| By Author | [ A B C D E F G H I J K L M N O P Q R S T U V W X Y Z | Other Symbols ] |
| By Title | [ A B C D E F G H I J K L M N O P Q R S T U V W X Y Z | Other Symbols ] |
| By Language |
|
Download this book: [ ASCII | HTML | PDF ] Look for this book on Amazon Tweet |
Title: Monopolies and the People
Author: Cloud, D. C.
Language: English
As this book started as an ASCII text book there are no pictures available.
*** Start of this LibraryBlog Digital Book "Monopolies and the People" ***
Libraries.)
Transcriber's Note: Obvious errors in spelling and punctuation
have been silently corrected.
MONOPOLIES
AND
THE PEOPLE.
BY
D. C. CLOUD,
MUSCATINE.
"THE ENUMERATION IN THE CONSTITUTION OF CERTAIN RIGHTS SHALL NOT
BE CONSTRUED TO DENY OR DISPARAGE OTHERS RETAINED BY THE PEOPLE."
"THE POWERS NOT DELEGATED TO THE UNITED STATES BY THE CONSTITUTION,
NOR PROHIBITED BY IT TO THE STATES, ARE RESERVED TO THE STATES
RESPECTIVELY, OR TO THE PEOPLE."
--Articles IX. and X. of the Constitution of the United States.
DAVENPORT, IOWA:
DAY, EGBERT, & FIDLAR.
1873.
Entered according to Act of Congress, in the year 1873.
By D. C. CLOUD,
in the Office of the Librarian of Congress, at Washington.
TO THE
Patrons of Husbandry,
WHO HAVE BECOME THE PIONEER CORPS IN THE EFFORTS BEING MADE
TO REFORM THE ABUSES NOW OPPRESSING THE COUNTRY, AND WHO ARE
EARNESTLY AND EFFICIENTLY LABORING FOR THE RESTORATION OF
THE RIGHTS OF THE PEOPLE, WITH THE HOPE THAT IT MAY AID THEM
IN THEIR PATRIOTIC WORK, THIS BOOK IS RESPECTFULLY DEDICATED
BY
THE AUTHOR.
PREFACE.
TO THE READER.
For two years past the author has awaited the auspicious moment for
presenting to the public his views upon the oppressions and abuses
practiced by corporations and combinations of men who were apparently
getting a controlling influence over the commerce, finances, and
government of the country. Recent action on the part of the people has
convinced him that his opportunity has come, and he embraces it. He has
aimed to present a true history of the operations of the different
monopolies.
Since he began the preparation of his work, some events have taken
place not noticed by him. Oakes Ames and James Brooks, two prominent
characters among railroad men, and whom he has had occasion to name,
have died. Some changes in the laws of congress have been made affecting
the interests of corporations. The law requiring the secretary of the
treasury to retain but one-half of the earnings from the government of
the Pacific roads to apply on the interest due to government on subsidy
bonds, has been repealed, and he may now retain and apply the whole
amount. Suit has also been brought against the Union Pacific company
because of its dishonest practices.
On the whole, however, combinations of corporations, and other rings
and organizations, at war with the best interests of the people, have
acquired new strength and more power within the last few months.
The reader will notice the fact, that while the author has quoted
liberally from the statutes and resolves of congress to show the great
privileges and powers conferred upon railroad companies, and
familiarized the reader with their financial and other transactions for
a clear understanding of their manner of doing business, he has not
pretended to give a full history; satisfying himself with such chapters
as would place before the public the true character of these monopolies.
The author has sought to present truthful statements of matters in
connection with the various _interests_ now so hostile to the _rights_
of the people, and he believes he has embodied the facts as they exist.
D. C. C.
MUSCATINE, Iowa, July 28, 1873.
TABLE OF CONTENTS.
CHAPTER I. PAGES.
A PRELIMINARY SURVEY, 15-18
CHAPTER II.
THE PACIFIC RAILROAD INIQUITY, 19-28
CHAPTER III.
THE MONOPOLISTS "HELP THEMSELVES," 29-39
CHAPTER IV.
HOW CONGRESS BETRAYED THE PEOPLE, 40-48
CHAPTER V.
CONGRESS BECOME A STOCK EXCHANGE, 49-55
CHAPTER VI.
HOW THE LAND GRANT RAILROADS "DEVELOPE" A COUNTRY, 56-62
CHAPTER VII.
THE CREDIT MOBILIER AND A VILLAINOUS CONTRACT, 63-80
CHAPTER VIII.
HAS CONGRESS THE POWER, UNDER THE CONSTITUTION, TO CREATE
OR ENDOW PRIVATE CORPORATIONS? 81-91
CHAPTER IX.
STATE RIGHTS AT THE BAR OF A CORRUPT CONGRESS, 92-98
CHAPTER X.
AN UNSETTLED ACCOUNT--A GUILTY DIRECTORY, 99-105
CHAPTER XI.
SOLE PURPOSES OF TAXATION, 106-111
CHAPTER XII.
THE RIGHT OF EMINENT DOMAIN--UNCONSTITUTIONALITY OF
MUNICIPAL AID TO RAILROADS, 112-122
CHAPTER XIII.
THE FATAL POLICY OF MORTGAGING CITIES AND COUNTIES FOR
THE CONSTRUCTION OF RAILROADS, 123-129
CHAPTER XIV.
THE IMPOVERISHING TRANSPORTATION SYSTEM--THE WAREHOUSE
CONSPIRACY, 130-137
CHAPTER XV.
A NEW AND FALSE PRINCIPLE IN HYDRAULICS--WATERED
STOCK--ITS UNLAWFUL PROFITS THE SOURCE OF EXTORTIONATE
TARIFFS--THE FAST DISPATCH SWINDLE, 138-146
CHAPTER XVI.
A PRIVILEGED CLASS--THE MONOPOLISTS RELIEVED OF THE
BURDENS OF TAXATION--AN OUTRAGE UPON REPUBLICAN
GOVERNMENT, 147-151
CHAPTER XVII.
THE STRONG GRASP OF CONSOLIDATED CAPITAL UPON
AMERICAN LEGISLATION--BEECHER ON "REFORMATION OR
REVOLUTION"--HISTORY OF RAILWAY LEGISLATION IN IOWA, 152-168
CHAPTER XVIII.
THE "TRAIL OF THE SERPENT" IN THE INTERIOR DEPARTMENT, 169-179
CHAPTER XIX.
THE MONOPOLISTS AT THE DOOR OF THE WHITEHOUSE, 180-185
CHAPTER XX.
THE UNITED STATES TREASURY THE VASSAL OF WALL
STREET--STOCK "OPERATIONS" EXPLAINED, 186-197
CHAPTER XXI.
HOW WALL STREET BUILDS RAILROADS--A HOT-BED OF CORRUPTION, 198-201
CHAPTER XXII.
THE SUPREME BENCH INVADED--ITS DECISIONS REVIEWED, 202-222
CHAPTER XXIII.
BANK MONOPOLISTS--THEIR CONTROL OF THE CURRENCY--A BANKRUPT
FINANCIAL POLICY, 223-230
CHAPTER XXIV.
OUR TARIFF POLICY--DOES "PROTECTION" PROTECT? 231-239
CHAPTER XXV.
PATENT RIGHTS, AND THEIR ABUSES, 240-246
CONCLUSION.
REFORMATION OR REVOLUTION--A RADICAL CHANGE DEMANDED IN
THE ADMINISTRATION OF PUBLIC AFFAIRS--CONCLUSIONS OF THE
AUTHOR, 247-326
APPENDIX.
CHAPTER I.
LEGAL TENDER DECISIONS, 329
CHAPTER II.
DISSENTING OPINION OF CHIEF JUSTICE CHASE, 330-345
CHAPTER III.
DISSENTING OPINION OF JUSTICE CLIFFORD, 346-386
CHAPTER IV.
DISSENTING OPINION OF JUSTICE FIELD, 387-430
CHAPTER V.
GOVERNMENT CONTROL OF RAILROADS, 431-453
CHAPTER VI.
THE INFLUENCE OF MONOPOLIES UPON LABOR, 454-462
ERRATA.
Page 125, third line from top, for "Then" read _These_.
153, second line from bottom, for "Gould Jay" read _Jay Gould_.
202, fourth line from top, for "jealous" read _zealous_.
238, eleventh line from top, for "1862" read 1872.
257, second line from bottom, for "to" read _by_.
272, fifteenth line from bottom, for "ultro" read _retro_.
MONOPOLIES AND THE PEOPLE.
INTRODUCTORY CHAPTER.
In treating of the topics discussed in this work, the author addresses
himself to the task with no partisan bias. His purpose is to draw aside
the veil, and let the facts speak for themselves. He writes, as he
believes, in the performance of duty. Serious dangers are threatening
the people. There is a power in the land, possessing elements
destructive not only of the industrial and producing public, but of the
very form and spirit of republican government. It will be the aim of the
author to show forth the progress and present attitude of this power in
its relations with the people, and to suggest, if not to advocate, such
measures of relief and protection as the exigency demands.
It is a fact to be admitted by every candid thinker, that of late
years, corporations, rings, and single speculators have, by united and
persistent efforts, obtained control of the government; that their
interests are guarded and protected by the legislative, executive, and
judicial departments of the government, both state and national.
The men who are thus combined in opposition to the people, do not belong
to any one political division; they are found in all parties; they are
firmly united for the purpose of grasping power; of controlling the
government in their own interest; of fastening upon the people
oppressive monopolies, and of enriching themselves at the expense of the
public. To accomplish these ends they procure donations of land, money
subsidies, protective tariffs, continue a depreciated currency, and by
arbitrary rules and by-laws of their own, hold the whole people at their
mercy. To such an extent have these monopolies been fostered and
protected, that at the present time the farmer pays in freights, taxes,
and duties, at least one-half of his farm products for their support.
A silent or passive acquiescence in, and submission to, these abuses and
oppressions, have given a controlling strength and power to monopolies
that cannot now be overcome without a united, long, and hard struggle.
These evils cannot be corrected, nor the rights of the people restored,
save by concerted action on their part, not only in securing proper
legislation, but in asserting and maintaining in their business, at
elections, and in the courts, their rights as free and independent
citizens of the United States. The taxing of the people for the purpose
of aiding private enterprises, the donation of the public land, or of
the public money, to individuals, or companies, or the enactment of laws
by which the people are compelled to pay a part of their hard-earned
substance to aid private parties in accumulating wealth, are oppressions
not to be tolerated in a republic. Yet it is true that we are now taxed
for the purpose of paying the interest on many millions of money given
or loaned to railroad corporations; that we pay large duties on goods
for the benefit of wealthy manufacturers; that extortionate rates are
exacted for transportation of products to market; that we are taxed to
build railroads for private owners, and these things are all pronounced
legal and constitutional, not because they are so, but because these
private interests have become so powerful that they control the country.
The _antiquated_ idea that the government was instituted by the people,
and for the people, has become entirely obsolete, and the new doctrine
has obtained that the whole duty of the government is to foster,
protect, and support monopolies, and that these monopolies own the
people.
In no country of the civilized world are the people more directly
connected with all the questions affecting their well being, than they
are in the United States. It follows that all should be familiar with
such measures as tend to fix and establish the general policy of the
government, not only in respect to its general administration, but
especially in those matters that directly or indirectly give to
corporations, associations, companies, or individuals, exclusive grants,
donations, or privileges, detrimental to the interests of those who are
not of the "favored few."
A republican government can only exist when it is controlled by the
people, and administered in their interest. When special, or class
legislation, for the benefit of certain limited interests, or in favor
of certain parties, becomes the rule of action in the administration of
either the state or national government, accompanied by grants of land,
money, or taxes, to be returned to the government by levies made upon
the people without their consent, that government ceases to be
republican.
In our country, with its vast extent of territory, its diverse
interests, and variety of products, and manufactures, it is but natural
for different localities and interests to ask governmental aid; nor is
it always an abuse of power for the government to give this aid. In some
instances it is the duty of the government to use its power and the
public money in matters that in some degree, at least, are in their
nature local; such, for instance, as the improvement of rivers, harbors,
&c. In these cases it is not an abuse of power, but a legitimate
exercise of the delegated authority for the benefit of the people.
But there is another species of legislation, approved by the executive
and judicial departments of the general government, and endorsed and
supported by the legislatures and courts of many of our states, that is
in its operation anti-republican and oppressive to the people. We refer
to the current special legislation in favor of railroad corporations,
our protective tariff, and the banking system, and financial policy of
the government.
No one will accuse the author of indulging in a partisan view of these
matters. The history of our country shows that men of all parties have
sought for and obtained special grants and privileges. Our aim is to
direct the attention of the reader to some of the facts connected with,
and resulting from, special legislation on the above named subjects, and
show their effect upon the people generally.
The assertion that the government is now committed to the policy of
donating the public lands to railroad corporations may be thought
untrue, yet if we look through the acts of congress for the last few
years we will find that more than two hundred million acres have been
donated to such corporations, and from the number of bills asking for
further grants introduced during the last congress these donations have
but just begun. It will not be claimed that the people asked for these
grants, or that the necessities of the government demanded them. Nor
will it be contended that the people derive any direct benefit from
them. On the contrary, the lands and the roads are owned and controlled
by private corporations, and not even the government can use these roads
for purposes of transportation without compensation. Now, these lands do
not belong to the government, but to the people. Those persons filling
the different departments of government are but the agents or servants
of the people, and have no more right to give the public lands to
railroad corporations than to tax the people and donate the money
received as taxes to these companies. The policy is bad and oppressive
in its effects. If one owns lands and employs an agent to sell it at a
given price per acre, this agent has no right to convey one-half of it
to himself and friends, and mark up the remaining half to a double
price, and leave it on the owner's hands. This is what congress has done
with the public lands, and in every instance the grants or donations
have been made to aid monopolies, corporations, and powerful companies,
who disregard the interests of the public, and use their power and these
immense gifts for the purpose of securing further grants by corrupting
legislators, judges, and executive officers. If we scale their efforts
at corruption by their apparent success, they have not always failed.
The interests of these monopolies are adverse to those of the people.
The privileges granted them are taken from the people. The wealth of the
nation, held by the government in trust for the people, has been and is
now being misapplied by the people's trustees, and given to these
anti-republican monopolies, and unless something is done to arrest this
species of dishonest and unconstitutional legislation, it is only a
question of time, and that time not distant, when this government,
called republican, will deny to the common people those _unalienable
rights_ guaranteed to them by the constitution. How is it now?
Discriminations are made against the public in favor of these monopolies
in payment of taxes, in special legislation for their benefit, and the
aid and protection afforded them by the courts.
Corporations and joint stock companies should have such legislation and
judicial aid afforded them as is necessary to give them a legal being,
and place them on an equal plane with individuals, and no more. All
privileges, immunities, and favors granted to them, beyond such as
are necessary for the above enumerated purposes, are in conflict with
the spirit and genius of our government. The granting of exclusive
privileges to individuals or companies tends to build up an aristocracy
of wealth, to array capital against labor, and to divide the people into
classes. While we have no titled aristocracy in this country, under the
fostering care of the government an aristocracy of wealth has sprung up
among us, more despotic in its nature than exists in the old world. It
holds in its grasp the labor of the country; it compels the whole people
to pay tribute to it; it is constantly asking, claiming, and receiving
additional strength at the expense of the people. So great has its power
become throughout the country as to alarm all who have considered the
subject. For the purpose of self-protection, the laboring community
throughout the country are banding together to resist this monopoly.
The Patrons of Husbandry are moving in the same direction, all feeling
assured that no time must be lost, and that the welfare of the country,
the perpetuity of our free institutions, and the privilege of owning and
enjoying the fruits of thrift and labor, without giving at least
one-half of them to support these monopolies, demand prompt, united, and
efficient action.
We propose discussing the different matter referred to in the following
order:--
I. Donations of land and government subsidies, and their effect upon the
people and the country.
II. The oppressions practiced, and unjust discriminations made by
railroad companies in the transportation, shipping, and storage of
freights.
III. The unjust system of taxation and discrimination made by
legislatures and congress in favor of railroad companies.
IV. The financial policy of the government, and the aid afforded by it
to corporations and monopolies.
V. The tendency of the courts of the country to uphold special or class
legislation in favor of monopolies and corporations, at the sacrifice of
the interests and rights of the people.
VI. The banking system of the country with its useless burdens imposed
upon the public.
VII. The policy of protective tariff, and its effect upon the people and
the interests of the country.
VIII. The evils incident to the patent laws of the country.
IX. The author will present his views respecting the means to be used
for redressing the grievances considered by him.
In treating of these different subjects, it will be our design to cite
and quote such acts of congress, of the state legislatures, and
decisions of the courts as will sustain the views presented, in order
that the reader may fully understand how these giant monopolies are in
fact aided and supported by the government; and we shall try to
demonstrate that the only way to arrest and correct these evils is by
united and persistent action on the part of the industrial and farming
communities, and that the remedy for all improper legislation for, and
governmental aid to, these monopolies is in the hands and under the
control of the people.
CHAPTER I.
A PRELIMINARY SURVEY.
Nothing in this country has contributed so much to the subversion of our
republican institutions as Land Grants made by congress to railroad
corporations, and congressional legislation in their favor. The policy
has opened a wide field for reckless speculation and corrupt
legislation. It has reversed the old rule, that "the people are
sovereign," and has given to "the favored few" the absolute control of
the nation. The reckless giving of lands to railroad corporations, by
congress, is without excuse, or even apology. When grants were first
made to states, it was pretended that railroads could not be built
without this aid. Subsequent developments exploded this idea. Take Iowa
as an example: In 1856 four leading railroads crossing the state from
east to west, received grants of lands sufficient to pay at least
one-half of the entire cost of their construction across the state, yet
they were not built until long years after the grants were made, nor
were they constructed as rapidly as roads built exclusively by private
enterprise and private capital. The effect of the grants was to retard
the settlement and development of the wealth and resources of the state,
by demanding from those who wished to settle upon the lands so granted,
an extortionate, or at least a greatly appreciated price therefor. It
does not require a great stretch of the imagination to arrive at the
conclusion that but for these grants the population and wealth of Iowa
(the taxable wealth) would be quite one-fourth greater now. The grant of
lands to certain railroad companies in Iowa reach eight thousand acres
per mile; this, at $1.25 per acre, amounts to $10,000. per mile; much
more than one-half of the actual entire cost of their construction. Yet,
as a matter-of-fact, some, if not all, of them became insolvent, and
either before, or soon after their completion, their roads were sold to
other parties--the original companies becoming bankrupt. But while the
companies became bankrupt, the officers and few stockholders who
controlled the corporation retired with immense wealth. These are the
men who, at the inception of the land grant system of building
railroads, inaugurated the theory which has since been practiced, that
all lands thus granted were to be treated as donations to the men who
controlled the roads receiving the grants. The result has been
demoralizing. It has opened a field to adventurers, stock jobbers, and
unscrupulous men, who have gone to the national capital and organized
themselves into squads, rings, and companies, for the purpose of robbing
the people. Not unfrequently the men elected by the people to look after
their interests in congress, have themselves become leaders and partners
in these raids upon the public treasurer; and so powerful are these
organizations that all the departments of government have yielded to
them, and the rule, with but few exceptions, is, to plunder the treasury
upon all occasions, and for every conceivable object. But as these
matters will be treated in detail in the following pages, we dismiss
them for the present.
The rule has been, with few exceptions, in granting lands, to provide
that the railroad company shall select alternate sections; that the
residue shall be for sale at $2.50 per acre; that it shall not be
subject to settlement under the pre-emption or homestead law. By these
provisions, those persons who enter the remaining alternate sections,
pay back to government the value of the lands donated to the railroad
company. This plan of aiding monopolies is at variance with every
principal of right and justice. The people themselves are the governing
power. They are the government. Those who fill the various offices are
not rulers, but agents and servants of the people. The public lands are
the property of the people, and these agents or servants representing
them in congress have no more right to give these lands to corporations
than to vote a part of each citizen's private fortune to the same
corporations. When, in addition to these grants, embracing territory
eight or ten times larger than the state of Iowa, large subsidies of
money are also voted to accompany the lands, the people should become
alarmed, and, if possible, arrest such abuses.
Every acre of land given to railroad companies is a direct robbery of
the people, and the fact that whenever a grant is made the people are
required to make good the amount taken from them by paying a double
price for the moiety that is left to them, but adds insult to injury.
The citizen who wishes to live upon and improve his quarter section,
instead of claiming it as a homestead, or even purchasing it at the
government price of $1.25 per acre, must pay $2.50 per acre before he
will be permitted to occupy it. Nor is this all; he must be taxed to pay
the interest on the subsidy bonds issued to the same companies that have
received the grants of land, and all the benefit he derives from these
unjust burdens imposed upon him, is the privilege of traveling upon
railroads, or of shipping his produce over them, after he has paid to
their officers whatever sum they choose to demand for the privilege.
To show more fully the extent to which the people are being plundered
under the plea of assisting railroads in their efforts to develope the
country, we desire to direct the reader's attention to some of the acts
of congress covering "railroad legislation." Let us, for an example,
take the Union and Central Pacific railroad, beginning at Council Bluffs
and terminating at San Francisco. The charter for this road was granted
in 1862, at a time when the country was at war; when it would be natural
to presume that the government had no surplus capital, and when reason
and common prudence demanded strict integrity and rigid economy in every
department. In chartering the company, all idea of economy, integrity,
or even _common honesty_ seems to have been abandoned. The demand for
the road as a national necessity in time of war, for direct
communication between the Atlantic and Pacific states, and the immense
cost of the road, with its great length, were the arguments used in
favor of liberal aid. All these reasons were plausible--perhaps valid.
They were seized upon, and the action of congress besought in the
premises by a ring that was formed for the purpose of making immense
fortunes out of the enterprise. A noticeable feature in the matter is,
that members of congress, in the senate and house, as soon as the act
was passed granting the charter, became large stockholders and managers
in the corporations. The aid granted by congress to this company was
sufficient, if honestly applied, to construct a double track road the
entire distance, and leave a large margin for distribution among the
stockholders. The act of congress granting the charter, with subsequent
amendments, opened a wide field for plunder, and the way the corporators
availed themselves of their opportunity shows that they had determined
to plunder the people of the last available dollar. A reference to this
act and amendments, as published by congress, will fully sustain all we
have asserted. Selecting the charter of this road as an apt illustration
of all others receiving aid from government, we ask the reader's
attention to some of its more remarkable features.
CHAPTER II.
THE PACIFIC RAILROAD INIQUITY.
On the first day of July, A. D. 1862, the charter of the Union Pacific
railroad was passed. It contains, among others, the following
provisions, to-wit:--
"SECTION 2. That the right of way through the public lands be, and the
same is hereby, granted to said company for the construction of said
railroad and telegraph line, and the right, power, and authority, are
hereby given to said company to take from the public lands adjacent to
the line of said road, earth, stone, timber, and other materials, for
the construction thereof. Said right of way is granted to said railroad
to the extent of two hundred feet in width on each side of said
railroad, where it may pass over the public lands, including, all
necessary grounds for stations, buildings, workshops, and depots,
machine shops, switches, side tracks, turn-tables, and water stations."
The right of way was reduced to one hundred feet for each side of the
railroad, by act of congress of July 2, 1864, and the right to take
material for the construction of the road was limited to ten miles on
each side thereof, by the same act. By this section the company is
allowed to take from the public lands all the material needed in the
construction of the road; to strip the lands, and leave them naked for
the people. The real value of the lands is given to the company; the
refuse left for the American people.
A part of the third section reads as follows:--
"That there be, and is hereby, granted to the said company, for the
purpose of aiding in the construction of said railroad and telegraph
line, and to secure the safe and speedy transportation of the mails,
troops, munitions of war, and public stores thereon, every alternate
section of land, designated by odd numbers, to the amount of five
alternate sections per mile, on each side of said road, on the line
thereof, and within the limits of ten miles on each side of said road,
not sold, reserved, or otherwise disposed of, by the United States, and
to which a pre-emption or homestead claim may not have attached at the
time the line of said road is definitely fixed. Provided, that all
mineral lands shall be exempted from the operation of this act; but when
it shall contain timber, the timber is hereby granted to said company."
By the act of congress of July 2, 1864, this act was so amended as to
grant ten alternate sections on each side of the road, and to grant to
the company the iron and coal found within ten miles of the road. The
reader will notice the reasons given for this grant. 1st. To aid in the
construction of the road; a legitimate reason. 2d. _To secure the safe
and speedy transportation of the mail, troops, munitions of war_, &c.
Twenty sections of land per mile are given to the company for the
purpose of securing the safe and speedy transportation of troops, and
above enumerated articles. It has been said that a poor reason is better
than no reason. Of all poor reasons given for an act, this appears to be
one of the weakest. The reader will not be able to discover its force.
As we progress, we will find that from its inception this Pacific
railroad charter, and amendments, were "conceived in sin, and brought
forth in iniquity;" that, in its provisions and grants, it presents a
state of facts which stamps the whole scheme as a base fraud upon the
public, planned by men who were seeking to enrich themselves at the
expense of their country; and that congress, either from inattention to
the interests of the people, or because the spoils were to be divided,
granted the company the precise charter that was to enable it to plunder
the public without hindrance.
That we may not be regarded as treating the subject captiously, let us
concede that the reason given was a good one, and that the grant of
lands would give security to the transportation of the mails; still the
thought presents itself that a grant of lands to the value of $15,500
per mile would be ample aid for the people to give to this company, in
the construction of its road. It is not a government work, owned by the
public, operated and controlled by the government. It is a private
enterprise, and while all persons see the necessity of a railroad
connection between the Atlantic and Pacific states, but few will indorse
the policy of the government giving to this private company more aid in
lands and money than the entire cost of the road, or more than it would
have cost if built by private capital. And when it is found that this
large grant is made without any equivalent, that not even the mails,
troops, or munitions of war, can be transported over the road without
the payment of just such rates as this private corporation chooses to
charge, the conclusion is inevitable that the good, not of the public,
but of the corporation, was the controlling motive in affording it aid;
that the untold millions of subsidy bonds, and vast tracts of land
wrongfully taken from the public, and given to this company, was but
placing the interests of the whole people, in their social and business
intercourse across the continent, at the mercy of a soulless
corporation.
The donations we have already noticed are the "right of way;" the right
to take all building material within ten miles of the road, and the
grant of twenty sections of land per mile. But this is not all. Section
five of the act provides: "That for the purposes herein mentioned, the
secretary of the treasury shall, upon the certificate, in writing, of
said commissioners, of the completion and equipment of forty consecutive
miles of said railroad and telegraph line, in accordance with the
provisions of this act, issue to said company bonds of the United States
of one thousand dollars each, payable in thirty years after date,
bearing six per centum per annum interest (said interest payable
semi-annually) which interest may be paid in United States treasury
notes, or in any other money or currency which the United States have,
or shall, declare lawful money, and legal tender, to the amount of
sixteen of said bonds per mile; and to secure the repayment to the
United States, as hereinafter provided, of the amount of said bonds so
issued and delivered to said company, together with all interest thereon
which shall have been paid by the United States, the issue of said bonds
and delivery to the company shall _ipse facto_ constitute a first
mortgage on the whole line of the railroad and telegraph, together with
the rolling stock, fixtures, and property of every kind and description,
and in consideration of which said bonds may have been issued." As we
shall hereafter see, this section was amended by act of July 2d, 1864,
so as to allow the company to issue its own bonds to the same amount per
mile issued by the government, and to subrogate the government bonds to
those issued by the company, thus making the bonds issued by the company
the first mortgage bonds.
Section six provides for the transmission of messages by telegraph, and
the transportation of the mails, troops, munitions of war, supplies, and
public stores for the government, giving it the preference at all times,
"at fair and reasonable rates of compensation, and not to exceed the
amount paid by private parties for the same kind of service."
Section eleven reads as follows:--
"That for three hundred miles of said road, most mountainous and
difficult of construction, to-wit: One hundred and fifty miles
westwardly from the eastern base of the Rocky mountains, and one hundred
and fifty miles eastwardly from the western base of the Sierra Nevada
mountains, said points to be fixed by the president of the United
States, the bonds to be issued in aid of the construction thereof shall
treble the number per mile hereinbefore provided, and the same shall be
issued, and the lands herein granted be set apart, upon the construction
of every twenty miles thereof, upon certificate of the commissioners as
aforesaid, that twenty consecutive miles of the same are completed; and
between the sections last named, of one hundred and fifty miles each,
the bonds to be issued to aid in the construction thereof shall be
double the number per mile first mentioned, and the same shall be
issued, and the lands herein granted be set apart, upon the construction
of every twenty miles thereof, upon the certificate of the commissioners
as aforesaid, that twenty consecutive miles of the same are completed;
provided that no more than fifty thousand of said bonds shall be issued
under this act to aid in constructing the main line of said railroad and
telegraph."
This vast amount of bonds was issued to the main line of the road,
which, as will be seen by an examination of the first section of the
act, terminates at the western boundary of Nevada territory. This
company, under its charter, gets $50,000,000 in bonds; its charter does
not authorize it to construct the whole road to the Pacific, but to the
western boundary of Nevada, where it meets the Central Pacific railroad,
built by a company chartered by the legislature of California. Fifty
millions in bonds, with the privilege of subrogating the security for
their payment to a like amount issued by the company as first mortgage
bonds on the road, with the grant of lands above named, the right of
way, and the right to all building material within ten miles of the line
of the road; this is deemed a fair provision for one company. In order
that no charge of selfishness, or want of charity, should be brought
against congress, it next turned its attention to other companies.
Perhaps it was thought promotive of the interest of this corporate
power, now controlling the government, that there should be unity of
action and purpose; that its strength should be so great, and its
ramifications so extensive, that neither private persons nor the public
would dare to resist its demands. The necessity for a railroad from the
Atlantic to the Pacific states was not the only consideration
influencing the law-making power of the country. This fact is clearly
apparent from the provisions of the charter, for numerous branch or
spike roads are included in the charter, and provided for in the land
grants and subsidy bonds.
Let us look at the "Central Pacific railroad company," of California.
This company received its charter from that state, was duly organized,
and as we are informed, was at work on its road when the charter was
granted by congress to the "Union Pacific." But congress, not to show
partiality, in the ninth section of the charter of the Union Pacific,
provides for the Central Pacific as follows:--
"The Central Pacific railroad company, of California, a corporation
existing under the laws of California, is hereby authorized to construct
a railroad and telegraph line from the Pacific coast, at or near San
Francisco, or the navigable waters of the Sacramento river, to the
eastern boundary of California, upon the same terms and conditions, in
all respects, as are contained in this act for the construction of said
railroad and telegraph line first mentioned, and to meet and connect
with the first mentioned railroad and telegraph line on the eastern
boundary of California."
Here is a company building its road exclusively in a single state, under
a charter derived from a state having the exclusive control of its own
affairs, and not subject to the legislation of congress, or the
administration of the general government, like the territories; yet
congress, that it may aid a great monopoly, assumes control of the
matter, reaches out its hand laden with the people's land, and the
people's money, and says to this California company: "If you will unite
with and become a part of this giant monopoly we are creating to crush
the people, and will accept the provisions of this act and render fealty
to the general government as the 'higher power,' we will give you twenty
sections of land, and subsidy bonds to the amount of sixteen thousand
dollars per mile, with the privilege of issuing your own first mortgage
bonds for an additional sixteen thousand dollars per mile for every mile
of road you build in the state of California." Of course this California
company accepts this tempting offer, and in addition to the fifty
thousand of subsidy bonds for sixteen thousand dollars each to the Union
Pacific, an additional sixteen thousand dollars per mile is issued to
the Central Pacific, all of which, as we will show, principal and
interest, will in the end come out of the pockets of the people. The
uniting of these two companies, and the completion of their roads and
telegraph lines, afforded to the country and the government (provided in
all cases they paid to the companies the amounts they charged therefor)
a road for the purpose of travel, and transportation of freights, and
secured a _"safe and speedy transportation of the mails, troops,
munitions of war, and public stores thereon,"_ and if the construction
of the road was aided for that purpose, it would seem to have been
accomplished, and as a matter of justice to the public, no further
burdens should have been imposed upon the public. Two companies had been
provided for at the people's expense, and all that was demanded for the
prosecution of the public business had been effected. But there was
danger that other through lines of railroad might be constructed across
the territories that might become rivals of this giant monopoly. The
Hannibal & St. Joseph railroad company were across the state of
Missouri, looking to the west. The Leavenworth, Pawnee, & Western
company were preparing for action. A road was crossing Minnesota and
Iowa to strike the Missouri river at Sioux City. Any or all of these
roads might become rivals. To prevent such a catastrophe, and to retain
for all time to come an absolute and exclusive monopoly, these companies
must be absorbed, or at least rendered harmless. To assist this scheme,
congress is called upon for further aid from the public lands and
treasury. The response is all that could be desired. It gave the final
blow to competition, and left the people powerless in the grasp of this,
the greatest monopoly in the country. A monopoly created by the servants
of the people, and enriched with spoils taken from the people, in
violation of every principle of right and justice, had been created by
act of Congress, and to insure it the absolute control of the country,
anything promising competition must be absorbed. To accomplish this
object, the same act, section nine, provides: "That the Leavenworth,
Pawnee, & Western railroad company, of Kansas, is hereby authorized to
construct a railroad and telegraph from the Missouri river, at the mouth
of the Kansas river, on the south side, so as to connect with the
Pacific railroad of Missouri to the aforesaid point, on the
one-hundredth meridian of longitude west from Greenwich, as herein
provided, upon the same terms and conditions in all respects as are
provided in this act for the construction of the railroad and telegraph
line first mentioned, and to meet and connect with the same at the
meridian of longitude aforesaid; and in case the general line or route
of the road from the Missouri river to the Rocky mountains should be so
located as to require a departure northwardly from the proposed line of
said Kansas railroad before it reaches the meridian of longitude
aforesaid, the location of said Kansas road shall be made so as to
conform thereto; and said railroad through Kansas shall be so located
between the mouth of Kansas river as aforesaid, and the aforesaid point,
on the hundredth degree of longitude, that the several railroads from
Missouri and Iowa herein authorized to connect with the same can make
connection within the limits prescribed by this act, provided the same
can be done without deviating from the general direction of the whole
line to the Pacific coast."
It will be seen that one of the rival lines is given a premium of lands
and bonds to intersect with the Union Pacific near the east end thereof;
it becomes, for a consideration, a part of this great monopoly, and
abandons all idea of competition.
Section ten provides for a union or consolidation of the Union Pacific,
the Central Pacific, the Leavenworth, Pawnee, & Western, and the
Hannibal & St. Joseph companies; and section thirteen provides: "That
the Hannibal & St. Joseph railroad company, of Missouri, may extend its
road from St. Joseph, via Atchison, to connect and unite with the road
through Kansas, upon filing its assent to the provisions of this act,
upon the same terms and conditions in all respects, for one hundred
miles in length next to the Missouri river, as are provided in this act
for the construction of the railroad and telegraph line first mentioned,
and may for this purpose use any railroad charter which has been or may
be granted by the legislature of Kansas." The section also provides for
connecting this road with the main line. This company promised to be a
rival, but when congress is appealed to, $1,600,000 in subsidy bonds,
and two thousand sections of land are given it as its share of the
spoils, provided it will accept this trifle as an inducement to combine
its interest with this great corporation. This disposes of all rivals
south of Omaha. True the people have paid dearly for it. They, through
their servants in congress, have enriched a lot of unscrupulous men,
banded together for the purpose of plundering the public, and given to
these corporations the power to oppress the people for all time to come;
but as it affords a safe means of transporting the mails, &c., for a
consideration which the people must pay as the services are rendered,
the public should not complain. Congress thought the matter so important
as to require the gift of vast sums of the public moneys, and princely
donations out of the public domain, and as our legislators acted for the
people, and the companies have built their roads, the public must
submit.
But there was danger that the roads crossing Iowa and Minnesota might
compete with the Union Pacific. Sioux City was an objective point on the
Missouri river. West of that city, across the then territory of
Nebraska, a road could be constructed at comparatively small cost. This
line might become a rival, and it also must be absorbed. To effect this
object, the following provision was made a part of the fourteenth
section of this act: "And whenever there shall be a line of railroad
completed through Minnesota or Iowa to Sioux City, then the said Pacific
railroad company is hereby authorized and required to construct a
railroad and telegraph line from said Sioux City, upon the most direct
and practicable route, to a point on, and so as to connect with, the
branch railroad and telegraph line in this section hereinbefore
mentioned, or with the said Union Pacific railroad, said point of
junction to be fixed by the president of the United States, not farther
west than the one-hundredth meridian of longitude aforesaid, and on the
same terms and conditions as provided in this act for the construction
of the Union Pacific railroad, as aforesaid, to complete the same at the
rate of one hundred miles per year." The amendment made to this part of
the act in 1864, to which we shall refer in another chapter, materially
changes its provisions; and as we examine these provisions, we will
discover that all the unjust donations made of the public lands and
moneys are exceeded in this amendment.
Now, if the reader will take a map on which the railroads are marked, he
will discover that from Leavenworth to Sioux City all the railroads
running west are concentrated into one line, after leaving the
one-hundredth degree of longitude--the Burlington & Missouri railroad
company being made by the act of 1864 a part of the same great monopoly.
By the exclusive franchises and imperial wealth conferred upon it by
congress, this great corporation is given control, absolute control of
the business interests of the great west. This grand system of railroads
looks well on the map, and lends color to the plea that the wants of the
public and of the government justified this large outlay of money and
lands; but an inspection of the act chartering the companies,
consolidating them, and by law giving them unlimited control of the
interests of the public, will convince the impartial reader that the
interests of the companies, rather than the needs of the government, or
the welfare of the people, controlled the action of congress.
Grants of lands and exclusive privileges have been made to other
corporations, as also to states, for the purpose of aiding in the
construction of railroads; but our aim being to combat the policy
itself, as involving gross injustice and oppression, and to show its
effects upon the public, we have selected the Union Pacific and its
branches as the best illustration of the action of congress in making
these grants, and the companies owning this road and its branches as a
fair sample of the class of professed benefactors of the people.
CHAPTER III.
THE MONOPOLISTS "HELP THEMSELVES."
The Pacific companies are such a deep mine of iniquity, we must sink our
shaft somewhat deeper if we would see the true quality of the
corruption. In order to fully comprehend the injustice done to the
people, it will be necessary to examine the further legislation of
congress in their favor.
A perusal of the act from which we have quoted will convince the reader
that these companies received all that was necessary for the successful
completion and operation of their road, and its numerous branches, and
to enable them to extort from the government and the people all that the
most grasping and avaricious could desire. But, like Oliver Twist, they
still asked "for more," and they got it; not in more lands and money,
but in being relieved, by act of congress, from the restrictions and
duties imposed upon them by their charter.
The act of congress chartering the Union Pacific railroad, and its
numerous branches, was amended by the act of July 2, 1864, in many
particulars, to some of which we have already referred. The fourth
section amends the third section of the original charter by increasing
the number of sections of land granted per mile to said road, from ten
to twenty, and allowing the selection of the lands to be made within
twenty miles of the line of the road, instead of ten, as provided in the
original charter; and also provides that the secretary of the interior
shall withdraw from sale and pre-emption all the land within twenty-five
miles of the line of the road, until the company has selected its twenty
sections. The original charter limited the withdrawal to fifteen miles.
The amendment also qualified the term "mineral lands," contained in the
original act, so as to except from the lands reserved by the government
all coal and iron lands; thus enabling the company to select coal and
iron lands to the full amount of twenty sections per mile, giving to
said railroad company, or companies, a monopoly of the coal trade in a
country where coal is, and will continue to be, the greatest
desideratum; and the same section gives the company the right to use, in
fact grants to the company, all the timber found on each side of the
road within ten miles thereof. The company can, under its charter, take
all the timber from the land it does not select, and then take its
twenty sections in coal lands, when they can be found. This it has done,
and in addition, bought of the government other large tracts of coal
land; not in the name of the company, perhaps, but in the name of the
individual stockholders. By this means, all who settle along the line,
in the vicinity of this Union Pacific road, are placed in the power of
this great corporation, and must pay it for fuel and transportation
whatever sum may be demanded, because the charter does not restrict the
company in the matter of charges for transportation.
Section seventeen of the original charter provided that twenty-five per
centum of the subsidy bonds should be retained by the government until
the entire line of the road was completed. Section seven, of the act of
July 2, 1864, repealed this provision.
Other amendments are made for the benefit of the corporation, as to time
and manner of payment; but as it is not our intention to examine all of
its provisions in detail, we pass to the tenth section.
By the original charter, the subsidy bonds issued to the company were to
be and remain first mortgage bonds upon the road and property of the
company, the company paying six per cent interest (payable
semi-annually) on said bonds, and the principal in thirty years. The
tenth section of the amendment reads as follows:--
"That section five of said act be so modified and amended that the Union
Pacific railroad company, the Central Pacific railroad company, and any
other companies authorized to participate in the construction of said
road, may, on the completion of each section of said road, as provided
in this act, and the act to which this act is an amendment, issue their
first mortgage bonds on their respective railroad and telegraph lines,
to an amount not exceeding the bonds of the United States, and of even
tenor, time of maturity, rate and character of interest, with the bonds
authorized to be issued to said railroad companies, respectively. And
the lien of the United States bonds shall be subordinate to that of the
bonds of any or either of said companies, hereby authorized to be issued
on their respective roads, property, and equipments, except as to the
sixth section of said act, to which this is an amendment, relating to
the transmission of dispatches, and the transportation of mails, troops,
munitions of war, supplies, and public stores, for the United States."
By this amendment, the public money appropriated to private
corporations, to the amount of about $65,000,000, for which security had
been taken, on all the property of the companies, was left in the hands
of the companies without any security; or, in other words, the servants
of the people made an absolute gift of this great sum of money. The
history of the country, in connection with railroad corporations,
demonstrates the fact that these corporations by "watering" their stock,
and other characteristic management, show, if they so desire it, no
margin from the business of their roads. They permit the interest on
their bonds to accumulate, until a foreclosure and sale on first
mortgage bonds are necessary, and then, under a new name, but with the
same persons as stockholders, the road is bought in and becomes
profitable. In this case the amount of $65,000,000, and the accrued
interest must be first paid, or the property of the corporation must be
sold, and the public money advanced by the government will be lost. Even
at the present time (as we shall show hereafter) the people are paying
the interest on these subsidy bonds, and the only security they have for
its repayment is the _honor_ of the company; for all precedents prove
that as a rule second mortgage bonds, when a large sum of first mortgage
bonds is to be paid, are of no real value.
Sections fifteen and sixteen provide for a division of earnings, and a
consolidation of the various companies. Sections eighteen, nineteen, and
twenty, provide for the admission of the Burlington & Missouri river
railroad company as a branch of the Union Pacific, with a grant of land
in Nebraska. But the greatest outrage upon the rights and interests of
the people, in this Pacific railroad law, will be found in the
seventeenth section of this amendment. By the original act, the Union
Pacific company was required to construct a branch, road from Sioux City
(on the most direct and practicable route) to some point on its road to
be fixed by the president of the United States (but not beyond the
one-hundredth parallel) when a railroad should be constructed through
Minnesota or Iowa to Sioux City. This new road was to unite with and
form a part of the great monopoly, and was to receive the same amount of
lands, and subsidy bonds, per mile, as the main line received. The
building of this road from Sioux City west, to a proper point of
connection with the main line, would have cost but little,
comparatively, because of the favorable character of the country through
which it would pass.
For some reason, unknown to the public, it was decided to make a change
in respect to this branch, not only as to its location, but also as to
the company whose _duty_ it should be to build it. To effect this
object, this seventeenth section contains the following provisions:--
"That so much of section fourteen of said act as relates to a branch
from Sioux City, be, and the same is hereby, amended so as to read as
follows: That whenever a line of railroad shall be completed through the
state of Iowa, or Minnesota, to Sioux City, such company now organized,
or as may be hereafter organized, under the laws of Iowa, Minnesota,
Dakota, or Nebraska, as the president of the United States, by its
request, may designate, or approve for the purpose, shall construct and
operate a line of railroad and telegraph from Sioux City, upon the most
direct and practicable route to such point on, and so as to connect
with, the Iowa branch of the Union Pacific railroad, as such company may
select, and on the same terms and conditions as are provided in this
act, and the act to which this is an amendment, for the construction of
said Union Pacific railroad and telegraph line, and branches; and said
company shall complete the same at the rate of fifty miles per year.
Provided, that said Union Pacific railroad company shall be, and is
hereby, released from the construction of said branch. And said company
constructing said branch shall not be entitled to receive, in bonds, an
amount larger than the said Union Pacific railroad company would be
entitled to receive if it had constructed the branch under this act, and
the act to which this is an amendment; but said company shall be
entitled to receive alternate sections of land for ten miles in width on
each side of the same, along the whole length of said branch; and
provided further, that if a railroad shall not be completed to Sioux
City, across Iowa or Minnesota, within eighteen months from the date of
this act, then said company designated by the president as aforesaid,
may commence and complete the construction of said branch, as
contemplated by the provisions of this act. Provided, however, that if
the company so designated by the president as aforesaid, shall not
complete the said branch from Sioux City to the Pacific railroad within
ten years from the passage of this act, then, and in that case, all of
the railroad that shall have been constructed by said company, shall be
forfeited to, and become the property of, the United States."
Now if the reader will take a late map, having the lines of railroads
upon it, he will discover that a road from Sioux City to Columbus, in
Nebraska, would be about one hundred miles in length, on a line running
nearly west; and at this latter point it would intersect and unite with
the Iowa branch of the Union Pacific; or a line running southwest for a
less distance would unite with the Union Pacific at Fremont, in
Nebraska. In the original charter it was contemplated to occupy one of
these lines, and, in fact, a branch road was commenced from Sioux City
to Fremont. The directors of this branch and the Union Pacific are in
part the same, to-wit: Oakes Ames, of Boston, and G. M. Dodge, of Iowa.
It would seem that this road, running southwest to Fremont, and there
uniting with the Pacific, would afford all necessary facilities for
securing the transportation of the mails, troops, &c., and that upon no
pretext whatever could another grant of land and subsidy bonds be asked.
Yet congress thought otherwise, and in the section last quoted
authorized any company organized under the laws of Iowa, Minnesota,
Dakota, or Nebraska, that might be designated by the president of the
United States, on application to him for that purpose, to construct a
railroad to unite with the Union Pacific, leaving it with the new
company to fix the point at which it would so unite, but requiring it to
commence at Sioux City. Taking advantage of this act, two companies, the
Sioux City & Missouri Valley, and the Chicago & Northwestern,
constructed a line of road from Sioux City to Council Bluffs, there to
unite with the Pacific; the Sioux City & Missouri Valley constructing
the road from Sioux City to Missouri Valley, and the Chicago &
Northwestern from Missouri Valley to Council Bluffs. This line of road
was constructed ostensibly as a part of the Pacific road. It is presumed
to run west. Look at the map and you will see that from Sioux City to
Council Bluffs, instead of going west, it runs on a line east of south,
to the extent of thirty miles, Council Bluffs being thirty miles east of
Sioux City. The company constructing this last named road received from
the government a grant of one hundred sections of land per each mile,
and $16,000 in subsidy bonds for each mile of road. This road runs along
the east side of the Missouri river, and in truth, is of no use as a
route for the transportation of mails, troops, &c., unless the
government prefers to use the longest, least expeditious, and most
expensive line of road. Indeed, it seems to be a road that is under the
especial care and protection of congress. It is called in the Railroad
Manual, "The Sioux City & Pacific Railroad." It was a "nice and fat"
job. It has one feature not often found in these railroad jobs carried
through congress. It appears to have been gotten up for the benefit of
congressmen. After repeated efforts to learn who were the incorporators
of this company, we addressed a letter to the secretary of state of
Iowa, and received the following answer:--
DES MOINES, December 7, 1872.
DEAR SIR:--In answer to yours of the 6th inst., I will say that there
is no line of railroad from Sioux City to Council Bluffs, run as one
road, or by one company. The Sioux City and Pacific railroad runs from
Sioux City to Missouri Valley, and the Chicago and Northwestern (Cedar
Rapids and Missouri River) from Missouri Valley to Council Bluffs. The
corporators of the Sioux City and Pacific company were L. B. Crocker,
M. K. Jessup, James F. Wilson, A. W. Hubbard, Chas. A. Lombard, Frank
Schuchardt, W. B. Allison, and John I. Blair.
Yours truly,
ED. WRIGHT,
_Secretary of State_.
Among the present directors are to be found the names of Oakes Ames,
John I. Blair, D. C. Blair, and G. M. Dodge. Ames was a member of the
late congress, and G. M. Dodge is an ex-member. Among the directors of
the Cedar Rapids & Missouri river company appear the names of John B.
Alley, and James F. Wilson, who were members of congress when the act of
July, 1864, was passed, amending the charter of the Union Pacific, and
making the large grants to the company designated by the president to
build the Sioux City branch of the Union Pacific railroad. Wm. B.
Allison has been a member of congress almost continuously from 1860 to
the present time.
This Sioux City branch seems to have been a special favorite with
certain congressmen. It received the lion's share of lands, getting five
times as many sections per mile as the main lines, and this, too, for
the purpose of building a railroad running east of south, instead of
west--the direction of the main line--following the course of the
Missouri river on the east side thereof for the entire length of this
branch, and crossing on the bridge to the Nebraska shore at Omaha.
