The United States Since The Civil War by Charles Ramsdell Lingley

C >> Charles Ramsdell Lingley >> The United States Since The Civil War

Pages:
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42

For some time it had been customary to pass special acts providing
pensions for persons whose claims had already been rejected by the
pension bureau as defective or fraudulent. So little attention was paid
to private bills in Congress that 1454 of them passed between 1885 and
1889, generally without debate and often even without the presence of a
quorum of members. Two hours on a day in April, 1886, sufficed for the
passage of five hundred such bills. Nobody would now deny that many were
frauds, pure and simple. Cleveland was too frugal and conscientious to
pass such bills without examination and he began to veto some of the
worst of them. Each veto message explained the grounds for his dissent,
sometimes patiently, sometimes with a sharp sarcasm that must have made
the victim writhe. In one case where a widow sought a pension because of
the death of her soldier husband it was discovered that he had been
accidentally shot by a neighbor while hunting. Another claimant was one
who had enlisted at the close of the war, served nine days, had been
admitted to the hospital with measles and then mustered out. Fifteen
years later he claimed a pension. The President vetoed the bill,
scoffing at the applicant's "valiant service" and "terrific encounter
with the measles." Altogether he vetoed about two hundred and thirty
private bills. Time after time he expressed his sympathy with the
deserving pensioner and his desire to purge the list of dishonorable
names, and many applauded his courageous efforts. Nevertheless, his
pension policy presented an opportunity for hostile criticism which his
Republican opponents were not slow to embrace. His efforts in behalf of
pension reform were said to originate in hostility to the old soldiers
and in lack of sympathy with the northern cause. In 1887 it even became
necessary for him to withdraw his acceptance of an invitation to attend
a meeting of the Grand Army in St. Louis, because of danger that he
might be subjected to downright insult.[4]

Before the hostility due to the pension vetoes had subsided,
Adjutant-General Drum called the attention of the President to the fact
that flags taken from Confederate regiments by Union soldiers during the
war and also certain flags formerly belonging to northern troops had for
many years lain packed in boxes in the attic and cellar of the War
Department. At his suggestion Cleveland ordered the return of these
trophies to the states which the regiments had represented. Although
recommended by Drum as a "graceful act," it was looked upon by the old
soldiers with the utmost wrath. The commander of the Grand Army called
upon Heaven to avenge so wicked an order and such politicians as
Governor Foraker of Ohio gained temporary prominence by their bitter
condemnation of it. Eventually the clamor was so great that the
President rescinded the order on the ground that the final disposition
of the flags was within the sphere of action of Congress only. In
February, 1905, however, Congress passed a resolution providing for the
return of the flags and the exchange was effected without excitement.

For the reasons already mentioned, little legislation was passed during
President Cleveland's administration that was of permanent importance.
An exception was the Interstate Commerce Act, which is a subject for
later discussion. A Presidential Succession Act, which has earlier been
described, provided for the succession of the members of the cabinet in
case of the removal or death of the president and vice-president. The
Electoral Count Act placed on the states the burden of deciding contests
arising from the choice of presidential electors. When more than one set
of electoral returns come from a state, each purporting to be legal,
Congress must decide which shall be counted. Of some importance, too,
was the establishment of the Department of Agriculture in 1889 and the
inclusion of its secretary in the cabinet. The admission of the Dakotas,
Montana and Washington as states took place in the same year. The
improvement of the navy, begun so auspiciously by Secretary Chandler
under President Arthur, was continued with enthusiasm and vigor, and the
vessels constructed formed an important part of our navy.

