they have about the results obtained. As a natural consequence of the application of tin ild phrase, "You must fight the devil with (ire," there has been a tendency on each side to use lawless and extreme methods to accomplish the ends sought. In earlier pages we have written at length of the crimes of capital and the crimes of labor. Hut it would be impossible to relate all the details of the charges that are bandied back and forth between the opposing forces, or to follow into all its branches the slimy trail of graft that can be traced across tie whole hi-torv of recent conflicts. We do not nerd to on back to the ctsc of the notorious Sam Parks of New York to find an example, though he has been ;i conspicuous figure in the list. characterized as he u ;( > by courage, recklessness and greed. During the spring and summer of 1905 the teamsters* strike in Chicago, with its attendant difficulties, disorders, negotiations and investigations, brought out evidences of plot and counterplot which showed the blight of graft :il every hand. Upon one side tin charge was made categorically by certain labor leaders that employers had offered large sums as bribes to induce the calling of strikes THE GRAFTER IN BUSINESS. 40«J against their competitors in business. This was made with special regard to one Large mail-order house, the claim being that the management had offered the sum of $10,000 to the union leaders and the strike fund it' a strike would be declared against the most conspicuous rival in the same business. Of course the charge was denied and indeed indictments for criminal libel were returned against the ones who voiced them, hut in various ways they have been reiterated against others. Again, it was charged in detail by Labor had ers and others, that the great strike of coal teamsters against the huge office buildings of Chicago, by which the latter were forced to abandon the use of natural gas for fuel, and take coal instead, was inspired and paid for by the most prominent coal dealers of the city for their own profit. On the other side, it is alleged with equal defmiteness that some of the labor Leaders have offered strikes for sale as a virtual business, or have agreed to avert strikes for money paid to themselves, or have called oil' the strikes when paid to do so, irrespective of the merits of the cause or the Interests of the unions they were purporting to serve. Money lias been spent lavishly in private dissipation by some of the more reckless labor leaders, and tlie onl\ source from which it could come is the treasury of the unions or graft from employers. The most conspicuous charges centered around the name of one John C. Driscoll, not a labor leader, but a "commissioner" who dealt with unions as a representative of employers. lie testified before the Grand Jur} in the Chi cago Investigations, in a way to throw much light on the subject. In his da} of Influence he seems to have acted on the broad general principle that indus Lriai peace had a cash value to employers of labor. Whenever a client of hi was threatened with a strike, he undertook to smooth awa} the difficult} if pro vided with tin necessary funds, and he applied the funds where he though! the} would do the most g I. Ordinarily he prevented b strike, according to In own story. Equall} satisfactory results were produced, he says, when there was ;i strike to he broughl to an end. According to Driscoll his methods hav( resulted in peaci on hundred-, of occasions. There are employers who defend such actions. The} agree with Driscoll that if labor Leaden of a certain sort need to be placated, it is the business of the expert e|||pln\e,| |' (ir ||,at purpose In establish a flie|ldl\ II lldelsl a I id I II g al the lowesl market rale. \s In I h. method* employed HlO man who di.iu th check i- studiously incurious. He gets whal hi pa} foi and asks no i]u< lion .lu-l as he has a lawyer to look after his interests In court, he ha* an ngcnl Lo fix up his labor troubles, Strikes are innoying md costly, lb prefers no! to Hit THE GRAFTER IS BUSINESS. tin in. or al leasl to get them settled as quickly as possible with the aid of s tg« nt and his check book. Thai is the immoral \\a_\. The employer lias no right to disavow responsi- bility for the methods of hi> agents. To assume thai trades union Leaders are corrupt, and to buy them off, is to bring corrupt men to the front in unions. Clearly it is to the interest of an honesl employer to deal with honest men when questions relating to his working force are to be considered. He has no righi to pay blackmail or tribute of any sort to keep from meeting an issue, even though that issue he raised for a dishonest purpose. Until this attitude is taken and maintained, we cannot bring graft in the labor world to an end. It i equally imperative that the honest Labor union men disavow and eliminate from their rank- the men who use or accept bribery and graft, even for the apparent profit of the unions. Sam Parks went to the penitentiary, after a career that involved grafting upon the labor unions whom he represented, and the employers who were equally his clients, as it afterwards developed. Hun- dreds of thousands of dollars were won and lost in the graft practices that obtained under hi> regime, and he was the largest sharer in the plunder. And vet he was tolerated and even upheld throughout the unions he pretended to •( n e. In the last analysis, the American public, of all ranks in life and Labor, will surely revolt against these nefarious practices that lower the whole tone of honesty and decency. It is in exposures, publicity and education to a higher standard of integrity, that we see hope for the future. CHAPTER XXXVI II WHAT ARE VOL' GOING TO DO AHOIT IT? Plutocratic