In addition to the road from Sioux City to Omaha, and for the purpose of
getting all the land and money possible out of the government, the
conspirators organized another company, under the laws of Nebraska,
to-wit: The Fremont, Elkhorn, & Missouri Valley company, and built a
road running from Missouri Valley to Fremont, in Nebraska--about fifty
miles,--and these two roads, from Sioux City to Missouri Valley, and
from Missouri Valley to Fremont, are now called the Sioux City &
Pacific. We do not know who were the incorporators of the Fremont,
Elkhorn, & Missouri Valley company, but we find among the present
directors, John I. Blair, D. C. Blair, and ex-congressman John B. Alley.
The two companies are consolidated. The grant of one hundred sections of
land, and bonds to the amount of $16,000 per mile, with the privilege
of issuing first mortgage bonds to the amount of $16,000 per mile,
altogether comprise one of the most remunerative jobs ever conceived and
consummated by incorporating, stockholding and "direct"-ing congressmen
in the companies receiving the aid. When it is remembered that the
actual cost of the construction of the road was less than $30,000 per
mile (as shown by the _Railroad Manual_), and that it is of no value to
the government because of its course, save for carrying local mails (its
entire earnings for government transportation being less than $1,000 per
annum), it will not be uncharitable to conclude that this _fat_ little
slice of the Pacific railroad job was put through congress, and nursed
and petted by government for the exclusive benefit of congressmen, their
friends and relatives.
We do not deny the right to congressmen to become and remain
stockholders and directors in railroad corporations, but we do deny
their right to vote lands and money to companies in which they are
stockholders and directors. They are elected to represent the people, to
attend to and protect the public interests. When they form themselves
into companies and vote the lands and moneys of the people to
themselves, they violate their trust, and instead of protecting the
people, plunder them, and divide the spoils. To give these unjust
practices some color of right, or in some manner to excuse themselves
for thus appropriating the wealth of the country and dividing it with
their friends, they assert in the laws thus enacted that it is done to
aid in the construction of railroads, and "to secure the safe and speedy
transmission of the mails, troops, munitions of war, and government
supplies," &c. It is no part of the duties of congressmen to construct
railroads, nor are the people under obligations to furnish them the
means for that purpose. When members of congress form themselves into
private companies, and to procure the means for prosecuting their
private enterprises, agree to divide among themselves a part of the
money and property belonging to the public, because the position they
occupy enables them to do so, they manifest the same disregard for the
rights of others, and the same disregard of law that is shown by the
class of men who follow theft and robbery for a livelihood.
But let us follow still further the course of this Pacific railroad
company. It would occupy too much space, and weary the reader were we to
state in detail all the acts of congress passed in aid of this gigantic
combination. In speaking of the Pacific railroad we are apt to look upon
it as simply a line of road extending from the Missouri river to the
Pacific ocean; to consider its great length; the character of the
country through which it passes; the sparse settlements; the necessity
for direct and speedy communication between the Atlantic and Pacific
states, and we yield a ready assent to the action of congress in voting
lands and subsidy bonds for its construction. But when we find that the
charters of the Union Pacific and Central Pacific companies, and their
various amendments, together with the several acts of congress making
many other companies branches of the Pacific road, virtually
consolidates all the railroads between the cities of St. Louis and St.
Paul on the Mississippi river, and all the railroads running west from
Chicago, into one vast corporation, uniting all in one track from Fort
Kearney to the Pacific ocean, the people will begin to realize that
while they thought congress was appropriating lands and moneys solely
for the purpose of opening a highway across the territories, it was in
fact aiding a combination of men and corporations in their attempt to
control the commerce of the great west; and when we further learn that
this great railroad interest is already virtually consolidated, and that
the whole people are placed at the mercy of this great monopoly, we see
at a glance the extent of the power vested in it by act of congress.
Among the railroad companies that are included in this combination are
the following: Chicago & Northwestern; Iowa Falls & Sioux City; Cedar
Rapids & Missouri River; Leavenworth, Atchinson, & Northwestern; Kansas
Pacific; Union Pacific; Burlington & Missouri River; Sioux City &
Pacific; Missouri River; Chicago, Iowa, & Nebraska; Hannibal & St.
Joseph; and the St. Paul and Sioux City. Most of the above roads
received grants of lands; some of them received subsidy bonds,
ostensibly for the public benefit, but in reality for the purpose of
combining in one the interests of all these combinations. Whatever may
have been the intention of congress in granting exclusive privileges to
these companies and permitting them to unite, the effect has been to
fasten upon the great west a monopoly, that for all time to come will be
an instrument of oppression. With its vast power and wealth it can but
control the fortune of the laboring and producing classes inhabiting the
richest portion of our common country. The further fact that this great
corporate power is the particular pet of congressmen, and that among its
directors and stockholders are members and ex-members of congress,
render the hope of any change in favor of the people remote, if at all
attainable. If the reader is desirous of learning who are the directors
and managers of the Pacific railroad and branches, he has only to
consult _Poor's Railroad Manual_ for 1872-3. He will find among the
present directors the men who, in congress, voted the lands and
subsidies to the companies in which they are now directors, and also,
that some of these directors are now holding the office of congressmen
and of United State's senators.
By the acts of congress granting and amending the charters of the
Pacific railroad companies and branches, it is made the duty of the
president of the United States to appoint five directors, "who shall be
denominated directors on the part of the government," and these acts
forbid such directors being stockholders in said Pacific railroad
companies. It is made the duty of these government directors to exercise
a general supervision of the Pacific road and branches, and to report
its condition from time to time to the secretary of the interior. In
contemplation of law they are to have no pecuniary interest in the
companies or in the roads. The present government directors are B. F.
Wade, of Ohio; Hiram Price, and J. F. Wilson, of Iowa; J. C. S.
Harrison, of Indiana; and D. S. Ruddock, of Connecticut. By act of
congress of June 2d, 1864, the Cedar Rapids & Missouri River railroad
was authorized to connect with the Iowa branch of the Union Pacific
road, and sections fifteen and sixteen of the acts of July 2d, 1864,
place all roads connecting with the Union Pacific on an equality as to
charges for freights and passengers, and permits them to consolidate if
they elect so to do. The Cedar Rapids & Missouri River company has
leased its road to the Chicago & Northwestern company, and it is
operated in connection with the Union Pacific, uniting with it at
Council Bluffs, and it virtually becomes a branch of the Union Pacific
road. The reader can look over the list of directors, as shown in the
_Railroad Manual_ before referred to, and learn if any of the government
directors of the Union Pacific are directors in the Cedar Rapids &
Missouri River company. The reports made of the cost, condition, and
other matters connected with Pacific railroad enterprises, disclose such
utter disregard of the rights and interests of the people, and such a
gross betrayal of the public good for the benefit of a ring (in part a
congressional ring) as to leave it without precedent.
The fact that the men who formed this ring have become a powerful
moneyed aristocracy, able by their votes and influence in congress to
convert the public lands and money to their own use, and are now boldly
taxing the people with the interest on the money appropriated to build
up these oppressive monopolies, should arouse the country to a sense of
its imminent peril.
CHAPTER IV.
HOW CONGRESS BETRAYED THE PEOPLE.
In order to fully realize the great power of what is known as the
Pacific railroad companies, it will be necessary to look at the Central
Pacific company, and its control of the transportation of freights and
passengers from the Pacific country. This company, organized under the
laws of California, was, by acts of congress of July 1st, 1862, admitted
into the grand combination known as the Pacific roads, and granted equal
privileges with the Union Pacific and branches. The Central Pacific
extends from the Pacific ocean to Ogden, a distance of eight hundred and
eighty-one miles. The acts of congress of April 4th, 1864, and July 2d,
1864, granted to this company additional privileges and powers,
including the right of consolidating with all the companies on the
Pacific coast. In 1870 the following companies, to-wit: The Western
Pacific railroad company; the San Francisco, Oakland, & Alameda railroad
company; the San Joaquin railroad company; the California & Oregon
railroad companies were consolidated.
The state of California at that date had but one thousand and thirteen
miles of road within its borders. Of this number of miles, about
one-half became a part of the Central Pacific, by the consolidation as
above stated. All the roads pointing towards the east were combined in
this one great corporation, forming a solid body, with one common and
general object and interest, viz: a monopoly of the travel and traffic
with the eastern states. And congress, by appropriating lands and
subsidy bonds, and granting exclusive rights and privileges to this
monster monopoly, has given it the key not only to the overland commerce
of the country, but also to the commerce of our country with other
nations upon the Pacific ocean. This giant monopoly, by the aid of
congress, has obtained the absolute control of the best interests of
the whole people for all time to come--a control that is now being used,
and will continue to be used, to enrich its own members and stockholders
by oppressive levies for transportation over its roads.
To fully comprehend the cost to the country of these munificent gifts by
congress to the Union and Central Pacific corporations, let us examine
the expense somewhat in detail.
First. A grant is made of all the material needed in the construction of
the roads, found within ten miles of the line of said roads.
Second. A grant of thirty-five million acres of the public lands,
amounting, at $1.25 per acre, to $43,750,000. This vast amount of land
is taken from the people and given to companies by congressmen who in
some instances are members of the companies, and receive their _pro
rata_ share of the grants.
Third. Aid voted by congress in shape of subsidy bonds, $65,000,000,
payable in thirty years, with six per cent per annum. The theory was
that the companies would pay the interest as it matured (semi-annually)
and eventually the principal. But that this was not the intent of the
companies, nor of congress, is apparent from the different acts
regulating the matter, and as the case stands, the government is
actually paying the interest and collecting the amount from the people
in tariffs and excise taxes. The payment of the amount of these bonds,
with the interest according to their terms, will require about
$200,000,000. This amount, or nearly all of it, will be paid by the
people, and not by the companies. The report of the secretary of the
treasury shows that the amount of interest annually due on these subsidy
bonds is $3,875,000, of which the Pacific railroad companies have paid
about $750,000, and the government the balance, say $3,125,000. The
original charter of the companies provided that the charges for carrying
done for the government should be credited to the companies in
liquidation of these bonds, and also that five per cent of the net
earnings of the road should be applied to the same object. The secretary
of the treasury of the United States insisted that these companies
should be bound by this provision of their charters, refused to pay them
their earnings for government services, and also demanded the five per
cent, under the law. The companies refused to pay the five per cent of
their net earnings, and demanded pay for transportation. If we remember
that congress had already so amended the charters of these companies as
to permit them to issue $65,000,000 of their own bonds as "first
mortgage bonds," and provided that the subsidy bonds obtained from
government should be subordinate or junior to the bonds issued by the
companies, and also bear in mind that these amendments also provided
that whenever twenty miles of road was completed the patent for twenty
sections of land per mile was to issue to the companies, so that when
the roads were completed they would have title to all their lands, we
will see good reasons for the stand taken by the United States secretary
of the treasury.
The security which the United States had for the payment of the
principal and interest of the bonds, under the charter, was destroyed by
subsequent legislation, and unless the secretary could retain the
amounts due from government for transportation, and collect the five per
cent, the whole amount of the subsidy bonds, would be lost to the
government and the people. The facts of the case being well known to
congress, who are supposed to be the representatives of the people, and
to legislate in their interest and for their benefit, it would hardly be
supposed that an act would pass both branches, and receive the approval
of the president, compelling the secretary of the treasury to yield to
the demands of these corporations. Honest legislation, and a decent
regard for the public welfare, would seem to forbid any attempt on the
part of any one of the departments of the government to aid the
companies in their dishonest endeavor to avoid the provisions of a
charter which had been enacted for their special benefit. And when it is
remembered that at the time the application was made to congress (March,
1871) certain members were stockholders and directors in these same
companies, one would not think it possible that an act could be passed
relieving the companies from these requirements of their charters, or
only possible because of the practice being so long established for
congressmen to appropriate public lands and moneys to their own use,
that they had arrived at the point where they deemed the property and
money of the government lawful plunder, and that their first duty was
to provide for the rings and corporations in which they had a personal
interest. It seems to have required some strategy for the friends of
these corporations to grant them the aid they asked. Afraid to take
issue with the secretary of the treasury, and unwilling to hazard the
success of their scheme by an attempt to pass an act for the _relief_ of
these railroad companies independently of any other measure, to insure
the safe passage of the legislation and its approval by the president,
congress, by an amendment, tacked it to the army appropriation bill
(which passed March 3d, 1871), secured the relief asked for.
Section nine of the army appropriation bill reads as follows: "That, in
accordance with the fifth section of the act approved July 2, 1864,
entitled 'An act to amend an act to aid in the construction of a
railroad and telegraph line from the Missouri river to the Pacific
ocean, and to secure the same for postal, military, and other purposes,
approved July 1, 1862,' the secretary of the treasury is hereby directed
to pay over in money to the Pacific railroad companies mentioned in said
act, and performing services for the United States, one-half of the
compensation, at the rate provided by law for such services heretofore
or hereafter to be rendered: _Provided_, that this section shall not be
construed to affect the legal rights of the government or the
obligations of the companies, except as herein specifically provided."
This act was approved by the president, and the question at issue
between the secretary of the treasury and the companies was settled by
congress in favor of the latter--absolutely relieving them from the
payment of any part of the $65,000,000 of subsidy bonds, except such
sums as may be paid by allowing the government to retain one-half of the
earnings of the roads for carrying mails, etc., which sums, as shown by
the companies themselves, amount to less than one-fourth of the annual
interest accruing on the bonds. The people must pay all the balance,
principal and interest. These companies have received, in lands and
bonds, from the general government, about $109,000,000, to aid in the
construction of their roads, and all that government receives in return
is one-half of the fare levied on government transportation over these
roads, "at the price fixed by law." The only provision as to price is,
that after having donated to the companies sufficient to pay the entire
cost of the construction of the roads, government shall pay such
reasonable prices as may be agreed upon, not exceeding the rate the
companies charge to other parties. When we say "the entire cost," we do
not mean the full cost claimed by the companies, for it is not policy
for them to make a correct showing in this matter; we mean the real
actual cost. We cannot find a statement of the cost of the Union
Pacific, and do not know what the company claim to be its cost per mile,
or the aggregate cost. The Central Pacific puts the cost of its roads at
$120,000,000, or about $136,000 per mile. It shows a paid-up capital
stock of $54,000,000, and a funded debt of about $82,000,000, making its
indebtedness about $16,000,000 more than the entire cost of its road,
including rolling stock and equipments. Making a liberal margin for the
value of these last named items, and allowing the Central Pacific to
cost nearly double the ordinary cost of other roads, and the reader must
conclude that there has been, in this case, a watering of stock and an
excessive issue of bonds for the benefit of the company and at the
expense of the people. The statement of the capital stock and funded
debt of the Union Pacific shows about the same condition for its road as
to indebtedness; but the estimated cost of the road is not given.
For proof that we are not mistaken in our estimated cost of these roads,
and that the companies have received from the government a sum more than
sufficient to defray the entire expense of their construction, we turn
to reports of the cost of railroads generally, in the country, made by
men who are in sympathy with our present railroad system. These men say
that the cost of railroads in this country, from their first
introduction, is about $50,000 per mile, and that those constructed
recently will average about $30,000 per mile. We are apt to think that
the cost of the Pacific roads would exceed that of most other roads.
Such is not the fact. On the contrary, taking the entire road into
consideration, the line was more favorable than any other in the
country. It is thus described in the Railroad Manual, before referred
to:--
"The route for the eastern portion of the line is up the valley of the
Platte, which has a course nearly due east from the base of the
mountains. Till these are reached, this valley presents, probably, the
finest line ever adopted for such a work for an equal distance. It is
not only straight, but its slope is very nearly uniform towards the
Missouri, at the rate of about ten feet to the mile. The soil on the
greater part of the line forms an admirable road bed. The road, after
leaving the mountains, has very few affluents, the only constructed
bridges for the distance being one over the Loup Fork and the North
Platte. The base of the mountains is assumed to be at Cheyenne, five
hundred and seventeen miles from the Missouri river. This part is
elevated six thousand and sixty-two feet above the sea, and five
thousand and ninety-five feet above Omaha. From Cheyenne to the summit
of the mountains, which is elevated eight thousand two hundred and
forty-two feet above the sea, the distance is thirty-two miles. The
grades for reaching the summit do not exceed eighty feet to the mile.
The elevation of the vast plain from which the Rocky mountains arise, is
so great, that the mountains, when they are reached, present no
obstacles so formidable as those offered by the Allegheny ranges to
several lines of railroads which cross them. * * * The line of the
railroad up the eastern slope of the Rocky mountains is not so difficult
as those upon which several great works have been constructed in the
eastern states. After crossing the eastern crest of the mountains, the
line traverses an elevated table land for about four hundred miles, to
the western crest of the mountains, which forms the eastern rim of the
Salt Lake basin, and which has an elevation of seven thousand five
hundred and fifty feet above the sea. Upon this elevated table land is a
succession of extensive plains, which present great facility for the
construction of the road. The whole line is a very favorable one, when
its immense length is considered. More than one-half of it is
practically level, while the mountain ranges are surmounted by grades
not in any case exceeding those now worked upon some of our most
successful roads."
The description of the line of the Central Pacific, or western six
hundred and sixty-seven miles, from Ogden to Sacramento, will not vary
much from that given of the Union Pacific. It is not quite so
favorable. Taking the character of the route as given, with the
facilities for building the road, and it is not probable that the actual
cost of construction averaged more than $30,000 per mile, or $57,000,000
for the whole line. Taking the highest rate, as given, viz: $50,000, and
apply it to the whole road, the entire cost would be $94,000,000.
To aid in the construction of this road, the government issued subsidy
bonds at the rate of $48,000 per mile for three hundred miles, $32,000
per mile for nine hundred and four miles, and $16,000 per mile for the
balance of the main road and branches. The funded debt of the companies
owning and operating the road (not including the debts of the branches),
after deducting the amount of bonds they received from the government,
to-wit: $65,000,000, is, as shown by their own report, $93,000,000. How
much their floating debt amounts to we cannot tell. The stock on their
road cannot cover one-tenth of the amount of their debts. The companies
report a paid up capital stock of $91,028,190. The statement of account
would be about as follows:--
CREDIT ACCOUNT.
Paid up capital $91,028,190
Bonds from government 65,000,000
Funded debt 93,000,000
------------
Total invested $249,028,190
CONTRA.
Actual cost of construction $94,000,000
------------
Balance $155,028,190
Deduct, for 37,500,000 acres of land at $1.25 per acre 46,875,000
------------
Balance against road $108,153,190
Thus, after placing the land received from the government to the credit
of the road, still a small balance of more than $108,000,000 has
disappeared, and the companies are not able to pay the interest on the
government bonds. The reports of these companies show, for the year
1871, that the net earnings of their roads (over and above all expenses,
including taxes, repairs, damages to property and persons, cost of snow
sheds, and all other items of expense) amounted to about $9,000,000, and
yet, because these companies asked it, congress released them from the
payment of the interest on the subsidy bonds.
The conclusion to be drawn from the facts of the case, as they develop
themselves, is, that these Pacific railroad companies have used the
federal offices, and the public moneys, and lands, for enriching
themselves; that a company of men, in congress, and out of it, have
combined and confederated together for the purpose of robbing the
people, and controlling the government. We have selected the Union and
Central Pacific companies for illustrations, and attempted to state the
facts in their case, not because of any exception that they present to
the general rule, but to show the manner in which the people are duped
and defrauded by congressmen voting government aid to railroad
companies, under the pretext of developing the country, and the equally
false necessity of providing speedy and secure transportation for the
mails, troops, supplies, and munitions of war.
One peculiar feature about the whole matter is, that congressmen have
deemed it necessary for the accomplishment of their object, to become
personally interested in their own legislation by subscribing stock, and
becoming directors in the companies to which they voted these aids. We
can name congressmen who, if they were not stockholders in these Pacific
roads, at the time the bonds and lands were voted, certainly were
stockholders and directors when these companies were relieved from the
payment of the interest on the bonds issued to them by the government,
to-wit: Oakes Ames and James Brooks. How many more held stock we cannot
tell; but the fact that members were stockholders and directors must
have been known to the different departments, for, under the charter of
these companies, the directors, and especially the government directors,
are required to report in detail the condition of the companies, and the
names of the directors once each year to the secretary of the interior,
at Washington. If the reader would know the extent of congressional
legislation in favor of the rings, and combinations of men, plundering
the people, he need only look over the different acts of congress passed
directly for their benefit during the last twelve years. He will arise
from their perusal feeling that the chief duty of the government is to
foster, protect, and enrich these rings at the expense of the people.
These Pacific companies are required, by their charters, to construct
telegraph lines along the route of their roads, and to transmit messages
for the government at such rates as they charge other parties. The
appropriations by congress show that $40,000 have been voted annually to
pay for telegraphic dispatches, between the Atlantic and Pacific, but
there is nothing to show that any such sum was due from the government
for telegraphing. Among the appropriations is an item for the mileage of
the government engineer for travel, from Cincinnati to Omaha, and from
Omaha to Washington, and thence to New York; but the charters of the
companies required _them_ to pay the expenses incurred on account of the
services of persons appointed by the president to inspect these roads.
Indeed, the action of congress is such as to induce the belief, that
these roads, if not owned by the general government, are owned by
congress, or congressmen, and that it is perfectly legitimate and proper
for government to pay the cost of their construction, and of the
telegraph lines, and also their running expenses. The energy and zeal
manifested by congress, in aid of these corporations, and the great
number and variety of acts passed for their benefit, demonstrate the
fact that while the representatives of the people assemble at Washington
ostensibly to legislate for the public generally, they devote their time
to legislation for their own benefit, and that of the numerous
corporations and companies of which they are members.
CHAPTER V.
CONGRESS BECOME A STOCK EXCHANGE.
In scanning the names of the directors of the railroad corporations
which have received large grants of lands, subsidies, and special and
exclusive privileges, we find many ex-members of congress in whose terms
of service these grants were voted. We also find members of congress who
were directors at the time their relief and aid bills were passed. We
find one member who is now a director in three of the companies
receiving the largest sums from government, and which are considered the
best of all, because of the opportunity they present to _enterprising_
men of legislative and financial ability; and in order that proper
provision should be made for his kindred, one of the brothers of this
same congressman is a director in five of these land grant subsidy
corporations. These jobs are "nice and fat," made so by the unjust
legislation of congress, and being "nice and fat," the division and
distribution of the spoils is made among these congressmen and their
friends. The practice of voting the money and lands of the public to
these corporations has become so common that it is considered legitimate
to bribe or buy the votes and influence of certain congressmen in favor
of certain grants. Large bribes have been offered, and perhaps accepted
for these purposes. So common is the practice of lobbying these jobs
through congress that it excites but little attention save in
extraordinary cases, and elicits but little comment. The power and
corrupting influence of these corporations have grown to such
proportions that they and their friends in congress can disregard and
defy public opinion, and compel all the departments of the government to
yield to their demands. They plunder the people with impunity. They have
transformed the government; while we are in name a republic, and
theoretically the people govern, we are in fact an oligarchy, and
corporations rule the country. If the reader has followed us thus far he
will have seen that while the idea of public necessity has been put
prominently forth as the excuse for the great donations made to railroad
companies, and the apology for the special privileges granted to them,
in fact, the real object has been to create by special charter a
privileged class with facilities to amass fortunes, and by the power
granted to this class of perpetual succession and exclusive right under
the law, to compel the whole people to pay tribute to it. This power is
so great at this time, that it controls the whole commerce of the
country, and as we will hereafter demonstrate, it controls not only the
financial, but also the judicial department, and reigns supreme in the
general politics of the country. Looking at these charters the thought
is presented to the mind, and the idea is incorporated in the charter,
that the people of the whole country are petitioning congress to grant
aid to these companies for the purpose of developing the country; that
by a spontaneous movement on the part of the whole people congress is
called upon to incorporate these different companies, and to grant lands
and money to aid in the different enterprises as they are presented. To
give color to this idea, the names of men from most of the states and
territories are included among the incorporators, some fifteen or twenty
of whom are named as provisional directors who are to hold their places
until the first regular meeting of the company, and the election of
officers. Congress fixes the time and place of meeting and the notice to
be given to the stockholders, and to carry out the idea that it is to be
a company in which all can participate, the charter provides that any
person can subscribe stock and become a stockholder who desires to do
so. In fact though, no petitions have been presented to congress, nor do
any considerable number of the persons named as corporators know of the
organization, or that their names have been used; nor is it intended
that they should know; the fifteen or twenty interested parties who have
formed their plan for a raid upon the treasury, are the only ones,
besides their particular friends in congress, who are supposed to know
anything about it. These fifteen or twenty men who have gotten up the
scheme, meet and elect themselves directors, and are then ready for
action. Having obtained their charters, and organized under them, the
work of robbing the people begins. With their friends, and some of their
directors in Congress, they have been able thus far to obtain all they
have demanded. There is no authority for the assumption that the
chartering of these companies is in obedience to the wish of the people,
either expressed or implied. On the contrary, this action of congress
has uniformly been in opposition to public opinion, and indeed it has
excited popular remonstrance. None but the few who wish to get their
hands into the public treasury have asked the interference of congress,
or desired the government to aid in these enterprises. So great is their
anxiety to aid in the development of the country that substantially the
same companies undertake to construct all the roads for which congress
will grant sufficient aid. All these railroad schemes which have
received the special attention of congress were planned by a set of
unscrupulous men, who combined to plunder the treasury.
The system of aiding in the construction of railroads by grants of land
was inaugurated in 1850, by grants to the Illinois Central, and did not
develop itself fully until 1862, when the plan of obtaining charters
from congress, connected with grants of land and subsidies, was
systematically adopted. Since the latter date, the practice has
increased with fearful rapidity, and within the last four or five years
it has assumed such immense proportions as to threaten the entire
subversion of the government.
The greatest raid made upon congress for these grants and special
charter privileges during any one term was at the session closing March
4th, 1868. When it is remembered that the public business did not
require these roads, and that the people had not asked congress to aid
in their construction, it seems incredible that in the fortieth congress
representatives and senators should have introduced more than _one
hundred and fifty bills and resolutions_ to aid railroad companies. Yet
such is the fact. A gentleman who spent much time in Washington, and
examined into this matter writes as follows:
"The latest developments show that in the grandeur and number of their
schemes of spoil and plunder, the congressional rings of railroad
jobbers throw into the shade all other rings of the lengthy catalogue of
confederate treasury robbers. * * * One hundred and fifty-nine railroad
bills and resolutions have been introduced in the fortieth congress, and
twice as many more are in preparation in the lobby; one hundred millions
of acres of the public lands, and two hundred millions of United States
bonds would not supply the demands of these cormorants. In other words,
this stupendous budget of railway jobs would require sops and subsidies
in lands and bonds, which, reduced to a money valuation, would swell up
to the magnificent figure of half of the national debt!" He continues:
"Among the jobs of this schedule is the Atchison & Pike's Peak railroad
company, or Union Pacific Central branch, which, after having received
government sops to the extent of six millions, puts in for seven
millions more. Next comes the Denver Pacific and Telegraph company,
which, having feathered its nest to the tune of _thirty-two millions_,
puts in for a little more, and this company is reported to be a mere
gang of speculators without any known legal organization whatever--a set
of mythical John Does and Richard Roes, who cannot be found when called
for. Next, we have the Leavenworth, Pawnee, & Western railroad, now
known as the Union Pacific, eastern division, chartered by the Kansas
territorial legislature in 1855, subsidized with Delaware Indian Reserve
lands in 1861, and then in 1862, by a rider on the Pacific railroad law,
granted sixteen thousand dollars per mile in United States bonds and
every alternate section of land within a certain limit on each side of
the line of the road, and the privilege of a first mortgage (by
subsequent amendment) to secure bonds issued by the company to the
amount of sixteen thousand dollars per mile. It further appears that a
clique of seceders from the old company illegally formed a new company,
and having by force of arms taken possession of the road, are pocketing
the spoils which legally belong to the old company. All this, too, with
the consent of the president, the secretary of the treasury, and
congress. From another source we learn that some half dozen Pacific
branch or main stem railroads, northern and southern, are on the anvil,
involving lands and bonds by tens and twenties and hundreds of millions;
that Senator Pomeroy of Kansas, has seven of these jobs on the docket;
Senator Ramsey of Minnesota, four; Senator Conners of California, five;
and Senator Harlan of Iowa, four. Senator Pomeroy, however, distances
all competitors in the number and extent of his jobs, for as it appears,
they include a line from Kansas to Mexico, three bills for roads from
Fort Scott to Santa Fe, in Texas, a South Carolina road through the Sea
Island cotton section, two or three lines from the Mississippi river
through to Texas, and a little private Atchison Pacific--one of the
nicest and fattest speculations ever worked through. Is not this a
magnificent budget, and is not the audacity of these railroad jobs and
jobbers positively sublime?"
We do not vouch for the entire accuracy of the statements above quoted,
but we know that much contained in them is absolutely true. If the
congressional committee now investigating the alleged Credit Mobilier
frauds, perform their duty honestly and faithfully, we will probably
learn that the John Does and Richard Roes referred to, were Ames, Alley,
and other distinguished persons in congress and out of it. An _expose_
by this committee of the sum total voted to this eastern division of the
Union Pacific, and the actual cost of the road and telegraph lines,
would show a large margin for division, a goodly portion of which found
its way into the pockets of members of congress. Can it be claimed that
the needs of government required these large subsidies of lands and
money? Had the people requested congress to make these grants? Has the
development of this country returned to the people a tithe of the wealth
thus recklessly given away by congress? The people are now groaning
under the burdens imposed upon them by reckless or dishonest legislation
at Washington. We might well stop and inquire, from what source the
power for this kind of legislation is derived. Mr. Washburn of Illinois,
now United States minister at Paris, in a speech in congress, in the
winter of 1868, seems to have comprehended the situation, and in
opposition to the system of plundering the public treasury spoke as
follows:
"With the unreconstructed states admitted into the Union, with full and
equal protection for all men, in all of the states, and with manhood
suffrage secured by legislation or constitutional amendments, the minds
of the people will turn to questions of finance, of taxes, of economy,
of decreased expenditures, and honest and enlightened legislation--to
questions of tariff, and to questions of railroads, telegraphs, and
express monopolies which are sucking the very life-blood of the
people--to the administration of the revenue laws and to the robberies
and plunderings of the treasury by dishonest office holders. Already the
eyes of the people of this country are upon congress. I may say they are
upon the republican majority in congress, for that majority is now
responsible before the country for the legislation of congress. It can
make and unmake laws in defiance of executive vetoes. The republican
party triumphed because it was pledged to honesty and economy, to the
upholding of public faith and credit, and to the faithful execution of
the laws. * * * The condition of the country, the vast public debt, the
weight of taxation, the depreciated and fluctuating currency, the
enormous expenditure of public money, mal-administration of the
government, the extortion of monopolies press upon our attention with
most crushing force. The people elected General Grant to the presidency,
not only on account of the great and inestimable services he had
rendered the country, in subduing the rebellion, not only on account of
his devotion to the great principles of the republican party, but
because they believed him to be emphatically an honest man, and an
enlightened statesman who would faithfully administer the laws without
fear, favor, or affection. The time has come when we are imperatively
called upon to take a new departure. Added to the other terrible evils
brought upon the country by the war for the suppression of the great
rebellion, in the demoralization incident to all great wars, and to the
expenditure of vast and unheard of amounts of public money; to the
giving out of immense contracts, by which sudden and vast fortunes were
made; the inflation of the currency, which engendered speculation,
profligacy, extravagance, and corruption, by the intense desire to get
suddenly rich out of the government and without labor, and the
inventions and schemes generally to get money out of the treasury for
the benefit of individuals without regard to the interest of the
government. While the restless and unpausing energies of a patriotic and
incorruptible people were devoted to the salvation of their government,
and were pouring out their blood and treasure in its defence, there was
a vast army of the base, the venal, and unpatriotic who rushed to take
advantage of the misfortune of their country, and to plunder its
treasury. The statute books are loaded with legislation which will
impose burdens on future generations. Public land enough to make empires
has been voted to private railroad corporations; subsidies of untold
millions of bonds, for the same purposes, have become a charge upon the
people, while the fetters of vast monopolies have been fastened closer
and still closer upon the public. It is time that the representatives of
the people were admonished that they are the servants of the people, and
are paid by the people; that their constituents have confided to them
the great trust of guarding their rights and protecting their interests;
that their position and their power is to be used for the benefit of the
people whom they represent, and not for their own benefit, and the
benefit of the lobbyists, the gamblers, and the speculators who have
come to Washington to make a raid upon the treasury."
The above shows the light in which Mr. Washburn, four years ago, viewed
the matters of which we are now treating. Since the delivery of that
speech act after act has been passed by congress in favor of these
corporations, giving them greater privileges, releasing them from their
obligations to government, discharging their liability to government for
many millions of money, and to accomplish this, imposing upon the people
additional burdens and taxes for which no equivalent has been or even
will be given. The determination to plunder the government and people,
seems to control not only the adventurers who go to Washington to lobby
their schemes through congress, but also congressmen themselves, who
become chiefs among this class of money and land grabbers. They vote to
the corporations, of which they are a part, large sums in money and
lands, and then use the means thus obtained for the purpose of bribing
and corrupting their fellow members in favor of other and larger
robberies.
CHAPTER VI.
HOW THE LAND GRANT RAILROADS "DEVELOPE" A COUNTRY.
The ostensible object in granting lands to railroad companies was to aid
new and undeveloped portions of the country in procuring necessary
railroad facilities for communication with the rest of the world; and to
assist, by donations of alternate sections, in their development and
settlement.
Whether these ends have been achieved is a matter of doubt. It is
scarcely to be hoped that the people will ever be reimbursed for the
vast extent of lands, and large amount of bonds, which have been so
recklessly lavished upon so many railroad companies. When the
proposition to grant lands to railroad companies was brought before
congress, the right to donate them to private corporations was not
admitted; the right of the states to have control of the lands was not
questioned. Recognizing this latter right, the lands were granted to the
states for the purpose of aiding in the construction of certain roads
within their borders. It was not until 1862 that congress came to the
front, created private railroad corporations, and endowed them with
lands and money. Nor did these corporations commence their wholesale
raid upon the public treasury until after congress went into the
business of creating railroad companies. Is it true that the country has
been benefited in proportion to the grants made? Are the people richer
because of these grants? Has the country, as a general rule, been more
rapidly settled and improved by this railroad legislation? We are aware
that the idea is commonly entertained that the people receive an
equivalent for these railroad grants in the increased facilities for
travel and transportation of freights. Were it true that the roads
receiving grants of land were more speedily constructed, or that
transportation over them was less expensive, then we would admit that
the benefits derived would in some degree be an equivalent for the aid
afforded them. To ascertain the facts let us see how this legislation
has affected the west, taking Iowa and Kansas as illustrations.
In the first place, for every acre of land given to railroads in these
states the people have paid $1.25; inasmuch as they are charged $2.50
for the reserved alternate sections. Taking the land granted in Iowa,
the amount charged to the people of this state is $9,009,841, or, taking
the grants already certified to, the people are charged with $4,387,303.
This sum, amounting to about $4.00 per head, has been taken from the
people of Iowa and given to railroad companies, and must be charged
against the benefits received. The construction of about eleven hundred
miles of railroad in Iowa was aided by land grants. The cost, at $30,000
per mile, would be less than $33,000,000. The amount the people are
obliged to pay into the public treasury for the _reserved sections_, in
making up the account should be charged to the land grant roads, as also
the increased price they are compelled to pay the companies for the
donated lands, which range from $5.00 to $50.00 per acre; and this, too,
of lands that under the general laws they could have entered at $1.25
per acre.
The amount taken from the people who settle in and improve the state and
develop its resources, which they must pay to the government and these
railroad companies before getting title to their lands, is about
$25,000,000 more than would have been demanded of them but for these
land grants. What have they received in return? The companies in Iowa
receiving grants of land have not extended their lines across the state
more rapidly than companies receiving no grants. In fact, roads built
entirely with private means have been constructed more rapidly than
these land grant roads. The companies receiving the grants did not keep
pace with the settlement of the country; the people, as pioneers, were
always in advance of the roads. It was only when the population of the
country was sufficient to afford a paying business that the roads were
extended. The excuse paraded by congress for making these grants was
that the companies would advance their roads so as to draw after them
an agricultural population. This has not been done. On the contrary, the
lands outside of the boundaries of the railroad grants were the first
settled, and the most rapidly developed. Has the result been different
in Kansas? The number of miles of railroad in this state in 1870 was
about seventeen hundred, of which nearly one thousand received grants of
land, and the Kansas Pacific company $6,303,000 in subsidy bonds.
Companies constructing these roads received land grants to the amount of
5,420,000 acres. At $1.25 per acre the grants amount to $6,775,000. This
sum is charged upon the reserved sections as in Iowa, and must be paid
by the people of Kansas. Add to this the $6,303,000 subsidy bonds, and
the Kansas railroads have cost the people of that state and the public
treasury $13,000,000, outside of the immense local aid voted to them by
the different cities, towns and counties. The population of this state
in 1860 was 107,206. In 1870 it was 362,872. Saying nothing about the
increased prices to be paid to the railroad companies for the lands
granted to them, or the large amount of subsidy bonds, and leaving out
the immense amounts of local aid afforded to the different railroads,
and the sum to be charged to the railroads for the extra price of the
reserved sections is about $20.00 per head for the entire population.
Looking at the facts as they are developed we conclude that the people
have not been benefited by these grants of lands, that railroad
companies are the only parties benefited, that the people are not richer
because of these grants, but, on the contrary, they would have made
money by giving to the railroad companies the actual cost of the roads.
Has the country been more rapidly settled and improved by reason of this
special legislation? The leading idea advanced in favor of grants to
railroad companies has been their necessity in developing the new states
and territories. We are pointed to the new states of Iowa, Minnesota,
Nebraska, Kansas, and Nevada, and the territories of Colorado, Utah, and
Wyoming, and referred to the fact that these states have a population of
2,874,000, and 9,000 miles of railroad; and from this exhibit an
argument is deduced in favor of these grants. The theory is that the
population has followed the roads. Is this theory correct? In 1850 Iowa
had a population of 676,913, and in 1870 a population of 1,191,729. In
1860 there were 655 miles of railroad, about three-fourths of which had
received grants of land. In 1870 the number of miles of railroad had
increased to 2,668. Of this increase not more than one-third was aided
by land grants, private enterprise having constructed at least
two-thirds of it; and the same kind of enterprise is still at work, and
since 1870 has increased the number of miles to 3,250. The land grants
were nearly all made to Iowa in 1856, yet the energetic and rapid
building of roads was not shown until after the close of the war, nor
until the people had advanced beyond the roads, and their necessities
demanded them. Kansas in 1860 had a population of 107,209; In 1870 it
had increased to 364,400. Prior to 1864 it had no railroads. In 1870 it
had 1,501 miles, all of which, save forty miles, was built in four
years. Nearly all of the Kansas roads were aided by grants, and some of
them by subsidy bonds. In 1870 there was one mile of railroad in Kansas
for every 242 inhabitants. To construct these roads in Kansas, counties,
cities, and towns have taxed themselves by vote to the amount of
$4,400,000, or about $9.00 to each inhabitant. This debt must be charged
to the railroad account, and a similarly voted indebtedness in Iowa to
the amount of about $6,000,000. The valuation of property in Iowa in
1860 was $205,166,000, and in 1870 $302,515,000. Thus while the
population of the state had nearly doubled, and the lines of railroad
had more than quadrupled, the valuation had increased less than fifty
per cent, and at least one-half of this increase was in the value of
railroads. Deducting from the increased valuation of property in Kansas
the value of railroads there, and about the same state of facts appears.
The figures in these two states will show, that so far from the
donations of land and money adding to their wealth the reverse is true.
And this position is supported by the exhibit of other states. In
Pennsylvania the population has increased since 1860, 600,000. The
mileage of railroads has nearly doubled in this time, and the valuation
of property has increased from $719,253,000 to $1,318,236,000. In that
state, where no government aid has been voted to railroads, the wealth
of the state has nearly doubled, while in the same time in the state of
Iowa it has not increased fifty per cent, land grants included.
The population of Nebraska has increased from 7,000 to 42,000 in the
last decade. This state has 593 miles of railroad, or one mile of
railroad to each seventy of its population, nearly all aided by grants.
California had a population in 1860 of 380,000. In 1870 it had increased
to 560,000.
Colorado in the last decade increased from 34,000 to 40,000. In this
territory there are 392 miles of railroad, all built by grants of lands
and bonds.
Of course the roads through the territories are the Pacific roads, but
as the states and territories were both cited as illustrations of the
wisdom of congress in making grants to companies for the construction of
railroads, we have examined the matter somewhat in detail to show the
weakness of the argument. If we take the census of 1860 and that of
1870, and observe the increase in population, wealth, and railroad
building, we will discover that the laws of trade, of supply, and demand
have controlled the whole matter, and that the growth of the country has
not been increased because of these grants from government. In all cases
where the construction of railroads has approached the frontier line of
settlement, it has drawn but little population after it, aside from the
employes of the road. The real pioneer immigration, that which opens and
improves the country, is doing now what it has done for the last
generation, moving steadily to the west, followed and surrounded by
railroad sharks and jobbers, who, after getting all they can from
government, prey upon the people; and the people of the new states,
instead of being blessed with the means of adding to their wealth, find
themselves burdened with debt and taxes, fastened upon them by the
construction of railroads, many of which are of doubtful utility. As a
necessary consequence of the railroad taxes upon their lands, and the
excessive charges imposed for the transportation of their produce, their
farms do not appreciate in value, and the anticipated rapid increase in
population and wealth of the locality is not realized. From a view of
the whole situation, regarding the benefits accruing to the people from
these grants to railroad companies, with what the people have paid for
them, the withholding of these railroad lands from market, and the high
prices charged per acre by the companies, together with the unjust
privileges granted to these corporations, we conclude that the people of
the new states and territories have not received an equivalent for the
grants made to railroad companies. We are aware that a different opinion
prevails, and that our conclusions will be controverted; but when it is
remembered that thousands of people have left Iowa, or, coming from the
east, have refused to settle in Iowa, because of the fact that lands
could only be had by purchase from railroad companies at extravagant
prices, and that for this reason vast tracts of Iowa lands are yet
unimproved which would now be settled upon and cultivated had they not
thus been withdrawn from the market, it must be admitted that Iowa would
have had a greater population, and greater wealth, had her railroad
companies received no land grants. And what is true of Iowa is also
true, as a general rule, of other states and territories. Perhaps an
exception exists in the far western territories, whose gold and silver
mines are in themselves an exception to the general rule, and where
agriculture has but few followers.
The advocates of the railroad land grant and subsidy bond system for the
settlement of a country have the following to say in its favor. We quote
from the _Railroad Manual_ before referred to: "One of the most
remarkable things connected with the progress of this country is the
construction of railroads in advance even of the lines of settlement of
our people. Such result is largely due to the grants made by government
of lands for the encouragement of these works. Never was a policy more
wise or more beneficent." No instances can be shown where railroads have
been built in advance of the line of settlement, save when the objective
point could only be reached by passing over an unsettled country, as in
the case of the road from the Atlantic to the Pacific states. In all
other cases, railroad companies have awaited the settlement and
development of the country, and followed, not led, our pioneer corps. Of
the wisdom and beneficence of these grants the people can judge from
their acquaintance with the workings of the system, and the wholesale
robberies and frauds practiced by the companies, to some of which we
have already referred. Again the author says: "The government has been
greatly the gainer in a pecuniary point of view, as it was enabled to
sell the land reserved at twice the established rate." It is not clearly
seen how this _gain_ is made. The people, who are the government, give
away one-half of their lands, and then pay into their treasury just
money enough for the remaining half to make up the value of the lands
they have given away. The only gain the government has made (and this is
not a pecuniary one) is the reflection that the men who have received
these large grants have become rich, while the people have been deprived
of their lands at the original price; they must pay for one-half of them
a double price, and for the residue just what they can buy it for from
the corporations to whom their servants have donated it. This author
says: "That the public has reaped the advantage of the construction of
some ten thousand miles of railroads, that otherwise would not have been
built." Is this true? In Iowa the land-grant roads were not built as
fast as other roads having no grants, and the companies finally
completed them because they were about to lose their lands by longer
delay. And in other states and territories some of these land grant
roads are dragging their slow length along, and are being constructed
only as fast as the lines are settled with a sufficient number of
inhabitants to make the business of the roads profitable. After showing
that in certain states and territories there is now one mile of railroad
for each three hundred inhabitants, the author adds: "This is certainly
a most wonderful exhibit, and is one no other nation can display, and
which in our case has only been secured by the wise, benevolent policy
of our government, which in this way did more to give remunerative
employment to the poorer classes than any other legislation could
adopt." It is certainly a "_most wonderful exhibit_." It is one that
"_no other nation can display_;" but its wisdom and benevolence are
matters of grave doubt. If we add to this "wonderful exhibit" the
$65,000,000 stolen from the people by corrupt men and interested
legislation, with the $3,126,000 annual interest that the whole people
are taxed to pay, because the Pacific railroad companies and the
congressional Credit Mobilier have wrongfully appropriated this vast sum
to their own use, it presents truly "a _most_ wonderful exhibit,"
without a parallel in any country in the world, but its wisdom and
benevolence are certainly wanting.
CHAPTER VII.
THE CREDIT MOBILIER, AND A VILLAINOUS CONTRACT.
We now approach one of the grandest schemes for defrauding a people ever
conceived in the breast of the speculator. Before considering the Credit
Mobilier, and to show the utter rottenness of the policy of affording
congressional aid to railroads, indulge us in a brief re-survey of the
subsidy bonds issued to the Pacific railroad corporations. We may
concede that at the date of the original charter of these companies,
there were no congressman interested in the grand scheme, and that it
was planned by outside combinations. The charter received various
amendments, with additional aids and privileges after members of
congress had became interested; these amendments were made while
directors of, and contractors for, these Pacific roads were occupying
seats in congress. Whether or not they voted for these amendments does
not appear, but it is certain they did not oppose them. As we have
already shown, the aid voted by congress was ample to build and equip
these roads, taking the statements of the Railroad Manual upon the
character of the country through which they pass, and the average cost
of railroads, as the basis for our conclusion. The companies could have
built the roads without using the capital stock they reported as paid
up. The Union Pacific has made no public exhibit of the cost of its
portion of the roads, and from this fact we are at liberty to infer that
an honest exhibit would present a bad look. Facts enough have been
disclosed to prove that the stockholders and directors of the Union
Pacific company had formed a combination for the purpose of defrauding
the government and the people. The letting of the contract for the
construction of its division of the roads presents one of the most
perfect combinations for private speculation at the expense of the
public that was ever planned or executed. When this division was
completed, according to the statements of the company it was indebted in
the sum of $112,911,512. The cost of the whole line of road, at the
highest price per mile given, to-wit, $50,000, would amount to less than
one-half of the reported indebtedness of the company, including the
paid-up capital reported as $37,000,000. To show what was done with the
subsidy bonds issued to this company, we must look at the contract made
by the directors with Oakes Ames for the construction of six hundred and
sixty-seven miles of the road, and the subsequent transfer of this
contract to the Credit Mobilier of America. Let us remember that, in
addition to the bonds issued by government to the amount of $16,000 per
mile for a part of the road, $32,000 per mile for a part, and $48,000
per mile for a part, congress, by a subsequent amendment to the charter,
allowed the company to issue its own bonds, for a like amount per mile,
as first mortgage bonds, and that at the time of making the contract now
under consideration, the directors of the company, and of the Credit
Mobilier were the same persons, some of whom were at that time and since
members of congress. With these facts before us, we can see the reason
for the excess of the debts over the cost of the road, as well as for
many of the peculiar features of this singular contract. The executive
committee of the company was composed of the following named persons:
Oliver Ames (brother of Oakes Ames, contractor and member of congress),
C. S. Bushnell, Springer Harbaugh, and Thomas C. Durant. The seven
directors of the company who were made trustees, and who signed the
transfer of the contract to the Credit Mobilier, were Thomas C. Durant,
Oliver Ames, John B. Alley (a member of congress), Sidney Dillon, C. S.
Bushnell, H. S. McComb, and Benjamin E. Bates; and the president of the
Credit Mobilier was Sidney Dillon.
The grant of lands and bonds was made to the railroad company, as well
as the right to issue their first mortgage bonds. All of the contracting
parties were directors in the railroad company, and in the Credit
Mobilier. As a body they controlled the whole matter. If a desire to
protect the best interests of the company, and to deal honestly with the
public had actuated these men, and not a determination to plunder the
public, no reason can be shown for this strange contract; but if it was
the intent of a combination of men to defraud the public and the
government, then the contract and its assignments can easily be
accounted for. All of the stockholders of the company, at the time the
contract was made with Oakes Ames, by indorsement on the back of their
certificates of stock, appointed the above named seven trustees,
irrevocably to represent their stock at all business meetings and
elections of directors, during the existence of the Ames contract. The
following is a correct copy of the contract and assignments:
THE "OAKES AMES CONTRACT."--ITS ASSIGNMENTS TO THE CREDIT MOBILIER.