Of less popular interest than many of the political questions, but of
more lasting importance, was the rapid reduction of the public land
supply. The purpose of the Homestead law of 1862 had been to supply land
at low rates and in small amounts to _bona fide_ settlers, but the
beneficent design of the nation had been somewhat nullified by the
constant evasion of the spirit of the laws. Squatters had occupied land
without reference to legal forms; cattlemen had fenced in large tracts
for their own use and forcibly resisted attempts to oust them; by hook
and by crook individuals and companies had got large areas into their
possession and held them for speculative returns. Western public opinion
looked upon many such violations with equanimity until the supply of
land began to grow small. Then came the demand for the opening of the
Indian reservations, which comprised 250,000 square miles in 1885. The
Dawes act of 1887 provided for individual ownership of small amounts of
land by the Indians instead of tribal ownership in large reservations.
By this means a considerable amount of good land was made available for
settlement by whites. The dwindling supply of western land also called
attention to certain delinquencies on the part of the railway companies.
Many of them had been granted enormous amounts of land on certain
conditions, such as that specified parts of the roads be constructed
within a given time. This agreement, with others, was frequently broken,
and question arose as to whether the companies should be forced to
forfeit their claims. Cleveland turned to the problem with energy and
forced the return of some millions of acres. Nevertheless, the fact that
it was becoming necessary to be less prodigal with the public land
indicated that the supply was no longer inexhaustible, and led the
President in his last annual message to urge that the remaining supply
be husbanded with great care. Congress was not alert to the demands of
the time, however, and no effective steps were taken for many years.

BIBLIOGRAPHICAL NOTE

H.C. Thomas, _The Return of the Democratic Party to Power in 1884_
(1919), is most complete and scholarly on the subject; Sparks, Curtis,
Dewey, and Stanwood continue useful; H.T. Peck, _Twenty Years of the
Republic, 1885-1905_ (1907), is illuminating and interesting; H.J. Ford,
_Cleveland Era_ (1919), is brief; the files of _The Nation_ and
_Harper's Weekly_ are essential, while those of the New York _Sun,
Evening Post_ and _Tribune_ add a few points. The Mulligan letters are
reprinted in _Harper's Weekly_ (1884, 643-646).

On the administration, consult the general texts and the special volumes
mentioned in chapter V; G.F. Parker, _Recollections of Grover Cleveland_
(1909); and _Political Science Quarterly_ (June, 1918), "Official
Characteristics of President Cleveland," give something on the personal
side; J.L. Whittle, _Grover Cleveland_ (1896), is by an English admirer;
Cleveland's own side of one of his controversies is in Grover Cleveland,
_Presidential Problems_ (1904); on Blaine, Edward Stanwood, _James G.
Blaine_ (1905). The _Annual Cyclopaedia_ has useful biographical
articles.

* * * * *

[1] A reference to the Dorsey dinner at which Arthur told how Indiana
was carried.

[2] His marriage to Miss Frances Folsom, which occurred in 1886,
occasioned lively interest.

[3] Other members were: Daniel Manning, N.Y., Secretary of the
Treasury; William C. Endicott, Mass., Secretary of War; A.H. Garland,
Ark., Attorney-General; William F. Vilas, Wis., Postmaster-General.

[4] President Cleveland also frequently used his veto power to prevent
the passage of appropriations for federal buildings which he deemed
unnecessary.

CHAPTER IX

TRANSPORTATION AND ITS CONTROL

The most significant legislative act of President Cleveland's
administration was due primarily neither to him nor to the great
political parties. It concerned the relation between the government
and the railroads, and the force which led to its passage originated
outside of Congress. The growth of the transportation system,
therefore, the economic benefits which resulted, the complaints which
arose and the means through which the complaints found voice were
subjects of primary importance.

Beginning with the construction of the Baltimore and Ohio Railroad
about 1830, the extension of the railways went forward with increasing
rapidity so that they soon formed a veritable network: between 1830
and 1850 over 7,000 miles were laid; by 1860 the total was 30,000
miles; the Civil War and the financial depression of 1873 retarded
progress somewhat, but such delays were temporary, and by 1890 the
total exceeded 160,000 miles. In the earlier decades most construction
took place in the Northeast, where capital was most plentiful and
population most dense. Later activity in the Northeast was devoted to
building "feeders" or branch lines. In the South, the relatively
smaller progress which had been made before the war had been undone
for the most part by the wear and tear of the conflict, but the
twenty-five years afterward saw greatly renewed construction. The most
surprising expansion took place in Texas where the 711 miles of 1870
were increased to 8,754 by 1890. In the Middle West, roads were
rapidly built just before the war and immediately after it, and the
first connection with the Pacific Coast, as has been shown, was made
in 1869.