Impudence— Education must be tin' Foundation to the Solution of Present Day Evils — Broadening of Governmental Power Publicity tin Best Cure for draft — The Same Brand of Honesty Needed for Public as for Private Life. A generation ago "Boss" Tweed, wIki ruled Tammany Hall and New York City as if a municipality were nothing hut a private enterprise for p< rsqnal exploitation and ^.ain, when remonstrated with for leading the city into a reign of boodh such as seldom has been duplicated, gave utterance to the historic phrasi : "What are you going to do about it?" Manifestly thi^ was a piece of effrontery which shocked the public. Hut. crude as it was and outspoken, it depicted the type of business, pol itical and social unfairness which <\ isted t hen and b1 ill exists, even though under the guise <> ABOUT ITf (i patronage, said, "The public be damned," he expressed something of this seemingly Inexplicable attitude of antagonistic classes in modern civilization. -in these varying phases of impertinence which range from downright criminality to the unfair absence of a consciousness of a duty to be performed, there are many steps, which in themselves appeal- insignificant, but which lead definitely toward a given goal. When Janas J. Hill resented the attitude of President Roosevelt in seeing that the anti-trust law against combination in restraint of trade was carried out, even though it necessitated the dissolution of the greatesl railway merger ever •n. and viewed the railway business as his "own business," the distinction from the other phases of unfairness was small. Thesamething held true of the attitude of the members of the Beef Trust in believing it within their province to restrict trade, contrary to law or otherwise, for the benefit of their fast-swelling purses. The example of plutocratic impudence carried out to its logical conclu- sion as seen in the history of the Equitable Life Assurance Society probably has no equal in the annals of so-called legitimate "high finance,'" though we find rep- utable people practically calling for the ostracism of the men who attempted to plunder the investing public through the scandalous hut "modern" business method- used in the flotation of the securities of the Tinted States Shipbuilding ( Company. In many directions we find the same disease eating it- way. The grafter in Philadelphia keep- brazenly at his work, confronted by a hundred hangman's noose-, and only desists from robbing the city, not only of its wealth bill of its name, when the logical force of Might — the populace — insisted upon its light-. Xo greater arrogance, even though it be less glossed over by super- ficial refinement, exists than that shown by many of the leaders of organized labor. Tin- is met by the same degree of stiff-neckedness on the part of the, capitalistic class which insist- "this i- my business." Hut this class cries out in horror when an indignant public demands to know how a Rockefeller honestly can accumulate the wealth of half a dozen states iii a lifetime. The. employer and those who justify his nut hod- deem he is doing humanity a great service by "giving work" to wage-earners. The wage earner insists upon the right to ! i mployer cries out against the boycott as un-American, forgetting that tin refusal of the people of the American colonies to buy products from hip of the mosl effective weapons aside from bloodshed used to freedom through lln War of the Revolution. And while tin- trust pro moter and "high finance" banker "water" stocks so copiously that the term has ne synonymous with robbery; while stock manipulation goes on dishonestly WHAT ARE YOV GOING TO DO ABOUT IT? US in Wall street, and the corporation manager, blinding Ins stockholders, issues the "official denial" which is tantamount to downright falsehood, the labor leader frequently advocates slugging, often selfishly restricts logical progress and carries business war forward constantly in such endeavors as will gain .» temporary victory, a- say, in the resistance of the policy of the "open shop." In the meantime the whole land trembles and cries for a "square deal." At this point the query, "What are von going to do about it :** comes not from the impudent malefactor hut from one and another of the \ast majority, which by the power of Might make their edict Right- from the millions of sober minded American- who by right of birth or naturalization have vested in them the power to declare their sovereign will operative for tin- benefaction of all society. Such a question, perhaps, is the natural query thai springs up in the mind of every person, who. roused by the cry for the "square deal." seeks through the medium of this hook to know more concerning the great domestic problems which confront the nation today. Indeed, the problems before the American people for solution differ hut in degree from those which are before the civilized nation- of the world. It follow- almost without saying it specifically that the existence of a de- mand for such a hook as the one lure presented presupposes a somewhat genera] admission of the fad thai education must be the foundation -tone on which an\ schem< of solution of present-daj evils is to be built. If the reader has seen anything of evolution in the foregoing chapter- there musl have been • than a hazy suggestion that the demand for knowledge which shall work for good citizenship, which shall result in good character-building and enlighten ineiit to the point that action may he taken logically to remedv existing evil abroad in ever} part of the Land. Perhaps those into whose hands this vol will fall and who agree with this assumption believe that the desire for know! idgc i- no sooner expressed than it m.i\ be gratified. Several