Agreement made this 16th day of August, 1867, between the Union Pacific
railroad company, party of the first part, and Oakes Ames, party of the
second part, witnesseth:
That the party of the first part agrees to let and contract, and the
party of the second part agrees to contract, as follows, to-wit:
_First._ The party of the second part agrees and binds himself, his
heirs, executors, administrators, and assigns to build and equip the
following named portions of the railroad and telegraph line of the party
of the first part, commencing at the one-hundredth meridian of
longitude, upon the following terms and conditions, to-wit:
1. One hundred miles at and for the rate of $42,000 per mile.
2. One hundred and sixty-seven miles at and for the rate of $45,000 per
mile.
3. One hundred miles at and for the rate of $96,000 per mile.
4. One hundred miles at and for the rate of $80,000 per mile.
5. One hundred miles at and for the rate of $90,000 per mile.
6. One hundred miles at and for the rate of $96,000 per mile.
_Second._ At least three hundred and fifty miles shall be, if possible,
completed and ready for acceptance before the first day of January,
1868, provided the Union Pacific railroad company transport the
material. The whole to be constructed in a good and workmanlike manner,
upon the same general plan and specifications as adopted east of the
one-hundredth meridian of longitude. The party of the second part shall
erect all such necessary depots, machine shops, machinery, tanks, turn
tables, and provide all necessary machinery and rolling stock at a cost
of not less than $7,500 per mile, in cash, and shall construct all such
necessary side tracks as may be required by the party of the first
party, not exceeding six per cent of the length of the road constructed,
and to be constructed under this contract. The kind of timber used for
ties and in the bridges and in its preparation, shall be such as from
time to time may be ordered or prescribed by the general agent, or the
company, under the rules and regulations and standard as recommended by
the secretary of the interior, of the date of February--, 1866.
_Third._ Whenever one of the above named sections of the road shall be
finished, to the satisfaction and the acceptance of the government
commissioners, the same shall be delivered into the possession of the
party of the first part, and upon such portions of the road, as well as
on that part east of the one-hundredth meridian now completed, the party
of the first part shall transport, without delay, all men and material
to be used in construction at a price to be agreed upon by the party of
the second part, his heirs, executors, administrators or assigns, and
the general agent, but not less than cost to the party of the first
part.
_Fourth._ The party of the second part, his heirs, executors,
administrators or assigns, shall have the right to enter upon all lands
belonging to the company, or upon which the company may have any rights,
and take therefrom any material used in the construction of the road,
and may have the right to change the grade and curvature within the
limits of the provisions of the act of congress for the temporary
purpose of hastening the completion of the road; but the estimated cost
of reducing the same to grade and curvatures, as established by the
chief engineer, or as approved from time to time by the company, shall
be deducted and retained by the party of the first part, until such
grade and curvature is so reduced.
_Fifth._ The party of the second part, his heirs, executors,
administrators, or assigns, is to receive from the company and enjoy the
benefits of all existing contracts, and shall assure all such contracts
and all liabilities of the company accrued or arising therefrom for work
done or to be done, and material furnished or to be furnished, for or on
account of the road west of the one-hundredth meridian, crediting,
however, the party of the first part on this contract all moneys
heretofore paid or expended on account thereof.
_Sixth._ The party of the second part, for himself, his heirs,
executors, administrators, and assigns, stipulates and agrees that the
work shall be prosecuted and completed with energy and all possible
speed, so as to complete the same at the earliest practicable day, it
being understood that the speed of construction and time of completion
is the essence of this contract, and at the same time the road to be a
first-class road, with equipments; and if the same, in the opinion of
the chief engineer, is not so prosecuted, both as regards quality and
dispatch, that then the said party of the first part shall and may,
through its general agent or other officer detailed for that purpose,
take charge of said work and carry the same on at proper cost and
expense of the party of the second part.
_Seventh._ The grading, bridging, and superstructure to be completed
under the supervision of the general agent of the company, to the
satisfaction of the chief engineer, and to be of the same character as
to the workmanship and materials as in the construction of the road east
of the one-hundredth meridian.
It is, however, understood that all iron hereafter purchased or
contracted for, shall be of the weight of not less than fifty-six pounds
to the yard, and to be fish bar joints.
_Eighth._ All the expenses of the engineering are to be charged and paid
by the party of the second part, except the pay and salary of the chief
engineer and consulting engineer, and their immediate assistants, and
the expenses of the general survey of the route.
_Ninth._ The depot buildings, machine shops, water tanks, and also
bridges shall be of the most approved pattern, and they, as well as the
kind of masonry and other material used, shall be previously approved by
the general agent and chief engineer of the company, and all tunnels
shall be arched with brick or stone, when necessary for the protection
of the same.
_Tenth._ Payments to be made as the work progresses, upon the estimates
of the chief engineer, in making which the engineer shall deduct from
each section its proportion of the cost of equipment not then furnished,
station buildings, superstructure, and cost of telegraph, but all
materials delivered or in transit for the account of the company may be
estimated for.
_Eleventh._ Payments hereon shall be made to the party of the second
part, his heirs, executors, administrators, or assigns, in cash; but if
the government bonds received by the company cannot be converted into
money at their par value net, and the first mortgage bonds of the
company at ninety cents on the dollar net, then the said party of the
second part, his heirs, executors, administrators, and assigns shall be
charged thereon the difference between the amount realized and the
above-named rates; provided the first mortgage bonds are not sold for
less than eighty cents on the dollar, and if there shall not be realized
from the sale of such bonds an amount sufficient to pay the party of the
second part, his heirs, executors, administrators, or assigns, for work,
as stipulated in this contract, and according to the terms thereof, then
such deficiency shall from time to time be subscribed by said party of
the second part, his heirs, executors, administrators, or assigns, to
the capital stock of said company, and proceeds of such subscriptions
shall be paid to said party of the second part, his heirs, executors,
administrators, or assigns, on this contract.
_Twelfth._ On the first one hundred miles on this contract, there shall
be added to the equipment now provided for and intended to apply on this
section as follows, viz: Six locomotives, fifty box cars, four passenger
cars, two baggage cars, and a proportionate amount of equipment of like
character be supplied to the second section of one hundred miles, after
the same is completed.
_Thirteenth._ The amount provided to be expended for equipment, station
buildings, &c., shall be expended under the direction of the party of
the first part, and in such proportion for cars, locomotives, machine
shops, station buildings, &c., and at such points as they may determine;
the party of the first part to have the full benefit of such
expenditures without profit to the contractor, or they may, in their
option, purchase the equipment and expend any portion of said amount
provided at any point on the road where they may deem the same most
advantageous to the company, whether on the section on which said
reservation occurs or not.
_Fourteenth._ The telegraph line is included herein under the term
"railroad," and is to be constructed in the same manner and with similar
materials as in the line east of the one-hundredth meridian.
The said parties hereto, in consideration of the premises and of their
covenants herein, do mutually agree, severally, to perform and fulfil
their several and respective agreements above written.
This contract having been submitted to the executive committee by
resolution of the board of directors, August 16, 1867, and we having
examined the details of the same, recommend its execution by the proper
officers of the company with the Hon. Oakes Ames, the party named as
the second part.
OLIVER AMES,
C. S. BUSHNELL,
SPRINGER HARBAUGH,
THOMAS C. DURANT.
_Executive Committee Union Pacific
Railroad Company._
_Resolved_, the foregoing contract between the Union Pacific railroad
company and Oakes Ames, referred to the executive committee by a
resolution of the board, August 16, 1867, to settle the details, be
approved, and that the proper officers of the company be instructed to
execute the same, subject, however, to the written approval of the
stockholders of the company, as understood by the board of directors
when the same was voted upon.
_Resolved_, that the option to extend this contract to Salt Lake be
referred to the board, with recommendation that said option be accepted.
ASSIGNMENT OF CONTRACT TO SEVEN TRUSTEES.
Memorandum of agreement, in triplicate, made this 15th day of October,
1867, between Oakes Ames of North Easton, Massachusetts, party of the
first part, Thomas C. Durant, of the city of New York; Oliver Ames, of
North Easton, Massachusetts; John B. Alley, of Lynn, Massachusetts;
Sidney Dillon, of the city of New York; Cornelius S. Bushnell, of New
Haven, Connecticut; Henry S. McComb, of Wilmington, Delaware, and
Benjamin E. Bates, of Boston, Massachusetts, parties of the second part,
and the Credit Mobilier of America, party of the third part.
That whereas, the party of the first part has undertaken a certain large
contract for the construction of certain portion therein named of the
railroad and telegraph line of the Union Pacific railroad company over
the plains and through and over the Rocky mountains, which will require
a very large and hazardous outlay of capital, which capital he is
desirous to be assured of raising, at such times, and in such sums as
will enable him to complete and perform the said contract according to
its terms and conditions.
And whereas, the Credit Mobilier of America, the party of the third
part, a corporation duly established by law, is empowered by charter to
advance and loan money in aid of such enterprises, and can control large
amounts of capital for such purposes, and is willing to loan to said
party of the first part such sums as may be found necessary to complete
said contract, provided sufficient assurance may be made to said party
of the third part therein, that said sums shall be duly expended in the
work of completing said railroad and telegraph line, and that the
payments for the faithful performance of said contract by said railroad
company shall be held and applied to reimburse said party of the third
part for their loans and advances, together with a reasonable interest
for the use of the money so loaned and advanced.
And whereas, said party of the third part fully believes that said
contract, if honestly and faithfully executed, will be both profitable
and advantageous to the parties performing the same, and therefore
willing to guarantee the performance and execution of the same for a
reasonable commission to be paid therefor.
And whereas, both parties of the first and third parts have confidence
and reliance in the integrity, business capacity, and ability of the
several persons named as parties of the second part hereto, and
confidently believe that said persons have large interests as well in
the Union Pacific railroad company as in the Credit Mobiler of America,
they will execute and perform the said contract, and faithfully hold the
proceeds thereof to the just use and benefit of the parties entitled
thereto.
Therefore, it is agreed by and between the said parties of the first,
second, and third parts hereto as follows; that is to say:
That said Oakes Ames, party of the first part hereto, hereby, for and in
consideration of $1.00 lawful money of the United States, to him duly
paid by the party of the second part, and for divers other good and
valuable considerations herein, thereunto moving, doth hereby assign,
set over, and transfer unto the said Thomas C. Durant, Oliver Ames, John
B. Alley, Sidney Dillon, Cornelius S. Bushnell, Henry S. McComb, and
Benjamin E. Bates, parties of the second part, all the right, title, and
interest of, in, and to, the said certain contract heretofore made and
executed by and between the Union Pacific railroad company and the said
Oakes Ames, bearing date the 16th day of August, 1867, for the
construction of portions of the railroad and telegraph line of said
railroad company, to which contract reference is herein made for them,
the said parties of the second part, to have, and to hold the same to
them and their survivors and successors forever in trust.
Nevertheless, upon the following trusts and conditions and limitations,
to-wit:--
1. That they, the said parties of the second part, shall perform all the
terms and conditions of said contract so assigned in all respects which
in and by the terms and conditions thereof is undertaken and assumed and
agreed to be done and performed by the said party of the first part
herein named.
2. That they, the said parties of the second part, shall hold all the
avails and proceeds of the said contract, and therefrom shall reimburse
themselves and the party of the third part hereto, all moneys advanced
and expended by them, or either of them, in executing or performing the
said contract, with interest and commission thereon as hereinafter
provided.
3. Out of the said avails and proceeds to pay unto the parties of the
second part a reasonable sum as compensation for their service, as such
trustees, for executing and performing the terms and conditions of this
agreement, which compensation shall not exceed $3,000 per annum to each
and every one of the parties of the second part.
4. To hold all the rest and residue of the said proceeds and avails for
the use and benefit of such of the several persons holding and owning
shares in the capital stock of the Credit Mobilier of America on the day
of the date hereof, in proportion to the number of shares which said
stockholders now severally hold and own, and for the use and benefit of
such of the assignees and holders of such shares of stock at the times
herein set forth, for the distribution of said residue and remainder of
said avails and proceeds, who shall comply with the provisions,
conditions, and limitations herein contained, which are on their part to
be complied with.
5. To pay over on or before the first Wednesday of June and September
each year, or within thirty days thereafter, his just share and
proportion of the residue and remainder of the said proceeds and avails
as shall be justly estimated by the said trustees to have been made and
earned as net profit on said contract, during the preceding six months,
to each shareholder only in said Credit Mobilier of America, who being a
stockholder in the Union Pacific railroad shall have made and executed
his power of attorney or proxy, irrevocable, to said several parties of
the second part, their survivors and successors, empowering them, the
said parties of the second part, to vote upon at least six-tenths of all
the stock owned by said shareholders of the Credit Mobilier of America,
in the capital stock of the Union Pacific railroad company, on the day
of the date hereof, and six-tenths of any stock in said Union Pacific
railroad company he may have received a dividend, or otherwise, because
or by virtue of having been a stockholder in said Credit Mobilier of
America, or which may appertain to any shares in said Union Pacific
railroad company, which had been so assigned to him at the time or times
of the distribution of the said profits as herein provided; and this
trust is made and declared upon the express condition and limitation
that it shall not enure in any manner or degree to the use or benefit of
any stockholder of the Credit Mobilier of America who shall neglect or
refuse to execute and deliver unto the said parties of the second part
his proxy or power of attorney, in the manner and for the purpose
hereinbefore provided, or who shall in any way, or by any proceeding,
knowingly hinder, delay, or interfere with any execution or performance
of the trust and conditions herein declared and set forth.
And the above transfer and conveyance of said contract is made upon
these further trusts and conditions, to-wit:--
1. The said parties of the second part, their survivors and successors,
trustees as aforesaid, in all their acts and doings in the execution and
performance of said contract, and in the execution of their several
trusts and conditions herein set forth, shall act by the concurrent
assent of four of their number, expressed in writing, or by yea and nay
vote, at a meeting of said trustees, either or both of which shall be
recorded in a book of proceedings of said trustees, kept for the purpose
by their secretary, and not otherwise.
2. Said parties of the second part shall keep an office in the city of
New York for the transaction of the business incidental to said trust.
Meetings of said trustees may be held on call of the secretary on
request of any two of their number; such call may be made personally or
by mail.
3. The said trustees shall appoint a competent person as secretary, who
shall keep a faithful record of all their acts, proceedings, and
contracts, in books to be provided for that purpose, and shall cause to
be kept suitable books of accounts and vouchers of all their business
transactions, which books shall at all times be open to the inspection
of any of said trustees.
4. The said trustees shall cause a monthly statement to be made, showing
the amount due from the Union Pacific railroad company on account of
work done or equipment or material furnished under the contract,
according to the estimates of the engineer of the Union Pacific railroad
company, as provided in said contract, a copy of which statement shall
be furnished to the Credit Mobilier of America.
And the above transfer and conveyance of said contract is made upon the
further trust and condition:--
1. That in case of death, declination, disability, by reason of sickness
or absence from the country for the space of six months, or neglect to
fulfil the duties and obligations of said trust for the same time by
either of said trustees, the remaining or surviving trustees may declare
the place of said trustee to be vacant, and to fill such vacancy by vote
in manner aforesaid.
2. That in case any one of said trustees shall wilfully neglect or evade
the performance of his duties as such trustee, or shall wilfully attempt
to hinder, delay, obstruct, or interfere with the execution or
performance of said contract, or the due execution or performance of
said trust and conditions, according to the true intent thereof, or
shall appropriate to his own use or benefit any money or other valuable
thing belonging or appertaining to said trust, fund, or property, he
shall not be entitled further to act as such trustee, or to receive any
of the benefits of said trusts, either as shareholder in said Credit
Mobilier of America, or otherwise.
The parties of the second part do hereby accept the said trust, and
agree faithfully to execute and perform the same according to the terms,
conditions, and limitations herein set forth.
The party of the third part, in consideration of the premises, hereby
agree to advance, as upon a loan, to the said parties of the second
part, their survivors and successors, all such sums of money, and at
such times as maybe necessary, to enable said trustees, economically and
promptly, to execute and perform the conditions of said contract, upon
the call of said parties of the second part, their survivors and
successors, such sums never to exceed in the whole the amount provided
for in said contract, to be paid by the Union Pacific railroad company,
for the execution and performance thereof, and to receive therefor
interest at the rate of seven per cent per annum, payable
semi-annually, on each sum so advanced, until the same are repaid.
And said party of the third part do further agree, for the consideration
aforesaid, and for an amount equal to two and one-half per cent on the
amount to be by them advanced, to be paid to them as commission, to, and
do hereby guarantee unto, the parties of the first part and second part,
the due performance and execution of the said contract, according to its
terms and conditions, and do indemnify and hold harmless the said
parties of the first and second part of and from all cost, liability,
loss or damage to them, or either of them, arising from or on account of
said contract, and to the faithful performance of the agreement,
contracts, and conditions herein above specified to be done and
performed by each.
And this conveyance and transfer is made upon the further trust and
condition.
That the trustees shall adjust and pay over to the Credit Mobilier of
America such portion of the net profits of the work done and material
furnished on the first one hundred miles west of the one-hundredth
meridian, as was done and performed prior to January 1, 1867.
In witness whereof, the party of the first part, the several parties of
the second part, in their own proper persons, have hereunto set their
hands and seals, and the party of the third part has caused these
presents to be executed by its president, attested by its secretary with
the seal of the said company, on the day and year above written.
OAKES AMES,
THOMAS C. DURANT,
OLIVER AMES,
JOHN B. ALLEY,
SIDNEY DILLON,
CORNELIUS S. BUSHNELL,
H. S. MCCOMB,
BENJAMIN E. BATES.
Signed, sealed, and delivered in presence of CLARK BELL.
The Credit Mobilier of America, by its president,
SIDNEY DILLON.
Attest: BENJAMIN F. HAM,
_Assistant Secretary_.
The first noticeable feature of this instrument is that the directors of
the company contract with one of their own body to build six hundred and
sixty-seven miles of its road.
Second, that they agree to pay to one of their own body nearly double
the actual cost of the work. Aside from these facts, nothing striking
appears in the contract. It is dated August 16, 1867. It was approved by
the directors, and on the 15th of October following, only two months
after its execution, it was assigned to the seven trustees for the
consideration of one dollar and diverse other good and valuable
considerations. These trustees agree to perform Oakes Ames' contract,
but upon consideration that they shall hold all the avails and proceeds
of the contract, reimburse themselves and the Credit Mobilier for all
money expended on said contract, with interest and commission, and
reserve to each of themselves $3,000 per year for services. The trustees
are to hold all of the residue for the several persons possessing and
owning stock in the Credit Mobilier, or to their assigns, but upon
condition that all stockholders in the Pacific railroad company, who own
stock in the Credit Mobilier, shall give an irrevocable proxy for their
railroad stock to the trustees named in the agreement. The Credit
Mobilier is to advance at seven per cent the money necessary for the
prosecution of the work, and for a commission of two and one-half per
cent, agrees to save harmless the parties of the first and second part
from all loss or damages to them, or either of them, arising from, or on
account of, said contract. The contracting parties are all stockholders
and directors in the railroad company, and in the Credit Mobilier
(whatever that may be) they are trustees for themselves. They loan to
themselves the money they receive as a grant from government (voted to
the railroad corporation while a part of their own members were members
of congress); they pay themselves seven per cent interest for loaning to
themselves their own money; also, two and one-half per cent commission
for furnishing this money, donated by government, to themselves, besides
$3,000 per year, each to themselves for their services in this most
extraordinary transaction. In order to have funds with which to
compensate themselves, they issue the first mortgage bonds on the road
of the Union Pacific company to the amount of many millions, and then
ask congress to relieve them from interest on the bonds received from
government; and congress, composed in part of the persons signing the
above quoted contract and assignment, relieves the company from
$3,125,000 per year, for thirty years, and taxes the people with this
vast sum, because the government requires "a _more safe and speedy_
transmission of the mails, troops, &c., across the territories to the
Pacific coast." We have nothing to do with the financial operations of
this company, only as far as the people are affected by them. Bearing in
mind that the eight persons concerned in and signing this contract and
assignment, were all directors of the Union Pacific railroad company;
that four of them were the executive committee; that one of them was the
contractor, and all of them stockholders in the Credit Mobilier,
probably at that time constituting that entire corporation; and that
seven of them were trustees for some persons, company, or corporation,
or what appears still more probable, for themselves, and Oakes Ames, the
contractor, and we can account for the wholesale robbery of the people,
perpetrated by these eight men with the aid of congress, as above shown.
But how the five non-stockholding directors, appointed by the president,
who are presumed to act for the government and its interest, could have
been ignorant of the whole matter, is not so easily understood. The act
of congress of July 2, 1864, section 13, provides:
"That at least one of said government directors shall be placed on each
of the standing committees of said company, and at least one on every
special committee that may be appointed. The government directors SHALL
from time to time report to the secretary of the interior, in answer to
inquiries he may make of them touching the condition, management, and
progress of the work, and shall communicate to the secretary of the
interior, at the same time, such information as should be in the
possession of the department. They shall, as often as may be necessary
for a full knowledge of the condition and management of the line, visit
all portions of the line of road, whether built or surveyed, and while
absent from home, attending to their duties as directors, shall be paid
their actual traveling expenses, and be allowed and paid such
reasonable compensation for their time actually employed as the board of
directors may decide."
If these government directors and the company observed the law, then one
of them was on the executive committee of the Union Pacific company and
must have known of this fraudulent contract and its assignment. If no
one of them was placed on the executive committee, then in the discharge
of their duty they should have reported the facts to the secretary of
the interior. One of two inferences is irresistible. 1st. That they were
ignorant of what it was their duty to know, or 2nd. That they were
unfaithful to the public trust confided in them.
Follow us a little further into this Credit Mobilier organization. It
was first organized in Pennsylvania as the Pennsylvania Fiscal Agency
for the buying and selling of railroad bonds, advancing loans to
railroads and contractors, and to do almost any kind of business except
banking. The charter was granted in 1860, to Duff Green and some fifteen
others, but included none of the Credit Mobilier company. In 1864 (the
corporation having done nothing up to this time) the secretary of the
company, supposing Duff Green (the president) to be dead, sold out the
charter to George Francis Train, Thos. C. Durant, Oakes Ames, Oliver
Ames, and others, and Train baptized it with the new name of, "The
Credit Mobilier of America;" and then George Francis seems to have
disappeared. It does not appear that any considerable amount of the
capital stock was ever paid in (the whole capital stock being
$5,000,000;) perhaps just sufficient to legalize their operations,
to-wit, $25,000. The first business done, of which there is any record,
was a contract made by the directors of the Union Pacific company with
one Hoxie, of Iowa, for building 247 miles of the road, at what price
per mile we cannot learn. It was not intended that Hoxie should build
this road, but, as the directors of the company could not contract with
themselves, it was arranged to contract with Hoxie, and then to set the
Credit Mobilier to "running," and divide the spoils. With the consent of
the executive committee of the company, Hoxie assigned his contract to
the Credit Mobilier. The first mortgage bonds of the company were sold
and sufficient realized to build forty miles of road in 1865, and in
1866 to complete the Hoxie contract. From the subsidy bonds received
from government, or from some other and unknown source, the Credit
Mobilier, in the year 1867, reported a paid-up capital stock of
$3,750,000, and were ready for extensive operations. In pursuance of the
plan formed by the executive committee of the railroad company and the
owners and directors of the Credit Mobilier, the contract with Oakes
Ames herein copied was made, and then assigned. The Credit Mobilier was
so used as to _do good_. It was "placed where it would do the most
good." It does not appear that this corporation had any considerable
financial transactions, or did any particular business save in
connection with the Pacific road; yet it proved to the holders the most
prolific stock of any on record. The Ames contract was assigned to
Sidney Dillon, and others, trustees, on the 15th of October, 1867. It
declared dividends as follows:
Dec. 12, 1867, Union Pacific R. R. bonds, valued at $2,700,000
Jan. 3, 1868, " " " " " 637,500
June 17, 1868, " " " " " 525,000
June 17, 1868, cash 2,250,000
July 8, 1868, " 1,125,000
----------
Total of dividends in seven months $7,237,500
In addition to the above, another dividend was declared July 3d, 1868,
of $2,390,625 in bonds, which were pronounced bogus, or worthless. It is
thus seen that the directors of the Pacific railroad company, who were
also the Credit Mobilier--trustees for themselves, and some of them
members of congress--by the aid of congressional legislation, and the
fiction of the Credit Mobilier, contracted with themselves, agreeing to
pay themselves extravagant prices for building their own road, and
getting their pay as a donation from the public treasury, and were able
in seven months to declare dividends to themselves of nearly two hundred
per cent upon the reported paid up capital, which capital was also
obtained from government. If the reader has followed us in the
statements we have made relative to the land and bond subsidies granted
to the Pacific railroad companies, he will not wonder that the
indebtedness of these companies, after the completion of the roads, and
after the receipt from government of more than their entire cost, nearly
doubles the amount necessary to build them, had honesty and economy been
used in their construction.
We might pursue this subject further, but we think enough has been shown
to convince the impartial reader, that whatever the pretence for making
these grants, the real object has been to enrich unscrupulous and
dishonest men at the expense of the public; and that this corrupting
power has become so great that those who occupy high and responsible
places in the government have become partners in these wholesale
robberies of the people. This conclusion becomes irresistible when we
find members of congress voting government aid to railroad companies in
which they are stockholders and directors at the time the aid is voted.
CHAPTER VIII.
HAS CONGRESS THE POWER, UNDER THE CONSTITUTION, TO CREATE OR ENDOW
PRIVATE CORPORATIONS?
To answer this question intelligently, we must examine the powers
granted to the United States, as well as the rights, powers, and
relative duties of the state governments. The state governments are
supreme in all matters affecting the public and the people, save in
those which, by the expressed provisions of the constitution, are
delegated to, or conferred upon, the general government. The powers thus
delegated to the general government are all of a public character, such
as states individually could not control or execute, and such as were
deemed essential to our national existence. All privileges, rights, and
powers, not deemed essential to the successful administration of the
national government, were reserved to the states and to the people. It
follows that the general government is one of limited powers; that while
it is supreme in all matters delegated to it by the constitution, and
while in its several departments it can exercise all such implied powers
as are necessary for the complete execution of those expressly
delegated, neither the executive, legislative, nor judicial departments
can assume the exercise of powers not conferred upon them by the express
provisions of the constitution; and that while the state governments can
exercise all powers not expressly prohibited in their constitutions,
because of their general sovereign character, the general government is
limited to such as are expressly granted. If these propositions are
correct, then the general government has no authority for creating
private corporations.
We are aware that congress has assumed the negative of these
propositions, and has granted charters to some of the most gigantic
corporations of the country, under which charters they have organized
and are doing business in states which, according to our interpretation
of the constitution, as above stated, should have the absolute control
of such companies. We shall attempt to demonstrate that the acts of
congress granting charters to railroad and other private corporations
are usurpations of power, in conflict with the provisions of the
constitution, destructive of the rights of the people and of republican
government.
What are the powers delegated to the general government by the
constitution in questions of this character? Article I. Section 8,
contains, among others, the following, as some of the powers conferred
upon congress: "To regulate commerce with foreign nations, and among the
several states, and with the Indian tribes;" "To establish post offices
and post roads;" "To make all laws which shall be necessary and proper
for carrying into execution the foregoing powers and all other powers
vested by this constitution in the government of the United States, or
in any department or office thereof." The same section gives congress
power to provide for organizing the army, &c.; and, in time of war,
extraordinary powers, controlled only by the necessities of the case,
are vested in congress. If congress have power under the constitution to
charter private corporations, it must be derived from, or contained in,
the provisions above quoted. Article IX. of the constitution reads as
follows: "The enumeration in the constitution of certain rights shall
not be construed to deny or disparage others retained by the people."
And Section 10 reads as follows: "The powers not delegated to the United
States by the constitution, nor prohibited by it to the states, are
reserved to the states respectively, or to the people." And the framers
of the constitution it would seem, for the purpose of making the line of
demarcation between the powers of the states and the general government
still more plain and definite, provided as follows: Article IV., Section
2: "The citizens of each state shall be entitled to all privileges and
immunities of citizens in the several states."
We think that the above quotations from the constitution (and we have
quoted all having any relation to the question we are discussing) prove
conclusively that the powers conferred upon congress by the
constitution are limited; that while within the scope of the delegated
powers its action is supreme, there is inherent in it no general power
to legislate upon subjects not named in the constitution, or not
included by necessary implication. On the contrary, all the powers not
expressly given are reserved to the states or to the people.
Is the authority to charter private corporations necessarily included in
the delegated power to regulate commerce among the several states, or to
establish post roads? We think not. What do we understand by the word
"Commerce?" Webster defines it as follows: "1st. _In a general sense_,
an interchange or mutual change of goods, wares, productions, or
property of any kind between nations or individuals, either by barter,
or by purchase and sale; trade; traffic. Commerce is _foreign, or
inland_. Foreign commerce is the trade which one nation carries on with
another; inland commerce, or inland trade, is the trade in the exchange
of commodities between citizens of the same nation or state. 2d.
Intercourse between individuals; interchange of work, business,
civilities, or amusements; mutual dealings in life." And again: "To
traffic; to carry on trade." In the absence of any definition given to
it in the constitution, we must accept the above general definition of
its meaning as being the sense in which it is used in the constitution.
Respecting trade with foreign nations or the Indian tribes, it can only
relate to the interchange of commodities, or purchase or sale of
articles of traffic. As incidental to this power, congress can prescribe
rules for the regulation of navigation upon the high seas, including
police regulations on board of vessels, because the oceans are the
common or public highways of all nations, and each nation navigating the
same is bound to protect not only its commerce, but its citizens or
subjects. Nations hold commerce with nations across and upon the high
seas, the citizens and subjects of each being protected by their own
government. This commerce with foreign nations is not regulated by
grants of private charters, but by acts of congress is open to all
alike, save where, for the encouragement of certain branches of trade,
certain bounties or privileges have been granted to particular parties
for a specified time. But all such grants have been to parties
navigating the high seas. The control of navigable streams within the
United States does not depend alone upon the powers given to congress to
regulate the commerce of the country, but depends also upon the further
power vesting in the general government exclusive maritime jurisdiction.
If we concede that the power to regulate commerce among the several
states gives congress the exclusive right to regulate the commerce
carried on upon our rivers, it would not follow that the power to
charter railway companies is conferred. Navigable streams are _public
highways_, open to the travel of all. No man, set of men, or
corporations, can claim the exclusive right to navigate these rivers,
nor could congress grant such exclusive right. The duty of protecting
the rights of the citizen, and of making river transportation safe, and
of protecting the rights of property, demand that the national, and not
the state legislature, should be supreme in this particular
jurisdiction, and hence this branch of commerce is placed in the custody
of the nation. But keeping in mind the definition of the word,
"Commerce," let us see what is meant by the term as applied to dealings
between the states. We insist that it has no reference to the
construction of roads, railroads, canals, or any other ways upon which
commerce might be carried, or over which articles of trade or traffic
might pass, but that it refers only to the dealing of the people of one
state with another; that while the people of each state are under the
supreme control of their state authority, all the privileges enjoyed by
the citizens of any one of the states as to residence or traffic with
the citizens of another state, are to be the same. No distinction can be
made, and for the purpose of carrying out this provision of the
constitution, and preventing the levy of tariffs or taxes by one state
upon the citizens of another state, and for the purpose of guaranteeing
to all citizens of the United States immunity from these unjust
discriminations, the power to regulate commerce among the states was
delegated to congress. Nor does it follow, that, for the purpose of
regulating commerce among the states, congress can grant exclusive
privileges and monopolies in any business not confided to one state.
When the constitution was adopted, each state was independent; each had
all the powers and prerogatives of a nation; each was supreme within its
geographical limits; each might prescribe its own rules in relation to
immigrants, and to trade and traffic with other states; it might
discriminate in favor of its own citizens; it might impose tariffs on
foreign imports, and deal with its sister states as with foreign
nations. To prevent this, and to secure to all citizens of the United
States equal privileges and immunities in all parts of the United
States, the provisions of the constitution we have quoted were adopted.
While the independence of the states was recognized and preserved, the
power to regulate commerce, among them, was delegated to congress; not
the power to withdraw from the state its right to legislate upon the
subject of commerce among its own citizens, or the right to protect its
own citizens in their dealings with the citizens of other states; but
simply providing that no discriminations should be made on account of
residence, and establishing equal rights and privileges of all citizens
of the United States in all the states, free from discriminations sought
to be enforced under local or state statutes and regulations. Should any
one state attempt to deny to the people of another state the privileges
guaranteed by the constitution, then it would be the plain duty of
congress to interfere and "_regulate commerce_" between these states.
But while a general national law might constitutionally be enacted upon
this subject, it certainly cannot be claimed, that upon the pretext of
regulating commerce among the states, congress can charter railroad
companies, or any other companies organized for pecuniary profit. Nor
can this power be claimed under the constitutional provision for the
establishment of post offices and post roads. We admit that the grant of
this power carries with it all such as are incidental; that by
implication it includes within its terms the carrying and distribution
of the mails, and all other matter necessarily connected therewith; and
that congress might build, own, and control post roads, so far as the
same might be found necessary for the transportation of the mails over
the territory belonging to the United States, and to provide for the use
of public roads for government purposes. Public highways are free to
all. Over these highways, whether on land or water, congress can
provide for the transportation of the mails, troops, army stores,
munitions of war, and other public property. These highways are at all
times open to the public. But while this is true, it does not follow
that the government of the United States can take the absolute control
of these public highways, and, by act of congress, deny the states a
control over those within their borders respectively. The location and
establishment of public roads within a state is a part of the local or
police regulation, and while these roads are free to the passage of all,
they are, by the provisions of the constitution and the universally
accepted custom of the country, recognized as being under the exclusive
control of the states within which they are situated. The fact that
congress never has taken the control of the public roads of the country
is a full recognition of the exclusive right of the states to control
them. Then how can it be claimed that congress, under the constitution,
possesses the power to charter railroad companies? Until within the last
few years, no attempt was made to grant charters to railroad companies
by the general government, nor indeed were charters granted for any
purpose save in relation to the financial departments, as in the case of
United States banks, fiscal agencies, &c., which were chartered for the
public benefit, and not as private institutions. We are not positive
that the constitutionality of these railroad charters has been
determined by the courts of the United States, but we are aware of the
fact that congress has deemed it necessary, in almost every instance
where charters have been granted and aid voted, to declare, and place
upon the record as a part of the charter, the reasons for granting it.
The following are the reasons assigned in some of the charters, to-wit:
In the charter of the Union Pacific railroad company--"For the purpose
of aiding in the construction of said railroad and telegraph line, and
to secure _the safe and speedy transportation of the mails, troops,
munitions of war, and public stores thereon_."
In the charter of the Northern Pacific railroad company: "For the
purpose of aiding in the construction of said railroad and telegraph
line to the Pacific coast, and to secure _the safe and speedy
transportation of the mails, troops, munitions of war, and public
stores_." In all other cases the above quoted statement of cause is
inserted in the charters, as though the right or authority to make these
grants was so doubtful that it became necessary in every case to state
the reason for the grant. If the present necessities of the government
demand such special legislation, then the same reasons existed from the
organization of our government; and if congress possesses the power
under the constitution to make these grants, and to assume the absolute
control of public or private roads through the states, then from the
adoption of that constitution congress could have taken the absolute
control of all the public roads in all the states of the Union. Before
railroads were constructed, all overland transportation of mails,
troops, munitions of war, &c., was over the public highways--highways
that were and still are under the exclusive control of the states in
which they lie. Over these public roads and such private ways as maybe
selected, government has a right to transport the mails, troops, and
public property, and no state has the right to prohibit or restrict this
right. Still, no power is given by the constitution, nor is there any
implied, under which congress can, under the plea of rendering more safe
and speedy the transportation of mails, troops, &c., grant exclusive
charters and privileges to private corporations. In the nature of
things, as our government is organized, the right to charter and control
all corporations organized for pecuniary profit remains with the states.
This power has never been delegated to the general government, nor
prohibited to the states, or people. There can be no doubt upon this
point, when we remember that the general government is limited to the
delegated powers; and that it is supreme only in those matters which are
delegated to and vested in it by the constitution. This position is
fully sustained by the adjudication of the supreme court of the United
States. In Marshall, on the federal constitution, page 164, we find the
following: "This government is acknowledged by all to be one of
enumerated powers. The principle that it can exercise only the powers
granted to it, would seem too apparent to have required to be enforced
by all those arguments which its enlightened friends, while it was
depending before the people, found it necessary to urge. That principal
is now universally admitted." Again, on page 301, the author says: "In
our complex system presenting the rare and difficult scheme of one
general government whose action extends over the whole, but which
possesses only certain enumerated powers and of numerous state
governments, which retain and exercise all powers not delegated to the
union, contests respecting power must arise. Were it otherwise, the
measures taken by the respective governments to execute their
acknowledged powers would often be of the same description, and might
sometimes interfere. This, however, does not prove that the one is
exercising, or has the right to exercise, the power of the other."
As to the power of congress to create corporations, an argument has been
drawn in its favor from the provision of the constitution, which
declares that congress shall have the power of making "all laws which
shall be necessary and proper for carrying into execution the foregoing
powers, and all other powers vested by this constitution in the
government of the United States, or in any department thereof." The
question before the court arose out of the attempt of the state of
Maryland to tax the United States bank, a corporation chartered by
congress. In this case the power was upheld on the ground that the bank
was necessary in the administration of the finances of the government,
that being one of the matters vested in or delegated to the general
government, the power to charter the bank was incidental to the granted
power. But on the question of the power of congress to create
corporations, Mr. Marshall says, page 167: "The creation of a
corporation, it is said, appertains to sovereignty. This is admitted.
But to what portion of sovereignty does it appertain? Does it belong to
one more than another? In America the powers of sovereignty are divided
between the government of the Union, and those of the states. They are
each sovereign with respect to the objects committed to it, and neither
sovereign with respect to the objects committed to the other. We cannot
comprehend that train of reasoning which would maintain that the extent
of power granted by the people is to be ascertained, not by the nature
and terms of the grant, but by its date. Some state constitutions were
formed before, some since that of the United States. We cannot believe
that their relation to each other is in any degree dependent upon this
circumstance. Their respective powers must, we think, be precisely the
same as if they had been formed at the same time. Had they been formed
at the same time, and had the people conferred on the general government
the power contained in the constitution and on the states the whole
residium of power, would it have been asserted that the government of
the union was not sovereign with respect to those objects which were
entrusted to it, in relation to which its laws were declared to be
supreme? If this could have been asserted, we cannot well comprehend the
process of reasoning which maintains that a power appertaining to
sovereignty cannot be connected with that vast portion of it which is
granted to the general government, so far as it is calculated to
subserve the legitimate objects of that government. The power of
creating a corporation, though appertaining to sovereignty, is not like
the power of making war, or levying taxes, or of regulating commerce, a
great substantive and independent power which cannot be implied as
incidental to other powers, or used as a means of executing them. It is
never the end for which other powers are exercised, but the means by
which these objects are accomplished. No contributions are made to
charity for the sake of an incorporation, but a corporation is created
to administer the charity. No seminary of learning is instituted in
order to be incorporated, but the corporate character is conferred to
subserve the purposes of education. No city was ever built with the sole
object of being incorporated, but it is incorporated as the best means
of being well governed. The power of creating a corporation is never
used for its own sake, but for the purpose of effecting something else.
No sufficient reason is therefore perceived why it may not pass as
incidental to those powers which are expressly given, if it be the
direct mode of executing them."
Taking the above definition of corporations, and their use, in the
administration of the government, we can have no difficulty in
distinguishing the cases in which congress can grant charters to any
company or association. It is only when some of the delegated powers
require the aid of corporate acts in their administration, that the
right exists in congress to grant charters, as incidental to the grants.
The grants of charters to railroad companies cannot be claimed as
incidental to any express delegation of power to the general government.
If railroads are private property, they cannot be chartered or
controlled by congress. If they are to be taken and treated as public
highways, then they are as exclusively under and subject to the control
of the respective state governments, as common highways. The state
legislatures have exclusive control of them in either case. If they are
treated as private corporations, then under the rights reserved to the
states, as well as by long usage, their exclusive control is retained by
the states. If they are public roads, the same local or state laws apply
to them as to all other public roads. Admit that congress has the right
to grant charters for railroads, then it follows that it can control
them. Admit that they are public roads, and that they are to be taken
and treated as common highways, and congress at once assumes the local
and police regulations of all the public roads in all of the United
States.
To this doctrine we cannot subscribe, but insist that the exclusive
power to charter and control railroad corporations remains with the
people to be exercised by and under the exclusive control of the state
governments. Nor can congress, rightfully, under the constitution,
charter railroad corporations in the territories. The power vested in
congress "to dispose of and make all needful rules respecting the
territory or other property belonging to the United States," does not
authorize the creation of private monopolies. When territorial
governments are formed, they are clothed with many of the attributes of
sovereignty. These governments are at liberty to legislate and to
provide for the well-being of the people, and subject to the provisions
of their "organic law," have the complete control of local and police
regulations. They can construct highways, erect public buildings, impose
taxes, grant charters, including charters to railroad companies. That
territorial governments can charter railroad companies, and that general
government has so acknowledged is proven by the acts of congress in
donating lands and bonds to companies chartered by territorial
legislation. This was done in the case of the Leavenworth, Pawnee, &
Western railroad company, chartered by the territorial legislature of
Kansas; and other instances are common. The power to grant charters
cannot vest in the states, and territorial governments, and at the same
time exist in the general government, for the reason that the supreme
power must exist in one or the other. If this were not so, one
government could destroy what the other had created. The privileges
acquired by a corporation under the one could be entirely annulled by
the other. Private rights would be subject to the adjudication of two
separate and distinct tribunals, created and sustained by distinct
governments, the one claiming to be supreme, because the right to
exercise the power had been granted to it, and the other denying such
grant, and because of this denial claiming the power as still remaining
with the state government. This course would be destructive of the
rights of the people, as well as of our system of government. Concede to
congress the right to charter railroad companies, and there is no limit
to the monopolies that can be forced upon the people of the whole
country. Land companies, loan, and interest companies, manufacturing
companies, and in short all conceivable projects of speculation can
obtain charters from congress, and our government becomes entirely
personal in character, without restraint or constitutional limit. The
assumption by congress of the power to create private corporations is a
fatal stab at our system of government, destructive of state rights, and
a wanton violation of the constitution.
CHAPTER IX.
STATE RIGHTS AT THE BAR OF A CORRUPT CONGRESS.
None of the subjects of legislation have tended to destroy
constitutional safeguards and debase public morals so much as
congressional legislation, with its grants of land and bonds, and other
special benefits in favor of railroad corporations. This species of
legislation has well nigh destroyed republican institutions. While our
government is republican in name it is in fact controlled by an
oligarchy. The whole government has become a prey to the class of
corporations above named, and is administered in their interest. Their
influence controls the legislative department, the courts of the
country, and its finances. This is a sweeping assertion, but who will
deny it. Further, the very men who by their votes in congress have
created these monopolies, have themselves in many instances received
pecuniary consideration for their votes, either in corporate stock, or
direct payment. This last assertion is now (January 9, 1873) being
supported by results arrived at by committees appointed to investigate
charges of corruption made against members of both branches of congress.
Having assumed the right to grant charters and aid to these corporations
in violation of the constitution, it was but one step further in the
same direction for congress to enact other unconstitutional laws,
regulating and combining railroads receiving their charters from state
legislatures, laws which enable these roads to so combine their
operations as to control the entire interests of the country. These acts
are numerous in the published laws of congress. We will refer to some of
them, and direct the reader to the following, of a general nature: On
the 15th of June, 1866, congress passed the following unconstitutional
act in the interest and for the benefit of railroad corporations: See
Second Brightley's Digest, page 528, "That every railroad company in
the United States, whose road is operated by steam, its successors and
assigns, be and is hereby authorized to carry upon and over its road,
boats, bridges, and ferries, all passengers, troops, government
supplies, mails, freight, and property, on their way from one state to
another state, and to receive compensation therefor, and to connect with
roads of other states so as to form continuous lines for the
transportation of the same to the place of destination. Provided, that
this act shall not affect any stipulations between the government of the
United States, and any railroad company for transportation and fares
without compensation, nor impair or change the conditions imposed by the
terms of the acts granting lands to any such company to aid in the
construction of its road, nor shall it be construed to authorize any
railroad company to build any new road, or connection with any other
road without authority from the state in which said railroad, or
connection, may be proposed." Commenting upon this extraordinary
statute, the editor says: "In the preamble to this extraordinary
assumption of power, on the part of the federal congress, they prefer to
base their authority for it on the power to regulate commerce among the
several states, to establish post-roads, and to raise and support
armies. But it has been decided that the constitutional power to
establish post-roads is confined to such as are regularly laid out under
state authority; the government of the United States cannot construct a
post-road within a state of the Union without its consent. The
post-roads of the United States are the property of the states through
which they pass. The United States have the mere right of transit over
them for the purpose of carrying the mails; the government could not
have an injunction to prevent the destruction of a mail-road." Citing
the case of the Cleveland, Painesville, & Ashtabula railroad company
_vs_. The Franklin canal company, in the circuit court of the United
States, the editor adds: "Congress certainly can confer no rights on a
railroad company incorporated by a state government, which are withheld
from it by the charter of its creator."
The above quoted act assumes that congress has full power to regulate
the connection of railroads in the different states, as well as the
carrying trade upon the same. It strips the several state governments of
all power to interfere, and in case of any controversy takes from the
state courts the power to determine the rights of the respective
parties; the act of congress could be pleaded, and, as a necessary
consequence, the United States courts would have exclusive jurisdiction.
It cannot be claimed that this act can be supported under any express
delegation of power to the general government, nor can it be supported
as being incidental to any express grant. It is an usurpation not
warranted or sustained by any part of the constitution. This one section
quoted, destroys the right of any state of the Union, or of two or more
of them, to legislate upon the subject of uniting or connecting
railroads meeting on the lines dividing them, and also takes from the
states the right to regulate the carrying trade within their own
respective borders. Congress had no more authority under the
constitution to enact this law, than to provide by statute for the
construction of public highways when they meet upon the line dividing
states, or to provide for the passage of teams from one state to
another, and the transportation of freights over the common highways
within or across a state. The whole power under the constitution is
reserved to the states. Prior to the creation of these great railroad
monopolies by congress, an attempt at such legislation would have been
deemed unconstitutional, but as soon as the whole affairs of government
passed into the hands of the few, and when the protection of their
interests demanded it, the act was passed, and has remained upon the
statute book as one of the laws of the land. This act is about the only
one that openly and broadly covers the whole ground, and assumes to
regulate the internal affairs of the states, but there are numerous acts
passed in relation to land grants and the companies chartered by
congress, which have the same effect. In some cases the absolute control
of roads constructed under charters obtained from state legislatures, or
under state laws, has been taken from the states by acts of congress,
and placed under the jurisdiction of the general government. In most
instances where this has been done, members of congress, or their near
relatives, were large owners of stock in the companies to be benefited
by the act. To speak more plainly, the acts granting special privileges
to particular companies, and placing them under the jurisdiction of the
federal government, were passed for the benefit of congressmen and
others in high official position. Let us examine some of these acts.
Among the stockholders and directors of the Union Pacific and its
branches, there are found at least eight persons who were members of
congress at the date of the act of congress creating the corporation,
and also at the date of the material amendments to the charter. Some of
these congressmen are still stockholders and directors, and were
directors when congress released these companies from payment of
interest on the bonds they had received from the government. Another
land grant company having congressmen among its stockholders and
directors, is the Leavenworth, Lawrence, & Galveston; also, the Iowa
Falls & Sioux City; also, the Cedar Rapids & Missouri River; also, the
Burlington & Missouri River; also, the Atlantic & Pacific; also, the New
Orleans, Mobile, & Texas; also, the Northern Pacific; also, Sioux City &
Pacific; also, the Fremont, Elkhorn, & Missouri Valley. The number might
be extended, but enough is given to sustain our charge. Most of the
above named companies were organized under state laws, or received their
charters from state or territorial legislatures. For the purpose of
consummating certain speculative ends, congress has treated with
contempt state laws and state authority. Where charters have been
granted under state authority, and the companies were rightfully under
the control of the states within which their roads were located, acts
like the following have been passed by congress: "That the Leavenworth,
Pawnee, & Western railroad company, of Kansas, are hereby authorized to
construct a railroad and telegraph line from the Missouri river, at the
mouth of the Kansas river, on the south side thereof so as to connect
with the Pacific railroad of Missouri;" and then follow the details for
constructing and operating the road, and placing it under the control of
the general government. In the case of the Central Pacific company,
chartered by the state of California, congress passed the following
act:--
"The Central Pacific railroad company of California, a corporation
existing under the laws of the state of California, are hereby
authorized to construct a railroad and telegraph line from the Pacific
coast, at or near San Francisco, or the navigable waters of the
Sacramento river, to the eastern boundary of California."
Substantially the same provision is found for most of the corporations
above named, and in all those cases, the authority to construct the road
is followed by a provision for aid by the general government.
It might be pertinent to inquire why it became necessary for congress to
assume the control of railroads already chartered under state authority.