[Illustration:
Railroad Mileage, 1860-1910, in thousands of miles]

Many of the circumstances accompanying this rapid expansion were novel
and important. Beginning with a federal grant to the Illinois Central,
for example, in the middle of the century, both the nation and the
states assisted the roads by gifts of millions of acres of land. It
was to the advantage of the companies to procure the grants on the
best possible terms, and they exerted constant pressure upon
congressmen whose votes and influence they desired. Frequently the
agents of the roads were thoroughly unscrupulous, and such scandals as
that connected with the Credit Mobilier were the result. More
important still, the fact that the federal and state governments had
aided the railroads so greatly gave them a strong justification for
investigating and regulating the activities of the companies.

Mechanical inventions and improvements had no small part in the
development of the transportation system. The early tracks,
constructed of wood beams on which were fastened iron strips, and
sometimes described as barrel-hoops tacked to laths, were replaced by
iron, and still later by heavy steel rails. By 1890 about eighty per
cent. of the mileage was composed of steel. Heavy rails were
accompanied by improved roadbeds, heavier equipment and greater speed.
A simple improvement was the gradual adoption of a standard
gauge--four feet eight and a half inches--which replaced the earlier
lack of uniformity. The process was substantially completed by the
middle eighties, when many thousands of miles in the South were
standardized. On the Louisville and Nashville, for example, a force of
8,763 men made the change on 1,806 miles of track in a single day. The
inauguration of "standard" time also took place during the eighties.
Hitherto there had been a wide variety of time standards and different
roads even in the same city despatched their trains on different
systems. In 1883 the country was divided into five vertical zones each
approximately fifteen degrees or, in sun-time, an hour wide. Both the
roads and the public then conformed to the standard time of the zone
in which they were.

[Illustration:
Map of the United States showing railroads in 1870]

Of greater importance was the consolidation of large numbers of small
lines into the extensive systems which are now familiar. The first
roads covered such short distances that numerous bothersome transfers
of passengers, freight and baggage from the end of one line to the
beginning of the next were necessary on every considerable journey. No
fewer than five companies, for example, divided the three hundred
miles between Albany and Buffalo, no one of them operating more than
seventy-six miles. In 1853, these five with five others were
consolidated into the New York Central Railroad. Sixteen years later,
in 1869, the Central combined with the Hudson River, and soon
afterwards procured substantial control of the Lake Shore and Michigan
Southern, the Rock Island, and the Chicago and Northwestern. As the
result of this process a single group of men directed the interests of
a system of railroads from New York through Chicago to Omaha. The
Pennsylvania Railroad began with a short line from Philadelphia to the
Susquehanna River, picked up smaller roads here and there--eventually
one hundred and thirty-eight of them, representing two hundred and
fifty-six separate corporations--reached out through the Middle West
to Cincinnati, Chicago and St. Louis, and in 1871 controlled over
three thousand miles of track, with an annual income of over forty
million dollars. In the eighties a railroad war in northern New
England started the consolidation of the Boston and Maine system.

The beneficial results of the growth of the transportation facilities
of the nation were immediate and revolutionary. The fact that average
freight rates were cut in halves between 1867 and 1890 helped make
possible the economic readjustments after the Civil War to a degree
that is not likely to be overestimated. Not only did railway
construction supply work for large numbers of laborers and help bring
about an ever greater westward migration, but it opened a market for
the huge agricultural surplus of the Middle West. Without the market
in the cities of the populous Atlantic Coast and Europe, the expansion
of the West would have been impossible. Moreover, the railways brought
coal, ore, cotton, wool and other raw materials to the Northeast, and
thus enabled that section to develop its manufacturing interests.

[Illustration:
Map of the United States showing railroads in 1890]

Despite the admittedly great benefits resulting from the railroad
system, there was a rising tide of complaint on the part of the public
in regard to some aspects of its construction and management. It was
objected, for example, that many of the western roads especially were
purely speculative undertakings. Lines were sometimes built into new
territory where competition did not exist and where, consequently, the
rates could be kept at a high point. The Chicago, Burlington and
Quincy presented such a case in 1856. Profits were so great as to
embarrass the company, since the payment of large dividends was sure
to arouse the hostility of the farmers who paid the freight rates.
"This, indeed," declared the biographer of one of the presidents of
the road, "was the time of glad, confident morning, never again to
occur in the history of railroad-building in the United States."
Sometimes lines were driven into territory which was already
sufficiently supplied with transportation facilities, in order to
compel the company already on the ground to buy out the new road. If,
as time went on, traffic enough for both roads did not appear, they
had to be kept alive through the imposition of high rates; otherwise,
one of them failed and the investors suffered a loss. The
opportunities for profit, however, were so numerous that the amount of
capital reported invested in railways increased by $3,200,000,000
during the five years preceding 1885.