obstacles, ' ever, interpose to prevent as definite progress in this direction u red. Poverty, no matter what may be the cause, is one of these difficulties, and al the same time it i- one of the ill- which through education wc seek to There i- one school of philanthropists which, now that Ameri leveloped a type of it- own making through the commingling of mosl of the wl and some other races, seeks to prevenl poverty h\ restricting imi certain so-called "undesirable" people from other countrii ' the nation already limit lhi> immigration to a considerable d< inal.s, diseased persons, contracl laborers and several other '\i Vnother school of sociologists hold, thai while criminal 01 nt WHAT ARE YOU GOING TO DO ABOUT ITf should be kepi from the country, it is an admission of faulty Logic when the sin of poverty can be stamped out only by such preventive methods. And closely nllied to these thinkers are those who cry out upon the coincidence of congested tenements and palaces of the millionaires in the greal cities and tin- broad acres of the rich man's country estates side by side with vast unused spaces where the poor would not find themselves shelterless so long as they had the free use of tlu ir limbs. Hut in the plea for education it is not alone the impoverished man who must he leached, for it is not always this class that is most ignorant of condi- tions which must he understood before some of the worst evils of modern society will find their remedies. Clearly one tiling must he understood concerning the attitude of the so-called lower classes. There is an influence at. work apparently to create a class instinct among wage-earners, if that instinct dot's not, in fact, already exist. This instinct does, or will, work for whatever will be either of temporary or of permanent interest to the wage-earner. Up to this point it has worked principally to create organizations of the trade-union type, to gain any advantage possible for members of the union, by peace methods if possible, but by war methods if necessary. Edwin Markham catches this spirit of the wage- earner in his poem "The Right to Labor in Joy r " the lines of which we print with the view to setting forth by indirection what must be some of the unfailing deinand> of the wage-earner upon society: "Out on the roads they have gathered, a hundred thousand men, "To n.sk for a hold on life as .sure as- the wolf's hold in his den, "Their need lies elose to the quick of life as the earth lies close to tin- stone; "It is as meat to the slender rib, as marrow to the bone. "They ash- but the bare to labor, to toil in the endless night, "For a little salt to savor their bread, for houses water-tight, "Then "*!'' but f l' r right to labor and to live by the strength of their hands — "They who have bodies like knotted oaks, and patience like sea-sands, "And the right of a man to labor and his right to labor in joy — "Not all your laws can strangle that right, nor the gates of hell destroy. "For if came with the making of man and was kneaded into his bones, "Ami it will stand tit the last of things on the dust of crumbled thrones." WHAT ARE YOU GOING TO DO ABOUT IT? U5 In many quarters one hears the ready assumption that "a man gets about what he is worth" and that "evolution" and the law of "survival of the litt. will take care of the fundamental matter of labor and the fruits thereof. It is not our purpose here so much to consider tin- ethics of the problem of which poverty is one of the principal phases, as it is to point out that the conditions that develop poverty to a great degree are working definitely as a tremendous force in its solution ami in answering the question of "What are you going to do about it?" Granted "undesirable" Immigrants come to this country from the worst classes of the peoples of Europe. Tin causes back of their coming arc manifold and will have to be removed at least in part before other malcfac tors can hide their sins under the cloak of this evil. In the first place, America is the "land of the free." In the next place, in hundreds of thousands of cases immigrants arc tempted to conn- to this country by wicked misrepresentations <•! people who will be benefited by their coming — principally employers seeking labor in the cheapest market and constantly using dishonest means to get labor at what is termed the "living wage." Obviously, however, the day has gone when the wage-earner i> going to be content with simply existing. With the progress of the world in ever} direction it should lie apparent to the most ignorant multimillonaire and here it may he said that as concerns the desires and ambitions of the poor the rich are the most ignorant that no Longer will a bare "living wage" suffice I'm- the wag< earner. If. perchance, the workman desires college educations for his children and Beethoven music for himself, nothing short <>f this can constitute the modern "living wage." Undoubted!