It cannot be claimed that the states acted without authority in granting
the charter; nor can the authority of the general government to take
from the states the control of railroads within their border, be
supported by any grant of power contained in the constitution. On the
contrary, the power is reserved to the states, and its exercise is
denied to the general government. It cannot be urged that the interests
of the people are subserved by this assumption of power; on the
contrary, these acts of congress take from the public its rights
reserved by the constitution. But one answer can be given, _these acts
were passed for the promotion of selfish and corrupt ends_. In support
of this, we need only state the fact, that in almost every instance
where congress has attempted to re-charter companies organized under
state authority, and granted them aid, members of congress who were
members at the date of the passage of the acts, were stockholders, and
not unfrequently directors. Some congressmen who have been members for
the last ten or twelve years, are stockholders in several of the
companies, and at least one member of congress of twelve years standing
is now a director in at least three companies that received grants of
land, one of them getting large amounts of subsidy bonds, for all of
which he voted, and for which, as often as occasion served, he has used
his vote and influence in procuring additional privileges. We do not
claim that every member of congress is interested in railroads; but we
do assert that there are many senators and representatives who are
personally interested, and that the proportion is so great that whenever
it is desirable to have legislation it can be obtained without
difficulty. To prove that the chartering and endowing of railroad
companies is one of the principal occupations of the national
legislature, we have only to look through the acts of congress the last
two or three sessions. At the first session of the forty-second congress
fourteen railroad bills were passed, some of them conferring grants to
companies yet in embryo, having no being save upon paper, but presenting
"great expectations" to our congressmen, who combine the business of
granting charters and building railroads, and who find no indelicacy in
becoming stockholders and directors in the corporations to which they,
as congressmen, have voted lands and money. Some of these roads, under
the acts of congress, present great inducements for investments, and in
due time will receive proper attention. The effect of this species of
legislation has been most baneful. The national congress, once the most
pure and patriotic body in the world, has become the headquarters of all
the unscrupulous men of the nation. It is under the control of dishonest
and reckless men. Elections to seats in that body have become of such
value, that to secure them men do not hesitate to pay more than the
salary for the entire term. Nor do candidates always pay their own
money. It is often furnished by rings and interests which require
special legislation. It is now well understood that senators and
representatives are in the market like other commodities. The purchase
is made either in large donations of $10,000, $20,000, $30,000, or more
from single corporations, or by shares, stock or bonds in companies
chartered by congress, and afterwards fostered and protected by
congressmen. So common has this practice become that it is not now
considered disreputable. What in former years would have been deemed
bribery and corruption are now nothing but fair business transactions.
We recall a case which illustrates the purity of former legislation
compared with what we see in our own day. Some thirty years ago, certain
parties desired a charter for a denominational college. A Rev. Mr.
Strong was appointed to visit the capital and interest the legislature
in behalf of the charter. He was introduced to a Mr. Cushing, to whom he
presented his case, and whom he sought to interest in favor of the
grant. The grant of the charter was likely to meet with opposition, and
to remove certain objections, Mr. Strong was anxious to have Mr. Cushing
examine into the matter fully, and as an inducement for making such an
examination he was told that the friends of the measure would compensate
him liberally for the time he might spend in such examination. This Mr.
Cushing interpreted as an offer to bribe a member of a legislative body,
and he felt bound to resist it. Accordingly he laid the matter before
the house. That body by unanimous vote, ordered the sergeant-at-arms to
arrest Mr. Strong, and bring him to the bar of the house. After an
investigation into the truth of the charge, Mr. S. was found guilty and
publicly reprimanded by the speaker. This happened before legislators
had learned to speculate upon their official position. It was in simple
times, when those elected to office supposed their first duty was to
serve their country, and when it was an irrecoverable disgrace to
receive a bribe. It was at a time when our law-makers had too much
self-respect to purchase their election with tens of thousands of
dollars, and then reimburse themselves by taking stock in, and dividends
from, giant corporations chartered and created by themselves. How is it
now? Let the facts answer. Class or personal legislation, for special
combinations, or in certain interests, is the rule, and legislation for
the benefit of the whole people is the exception to that rule.
Congressmen, to secure an election, expend large sums of money, and when
elected their first care is to _get even_. To accomplish their purpose,
they resort to unconstitutional legislation, such as granting exclusive
privileges or jobs to individuals, for which indirect pecuniary
consideration is received. But this alone would not suffice to reimburse
them for their great outlay. The greatest source of profit to
congressmen has been, and unless it is checked, will continue to be,
found in railroad legislation.
CHAPTER X.
AN UNSETTLED ACCOUNT--A GUILTY DIRECTORY.
We now invite the attention of the reader to the account as it now
stands with the subsidy bonds voted by congressmen to companies in which
many who voted were stockholders and directors.
As the law stood prior to April, 1871, all railroad companies that had
received government lands were required to pay the interest once in six
months as it accrued. This interest had not been paid, and the secretary
of the treasury withheld, to apply on the accrued interest, the amount
earned by the different companies by the transportation of the mails,
troops, &c., for government. Congress, composed in part of stockholders
and directors in these same companies, passed a law ordering the
secretary to pay in money to the different companies one-half of the
amount thus earned, and left it optional with the companies to pay, or
not to pay the interest on their bonds. This they have not done, and the
interest account of these companies with the government stands about as
follows:--
Central Pacific, paid $ 527,025 Bal. due $5,841,351
Kansas Pacific, " 973,905 " " 995,448
Union Pacific, " 2,181,989 " " 4,779,763
Central Branch, U. P., " 15,839 " " 477,969
Western Pacific, " 9,350 " " 358,329
Sioux City & Pacific, " 826 " " 388,780
Making the total amount of payments the sum of $3,708,935, and the
amount that these companies owe government, as the accrued interest on
subsidy bonds, $12,861,640. This is the amount due in July, 1872. Add
the interest accruing since that date and these companies owe the
government not less than $16,000,000 interest on their bonds. This
amount, as well as future interest, and the principal of the bonds was
at one time secured to the government; but when congressmen and their
friends get a controlling interest in the companies, they procured the
passage of an act, supported by their own votes, which destroyed the
security held by the government, and relieved the companies of the
payment of this large amount of interest, thereby compelling the people
to pay it, while the stockholders, including some of the same
congressmen who had voted in favor of the act, received dividends on
their stock and on their _Credit Mobilier_ stock to the amount of two
and three hundred per cent; thus, by the abuse of the power vested in
themselves as members of congress, compelling the people to pay the
interest the companies should have paid, and pocketing in the shape of
dividends the money so dishonestly obtained. If we needed any further
proof to establish the fact that these Pacific railroads were in fact
congressional jobs, that members of congress were looking to their own
interests rather than to the interests of the people, we need but glance
at the interest account of the Sioux City & Pacific company. The excuse
pleaded of the "necessities of government," will not avail in this
instance. While the interest account of this company is about $400,000,
the account for the transportation of troops, mails, &c., over its road,
amounts to the sum of $1,642, one-half of which has been applied on the
interest account of the company, and the other half, under the act of
congress, has been paid by the secretary of the treasury to the company.
The conclusion is irresistible, that the personal interest of
congressmen, rather than the wants of the public, has controlled their
action.
Connect with the incorporation of railroad companies, and special
legislation in their favor, the legislation in favor of "Indian rings,"
"whisky rings," "patent right combinations," and the numerous other
kinds of special legislation, with the advantages presented to
legislators to make personal gain from all these sources, and we can
well understand why men are willing to spend such large sums to secure
an election to the United States senate, or house of representatives.
The baneful effects of the modern code of political morality are not
seen in the legislative department of the government only. The same
disregard of the rights of the people, and a determination to protect
and aid combinations in their efforts toward self-aggrandizement, made
at a sacrifice of those principles which are supposed to govern all
persons holding places of trust, honor, or confidence, seem to influence
to a great degree those holding high position in other departments of
the government. The acts of congress chartering the Pacific railroad
companies make it the duty of the president of the United States to
appoint five government directors for these roads. Under the statutes
these directors cannot own stock in the companies, nor have in them any
personal interest whatever. They are supposed to be free from any bias
for or against the companies: but they are appointed to represent the
government, and to guard against and report to the secretary of the
interior all abuses on the part of the companies, and at such times as
they are required to so report, to also make such suggestions as in
their opinion shall best subserve the interests of the public. It is
made their duty to personally inspect the roads, during their building
and after their completion. At least two of these government directors
must have a place on all important committees appointed by the companies
for the management and prosecution of their business. Any dishonesty on
the part of the companies in letting contracts for the construction of
their roads, or any misapplication of the grants made by congress, must
have been known to these five government directors, or some of them, if
they had properly discharged the duties imposed upon them by law. The
formation of an inside ring, under the title of "The Credit Mobilier of
America," composed entirely of the directors and stockholders of the
Union Pacific company, the letting of the contract for the construction
of the road to one of the directors of the railroad company, who was
also a director in the Credit Mobilier (and a member of congress), at
more than double its actual cost, the transfer of this contract to
certain trustees who were directors in both companies, in the manner
stated in a preceding chapter of this work, and the declaration of large
dividends on the stock of the companies at a time when the work on the
road was barely begun, and before any dividends could possibly have been
earned,--all these facts must have been known to the government
directors, and concealed by them from the government. When it is
remembered that some of these government directors were members of
congress at the date of the passage of the acts chartering the roads,
there is but little question that the same influences controlling them
in voting these large subsidies to the companies also controlled them as
government directors in their supervision of the roads. This conclusion
is strengthened on seeing that some of them became owners of stock in
the Credit Mobilier.
The same corrupting influences have been felt in other departments of
the government. The abuses practiced in the collection of customs by the
officers at the different ports of entry, as shown at the recent
investigations made by authority of congress, are but the natural
sequence of the questionable course of the legislative department. The
great frauds practiced by parties having contracts for furnishing
supplies to the Indian tribes are traceable to the same source. This
assumption by congress of the power to grant charters to private
monopolies, its unconstitutional interference in matters reserved to
state control, its determination to foster these gigantic corporations
by princely grants, with the corruption incident to these selfish and
greedy combinations, are the direct cause of the dishonesty prevailing
everywhere among our public officers, and besides other rank growth have
led to the imposition of burdens upon the people, oppressive to the last
degree. The controlling purpose of a large portion of those elected or
appointed to government offices seems to be to accumulate wealth without
regard to the propriety or honesty of the means employed. In their
eagerness to benefit themselves, all consideration for the public good,
or respect for their obligations as sworn servants of the people, are of
secondary importance. They accept office from purely selfish motives,
and enter upon their duties with the same object in view animating those
who embark in trade, manufactures, or commerce, viz: private gain.
Seemingly viewing the offices they hold as being their own private
property, they use them as the banker uses his money--for purposes of
speculation. Not unfrequently they permit themselves to be bought and
sold, like any other articles of merchandise. While we do not claim that
all public officers were pure prior to the legislative creation of the
monopolies we have been examining, we do claim that previous to that sad
departure, honesty was the rule, and not the exception. It was when
congress entered upon the business of chartering railroad companies,
donating public lands to them, and voting them money from the public
treasury, that the rule changed; and when, in addition, congressmen
became principal owners and directors in these companies, while still
retaining their seats in congress, they placed themselves upon the
record as unfaithful to their trust, and struck a blow at public
morality which will be fatal to our popular government, unless resisted
by the whole moral power of the nation.
And here we might well pause, and ask, what security have the people for
the continuance of republican government? These gigantic corporations
are in their nature anti-republican; they tend to a centralization of
power; they compel the people to submit to their demands; they are under
the protection of congress, under whose special legislation they are
permitted to disregard state laws; their ramifications extend throughout
the country; their artifices and money control the votes of the people;
they elect their friends to both the senate and house; they organize and
send strong bodies of men to the lobby of congress and state
legislatures, well supplied with money to obtain the passage of laws in
their interest, and to prevent such legislation as would be detrimental
to them, and in favor of the people; they have their friends and
emissaries in every department of the government, and throughout the
country, and they exercise a controlling influence not only at
Washington, but at almost all the seats of state government. The offices
filled by appointment of the executive and confirmation of the senate,
are too often the agencies of this same influence. We would not be
understood as saying that the president acts corruptly in these
appointments; we mean that the influences that secure many of the
presidential nominations are the same as used by these corporations in
the election of _their_ senators and representatives. The appointment of
judges of the supreme court of the United States has, in at least two
instances, within the last few years, been made through the influence
and in the interest of these monopolies. These corporations are also
represented in the cabinet. It is well understood that the removal of
Attorney General Ackerman, and the appointment of his successor, was
done by these corporate influences. The fact that the secretary of the
interior, to whom reports should have been regularly made of the
progress and condition of the Pacific railroad, was silent, while
private fortunes were being fraudulently taken from the public treasury,
proves that he also was under the same influence. It can be accepted as
an established fact, that all the departments of the government are to a
great extent controlled by corporations and combinations of speculators
whose interests are adverse to those of the people, and the result is,
that statutes are enacted, executive offices appointed, and decisions of
court rendered in the favor of these powerful classes, while the rights
guaranteed to the people by the constitution are disregarded.
The influence of corporations is also powerful in the administration of
state governments. While no such gigantic monopolies as the Pacific
railroad have been organized in any state yet, either by special
charters granted by state legislatures, or under general incorporation
laws, railroad corporations in large numbers have been organized, and by
combining their influence, have obtained control of most of the state
governments; they have been granted special and exclusive privileges,
and by the use of money and patronage have been able to control state
conventions, state legislatures, and state courts. As a logical result,
the people are taxed, while railroad companies are practically free from
taxation; subsidies to corporations are authorized and declared to be
constitutional, and the people are obliged to submit to rates of charges
for transportation of freight that amount to a confiscation of the farm
products of the country. We need not enter into a history of state
grants to railroad companies, for it is familiar to all; the same
corrupt practices incident to national, attend state, legislation. In
many instances, corporations have organized under state statutes, or
obtained special charters from state legislatures, located their roads,
procured local aid, and then obtained from congress land grants for
their roads, and have thus become powerful in the states where they are
located, while other companies have built their roads exclusively with
the means afforded by local aid voted under state laws, and loans of
money or sale of bonds; but in every instance so planning and contriving
that the entire road shall pass into the exclusive control of a select
few, leaving to those who furnished the local aid no rights or
privileges in connection with the company, or the road, save that of
paying extortionate freights and burdensome taxes.
CHAPTER XI.
THE SOLE PURPOSES OF TAXATION.
Taxes can only be levied, and collected, for public purposes; but all
the property of the country can be taxed to its entire value, when the
public good requires it. The exigency demanding high rates of taxation
is left to the determination of the legislatures of the states, and of
the general government. No taxes can be legally levied or collected save
for the support of the government, state and national, and subject to
the restrictions incorporated in the constitution. All other taxes
imposed upon the people are unconstitutional, illegal, and oppressive,
and should be declared absolutely void. Direct taxation, for the support
of the general government, has never been practiced in time of peace.
The usual method for raising a sufficient revenue for its support has
been by duties, or tariff imposed by acts of congress upon imports. This
has always been deemed the best method for raising the revenue necessary
for the support of the government. The powers and duties of the general
government are limited and restricted by the constitution of the United
States; and as its legislative, executive, and judicial powers are thus
limited, it follows that its power to impose taxes upon the people is
limited in the same manner, and that it can tax for no purpose save for
defraying the expenses of its different departments in the exercise of
the powers delegated by the federal constitution. This conceded, all
that can be claimed by those who administer the affairs of the nation,
unless they transcend the constitutional limit, is conceded. The power
to appropriate the lands or money of the public to private parties or
corporations not being found in the constitution, nor implied in any of
the granted powers, all such appropriations are usurpations; they are
donations of the people's money and property to private corporations
and individuals in violation of the constitutional restrictions; and no
authority is vested in congress to tax the people, either directly or
indirectly, for the purpose of making return of the money and property
thus wrongfully taken from them. A private corporation is not a public
necessity; its franchises are private property, and even if the United
States owned the whole of its stock, and took the entire control of its
business, it could not become a public corporation, for the reason that
congress does not possess the power, under the constitution, to create
private corporations. The fact that the United States owned the stock
and controlled the corporation would not impart to it any of the
attributes of sovereignty, but in so far as the general government was
interested in the corporation, it would be treated as any other private
party, and would be amenable to the same law and subject to the same
jurisdiction as private parties or individuals. If the action of the
general government can confer none of the attributes of sovereignty upon
a private corporation--if it has no constitutional authority to donate
lands or money to railroad companies--how can it lawfully collect taxes
from the people, either by direct levies, or in duties upon articles of
commerce, for the purpose of re-imbursing the government for the lands
donated to corporations, or to pay either the principal or interest on
the bonds given to these corporations? As well might congress levy a
direct tax upon the property of the people for the purpose of donating
to a private party sufficient means to build a residence; there is not
found in the constitution any warrant for either of such levies. Both
alike are unwarranted usurpations of power, not to be justified under
any grant of power from the people to the federal government. To admit
that the congress of the United States possesses the power to tax the
people for any purpose save for the support of the general government,
is to admit that the constitution is elastic, subject to any
congressional construction, and liable to be used as an instrument for
promoting personal and private ends. Congress had no power to vote
subsidy bonds to railroad corporations, as we have already shown; nor
could it release these corporations from the payment of these bonds, and
the interest as it accrues, and collect the amount from the people in
duties on imports, or in any other kind of taxes. No such power was
ever delegated to the general government by the people. This power
cannot be found in any part of the constitution. While this is true, the
people are now taxed annually to the amount of many millions of dollars
to pay the interest on the bonds issued to the Pacific railroads. Taxes
are also collected to the amount of $18,000,000 or $20,000,000 to pay
the interest on the banking capital of the country, the stock of a
gigantic corporation, chartered by congress, but in the hands and under
the control of private parties and companies. While the general
government, under the constitution, has the control of the money of the
country, and its coinage, value, etc., and can provide such means as
shall be deemed best for the administration of the national or public
finances, it has no power to enter into private banking; and because it
has not this power, it cannot create private banking institutions and
tax the people for their support. Any tax levied upon the citizen by the
general government for any purpose whatsoever, save for the necessary
expenses in the administration of the same, in all of its departments,
in accordance with the letter and spirit of the constitution, is without
authority, and violates the fundamental law. The levy of taxes in aid of
private corporations subserves none of the purposes of the government,
and is the exercise of a power not possessed by congress. Our position
is fully sustained by legal adjudications, and by the writings of
eminent jurists. Chief Justice Marshall, in his writings upon the
constitution, has considered this point. He says, on page 345 of his
work: "It is, we think, a sound principle, that when a government
becomes a partner in a trading company, it divests itself, so far as
concerns the transactions of the company, of its sovereign character,
and takes that of a private citizen. Instead of communicating to the
company its privileges and its prerogatives, it descends to a level
with those with whom it associates itself, and takes the character
which belongs to its associates, and to the business which it
transacts. * * * As a member of a corporation, a government never
exercises its sovereignty. It acts merely as a corporator, and exercises
no other powers in the management of the affairs of the corporation than
are expressly given by the incorporation act. The government of the
Union held shares in the old Bank of the United States; but the
privileges of the government were not imparted by that circumstance to
the bank."
If there exists any authority in the general government to create a
corporation for any purpose, it is in relation to the finances of the
country. The necessity of a fiscal agent of some kind would seem to
warrant the creation of a banking corporation. But, if the power is
conceded, it does not follow that the people should be taxed to provide
a bounty, payable semi-annually, to the private companies who are
engaged in banking, and who alone receive the profits arising from the
business. Yet the act of congress creating the banks provides for the
payment of semi-annual interest on the capital invested; and this
interest is collected from the people. All railroad corporations,
created by act of congress, are absolutely private corporations. The
insertion in the charter of the words--"to secure the more safe and
speedy transportation of the mails, troops, munitions of war, and
government supplies"--found in all of these charters, does not change
the character of the corporations. The grants are made to private
parties; the roads are under their control; they receive aid from the
general government, but in their own names own and control the roads,
and can, at any time, dispose of the roads and franchises, and the
general government has no power to prevent any action the companies may
choose to adopt so long as they regard the provisions of their charters.
No statesman or jurist of our country has at any time, until within the
last few years, claimed that congress could create corporations for
private purposes; on the contrary, in all of the earlier decisions of
the federal courts, it was uniformly conceded that congress did not
possess the power to create such corporations. Chancellor Kent, Chief
Justice Marshall, and other eminent writers, are all agreed that, under
the constitution, congress cannot create a private corporation. If
congress had no constitutional right to create railroad corporations,
how can it possess the power to tax the people to pay their debts? The
people are now paying at least $8,000,000 per annum in shape of taxes
for the purpose of liquidating the interest due from railroads chartered
by congress in violation of the fundamental law of the land. This large
amount of taxes is collected and applied by the general government in
payment of interest due from railroad companies, because the influence
of congressmen and their friends, in these companies, was sufficiently
powerful to override constitutional barriers, and to procure the passage
of an act enabling the parties holding the stock to pocket the earnings
of their roads and make good the deficit in their interest account by
taxing the people.
The whole history of congressional legislation does not present a case
of such entire disregard of the provisions of the constitution, and such
dishonest and corrupt legislation as is contained in the acts of
congress relating to the Pacific railroads. It is questionable whether
another instance can be found in this or any other country, having a
constitutional government, where legislators, by direct vote, have taken
millions of money from the public treasury and given it to private
corporations of which they were members and directors, and to make good
the amount thus taken from the treasury have provided _by law_ for its
collection from the people in the shape of taxes and duties! When we
remember that congress does not possess the power to charter private
corporations; that in so doing it violates the letter and spirit of the
constitution; upon what principle can it claim the right to tax the
people for the benefit of these private corporations? We repeat, no
country in the world, governed by a written constitution, offers a
parallel case. Not even in France, under the personal government of the
late emperor, would such an unwarranted act have been attempted.
We are aware that it is claimed that railroad corporations are public
corporations--and this granted, taxes may be rightfully levied and
collected for their benefit. But we do _not_ grant this, and shall, in
the following pages, essay to demonstrate that all railroad corporations
are private, being owned and controlled by private citizens, and not by
the state or national government. But admitting they are public and not
private corporations, the general government even then cannot legally
charter or control them, because the power for that purpose has never
been delegated by the states or the people; and it follows that the
general government cannot rightfully impose taxes upon the people for
the support of corporations over which it can have no control. If
congress can levy taxes for the construction and support of railroads,
and take the management and control of them, it certainly can take the
entire supervision of all the highways in all the states, provide for
their construction, and tax the people at will for that purpose. This
being admitted, no local or police regulation in any of the states is
exclusively under the jurisdiction of the state governments; but the
general government may at any time take the absolute control of the
governmental affairs of the several states, and thus complete the
centralization of power now so rapidly developing in all the departments
at Washington. The assumption of the right to tax the people for any and
every purpose that to congress shall seem expedient, irrespective of
constitutional prohibition, is at once destructive of the rights that
were supposed to be guaranteed and preserved to the whole people by the
constitution. If the will of those men who happen to occupy seats in
congress (and that will too often controlled by personal interest) is to
govern, then all constitutional government is at an end, and the liberty
and property of the citizen have no constitutional safeguard. Taxes to
the entire value of all the wealth in the country may be levied by the
general government, and the citizen of this republic holds his entire
estate at the will of the persons who fill the offices of the country.
Under the system of congressional legislation that now obtains, the
laboring and producing classes are being rapidly reduced to a state of
servitude that would grace the most despotic government.
CHAPTER XII.
THE RIGHT OF EMINENT DOMAIN.--UNCONSTITUTIONALITY OF MUNICIPAL AID
TO RAILROADS.
The question of taxation for the benefit of private corporations has
agitated the public mind since the construction of railroads became one
of the admitted necessities of the country. For the purpose of
justifying and legalizing governmental aid to railroad corporations, in
the various forms in which such aid has been afforded, the doctrine has
obtained among the advocates of the measure that railroads are public
highways, as well as a public necessity; and such being the fact, that
aid in the shape of grants, taxes, and subsidies, are legal, legitimate,
and proper. They draw an argument in favor of this doctrine, from the
fact that legislatures, state and national, have provided by law for the
condemnation of private property, for the use of the companies,
respectively, upon paying the assessed value thereof; and that thus the
right of eminent domain is vested in these corporations; that the right
of _eminent domain_ is an attribute of sovereignty, and that the
granting of this attribute to corporations imparts to them the character
of public highways. They reason that because they are public highways,
and the companies owning them are common carriers, taxes may be legally
levied and collected for the exclusive use of these companies. They
claim that because the United States, states, counties, cities, towns,
and townships, have authority to construct, or to aid in constructing,
common highways, they have the same right to construct, or aid in
constructing, railroads.
If it were not that precedent has tended to sustain this "false
doctrine," we would not think it profitable to combat it. The only point
in the argument in favor of this doctrine that has any real foundation,
is, that railroad companies are allowed to locate their roads where they
please, upon payment of the damages assessed in the manner prescribed by
statute. The answer to this is, that railroads could not be built,
unless the companies had permission to pass over the lands of private
citizens. If the title from each land owner could be procured only by
negotiation and purchase, no railroad could be constructed, for the
reason that a direct or continuous line for a road could rarely be
secured. Railroads are constructed to aid in the transportation of
freight and passengers from one part of the country to another; to
promote commerce throughout the whole country; to supply the wants of a
people, just as a mill or factory supplies the wants of a particular
locality. The miller constructs his dam across a stream, and, under the
statutes of most of the states, he can procure the condemnation of the
land of his neighbor overflowed by his dam, to his own use, upon payment
of the damages assessed. It is not a condemnation for the use of the
public, but for the use and benefit of the owner of the mill. The mill
itself, while it is owned by a private individual, and can be sold and
transferred by him at any time, is also a public benefit. Can it be said
that the right of eminent domain attaches to the mill or its owner? So
with railroads: They are owned by private companies--are built and
controlled by them; they are of public benefit, but not owned or
controlled by the public or by the state, or local authority, as in the
case of public highways. Their private owners can sell them, with all
their franchises, rights, and privileges. The rules for their operation,
rates of charges, and all other matters affecting their government, are
exclusively under the control of the parties owning them. Only that the
companies may become the owners of the necessary grounds over which to
build their roads, have legislatures provided that they may enter upon
lands owned by private persons, and upon the payment of the appraised
value thereof, appropriate a narrow strip (the width being fixed by
statute) for the purpose of locating their road upon it. It is not
condemned for public use, as in the case of a public highway, or where
land is needed for public buildings, or any other public purpose. The
assessed value is not paid by the government, or from the public fund,
nor by individuals for the public; but by the private corporation out of
its own purse, and for its own gain.
This is what is called, by the advocates of the measure, "the right of
eminent domain," a right that only belongs to the supreme government.
This power cannot be exercised by local or subordinate governments,
unless it is delegated to them by the supreme or superior government.
While the courts in some of the states, Iowa included, have, by
decisions, made this right of eminent domain attach to railroad
companies, it cannot be supported on principle. To allow it to obtain is
to clothe private corporations with the attributes of sovereignty. But
conceding that this right attaches to these corporations, upon no
principle of constitutional law or justice can the right to levy taxes
upon private citizens to aid in the construction of railroads, either by
acts of congress, by state statutes, or by local municipal government,
be supported. And it matters not in what form these taxes are imposed
upon the people, whether in the shape of municipal subscriptions of
stock, to be paid by assessments upon the people; by donations of land
or money, to be repaid by imposing a larger price upon lands sold to the
citizen; by indirect taxation, or by special local elections held in
cities, towns, or counties,--the compulsory taxation of the property of
individuals, under our system of government, can only be imposed for
governmental or public purposes. Taxes are levied for the support of the
government in all its departments; for the construction and repairing of
highways; for the building of school houses and all other edifices of a
public character; for the support of schools; for the necessities of
local municipal governments, and for other objects having the public
weal for their sole consideration. These taxes are legitimate and
proper, because the ends sought to be reached by such taxation are for
the use and benefit of the whole people, and for the protection of their
rights. For all of these purposes the legislature can provide an uniform
system of taxation. But when the government attempts to compel A to pay
a tax to assist B and C in building a railroad, it enters upon the
exercise of a despotic and oppressive power, that is in conflict with
the letter and spirit of our constitutions, both state and national.
The legislature, by the passage of such a statute, says, in substance,
to the taxpayer: "A company is formed for the purpose of building a
railroad which passes through the county in which you reside. This
company has not sufficient means for constructing and stocking its road.
That the necessary means may be furnished to it for that purpose, you
must pay a tax upon your property, amounting to one-tenth or
one-twentieth of its value; this amount you must donate to the company.
True, you will have no interest in this road when it is completed; you
will not be a stockholder; you cannot ride in its cars, or ship your
freights over the road, without paying the same price as other persons.
It may cause you to sacrifice a part of your property to pay this tax,
but the road will be of great advantage to the public, and you must make
this donation to help the enterprise." The consequences flowing from
this unjust and oppressive system of taxation are appalling. It has no
foundation in right or justice. The legislature has no inherent right to
impose taxes for any purpose. The authority to levy taxes is dependent
upon the power delegated by the people as contained in the fundamental
law. In a republic even a majority of the people do not possess the
inherent right to tax the minority for private purposes. Such taxation
can be imposed by no other government than a despotic one, where the
will of the despot is the supreme law, and where might rather than right
is the controlling power. So conscious are the advocates of this species
of taxation of the fact that taxes can be levied for public purposes
alone, that they deem it all-important to connect and blend in one--the
right of eminent domain and taxation.
But this position is not tenable. Bouvier defines the term, "Eminent
Domain," as follows: "The right which the people or government retains
over the estate of individuals, to resume the same for public use."
Taxes are defined to be burdens or charges imposed by the legislative
power of a state, upon persons or property, to raise money for public
purposes. It will be seen that there is a wide distinction between the
taxing power and the right of eminent domain: that while they both
appropriate private property for public uses, they differ in degree.
While the right of eminent domain takes from the private citizen the
absolute title to property upon just and fair compensation, taxation
exacts from each property owner a contribution for the support of the
government, or for the benefit of the public, without any other
compensation than the protection the government affords him in life,
liberty, and property. Contribution for this purpose is a duty imposed
upon all who are under the protection of government. A complete power to
procure a regular and adequate supply of revenue forms an indispensable
article in our constitution; and provisions for levying and collecting
this revenue is a charge laid upon the legislative department. The levy
and collection of all taxes deemed necessary for the administration of
the government and for the public good, is an incident of sovereignty;
but this does not extend to the levy and collection of taxes to aid
private interests or enterprises. The taxing power is limited; the needs
of the public fix this limit. When this is passed, the citizen is
subject to continual plunder. The value of his property is destroyed; he
is but a trustee holding his property subject to the will of an
arbitrary power, that can at any moment call for a part or all of it. He
had entered into a governmental contract for the purpose of appealing to
the strong arm of constitutional law when his rights are assailed, but
finds, instead of the protection he had reason to expect, an
irresponsible, arbitrary, power, compelling him to divide his property
with railroad corporations, or other private parties, without any
consideration; not only without consideration, but the taxes illegally
and forcibly taken from him are used to build up and protect a monopoly
that is blasting the fruit of his labor, while it is as surely
destroying constitutional and republican government. His property is
taken from him by what can only be termed a superior, despotic, power,
and appropriated without his consent for the benefit of a private
corporation.
It is not difficult to distinguish what are proper objects of public
support and for which taxes can be levied and collected from those that
are not, if we keep in sight the fundamental or organic law. In the
formation of a republic no new rights are created. The adoption of a
constitution is but declaratory of pre-existing rights and laws; its
object is to define and limit the powers of the government, and to guard
and protect the rights of the citizens. An eminent jurist, in speaking
of the constitution, uses the following clear and forcible language: "It
is not the beginning of a community, nor the origin of private rights;
it is not the fountain of law, nor the incipient state of government; it
is not the cause, but the consequence, of personal and political
freedom; it grants no rights to the people, but is the creation of their
power, the instrument of their convenience, designed for their
protection in the enjoyment of the rights and powers which they
possessed before the constitution was made; it is but the frame-work of
the political government, and necessarily based upon the pre-existing
condition of laws, rights, habits, and modes of thought. There is
nothing primitive in it; it is all derived from a known source. It
pre-supposes an organized society, law, order, property, personal
freedom, a love of political liberty, and enough of cultivated
intelligence to know how to guard it against the encroachments of
tyranny. A written constitution is, in every instance, a _limitation_
upon the powers of the government in the hands of agents, for there
never was a written republican constitution which delegated to
functionaries all the _latent powers_ which lie _dormant_ in every
nation, and are boundless in extent, and incapable of definitions."
Keeping in mind the distinction existing between measures of a
governmental or public nature, and those that are private, and applying
the above quoted definition of constitutional power, we cannot find it
difficult to determine what are, and what are not, constitutional levies
and collection of taxes.
Another thought having weight in connection with the constitutional
right to tax the people in aid of railroads, is, that minorities have
the right to live, and to own and enjoy property; and the majority has
no right to compel the minority to contribute aid to railroad
corporations. It has always been conceded that in a republican
government the majority should rule, and that their will expressed in a
constitutional and legal manner should be the law of the land; yet no
one claiming to respect constitutional law will contend that this will
of the majority can act outside, or independent of, constitutional
restrictions. If this doctrine should obtain, constitutional government
is at an end; private rights are destroyed, and the unrestricted will of
a bare majority becomes supreme; all the guarantees of the constitution
are annulled; life, liberty, and property, are all dependent upon the
popular will; constitutional safeguards are destroyed, and the stability
of the government is lost. The first step in this direction is fraught
with the greatest danger. When the restrictions embodied in the
constitution are overridden and disregarded in one instance it affords a
precedent for a second step in the same direction. Acquiescence in
encroachments upon constitutional restriction by the people, undermine
and absolutely destroy republican institutions and the government
itself. If, for the accomplishment of some private purpose, a community,
a state, or the general government disregard the provisions of the
constitution, and assume powers not granted them by that instrument,
they arbitrarily act the part of the absolute tyrant. And it makes no
difference whether the course pursued, or the measure adopted, proves
beneficial to the public, or oppressive. In the fact that it is the
usurpation of an unauthorized power, lies the danger. The disregard of
the limits fixed by the constitution, in the administration of the
government, destroys the only guarantee the people have for the
protection of their private rights. Among all the unconstitutional
measures which now obtain throughout the country, the affording of aid
to railroads, by the government, state and national, has proved the most
burdensome to the people. Of this class of subsidies, that afforded by
local, municipal subscription, with or without a vote of the people, has
caused the greatest injury. A local or municipal government can lawfully
impose taxes for the support of its administration, and for contribution
to the general comfort and happiness of the people. It can tax for the
purpose of laying out and constructing streets and public highways,
because these objects are intended to be, and in fact are, open to the
use of the whole people; all can use them on equal terms; they are made
for the benefit of the public; each citizen has undertaken to contribute
his just proportion of the expense of providing for the common, public
benefit. But when a county, a city, town, or township, organized for
the convenience of the people, and to more effectually protect their
rights, attempts to become a stockholder in a railroad corporation, it
attempts the exercise of a power it does not and cannot possess under
the constitution. Municipal corporations were not created for the
purposes of private speculation or private gain, but for purely and
strictly government purposes. No power is granted (nor can it be
implied) to county judges, commissioners, or supervisors, nor to
township trustees, or city boards, to take stock in railroad
corporations, or to issue bonds of the municipality in payment for such
stock, for the reason that such power is not necessary for the
administration of these several governments, and does not come within
the limit of the powers granted by the people. We know there are many
decisions of courts sustaining the position that municipal corporations
can become stockholders in railroads, and may issue bonds in payment
therefor, and that it is within the scope of the powers vested in such
corporations to levy taxes for the payment of the bonds so issued; but
we have yet to see a decision that is sustained by any provision of the
constitution. Many of these decisions admit that the right to subscribe
stock is not contained in the constitution, and cannot be justified on
constitutional grounds. Of these decisions we shall speak hereafter, and
we leave them for the present. We insist that there is no authority in
the constitutions, state or national, under which any department of any
of the governments can become stockholders in a railroad corporation;
nor is the right to take such stock in accordance with the genius or
spirit of republican government. The distinction that exists between
cities and towns acting under charters, and counties, townships, school
and road districts, is marked, and should be kept in mind in considering
the nature of the powers possessed by each. County, township, school,
and road district organizations are necessary in the administration of
the laws of the state. They are at most but _quasi_ corporations; all
their powers are derived from, and executed under, the general statutes
of the state. They have no special grants or privileges, but are the
chosen means for executing state laws. In the distribution of the powers
and duties vested in and imposed upon the state governments, the duties
of administering the local affairs of the counties, townships, and
districts, are delegated to, and imposed upon, these _quasi_
corporations respectively. They can only exercise such powers as are
necessary for the accomplishment of the objects of their creation. Their
acts are the acts of the state government as applied to their respective
localities. They are not clothed with any extraordinary power; nor can
the state government delegate to them a power it does not itself
possess. When the constitution of a state (as in the case of Iowa and
other states) prohibits the state from subscribing stock, loaning its
credit, or issuing its bonds to private corporations, we would at once
conclude that it could not delegate authority to one of its subordinate
departments to do an act forbidden to itself by the constitution. But
this is what it has done, if these _quasi_ corporations possess the
power to afford aid to railroad or other private enterprises. Municipal
corporations, such as cities, towns, &c., act under special charters,
and in some respects are sovereign. But they are governed and controlled
as absolutely by the provisions of their charters, as is the state by
its constitution. They can only act within the scope of their delegated
powers, and in all doubtful questions the presumption is against their
right and in favor of the public, for the reason that only special
privileges are conferred upon them. Nor can the legislature confer upon
them privileges or powers not possessed by itself under the
constitution. It is then absolutely certain that neither counties,
cities, nor towns can aid private corporations, or become stockholders
in such corporations, unless the power has been delegated to them by the
state legislature. It is equally certain that unless the state, in its
sovereign capacity, possesses this power, it cannot delegate it to
either counties or cities, and that when the constitution of a state
forbids the exercise of a power, it includes the legislature, all the
departments of the state government, all counties, cities, and towns,
and all the people. All these corporations are agencies in the
administration of the affairs of the public. Being political in their
nature, they are entirely distinct from private corporations organized
for the purpose of pecuniary profit. They are established for public
purposes exclusively. Judge Dillon, in his valuable work on municipal
corporations, says that "They can exercise the following powers, and no
others: First, those granted in express words. Second, those necessarily
or fairly implied, or incident to the powers expressly granted. Third,
those essential to the declared objects and purposes of the
corporation--not simply convenient, but indispensable." The same author,
in treating upon aid to railroads, while admitting that the current of
judicial decision is in favor of the principle that in the absence of
special constitutional restrictive provisions, it is competent for the
legislature to grant this power to municipal corporations, says that
"Notwithstanding the opinions of so many learned and eminent judges,
there remains serious thought as to the soundness of the principle,
viewed simply as one of constitutional law. Regarded in the light of its
effects, however, there is little hesitation in affirming that this
invention to aid private enterprises has proved itself baneful in the
last degree," and he adds: "Taxes, it is everywhere agreed, can only be
imposed for public objects, and taxation to aid in building the roads of
private railway companies is hardly consistent with a proper respect for
the inviolability of private property and individual rights. Fraud
usually accompanies its exercise, and extravagant indebtedness is the
result, and sooner or later the power will be denied either by
constitutional provision (as in Pennsylvania, Ohio, and Illinois, it
already is) or by legislative enactment."
As we are now dealing with constitutional rights, and not with judicial
decisions, we think we have fully shown that public or municipal
corporations have no authority under the constitution to aid railroads
by subscription of stock, or the issue of bonds, and that no authority
exists for taxing the people to pay for such stock or bonds; and if it
be true that counties and cities are not, and cannot be, clothed with
the power to aid in the prosecution of private enterprises, it is
equally true that the legislature cannot delegate to the majority of the
voters of a county, city, township, or district, the authority to tax
the minority for the same purpose. Legislatures cannot create new
powers; they can only exercise such as they possess under the
constitution. The powers not delegated by the people in the fundamental
law, are retained by them. If the people are sovereign, they are the
source of power, and all that is not vested in some department of the
government remains vested exclusively in the sovereign. If the
legislative, executive, or judicial department of the government can act
independently of the restrictions and prohibitions contained in the
constitution, then the will of the servants of the people is the supreme
law, and the sovereign power supposed to reside in the people is
destroyed, and constitutional government is at an end. Oppressive
taxation imposed without authority, for private and selfish ends, if
persisted in, will eventually subvert our republican institutions. This,
and other unconstitutional legislation, to some of which we have already
referred, has caused such a departure from the old landmarks that it is
questionable if we now have, in fact, a republican government. Under the
rules adopted in legislation, and the pliant decisions of courts,
constitutions are made to yield to the demands of combinations,
stock-jobbers, and private corporations, until we cease, as a people, to
revere and respect these safeguards of our liberty.
CHAPTER XIII.
THE FATAL POLICY OF MORTGAGING CITIES AND COUNTIES FOR THE CONSTRUCTION
OF RAILROADS.
The justification for the munificent grants and lavish taxation of the
people in aid of railroads has been, that these roads afford the
necessary facilities for transportation of freight, promote speedy
communication throughout the country, provide ready markets for the
products of husbandry, increase the value of property in their vicinity,
and assist in improving and developing the new portions of our country.
While some, or all, of these objects may have been in a degree promoted,
the little good thus accomplished has been more than counterbalanced by
the evils uniformly attending this species of aid to railroads. What are
the evils incident to the general incorporation acts, and local taxation
in favor of railroads?
_First._ They take from the individual the natural and constitutional
right of owning and controlling his own property, and license the agents
of a county, city, or town, to incumber his property with a debt,
without his consent and against his protest.
_Second._ The policy engenders a rivalry between different localities,
causing reckless extravagance and the creation of an immense
indebtedness by public corporations. This indebtedness not unfrequently
retards the settlement of the locality expected to be benefited, and
depreciates instead of enhancing the value of property, for the constant
and compulsory drain of the resources of the place in payment of the
debt thus created can leave nothing but barrenness behind, the rule
being, with but few exceptions, that non-residents hold the evidences of
the indebtedness, and as a consequence, payment must be made to distant
creditors. If one thinks that this is overdrawing the picture, let him
examine the condition of those counties and cities that years ago loaned
their credit to railroad companies, or subscribed to their capital
stock. Localities less favorably situated, with fewer natural
advantages, fewer miles of railroad, and with less productive countries
tributary to their growth, have far outstripped their bonded neighbors
in wealth, improvements, and the increased value of their property.
Persons who are seeking locations dread and shun these bond-_cursed_
localities, and seek homes elsewhere. New counties far outstrip these
old ones in improvement and wealth; new towns and cities spring up and
destroy the business of these old bond-ridden ones, and the latter,
instead of receiving the anticipated and promised increase of wealth,
show a paralyzed industry and depreciated property. Localities that
fifteen or twenty years ago gave promise of a prosperous future, are
less wealthy, less prosperous, and in some instances less populous than
when they subscribed stock, and issued bonds to railroads. For years to
come, the wealth and industry of these places must suffer from the
incubus of enormous taxes levied for the payment of bonds issued under
the mistaken idea that great benefit was to result from the
indebtedness.
_Third._ It places the pecuniary interests of all of the people of the
counties and cities creating this kind of indebtedness in the hands of
unscrupulous and relentless non-resident creditors, mainly Wall Street
stock-jobbers, who obtained it at large discounts, often at one-fourth
its par value, and who own not only the county and city bonds, but
control the railroads in aid of which they were issued, and so by
constantly collecting from the people the oppressive taxes required to
pay the interest and principal of these bonds, withdrawing the amounts
so collected from circulation and sending it to the east without
leaving, or ever having paid any equivalent, they are constantly
impoverishing the people with the very means which were to have been
sources of prosperity.
_Fourth._ The aid granted to railroad companies has enabled them to get
control of the commerce of the country. As a general rule, all of the
railroads receiving subsidies in land, government, state, county, and
city bonds, and large gifts in local taxes, have been owned or
controlled by the same class of men, and not a few of the roads by the
same ring or combination. Then speculators have visited all parts of the
country, claiming to be men of "large hearts" who desire to benefit
mankind. They talk of their large experience in railroad matters; of the
great benefit the particular locality will derive from the construction
of a certain line of road; of the great profit to be returned in the
shape of dividends if local aid is voted, and after having by fraud,
falsehood, and willful deception induced the people to move in the
matter, they then turn their attention to state legislatures and to
congress for more aid, and so perfect is their combination, that in
almost all their attempts they are successful. Among these rings and
combinations are found men to fill every department in the scheme for
plundering the people. Some of them become directors in the corporations
to which the aid is voted and granted, and they thus get control of the
donations, grants, and bonds. Some members of the ring become agents to
sell the bonds of the corporation, as well as any others received from
the general or local government, and to mortgage the lands granted to
the companies. Still another division of the ring become the purchasers
of the bonds at their _market_ value. They all unite in this way and
mortgage their roads, rights, and franchises, and construct the road,
taking care that when the road is completed, the liabilities resting
upon it shall be sufficient to represent its entire value. By this means
they become the creditors of the counties and towns through which the
road runs; they own and control the road; and the combination being the
same substantially throughout the country, owning and controlling all
the roads, holding and using the subsidy bonds, fixing the rates of
freight and passenger transportation, they control the whole country and
hold the best interests of the people subject to their will. In the
prosecution of their ends they bribe local officers, state legislatures,
and members of congress. To secure the election of their friends to
congress, large gifts are made. In one instance one of these raiders
upon the rights of the people bestowed upon a prospective United States
senator, $10,000, for the purpose, as he stated, of securing friendly
legislation for a certain railroad company. The pirates and robbers who
prey upon mankind are not more dishonest or unscrupulous than are these
rings who make the people their prey. They differ only in the degree of
punishment received; the former being executed or sent to prison, while,
of the latter, many are elected to congress or to other high and
responsible offices, or they are appointed to high places of trust and
profit in the government. If the reader will look through the _Railroad
Manual_, he will find a long list of names of men, prominent now from
the recent raids upon the people and public treasury, who have been
engaged in the same business for at least twenty years; men whose names
are now as familiar to the western people as "household words," who,
like birds of prey, have flitted from one part of the country to another
until their blighting influence is felt in the whole land. We are
referring of course to the men who have followed the business of
"organizing" railroad companies for the purpose of procuring aid in
lands, bonds, and taxes, and who have devoted their energies to this
class of railroads, and not to those capitalists who, with their own
money and credit, have constructed their roads and pursued a legitimate
business. Prominent among the men who have devoted their time and
talents to railroad enterprises, will be found the names of Thomas C.
Durant, John A. Dix, Henry Farnham and others, whose memory will remain
fresh with western men, because of their diligence in procuring local
aid to railroad companies from counties and cities fifteen or twenty
years ago, and who, after obtaining such aid, by some means became the
owners of city and county bonds, to a large amount, and then to prompt
the people to greater diligence in the payment of taxes, levied to
liquidate these bonds, applied to the president of the United States for
troops to aid in their collection. Slightly varied, the same
organization of men which inaugurated the system of constructing
railroads through land grants, donations, and subsidies, is still in the
same business. With their headquarters in New York and Boston; with Wall
Street as the principal depot for all railroad stocks and bonds, as well
as the bonds of the United States, and of such states, counties, and
cities as have been duped by them, these _raiders_ upon the treasury and
resources of a people have taken the absolute control of the railroad
interest of the country, and "run it" for their own exclusive benefit,
to the injury of the country and the absolute destruction of the
agricultural interests of the great west. By having placed in their
hands the large grants of land and subsidies voted to railroad
corporations, they acquired the means of controlling the principal roads
throughout the country. Roads in Texas, Louisiana, Alabama, Arkansas,
Kansas, Nebraska, Iowa, and in other states and territories, are owned
and managed in the exclusive interest of capitalists in the eastern
cities who have no interest in the communities where these roads are
located, save to realize large dividends by extortions and oppressions.
All of the roads receiving large grants and subsidies, whether from the
general or state government, or as local aid, are in the hands of this
class of men, with their fiscal and transfer agencies in the cities
above named.
This statement has its illustration in the Kansas City, St. Joseph, &
Council Bluffs company, which has five directors in Boston, two in New
York, one in Michigan, and one in Missouri--Fiscal agency and transfer
office, Boston. Peoria & Bureau Valley company has its principal office
in New York; Chicago & Northwestern--Financial and transfer office, Wall
street, New York; Dubuque & Southwestern--all of the directors, save
one, and its financial agency, in New York; Atchinson, Topeka, & Santa
Fe company--fiscal agency and transfer office, Boston; Galveston,
Harrisburg, & San Antonio company--Fiscal and transfer agency, Boston;
Leavenworth, Lawrence, & Galveston company--Fiscal agency and transfer
office, Boston; Kansas City & Sante Fe company--Fiscal and transfer
agency, Boston; Cedar Falls & Minnesota company--All of the directors
reside in New York; Iowa Falls & Sioux City company--Of the directors,
John B. Alley, Oliver Ames, P. S. Crowell, and W. T. Gilden, reside in
Massachusetts, J. I. Blair in New Jersey, and W. B. Allison and Horace
Williams in Iowa--Fiscal and transfer agency, Boston; Colorado Central
company--Of the directors, Oliver Ames, Frederick L. Ames, and four
others, reside in Massachusetts, and the fiscal agency is in Boston, and
the principal office in California; Cedar Rapids and Missouri River
company--John B. Alley, Oliver Ames, and nine other of the directors
are in the eastern states, and James F. Wilson, and three others, are of
Iowa; Northern Pacific company--Principal office, New York; Hannibal &
St. Joseph company--Fiscal and transfer office, New York; Burlington &
Missouri River company--Fiscal and transfer office, New York; Union
Pacific (central branch)--All but two of the directors in Washington
City and the east, and principal office in New York; Union
Pacific--Among the directors are Oliver Ames, Oakes Ames, and eleven
others in New York and Massachusetts, one in Illinois, and G. M. Dodge
in Iowa--Fiscal agency, Boston; transfer offices, Boston and New York;
Fremont, Elkhorn, & Missouri Valley company--John B. Alley, of Boston,
John I. and D. C. Blair, of New Jersey, C. G. Mitchell, of New York,
and three Cedar Rapids men, directors (this is a part of the Sioux
City & Pacific road); Winona & St. Peters company--Fiscal and
transfer office, Wall street, New York; Burlington & Missouri River
(in Nebraska)--Principal office, Boston; Sioux City & Pacific
company--Directors: Oakes Ames, and six others, in the east, and G. M.