A practice which was productive of much wrong-doing and which was
suggestive of more dishonesty than could be proved, related to the
letting of contracts for the construction of new lines. The directors
of a road frequently formed part or all of the board of directors of a
construction company. In their capacity as railroad directors they
voted advantageous contracts to themselves in their other capacity,
giving no opportunity to independent construction companies who might
agree to build at a lower cost. As the cost of construction was part
of the debt of the road, the directors were adding generously to their
own wealth, while the company was being saddled with an increased
burden. It cost only $58,000,000, for example, to build the Central
Pacific, but a construction company was paid $120,000,000 for its
services. When John Murray Forbes was investigating the Chicago,
Burlington and Quincy he found that the president of the road was
paying himself a salary as president of a construction company, out of
the railroad's funds, without the supervision of the treasurer or any
one else, and without any auditing of his accounts. Moreover, six of
the twelve members of the board of directors were also members of the
construction company. Such an attempt to "run with the hare and hunt
with the hounds" was suggestive, to say the least, of great
possibilities of profit to the directors and a constant invitation to
unnecessary construction.

Another grievance against the railways was the reckless, irresponsible
and arrogant management under which some of them operated. An eminent
expert testified before an investigating commission in 1885 that Jay
Gould once sold $40,000,000 of Erie Railway stock and pocketed the
proceeds himself. Most of the energy of the officers of some roads was
expended in deceiving and cheating competitors. "Railroad
financiering" became a "by-word for whatever is financially loose,
corrupt and dishonest." If certain roads demonstrated by successful
operation that honest methods were better in the long run, their
probity received scant advertisement in comparison with the
unscrupulous practices of their less respectable neighbors. It is to
be remembered, also, that the growth of the railway system had been so
rapid and so huge that it was impossible to meet the demand for
trained administrators. Naturally, men possessed of little or no
technical understanding of transportation problems could not provide
highly responsible management.

The dishonest manipulation of the issues and sales of railroad stocks
is a practice that was not confined solely to the twenty-five years
after the Civil War, but the numerous examples of it which occurred
during that period aggravated the exasperation which has already been
mentioned. Daniel Drew, the treasurer of the Erie Railway in 1866,
furnished an excellent illustration of this type of activity. Drew had
in his possession a large amount of Erie stock which had been secretly
issued to him in return for a loan to the company. The stock in the
market was selling near par and still rising. Drew instructed his
agents to make contracts for the future delivery of stock at prices
current at the time when the contracts were made. When the time came
for fulfilling his contracts, Drew suddenly threw the secret stock on
the market, drove general market prices on Erie stock down from
ninety-five to fifty, bought at the low figure, and sold at the high
price which was called for in the contracts made by his agents. The
effect of such sharp dealing on investors, the railroad or the public
seems not to have entered into the calculation. Indeed, the Erie and
many another road was looked upon by its owners merely as a convenient
piece of machinery for producing fortunes.

Gould, Drew and other railroad men of their time were also expert in
the practice of "stock-watering." This consists in expanding the
nominal capitalization of an enterprise without an equivalent addition
to the actual capital. The rates which the railway has to charge the
public tend to increase by approximately whatever dividends are paid
on the water.[1] Then, as later, when a road was prospering greatly
it would sometimes declare a "stock dividend," that is, give its
stockholders additional stock in proportion to what they already
owned. The addition would frequently be water. Its purpose might be to
cover up the great profits made by the company. If, on a million
dollars' worth of stock, it was paying ten per cent. dividends, the
public might demand lower freight and passenger rates; but if the
stock were doubled and earnings remained stationary, then the
dividends would appear as five per cent.--an amount to which there
could be no objection. H.V. Poor, the railroad expert, declared before
a commission of investigation in 1885 that the New York Central
Railroad was carrying $48,000,000 of water, on which it had paid eight
per cent. dividends for fifteen years. He also estimated that of the
seven and a half billions of indebtedness which the roads of the
country were carrying in 1883, two billions represented water. Others
thought that the proportion of water was greater. In any case the
unnecessary burden upon business to provide dividends for the watered
stock was an item of some magnitude. The investor, however, looked
upon stock-watering with other eyes. The building of a new road was a
speculation; the profits might be large, to be sure, but there might
in many cases be a loss. In order to tempt money into railroad
enterprises, therefore, inducements in the form of generous stock
bonuses were necessary.