} this is the fundamental impulse that now is <|. veloping what sonic please to call a "class consciousness" among those who do the work of the world. It is this surge which has held together the trade union as a makeshift toward getting better conditions for labor until a more perfect w.i\ can be evolved. With this somewhat slow awakening to needs tor a higher oil of existence than that of dumb brutes and meager and imperfect mean- lor obtaining them, there has come another awakening which the present dominant nnot overlook. This is the awakening to tin fact that wrong has been committed in high places. As has been outlined in the fori going chapt rs, a wave of infidelity to the obligations of trust has swept over the country. There appeals ;,> b. easy set of business morals at work in many quarters toda} It has been said truthfully thai "men who recognize and obej the highest demands of honorable conduct in the discharge of the duties of a trustee under a will or i rdian of an infant, w em to jet up a different standard whi n w n ii r or H(i WHAT ARE YOV GOING TO DO ABOVT tT9 ugenl of a corporation." In feudal Europe there were two principles at work to keep the demands of the populace in check: "the king can do no wrong" and ••1 rule l>\ Divine right." It has been said thai while these have given way long since, they have given way to ne^ principles which run something in this fashion, "the kings of industry ran do uo wrong" and "we rule by divine righl of high finance." People do not like the idea of a self-perpetuating, irrespon sible monarch in business any more than they like the absolute monarch in gov- ernment The eighteenth century saw the movement for freedom from political despotism and tins twentieth century is witnessing the movement for freedom from financial despotism. And when we find the wage worker In lit upon a higher scale of life and crying out upon the faithlessness to trust in high places we find potent instruments for furthering the evolution which we are witnessing. Thus far education has been reciprocal and all present signs point to a con- tinuation of this tendency. In days of feudalism the educative forces of civiliza- tion were dominated by the overlords who retained the educators. Concessions from existing conditions to the underclass came slowly and education wrote into the ethics of the ruling class new doctrines of liberty generally only after liberty- had been achieved. Today it is quite patent that the dominating class, the. cap- italist, works through education as well as through social, business and legal influences. This being true, we may expect to see ideas favoring anything beneficial to capitalism as the dominant system of economics working constantly in law. in education, in morals, in general business. Because of this we find more and more the dollar the goal of all ambitions. In the question of this goal we find many people who do not use the rules of the game of present-day competi- tion. In fact, as pointed out heretofore, we find the motto in many business quarters to he "business is war.'* Naturally here arises the question as to what can be secured by .ducat ion at this juncture. Briefly put education must raise the genera] level of humanity to a consid- erable degree, hut in current events it appears to he disclosing to the lower order of intelligence the questionable methods employed by the dominant class to gel whatever of the good things of this earth are available to .Might. Thus, while the wage-earner i- confronted with the goal of his employer, he is also tempted to use the mean- his employer has used to attain that goal. Before education, there- fore, i~ to work a good influence on the lower classes, it is barely possible that the dominant class must learn square dealing. But ;it once the disciple of educative methods for relieving social ills is con- fronted with fact that even legal methods can he used to benefit the more power- ful c];i-. When the strongest party desires certain legislation it can legally WHAT ARE VOL' GOING TO DO ABOUT IT? n' secure that legislation by force of controlling public opinion. Therefore the class instinct in the wage-earning class finds it to the interest of this class to work through kgal means to secure every possible advantage over the capitalist class. Obviously, education among the wage-earners is developing to a know! edge of how to use the right to vote to the best advantage. Today as never before there is a spirit abroad among the wage-earners to awake to the natural power placed within the reach of all Americans to create, by means of the elect- oral franchise, conditions which will favor them instead of the employing class. Here we find up to the present time the existence of the idea that the in- terests of capital and labor are conflicting rather than identical. And at this point it is perhaps permissible to state that on this rock many schemes for im- proving existing conditions have been wrecked. Naturally it is to the advantage of the capitalist da-- to educate the w -age-earner to view the prescnl system of distribution of wealth as the only feasible one. Hut the wage-earners, and many others for that matter, express grave doubts over the stability of the capitalistic system of uealth distribution. Therefore we find educative forces among the wage earners working to build up a sentiment to destroy this system and place in its stead one which will not permit of such glaring inequalities as exist between the capitalists and the wage-earners today. Apparently this results in working in a circle and haves class antagonism where it started, bent upon the mastery of the situation by the most powerful. And to some degree this assumption is based upon known tendencies. It capital is being educated to consider the needs of tin poor m order l<> set a better example to tin wag< earner, the working class is being educated to the power of the ballot. For there is no douht that the wage-earners are in the majority and that therefor they can legally declare Might to he Right and vote to make even as sweeping changes in existing conditions as the confiscation of public utilities and other tool- of production and thereby displace tin present system of capital domino tion by community owner-hip. This, indeed, i- being accomplished in som< measure by municipal ownership in many cities of Europe and Bom< cities in this country. Man} i town own- its water and light plants, -mall pari- ami neighborhood settlement houses, and some of t hem operate street railway jystems. What we ?eck to learn from these di velopments i- to ascertain to what extent this ph icial life is a criterion of the future functions of government. In the foregoing chnptcrs what lm In en the dominant note -truck l>\ history itself? In Hie cases of tin w tion of th. Beef Trust, the Standard oil Trust, the Life I. Trust, of the prosecution of grafters and of the intcrfcrcno between employer and employe us it HAT ARE YOV GOING TO DO ABOUT ITf in the clash of conflict wc find definitely a tendency for government in some t'orm to interpose its influence. We find many laws in existence to prevent combinations in restraint of trade, laws against trusts and monoplies, when actually there are great savings in the methods used by the trusts and monopolies. Win is this? Emphatically because the lawmakers of the country fear that people will not lie fair enough to each in the quest for dollars to be left to themselves in charge of great power without the restraining hand of the law. This brings as to the conclusion that, whatever is to he the ultimate future of s (H -ial conditions, government regulation is to play an important part for some time to come. By this we mean the supervision of governmental forces over the business of the country. There are those who believe this will be but a makeshift in the course of evolution, that the eventual trend is for government to assume any and all duties that will make for the happiness of all. Specifically it is pointed out that in an industrial millennium equal opportunities will offer for every person to achieve easy conditions of life. But in the meantime, for instance, while strife between capital and labor goes on, it seems quite likely that tin' suffering public will demand such government intervention as will go to the point of forcing contending interests to arbitrate their difficulties, regardless of the plea of one side that "there is nothing to arbitrate." Briefly, therefore, it may he said in answer to those who ask "What are you going to do about it?" that the question is being answered daily through actual progress, although that progress may be slow. In the first place we find the general weal calling for education in order to handle perplexing prob- lems with something of sanity. Then we find that although there is a class war between capitalist and wage-earner the public calls for the use of the ballot instead of the shock of physical combat. And, furthermore, wc find a definite tendency for the public to lean so strongly toward governmental regulation of monopolies and other powerful combinations that government ownership is ad- vocated and adopted in many quarters. Now the obstacle that confronts the advocate of a general advance toward such a community ownership as is suggested by Socialists comes from the dread of graft among the politicians. Those who are combatting the socialistic tend- ency use the argument that as a people we are not fit to govern ourselves to the point of owning and operating all utilities, lest graft creep in and debauch the country. Doubtless the examples of graft today have made this fear seem based on something definite and lasting. But at this point publicity, which is the accepted cure for temporary ills, is advanced as the preventive of grave abuses in a more ideal community. Whatever the tendency toward this ideal WHAT ARE YOU GOI&G TO DO ABOUT JJ'r 419 may be, it is evident that the bulwark of democracy today is publicity. For one thing, the public as a whole is too honest to countenance graft, "high finance" robbery or arrogance in bribing employer or slugging labor leader if the facts are laid bare. Corruption cannot bear the light of publicity any ...ore than darkness can withstand the rays of the sun. Self-interest will not permit of general wrong. This corruptionists have s,. t „ long since, and as a result the". have bought up newspapers and other means of publicity either to gtifle the cry for the "square deal*' or to start a counter-cry which will drown the honest complaint. Venality exists with the press ;l s everywhere else. Hut eventually .t becomes known. 'Dure are times when publicity is hard for misfortunate or dishonest people or corporations. The stock company which is thriving finds publicitj easj ; .1 is when the company runs upon hard times and financial statements riio* up poorly that the rub comes. As President Wilson of Princeton Universitj says of the corporation manager: "If we are t„ give them our money we must at least troubh them to let us see their consciences." The Rockefellers and Havemeyers who view publicity as a si„ against -big business" ask the public to trust the corpor- ate manager while such rottenness creeps into high finance as i,, the case of the Equitable Life scandal. John E. Parsons, counsel for the Sugar Trust, says: "Give me a body of honest men who are perfectly trustworthy, and I would be willing to invest money with them without going very deeply or minutelj into prospectuses or reports." Of course honesty and probity are the st essential things in corporate management as ;„ private life. -If all men were absolutely honest as well as able," says the Wall Street Journal; -if all directors felt theii responsibility as trusters f other people's num. \ as keenlj as they appreciate their own opportunities for personal gain, then it might be said there was no "" ,l for publicity." But publicity is necessarj to enable people to know thi character of the men directing corporation affairs. Character of course i sential, but we cannot know tl„ character of a corporation which hid., behind the \«il of mysterj and does not disclose its affairs, good or bad, ^.n to it, stock holders. Following close in this line of thinking, we find certain statesmen