Dodge, of Iowa--Fiscal and transfer office, Boston; Missouri River, Fort
Scott, & Gulf company--Fiscal and Transfer office, Boston; Central
Pacific company--Fiscal offices, San Francisco and New York; [A]New
Orleans, Mobile, & Texas company--Oakes Ames and twelve other directors,
resident in New York and the east, and two in New Orleans; principal
office, New York; Houston & Texas company--Fiscal agency and transfer
office, New York; Chicago & Northern Pacific Air Line company--Principal
office, New York; Elizabeth, Lexington, & Big Sandy company--Principal
office, New York; Dubuque & Sioux City company--General offices,
Dubuque, Iowa, and New York. [B]Texas and Pacific company--Principal
office, New York.
[A] NOTE.--This company has a donation from the state of Louisiana
of $3,000,000; a subscription of stock by the same state to
the amount of $2,500,000; and the same state has indorsed the
company's bonds to the amount of $12,500 per mile. This company
has also received other large sums in municipal aid and other
donations.
[B] NOTE.--This company has a grant of 13,440,000 acres of land,
and other aid.
We might continue the above list indefinitely, but think we have
extended it sufficiently to sustain our charges. If the reader is
desirous of learning who compose these various companies, the Railroad
Manual will disclose the same set of leading men, divided into three or
four principal squads or companies, who raid from one end of the country
to the other; control all the roads that have received aid, and at once
place them under the direction of the central railroad combinations in
Boston and New York; diverting the grants and donations supposed to have
been made for the benefit and in the interest of the people, to their
own selfish purposes; making the aid thus granted a means of oppression
to the people, rather than an agency for their relief.
CHAPTER XIV.
THE IMPOVERISHING TRANSPORTATION SYSTEM.--THE WAREHOUSE CONSPIRACY.
One of the great evils resulting from this bonded subsidy system of
building railroads, is that it gives to those who manage them the
control of the whole carrying trade of the country, and enables them to
impoverish the great agricultural population of the west and south. The
wealth of the United States lies in its agricultural products. The
greater portion of the people are engaged in agricultural pursuits. Good
markets and cheap freights are of the utmost importance to agriculture.
However abundant may be the crops, unless a market can be reached
without a sacrifice of one-half the product in the shape of freights and
commissions the husbandman will be impoverished. If the farmers, the
tillers of the soil, do not receive a fair remuneration for their work,
all other industrial interests will suffer with them; anything that
tends to deprive the producer of the value of his product, tends to the
impoverishment of the whole country. Any system of laws, regulations, by
government, or combinations of men, or corporations, that are oppressive
to the producer, oppress the whole people. It matters not whether these
oppressions are in taxes, tariffs, or charges for transportation of the
farm product; no matter in what shape it comes, the result is the same.
The great oppression now being practiced upon the people is in the
enormous charges made by railroad companies for carrying freight. The
charters, grants, subsidies, and privileges given to these companies
have enabled them to organize a powerful monopoly, through which they
demand and receive for transporting meats, grains, and other farm
products from the west to the eastern markets, at least one-half the
value thereof. The charges of these monopolies are arbitrary, and often
fixed by the value of the different kinds of grain carried by them. For
instance, they charge one-third more per ton for carrying wheat from the
west to the east than for corn and oats; it being worth more in market,
they ask a larger dividend from it. It can be carried as cheaply as oats
or corn, but, because of its value, will bear a greater charge, and
still leave one-half of its value for the producer. There is no good
reason why a railroad company should charge thirty cents per hundred for
carrying wheat from Muscatine (Iowa) to Chicago, when it charges but
twenty cents for carrying oats and corn over the same road, the same
distance. Yet such is the fact. Those who are in the interest of these
monopolists talk about cheap freights; they argue that railroads can
transport freights much cheaper than it can be done over ordinary
highways. Let us turn again to the Railroad Manual, and see how the
matter is treated. Says the author: "The cost of transporting Indian
corn and wheat over ordinary highways will equal twenty cents per ton
per mile. At such a rate, the former will bear transportation only 125
miles to a market where its value is equal to seventy-five cents per
bushel; the latter only 250 miles when its value is $1.50 per bushel.
With such highways only, our most valuable cereals will have no
commercial value outside of a circle having a _radii_ of 125 miles and
250 miles, respectively. Upon a railroad the cost of transportation
equals one and one-fourth cents per ton per mile. With such a work,
consequently, the circle within which corn and wheat, at the price
named, will have a marketable value, will be drawn upon a _radii_ of
1,600 and 3,200 miles respectively. The arc of a circle with a _radius_
of 125 miles is 49,087 square miles; that of a circle drawn upon a
_radius_ of 1,600 miles is about 160 times greater, or 8,042,406 square
miles. Such a difference, enormous as it is, only measures the value of
the new agencies employed in transportation, and the results achieved
compared with the old."
Here the fact is acknowledged that freights can be transported over
railroads for one and one-fourth cents per ton per mile. At this rate, a
ton of freight transported from Muscatine, Iowa, to Chicago, would cost
less than $2.50. This is what the advocates of aid to railroad companies
publish to the world as a fact, and from it deduce the argument in favor
of increased facilities for their construction, with greater privileges
to be granted to the companies constructing them. The same rate of
charges for transportation from the state of Iowa to the city of New
York would not amount to more than from twelve to fifteen dollars per
ton, and would allow the producer a fair price for his product. But
while it is admitted that the above stated amount will compensate the
railroads for transporting freights, the amounts actually charged range
from twenty-five to fifty dollars per ton from Iowa to Chicago, with a
proportionate increase to New York and other eastern cities. Where
commerce is open to competition, a fair remunerative price for carrying
freights is all that is demanded or paid. If the railroads of the
country were not owned and controlled by the same combinations; if they
in any degree answered the ends anticipated by the public when their
charters were granted and privileges were bestowed upon the companies
constructing them, these excessive charges would not be made or paid.
We have attempted to show that all the railroads in the country are
owned, controlled, and operated in the interest of eastern capitalists,
with their headquarters in New York or Boston; and that the only
interest these capitalists have in the producer is to extort from him
all they can get, even at the risk of ruining the whole country. These
monopolists, taking advantage of the great privileges granted them, and
of the necessities of the agricultural and producing classes, have
combined, and defying all competition, as well as the legal restrictions
sought to be placed upon them, are now, and for some time past have
been, charging such unjust rates for transportation as to render the
farm products of the west of little or no value. Corn, worth from sixty
to seventy cents in New York, is worth only from fifteen to twenty-five
in Iowa--two-thirds of its eastern value being absorbed in charges for
transportation, storage, &c. Wheat, worth from $1.50 to $2.00 in New
York, is worth but from ninety cents to $1.25 in Iowa, the difference
being absorbed in charges for transportation, storage, commissions, and
in passing it through elevators. It will be seen that these monopolists
who have combined for that purpose are systematically robbing the farmer
of about one-half of his crop. After he has labored diligently during
the season, and harvested his crops and prepared them for market,
because of the privileges granted to these monopolists he must divide
with them, giving them one-half, or let it go to waste, and suffer his
family to want for the necessaries of life. The combination against him
is so perfect he is without remedy. All other means of transportation
have been superseded by railroads, and he is powerless to resist. The
banditti who raid upon the country, and levy tribute upon the
inhabitants by force, are no greater robbers or oppressors than these
monopolists. Indeed the wrongs practiced by the former are less to be
dreaded than those practiced by the latter. The people, supported by
natural and common law, as well as by statutes, can rid the country of
the bandit; but the monopolist has become so powerful that he defies the
people, moulds the statutes and decisions of courts to suit himself, and
compels the whole country to submit to his extortions. No one would wish
those engaged in transporting freights from the west to the east to lose
money in the business. On the contrary, the people desire that railroad
carriers should receive a fair and liberal compensation in their
business, and upon the capital invested. But when it costs but $30,000
per mile to construct and stock the railroads, and when for the purpose
of illegitimate gain the persons owning and controlling them water the
stock, and add to the actual cost fictitious and imaginary items, that
it may appear that these roads have cost fifty or sixty thousand dollars
per mile, then issue to themselves or their agents bonds to meet these
fictitious amounts, and annually pay to themselves the interest on these
bonds, and to increase the value of these bonds declare dividends upon
the whole stock, it will readily be seen why the producer does complain
of the high rates now charged for transporting his products to market.
These companies make it impossible to do an honest business and show
dividends, or ever pay the interest upon the bonds they have issued. If
it be true that the charges for freights cannot be reduced on railroads,
two things are demonstrated: First, that the published statements of the
costs of carrying upon railroads are untrue; and second, that railroads
have entirely failed to supply the necessities of the country. If we are
to depend upon railroads to carry the agricultural products of the
country to the seaboard, all hope of competing with other countries in
European markets is at an end. If the cost of carrying a bushel of wheat
from Iowa to New York is to remain as at present, one of two
alternatives is presented. Either the producer must sell at ruinous
rates, or a home market must be found for his crop; for the large amount
charged for carrying it to the coast, added to the ocean freight,
destroys all hope of a foreign market, save in times of failure of crops
elsewhere. We now complain of our lack of shipping upon the ocean, and
of the fact that the balance of trade is against us. With our large
annual product of cereals, meats, cotton, and yield of precious metals,
the balance of trade is in favor of England; and American shipping, once
the equal of England's, is now classed with only third and fourth rate
nations. One of the chief causes of this deplorable state of affairs is
the absolute control obtained by these petted monopolists over our
inland commerce, and their tyrannical extortions in rates for
transportation.
We have spoken of the rates of charges from the west to the east. We
need not go into details in this matter, for every farmer knows from
experience what proportion of his crop railroads demand as their share.
If he does not, let him look at his crib of corn, worth in New York from
seventy-five cents to one dollar per bushel, and in Iowa from fifteen to
twenty cents. Three-fourths of his crop is what these corporations,
_these great blessings to the country_, as they claim to be, demand of
him for carrying his one-fourth to market, provided he will, at his own
proper cost, load his whole crop at the place of shipment, and unload it
when it reaches its destination; or, what is worse for him, permit it to
go into the company's storehouse. While this state of things lasts, it
is not a question as to how much the producer is increasing in wealth,
but how long will he be able to pay his taxes and keep his family from
starving? If he is in debt, he is without hope of paying. No king,
emperor, or despotic sultan, would dare to extort from his subjects
three-fourths of the productions of their toil; yet this oligarchy,
composed of men who, from long practice, have come to look upon the
people as their vassals, and the fruits of their labor as lawful spoils,
demand and receive as their toll from one-half to three-fourths of the
entire farm products of the country. The consolidation is now so
perfect, that these railroad kings can dictate to the people how much
they shall receive for their products, and how much they must pay for
transporting it to market. Any one of the railroad kings of New York, by
a telegraphic dispatch to the west, can depress the price of grain one,
five, or ten, cents per bushel. The order is made at headquarters, and
in one hour from the time it is made the farmer in the west who is about
to sell his one thousand dollars' worth of wheat must take nine hundred
dollars for it, because this railroad king has sent word west that he
must have another one hundred dollars added to the already enormous
charges for transportation. Unless this combination can be broken up and
destroyed, and they who own, manage, and control the carrying trade of
the country forced to act honestly, there is no prosperous future for
the laboring and producing portion of the people; they must remain
bond-servants and vassals of this railroad oligarchy now controlling the
country.
Another evil resulting from this railroad system, directly affecting the
producer, is the elevator and warehouse system, put in operation,
supported by, and prosecuted in the interest of, this monopoly. As a
necessity in shipping and handling grain and other farm products, there
must be at shipping points, as well as at the great grain depots,
warehouses, storehouses, and elevators. If these were owned and
controlled by individuals, unrestricted by railroad companies, they
would be of great benefit to the producer; but such is not the fact. Go
to any way-station on the roads, or to any of the more prominent points,
as well as to the great grain depots, and you will find an arbitrary and
oppressive rule adopted, which demands of the producer a further
dividend from his products. At unimportant points and way-stations, the
warehouses and elevators are built upon the company's depot grounds,
and, if not owned by the company, are built under an agreement that
there shall be a division of the receipts; and in order to make it
mutual, the elevator company, or warehouseman is to charge certain rates
on all grain passing through their hands; and the railroad company is to
receive on board their cars no grain that has not paid its duty to the
elevator or storehouse. Whether it is stored or not, whether it passes
through the elevator or not, this arbitrary toll or levy must be paid
before it can be shipped. If the farmer deliver it directly on board the
cars of the company, he must pay these charges the same as though he had
delivered it to the warehouseman. He cannot avoid this extortion, for
the only possible way he has to get his grain to market is to ship it
over the road, and this he cannot do unless he pays this charge. But by
far the greatest imposition is practiced at the great grain depots at
Chicago, New York, and other cities. The immense daily receipts at these
great depots demand immense warehouse and elevator facilities. Large
numbers of elevators and warehouses were provided and used--formerly by
individuals; and while warehousemen dealt individually with the public,
there was but little abuse; competition was sufficient to insure
reasonable charges. The owner of grain, upon its arrival at its
destination, could avail himself of any competition among warehousemen,
and select such as his judgment approved or his interest prompted.
But a different rule now obtains. These railroads do not stop half way.
Their combination for carrying the product of the country is perfect;
but another combination will afford them an opportunity for extorting
from the producer an additional portion of his crop in the shape of
storage. To effect this object, the different warehouse companies in the
principal grain marts have consolidated or "pooled" all their interests,
and in combination with the railroad companies have pursued, and are
pursuing, a course of extortion which is oppressive upon the producer.
When his grain reaches its destination, it must go into a warehouse; he
is in a worse situation now than when he shipped it; then he had the
option to keep it, or submit to the first levy in favor of the
warehouseman; but he is now entirely helpless in the hands of the _ring_
formed to rob him. Without asking his consent his grain is taken to such
warehouse as the railroad agent directs; it is seized by the
warehousemen and stored at such ruinous rates as to compel him to sell
at once, or have the small portion of the crop which he sowed and
harvested, and which thus far the railroad combination has graciously
allowed him to retain, absorbed by elevator and warehouse charges. He is
obliged to use all these agencies or let the crop go to waste on his
hands; and these agencies are all owned and controlled by this vast,
this gigantic corporate power, created, enriched, and protected by state
and national legislation, and constantly guarded by the decisions of the
courts, state and national. Indeed, the old despotic maxim, "The king
can do no wrong," that his acts cannot be questioned, seems to have
descended to these monopolies. They are protected by government, and, as
the case now stands, _their servants, the people_, must be content,
because all hope of relief from efficient action on the part of either
the legislative or judicial departments of the government is denied
them.
CHAPTER XV.
A NEW AND FALSE PRINCIPLE IN HYDRAULICS--WATERED STOCK--ITS UNLAWFUL
PROFITS THE SOURCE OF EXTORTIONATE TARIFFS--THE "FAST DISPATCH" SWINDLE.
We have attempted to show some of the oppressions of the present
railroad system upon the agricultural interests of the country, and, at
the close of our last chapter, were treating of freights, warehouse
charges, &c. Closely connected with these latter charges is another
abusive and fraudulent practice, which threatens not only to still
further oppress the people, but also to more closely combine the power
now so rapidly and surely destroying our republic. I refer to what is
known as "Dispatch Companies." To fully understand the object and effect
of these companies it will be necessary to look a little further into
the management of railroads, and the methods adopted in their balance
sheets for showing the cost of their construction, the amounts of
paid-up capital, and their total indebtedness. These balance sheets do
not present the truth in any instance, and have not that purpose, being
only an exhibit that will apparently justify the many extortions and
deceptions practiced by these corporations. The actual cost of
constructing and stocking the roads is not given; instead, we have the
cost as represented by the stock and bonds issued and _watered_. For a
clear understanding of this book-keeping, let us examine the cost of
some of the roads as the same is given to the public, and compare it
with the actual cost as shown by other evidence. The "Central Pacific"
will do for one illustration.
The Central Pacific is eight hundred and eighty-one miles in length. The
cost of the road as given is $120,432,717, or $136,700 per mile. The
actual cost per mile, taking the whole length of the road into
consideration, was less than one-half the amount reported. This
information we get through reliable channels, and is undoubtedly
correct. The evidence induces the belief that the cost was less than
$50,000 per mile, and less than $50,000,000 for the whole road. The
company report a capital stock of $54,283,190, and a funded debt of
$82,208,000. They also report the liabilities of the road at
$136,491,190, being more than $80,000,000 above the actual cost, and
$16,000,000 more than the reported cost. The stock of this company was
watered to so great an extent, that to pay the interest on the funded
debt, and declare a dividend on the stock, and pay operating expenses,
and other contingencies, the road must earn at least fifty per cent per
annum. Or to put it in plain language, the company must defraud the
public in unjust and extortionate charges.
The "Sioux City & Pacific" is the pet road of Massachusetts and Iowa
congressmen. The cost of this road per mile, as shown by the report of
the company, is $34,547. This cost is represented by paid-up
capital--$2,067,600, and first mortgage bonds--$1,629,000. The road is
one hundred and seven miles long. The actual cost of this road was less
than $30,000 per mile.[C] Aside from these government bonds, the
reported cost of the road shows that the stock has been _watered_.
[C] NOTE.--This company received $16,000 per mile, government subsidy
bonds, amounting in the aggregate to $1,712,000, which does not
appear in the report.
The Chicago, Rock Island, & Pacific railroad company has, from Chicago
to Davenport, one hundred and eighty-four miles of road, and in Iowa
three hundred and sixty miles, making five hundred and forty-four miles
in all. The total cost as reported, is $28,496,999, or the sum of
$52,384 per mile. The actual cost of the Illinois portion, as shown from
official reports, did not amount to $30,000 per mile, and the Iowa
extension cost still less, but including the bridge at Davenport, the
cost will approximate to $30,000 per mile, making the total actual cost
$15,320,000, showing that the stock of this road has been watered to the
amount of $13,000,000. The Iowa portion of this road received a grant of
five hundred and fifty thousand acres of land, and aid by county and
city subscriptions amounting at least to $500,000, that do not appear
in the published statement.
The Iowa Falls & Sioux City road is under the special care of
congressmen. It has one hundred and eighty-four miles of road, but no
rolling stock. The total cost as given is $7,585,000, or $41,222 per
mile, while the actual cost was about $31,000. The stock was watered to
the amount of $1,800,000, and this, too, after having received a grant
of land to the amount of one million two hundred and twenty-six thousand
four hundred and six acres.
We might continue this list, but think we have referred to a sufficient
number for our purpose. It will be seen, and is now pretty well
understood, that the cost of railroads as reported by the companies is
not their actual cost, but includes large amounts that are pure
fictions--an increase of the capital stock, no part of which is used or
needed in the construction of the road, stock that is not even paid up,
but is distributed among stockholders in proportion to the amount of
_bona fide_ stock each one holds in the company. The capital stock of
the company, and bonds issued by it, are supposed to represent the cost
of the company's road, rolling stock, &c. But few roads in the country
fail to earn large dividends on this actual cost, and but for the custom
of watering stock, would show fair profits after running expenses,
repairs, &c., are paid. If these corporations were prohibited by statute
from increasing their capital stock above the actual cost of their
roads, less money would be required for transportation of freights, and
there would be no need of resorting to dispatch companies, or any other
ring combinations for the purpose of extorting unjust amounts for
transportation. But these combinations do not construct roads, simply
for the purpose of operating them; this is but a secondary
consideration. The main object is to speculate in stock and bonds.
Wall street being the grand center for this kind of speculation, the
company, in order to profit by sale of its bonds, must make a showing in
this grand mart of receipts sufficient to command public attention, the
rule being that stocks and bonds appreciate in value in market in
proportion to the dividends declared upon their earnings. They who
control these roads have two objects in view: first, to add to their
capital stock; and second, to make dividends upon such increase of
stock. If a line of road cost $2,000,000, and the company owning it can
by any means make it pay dividends on three or four millions, they can
issue to themselves stock representing this increase. Having thus
increased their stock, under the pretense that they wish to construct
more road, or improve or repair what they already have, they issue their
bonds to the amount of the increased stock (sometimes to an amount equal
to more than their entire capital) and put them upon the market. The
first object is to get dividends upon whatever stock they have paid up
(if any is paid up), and next to make their roads earn enough to pay the
interest on their bonds, and then, if possible, to force the earnings of
their roads to a point where dividends can be paid on the increase of
stock. Having increased their capital stock, and issued and sold their
bonds, they are in no haste to add to, or improve or repair, their
roads; for they have already consummated the object in view, to-wit:
made in cash the market value of their bonds. This same operation is
repeated as often as their capital stock will bear reducing, and in some
instances it has been repeated until the stocks and bonds became almost
worthless. This species of speculation does not add one dollar to the
wealth of the country, nor aid commerce. It only enriches that class of
speculators who prey upon the public.
We have shown that one and one-fourth cents per mile per ton will
compensate for transporting freights over railroads, provided the
business is conducted fairly and honestly, and we can now begin to
understand why such enormous rates are charged. The roads must earn
enough to pay the interest upon all the bonds sold and upon the capital
stock issued by these companies. The people, the producers, are taxed
for this purpose. One-half of the products of every farm in the west
goes into the pockets of these Wall street speculators, and the rates
for transportation are increased in the same proportion that these
stocks and bonds are increased. When more money is demanded in Wall
street, telegrams are sent throughout the country by these railroad
kings to their agents and employes to advance the rates on
transportation. This reduces the price of the farm products, and puts
the earnings of the farmer into the pockets of the railroad monopolist,
and the stock and bond gambler in Wall street.
It would look as though the combinations of this oligarchy were perfect;
that the system of extorting from the people and robbing the producers
could not be improved, and that these most unscrupulous oppressors ought
to be satisfied. Such is not the case. Either because they wish to have
fewer numbers with whom to divide the spoils, or because they have
reduced the value of their stocks and bonds until it is necessary that
their roads pass under other management, or because they must have still
higher rates for transportation, of late a new combination for
transportation has been formed, called Dispatch agencies or companies--a
kind of "Credit Mobilier" arrangement. These dispatch companies are
comparatively new in the west, and we know but little of their
organization save that it costs still more to ship with them than with
railroad companies. These dispatch agencies are not formed to compete
with railroad companies in the transportation of freights, nor are they,
in any measure, rivals or opponents of railroad companies. In the nature
of things there must be perfect accord between these two corporations,
for the railroad companies could and would at once destroy the dispatch
business, if the same in any manner conflicted with the interests of
railroad managers. The dispatch companies depend entirely upon the
railroad companies for cars, locomotives, and railroads for carrying
their freight. Enough is known of railroad management to satisfy the
most skeptical, that the organization of dispatch companies is for
purposes other than the more expeditious transportation of freight.
These dispatch companies are composed mainly of railroad directors and
superintendents, with a few figure heads to represent the outside world.
After the formation of the dispatch companies, contracts for the use of
cars, locomotives, and roads are made upon the same principle and for
the same objects as in the case of the Union Pacific railroad company
and the Credit Mobilier company. The directors of the railway company,
representing the company, contract with themselves as a dispatch
company, to supply themselves cars, locomotives, and roads for the
prosecution of the business of the dispatch company, and for a certain
consideration agree to pay themselves, as directors of the railway
company, for what is so leased to themselves as a dispatch company; and
then in order to promote the business interests of the dispatch company,
and secure to themselves as its directors higher rates for
transportation of freight, they make it a point at all times to give the
preference to the said dispatch company. As a result of this arrangement
the dispatch companies monopolize the principal part of the business.
They are in appearance opposition lines to the roads on whose tracks
they are carried, and are really so, when the interest of the railroad
stockholders not concerned in the dispatch companies are considered.
These stockholders get their dividends upon their capital stock and
their share of "watered stock" and bonds, but do not participate in the
profits of the dispatch business.
Like the Credit Mobilier, it pays large dividends which it extorts from
the people, charging even higher rates than the railroad companies; but
it only divides among its members, and not with the stockholders of the
railroad company whose track it uses. The interest of these stockholders
is not considered. They have built and equipped the road, and selected
their directors and managers; but these managers and directors turn the
road over to a hostile company, composed of themselves and select
friends. To promote the business of the dispatch companies, their trains
are transported from one end of the railroad to the other in less than
half the time required to transport a train of freight cars belonging to
the road. The effect of this course of procedure is obvious. Shippers,
finding that these railroad managers discriminate against the cars
belonging to the road proper, and that they grant extraordinary favors
and facilities to the _opposition_ lines, quit patronizing the former
and do business with the dispatch companies. The result is that the
dispatch companies now control the freight business, and the railroads
have, as a rule, quit providing themselves with freight cars. When
applied to for cars, the answer is, "We have none," while at the same
time the side tracks are filled with freight cars belonging to these
dispatch companies, demanding much higher rates than the regular
charges. At the first glance we fail to understand why a course so
suicidal to the best interests of the railroad company is pursued by its
directors and managers, nor can we readily comprehend why they permit
these dispatch companies to monopolize their tracks and destroy the
business of their roads. We think we can solve the problem. These
managers of the railroads, and such stockholders as are admitted to a
participation in the conspiracy, are the proprietors and incorporators
of the dispatch companies. After payment of the running and other
expenses of the road, and their own salaries (fixed by themselves) the
dividends on their railroad stock is small. Their position as
stockholders in both the railroad and dispatch companies is the same as
was that of the stockholders of the Pacific railroad companies and the
Credit Mobilier, who could well afford to sacrifice the interests of the
road and its stockholders who had no interest in the Credit Mobilier,
provided they received large dividends from their Credit Mobilier stock.
So, in organizing the dispatch companies and giving them the preference
over the roads, with the absolute control of the freighting business,
while the railroad stocks pay no dividends and depreciate in value, and
the roads and rolling stock are being worn out, the dispatch business
thrives and pays large dividends to this inside ring--comparatively
small in numbers--which controls the road, and in addition to preying
upon the public, so arrange the business as to exclude the stockholders
of the road from any share in the profits of the dispatch company.
Having oppressed the public by extortionate charges for transportation,
increased the stock of the railroad company to an amount that precludes
profitable dividends, even from the highest of tariffs, and issued and
sold bonds of the company to so large an extent as to make it impossible
to pay the interest on them, and at the same time meet the running
expenses of the road, including their own salaries as officers and
managers, having, in short, loaded the railroad companies with burdens
greater than they can bear, as a last master stroke of financiering they
organize themselves into dispatch companies, and while they enrich
themselves they reduce the railroad companies in which they are managing
directors to absolute bankruptcy. The stockholders who, confiding in
the integrity of these men, elected them directors and managers, are
swindled out of their legitimate dividends, their stock becomes
worthless, debts accumulate against the company, locomotives, tracks,
and cars are worn out in transporting freights for the dispatch company,
at rates ruinous to the railroad company, and as a grand _finale_ the
road passes into the hands of these conspirators, under the orders or
judgments of courts. In the meantime shippers are compelled to pay
double prices for freights, because the _railroad companies_ have not
the necessary facilities for shipping; all has passed into the hands and
under the control of the dispatch companies. By a mere fiction, the
managers of the road contracting with themselves as dispatch companies,
a competition is permitted to take the control of the carrying trade
over the road, control the track and rolling stock, as well as the
officers of the railroad company, destroy their business and drive them
into bankruptcy. Those not in the secret of the organization fail to
comprehend its necessity; why, for example, a train of cars run in the
interest of the dispatch companies can travel at double the rate of
speed of the trains run in the interest of the railroad company, or why
higher rates for transportation should be taxed and paid. The only
solution we can give is, that it presents additional means for taking
from the producer an additional portion of his product, in the shape of
charges supposed to be paid to a company organized for the purpose of
aiding in the transportation of freights, but which is, as a matter of
fact, a combination in the interest of the managers of the road with the
real purpose of making personal gain to themselves at the sacrifice of
the interests of the stockholders.
As a result of this new mode of conducting business, let us see how the
price of freights is affected. During the summer and fall of 1872 the
price of freights by water from Chicago to New York was $4.25 per ton,
and by railroad from $7.00 to $8.00. With the close of navigation the
rates, under the management of the dispatch companies, advanced to from
$25.00 to $28.00 per ton. While the railroad companies can carry for
$7.00, the dispatch companies charge $25.00. The margin for profit on
the stock of these dispatch companies promises to equal the dividends
of the Credit Mobilier stock, and from this showing we can have some
idea of the robbery being practiced upon the people, particularly the
farmers. Well may the producers of the west complain of these swindling
monopolies, and band together for mutual protection.
CHAPTER XVI.
A PRIVILEGED CLASS--THE MONOPOLISTS RELIEVED OF THE BURDENS OF
TAXATION--AN OUTRAGE UPON REPUBLICAN GOVERNMENT.
Another evil resulting from the railroad system of the country is the
partiality shown railroad companies in the matter of taxation. The
constitutions of all the states provide that the levy of taxes shall be
uniform; and in contemplation of law each owner of property subject to
taxation must bear a proportionate share of the taxes levied for the
support of the government. Indeed, it is a part of the compact entered
into among all civilized people, that each will contribute a
proportionate share towards defraying the expenses of the government
under which he lives, and which affords him protection, and secures to
him the enjoyment of his rights as a citizen. In a republic where all
have, or are supposed to have, equal rights, this contribution to the
support of the government is a duty weighing upon all, and to make a
discrimination in favor of any man or class of men, or of any companies
or corporations, contradicts the fundamental principles of republican
government, and recognizes favored or privileged classes. To compel the
property of individuals to alone bear the burdens which should be shared
by that of corporations violates both the letter and spirit of the
constitution. All public burdens should bear equally upon all people,
associations, and corporations. The legislature has as much right to say
that the property of one-half of the citizens of a state shall pay the
entire expenses of the government, while no taxes shall be imposed upon
the property of the other half; or to provide that they who engage in
particular branches of business shall supply all the means for defraying
the expenses of the government, as to provide for the partial or total
exemption from taxation of the property of corporations. Yet as a
matter-of-fact railroad corporations are not required to pay their
proportionate share of taxes, nor is their property subjected to the
same rules of taxation as that of individuals. In almost all the states
these corporations are taxed upon their earnings; their own officers
keep the books, and once in each year make a showing, and upon this
showing a small tax is levied. If they are honest and present a correct
statement of the earnings of their road, the amount of tax fixed by the
legislature of the state is paid; but if they choose to suppress the
truth a less amount must suffice. Take the state of Iowa as an
illustration. Prior to 1872 railroad property in this state did not pay
more than one-seventh as much tax upon its value as the property of
individuals, and under the present law it does not pay more than
one-half as much. Yet no property in the state has yielded such large
profits on its actual cost and value as railroad property. Iowa had in
1872, subject to taxation, 3,160 miles of railroad. Take the value of
their roads as fixed by the companies and reported in the Railroad
Manual, and the average per mile is over, rather than under, $40,000.
Then for the purpose of taxation reduce the valuation to about the same
rates as are fixed upon the property of individuals, and the average
would be about $18,000 per mile. This would make the grand aggregate for
tax purposes $56,000,000. Now if a two per cent tax (which is less than
the average rate for all purposes) was assessed upon this property, the
revenue to the state and counties would amount to the sum of $1,120,000.
But if the same rule of taxation were applied alike to all property in
the state the rate demanded of individuals would be less than at
present, while railroad companies would only be required to do what the
constitution exacts of them, to-wit: pay their just proportion of taxes
for the support of state government. Is it any wonder that we complain
of high rates of taxes when so large a portion of the property in the
state is exempt from taxation? In Muscatine county there is at present
about eighty-five miles of railroad. At an assessed value of $18,000 per
mile the total for taxation would be $1,530,000, which, on a two per
cent tax would afford a revenue of $30,600, of which, if divided between
the state and county as other taxes are divided, there would be paid
into the county treasury about $24,500, which would be a large increase
over the amount now paid to the county. The same would be the result in
all the other counties in the state were the manner of taxing railroads
so changed as to make no discriminations in their favor. The same kind
of discrimination is made in most of the states in favor of the
railroads and against the people. No good reason has ever been given for
this kind of discrimination, nor can it be supported or justified upon
principle or upon constitutional grounds. The value of a mile of
railroad can be as easily ascertained as that of an acre of ground, or
of a house and lot. The depot, and station grounds and buildings can be
assessed as readily as any grounds or buildings. The value of their
rolling stock is always included by the companies in giving the cost of
their roads, and the value of the roads, including rolling stock, can be
more easily ascertained by the assessor than the value of many kinds of
personal property, yet it has never been considered necessary or
permissible under the constitution to discriminate in favor of
individuals or classes of individuals when assessing property for the
purposes of taxation. But when the property of these gigantic
corporations is to be taxed, when they are called upon for their share
of taxes to aid in defraying the expenses of the governments that are
granting them extraordinary and exclusive privileges, they refuse to
submit to the law which prescribes the manner of collecting taxes from
the people and ask special legislative enactments in their favor. To
secure such enactments they use their great influence in filling the
legislative halls with their stockholders, directors, and attorneys.
Thus far they have generally succeeded, and in most of the states
special statutes, discriminating in their favor, are now in force.
Because of this special legislation the people are paying taxes that
should be paid by railroad companies, and in return for favors shown,
these companies are constantly increasing their extortions, and imposing
additional burdens upon the people.
We can more fully realize the extent of the unjust burdens imposed upon
the people by ascertaining the amount of capital invested in railroads
in the United States, and showing its relative value compared with the
taxable property of the country. For this purpose it will not be unfair
to take the value of railroad property as given by the different
companies and published in the Railroad Manual. The reported cost of all
but forty-six roads in the United States is $2,070,980,285. If we add to
this amount the probable cost of those not reported, among which is the
Union Pacific, this large sum will be swollen to nearly $3,000,000,000.
The taxable property in the United States, reported in the census of
1870, was $14,178,986,732. If this railroad property was included, these
corporations should pay about one-fifth of all the taxes collected in
the country. The method of taxing railroad property that has always
obtained in Iowa, and some of the other states, relieves it of at least
three-fourths of the taxes justly due from it, and requires the people
to supply the deficiency created by this exemption. But, as will appear
from the census returns, a small portion only of the vast railroad
wealth of the country is included in the valuation of property returned;
nor is it listed and returned by local assessors as is the case with the
property of individuals. In Iowa the census returns show the value of
the property in the state to be $302,515,418. The value of railroads in
Iowa, as shown by the different companies, is $84,067,663. An equal
assessment and levy of taxes upon all the property in the state subject
to taxation would require this railroad property to pay over one-fourth
of all the taxes levied in the state; yet as a matter of fact not
one-twentieth of this amount has ever been collected, unless we except
the year 1872, when a small increase over old rates was required. While
all acknowledge the injustice of this system of discrimination in favor
of railroad companies, and while the people are burdened with more than
their just proportion of taxes, all efforts to correct the evil seem to
have proved abortive. The fact that more than eighty-four millions of
dollars, being over one-fourth of the entire wealth of the state, is
held and controlled by corporations, possessing under their charters
special privileges, who have combined to prevent legislation that would
require of them a contribution of their just share for the support of
the government, explains the reasons for these discriminations in the
collection of taxes. The power of this railroad oligarchy is now so
great that it shapes and controls all revenue statutes. In all cases
where the interests of the people and those of these corporations
conflict, the corporations acting in concert, are triumphant, and the
interests of the people are disregarded. Taxes justly due from the
corporations, by special legislation, are extorted from the people,
because this anti-republican combination, controlling the wealth of the
country, demands it.
CHAPTER XVII.
THE STRONG GRASP OF CONSOLIDATED CAPITAL ON AMERICAN
LEGISLATION--BEECHER ON "REFORMATION OR REVOLUTION"--"HISTORY
OF RAILWAY LEGISLATION IN IOWA."
However much we may boast of our purity, patriotism, and political
integrity, the history of the legislation of the United States, both
state and national, proves that legislators, like other men, are subject
to temptation, and that they do not always successfully resist the
tempter. It is not a pleasant truth to acknowledge, that the acquisition
of money is the controlling motive in the American mind; yet it is a
truth. Nor is it pleasing to admit that corporations control the
legislation of our nation and state; but the fact is too patent to be
denied. Nor will any one who, without prejudice, examines the history of
legislation upon the subject of railroads, deny that legislators have
been controlled in their acts by the desire, and from the prospect of
receiving personal pecuniary benefit by the passage of acts granting
special favors to railroad companies. If the instances of corrupt
legislation were rare, or if the persons who acted from personal
considerations, rather than for the public good, were few in number, we
would not feel justified in devoting time to the discussion of the
subject. But when this species of legislation becomes the rule, and
legislation in favor of the people the exception, as has been the case
for years past, we feel fully justified in calling the reader's
attention to the matter.
If we were asked what acts passed by the forty-second congress were of
benefit to the people, we would be expected to answer that the internal
revenue and tariff laws had been modified, and a part of their burdens
lifted from the people; but nothing else of benefit to the public. If,
however, we were to look through the acts of this congress, we would
find almost all conceivable acts in favor of corporations, companies,
and individuals, granting special privileges, which, in almost every
instance, might be characterized a "congressional job." Patent right
extensions; grants to railroad companies; for the sale of Indian
reservations; amendments to railroad charters, bridge charters, and
other like interests, have monopolized the time of the national
legislature not consumed in investigating alleged irregularities of some
of its members. As a rule, lobbyists and rings have shaped and
controlled legislation for years, and have constituted themselves one of
the established institutions at the national capital. The successful
lobbyist demands and receives for his services larger pay than the
salary of congressmen. These men never appear at Washington unless they
have a congressional job on hand. To them the ear of the average
congressman is always open. A measure without any merit, save to advance
the interest of a patentee, or contractor, or a railroad company, will
become a law, while measures of interest to the whole people are
suffered to slumber, and die at the close of the session from sheer
neglect. It is known to congressmen that these lobbyists are paid to
influence legislation by the parties interested, and that dishonest and
corrupt means are resorted to for the accomplishment of the object they
have undertaken; that they are a species of brokers whose business it is
to beg and buy congressional votes for some pet scheme; to do acts which
in former times would have disgraced all parties concerned, but who are
now looked upon as a necessary part of the legislative machinery. Of
course those interests that can employ the greatest number of these
_congressional brokers_, and wield the greatest influence throughout the
country, are in the best shape to secure favorable legislation. No one
interest in the country, nor all other interests combined, are as
powerful as the railroad interest. Railroad corporations, by constantly
asking and receiving, have acquired such strength as to control
legislation in all cases where their interests are affected. With a
net-work of roads throughout the country; with a large capital at
command; with an organization perfect in all its parts; controlled by a
few leading spirits like Scott, Vanderbilt, Gould, Jay, Tracy, and a
dozen others, the whole strength and wealth of this corporate power can
be put into operation at any moment, and congressmen are bought and sold
by it like any article of merchandise.
We have already shown the value of the railroad property in the United
States, and some of the practices of companies, and their abuse of the
privileges granted them. We are now treating of their influence upon
legislators and legislation, and of the great power their wealth and
combination secure for the purpose of controlling legislation. In this
connection we must not forget that the vast sums owed by railroad
companies in the United States, for which their bonds have been issued
and sold, is a powerful persuasion for legislation in their favor.
We look upon the national debt as being enormous, and are apt to
complain of the burdens it imposes; but great as it is, these railroad
corporations, after showing a paid-up capital equal to the cost of all
the roads in the country, less $865,357,195, show a bonded indebtedness
of $2,874,149,667, being two billions over and above the entire cost of
all the roads in the United States, showing that the total amount
chargeable against the railroads of the country, exclusive of floating
debts, is the sum of $5,169,129,664. This vast sum, amounting to more
than one-third in value of the entire taxable property of the nation, is
concentrated in these corporations, whose interests are at war with the
people's. Controlled as it is by a few leading men, who have their
partners, agents, and servants everywhere, it is not strange that the
champions of these monopolists should be found in congress. The power of
this great monopoly is felt in the nomination and election of
congressmen. One-third of the wealth of the nation combined under the
control of a few men is a dangerous power in a republic. When the object
sought to be accomplished by this power has been to take control of the
government, and administer all its departments in the interest of
anti-republican institutions, to build up monopolies, and trample upon
the rights of the people, it has had no trouble to secure the number of
congressmen sufficient for its purposes. In proof of this assertion we
have only to look at the history of congressional legislation upon the
subject of railroads as shown in a former part of this work. We cannot
shut our eyes to the fact that the consolidation and combination of
wealth and influence of railroad companies have procured the passage of
acts of congress under, and by means of which, these corporations have
added largely to their wealth, and strengthened themselves for the
desperate struggle soon to come between them and the people. Mr. Henry
Ward Beecher has had his attention drawn to some of the more alarming
phases of our present political condition. In a recent address delivered
in St. Louis, he used the following language:
"I must, however, make haste to say, that among the dangers of the
times, is one which has developed out of the prodigious rapidity of the
accumulation of enormous and consolidated wealth. If I stand in the city
of New York and look southward, I see a railroad--the Pennsylvania
Central, that runs across the continent with all its connections. Its
leases and branches represent a capital of some hundreds of millions of
dollars. If I turn my eyes to the north, I see the Erie, where many
hundreds of millions dollars lie. If still further to the north, I see
the great New York Central, that represents hundreds of millions of
dollars. These three roads represent thousands of millions of
consolidated capital. Now suppose, in any emergency the railroad
interest demands--suppose there were some great national question which
demanded that the president of the United States should be a man, and
the senate should be composed of men playing into the hands of the great
national railroads' concentrated capitalists, what power is there on the
continent that could for a moment resist them? It is not a great many
years since it would seem almost atrocious to have suggested that
thought. But legislatures have been bought and sold, until we think no
more about it than of selling so many sheep and cattle. Does any body
suppose that if it were a national interest that these vast corporations
were seeking to subserve, that there is any legislature on this
continent that could not be crushed or bought out by this despot,
compared with which even slavery itself were a small danger. One of the
greatest humiliations of a nation that is justly proud of so many
things, is that disaster which has fallen upon our congress. When we see
the slimy track of the monster, we may justly ask: 'What are we coming
to?' There has got to be a public sentiment created on this subject, or
we will be swept away by a common ruin. I tell you that the shadow that
is already cast upon the land is prodigious. I do not believe in the
sociologists, in the international, nor the communists; but when I see
what rich men, as classes, are doing with our legislatures, what laws
they have passed, what disregard there is to the great common interest,
I fear that the time will come when the workingmen will rise up and say,
that they have no appeal to courts, no appeal to legislatures; that they
are bought and owned by consolidated capital, and when that time comes,
unless it brings reformation, it will bring revolution; and if any such
time does come, I do not hesitate to say I will stand by the common
people for the encouragement of the working people, and against the
wealth of the consolidated capital of the land."
This great consolidated railroad interest now has its champions in the
halls of congress. In the senate is Dorsey, president of the Arkansas
Central railroad. Patterson, senator-elect from South Carolina, is a
railroad man. Jones, of Nevada, Allison, of Iowa, Mitchell, of Oregon,
Carpenter, of Wisconsin, and Windom, of Minnesota, and others are
recognized as reliable railroad men. In the house we have Brooks, Kelly,
Schofield, and many more who have proved their fealty to this great
monopoly on many occasions. In addition to the friends of these
corporations in the legislative halls, paid lobbyists throng the
capital, supplied with stocks and money, to be used "where it will do
the most good." This money is supplied by the railroad companies for
purchasing votes for favorite measures, and the recent startling
developments show that this fund does not lie idle. All this has
resulted in corrupt legislation. Congressmen have aided in procuring
grants and special privileges to companies of which they are members,
and other congressmen have listened to the arguments of lobbyists, and
sacrificed the best interests of the people to promote the interests of
these monopolies.
The influence of railroad companies over legislation is not confined to
the general government. It develops its full strength in state
legislatures. There it manifests itself openly. Railroad companies
nominate and elect their own men for the avowed purpose of securing the
enactment of laws favorable to themselves. Railroad directors,
stockholders, and attorneys are elected to the legislature because their
interests are adverse to those of the people; they are selected to
defeat all legislation tending to protect or relieve the people from the
oppression of these corporations. Paid lobbyists are kept in attendance
during the legislative session for the same purpose. Free passes are
given to legislators as cheap bribes, and money and railroad stock and
bonds are placed "where they will do the most good" to the railroad
interest. By the use of all these means, majorities in the interest of
railroad companies are secured, or such strong minorities as will
prevent unfriendly legislation. As a fact, now a part of the history of
the country, the legislatures of many of the states are in the interest
of, and controlled by, these corporations. They shape all public
legislation, and rule the affairs of the state. The people are taxed and
robbed by their own legislatures. Immense sums of money, or state bonds,
are donated to these corporations, and the people are taxed to pay them,
while the railroad property is practically exempt from taxation. The
legislature of the state of Louisiana donated to a single railroad
company $3,000,000, and guaranteed the bonds of the same company for
about as much more. The legislature of the state of Alabama has voted to
different railroad companies many millions of dollars. The same is true
of Georgia, Texas, North and South Carolina, and many other states. In
some of these states men who were elected to represent the people, and
who were pledged in their interest, have openly sold themselves to this
railroad monopoly. For a consideration paid to them they have assisted
in bankrupting their states, and reducing the people who trusted and
honored them to a state of servitude, scarcely less oppressive than the
old system of African slavery. The value of property is destroyed by
excessive taxation, and the political and judicial power of the states
is handed over to railroad men, who, by combining their interests, have
created a great central power, antagonistic to the people, and
destructive of republican institutions. In the northern states it has
been found impossible to procure just legislation where the interests of
railroads and of the people conflict. In addition to the license given
to railroad companies, by legislative grants and special privileges, to
plunder the people, legislators, in violation of constitutional
provisions, and of every principle of justice, have persistently refused
to require of these corporations their just proportion of taxes, and
have just as persistently provided for taxing the people to aid railroad
corporations. Take the state of Indiana as an illustration. Counties,
cities, and towns have been burdened for years with unjust taxation
because of legislation in favor of local aid to railroads. In that state
there are now three thousand five hundred and twenty-nine miles of
railroads, representing about $100,000,000. For the purposes of
taxation, all of this railroad property represents but $10,000,000. Some
of these roads, for the purposes of taxation, are appraised at $3,000
per mile, and some as low as $500, and $400. While the property of
individuals is appraised at about one-third of its estimated value, this
railroad property does not pay taxes upon more than one-tenth part of
its estimated value, and when at a recent session of the legislature an
effort was made to amend the statute so as to make taxation more equal,
it was defeated by the railroad men in the legislature, supported as
they were by the strong lobby whom they had paid to be in attendance.
The history of railroad legislation in the state of Iowa is of the same
glaring character. We have the pleasure of laying before our readers the
following succinct history of this Iowa legislation, from the pen of
Hon. Samuel McNutt, who, for the last ten years, has been a member of
the legislature (six years in the house and four years in the senate),
and who kindly furnishes this communication at our request.
HISTORY OF RAILWAY LEGISLATION IN IOWA.
HON. D. C. CLOUD, Muscatine, Iowa:--
DEAR SIR: The progress of the railroad question is remarkable in our own
state. As a member of the Iowa legislature, for ten consecutive years, I
have had occasion to note that progress, and to observe the advancement
of that interest from struggling infancy to vigorous growth--from
feebleness to a strength that is fearful to contemplate.
The people of Iowa, through their legislature, have always been
eminently friendly to the construction of railroads and the promotion of
the railway interests. In proof of this, witness the whole history of
our legislation; witness our magnificent land grants, subsidies, bonds,
subscriptions, and taxes, to the amount of five per cent of our entire
valuation, in one year, as free gifts to railroad corporations. And yet
some of these corporations have cheated us as people never were cheated
before. We have afforded immunities to capital invested in railroads
that are not afforded to any other kind of capital in the state. Witness
the hitherto almost entire exemption from taxation of that kind of
property. But, more than this, we have laws regulating the charges to be
made by those engaged in several of the industrial pursuits, while up to
the present time there has been no law upon our statute books
interfering with the charges made by railroad corporations; and only
_the right_ to interfere has been claimed in cases of public necessity,
where those corporations are guilty of gross extortion or unjust
discrimination.