The rate wars of the seventies gave wide advertisement to another
aspect of railroad history. The most famous of these contests had
their origin in the grain-carrying trade from the Lakes to the
sea-board. The entry of the Baltimore and Ohio and the Grand Trunk
into Chicago in 1874, stimulated a four-cornered competition among
these roads and the Pennsylvania and New York Central for the traffic
between the upper Mississippi Valley and the coast. Rates on grain and
other products were cut, and cut again; freight charges dropped to a
figure which wiped out profits; yet it was impossible for any line to
drop out of the competition until exhaustion forced all to do so. A
railroad can not suspend business when profits disappear, for fixed
expenses continue and the depreciation of the value of the property,
especially of the stations, tracks and rolling stock, is extreme.
Since the rate wars were clearly bringing ruin in their train, rate
agreements and pooling arrangements were devised. The latter took
several forms. Sometimes a group of competing roads agreed to divide
the business among the competitors on the basis of an agreed-upon
percentage. Another plan was to pool earnings at the close of a period
and divide according to a prearranged ratio. Sometimes destructive
competition was prevented by a division of the territory, each company
being allowed a free hand in its own field. In general, pooling
agreements were likely to break down, although a southern pool
organized by Albert Fink on a very extensive scale lasted for many
years and was thought to have had a vital influence in eliminating
rate-wars. Their efficacy depended mainly on good faith, and good
faith was a rarity among railroad officials in the seventies and
eighties. In the eyes of the public, rate agreements and pools were
vicious conspiracies which left the rights and well-being of the
private shipper completely out of the calculation.

Still another indictment of the railways resulted from their
participation in politics. It was inevitable, of course, that the
roads should be drawn into the field of legislation--the grants of
public land, for example, helped bring about the result. It early
seemed advantageous to attempt to influence state legislatures to pass
favorable laws, and it seemed a necessity to bring pressure to bear in
order to protect the roads from hostile acts. The methods used by the
railway agents in their political activity naturally varied all the
way from legitimate agitation to crude and subtle forms of bribery. An
insidious method of influencing both law-making and litigation was the
pass system. Under it the roads were accustomed to give free
transportation to a long list of federal and state judges, legislators
and politicians. For a judge to accept such favors from a corporation
which might at any time be haled before his court, and for a
legislator to receive a gift from a body that was constantly in need
of legislative attention is now held to be improper in the extreme.
But in those days a less sensitive public opinion felt hardly a qualm.
That the practice was likely to arouse an unconscious bias in the
minds of public officials is hardly debatable. The more crude forms of
bribery, too, were not uncommon. It was testified before a committee
of investigation that the Erie Railway Company in one year expended
$700,000 as a corruption fund and for legal expenses, carrying the
amount on the books in the "India-rubber account." The manipulation of
the courts of New York by the Erie and the New York Central during the
late sixties was nothing short of a scandal. Alliances between
political rings and railroad officials for the purpose of caring for
their mutual interests were so common that reformers questioned
whether the American people could be said to possess self-government
in actuality. Immediately after the Civil War, Charles Francis Adams,
an acute student of transportation, declared that it was scarcely an
exaggeration to say that the state legislatures were becoming a
species of irregular boards of railroad direction. The evils of the
alliance between the roads and politics were not, of course, due
entirely to the former. The receiver of a pass shared with the giver
the evil of the system. Many a legislator was corrupt; more shared in
practices which were little removed from dishonorable. Adams, for
example, gives an account of his experiences, as a director of the
Union Pacific, in dealing with a United States senator in 1884. The
congressman was ready to take excellent care of railroad corporations
which retained him as counsel, but was a corrupt and ill-mannered
bully toward the Union Pacific, which had not employed him.[2]