advo eating federal licenses for the interstat* corporation, as suggested bj Com mission,,- Garfield. I., this line Judge Peter - I up of the CTnited si Circuit Court expressed his news in McCluro's Magazine as follows; "Let me preface it b\ saying that against corporations, aa corporation I have no enmity. Modern civilization requires that capital shall be wielded in large mass,,. The corporation is civilization's method of wielding capital i\!n WHAT ARE YOU GOING TO IX) ABOUT ITf m large masses. On that account the corporation is here to stay. The only institution in sight to supplant it is stair socialism; and state socialism is iv\ olution accomplished "Hut tlu- fundamental basis i){' the corporation is the institution of private property and the guaranties our government gives to private property. Now, it so happens that the fundamental basis of the thing I have culled measur- able individual independence, and the opportunity to measurably exercise individual dominion, is also this institution of private property. "It was the institution of private property that, more than any other secu- lar agency, brought us to civilization; and on this institution, as on a rock, the civilization of the world, and the world's republican institutions, must con- tinue to rest. "Now, it is just this institution of private property that is undergoing, at this time, a strain never put on it before. The weight producing the strain is the corporation. Not because the corporation, in essence, is retrogressive and unrepublican. but because, in fact, it is unrepublican, and for that reason re- trogressive also. Not because the corporation is big and growing bigger; but, because, in all this growth of superstructure, the base is narrowing — the pro- prietorship of the private property of the country, by the bulk of the people of the country, is radically narrowing.- "Thus coroporate dominion has, within thirty years, beginning with almost nothing, outstripped agricultural ownership by more than three billions of dollars; and. barring city real estate, comprises now nearly one-half of the whole wealth of the country. In the swing of the industrial system, the corporation has come to be the gravitating force that holds the activities in their orbiK. I> it much wonder that, in the eyes of those who look upon the Corporation as an interloper, it has come to be regarded as a ursurper also — the usurper of what the labor of individual men has created; or, that in the of tho^e who, with clearer vision, look upon it as an indispensable phase of industrial evolution, the way in which the corporation shall hereafter be organized, and the bounds given to its dominion, are coming to be the para- mount political problems of our time? "Nor. viewed purely as a question of economics, can the transformation be ignored. The industrial complaint that has greatest voice today is the danger of monopoly. Corporations owned widely by the people might, per- haps, become monopolies; though I know of no actual instance of a monopoly widely owned. But the antidote of monopoly is competition; and let it come about that corporations be made reasonably safe, and therefore desirable in- WHAT ARE YOU GOING TO DO ABOUT II 421 vestments— let it come about that the corporation shall no longer be regarded as a mere financial sinkhole, except for those skilled in its ways— and there will be abundance of capital at hand, as the' bank deposits show, to put in tin field a competitive corporation, whenever in that field monopoly seems to ! established itself. Indeed, the chief reason why any monopoly can qow maintain itself is, that besides having a grasp on all the physical sources of productivity within a given Held, it has a large grasp, also, on all the finan rial resources that would otherwise. go into the building up of competitors. "But the transformation strikes deeper than mere economic conditions, 01 the natural laws that govern monopoly and competition. The transforma- tion of the ownership of a country's industrial property, from its people generally, to a i'^w of its people only, reaches the bed-rock of social ahd moral forces on which, alone, the whole structure of republican institutions rests; for, under such conditions, instead of depending, each on himself and ins own intelligence chiefly for success, the greai hulk of our people. Increas mgh-, will become dependents upon others. Those who possess investible means will come to rely solely upon the greai financial institutions; and those who possess nothing hut capacity for labor, upon ih« greai organiza tions of labor. Thai is paternalism that will eventually divide the country into two hostile camps, the camp of those who have, and the camp of those who have not: tin paternalism that speedily descends into actual state social ism or a dry-rotted citizenship as nerveless and squalid as state socialism. "The firsl step in the solution of that problem is, that the governnicnl obtain a full grasp of tin whole subject matter; and this, in m \ judgment, can adequately be done onlj by putting aside tin five-and forty bewildering state hands, for tin- one gnat national hand. "The second step, the step for which the first i> taken, i-, to t .- 1 k . can upon what kind of corporate proposal the government's great seal is s, i to cut out the stock-jobbing corporation: tin water-logged corporation; th mere vision of visionaries; the labyrinthian corporation whose stock and bond is>ue>. are so purposelv tangled thai no mind, not an expert's, can follow their inuosities. In short, to regenerate the corporation. "The third step is to open to the wage-earner of the country tin road to proprietorship. The basis of even greai nuccessfnl enterprisi i- thi com mand: Go forth, increase, and multiply; and to no enter] ht fully be denied the fruit- of thai command.