The first grant of lands to aid in the construction of railroads in our
state is known as the "Iowa Land Bill," which passed congress and was
approved by the president, May 15th, 1856. Under this act there has been
certified to the state, to aid the four original land grant roads, as
follows: to the Burlington & Missouri River railroad, two hundred and
eighty-seven thousand acres; to the Mississippi & Missouri (now part of
the Chicago, Rock Island, & Pacific) railroad, four hundred and
seventy-four thousand six hundred and seventy-five acres; to the Iowa
Central (afterwards the Cedar Rapids & Missouri River) railroad, seven
hundred and seventy-five thousand and ninety-five acres; and, to the
Dubuque & Sioux City railroad, one million two hundred and twenty-six
thousand five hundred and fifty-nine acres. On the 12th of May, 1864,
congress passed an act granting lands to aid in the construction of
another railroad across the state, from the city of McGregor, westward,
on or near the forty-third parallel, to Sioux City. The lands in this
grant were supposed to exceed a million of acres, but were found
afterwards to be less than half a million. On the 12th of July, 1862,
congress authorized the diversion of a portion of the Des Moines River
Improvement company's land grant to the Des Moines Valley railroad
company, the amount of which I have not before me. It is safe to say
that all these railroad land grants, taken together, amount to _over
four millions of acres_, or nearly one-eighth of the land of the state;
or, more approximately, _one acre out of every eight and a half acres_
of the entire area of Iowa has been given away to railroad corporations.
In addition to this immense subsidy, the people along the several lines
contributed largely toward their construction.
On the 14th of July, 1856, the general assembly, in extra session,
passed an act conveying the land to the four first mentioned companies,
upon certain conditions. Section 14 of that act (which act is the
original "charter" of those corporations), now found as section 1,311 of
the Revision of 1860, reads thus: "Said railroad companies accepting the
provisions of this act shall at all times be subject to such rules and
regulations as may, from time to time, be enacted by the general
assembly of Iowa, not inconsistent with the provisions of this act, and
the act of congress making the grant."
Under this "charter" the companies went to work, and when some of their
roads were extended toward the interior, complaints began to arise that
the railroad tariffs were so arranged as to seriously discriminate
against the trade and commerce of Iowa towns and in favor of points out
of and beyond the state; that these tariff rates were also so arranged
as to deprive our people of a choice of markets, rendering the
Mississippi river useless as a highway of trade and commerce, and
compelling our people either to pay tribute to Chicago or go without a
market. The evidence in this matter was of a character that could not be
questioned, and although the subject was brought before the general
assembly of 1864, we refused to take any action at that time, hoping
that the companies which had been so liberally dealt with by our people
would, upon remonstrance, deal fairly and justly by them.
When the general assembly met again, in 1866, the matter of railroad
discriminations against our people had assumed a still more momentous
shape. The greater portion of our time during that session was occupied
with that question. Weeks after weeks were spent mainly discussing
whether or not the state had the right to prevent unjust discrimination
or in any way control railroad corporations as to their charges. The
then attorney general (Hon. F. E. Bissell, now deceased) gave it as his
official opinion that the state possessed no such right; but that in the
matter of tariff charges, those corporations were above and beyond all
legislative control. Whether the fact that he was a "railroad attorney,"
as well as attorney general for the state, had anything to do with
influencing his "opinion," is not for me to say. We had able lawyers of
the very opposite opinion, but the fact of this announcement gave great
encouragement to the railroad party, and was calculated to dishearten
those of us who believed that the people had some rights which even
corporations should respect. It was now openly declared by eminent
attorneys, both in the legislature and in the powerful "lobby" that hung
around us, that in the original "charter," or grant, the state, while
reserving the right to "enact rules and regulations," had either failed
or neglected to reserve, in specific and "_express terms_," the
particular right to regulate and limit tariff charges, and therefore she
could not now exercise that right, and could never regain it.
Listening to these astounding claims, put forth by the attorneys for the
corporations, some of us declared that if God and the good people of
Iowa ever gave us a chance to reserve, in a railroad charter, the right
of control, we would surely do it in such specific and "express terms"
as even a railroad attorney could neither mystify nor explain away. The
golden opportunity to do this very thing occurred in 1868. A certain
state of facts existed regarding the management of the Chicago, Rock
Island, & Pacific railroad company, which rendered new legislation
necessary. The executive committee, headed by John F. Tracy, had issued
and put upon the New York money market nearly _four million dollars'_
worth of "watered stock," and realized the cash for it before certain
other parties were aware of what had been done. With this money the
Tracy party claimed that they intended to build the road from Des Moines
to Council Bluffs (the road at this time being completed only to Des
Moines). The immediate result of this "stock operation" was a bitter
quarrel between the Tracy and the anti-Tracy parties of the
stockholders. The Tracy party were said to be in the minority, but they
had the money and the executive committee. Suits were commenced against
them in the New York courts to forbid their construction of the road
west of Des Moines, and to compel them to disgorge the four millions of
dollars for distribution among the stockholders. In the meantime the
company had forfeited their right to the land grant in consequence of
the non-construction of the road beyond Des Moines, according to the
terms of the original act. The consolidation of the Chicago, Rock
Island, & Pacific railroad company's stock (a company organized under
the laws of Illinois) with that of the Mississippi & Missouri railroad
company (organized under the laws of Iowa), needed legislative sanction
by the general assembly of Iowa; and further, the directors of the
consolidated company wanted not only a legalizing act covering the above
points, but also an extension of their term of office for one year
beyond the time for which they had been elected by the stockholders.
Under this state of things, the "Tracy party," legally representing the
consolidated company, applied to our legislature for relief and
protection; and, accordingly, a bill was introduced covering the desired
points, and re-granting the lands to the company under certain
conditions and restrictions, which, when agreed to by the company,
should remain forever _a contract_ between the state and the company.
At this juncture, one of the judges of the supreme court of New York
issued a solemn injunction upon the general assembly of Iowa, forbidding
that body to legislate, in any way, upon the matters I have above
recited. Some of us, not having the fear of New York courts nor the
majesty of Judge Cardozo before our eyes, fairly laughed at that
judicial functionary's lordly impudence. We thought that the grand
opportunity had now arrived when the state could justly step in and pass
an act compelling the company to construct the road, for the sake of the
extraordinary relief sought, and in that act _reserve, in "express
terms,"_ as a matter of _contract_, the right to control the tariff
rates of at least one powerful corporation, connecting with the Pacific
railroad at Council Bluffs, and thereby control the rates of other
lines crossing the state with similar connections. This express
reservation of right, in the form of what was known as the "Doud
Amendment," was inserted in the act in relation to the Chicago, Rock
Island, & Pacific railroad company, and will be found as the first
proviso in the second section of that act (chapter 13, on page 14, Acts
of Twelfth General Assembly), and is in the following words:
"_Provided_, said railroad company, accepting the provisions of this
act, shall at all times be subject to such rules and regulations, and
rates for the transportation of freight and passengers, as may, from
time to time, be enacted by the general assembly of Iowa."
The company, through its proper officers, accepted the terms of this
act, and filed that acceptance in the office of the secretary of state,
thus closing _a contract_ between the state and the company, and setting
at rest forever the question of controlling and regulating the charges
for freight and passengers in favor of the state. The same proviso was
afterwards inserted in the act in relation to the Des Moines Valley
railroad company (chapter 57, page 63); also in the act relating to the
McGregor Western railroad company (chapter 58, page 67); also, in the
act relating to the Dubuque & Sioux City railroad company (chapter 124,
page 164); all acts of the twelfth general assembly.
The passage of the last named act aroused unusual commotion along the
proposed railroad line from Cedar Falls, via Fort Dodge, to Sioux City,
in consequence of the railroad managers declaring that not another mile
of that road would ever be built until the proviso for control should be
repealed. Work ceased along the line; the laborers were discharged; the
people who expected a railroad through their country became alarmed.
Meetings were held at Fort Dodge, Sioux City, and other points, and
extraordinary efforts were put forth to induce Governor Stone to call an
extra session of the legislature for the purpose of repealing the
so-called "_Doud Amendment_." A committee of prominent citizens was
appointed to visit, in person, the members of the general assembly, and
have them sign a request to the governor in favor of an extra session.
This committee, knowing my record on this question, did not do me the
honor of a personal visit, but they sent me a letter (still in my
possession), to which I replied through the public press, strongly
opposing their movement, and, after reciting a portion of the facts
herein recapitulated, earnestly requested them to let the Doud Amendment
alone; for I believed it to be one of the wisest measures ever enacted
by our legislature, and, having been one of its foremost advocates in
that body, I would still defend it. The effort to call an extra session
failed, and the railroad managers in the north, finding their efforts,
in that instance, vain, after frightening the people nearly a year,
concluded to go to work again, and so the building of that road went on
to completion.
We had now succeeded in making the question of control a matter of
contract between the state and the companies above named; so that, so
far as they are concerned, no person or authority can question that
_right_. Some of these roads being parallel lines across the state, the
limitation of their charges will virtually control the others.
I have always maintained that the state, by virtue of her sovereignty,
possesses the right to regulate and limit railroad charges, whenever the
public necessity, or the public welfare requires such limitation,
without any special reservation in any charter or contract. But inasmuch
as eminent counsel denied it, I was one of the original prompters and
friends of the "Doud Amendment." I was this for the further reason,
also, that history teaches me that when the interpretation of
constitutions or doubtful laws, in cases where the poor and humble were
on one side and wealth and power on the other side, that interpretation
has been almost invariably on the side of wealth and power.
During the session of 1870, the question of regulating and taxing
railroads came up again; but nothing was done except the passage of a
law authorizing the state treasurer to levy a tax on their gross
receipts, as follows: On the first $3,000 or part thereof, per mile, one
per centum; on receipts over $3,000, and under $6,000, two per centum;
and on the excess of $6,000 per mile, three per centum. An act was also
passed (which I opposed) authorizing townships, towns, and cities, to
vote a tax, not exceeding five per cent of their assessed valuation, to
aid in the construction of railroads. At this session I succeeded in
securing the passage of an act (chapter 90, acts of Thirteenth General
Assembly) providing that taxes levied by order of any court to pay
judgments on county or city bonded indebtedness, no penalty but legal
interest shall be collected.
At the session of 1872, the questions of railroad tariffs, taxation, and
control, came up again with increased interest. We passed an act
(chapter 12 of public laws) making the work, &c., of laborers and
mechanics a lien upon the road bed, right of way, &c., of railroads,
thus securing them in their pay for labor done or materials furnished.
The five per cent tax law was repealed, and an act (chapter 26 of public
laws) was passed, making the census board (now executive council) a
board of assessment of railroad property. Under this act a new plan of
assessing this kind of property was adopted, and a much larger revenue
derived therefrom than heretofore. A freight and passenger tariff bill
(known as the O'Donnel bill) passed the house, but failed in the senate.
Those of us, in the senate, who voted for the bill, were remembered by
the railroad managers when we met in adjourned session last winter,
(January 15th, 1873) by leaving us out of the list of senators whom they
favored with free passes. But they sent passes to all the senators who
voted _against_ the bill. The passes from the Chicago, Rock Island, &
Pacific railroad company were accompanied with a private note, stating
that free passes were not now given generally, "_but only to their
friends_."
The adjourned session of 1873 was for the special purpose of considering
and enacting the new code, which the three commissioners had now spent
nearly three years upon. Our time was limited by joint resolution to
thirty days; and yet, during a considerable portion of our limited time,
the railroad question occupied our attention. While we were in session,
an extraordinary convention, or gathering of farmers, known as the
"State Grange of the Patrons of Husbandry," met in Des Moines. This body
was composed of the officers called Masters and Past Masters of the
subordinate granges, or lodges, of a new secret society of
agriculturists scattered throughout the state. This State Grange, or
convention of delegates, numbered over twelve hundred members,
representing, it was said, some seventy thousand farmers of Iowa. The
meeting of this "Grange" lasted a week, and passed strong resolutions
urging the legislature to enact a passenger and freight tariff law, and
also presented an official petition to that effect.
The members of the senate in favor of such a law prepared twelve
sections (mainly from the old O'Donnel bill) to be inserted in chapter 5
of title 10, of the proposed code, and I was chosen to offer them in the
senate, at the proper time. This I did, and the first section was
adopted almost before the railroad men could rally their forces. This
section limits the fare for passengers to three and one-half (3½) cents
per mile. But the other sections, which fixed a maximum rate for the
transportation of all kinds of grain, produce, lumber, manufactures, and
commodities, were lost by a tie vote, the president of the senate,
Lieutenant Governor Bulis, refusing to vote, which was equivalent to
voting against the sections. These sections were afterwards fixed to the
chapter by the House, with an additional section, known as the "Keables
Amendment," but were again lost in the senate for want of two votes.
The commissioners had omitted from the proposed new code all the
so-called "Doud Amendments," and reservations of control by the state
over railway corporations, on the ground that they were local or special
provisions not to be included in a code of general laws. But some of us
thought that those reservations of control, and special contracts, were
of too important a character to the people of Iowa to be entirely
ignored, and so I prepared an amendment to chapter 5, of title 10, in
the following words:--
"SEC. 6. All contracts, stipulations, and conditions, regarding the
right of controlling and regulating the charges for freight and
passengers upon railroads, heretofore made, in granting lands or other
property, or franchises to railroad corporations, are expressly
reserved, continued, and perpetuated, in full force and effect, to be
exercised by the general assembly whenever the public good and the
public necessity requires such exercise thereof." This was adopted.
I have thus hastily sketched the history of railroad legislation in our
state, and yet perhaps I have exceeded the space you generously allow me
in your valuable work. Time and space would not permit me to detail the
skill exercised or the means used to defeat every act of legislation
looking toward the control of railway corporations.
To-day both the people and the government of this nation are, to a great
degree, under the control of the consolidated money capital of the
country, and a few individuals are at the head of this capital. These
are men, mainly, who regard republican or democratic institutions as too
unstable for the security of wealth, and have no real love for our form
of government. It remains to be seen what the people will do in the
coming crisis. I have faith in the people.
Yours truly,
SAMUEL MCNUTT.
Mr. McNutt tells what he knows, and gives us a correct idea of the means
resorted to by these corporations to thwart the will of the people. In
view of the vast wealth of these corporations, their combination and
consolidation, with their absolute control of congress and state
legislatures, and the centralization of power in themselves, we may well
inquire whether our constitutional guarantees have not been so long
disregarded as to be virtually destroyed. The question at issue between
the people and these corporations is clearly marked and defined. This
great railroad oligarchy is gradually but surely overturning the
principles upon which our government is founded. It is substituting a
personal for a constitutional government, and to achieve its purposes,
it brings to bear its vast wealth and influence; it bribes and buys
legislators, and maintains throughout the country a vast army of
employes, many of whom occupy high official position under the
government. It now boldly proclaims the doctrine, that the interests of
this great government, and of railroads, are one!
On the other side of the question are the people, who begin to realize
the oppressions of this oligarchy. They find themselves burdened with
taxes; the value of the produce of the country consumed in unjust
railroad charges; the halls of congress and of state legislatures cursed
by the presence of men who take and give bribes in aid of the people's
oppressors; their natural rights denied them; the guarantees of the
constitution disregarded; all doubtful points decided in favor of the
power that is reducing them to slavery, and making their property and
the fruits of their labor of no value. They begin to realize that the
final struggle must soon come, and that the question will be whether the
people, the sovereign people, or their oppressors are to be the future
rulers of the _republic_. The result is not uncertain. Legislatures and
courts must restore to the people their constitutional rights. If these
are denied, then, other means failing, the people, who are sovereign,
_must take their rights by revolution_. The self-evident truth that all
men are equal, that they have equal rights to enjoy and possess
property, and to the protection of those rights in the courts, and that
all should bear their proportionate share of the public burdens, MUST be
recognized, by all classes, as the supreme law of this republic.
CHAPTER XVIII.
THE "TRAIL OF THE SERPENT" IN THE INTERIOR DEPARTMENT.
We have attempted to show the controlling influence of railroad
corporations over the legislative department of the government, and its
effect upon the people, without following it through all its various
forms, our object being to present what we deemed sufficient evidence to
direct the public mind to the great and growing evils resulting from
this influence. We now desire to refer to the influence of these
corporations over the executive department of the government.
The administration of the laws being confided to the executive
department of the government, their impartial and honest administration
is of the greatest importance to the people. Congress, without the
constitutional right, having granted charters and made large grants of
lands and bonds to railroad companies, it became necessary that the
executive department should have some kind of supervision over the
companies. In the issuing of bonds and certificates for land grants; the
transportation of mails, troops, etc.; the appointment of government
directors, inspectors, and engineers; the transmission of telegraphic
dispatches, and respecting many other matters connected with these
corporations, special duties were imposed upon the president and members
of his cabinet. The government directors, under the statute, had a place
on all business committees of the Union Pacific railroad company. They
were government officers, appointed by the president, and were to
report, from time to time, upon the progress of the work, and condition
of the roads. They were prohibited from owning stock, or being
personally interested in the roads. Their reports were to be made to the
secretary of the interior. If these government directors had faithfully
performed the duties laid upon them by the law, the contract of the
directors of the railroad company with the Credit Mobilier company could
not have taken place without their knowledge, which fact should at once
have been communicated to the secretary of the interior. Nor could the
directors of the railroad have organized themselves into a Credit
Mobilier company and contracted with themselves to rob the government
and defraud the people, without the knowledge of the government
directors. And, unless we concede that they were totally unfit for the
discharge of the duties imposed upon them by statute--"more sinned
against than sinning"--we must conclude that they had full knowledge of
all the abuses being practiced by the railroad companies, and failed to
discharge their official duties. The national reputation these
government directors had achieved in the halls of congress, and
elsewhere, precludes the idea of their being ignorant of what they
should have known, and we are forced to conclude that they had this
guilty knowledge of the frauds being perpetrated upon the government and
the people. Their action in the premises can only be explained on the
ground that they were subject to the same railroad influences which have
controlled congress and state legislatures. If their action was not
governed by corrupt motives and pecuniary considerations, that
persuasive influence which emanates from these corporations, blinded
their minds and warped their judgments to such an extent as to induce
them to wink at the frauds of the companies in the construction of their
roads and the prosecution of the business connected therewith. Recent
investigations show that some of those directors were controlled in
their actions by pecuniary considerations; that these corporations have
been able to purchase the influence of the men selected by the president
to protect the public interest, and that, by reason of such purchase,
the sum of $16,000 per mile, in government bonds, has been duplicated on
fifty-eight miles of the Pacific road. Other abuses, such as the
defective construction of the roads, unlawful payment by the government
of engineering expenses, dishonest returns of the cost of the roads, and
other minor but important abuses of the privileges granted to these
companies, were permitted by these government directors without
objection, showing, beyond all reasonable doubt, that their duties,
prescribed by acts of congress, were of secondary importance when the
interests of the corporations or of these government directors were to
be considered.
While the reckless and dishonest transactions of the company directors
were such as to call out a protest from an honest engineer employed on
the road, prompting him to resign his position as chief engineer rather
than be a party to fraud and scandal, these government directors seem to
have remained silent and inactive. A contract had been entered into with
a man by the name of Hoxie, who had neither personal means, nor position
to command any considerable amount of capital, for the construction of a
portion of the Union Pacific road. While this contract did not possess
all the peculiarities of the contract with the Credit Mobilier, it was
such an outrage upon right and justice, as to elicit from the chief
engineer, Peter A. Dey, the following letter, addressed to General John
A. Dix, after having tendered his resignation as chief engineer of the
Union Pacific road, to General Dix, who was then president of the
company. Mr. Dey says:--
"My views of the Pacific railroad are peculiar. I look upon its managers
as trustees of the bounty of congress. I cannot willingly see them take
a step in the incipiency of the project, that will, I believe, if
followed out, swell the cost of construction so much that by the time
the work reaches the mountains the representative capital will be
accumulated so much that, at the very time when the company will have
need for all its resources, of capital as well as of credit, its
securities will not be negotiable in the market. From my very boyhood I
have associated Mr. Cisco and yourself with Mr. Bronson and Mr. Flagg,
men whose integrity, purity, and singleness of purpose have made them
marked men in the generation in which they lived. Of course, my opinion
remains unchanged. You are, doubtless, uninformed how disproportionate
the amount to be paid is to the work contracted for. I need not
expatiate upon the sincerity of my course, when you reflect upon the
fact that I have resigned the best position in my profession this
country has ever offered to any man.
"With respect.
"PETER A. DEY."
Mr. Dey protested against the extravagant amount agreed to be paid
Hoxie. The cost of the sections of the road contracted to Hoxie was
$7,806,181. The amount agreed to be paid Hoxie for the work was
$12,974,416. Mr. Dey saw that this man Hoxie was a _straw man_, and that
near $5,000,000 were to be divided among the directors as the profit on
this contract, and, as engineer, he protested against it. Yet these
government directors, whose sole duty it was to look after and protect
the interests of the government and the people, failed to discover and
report these abuses to the secretary of the interior; or, if the same
and the Credit Mobilier transactions were so reported, then the
influence of these corporations controlled the department of the
secretary. The truth is, the position of these government directors was
such that, without a total disregard of the statutes, and their duties
under it, it was not possible to keep all knowledge of these gross
abuses from the department. But one conclusion can be drawn from the
facts, which is, that the government directors, influenced by these
powerful monopolies, were unfaithful to the trust confided to them by
the president.
Under the statute, the secretary of the interior has the general control
of the issue of bonds, certificates for lands, rights of way, &c. The
government directors were bound to report to him. If the duties imposed
under the law had been faithfully discharged by him, the great abuses
practiced by the Pacific railroad companies would have been prevented.
The Hoxie contract, the Ames Credit Mobilier contract, and the Davis
contract, were all made for about double the cost of building the
respective sections of the road covered by these contracts, the actual
cost of these respective sections being $50,720,957, and the amounts
allowed the contractors being $93,546,387. In this amount is concluded
$1,104,000, which was a duplicate payment allowed Ames for work done,
and once paid for, under the Hoxie contract. These three jobs put into
the pocket of the Credit Mobilier company a net profit of $43,929,337,
a large part of which was in subsidy bonds issued by government. These
bonds could only issue after the approval, by the secretary of the
interior, of the report of the government directors. If the secretary
had discharged his duty, or if the interest of the people, which he was
supposed to be protecting, and not the interest of these companies, had
controlled his action, _duplicate bonds_ would not have been issued at
the rate of $16,000 per mile, for more than fifty miles of the road. Nor
would certificates for land have issued to the companies while they were
openly cheating, defrauding, and robbing the government and people. Let
the reader look at the laws of congress chartering the roads, with the
different amendments, and learn the duties of the secretary of the
interior respecting their construction and the issuing of bonds and land
certificates, and he will conclude that the secretary was ignorant of
what the law made it his duty to know--that he was inexcusably negligent
in the discharge of his duty, or what is most probable, that the same
potent influences that controlled congress in aiding these companies,
found their way successfully to the chief parlor of the interior
department. Without the secretary's approval of the companies' work and
accounts, they could not possibly have committed such gross frauds upon
the government.
If additional proof of the fact that the secretary of the interior was
influenced by, and used his official position to assist the railroad
corporations, in the raids upon the treasury, was needed, we have it in
his action relative to the homestead and pre-emption rights of settlers
upon the public lands, within the limits fixed by congress for the
selection of lands by the different railroad companies. In all cases
where lands have been granted to railroad companies, lands to which
pre-emption rights attached at the time the line of the road was fixed
have been saved to the pre-emption and homestead claimants. In many
instances the railroad companies have not been able to find, within the
limits fixed, the amount of lands granted to them belonging to the
government. This has caused them to make war upon pre-emption and
homestead claimants. If these claimants could be forced from their
lands, some millions of acres would be thus seized by, and allowed to,
the railroad companies. The practice of going upon the public land
under the pre-emption and homestead acts had become so common, that
these claims had been recognized by the public and the government as
vesting in the claimant a title, which could only be defeated by his
failure to comply with the provisions of the law respecting the
perfection of his title. No one, save where two or more pre-emption
claimants were contending for the same tract, could interfere; nor is
there any provision of statute by which railroad companies can call in
question the pre-emption or homestead right. In the absence of any
contest between pre-emptors, the claimant has only to show a substantial
compliance with the law, pay the required amount, and obtain his title.
So, also, in regard to homestead rights. Nor did any difficulty arise
until railroad companies began to interfere. The acts granting lands to
railroad companies made no provision for the selection by them of lands
held by pre-emption or homestead claimants at the time the lines of
their roads were fixed, and subsequently abandoned. The companies
applied to the secretary of the interior, and procured from him a
construction of the statutes, giving them the right to select as
railroad lands all such so abandoned. This was the first decision in
their favor, and committed the secretary to their interest.
A war upon pre-emption and homestead claimants was begun, and the
representation to the department that a claimant had abandoned his claim
was sure to pass the title to one hundred and sixty acres to the
company. But something more must be done to get hold of the claimed
land. The question as to the regularity and validity of the settler's
claim is raised by the companies, and then they apply again to the
secretary of the interior. While the statute respects and protects the
occupancy and rights of the claimant, the secretary, to aid the railroad
companies, interpolates the word, "valid," and holds that if the claim
is invalid, the railroad companies can drive off the claimant and take
his land. The action of the department gave the companies an advantage
over the claimant which was almost equivalent to the destruction of his
claim. Many claimants became alarmed, and did just what the companies
desired,--they abandoned their claims to their oppressors, and the
companies made large gains. But the claimants were not yet entirely in
the power of their oppressors, and resort is again had to the
department, and the settlers are placed entirely at the mercy of these
monopolies. The interior department issued an order under date of June
22, 1872, allowing railroad companies to contest the right of
pre-emption and homestead claimants to their quarter-sections. While the
act of congress absolutely prohibited railroad companies from
interfering with the rights of these claimants, the interior department,
in the interest of these giant monopolies, in violation of the statute,
by interpolation and a forced construction of the law, allowed these
corporations to appear and dispute the claim of the poor pioneer who had
gone in advance of railroads, and pre-empted a small tract of land for a
home for his family, before the company disputing his right was
organized, or had thought of locating a railroad in his vicinity. The
pre-emption and homestead laws were passed for the benefit of the actual
settlers of the country. If they get their lands, they pay the
government the price fixed by law; but if the railroad companies get
these lands, they aid in building up and strengthening a monopoly
already too great for the welfare of the country. The department having
lent its powerful aid to this monopoly, and, by unjust rulings,
interpolations, and decisions, assisted in turning these poor men adrift
and depriving them of their lands and years of toil, already more than
one million of acres that of right, and under the law, properly
interpreted and administered, would have belonged to actual settlers,
have become the property of these railroad companies. Claimants are
becoming alarmed at the action of the department, and are leaving their
lands, choosing to lose their claims and the years of toil expended upon
them, rather than defend against these companies, backed by the
department.
To still further show the _quasi_ collusion between the department and
these great corporations, let us look at the circular issued to the
different land offices from the department in June, 1872. The circular
says:--
"A pre-emption or homestead claim of record is of course _prima facie_
evidence of a valid right; yet it may occur that such a claim has a
fraudulent inception. When such is the case, the claim is of course
void _ab initio_, and does not defeat the right of the railroad. In view
of these rulings the following is communicated for your information and
government, to the end that the rights of all parties may be protected,
and the spirit of the _grants_ fully complied with:--
"1st. In relation to pre-emption claims, the pre-emption law requires
that a person must be over the age of twenty-one years, or the head of a
family, a citizen of the United States, or a person who has filed a
declaration to become such, and also that a person may file a
pre-emption claim for such land as he may have settled upon, thus
imposing conditions as pre-requisite to the initiation of a claim.
"2d. In relation to homestead claims, the law requires that a person
must be over twenty-one years of age, or the head of a family, a citizen
of the United States, or one who has declared his intention to become
such, and under the first and third sections of the amendatory act of
March 21, 1864, the persons claiming the benefit of said sections must
make settlement upon the tracts before they can obtain the benefit of
said sections. Therefore, as the fraudulent character of the pre-emption
or homestead claim in its inception may be brought in question, it is
right that the parties in interest should have an opportunity in all
cases to be heard. With this view you are required,--
"3d. When application is made by a railroad company to select tracts
which are covered by existing pre-emption or homestead claims at the
date of the right of the road attaching, but subsequently relinquished
or abandoned, to allow the company to file such proof as they may have
in support of their right to the land, or to have hearings for the
purpose, and should the evidence be satisfactory you will permit the
selections.
"4th. When any person applies to enter a tract of such lands, claiming
the right to do so by such prior abandoned claim, you will order a
hearing, notifying the railroad company, as well as the pre-emption or
homestead claimant, so that they may produce such evidence in support of
their right as they may have to furnish. Your inquiry must be directed
to the personal qualifications of the original claimant, and his
compliance with the law prior to filing an entry; and I desire to
enjoin upon you the necessity of excluding all testimony not material to
showing the facts upon the subject of inquiry. You will, however, be
careful that all such facts are brought out, and if necessary to this
end you will yourselves examine and question the witnesses. You will in
all cases give the parties interested personal notice of the time and
place of hearing, when their whereabouts are known, or they can be
reached by such notice. In other cases you will cause the notice of
contest to be published at least once a week for four weeks in the
newspaper having the largest circulation in the vicinity of the land.
Parties initiating a contest must provide for defraying the expenses
thereof, but when the case comes before you for trial you can apportion
the expenses according to the equities of each case. Your particular
attention is called to the fact that in some of the earlier railroad
grants, lands covered by homestead claims, which may subsequently be
cancelled, are not exempted from the operation of the grant. Therefore,
in such cases, the tracts revert to the grant, and you will recognize no
application for these lands by other parties, but will pay due regard to
the rights of the grantees. You will in no case allow pre-emption
filing, or homestead entry on this class of lands, without instructions
from this office."
This circular, in the interest of railroad companies, is signed by
Willis Drummond, commissioner, and directed to registers and receivers
of district land offices. While the acts of congress exclude from the
grants to railroad companies all lands held by pre-emption and homestead
claims, the secretary of the interior says it means _valid_ claims. He
then declares all claims invalid or fraudulent when there has not been a
literal compliance with the statute. If the pre-emptor filed his claim
one day or one week before he commenced his occupation, his claim, as
against the railroad company, is fraudulent. Or, if for some cause,
after having complied with all preliminaries, he should leave his claim
for a day or a week, it could be treated as abandoned, and his right
would be lost. These rulings, in favor of railroad companies, and
adverse to the settlers, having been made, the companies were not slow
in taking advantage of them. Men who supposed their claims to be valid,
who had invested their all in improving them, have had their validity
questioned, or have been charged with abandonment. The first intimation
a settler has, is a notice to appear and defend the home of his family
against the claim of a powerful corporation that is seeking to take it
from him. He must submit to the alternative of losing his home at once,
or of protracted, expensive litigation, with the assurance that he is
combatting a powerful adversary before a tribunal that has already
prejudged his case in favor of his opponent. All that the railroad
companies need do to defraud the settler is to satisfy the register or
receiver that, under the rulings of the department we have quoted, the
settler's claim is invalid, or that he has abandoned it.
We draw no fancy sketch. The circular speaks for itself, and the large
number of men who have been compelled to leave their pre-emption and
homestead claims, with the constantly increasing quarter-sections of
land that are being added to the railroad grants, attest the truth of
our statements. We are not aware of any law of the United States
recognizing the right of railroad companies to become parties in a
contest concerning a homestead or pre-emption right. Nor do we believe
that the interior department of the government can legally authorize
these companies to become claimants for lands held by settlers under act
of congress. If any question arises between two pre-emption claimants,
the commissioner of the general land office decides the dispute. If any
question is raised as to whether the claimant is entitled to his
pre-emption, there are, under the acts of congress, but two parties to
the controversy--the claimant himself and the interior department. The
order allowing railroad companies to appear as parties, and by virtue of
numerical strength and immense wealth and influence, to overpower the
settler, is doing him injustice, as well as degrading a high official
position, and sustains our charge that these railroad companies
influence the interior department of the government. We think we have
shown that the whole strength of this department is used in favor of
these great monopolies, and against the interests of the people. While
we do not charge the officers of this department of government with
intentional wrong, we do charge that this great corporate power, which
has such unlimited influence over the legislative department of the
government, has virtually taken control of the department of the
interior in cases where its interests can be subserved by the influence
of the department.
CHAPTER XIX.
THE MONOPOLISTS AT THE DOOR OF THE WHITE HOUSE.
The influence of this great corporate power does not spend all its force
at the interior department, but it is seen handing in its card at the
white house.
While we claim that railroads and other corporations have, to a
considerable extent, influenced the distinguished occupants of the
presidential chair, we do not wish to be understood as intimating that
any of our chief magistrates have acted corruptly. We simply assert that
this great corporate interest has secured favorable action from our
presidents when they have been appealed to. As will be seen by their
perusal, the acts of congress chartering the Pacific railroad and
branches, imposed certain duties upon the president in connection with
their location and construction. In the discharge of these duties the
wishes of the companies were in all cases complied with, and in some
instances to the injury and at the cost of the government and the
public, and under circumstances leaving no doubt that the president
acted wholly upon the representations of the companies.
In the act of July, 1864, the Union Pacific charter was so amended as to
permit any company organized under the laws of Iowa, Minnesota,
Nebraska, or Dakota, and designated by the president of the United
States, to construct a railroad from Sioux City, Iowa, to connect with
the Union Pacific road at some point not farther west than the
one-hundredth degree of longitude. A company was organized under the
laws of Iowa to build a railroad from Sioux City to Missouri Valley in
the same state, the latter point being some thirty miles east of Sioux
City, and seventy or more miles south. Another company was organized to
build a railroad from Missouri Valley to Fremont, in Nebraska, the
latter place being a point on the Union Pacific. These companies were
incorporated by a few men, among whom were several members of congress
who had aided in the passage of the act of July, 1864. Through the
influence of one of the incorporators, then a member of congress, now of
the United States senate, the president designated these companies as
the companies to build the Sioux City branch of the Union Pacific, and
their roads, representing two sides of a triangle, were adopted as the
branch road. The road is known as the Sioux City & Pacific. A road
running westerly from Sioux City to Fremont would be about seventy-five
miles in length. The road, as constructed between these two points, is,
as given in the Railroad Manual, one hundred and seven miles. The act of
congress required the road to be constructed on the most direct and
practicable route. This road received the same privileges, subsidies,
and grants, as the main line, with an addition of eighty sections of
land per mile. Now it cannot be presumed that the president, acting on
his own judgment, uninfluenced by the railroad company, would have
designated these companies, and these roads, as the Sioux City branch of
the Union Pacific road, with one hundred sections of land and $16,000
subsidy bonds for every mile of the road. We have given this instance to
show the direct influence of this corporate power over the president.
This great influence, so dangerous to the welfare of the country, is
indirect in its action. Vast numbers of men have their funds invested in
railroad stocks and bonds. They engage in Wall street speculations; they
buy and sell stocks and bonds; they operate in gold and values, and have
no interest in common with the laboring and producing classes of the
country. These corporations own and control property worth billions of
dollars; they rule the finances of the country; they have tens of
thousands of men in their employ; as they increase in strength and
wealth, they are constantly striving for greater powers and privileges.
Their lobbyists and retainers surround every department of the
government. When public offices are to be filled, they unite in favor of
men in their interest; and when decisions are to be made upon questions
affecting their rights and obligations, they take care that their
friends shall be in position to make or shape these decisions. The
president, with his appointing power, if influenced in their favor,
becomes an important ally. In his appointments to office, it is not to
be expected that he can personally know the qualifications and views of
every nominee. He must of necessity rely upon others, to a great extent,
in making his selections. Next to legislative action in their favor,
railroad companies are most deeply interested in the judicial decisions
affecting their interests. Judges are apt to be influenced by the same
motives that prevail with other men. Years spent by men as railroad
attorneys, or as attorneys for any other great interest, will, to a
certain extent, control their reasoning and decisions upon questions
coming before them should they be promoted to the bench. In close
relation with, and next in importance to the decisions of courts, on
points affecting this great corporate interest, are the rulings and
decisions of the attorney general of the United States. If these
important offices can be filled by persons whose past pursuits have
demonstrated that they entertain views favorable to the interests of
these companies, an important gain is made at the start in their favor.
To secure such appointments, all and every influence at the command of
these corporations are brought to bear upon the president. The services
of the most influential men, in congress and out, are engaged; the names
of the candidates selected are presented for the consideration of the
president, and their appointment urged by the whole railroad and
corporate interest of the country. The president, following a long
established precedent, usually appoints the persons who are most
strongly recommended. This fact is well understood by these corporate
interests and hence their vigilance and activity. We do not say that the
president, in yielding to this tremendous pressure, acts from improper
motives. We simply assert that this pressure is used, and that it is
scarcely to be resisted.
The fact that judges of ability and integrity differ in their
construction of the constitution and laws, is well understood by the men
who lead and control the corporate interests of the country; as also the
further fact that the time is not distant when the question whether the
people or railroad corporations shall govern, must be determined. To
prepare for this issue they use their great influence to have the
important positions in the government occupied by their friends. To a
considerable extent they have succeeded.
Mr. Ackerman, of North Carolina, was attorney general. He was what might
be termed a strict constructionist. His views were conservative. As the
legal adviser of the executive department, his opinions were adverse to
the interests of the railroad companies on certain questions submitted
to him. At the request of the president he resigned, and Judge Williams,
of Oregon, was appointed in his stead. No one will question the
integrity of the present attorney general. Yet it was a well-known fact
that, at the date of his appointment, he was one of the attorneys of the
Northern Pacific railroad company; that he was fully committed to the
railroad interests, and that his appointment was urged by railroad men
in all parts of the country. By his appointment a friend of these
corporations became a member of the cabinet, and an important ally is
present whenever questions affecting their interests are discussed in
executive council.
A question of the greatest importance to these corporations was the
construction to be given to the statutes of the United States, and
especially the "Legal Tender Act." The first of the legal tender acts
was passed July, 1862. This was followed by other acts increasing the
amounts of legal tender issues. Prior to the passage of these acts,
railroad corporations had issued and sold many millions of bonds, and
stipulated that both principal and interest should be paid in gold. Soon
after the issue of legal tender bills their value depreciated, and from
that time to the present there has been, and still is, a wide margin
between their value and coin. If these railroad companies could pay
their bond indebtedness with legal tender at par, a saving of from ten
to fifteen dollars could be effected on every hundred so paid. In the
year 1869, the question whether this act was retroactive in its
operation or effect was presented to the supreme court. The court was
then composed of eight justices. When the case involving this question
was presented to and decided by the court, but seven of the justices
were on the bench. Of these, four, including the chief justice, were of
the opinion that the statute did not affect contracts made before its
passage, and decided that these railroad companies must pay their bonds
in coin according to the contract. This decision was not acceptable to
this vast corporate power. It was condemned by railroad men throughout
the country. The president was approached on the subject, and his great
influence was besought in the matter. Four of the justices (one-half of
the court) having held adversely to the corporations, a full bench could
not reverse their decision. To effect a reversal, one of the four must
change his opinion, or the number of justices must be increased. The
latter alternative was decided to be the more feasible, and the
president asked congress to increase their number to _nine_. The reason
urged was, that upon important questions, before a full bench, the court
might be equally divided, and important questions would remain
undetermined. The railroad interest was fully represented in the lobby
at Washington, and congress provided for an additional justice. About
this time one of the justices retired from the bench, making a vacancy,
and rendering it necessary for the president to appoint two new
justices. This was a grand opportunity for the railroad interest. If men
who were identified with them could be appointed, the decision on the
"Legal Tender Act" could be reversed, and they could save from ten to
fifteen millions of dollars on every hundred million of dollars due from
them. Not only could they save this amount, but in future, as the
members of the court are appointed during life or good behavior, they
would have no apprehensions of a decision against their interest. At
once the president was importuned to appoint William Strong, of
Pennsylvania--a man who was fully identified with them by education and
employment, he being attorney for the Pennsylvania railroad company--and
Joseph P. Bradley, of New Jersey, who was also identified with this
interest, he being the attorney of the greatest railroad corporation in
that state. Neither of these men had any national reputation, but all at
once the city of Washington, as well as the whole country, was
enlightened as to their great judicial worth, and railroad men
throughout the country were urging their appointment. It was publicly
announced, and not contradicted, that they were in favor of reversing
the decision of the court on the legal tender act, and their
appointment was urged for this reason. This influence controlled the
president. These gentlemen were nominated by him, and their appointment
was confirmed by the senate in 1870. The decision on the legal tender
act was reversed, and railroad men were happy. As we shall attempt to
show, when we treat of the controlling influence of these corporations
upon the finances of the country, this reversal was most baneful to the
country, and detrimental to the best interests of the people. We do not
wish to be understood as accusing the president of being governed by
improper motives in the appointments of Messrs. Strong and Bradley to
the supreme bench; but we do mean that the railroad interests, by
concert of action, procured these appointments; it being known, or at
least well understood, that these appointments would insure a reversal
of the decision, as we have recounted, and that by such reversal their
interests would be greatly subserved. Nor do we wish to be understood as
accusing the persons so appointed of lacking the requisite ability for
the honorable stations for which they were selected, or that their
decisions were governed by personal considerations, or that they
reversed said former decision to specially subserve the interests of
railroad corporations. We have long since come to the conclusion that
judges of courts, like other men, are influenced by surrounding
circumstances; that they are not infallible, and that it is no unusual
thing for the most eminent judges to differ upon questions submitted for
their decision. While these decisions are honestly made, they are often
controlled or dictated by extra judicial considerations. As we shall
have occasion hereafter to examine this subject when treating of the
intimate and controlling relations between these corporations and the
courts of the country, we are content to leave the case of their
influence with the executive department to the proof submitted in these
three appointments of Williams, Bradley, and Strong.
CHAPTER XX.
THE UNITED STATES TREASURY THE VASSAL OF WALL STREET--STOCK "OPERATIONS"
EXPLAINED.
We now beg to call the reader's attention to the financial operations of
the monopolists, and the course resorted to by them to control the
finances of the country. There are now (January, 1873) seventy thousand
one hundred and seventy-eight miles of railroad completed in the United
States and territories. At an expense of $35,000 per mile, the total
cost of these roads is $2,456,230,000. The cost as given by the
companies is $3,436,638,749, or $48,970 per mile. In contemplation of
law, and as reported, this cost is represented by stock certificates,
and is supposed to be paid up. If the roads cost but $35,000 per mile,
then $980,408,749, of the stock certificates (that amount being the
excess over actual cost), have only an imaginary value. In addition to
the stock certificates, representing the above sum of $3,456,230,749,
the railroad companies have issued and put upon the market their bonds
to the amount of $2,800,000,000, thus making their roads represent the
enormous sum of _six billions two hundred and thirty-six millions six
hundred and thirty-eight thousand seven hundred and forty-nine dollars,
or eighty-eight thousand eight hundred and seventy-two dollars per
mile_. The only real value all these bonds and certificates of stock
represent, is the railroads. These we have put at $35,000 per mile. Of
course some lines of road exceed this valuation; but an examination of
the actual cost, as reported by the engineers of the respective roads,
will show that much the largest portion of the roads have cost less. Now
let us look at the amount of the capital represented by a few of these
roads, as reported in the _Railroad Manual_, and _The Stockholder_. The
Chicago, Burlington, & Quincy is reputed to be one of the best and most
prudently managed roads in the country. This road represents in stock
and bonds the sum of $32,845,880, or $43,292 per mile. On the other
extreme we will take the Central Pacific, which represents the sum of
$182,208,000, or $130,000 per mile. The Atlantic & Great Western (an
organization of the N. Y., Penn., & Ohio) represents the sum of
$109,000,000, or $256,000 per mile. The Cedar Rapids & Missouri River
railroad represents $11,334,000, or $41,000 per mile. The Chicago, Rock
Island, & Pacific represents the sum of $25,717,000, or $56,667 per
mile. The Erie represents the sum of $112,935,710, or $125,750 per mile.
The New York Central & Hudson River railroad represents $104,660,049, or
$142,656 per mile. The Union Pacific represents $112,911,512, or
$109,507 per mile. We give the above as samples of the amounts
represented by the different roads. In some other instances the stocks
are "watered" more, and in others less than in the roads above named.
Taking all the roads in the country, and adding together the stock and
bonds issued, they represent $3,800,408,749 more than their actual cost.
It will not be out of place here to state that the only resource these
railroad companies have for the payment of interest and dividends on
their stock and bonds, representing the sum of $6,236,638,749, is the
earnings of their roads. While a low rate of charges would pay fair
dividends on the actual cost of the roads, yet in order to pay dividends
on their "watered" stock, and interest on their bonds, oppressive and
extortionate rates must be charged and collected. The men who control
these great monopolies, viz: Col. Scott, who controls roads representing
about $700,000,000; Vanderbilt, who controls about as great an interest;
Drew, Gould, and some few others of the principal railroad men, care but
little about the prosperity of the country, or the profits made by their
roads, save as a basis for their Wall street speculations. The roads
serve as a basis for financial operations. Like the old "wild cat" banks
that issued bills without regard to stock or capital, so the roads
controlled by these railroad monarchs are loaded with "watered" stock
and bonds, until their value as roads are destroyed, and passengers and
shippers are oppressively taxed for the purpose of giving some sort of
market value to the bonds and "watered" stock with which Wall street is
flooded. The issuing of stock certificates goes on, and will continue as
long as dividends can be declared. At the present time the railroads of
the country collectively represent about three times their value, or
actual cost. If the people were not taxed on "watered" stock and bonds,
dishonestly issued, the rates charged for transportation would be but
little more than one-third the figures of the present tariff. The vast
wealth claimed by railroad corporations is about two-thirds pure
fiction, and but for the extortions practiced upon the public, their
stocks and bonds, beyond the value of their roads, would not be
considered in market; but so long as interest at the rate of six, eight,
and ten per cent can be drawn from the public, they are marketable.
These stocks and bonds are owned or controlled by the men who not only
manage the railroad interests, but also the bond and stock market of the
country. Being the leading spirits among Wall street brokers, using
their railroads for the purpose of aiding in their stock-jobbing
speculations, by compelling them to earn interest on all of the
worthless stocks and bonds they put upon the market, a fictitious value
is given to them. Having their principal place of business in the
commercial metropolis of the country, being able whenever their
interests demand it to "corner" the money of the country, it could be
hardly expected that the treasury department of the government would
escape their control. If a conflict should arise between the secretary
of the treasury and these vast monopolies, the question of which side
would come off victorious could not be doubtful.
The circulating medium of the country is, in legal tender notes,
$356,000,000. That of national banks, excluding their reserves, is less
than $300,000,000. This currency is scattered over the country--a small
portion of it in foreign countries. No coin is in circulation, most of
it being locked up by Wall street brokers, in the interest of these
railroad corporations. Many of the national banks of the country are
owned by railroad men. In addition to the immense earnings of the
railroads, which under the present system are concentrated in the city
of New York, almost the entire amount of stock and bonds issued by
railroad companies is either owned or represented in Wall street, and
as occasion demands is put upon the market. Thus the whole of this
corporate influence can be used at any time in a financial conflict with
the government. It has been and is still being used against the
government. Under the revenue laws of the country, import duties are
paid in coin. A part of the sum thus realized is applied in payment of
the national debt. There is no good reason why the secretary of the
treasury should not apply this sum directly in payment of government
bonds. Such a policy would tend toward the resumption of specie payment,
making the money of the people of equal value with that used by the
government. This would not suit railroad companies. So long as a margin
can be preserved between coin and currency (and for their purposes the
wider the better) under the decision of the supreme court they can
discharge their bond indebtedness, contracted to be paid in gold, with
depreciated paper at par, and save the margin. In order that a margin
may be continued, instead of making direct payment of government bonds
to the direct holders thereof, the secretary of the treasury is required
to sell gold in New York, and purchase or liquidate the bonds with the
proceeds of these sales. It is noticeable in all cases of the sale of
coin, that Wall street brokers are the purchasers, and usually at less
than the quoted market value. By this means the interests of these
railroad managers are subserved in more than one particular. Their
brokers purchase and corner the coin sold, and prevent it going into
circulation, and the margin between coin and currency is preserved. The
day for the resumption of specie payment is kept in the distant future.
The importing merchant must buy gold of the brokers (who are the
railroad managers) at its market value, to pay government duties on
their imports, and thus the companies make the difference between the
price paid and the price obtained. When some favorite railroad stocks
are to be forced upon the market, these brokers, who can do so at
pleasure, supply the money market, and sell the stocks at a large
profit; and when the object is to reduce the value of stocks, they
withdraw from circulation a sufficient amount of the currency to cause a
stringency in the market, until their end is accomplished. Controlling
absolutely the gold market, as well as the secretary of the treasury in
his financial operations, they have only to corner a few millions of
currency to make the entire commerce of the country subserve their
special purposes. With all of their interests united, all their business
concentrated in Wall street and controlled by six or eight leading men,
they regulate the finances, fix the value of the produce of the country,
and hold the producers of the great west in a state of vassalage which
has no precedent, even in despotic countries. The secretary of the
national treasury, who is supposed to control the financial department
of government, is in fact the servant of these men, and whatever policy
is beneficial to their interests must be adopted by the government. To
the uninitiated it may appear impossible for a few men in New York to
exercise a controlling influence over the financial policy of the
nation, but if we remember that all the wealth of these corporations,
actual and fictitious, is concentrated in that city, or controlled by
men doing business there, and that an immense stream of money, received
by these corporations from passengers and shippers, is constantly
flowing into Wall street from all parts of the country, we can
understand their power and appreciate their influence. The fact that it
requires more than twice as much money to pay the interest on the bonds
issued by these corporations, and dividends on their stock, as would pay
the interest on the national debt, is significant. When private
corporations combine their interests and become so powerful as to
require an annual expenditure of more than twice the amount expended by
the United States government, and when their revenues more than
quadruple those of the government, they must of necessity exercise a
controlling influence over the financial and industrial interests of the
country. This fact is now being demonstrated by a combination of the
railroad corporations of the country, as the people know to their cost.