* 1 In order to weigh the foregoing statcmenl in the jusl be tlern development and of the "squari deal," it must Im aid it cxpn 4£g WHAT ARE YOU GOING TO DO ABOUT ITP Bests, the belief of an exponent of the capitalist class, the ideas of a believer in private property to the exclusion of any other form of property owner- ship. It is not our purpose here to pass final judgment on what Judge Grosscup decries as paternalism. The one great question before the Amcri- can public is. what will give the majority of the citizens of this country the most happiness? We have seen that private exploitation of such public functions as lite insurance, the postal service, railway lines to the point of dis- crimination and many others is not to he tolerated. We have seen that logical m<»uth of business constantly tends toward monopoly for the purpose of economy. Hut we have also heard the emphatic denunciation of abuse of pri- vate ownership of monopolies. 1). W. Frederikscn, a well-known student of tin- question of monopoly and trusts, said recently: "Many will doubt whether this (government) regulation is feasible, and will say prices must be regulated by supply and demand and not by law or by the courts. Given FREE competition both by vendors and buyers, this is true, but if the VENDOR owns the ENTIRE WORLD'S— or the entire locality's— supply, the law of supply and demand does not come into play, since it is demand alone, or the buyer's necessity, which fixes the price. The vice of the trusts i- to substitute for law of supply and demand, the law of demand merely, and it is in such cases only that regulation by law or by the courts would seem to be necessary." It is quite evident, therefore, that if, as we know, monopolies do exist, and do command markets and do regulate prices and do work injustice, the happiness of the majority of the citizens of the United States is not conserved. Before final condemnation is placed, then, on the idealistic pur- poses of those who would like to see so-called "private" business operated more nearly on the "square deal" plan, there are to be heard from at least many thousand voters who, apparently, will insist upon some further test of this bugaboo of paternalism. And it is of necessity that we revert here to the significance of the remarkable demonstration of discontent in the vote of nearly 4-00,0()<) citizens for E. V. Debs, the Socialist candidate for Presi- dent in 1904. As has been pointed out elsewhere, men of affairs consider this a protest against the mismanagement of business by our much lauded "captains of industry." What this tendency, running strong toward Social- ism, will bring forth, cannot be known now. Suffice it to say that there are many clear-eyed men among these much maligned "cranks," "reformers," ••revolutionists," or what you phase, who see the logic of combination and monopoly in business as definitely as does the leader of business himself. WHAT ARE YOU GOING TO DO ABOUT ITt &3 But there is one great difference between these class The captain of industry is always working for his own interest, and man \ of his type will use questionable methods it' there be a dollar in it. whereas the "dreamer*' at least preaches "an equal opportunity for all" and teaches daily a working lesson on the "square deal." To recapitulate, we would record the tendency of the times to !»■ about as follows : 1. Industry today is better regulated for the production of wealth in abundance than ever before in the history of the world. Monopoly and trusts are economical and are lure to stay. °>. Although the world is producing more than ever before and doing it more economically than had been dreamed of a decade ago. the inequality between the rich and the poor the wage-earner and the employer, the toil en and the idle classes, perhaps never was more marked. .'3. Coincidentally with this great inequalty, human being- have been turned into mere machines, men created in the image and likeness <>t God have been marred in soul and body beyond the recognition of their divine nature — all to the glory of that demon Mammon. 4. And still further, and also coincideiitalU with these developments, crime ha- entered to seperate employer and employ: graft has crept in to trample upon the legal right- of citizens, legal murder ha- been committed in the name of the "divine right of high finance and big business,' 1 and the fountainhead of liberty again ami again has been tainted in a bundled dif- ferent ways. .-,. H,,t while the more intelligent people ni the country, and. therefore, those who are more strictly an-uerable to God and man for their A><<\^ have trodden down the poor and laid wa-te tbe home- of father, mother. si-ter Slid brother, the populace ha- awakened I., the enor.mU of the UH. 6. Remonstrance against the unfairness of modem business and systems has become general and the crj for the "squaw deal" has gone up from almost every quarter of the country. 7. While demands for fair dealing have been loud and frequent, action looking to amelioration of existing evils Ik.- bee,, somewhat constant. to the present this ha- been instanced principallj through efforts to en! existing laws, and to enlarge the icope and function of government. This has been due largely to the fad thai constant^ business interests h*v, ,,,,,,,,1 methods to circumvent tbe law in their efforts to find the most feasible and economical mean- of producing wealth. Ul WHAT ARE YOU GOING TO DO ABOUT IT? v The broadening of governmental power has been seen through such of its phases and art ion as aim to secure municipal ownership of public utilities, regulation o\' railway, gas and electric Light rates, prosecution of the trusts, etc. This power has been combatted fiercely by the money inter- ests because ii threatens ami curtails the power of the capitalist class. }). The laboring class, through trade unionism, has tried to create as definite ami tar reaching a monopoly in Labor as capital has mule of natural resources, and the tools of Labor. War has ensued which both employer and employe aggravate 1>\ unfairness. 