It will be proper here to detail the _modus operandi_ of these railroad
companies at their headquarters in Wall street. We read of large
operations in stocks and bonds, as well as in gold, and are apt to
conclude that sales and purchases are made by regular transfers in a
fair and legitimate manner. Such is not the case. Among the initiated
sales are pure fiction in many cases, and in others it is but
purchasing or selling the chance of an advance or decline in the price
of stocks, bonds, or coin. To call these transactions by their right
name--_they are nothing but gambling_. If legitimate sales are made, it
is with outside parties, or to the uninitiated. The corporation rings
congregated in Wall street, calling themselves bankers and brokers, sell
to, or purchase stocks from, each other, without delivery or even
payment, all the money passing between the seller and purchaser being
the margin between the price agreed to be paid and the market reports at
the time fixed for delivery. To illustrate, let us suppose that certain
railroad stock is quoted at ninety-three cents, or seven per cent below
par. A, who believes that there will be no further rise in the price,
but that the same will decline, offers B $10,000 of this stock at
ninety-one cents, to be delivered in three days. He has no stock, but
believing it will decline to ninety cents or less, within the time fixed
for delivery, he expects to buy at a still lower rate than he has agreed
to sell, or to borrow it for a consideration if the decline does not
meet his anticipations. Or he will settle his contract with B by paying
him the difference between the market value at the time of delivery and
the price at which he agreed to sell. The same process is gone through
if the sale is made with the expectation of the stock advancing in
price. A agrees to purchase of B four days after the date, $15,000 in
stock at ninety-five cents, being an advance of two per cent on the
market price on the day of sale. The stock does not advance, and at the
time for delivery A pays B the margin between two cents on the dollar,
and the market price. No stock has passed between them. It was a fight
between a "bull" and a "bear" for the margin.
Nearly all of the financial operations of Wall street brokers are of a
like character. Some of them involve immense amounts. One man makes a
fortune, and another becomes bankrupt in a day. Wall street is the place
where men of all creeds and nationalities meet to engage in this kind of
gambling traffic. Men run about the streets--into the "gold room," the
"clearing house," their faces flushed, their whole person excited, their
appearance "distorted, hair dishevelled," their voices hoarse, all
intent on making money, not in a legitimate way, but by the chance of a
rise or fall in gold, bonds, and stock. Let us see some of the terms
used by them in their business. The rings operating in stocks are
divided into two classes--"bulls" and "bears." They have the advantage
of the real bear and bull in this: they can change from one to the other
as the occasion serves. Daniel Drew, Col. Scott, and Commodore
Vanderbilt can be bulls to-day and bears to-morrow, as their interests
dictate. The object of the _bulls_ is to advance the price of stocks;
that of the _bears_ to depreciate. They thrive most when the people
generally are in want, or when some public calamity unsettles commerce.
They oftentimes devise means to bring on a panic, that they may break
the market and buy favorite stocks at low rates. They do not care how
much the community may suffer, or how many men engaged in legitimate
business may be ruined, provided their own interests are served. We take
from _Appleton's Journal_ a description of some of their terms, and
their manner of doing business:--
"The terms, 'long' and 'short' are of respective application to the
'bull' and 'bear' parties. The bulls are always 'long' of stock, and the
bears are always 'short.' The speculator who has stock on hand which he
bought with expectation of selling at higher prices, is on the bull
side, and, in the parlance of the street, is 'long.' A bear seldom has
stock on hand. His business is to sell 'short'--that is, to sell
property which he has not got, intending to buy and deliver when prices
are lower. Generally, the stock is to be delivered the day after it is
sold, but quite often the bear does not buy it for a month or two, or
three months. How, then, can he deliver it in twenty-four hours? By
borrowing it from another person. There is in Wall street a regular
system of borrowing stock. The borrower, who represents the speculator,
procures the stock from another broker, to whom he gives a check as
security for the stock borrowed. This transaction is good for one day
only, but it may be renewed for the next day, and then the next, and
thus several weeks may pass before the stock is really purchased for
delivery. Meantime the seller, if he belongs to a clique, or 'pool,' is
trying every day to depress prices, in order that he may buy the stock
at a lower figure than that at which he sold it. This is the operation
known as 'hammering the market,' and a very exciting one it sometimes
is. But the bears are sometimes badly 'squeezed,' and then they make a
rush to 'cover.' When the bulls learn that there is a large 'short'
interest in a particular stock, they put their heads together and get up
a 'corner.' When a stock is said to be 'cornered,' the meaning is that
it is controlled by a clique. The clique hold enough of it to control
the market, and exact such terms as may be desired. An upward movement
is suddenly developed, and then the bears, who have sold 'short,' in
expectation of lower prices, become alarmed, and begin to buy. In the
majority of cases, the men who work the advance are the very ones who
bought what the bears sold, and they are now selling it to them at
higher figures for delivery back to themselves. 'Twisting' is the
process of making the bears pay high prices for what they probably sold
at low prices, and 'covering' is the operation of buying stock to close
'short' contracts. Once in a while a stock is so closely 'cornered' that
it can only be borrowed at an enormous interest for a day's use--perhaps
at a rate that exceeds a thousand per cent per annum. An operation of
this sort is the worst squeeze of all; and it is not to be wondered at,
that, as the gentlemen of the stock exchange say, the bears generally
squeal under it. One shrewd manipulator of stock is known to have
cleared $50,000 in one day, by loaning a fancy stock that he had
'cornered.' But the same gentleman sometimes gets into a 'corner'
prepared by others. It is commonly understood that he was fleeced to the
amount of $2,000,000 during the lively 'Northwest' gale a few weeks
since. 'Puts' and 'calls' are terms of more than ordinary difficulty for
the uninitiated to understand. A proposes to 'put' to B, that is, to
deliver to him, a certain amount of a certain stock at a certain time,
at a price agreed upon when the contract is made, and gives B a bonus of
one, two, or three per cent, as the case may be, for the privilege. This
is a 'put.' If the stock does not decline in value to an amount
exceeding the sum given to B, A cannot make anything by the transaction;
and, unless he chooses to deliver the stock, he is not obliged to do so.
If it falls more than the amount, A makes a good profit, for B, having
accepted the bonus, is bound to take it, even though it may be selling
five or ten cents below the price at which he agreed to take it. A
'call' is pretty much the same thing, with this difference: A gives B a
hundred or a thousand dollars, or whatever sum may be agreed upon, for
the privilege of 'calling' from B a certain amount of stock within a
given number of days. If it advances, A may 'call' it and make money. If
it declines, he need not 'call' it, but of course the bonus he gave to B
is forfeit. There are times when the business in 'puts' and 'calls' is
quite large, and a great deal of money is made by it; but, like all
other kinds of speculation, it is dangerous to the inexperienced.
'Scoop' is a term less familiar to the public than any of the foregoing.
This 'scoop game' is a very common one, and is played in this way: A
clique of speculators, let us suppose, wish to get possession of a good
deal of some particular stock, which they have reason to believe will
soon advance in price; but of course they want to get it cheap, and they
accomplish their object by starting a break in the stock. This is done
by offering it at low figures. They instruct their brokers to offer
small quantities under the market price, and to keep on offering lower
and lower, until other holders of the same stock who are not in their
confidence become alarmed, and sell out at the best price they can get.
In the meantime the clique have other brokers buying all the stock that
is offered, and thus they get possession of a large amount of stock at
low prices, which they can probably sell, a few days later, at a large
profit. This 'scoop game' is one of the most profitable that the Wall
street gentlemen play. The process of 'washing'--a very good one in its
ordinary sense--is often employed in Wall street. 'Washing' is a
peculiar operation there, very peculiar indeed, and the outsiders ought
to keep as far as possible from the suds. A clique is as necessary to it
as to the 'scoop' business. There is a stock on the list, for instance,
that the public persist in letting alone, and the holders of it want to
stir up some excitement in this stock, and induce the public to buy it.
How do they proceed? Their plan is quite simple: Several brokers--let us
suppose four--are employed to 'wash' the stagnant stock. No. 1 offers to
sell; No. 2 takes what is offered. No. 3 wants to buy; No. 4 sells him
all he wants. This is kept up for a few days, the price rising steadily
as the 'wash' proceeds; but not one share is actually sold. The innocent
outsider, supposing these fictitious transactions to be real, and
thinking there is a chance to make a turn in the stock, goes in as a
buyer himself. Ten to one he will never get as much for the stock as he
paid, for it falls stagnant when the speculators have got it off their
hands. 'Coppering' is a term recently introduced, but very well
understood in the street. It means operating in a direction contrary to
that of another. For example, one buys a particular stock, believing
that it will advance; another man, observing that the first has not been
lucky in his operations, sells this particular stock, believing it will
decline. Or the first may sell a particular stock 'short,' and the
second, calculating on the other's ill luck, will buy. This sort of
speculation is carried on only among the smaller class of operators, and
may be set down as sheer gambling. A 'straddle' is a double privilege,
entitling the purchaser to either 'put' or 'call' a stock. The bonus is
generally the amount paid for the single privilege of 'put' or 'call.' A
'margin' is the money deposited with the broker through whom the stocks
are purchased, as a security against a sudden depreciation. The amount
is generally about ten per cent of the par value of the stock. 'Margins'
are the rocks on which many adventurers on the uncertain waters of
speculation are utterly wrecked. 'Carrying' means holding stock in
anticipation of higher prices. Often a stock is 'carried' for six
months, but generally the time is not more than two months, and
frequently not more than a week. Quick turns is the rule of a majority
of speculators. 'Watering' is the operation of suddenly increasing the
capital stock of a company. Wall street was thoroughly familiarized with
it by the reckless Erie managers, who earned a notoriety that certainly
honorable men would not covet. It is very dangerous to the holders of
the stock previously in the market."
The foregoing discloses the manner in which these corporations, through
their managers, play the double _role_ of operating railroads and
operating in Wall street. To outsiders there seems to be but little
difference between what is known everywhere as downright gambling, and
Wall street operations. The gambler who risks his half-dollar on a game
at cards is punished for violating the law; but these Wall street
operations, which are but games of chance, are dignified with the name
of "speculations." Honorable men, reputed Christian men--Jew and
Gentile--all engage in them. While they prey upon the producer in
operating their roads, they prey upon the unsuspecting public in their
stock operations; and, by way of variety, occasionally devour each
other. Controlling, as they do, the means of transporting the products
of the country to market, as well as the coin of the country and the
stock market in Wall street, they are prepared to get up a "corner" on
any marketable commodity--upon the currency of the country, and upon
gold. In fact, they may have all the coin of the country under their
control, save the amount held in the treasury of the government. The
monthly reports of the secretary of the treasury show that while there
was the amount of about $100,000,000 in the treasury one year ago, there
is but about two-thirds of that amount now. The reports of sales show
that these Wall street operators have cornered about one-third of the
gold held by government within the last year. This cornering process
goes on, and is now reduced to a system. Suppose the secretary sells, in
the month of January, 1873, in New York, $6,000,000 in coin. It is all
bought and cornered by the brokers. The importing merchants require but
$3,000,000 during the same month to pay duties. The difference,
$3,000,000, is locked up in Wall street. This transaction, in a greater
or less degree, is repeated each month, and while the amount of gold in
the treasury is decreasing, that controlled by railroad brokers is
increasing. The treasury weakens, and these gambling rings and
combinations strengthen. It is only a question of time, under the
present system, when the treasury will be obliged to replenish itself by
purchases from the brokers. So completely are the finances of the
country under their control, the secretary of the treasury is obliged to
keep a large surplus of coin on hand to meet emergencies. In order to
prevent a panic, he is obliged to sell coin monthly, and whether the
financial condition of the treasury or of the country will warrant it or
not, he is obliged to pay some portion of the national debt as an
excuse for selling coin. These corporate rings are laboring to control
the gold of the country, and thus prevent the resumption of specie
payment. To make resumption impossible, they "bull" gold as well as
stock, and thus force gold sales by the secretary. The sooner they can
deplete the national treasury, the sooner can they become masters of the
situation. They now hold the secretary of the treasury at their mercy,
and compel him to serve their selfish purposes. When they achieve their
final victory (and achieve it they will under the present system) they
can, without hindrance, fix the value of gold, and extort from the
people and the government just such premiums as they please to ask for
it. They can render specie payment impossible, and thus reap the full
benefit of the "Legal Tender Decision."
CHAPTER XXI.
HOW WALL STREET BUILDS RAILROADS--A HOT-BED OF CORRUPTION.
We have attempted to show the controlling influence of these railroad
corporations upon the legislative and executive departments of the
government, and have placed before the reader the danger to republican
institutions and liberties of the people, resulting from this influence.
In this connection it remains for us to treat of the influence of these
corporations upon the judiciary of the country. Before proceeding to
this branch of the subject we desire to direct the reader's attention to
some alarming facts respecting these corporations, hitherto only alluded
to, and the disastrous results which must follow their present
management.
We have already shown that railroads, in stocks and bonds, represent
capital to about three times their actual value, and that because of
this, the people are compelled to pay rates of transportation ruinous to
the agricultural interest of the country. We have shown the relations
existing between the men who manage these corporations and the Wall
street gamblers, with their manner of issuing and putting upon the
market fictitious or "watered" stock. The idea generally prevailing is,
that the enormous wealth which these monopolies represent is real. In
fact, about two-thirds of it is pure fiction. It is _manufactured_, and
by reckless and dishonest men, who stop at nothing, and who care not for
the prosperity of the nation, or of the government, when their own
interests are in view. They drain the country of its wealth, concentrate
it in Wall street, and there spend it in stock and gold gambling; and
this hot-bed of corruption which has no counterpart, save in the
infernal regions, has raised such a combination throughout the country
as to control the whole financial policy, and compels even the secretary
of the treasury to yield to its demands. The public and private wealth
of the country is being rapidly destroyed by these corporations, and all
departments of government are compelled to do them homage.
We have shown that the railroads of the country are in the hands of
unscrupulous men, whose sole interest in transportation is the money it
can extort from the public. This must be so from the manner in which
roads are built and controlled. Formerly railroads were paid for from
the proceeds of paid-up capital. The men who became stockholders were
interested in making good and cheap roads, and in operating them
honestly and economically. These men were free from the scandal of
watering stock, issuing and selling bonds to an unlimited amount, and
were not partners in the iniquitous Wall street speculations which have
become the bane of the country. In Appleton's Railroad and Steamboat
Companion, published in 1849, we find a statement of the cost of
railroads then constructed. The roads then constructed were supplied
with rails that cost less than those now in use, but the road-beds in
most cases, in the eastern states, cost much more than those constructed
at more recent periods. Some of them were lines of solid masonry,
supporting lateral or string timbers, throughout the entire length, and
the rails were placed upon these timbers. Others were constructed upon
the plan now in use, costing less than half the cost of the others. The
roads in the eastern states, built upon the plan first named, cost as
follows: In Massachusetts and the other New England states, $24,000 per
mile. In New York, $26,000. In New Jersey and Pennsylvania, $40,000. In
Michigan, Ohio, and Indiana, where the roads were built upon the modern
plan, $11,000. Of course, the small cost in these last named states is
attributable in part, to the nature of the country through which they
pass. The facilities for building railroads at the present time more
than counterbalance the additional cost of iron, and no good reason can
be shown why the actual cost of roads at this time should exceed that of
the more substantially constructed roads built thirty or forty years
ago. But at the present time the building of railroads from the proceeds
of paid-up stock is not generally practiced. A different rule prevails.
The general rule now is to get grants of land, government, state, and
local subsidies, in amounts sufficient to organize a company and
commence the work of construction, then to issue and sell bonds, secured
by mortgage upon the roads to be constructed, and from the proceeds
construct the roads. Then stock certificates representing paid-up
capital are issued, when in fact, all that has been paid is the local
subscriptions obtained by managers from persons located along the lines
of roads. The roads having been built on borrowed capital, the stock
represents nothing but an opportunity for dishonest speculation. A
"railroad" now means, to a large majority of those who are engaged in
projecting and creating it, nothing but a fraudulent device for
extorting money from the public under cover of developing the country
and rendering great public benefit to the nation. After the roads are
built, the men who have built the same, and issued and sold the bonds,
issue to themselves certificates of stock, no part of which they have
paid up, and go into Wall street to unload, that is, to sell their
stock. If it be in good demand it will bear "watering." More stock is
issued and sold, and by this process men who were worth nothing, but who
were so fortunate as to get the control of certain railroad companies
without having invested to the amount of a dollar, suddenly become
immensely rich. The value of the road to those who have paid up their
stock, but are not included in the ring, is destroyed; the road is
loaded with a debt that destroys its value. This new method of
construction meets with favor among a large class of men in all parts of
the country, who have combined to aid each other. All that is lacking on
their part to take absolute control of the whole country and government
is a consolidation of all the railroads of the country under one
management. At this time, six or eight great combinations, with a half
dozen men at their head, manage the railroad interest of the country.
They are extending their power and it may not be long until all will be
consolidated in one, which would give this monopoly absolute control,
not only of the markets, but of the whole legislation of the country in
matters affecting their interests. With packed legislatures, state and
national; with paid or intimidated judges, and with civil service of
several thousand cunning clerks, and able-bodied brakemen, conductors,
and switch tenders, they would be in that position most to be dreaded by
all lovers of liberty--a powerful and enormously rich corporation,
surrounded by a weak, timid, and helpless public. While we were still
engaged in singing pæans over the glorious institutions of our happy
country, we would suddenly find that our institutions had disappeared,
and that we had, riveted around our necks, a worse despotism than we
ever lamented for the down-trodden of other lands. This is really no
imaginary picture as all will see who remember the stronghold,
absolutely inaccessible to the law, which Fisk and Gould erected, and
for a time maintained in New York; or the military operations of the
employes of the Erie on the Susquehana road, and who have followed, with
any attention, the helpless struggles of the government of the United
States--formerly supposed quite able to take care of itself--in the foul
toils of the Union Pacific railroad. These corporations foreshadow what
must follow when a perfect consolidation is effected. Now at
non-competing points they extort from shippers such enormous rates for
transportation as absorb almost the entire value of the farm products;
while from points at which there are competing lines of road they will
carry at greatly reduced rates. They will charge no more for carrying
freight one thousand miles from a point where there is a competing road,
than for carrying one-tenth of that distance, where there is no
competition. When they have the power, and hold the shipper at their
mercy, they virtually rob him. What is true of their course where there
is no competition, will become the universal rule, when a perfect
consolidation of the whole railroad interest is effected. Add to this
the control of the finances of the country (which they are now rapidly
securing) and their rule becomes absolute over the whole people, and all
departments of the government. If the reader has followed us thus far,
he will have observed that the corporate interest of the country has
assumed a position in antagonism to the people; that it has a secure
hold upon the industrial and financial interests, and that, to a great
extent, it already controls the action of the legislative and executive
departments of the government, state and national.
CHAPTER XXII.
THE SUPREME BENCH INVADED--ITS DECISIONS REVIEWED.
We are aware that many look upon the final decisions of courts with a
degree of awe and respect which is almost reverential. The railroad
companies of the country, with all their paid attorneys, are now
extremely jealous in their efforts to convince the public that the
supreme court of the United States is a body of the greatest jurists the
world ever produced; that their decisions are pre-eminently able, and
that it is disloyal, if not rank treason, to call them in question, or
to even criticise them. While we feel bound to recognize the decisions
of courts as binding until they are reversed, we claim that it is not
only the right, but the duty of every citizen of the republic to examine
these decisions, and to approve or condemn, as to his judgment shall
seem right. We examine, and approve or condemn, acts of congress and
state legislatures; we discuss the motives of legislators, and when acts
have been passed which are not acceptable, their repeal has been
demanded. Not unfrequently repeals have been effected soon after their
enactment, either because of patent defects, or because the people
condemned them. History has proven that the election of a man to
congress, or to the legislature, does not clothe him with wisdom, not
always with honesty, but that the frailties of humanity affected him as
it did others. The same rule applies to courts and judges. They are made
of the same flesh and blood, and are subject to the same infirmities as
other men. Their knowledge is not perfect; their judgment is not
infallible, nor are their official decisions always pure and free from
bias. Instances are not wanting where judges have been impeached, and
removed for dishonest practices. They have been and still are being
influenced by popular feeling, by certain interests, and are always
more or less controlled by education and association. Their decisions
are often reversed, and they sometimes reverse their own decisions.
If we want examples of a corrupt bench, we can refer to the city of New
York, where certain judges have been impeached, and removed from office.
Of partisan judges, we find them in Louisiana, Alabama, Arkansas,
Kansas, and many other states. Of ambitious judges, those who, while
acting in their official capacity, enter into political contests, and
use their judicial positions to secure other preferment, we need only to
look over the history of any of the states, and to the highest court in
the nation. Judges of the supreme court of the United States are found
identified with political parties; entering the lists as candidates for
higher distinction; and while they are holding high and responsible
offices, to which they have been appointed for life, they are seen
mixing with politicians as partizans, and seeking nominations. Judges
whose judicial decisions have been controlled by public sentiment, can
be found in Iowa, Illinois, Indiana, and Wisconsin. Judges who have
reversed their own decisions, can be found in any state in the Union,
and we have recent examples in the supreme court of the United States.
Such being the facts, it is not strange that railroads, and other great
corporations, should, to a very considerable extent, influence the
actions and decisions of courts. We feel warranted in saying, that the
decisions of courts, more than everything else combined, have promoted
the rapid strides made by railroad corporations toward a complete
destruction of republican institutions. The pernicious practice of
solving all doubtful points in favor of these corporations by the
"judicial construction" of statutes, or what might be called "judicial
legislation," has been of vastly more benefit to them than all the
grants received from legislative bodies. Legislatures do not possess the
power to grant to any individual, company, or corporation, exclusive
rights or privileges, unless such power is conferred by the
constitution. The rule formerly obtained, that in cases where the rights
of the public and that of an individual or corporation came in conflict,
an act of the legislature of doubtful authority would be construed in
favor of the people. The reason for this rule of construction is
obvious. The people are sovereign. All the powers not delegated to the
government, or to some department of it, were retained by the people.
Hence, when a question was presented involving a doubt of its
constitutionality, and a decision in favor of the individual or
corporation would deprive the people of any of their reserved rights, it
was resolved in favor of the sovereign people. The act was held to be
unconstitutional because the legislature could not exceed the scope of
the authority conferred upon it. The constitution was a limitation upon
legislation.
In a former chapter we have attempted to show the distinction between
the power of the states and general government under the constitution;
to demonstrate that the power of states was supreme in all matters save
in those expressly conferred upon the general government by the
constitution, and that for this reason the constitution of the United
States should be strictly construed. We are warranted in saying that
this rule obtained until questions involving the interests of railroads
began to present themselves for the decisions of the supreme court of
the United States. When these questions began to arise, a different rule
was demanded by the companies, and by a gradual departure the supreme
court has reversed this old and just rule, and now the will of that
court must be treated as the supreme law of the land. Judicial
legislation has usurped the place of judicial investigation, and the
people are without remedy, unless a return can be had to constitutional
rule. There is now a general complaint throughout the whole land,
because of the recent interpretation given by the United States courts
to the constitution; their disregard of statutes, constitutions, and
decisions of state courts, which have reached a point which virtually
makes the will of the supreme court superior to all constitutional and
statute law. During the war, the power and jurisdiction of the United
States courts were enlarged, and special powers were conferred upon them
to meet the exigencies of the time. From that period to the present,
these courts, by judicial construction of their power under the
constitution and new interpretations of that instrument, and by judicial
legislation, have gradually extended their jurisdiction, until there
seems to be no constitutional or legal barrier to their decisions.
Questions connected with railroad companies have increased rapidly.
Conflicts have arisen between the public and these corporations; they
have multiplied in the federal courts, and, as a general rule, have been
decided in favor of the companies. In some instances, upon questions
arising exclusively under the constitution and statutes of a state, the
judges of the federal courts have disregarded the action of the people
of the state, overridden their state constitutions and statutes, and
pronounced the decisions of the state courts invalid, and refused to be
bound by them, substituting their own conclusions in the interest of
these monopolies. To prove this, let us compare some of the earlier
decisions of these courts with those of more recent date, citing cases
where the powers, rights, and privileges of corporations were involved,
and where conflicts arose between the government of states and of the
nation. In the early years of our republic, questions connected with
corporate rights were submitted to the supreme court of the United
States; they were ably argued by the best constitutional lawyers of the
nation, and were carefully considered and decided by the courts. Upon
the question as to whether state courts were inferior, the supreme court
of the United States decided that they were not. The same court, on a
question raised as to the authority of the legislature of a state to
grant to private parties exclusive rights to certain property in
Georgia, _held_, that the real party in interest was the people, and
that it was only when the legislature acted within the power conferred,
that their acts were valid; that it was the peculiar province of the
legislature to prescribe general rules for the government of society,
but not to apply those rules to individuals of society.
The question as to the rights, powers, and privileges, of corporations,
came before the supreme court of the United States, and was fully
examined and decided, in 1819, in what is known as the "Dartmouth
College Case." The charter for the college had been granted by the king
of England for educational purposes. It was in no sense a corporation
for pecuniary profit. Without the consent of the trustees of the
college, the legislature of New Hampshire amended the charter in a
manner not acceptable to the trustees. They refused to recognize the
change made. A suit was instituted, and the case was taken to the
supreme court for a decision. The point at issue was whether the college
was a public or private corporation; and, also, as to the extent of the
power the state legislature possessed over its charter. It is not our
purpose to examine all the points raised and decided in that case, but
only to notice such as refer to the nature of corporations and the power
of the state governments to control them. In deciding these questions,
the court seems to have looked at the objects for which corporations
were intended. The court says; "A corporation, being a mere creation of
law, it possesses only those properties which the charter of its
creation confers upon it, either expressly or incidental to its very
existence. These are such as are supposed best calculated to affect the
object for which it was created. * * *
"The objects for which corporations are created are universally such as
the government wishes to promote. They are deemed beneficial to the
country, and this benefit constitutes the consideration, and, in most
cases, the sole consideration of the grant." * * "From the fact, then,
that a charter of incorporation has been granted, nothing can be implied
which changes the character of the institution, or transfers to the
government any new power over it. The character of civil institutions
does not grow out of their incorporation, but out of the manner in which
they are founded, and the objects for which they are created. The right
to change them is not founded on their being incorporated, but on their
being the instruments of government created for its purposes. The same
institution, created for the same objects, though not incorporated,
would be public institutions, and, of course, controllable by the
legislature. The incorporating act neither gives nor prevents this
control."
The doctrine above enunciated fixes the line of distinction between
public and private corporations. Those created for public or
governmental purposes are defined to be "public corporations," and those
created for the advancement of private enterprises are "private
corporations." Private corporations possess none of the attributes of
sovereignty, and hence are to be treated in law as private individuals;
the act of incorporation being for the purpose of affording the
corporators proper facilities for transacting business. Corporations
being the mere creatures of the law, they possess only those properties
which the charters of their creation confer upon them. Under the
decision to which we have referred, and from which we have quoted,
corporations are created by statute, and are subject to the control of
the power creating them. A grant from the sovereign power to an
individual, or to a company, is not necessarily irrepealable, nor will
it in all cases be treated as a contract. Corporations created for
public or governmental purposes are binding as contracts only so far as
they affect private interests, for the good reason that government
cannot contract with itself.
Nor could the legislature confer exclusive privileges upon a
corporation, the exercise of which would deprive the people of the
rights guaranteed to them in the constitution; for the reason that the
attempt to clothe a corporation with such privileges would be an
unauthorized act on their part. In the case of "Providence Bank _vs_.
Billings & Pittman," decided by the same court, in 1830, it is said that
"The great object of an incorporation is to bestow the character and
properties of individuality on a collective and changing body of men.
This capacity is always given to such a body; any privileges which may
exempt it from the burdens common to individuals do not flow necessarily
from the charter, but must be expressed in it or they do not exist." The
doctrine obtained that corporations can take nothing by implication, and
that unless the power to regulate and control them has been surrendered
by the legislature, that power remains undiminished. The rule that
grants of privileges to corporations are to be strictly construed, when
the rights of the public are affected, is recognized in this case. We
are warranted in saying that it is only since corporations have become
all-powerful in the land that a different rule has obtained. Under the
statutes of the United States, and as formerly held by the supreme
court, a promissory note given by a citizen of a state to another
citizen of the same state, but transferred to a citizen of another
state, could not be sued in the United States courts, but the holder was
compelled to bring his action in the state courts. This rule obtained
until counties, cities, and towns began to issue their bonds to railroad
companies, and was then disregarded. Railroad companies had sold and
delivered these bonds to parties in Wall street, or elsewhere; they had
failed to fulfil their contracts with the parties from whom they had
received the bonds, and when suit was brought upon them in the state
courts the bondholders were beaten. Suits were then commenced in the
federal courts, the plain letter of the statute was disregarded, the
established decisions of the supreme courts were overruled, state
statutes and constitutions were treated with contempt, the decisions of
the supreme court of a state, which had been followed for years, were
called "_oscillations_," and the interests, frauds, and deceits of
railroad corporations were fully protected and sustained; not because
this course was supported by the statutes or precedents, but because
such a course would subserve these harmful interests. This action on the
part of the supreme court was not the result of any dishonest or
partisan intent, but it was made to prevent what the court was pleased
to term great wrongs about to be inflicted on _innocent_ holders of
bonds purchased of railroad companies. In many instances the _innocent_
bondholders were the same parties who, as railroad men, had cheated the
counties and cities, and by fraud and false representation had obtained
these bonds, for which no consideration has been paid to the present
time. It will not be out of place here, as showing the influence of
these corporations over the supreme court of the United States, to refer
to the transactions that caused the first departure by the court from
the settled rules of decisions on questions arising under the
constitutions and statutes of states, and, we may add, initiated a rule
of decisions, followed to the present time, which have well nigh
destroyed states rights. Under this new rule the whole country is
governed by the supreme court and corporations. The people are
powerless, and monopolies reign supreme. We refer to the question of aid
by counties and municipal corporations to railroads. In many of the
states municipal corporations have subscribed stock and issued their
bonds to railroad companies, in some instances under express statute
authority, and in others without such authority. No one is prepared to
admit that compulsory payment by the citizen of a part of his property,
or money, to aid a private corporation in building a railroad, is the
payment of taxes for the support of government, or that the levy and
collection of a tax for that purpose can be supported by any section of
the constitution. Yet we all know that such taxes have been, and are
being, levied and collected. Judge Dillon, in his work on municipal
corporations, says: "The courts concur, with great unanimity, in holding
that there is _no implied authority_ in municipal corporations to incur
debts or borrow money in order to become subscribers to the stock of
railway companies, and that such power must be conferred by _express_
grant. To become stockholders in private corporations is manifestly
foreign to purposes intended to be subserved by the creation of
corporate municipalities, and the practice of bestowing powers of this
kind is of recent date and origin; and hence the rule, that in order to
exist, it must be specially conferred, and cannot be deduced from the
ordinary municipal grants."
If the above quotation is good law (and this no one will deny), the
recent decisions made by the supreme court cannot be supported. But in
order to avoid the force and effect of this principle, and to provide
for the collection of bonds illegally issued (by recent decisions), a
new doctrine has been promulgated by the court which overturns state
statutes, as well as the decisions of state courts. Treating of this
class of bonds, Judge Dillon says:--
"Respecting negotiable bonds issued under legislative authority, by
municipalities for such and kindred purposes, when in the hands of _bona
fide_ holders, the supreme court of the United States, influenced,
doubtless, by a keen sense of the injustice and odium of repudiation,
has at all times displayed a strong determination effectually to enforce
payment. Accordingly it has refused to follow the subsequent decisions
of the state courts against the validity of such bonds, in cases where
the prior rulings of the state courts had been in favor of the power to
issue them; it has adopted liberal constructions of statutes and
charters authorizing the creation of such debts; it has given no favor
to defences based upon mere irregularities in the issue of the bonds, or
non-compliance with preliminary requirements, not going to the question
of the power to contract; and has held that the circuit courts of the
United States were clothed with full power and authority by _mandamus_,
or otherwise, to enforce the collection of judgments rendered therein on
such bonds, and that this authority could not in the least be interfered
with, either by the legislature or the judiciary of the states." It will
be seen that for the purpose of relieving railroad companies from their
liabilities as guarantors, on bonds issued to them by municipalities
(for these bonds were uniformly so guaranteed), the supreme court of the
United States has declared the statutes of states, and the decisions of
state courts, absolutely null and void. In violation of both the letter
and spirit of the constitution, in order to compel the payment of bonds
issued without authority, and in violation of every principle known to
the law, it has said that these bonds must be paid because they are in
the hands of _bona fide_ holders.
This same court, as we will hereafter show, when the holders of bonds
issued by railroad companies were asking payment, has released the
companies from their written agreement to pay in coin, and compelled the
holders to take at par depreciated paper. When the bondholders are
demanding payment from the people, of the bonds issued without
authority, the court, in order to compel payment, nullifies state
government; but when these same bondholders demand that railroad
companies shall live up to their written contracts, have decided that
they need not do so. It fears the stigma of repudiation when the people
are called upon to pay, but when the call is made upon corporations it
decided in favor of repudiation. Our author continues: "It has upheld
and protected the rights of such creditors with a firm hand,
_disregarding at times, it would seem, principles which it applied in
other cases, and asserts the jurisdiction and authority of the federal
courts with such striking energy and vigor as apparently, if not
actually, to trench upon the lawful rights of states and the
acknowledged powers of the state tribunals_."
Municipal corporations have no right to become stockholders in private
corporations; acts of the legislature pretending to confer such
authority are void; the officers who control and administer the
municipal government are the mere agents of the municipality, and can
only act within the scope of the powers conferred upon them by the
charter of the municipality they represent. Neither the constitution of
a state, nor of the United States, nor the charter of a municipality,
can confer upon the nation, state, county, city, or town the authority
to compel any citizen against his will to bestow any part of his money
or property upon private corporations. And it matters not whether this
comes in shape of a tax, an arbitrary appropriation of a fraction or of
all his property or possessions to such private corporation, or by a
subscription of stock to it. If the national, state, or municipal
government can in either of the above methods compel him to aid in
building up and supporting private corporations, then private
corporations are clothed with attributes of sovereignty, and all private
citizens own and possess their property subject to the will of these
corporations. If a majority of the qualified voters of a state, or
particular locality, are in favor of taxing the state, or local
district, to the extent of one-tenth or one-half of the assessed value
of all property in the district, and investing the amount in a railroad
enterprise, the minority, notwithstanding their protest and
remonstrance, must submit to have their property taken from them and
applied to the same object. Their constitutional rights are taken from
them, and our boasted free government has no real existence. By recent
decisions of the supreme court of the United States, the people of the
whole country are placed in that position now. Railroad corporations
have been, and are now, under the fostering care and protection of this
court. Statutes have been so often disregarded by it, when their
interests were to be subserved, and in conflicts between the people and
these monopolies the decisions have been so uniformly in favor of the
latter, that it is now a question whether the government controls
corporations, or corporations control the government. If a pernicious
law is enacted by congress, or a state legislature, it is soon repealed.
The men who compose those bodies are constantly changing, their term of
office is short, and the errors committed by them can be speedily
corrected. The judges of the supreme court are appointed for life; the
people have no control over them; their decisions cannot be reversed by
any department of the government. A decision of the supreme court is
the supreme law of the land, and cannot be reversed or amended by any
other power in the land. It is superior to all statute law, and the
power of the court has no limit, save that fixed in the constitution and
statutes of the United States, both of which must receive _their_
construction and interpretation from the court. We have already said
that judges of this court are subject to the infirmities common to all
men; that they are liable to be influenced by the same causes that
influence others; that no matter how honest and pure they may be in
their intentions and actions, their decisions were liable to be
controlled by surrounding circumstances, and that the influence of this
great corporate power did control them. In proof of this we need only
look at their course of decisions on municipal bonds, and on bonds given
by railroad companies, before referred to, as well as their decisions
upon the nature of railroad corporations. It strikes us as remarkable
that the supreme court of the nation should have or entertain any doubts
as to the fact that these corporations are private. Upon what principle
the court can hold that railroads are public highways is not readily
seen. The stock, the roads, and all other property belonging to the
different railroad companies, are as much their individual or corporate
property as are the furnace, the factory, or the mining interests, the
property of the companies owning them. Their ownership is as complete as
that of the private person who owns the stage and team used for carrying
the mails in certain districts. The same law that governs other common
carriers, governs these corporations. Government can only interfere with
their business when they abuse the privileges granted in their charters.
It cannot compel them to carry the mails, save in pursuance of contracts
made with them. They own the ground upon which their roads are built,
and no one can travel upon these roads, or ship freight over them, save
by the permission of the companies. While courts and legislatures have
the constitutional right to regulate and control these corporations,
and, if need be to prevent abuses and oppressions, to declare their
charters forfeited, as in cases of banks, insurance companies, and other
corporations,--upon no principle of law can they declare them public
corporations. If it is a fact that they are public corporations, then as
a resulting consequence they are clothed with the attributes of
sovereignty, and are a part of the government. If railroads are public
highways for any purpose, they are for all. Until they cease to be owned
and controlled by private corporations, it will hardly be claimed by any
respectable court that they are public highways, in the same sense as
common public roads, nor can they be until they are open to public use.
This cannot be until the public becomes the owner of these railroads.
But we are told that the supreme court has decided the question, and
declared that they are public highways, no matter whether they are owned
by the state or private companies. We have not seen the decision; but if
such decision has been made, we are bound to accept it as the law of the
land, until the same court reverses it. Yet if the court was to decide
that a river was a railroad, or that a steamboat was a train of cars,
while we would accept this decision as the law, we would not admit that
such was the fact. We are not aware that the question as to whether
railroads are public highways has ever been before the supreme court,
save in connection with the right of municipalities to subscribe stock
and issue bonds therefor, and upon the question of voting taxes to aid
in their construction. When these questions have been presented to the
supreme court of the United States it has held that they were public
highways. It is noticeable that these decisions have been made only when
the interests of these corporations were to be subserved. In a recent
case from Wisconsin the supreme court decided that they were public
highways, and that it was just as lawful to levy taxes for railroads as
_for any other public works_. The same court has decided in a large
number of cases when suits were instituted on municipal bonds, that
railroad corporations were private companies, and in all of the states
where the question has arisen, we believe they have been held to be
private corporations. We might cite several recent decisions of the
supreme court to the same effect. In the cases of Kansas Pacific Railway
Company _vs_. Prescott, Ribon _vs_. Chicago, Rock Island, & Pacific
Railway Company, Putnam _vs_. New Albany & Sandusky Railway Company, and
Chicago & Quincy Railway Company _vs._ the County of Otoe, tried in
Washington last winter, the court virtually decided the corporations
were private, and not public. The doctrine to be gathered from these
decisions is, that when the interests of these corporations demand it
they are to be treated as private, but when the question is as to their
right to compel the people to contribute of their substance to build
railroads, then the roads are public highways. If the corporations are
private, and their roads are built and owned by them, the fact that
these roads are private still exists, notwithstanding the courts as to
the law of the case decide that they are public highways. The fact that
such a decision has been made, is strong proof of the correctness of our
position, that the corporations have a controlling influence over the
judiciary of the country more to be dreaded by the people than all the
appliances that can be brought to bear upon the legislative and
executive department of the government. But in no other instance has the
influence of these corporations over the supreme court of the country
been made more manifest than in what is known as the "legal tender"
decision. And we might add that no other decision of the court, and no
act of any department of the government, has proved so disastrous to the
people as this decision. We have already referred to the means used by
these corporations to secure a majority of the supreme court favorable
to their designs, and of their success in the selection of judges
committed to their interests. It only remains for us to review this
decision to convince the most skeptical of the fact that corporations
have captured the supreme court, as well as the other departments of the
government, and the effect of this decision has given to these
corporations, and Wall street brokers, and gamblers, the absolute
control of the finances of the country. But before coming to the
decision, it will not be out of place to remark, that _money_ is always
the standard of value for all commodities; that the universally adopted
idea of money means coin--gold and silver--or, what is called the
precious metals. Bank bills, treasury notes, bills of exchange, and all
kinds of commercial paper are only valuable as the representatives of
money. The fact that they are expected to be converted into money gives
them their value in the market. Let it be understood that they cannot
at some future day be collected in money, and their commercial value
ceases. In proportion to the length of time that must elapse before any
bank bills, treasury notes, or other commercial paper can be paid in
specie, does its value increase or diminish in commercial transactions.
Nothing but money of the standard value can be made a legal tender in
contracts between individuals. Congress does not possess the power,
under the constitution, to say that A who has contracted to pay B $1,000
in money, can discharge that contract by paying him $1,000 in bank bills
or treasury notes, that are worth in money but $800. If such powers
exist, then all standard values of property is destroyed, and it
fluctuates in value as the price of the paper representing money
approaches to, or recedes from, the money standard. The rule that
nothing but gold and silver is, or can be, "legal tender" has been
uniformly adhered to from the formation of our government, until 1872,
when a majority of the supreme court reversed the rule, and decided that
what are termed treasury notes are, under the acts of congress, legal
tender for all contracts and business intercourse among men.
The question was fully argued in 1869 before a full bench, then composed
of a chief justice and seven associates, five of whom concurred in
deciding that the act of congress making anything but gold and silver a
legal tender was unconstitutional. Before the decision was announced
Justice Grier resigned, leaving but six associates on the bench when the
opinion was delivered. Chief Justice Chase delivered the opinion, and,
in speaking of the powers of congress, says: "No department of the
government has any other powers than those delegated to it by the
people. All the legislative power granted by the constitution belongs
to congress; but it has no legislative power which is not thus
granted. * * Not every act of congress, then, is to be regarded as the
supreme law of the land, nor is it by every act of congress the judges
are bound. This character, and this force, belongs only to such acts as
are made in pursuance of the constitution." The court then decides that
there is in the constitution no grant of legislative power to make any
description of credit currency a legal tender in payment of debts, and
that it does not exist as incidental to any of the granted powers. That
the power does exist in congress to issue bills of credit or treasury
notes, but not to make them legal tender for debts. The opinion
concludes as follows: "We are obliged to conclude that an act making
mere promises to pay dollars a legal tender to pay debts previously
contracted, is not a means appropriate, plainly adapted, really
calculated to carry into effect any express power vested in congress;
that such an act is inconsistent with the spirit of the constitution,
and that it is prohibited by the constitution." This decision was not
acceptable to corporations and railroad managers. It would compel them
to live up to the contracts they had made, and destroy their power of
controlling, in connection with the Wall street stock jobbers and gold
brokers, the entire financial interests of the country. We have already
shown how this combination of corporate interests secured an increase in
the number of judges, and that Messrs. Strong and Bradley were appointed
because of their opposition to the legal tender decision. None of the
judges who had concurred in the decision of Judge Chase had changed
their opinions; these were then dissenting members of the court. The two
new appointees uniting with three dissenting judges, a majority of the
court could overrule the long settled decisions of the court, and
sustain the act of congress making depreciated paper a legal tender. The
law of the land, recognized since the organization of the government,
approved by all the eminent jurists and statesmen who have lived in the
last century, could be overturned; values could be unsettled; the
financial and commercial interests of the country could be made subject
to this great corporate power which had obtained such complete control
of the different departments of the government.
Soon after the appointment of the two judges above named the legal
tender question was again brought before the court, a full bench of nine
judges sitting and participating in the decision of the question. Five
of the nine concurred in holding the legal tender act constitutional,
Justice Strong delivering the opinion of the court. It is a noticeable
feature of the case that a judge who had just taken his seat should be
selected to pronounce the decision; that after a uniform course of
decisions, made and upheld by all the great jurists of the country for
eighty-five years, two judges who had just been appointed should be
found delivering opinions reversing this long settled rule, and that
both of said judges were appointed because of their avowed friendship
for the corporations which were to be so largely benefited by the
reversal of this long settled construction of the constitution upon the
question of legal tenders, and it seems that even these judges base
their decision upon what they deem the necessity for a reversal rather
than upon any constitutional grounds. Justice Strong, as preliminary to
the opinion of the court, says: "The controlling questions in these
cases are the following: Are the acts of congress, known as the legal
tender acts, constitutional when applied to contracts made before their
passage? and, secondly, Are they valid as applicable to debts contracted
since their enactment? These questions have been elaborately argued, and
they have received from the court that consideration which their great
importance demands. It would be difficult to overestimate the
consequences which must follow our decisions. They will affect the
entire business of the country, and take hold of the possible continued
existence of the government. If it be held by this court that congress
has no constitutional power, under any circumstances, or in any
emergency, to make treasury notes a legal tender for the payment of all
debts (a power confessedly professed by every independent sovereignty
other than the United States), the government is without those means of
self-preservation which, all must admit, may, in certain contingencies,
become indispensable, even if they were not when the act of congress now
called in question was enacted. It is also clear that if we hold the
acts invalid as applicable to debts incurred, or transactions which have
occurred since their enactment, our decision must cause, throughout the
country, great business derangements, wide-spread distress, and the
rankest injustice. The debts which have been contracted since February
25th, 1862, constitute, doubtless, by far the greatest portion of the
existing indebtedness of the country. They have been contracted in view
of the acts of congress declaring treasury notes a legal tender, and in
reliance upon that declaration. Men have bought and sold, borrowed and
lent, and assumed every variety of obligation, contemplating that
payment might be made with such notes. Indeed, legal tender notes have
become the universal measure of values. If now, by our decision, it be
established that their debts and obligations can be discharged only in
gold coin; if, contrary to the expectations of all parties to these
contracts, legal tender notes are rendered unavailable, the government
has become an instrument of the grossest injustice, and debtors are
loaded with an obligation it was never intended they should assume. A
large percentage is added to every debt, and such must become the demand
for gold to satisfy contracts, that ruinous sacrifices, general
distress, and bankruptcy, may be expected. These consequences are too
obvious to admit of question. And there is no well-founded distinction
to be made between the constitutional validity of an act of congress
declaring treasury notes a legal tender for debts contracted after its
passage, and that of an act making them a legal tender for the discharge
of all debts, as well those incurred before as those made after its
enactment. There may be a difference in the effects produced by the acts
and in the hardship of their operation; but in both cases the
fundamental question, that which tests the validity of the legislation,
is, Can congress constitutionally give to treasury notes the character
and qualities of money? Can such notes be constituted a legitimate
circulating medium having a defined legal value? If they can, then such
notes must be available to fulfil all contracts (not expressed by
exception) in money, without reference to the time when the contract was
made."
This quotation from the opinion of the court may be taken as a sample of
the reasoning in favor of a reversal of former decisions on the question
of legal tender. After elaborate argument in the same strain, by Justice
Strong, and also by Justice Bradley, a majority of the court decide that
the legal tender acts are constitutional, while the four judges
remaining on the bench, who but a short time before had made a contrary
decision, dissent from the opinion of the majority. The argument of the
majority in favor of the decision seems to ignore the real question,
to-wit, the constitutionality of the acts of congress, and to place the
decision upon the ground that a contrary holding would be ruinous to the
financial interests of the country. The assertion is made that the
decision "_will affect the entire business of the country, and take hold
of the possible continued existence of the government_." The decision
was made about one year ago, and its effects on the business interests
of the country are made manifest. If the court believed that the
decision sustaining the legal tender acts would prove beneficial to the
people, it was sadly mistaken. But if it believed such a decision would
strengthen monopolies, and enable a few railroad managers and Wall
street brokers to corner and control the finances of the country, then
the decision was a success. The effect has been to unsettle the
commercial and financial interests of the country, and to show that
treasury notes, if they are the standard of values, are a fluctuating
standard. The consequence of the decision has taken "_hold of the
possible continued existence of the government_," and has enabled the
gold and stock gamblers in Wall street to suck the life-blood of the
nation. The decision gives strength to corporations, who, uniting with
Wall street brokers, are depleting the treasury of the nation to advance
their own private purposes. By the decision two standards of value are
fixed: one that is stable, and must ever remain so--the standard of
money--gold and silver; the other, the standard of fluctuating paper, of
no intrinsic value, liable to be inflated or depressed, as shall best
subserve the interests of the parties who, by combining, have got such
absolute control of the market as to be able to change the value of this
_legal tender_ paper at pleasure. The idea advanced in the decision,
that to declare that nothing but coin could be a legal tender, would
cause widespread ruin, presents but a partial view of this matter. As a
matter of fact, no act of congress prior to 1862 had ever been passed
making anything but coin a legal tender; nor was there any decision of
the supreme court recognizing or deciding that paper money could be a
legal tender until 1872; and yet no such widespread ruin had overtaken
the financial interests of the country as has manifested itself since
that decision was rendered.
Simultaneous with the decision of the court declaring treasury notes
legal tender, the quantity of coin in the treasury began to decrease,
and one year's experience has sufficed to reduce the amount from
one-third to one-half, and in proportion the amount controlled by Wall
street has increased. The secretary of the treasury is now obliged to
have recourse to the $44,000,000 of treasury notes held as a reserve to
prevent panic and disaster. This decision does not benefit the importing
merchant, who must pay in coin; it does not benefit the legitimate
business of the country; it does not benefit the farmer, or any of the
industrial interests of the country, because in buying and selling, if
payments are made in paper (_legal tender_) the prices of the articles
bought and sold are fixed by a gold or coin standard. Coin is, in all
dealings, the measure of values. The decision of the court does not and
cannot change these facts. The only parties who derive any real benefit
from it are corporations and brokers, who can save large amounts by
being released from their contracts. Another argument used by the court
in favor of the decision is, that every independent nation possesses the
power to make paper a legal tender, and that it must be possessed by our
government. The answer to this is, that the constitution does not confer
upon congress, or the courts, even by implication, any such power. And
if we admit that other nations possess it, we conclude it is because the
fundamental law recognizes it, or because the government is of unlimited
power.