10. The public, composed of both contending forces and the middle class, cries out upon such conditions and seeks to enforce the law against thuggery, retaliation, bribery and graft. 11. In the meantime, efforts are making to educate all classes to the saner and more honest use of the ballot, with a view to making government the umpire which shall declare against unfairness and work under the doctrine of the "square deal." 12. Finally there appears to be at work an influence, which, if not overcome by something better than violated promises of fair treatment for all under the present system of the unequal distribution of opportunities and the wealth produced by mankind, may swing one of the great political parties into changing conditions radically by the power of the ballot. And the motto of the men who are at work thus to accomplish what they con- sider something of an industrial millennium, where happiness for the many and not the few is the goal, seems to be, "Anything that will promote general welfare, even to the point of paternalism and community ownership of the means of producing and distributing wealth, is a just and equitable function of government." In conclusion, it must he said that all the ills of the world will not be cured in a day. Men will differ honestly in opinions and often, will change tho>' opinions. Struggles will not cease, but battles more and more will I*, for virtue's sake. In reiterating the endorsement of the new doctrine of the "square deal"- new because men once more have come back to the old way of thinking that "honesty is the best policy"— ii must be said that, inas- much as this world i- made up of human beings, the personal equation must always he considered in the last analysis of the problems of mankind and of tin "square deal." And here we append some of the desired things in this line of the personal equation which Success believes would make the world better nid which we give our hearty endorsement : WHAT ARE YOU GOING TO 1H) ABOUT IT? 4^"> Men who cannot be bought. Men whose word is their bond. .Men who put character above wealth. Men who possess opinions and a will. .Men who see the divine in the common. Men who "would rather be right than be president." Men who will not lose their individuality in a crowd. Men who will not think anything profitable that is dishonest. Men who will be as honest in small things as in great things. Men who will make no compromise with questionable things. Men whose ambitions are not confined to their own selfish desires. Men who are willing to sacrifice private interests tor the public good. Men who are not afraid to take chances, who an- not afraid of failure. Men of courage, who are not cowards in any pari of their natures. Men who are larger than their business, who overtop their vocation. Mill who will give thirty-sis inches for a yard and thirty-two quarts for .1 bushel. Philanthropists who will not let their right hand know what their left hand 18 doing. Men who will not have one brand of honesty for business purposes and another for private life. Young men who will be true to their highcsl ideals in spite of the sneers and laughter of their companions. Clergymen who can hear a louder call than that of public applause, larger salary or a fashionable church. Statesmen who will not pack caucuse*, pull wires or he influenced in then policy by personal motives. Magnanimous souls who do not look upon everybody thej meet for th possible use they may be to them. M, n w h ;,,(• true to their friends through good report and evil report, in adversitj as well a. in prosperity. Single-hearted people who do not look at every proposition from the point , I view of -"What is there in it tor me? M Journalists who will ad write scurrilous, scandalous articles merel) because Iheil editor in chief wishes them to do SO. young men and women who can stand cred and independent, while others how ami fawn and cringe for place and power. km; WHAT ARE YOU GOING TO DO ABOUT ITf Men who ilo not believe that shrewdness, sharpness, cunning and long- iieadedness arc the best qualities for winning success. Merchants who will not offer for sale "English woolens" 1 manufactured in American mills, or "Irish linens" made in New York. Lawyers who will not persuade clients to bring suits merely to squeeze fees out of them, when they know very well that they have no chance of winning. Men who have the courage to do their duty in silence and ohscurity while others about them win wealth and notoriety by neglecting sacred ohligations. Men "ho are not ashamed or afraid to stand for the truth when it is un- popular, who can say "no" with emphasis, although all the rest of the world say ""yes." Men who have the courage to wear threadbare clothes and to live simply and plainly if necessary, while their competitors revel in luxury purchased by crooked methods. Men who have gained such complete control of themselves that they can pass through the most exasperating situations without doing or saying an unpleasant thing, without losing their temper or flying off their center. Men who can stand before a demagogue and scorn his treacherous flatteries without winking. THE LIBRARY UNIVERSITY OF CALIFORNIA Santa Barbara THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW. El<3 Series 9482 1205 00354 2964 AA 000 748 395