The court decides that "_legal tender notes have become the universal
measure of values_." This is simply untrue. In all quotations of values,
the measure is fixed by gold, and then legal tender notes are quoted as
being worth such per cent less (or what amounts to the same thing); gold
is quoted as being worth ten, fifteen, twenty, or more cents to the
dollar more than paper, and while the value of gold is fixed, that of
treasury notes is constantly fluctuating. Under this decision railroad
companies, and their associates, the Wall street gamblers, control the
finances, while all the honest and legitimate business of the country
languishes. Had the court designed to place the whole interests of the
government and the people in the power of these corrupt rings and
dishonest brokers, no more effectual means could have been devised or
adopted. Justice Bradley, in his opinion concurring with the opinion of
Justice Strong, makes use of the following bold and dangerous language:
"It is absolutely essential to independent national existence that
government should have a firm hold in the two great sovereign
instrumentalities of the _Sword_ and the _Purse_, and the right to wield
them on occasions of national peril." Let this pernicious doctrine be
accepted as the law of the land; let the _purse and the sword_ be placed
in the hands of government officials without restrictions, and what
vestige of republican institutions is left? What difference is there
between our government and absolute despotism? But more than this, let
the highest court of a nation, by a partisan decision, place the _purse_
of the nation in the hands of a gigantic monopoly, banded together for
the purpose of plundering the public, and what vestige of independence
is left the people? Reader, look carefully at the almost unlimited power
the corporations of the country have obtained over each department of
the government; at the legal tender decision and its effect upon the
people of the country, and then ask yourself if we, as a nation, are not
nearing the point where we cease to be a republic, save in name. This
decision impairs the obligation of contracts, in violation of the letter
and spirit of the constitution. It compels the creditor to take from the
debtor irredeemable paper at par, on a contract payable in money. It
says that a mere promise to pay is a legal tender. It makes it
absolutely impossible to resume specie payment because it withdraws all
coin from circulation, and does away with the necessity for its use in
domestic transactions. The coin of the country is shipped to foreign
countries to meet demands against us in those countries, and to pay for
such commodities as we purchase from them. Credit currency, no matter
whether it is issued by the general or state government is not, nor can
it under the the constitution, be made a legal tender by act of congress
or by a decision of any court in the land, because the laws of trade
will control the whole matter, being stronger than legal enactments or
judicial decisions. Money is the universal medium or common standard
which fixes the value of all other things that can be sold or bartered,
and neither the congress of the nation, by the passage of a law
declaring that paper shall be a legal tender, nor the supreme court
deciding that such law is constitutional, can impart an actual value to
such paper, because it is but a promise to pay money. They can no more
accomplish this object than can the alchemist convert iron into gold.
The only effect of this decision, as we have attempted to demonstrate,
is to place the people more completely in the power of corporations. If
the reader has followed us he will not fail to perceive that all the
departments of the government are virtually controlled by the great
anti-republican corporate interests now overshadowing and cursing the
land; and that the supreme court of the United States, originally
intended to be a check upon unconstitutional legislation, and to guard
with jealous care the rights of the people, has become an instrument to
aid this great power in its war upon the rights of the citizen; that by
judicial construction of statutes involving the rights of corporations
and the people, such decisions have been made as leave the people but
little to hope for in the future, and induce the belief that the will of
the court, and not constitutional law, is to be the "supreme law of the
land."
CHAPTER XXIII.
BANK MONOPOLISTS--THEIR CONTROL OF THE CURRENCY. A BANKRUPT FINANCIAL
POLICY.
Gold and silver are and must remain the standard of values. This being
true, any attempt to substitute any other standard unsettles values, and
opens avenues for reckless speculation. Bank bills, or other promises to
pay, are and always will remain unsafe as a money standard; especially
when they cannot be exchanged for specie, save at large discounts. The
policy of the government, of substituting treasury notes for coin, as
legal tender, and then issuing national currency for general circulation
by the banks of the country, has been effectual in preventing the
circulation of coin, as well as the resumption of specie payment. No
good reason can be given for issuing two kinds of currency, or for
providing that one kind (treasury notes) shall be legal tender, and the
other (national currency) shall be of less value, good in ordinary
circumstances, but which no one is obliged to accept in payment of
debts.
The present banking law provides that any five or more persons may form
a private corporation or banking association, and upon compliance with
the provisions of the law, transact all business usually transacted by
banking associations. As a condition to the issuing of bank notes, the
company, after it has organized according to law, must deposit with the
proper officer in Washington, in government bonds, an amount greater by
ten per cent than the amount of bank notes it receives for circulation.
If it deposit $100,000 in bonds, it receives from the comptroller of the
currency, $90,000 in national currency, which it can issue, and as
occasion requires, must redeem in treasury notes. The government bonds
are held by the department as security for the redemption of the bank
notes received for circulation, and the government pays to the different
banking companies semi-annual interest at the rate specified in the
bonds deposited by the companies respectively. The amount of tax
annually collected from the people to pay this interest to bankers is
between $18,000,000 and $20,000,000. All that the people receive in
return for this sum is the privilege of borrowing national currency from
banks at legal rates of interest. The banking companies receive from
government their six per cent annually in gold on their bonds deposited
with the department at Washington, and the lawful rates fixed by the
states respectfully upon loans and discounts with such other profits
usual among bankers.
We cannot discover the wisdom of the law which provides that a banking
company shall buy an amount of government bonds equal to its capital
stock, paying government therefor, and after depositing it with the
proper government officials, receive interest on it. If a man pay his
note or bond, and gets it in his own possession, he would lack wisdom if
he were to continue the payment of semi-annual interest on it after that
time. Government is doing this with only this difference: It says to the
banking company: "Buy my bonds, pay for them, and then I will hold them
in trust, and pay you the interest on them." We can see no good reason
for this provision of the law. If the object were to borrow money, it
could have been accomplished by receiving it directly from the banking
company, and then issuing to such company legal tender notes in payment
therefor, and by so doing government would have saved the large amount
of interest now being collected from the people. If the object were to
furnish a circulating medium, the legal tender treasury notes would have
been a preferable currency. The government would have hazarded nothing,
because it would have had possession of the full value of the notes or
bank bills furnished the company. But if the object were to foster and
fatten corporations, then the law, as passed, has fully accomplished its
purpose. The law provides for a general system of banking, without
requiring the bankers to keep one dollar of coin for the redemption of
their issues. It provides for the redemption of _currency_ with
_currency_, thus making the resumption of specie payment impossible, so
long as legal tender notes are in circulation. It locks up from
one-tenth to four-tenths of all the capital invested in banking, and
compels the people to pay interest on this amount without receiving any
equivalent. It fixes arbitrarily the amount of circulating medium for
the whole country; the amount being $356,000,000 in legal tender notes,
and about the same amount in national currency; and of this last amount
the banks are compelled to keep on hand a reserve of from fifteen to
twenty-five per cent on all their bills and deposits, thus leaving for
circulation, throughout the entire country, not more than $550,000,000,
the whole of which is irredeemable in coin. It places the finance of the
whole country under the control of one man--the secretary of the
treasury. The amount of currency being fixed by law, and apportioned
throughout the country, with no means for its increase, it is not
difficult for speculators to withdraw sufficient from circulation to
affect injuriously the commerce of the country. The combined corporate
interest of the country can, at pleasure, corner such amounts as to
create a stringency, and if desired, a panic. We have shown in a former
chapter the combination existing between railroad corporations and Wall
street brokers, and their control of the finances of the country. We
have also shown the effect of the legal tender decision upon the
financial interests of the country, and the large benefits the railroad
corporations are deriving from it; and that they controlled to a great
and dangerous extent all departments of the government. Under the
present financial and banking system they hold the whole country at
their mercy. They fix prices upon all the farm products of the country.
Having full knowledge of the amount of currency in the banks of the
great commercial centers, as well as the amounts in the different parts
of the country, with the means in their own hands of controlling and
expanding these amounts at pleasure, by withdrawing, or as it is termed
"cornering" the necessary sum, they fix the price of all articles of
commerce, and stocks, and gold. The government, under the present
financial policy, cannot prevent this state of things. It has no reserve
with which to aid the people. Nor can the banks, if they had the
inclination, remedy this evil. The business interests of the country
require more money. The government, as well as the banks, are
prohibited from issuing more. Because of the lack of quantity required
by commerce, the banks are, as a general thing, without any considerable
surplus on hand. When these corporations and brokers desire a stringency
in the market, they withdraw from the banks a few millions of dollars
and lock it up. It is withdrawn from the already insufficient amount in
circulation, and legitimate business languishes. Having their vast
corporate stock and bond interest to protect, being engaged in
constructing railroads, having created large debts upon their roads by
reckless and dishonest watering of stock and loose issuing of bonds,
they seek to compel all commercial and industrial pursuits to pay
tribute to them, and they accomplish this object by controlling the
currency of the country. A financial system that can be controlled by
one interest, or in the interest of one class of men, is bad. When, as
is now the case, that interest is a combination and consolidation of the
greatest monopolies that ever cursed a country, the system should be
changed.
Under our present system, no matter how evenly the currency was
originally distributed over the country, the larger portion of it finds
its way to the great commercial centers. The merchant must carry his
money to his place of purchase, or what is the same thing, buy an
eastern draft from his local bank, which bank, in order to command
eastern exchange, must have deposits in eastern banks. The farmer who
ships his produce to the east, must pay the charges for transportation,
which are usually collected at its place of destination; and these
charges being much more than one-half the entire value of the shipment,
are retained in the east, or if charges are paid to local agents, they
are forwarded to the principal office in the east. Nearly all the great
railroad companies having their principal offices in the large eastern
cities, their earnings are forwarded to those offices. By these means,
the currency of the country is concentrated in the larger commercial
cities of the country, mainly in New York, where it is in the absolute
custody of these great railroad corporations and brokers; and the
financial and banking system of the country, designed to meet the wants
of the people, has become, in the hands of these giant monopolies, a
principal agency in their oppression. The produce of the farm, and of
the entire industrial pursuits of the country, are being swallowed by
this huge monopoly, and those others created by our tariff. For this
state of things there is no relief without a change of policy on the
part of the government. An increase of irredeemable paper will not
afford relief. Already there is a wide margin between coin and currency.
An increase of the latter would increase that margin, and lessen values.
With a fixed amount of increase, the same interest that now controls the
finances would, in a short time after its issue, obtain the same
control, and this would demand another issue; the same process to be
repeated until our currency would be of little or no value, the
unlimited increase of irredeemable currency would in the end inflict
upon the country absolute ruin. We are now traveling in that direction.
Currency is only of value as the representative of money. Now (April,
1873) a dollar in paper represents but eighty-two cents in money. Our
government has adopted the Utopian idea of making _small strips of
paper_, with certain printed promises thereon, legal tender. This kind
of paper has been decided by the supreme court to be _money_, the
"measure of values." Notwithstanding the laws of congress and the
decisions of the supreme court, this measure of values will not become
or remain stable; it is gradually shrinking, while gold, the money of
the country, is disappearing. Unfortunately for us, our strips of paper
will not pass for money, or legal tender, with other nations. For this
reason, the coin of the country has to be used in our commerce with
foreign nations. Within the last year, the amount of coin in this
country has decreased over $38,000,000. The balance against us in our
dealings with other countries is the above named amount. Unless some
course is adopted that will prevent this large export of gold, it is
only a question of time when we shall have no gold in the country, and
the only representative of values left us will be paper money without
any intrinsic value. Under the present financial policy of the
government, and the unlimited control that corporations and rings, with
their power all centered in Wall street, have over the finances, we need
not hope that the agricultural products of the country can be
transported to the seaboard at rates that will enable us to export the
same to foreign countries in any considerable amount. We cannot pay
inland and ocean transportation, and compete with other grain-producing
countries. The markets of the outside world are practically closed
against us. With our high protective tariffs, extortionate charges for
inland transportation, lack of ocean commerce, and immense foreign
debts, public and private, absolute financial ruin must overtake us,
unless a different policy is adopted. The amount of currency being fixed
by law, the government has in effect declared that the people of this
country shall have but this fixed amount for all the purposes for which
money is used. The effect of this arbitrary law, followed and supported
by the legal tender decision of the supreme court, is to prevent any
increase of the currency or money. The control of the currency being
placed in the hands of one man, the whole financial interests of the
country are dependent upon his will. No matter how great the wants of
the country may be, or how inadequate the supply, no departure is
allowed from the inflexible rule as to reserves that the banks are
required to hold. If the secretary of the treasury conclude to sell gold
to ease the market, he does so; if he decide to issue a half million
treasury notes, they are allowed to go into the hands of the people, and
withdrawn, when in his judgment, he deems it advisable. His acts create
a feverish excitement in the money market and derange business, carrying
loss to everybody, except Wall street brokers. That power, so necessary
to a despotism, and so destructive to republican institutions--the
control of the purse of the people, and of the government, has fully
obtained in this country. The whole people of the land are as completely
under the control of the secretary of the treasury (and he in turn ruled
by these powerful combinations) as a ward is ruled by his guardian. The
system is bad, and should be changed at once. The government should
control its own finances, and the people should be permitted to provide
for themselves without asking the permission of the government. We
subjoin the following expression of views of one of the ablest and most
experienced of the bank officers in this country:
"The incompetency of special legislation, when applied to the adjustment
and regulation of the paper currency of the country, I presume few
sensible men, at all acquainted with the subject, will question; nor is
it possible for any man of business, or any possessor of property, in
whatever shape, to feel safe while the power to inflate or contract the
currency is arrogated by any one man, whether he happens to be some
narrow-minded, bigoted, obstinate official, acting on his own volition,
or some subordinate clerk, acted upon by others.
"No one should be entrusted or tempted with such a power; for no man,
however able and honest, could by any possibility justly or accurately
exercise it. Foolish as was the experiment, however, we have tried it:
and with the ill success that was inevitable.
"The sway to and fro of our currency, controlled by the ebb and flow of
our business transactions, consequent upon seed time and harvest, is
subject to law as imperious and immutable as any that governs either the
physical or moral world; and in just the degree that we understand and
conform to its action can we hope for a successful solution of the
problem that now so vexes the minds and disturbs the interests of all
classes of the community.
"The nearest approximation we have yet made to such an understanding and
conformity has been in the New York free banking law, from which the
national currency act has borrowed all of any merit it possesses.
"This New York law, free from the vice of monopoly which the national
currency act inherits from the necessities of its birth, and open to all
men, as any honorable pursuit should be in this republic of ours, is
also distinguished by three salient points: perfect security to
bill-holders, freedom from arbitrary reserves, and systematic redemption
of bills. In this last feature of the law, disagreeable as it is at
times to speculation or unwary bankers, lies the key to its success,
checking and governing as it does by its conservative action all
over-issues, while still leaving the open freedom of the system
untouched by any useless restriction; so that, no matter how great the
number of those who choose to embark in the business, no more currency
can be kept afloat than the wants of the country demand. The national
currency act fails because it is a monopoly; because it has only a
nominal redemption; and because of its arbitrary reserve clause, which
serves only to hamper the means and obstruct the usefulness of our
metropolitan banks at the very time when the trade of the country most
requires their services, to say nothing of the power for evil which a
knowledge of this fixed limit gives to the gamblers and speculators who
hang around and within our stock-exchanges; and, lastly, because it has
no power of expansion and contraction in response to the varying calls
of trade and commerce.
"The substitution of a free banking law for the national currency
act--in the mere fact of the release it would give us from constant
petitions to Washington officials, leaving the government to attend to
its own monetary affairs and strictly mind its own business--would go a
great way toward restoring and maintaining the manhood and self-respect
we are fast losing, from our constant looking up to and attendance upon
the central power, asking to have done for us things which should be
self-regulating or which we should do for ourselves. Democrats as we
profess to be, we are rapidly aping the follies and acquiring the habits
of dependence upon authority characteristic of the older civilizations
of monarchial Europe. It is hardly time, I think, for us to take the
backward swing of the pendulum of political progress, that is sure
eventually to land us where we began."
A careful examination of the financial policy of the government ought to
convince us that a change is necessary to prevent ultimate ruin and
bankruptcy. With gold driven from circulation--an insufficient amount of
depreciated currency for the transaction of the business of the country,
and the facilities afforded the monopolies for controlling our whole
commerce, the agricultural and industrial interests of the country
languish--the farmer receives no reward for his toil--the laborer is
poorly paid--and general prostration extends over the land. A return to
specie payment, or an increase of sound currency, would relieve all
cause of complaint, and enable the industry of the country to receive a
fair remuneration for its labor.
CHAPTER XXIV.
OUR TARIFF POLICY.--DOES PROTECTION PROTECT?
A diversity of opinion exists throughout the country upon the question
of tariff. Politicians, statesmen, and the people generally, differ as
to the policy the government should adopt respecting it. It is generally
admitted that the revenue for the support of the government should be
derived from duties levied upon imports. The real point upon which a
difference exists is, whether the government should levy a tariff for
revenue alone, or whether it should be levied for the purpose of
affording what is termed a protection to American manufactures and
interests. This question is no nearer a solution now than it was forty
years ago. Those who favor protection appeal to our national pride; the
necessity of encouraging home manufactures, and of competing with the
cheap labor of Europe. A tariff for protection has been urged and
adopted as the only means of fostering home productions for so long a
time that it is deemed one of the necessities of the country by its
advocates. They look upon it as a chief means of affording a home market
for the farm produce of the country, as well as affording a market for
all manufactured articles. While, on the other hand, those who are
opposed to a tariff save for revenue, claim that what is termed
protection, is, in fact, oppression; that it cripples commerce, taxes
the people oppressively and unjustly, and, instead of benefiting the
producer by affording him a market, deprives him of it. They insist that
the agriculturalists of this country need, and must have, the advantage
of foreign market in order to make farm pursuits remunerative.
We have been combating monopolies, and shall attempt to show that what
is termed a protection tariff affords no protection to the people at
large, or to the operatives and laborers in factories and shops, but
only to the capitalists of the country. An equitable tax for revenue is
one that is levied upon articles of foreign growth or production, that
enter into general consumption; and not one that is levied upon articles
the main portion of which are of home manufacture. It is only the
imported article that pays a duty to the government. The home
manufacturer does not sell his fabrics for less price than is paid for
the imported articles of like character and value; hence when only a
part of any commodity is imported and pays a duty, and the other part is
supplied from home manufactures, while the government derives revenue
from the imported articles, the manufacturer puts into his own pocket
the same per cent that is paid to the government in shape of import
duty. To make it plainer: If a tariff of forty per cent is paid upon the
imported article, when it is sold, the purchaser must re-pay this per
cent to the importer, but the manufacturer can advance the price of his
goods so as to realize forty per cent, or the amount of the tariff over
his former prices, and still compete with the importer. The tariff
protects him at the rate of forty per cent, which must be eventually
paid by the consumer. No tariff is paid on home manufactures, and yet,
in all cases, the manufacturer adds to the cost of production the amount
of the tariff placed on like articles, and collects it from the
purchaser or consumer. A tariff for protection gives to the
manufacturers a monopoly, in some cases so complete as to drive the
foreign article from our ports. In such cases the government receives no
revenue, but the manufacturer makes a clean profit of the per cent fixed
by the tariff, all of which is eventually paid by the consumer, and for
which he receives no consideration. To illustrate this, let us take the
duties on blankets for the year 1871, and the quantity imported. The
duties on the four classes of blankets were 87, 88, 100, and 109 per
cent, respectively. The whole imports for that year amounted to $19,355,
and the tariff duties amounted to $17,316. All of the residue of
blankets purchased during that year were home productions. The
manufacturer has only to mark up his price to realize about one hundred
per cent over the price at which they would have been sold but for the
protection tariff. Take boots and shoes as another illustration: We
imported none in 1871, and of course no revenue was received on these
articles in that year; yet the manufacturers had the benefit of a tariff
of thirty-five per cent on each pair sold. If a pair of boots was sold
at $8.00, the protection the wearer paid the manufacturer was $2.80. The
law compels the farmer and laborer to pay that sum as a bounty to the
manufacturer. On cotton goods, the consumer pays a duty of from
thirty-five to sixty-three per cent. For almost every article of
clothing worn by man, woman, and child, a duty must be paid. The average
is about forty-five per cent on the value. Prices are nearly uniform for
the same classes of goods, whether of foreign or domestic manufacture.
On imported articles the tariff is paid to the government; on domestic
manufactures the duty is paid to the manufacturer. This system compels
the poor man to contribute more than his fair proportion to protect the
already rich manufacturer. To illustrate this, let us suppose that A is
worth $500,000, and has a family of four to clothe, while B, who has
nothing but his industry, and perhaps a small homestead, has a family of
eight dependent upon him (as a general rule, the poor man has the larger
family). Both families must be clothed and fed; each must contribute to
the manufacturer the same rate of protection. The man with his half
million in property and family of four will probably purchase as much
for his family as the poor man will for his family of eight; each
expends for his family during the year, for clothing, say four hundred
dollars. If the duty on the purchases average forty per cent, each pays
for the support of the government and to protect home manufactures the
sum of $160.00. The sweat and toil of the poor man contributes just as
much as the rich man's half-million. Or, suppose A is a man without
family, and has great wealth, and B is dependent upon the product of a
small farm for the support of himself and family. A spends for clothing
$200.00, while B is obliged to expend $400.00 for clothing his family.
Here the labor of the poor man pays twice as much as the capital of the
rich man to protect home industry and support the government.
The above illustrations will serve for all articles of general
consumption. Let us look at the effect of the tariff upon other
articles, taking railroad iron as an illustration. Under a revenue
tariff railroad iron was sold for less than two-thirds of its present
cost. Manufacturers amassed princely fortunes; laborers were better paid
than they are now; the iron interests seemed to be in a prosperous
condition; the demand was growing and increasing, and has continued to
increase, until the supply is insufficient; and both foreign and
domestic markets are depleted, and at times exhausted. With this
increasing demand and scant supply there seems to be no good reason for
government protection to home manufactures, yet a protective duty of
about one-fourth its value is allowed on railroad iron. While the
companies constructing the roads pay this duty, the producing classes
also pay it in the end, in the shape of appreciated charges for
transportation. The protection afforded to manufacturers does not extend
to the laborers and operatives. The slight increase on the amount paid
them does not meet the increased cost of living resulting from the
protection tariff. They must pay more for what they consume, as well as
receive the pay for their labor in depreciated currency. The effect of
protecting the iron interests is to strengthen a monopoly that is now so
rich and powerful that it controls some of the largest states in the
Union. For this protection it returns no equivalent. The effect is the
same in other manufacturing states. The owners of the factories make
large profits, but the laborers and operatives, while their wages have
advanced, really do not receive as much, over and above the increased
cost of what they consume, as they received prior to 1860 under a
revenue tariff.
The purchasing power of a dollar before 1860 was as great as that of one
and a half dollars now, for the reason that then it was the value of a
coin dollar, while at the present time it is the value of an
irredeemable paper dollar, at no time worth a dollar in coin, and for
the further reason that the present tariff compels labor to pay for its
purchases from thirty to eighty per cent for protection to the
manufacturer. Thus, while the actual increase of wages is, as shown by
reports made after investigation, but twelve per cent, the cost of
living has increased fifty per cent. Under the plea of encouraging home
manufactures, the operative and laborer is compelled to work at
starvation prices, and it is not strange that they are organizing mutual
aid societies.
Another argument in favor of protection, which is often urged, is, that
we should protect our people from the competing effects of the pauper
labor of Europe. If this object were accomplished by a protective
tariff, one good purpose would be achieved. But what are the facts? The
manufacturers avail themselves of the higher prices warranted under the
tariff, and then import their laborers and operatives from Europe, and,
instead of finding, as formerly, American factories, furnaces, and
machine shops, operated by Americans, they are worked mainly by imported
laborers and operatives, and those who were to be protected and receive
living wages are compelled to seek employment in other pursuits. Instead
of protecting our own laborers from the competition of foreign pauper
labor, the foreign laborers are imported, and supersede those who were
promised protection.
Another argument in favor of a protective tariff is, that it will afford
a home market for the agricultural products of the country. Is this
true? The vast agricultural resources of the great west and south demand
the markets of the world. Illinois and Iowa can produce enough to supply
a manufacturing population who, in turn, could supply all the fabrics
and manufactured articles demanded by the entire population of the whole
country. If we are to have the balance nicely drawn, so as to have a
manufacturing population sufficient to consume the agricultural products
of the country, then we could furnish the manufactured articles at rates
that will allow us to export to other countries and compete with them in
their own markets, or else the supply will so far exceed the demand that
only a limited number could continue manufacturing pursuits, and a
protective tariff, no matter how high, could not furnish a market beyond
the demand. Let us refer to the returns made to the state department for
an illustration of one point: In 1860 the exports of manufactured
articles to foreign countries, under a revenue tariff, amounted to
$21,351,562. The total amount of like exports in 1871, under the present
protective tariff, amounted to $13,038,753, in coin. The exports in 1860
were in excess of those of 1871, under the highest tariff ever known in
this country, $8,282,811, showing that under a low or revenue tariff our
manufacturers could, and did, sell in foreign markets more than under
the present system of high duties. Again, if we look at the exports of
meat and breadstuffs for the years 1860 and 1871, we will find the
amount exported in 1860 exceeded that exported in 1871 $2,000,000. We
have not the figures before us, but believe they will show a still
greater falling off in 1872. Now let us look at the imports during the
same period. In 1860, we imported manufactured articles to the amount of
$146,177,136, and in 1871 to the amount of $165,463,679, being an excess
of the amount for the year 1860 in the sum of $19,286,543. If we add to
this the falling off in exports ($2,000,000), the balance of trade
against us, on manufactured articles, as between us and other nations,
is $21,286,543. The imports for 1872 far exceed those of 1871, and the
balance of trade against us for that year was but little less than
$40,000,000. But if we take our entire commerce with other nations in
account, the balance against us in 1871 was over $100,000,000! In 1872
it was over $140,000,000, and, if we add the amount of interest paid
annually on bonds held in other countries, payable by railroads and
other corporations, and the general government, the balance against us
in 1872 was not less than $250,000,000. This balance must be paid with
the products of our country, or in money. We have not coin with which to
pay, and under our _protection_ system we cannot pay with our products.
A protective tariff makes the farmers, the laborers, and all consumers,
insurers of a certain profit to the already powerful combination of
manufacturers. While the mechanic must depend upon the demand there is
for his skill and labor, the laborer must also take his chances in the
same way, and be content to accept such wages as his services will
command, and the farmer must depend upon the demand and supply for the
sale of his farm product, and not unfrequently will sell at ruinous
prices, while the manufacturers have a monopoly in their line--they can
always sell at a profit; all they need to do is to sell about as cheaply
as the same article can be furnished for from a foreign market, plus the
"protection" of the duty. The duty paid on the foreign article is the
amount of _royalty_ the manufacturer charges for his goods. All other
industries are compelled to divide their labor and products with him.
The laborer who receives $20.00 per month and buys cloth of domestic
manufacture for a suit of clothes, for which he pays $20.00, contributes
about $7.35 of that amount to "protect" the manufacturer. The farmer who
sells one hundred bushels of wheat for $100.00 and expends the amount in
clothing for himself and family, donates about $38.00 to protect the
manufacturer. The same is true of all other classes of consumers. Each
one pays from thirty to eighty per cent on his purchases to protect the
owners of factories, furnaces, etc.
The protective tariff has destroyed our ocean commerce. It would not be
profitable to spend time in reviewing the duty levied upon the materials
and in the construction of vessels for ocean commerce. The fact is well
known that our carrying has passed into the hands of other nations. That
vessels can be built more cheaply in foreign ports is well known, as
also that American ship owners build or purchase their ships in Europe,
sail under English colors, and use English papers, assigning as a reason
therefor their inability to pay the duty upon the materials used in ship
building. So oppressive is this duty, and so damaging has it become to
our commerce, that congress is being urged to grant subsidies to ship
owners. As a necessary result of this system of protective tariff, the
American built ships cannot carry freight as cheaply as those built in
foreign countries, and the producer must be content to have his produce,
already taxed to a half or two-thirds its value for inland
transportation, taxed beyond the amounts charged by the vessels of other
nations for ocean transportation, or allow the ocean trade to remain as
it now is, in the hands of England. American seamen must abandon the
ocean, or sail under foreign flags. Protection has destroyed our
mercantile navy, and compelled our seamen to seek employment elsewhere,
and in other occupations. With our vast agricultural wealth demanding
the markets of the world, the protective policy of the government
effectually closes our ports to other nations, while the farmer is
obliged to accept for his grain the low price that a home market,
already glutted, will afford him. The protective tariff is draining the
country of coin, and making it impossible to resume specie payment.
Taking it in connection with the combination of corporations, and Wall
street brokers, the prospect of having coin as a circulating medium is
but faint, if it is ever possible.
The products of our mines for the year 1872 were about $62,000,000, and
for the last four years have been nearly $200,000,000. The value of
petroleum produced in the United States for the year 1872 was not less
than $60,000,000, a large portion of which was shipped to and sold in
foreign countries, and to that extent should be reckoned as money in our
dealing with foreign nations. In 1862 the balance of trade was against
us to the amount of about $250,000,000. After absorbing the produce of
our mines, and our petroleum, the net balance against us was not less
than $120,000,000. This balance had to be paid in coin or in the issue
of new bonds. At no time since the enactment of the present tariff has
the balance of trade been in our favor. Thus, notwithstanding the high
duty paid, and the protection afforded by the tariff, our demands for
foreign manufactures increase to such an extent as to threaten the
nation with bankruptcy. According to official reports, the amount of
coin in the country in 1868 was $350,000,000. The products of the mines
since that date amount to $200,000,000. The amount of coin now in the
country is reported less than $250,000,000, and most likely will not
amount to $200,000,000. Protection to a small band of monopolists has
caused an annual decrease in the amount of coin in the country equal to
the excess of imports over exports. A few owners of factories and
furnaces are being benefited and enriched by protection; the prices of
manufactured articles have increased on an average about fifty per cent.
The wages of operatives and laborers have increased but twelve per cent;
the exports of manufactured articles have decreased; the value of
imports has increased; the ocean commerce of the nation has been
destroyed; the prices of the agricultural products of the country are
reduced to a point that has blasted the prospects of the farmer, and
made it difficult for him to live; the country is being drained of its
precious metals, and an irredeemable currency has become the only
circulating medium; values are unsettled, and the country is threatened
with financial ruin--all to afford protection to home manufacturers and
corporations. Protection is but another name for the systematic plunder
of the farmer, laborer, and all the industrial interests of the country,
by a class of monopolists that should be classed with corporations,
stock jobbers, and Wall street brokers, and who are, in part at least,
composed of the same men who control the corporate interests of the
country.
CHAPTER XXV.
PATENT RIGHTS AND THEIR ABUSES.
Closely allied to the monopolies of which we have been treating is that
of patents to inventors. The original idea in granting patents was to
protect inventors and discoverers when their inventions and discoveries
were _new_ and _useful_. It is but just that the person who invents or
discovers a new and useful principle in arts or mechanics, or makes a
new and useful combination of principles not new, should be protected in
his discoveries; that for a limited time he should reap the exclusive
benefit of his discovery, in order that he may receive a fair
consideration for the benefit his fellow-men are to derive from his
studies and enterprise.
To these inventors and discoverers we are indebted for much that is of
great value to the public. The arts, sciences, and mechanics, as well as
agriculture, have been greatly benefited by discoveries and inventions.
The wealth, comfort, and happiness of the nation have been increased,
while the inventors, because of the protection afforded them, have
received a fair remuneration. The fact that valuable inventions reward
the inventor liberally has led to great and growing abuses of the patent
right statutes, and to great frauds and impositions. The desire to
acquire sudden wealth has caused dishonest adventurers to enter the
field of invention and discovery, with the intent of defrauding the
people, as well as deceiving the patent office department. The same
desire has caused those whose inventions are of value to resort to
various schemes and subterfuges to continue their exclusive right to
manufacture and sell their inventions long after they have been fully
compensated for all they have expended in thought, time, and labor, in
arranging and perfecting their discoveries and inventions. Having been
granted a monopoly, they contrive to continue it. Lobbyists and
congressmen become interested for a consideration, and patents are
renewed from time to time by an abuse of the law that was designed to
encourage discoveries and inventions, but not to build up and continue
oppressions of the people.
No class of the community has suffered as much from these monopolies as
the agriculturalists. All improvements in farming implements and
machinery are patented. Some of them, patented more than a quarter of a
century ago, are still under the exclusive control of the patentees.
Reapers that cost the manufacturer but fifty or sixty dollars, are sold
for from one hundred and seventy-five to two hundred and twenty-five
dollars, because the patentee, or his assigns, have now, and for nearly
a generation have had, an exclusive right to make and sell them. So with
seeders, plows, harrows, fanning mills, and almost all farming
implements. The farmer is obliged to pay at least one hundred per cent
royalty to the inventor, or his assigns, before he can receive any
benefit from a discovery or an invention designed especially for his
use. The inventors have already realized princely fortunes from their
inventions, and the intent of the law has been fully accomplished; yet
the patents are continued, and no one is allowed to make or sell these
implements without the permission of the inventor. The law, which gave
an exclusive right for fourteen years, has been amended from time to
time; the rights have been extended, until patentees and their assigns
annually claim tribute from the farmer in an amount that is oppressive.
Patent right men operate together; they combine for the purpose of
extorting from the people of this country, where they have a monopoly,
while at the same time they sell their manufactured articles in foreign
markets for one-half the price they demand in this country. We might
illustrate this by numerous facts, but will content ourselves with
reference to sewing machines and reapers. These are all patented, and
all have patents for improvements made from time to time, many of which
improvements are of little or no value, save as a pretext for the
renewal of the patent. A sewing machine that cannot be purchased in the
United States for less than seventy dollars costs but twelve or thirteen
dollars for work and materials. This same machine (Singer's) is shipped
to Europe and sold for $32.00. Here, where the patentee has an exclusive
monopoly, we pay $38.00 more for the machine than it costs in England.
We could order an American-made sewing machine from Belfast, pay freight
and charges twice across the ocean, and get it for one-half it costs to
buy it in America. If you purchase a McCormick's reaper in this country,
it will cost you about $200.00. You can order the same machine from
England, pay freights for its passage twice across the Atlantic, and get
it for about one-half the money. The manufacturer cannot sell in this
country without paying about one hundred per cent royalty to the
inventor, but he can ship to Europe and sell at one-half the price
charged in this country, and realize a fair profit on the sale. When a
farmer purchases a reaper for himself, and a sewing machine for his
wife, paying for the two $270.00, he pays as royalty to the inventor,
$135.00. This same rate has been paid for the last twenty-five or thirty
years. This large royalty is paid to the inventor, and is called
protection. Continued beyond a reasonable time, it is nothing but
legalized robbery.
The fact that large fortunes have been, and are, made by inventors and
pretended inventors, has filled the country with sharpers and swindlers,
who are constantly on the lookout for an idea that may lead to some sort
of invention upon which they can apply for a patent. The ease with which
patents can be obtained encourages them in their undertaking. If we are
to judge of the ability and competency of the examiners of models and
drafts by the patents issued for almost all conceivable articles, we
must conclude that the only qualifications they possess are to receive
the fees, and recommend the issuing of letters patent. Principles so old
that the date of their discovery is lost, that have been in use so long
"that the memory of man runneth not to the contrary," are being
monopolized by letters patent, until a mechanic, or farmer, if he puts a
handle in a hatchet, a hoe, or rake, or changes the arrangement of a
harrow, plow, churn, or washboard, must expect to have a sharp
speculator call upon him for royalty for an infringement upon his
patent. Or, if a seamstress cuts her thread in a particular way, she
must pay royalty. If the farmer makes a glove to protect his hands in
husking corn, before he has used them a half hour, some vender of
patents will call upon him for royalty. If the owner of a house attempts
to paint it, or repair the roof, he must pay royalty for the privilege,
if his own judgment should prompt him to compound his paints with some
article not ordinarily used; or to use for his roof a kind of
composition not in general use.
The increase in the business of procuring patents is now so great that
it has become a general and common nuisance to the whole country. The
following is a list of one week's business in the patent office:
Patents were issued in one week to applicants from the western states
for threading nuts; broom corn duster; threshing machine; school desk
and seat; station indicator; binding screw; corn sheller; windmill;
photograph skylight; corn husking thimble; land pulverizer; manufacture
of sweet biscuit; railroad frog; dress pattern; two for plows; thread
cutter for sewing machine; corn husking glove; wheel plow; bridle bit;
railroad track wrench; cradle; paper file; garden hose holder; sawing
machine; saw swage; scythe rifle; butter package; spring hinge; swage
for forming horse shoes; automatic grain weigher; fire-place grate;
potato digger; automatic gate; faucet; stock for mill-stone picks;
piston valve for steam engine; car coupling; motive power; grain basket;
dining table; portable fence; fishing torch; extension table; driving
gear for hand car; horse collar; harrow; cross-cut saw handle; extension
ladder; machine for cutting leather; bee hive; cloth measuring register;
cutter for tonguing and grooving lumber; heating stove; rotary steam
engine; manufacture of steel; blast furnace; compound for preventing
incrustation; fruit press; fire extinguisher; two for cultivators; hub
for heavy wheeled vehicles; horse-shoe attachment; egg carrier; hose
pipe nozzle; cotton cultivator; shoe pegging and trimming machine;
combined seed separator and drill; felloe; filter for corn-juice, oils,
&c.; gate hinge; distilling of turpentine; cotton stalk knocker;
automatic fan.
The above comprises only a partial list of the patents issued in one
week. Followed up for one year, the list of patents would swell to near
4,000; about one in twenty of which are of value, while the residue are
of no value save to enable the patentee to defraud the people upon whom
he imposes his patent, or to force the timid to pay him royalty. Of the
immense number of patents obtained for improved churns and washing
machines, but few are of any real value. The same is true of patent
bridges, reapers, and mowers, of threshing machines, of seeders and
planters, of fences, and almost all farming implements. So of sewing
machines.
Many of the patents obtained contained no new principle, discovery, or
combination, but, by imposition and fraud, adventurers obtain letters
patent for something in general use, for the purpose of levying
blackmail, in the shape of royalty, upon those who, ignorant of any
exclusive right claimed by any one, continue to use an article which has
been in general use long before the letters patent were issued. But few
farmers or mechanics have escaped the claims of these patent right
sharpers. Rather than be at the expense of defending a suit in the
United States court, they submit to the demands of the man who presents
himself as the agent or assignee of the patentee demanding blackmail,
well knowing that the rascal has no legal claim, but preferring to buy
peace rather than to be annoyed by vexatious litigation.
No better illustration of the results of granting letters patent for
pretended inventions or discoveries, as well as of the careless manner
in which letters patent are issued, can be found than is presented by
the gate, known in the west as "Teel's Patent." This gate in its
combination and construction does not contain a single new principle.
The same identical gate has been in use for thirty years in various
parts of the Union. With the addition of "friction wheels" or "rollers,"
or "pivot wheels" (as they are indifferently called), this gate was on
exhibition and sale in many of the western states in 1863. In fact, the
patent for the friction wheels obtained in that year was attached to the
gate and publicly exhibited, no claim being made for a patent upon the
gate, but only upon the attachment. The gate itself consists of battens
nailed upon the ends and near the center of four or five boards which
forms the gate, with the posts so placed that after it is pushed a
sufficient distance to make it balance on its center, it can be opened,
its center acting as the pivotal point. The balancing principle for
which the patent was obtained was first discovered by two of the
descendants of Father Adam, in their youthful days, when they balanced a
pole or board across a log or a fence, and, seated, one on each end,
enjoyed a game of seesaw. The little boy who built a pig-pen years
before the great intellect of Teel forged the idea, made the same kind
of a balance gate for it. The man or boy of past generations who desired
to make a cheap gate, instinctively made a _Teel Gate_. Yet some ten
years ago the mighty intellect of Teel forged the idea, produced a model
and forwarded it to the patent office. The _Scientific_ (?) _Examiner_,
who decides upon the merits of all inventions, who, if he had traveled
and observed the common farm gate in many parts of the country, must
have seen the gate in actual public use, issued to Teel letters patent,
which are safely and securely held until the new western country is
settled and this cheap gate is in general use, when he and his agents
and assignees appear and demand _royalty_. He has been given an
exclusive monopoly for the making, selling, and using a gate that is not
new in any of its principles. By this fraud of the applicant and the
incompetence of the examiner, the farmer is forbidden to use the old
invention of a cheap gate until he pays a bounty to a patentee. The law
for the protection of discoverers and inventors is prostituted, and the
people compelled to pay out their money without consideration.
The same state of facts exists with respect to many other patents. Men
travel over the country, examine all machinery and farming implements,
not for the purpose of making new or useful discoveries or improvements,
but for the purpose of learning whether they cannot so contrive as to
collect royalty from others for an invention long in use, but for which
the inventor had not asked or received a patent. Add this monopoly of
patent rights to the other monopolies now cursing the country, and the
need of a speedy reform, or the alternative of poverty and bankruptcy
among the producing classes, becomes still more apparent.
This patent right monopoly is, in a great measure, owing to the want of
proper care and knowledge in the department of the patent office, where
the only pre-requisite for the granting of letters patent for almost
anything, where the application is not contested, is a model and the
patent office fee. The effect of this free and easy course in the
department is to bring into disrepute the really valuable invention and
discovery, and to impose upon the people useless burdens.
CONCLUSION.
REFORMATION OR REVOLUTION.--A RADICAL CHANGE DEMANDED IN THE
ADMINISTRATION OF PUBLIC AFFAIRS.--CONCLUSIONS OF THE AUTHOR.
FIRST. We have sought to call the reader's attention to some of the
monopolies existing in our land, and to show their power and influence
with the government, and their control of the commercial and
agricultural interests of the country. It now remains for us to direct
his attention to the effect of these monopolies upon the people and
prosperity of the country. No country in the world has been as
bountifully supplied by the Creator with all the means to make a nation
prosperous and happy as ours. It is vast in extent of territory. Its
soil is rich, and most of it new. Lying in all latitudes, it produces
fruits of every climate. The husbandman is assured of an abundant crop.
All agricultural and horticultural pursuits are rewarded with large
growths and bounteous harvests. Our shores are washed by oceans, which
afford us highways, over which we can avail ourselves of the markets of
the world; while flowing through the agricultural portions of our common
country are our great rivers, upon whose waters the produce and
manufactures of the land are transported to market. Our great lakes
furnish us an outlet for the surplus product of the great west. Our
sixty or seventy thousand miles of railroad traverse our country in all
directions, reaching from the Atlantic to the Pacific, and spreading
like a net-work from the lakes to the gulf. Our mines produce immense
yields of the precious metals, while our hills and mountains are full of
iron, coal, and lead. Petroleum flows in quantities which should add
largely to the wealth of our common country. Our timber is not excelled
by that of any growth in the world. Our lands are rich in fertility, and
poor only in price. The Creator has done for us all that could be
desired to make us prosperous and contented. Our government is, or was
intended to be, based upon the will of the people. Our constitution
recognizes no royal rulers, no lords, no titled gentry. Under it we are
all equal. They who administer the laws are selected by the people. In
contemplation of law, all are equal--all are free and independent. With
all these blessings and advantages we ought to be the happiest and most
prosperous people on the earth. Peace, plenty, and contentment should
reign supreme throughout the land. What are the facts?
Throughout the entire length and breadth of our land, mutterings and
complainings are heard. From the farmers, the mechanics, and laborers
alike, the complaint is heard, "We cannot pay our taxes and support our
families;" "Our wages will not enable us to buy the necessaries of life,
because of the large duties laid upon them;" "Our farm products will not
pay taxes, charges for transportation, and other burdens imposed upon
us, and leave us any margin;" "We had better let our lands lie idle than
to attempt to cultivate them." These and like complaints are heard from
the laboring and producing classes. Nor are their complaints without
cause. Another interest has arisen in the land--it has become
all-powerful. This interest penetrates the remotest portions of the
country. It calls upon the laborer, the operative, the mechanic, the
farmer, and all private citizens, for a division of the products of
their labor. It enters the halls of legislatures and of congress, and
demands, and not unfrequently purchases, special privileges and powers.
It visits the executive department of the government, and there secures
special favors. It stalks boldly into the courts of the country, and
_there_ procures unjust decisions in its interest. It indeed places its
own men upon these _seats of justice_, that the judiciary of the country
may not fail to support its aims. It has already obtained complete
control of the finances of the country. It has corrupted legislatures
and congressmen, until the law-making power has become a party to
schemes of robbery and plunder. By corrupt legislation and _ex parte_
judicial decisions, it has destroyed all the old republican landmarks,
overridden the provisions of the constitution, and substituted for the
government prepared for us by our forefathers an oligarchy that rules
the land and holds the people at its mercy, and their property as its
lawful booty. This great oppressor of the people is the railroad
corporations and their associates, of which we have been treating.
Railroad and other corporations, brokers, and stock-jobbers, have
obtained such complete control over the government, the people, and the
financial and commercial interests of the country, that they who depend
upon agricultural pursuits, or upon their labor, for a support, are
deprived of those God-given rights which formed the base of our
political superstructure.
Formerly, the people, through the ballot box, governed the country; they
were sovereign. In this republic no rival power existed, and it was our
boast that our people were free and independent. Our fundamental law is
still the same. In theory, our people are still sovereign; in fact, most
of their sovereignty has been legislated from them. Statutes are enacted
compelling the people to divide their hard-earned substance with private
corporations without any consideration; and the highest courts of the
country have affirmed the constitutionality of these laws. The freedom
and equality which was our national boast have disappeared, and instead
thereof the people are ruled by cruel and oppressive task-masters, who
are fostered and supported by legislatures and courts in their united
purpose of controlling the country. These oppressions have been endured
by the people, with but feeble efforts to regain their rights, until the
alternative is presented of organized resistance or absolute ruin.
Throughout the length and breadth of our common country, the laboring
and producing classes are struggling for the necessaries of life, whilst
those who own and manage the corporations of the country have firmly
grasped and now control the financial and commercial interests of the
country, and are amassing princely fortunes and rolling in wealth. To
stay the course of their oppressors, and get back some of their rights,
the laboring classes are organizing, and demanding of their employers
such compensation as will enable them to supply the common necessaries
of life. They demand that their wages shall be increased in proportion
to the increased cost of living, occasioned by special grants and
privileges bestowed upon corporations and monopolies; that instead of
being treated as vassals of the despots who now rule the country and
control the government, that their rights as freemen shall be
recognized.
The operatives and mechanics are banding together for the same purpose.
They are all seeking, in the same degree, to counteract the evil effects
of the grants and privileges conferred upon monopolies. The farmers,
who, as a class, have always been deemed the most independent in the
country, are so impoverished by these monopolies that they have been
compelled to band together for mutual protection. No choice was left
them. The bestowal of such great powers and special privileges upon
corporations presented the alternative of utter financial ruin, or
united and combined efforts on the part of the people, to check the
great and growing power which now is fattening upon their toil and
industry. While under ordinary circumstances, all class organizations
are attended with some bad results, yet when any interest becomes so
powerful as to oppress all others, when it has such strength that it can
defy all ordinary attempts at reform, then any and all organizations
having for their object the correction of abuses, the restoration of the
rights of the people, the destruction of an oligarchy that has already
obtained such power in the land as to subvert the very nature of free
institutions, is not only right, but its objects are patriotic. Though
the organization may have for its object the protection of a single
interest, the correction of a single abuse, the restoration of a single
right, it benefits all classes who suffer like oppressions. It is
fortunate that while the grants of great bounties and special privileges
to corporations have resulted in great wrongs and oppressions to the
people generally, they have also been the means of effecting
organizations that will eventually restore to the people those rights
which in our government are considered as inalienable. When the
agriculturalists of the whole country become united in their demands for
redress, neither the state legislatures, the congress of the nation, or
the courts, will dare to disregard their demands. Numbering more than
all who are engaged in other pursuits, being a majority of the whole
people, when their united voice is heard it will not be an "uncertain
sound." It will command obedience. Grants of bounties and privileges to
corporations have depressed and sometimes destroyed other great
interests to the injury of the people, and divided the people into
classes, one class representing the capital and corporate interests of
the country, and the other, comprised of the laboring and producing
classes; but this special legislation has also resulted in bringing to
the front the great agricultural population, who possess the power, by
united action, of restoring to the people their lost rights, while
corporations shall enjoy equal rights with other interests, shorn of
their power granted to them by corrupt and interested legislation and
partial decisions of courts. This legislation and these decisions we
have reviewed in preceding pages. It now remains for us to express our
views upon the policy rendered necessary by the grave situation of the
country.
SECOND.--_The Constitutional Right and Duty Resting upon the People to
Repeal all Class Legislation._--While we do not claim to possess more
knowledge than other men, and while our views as to the means to be
employed for remedying the evils under which we now suffer may be
erroneous, we shall venture to present them with the hope of aiding the
efforts now being made to arrest the rapid concentration of the whole
political, commercial, and financial interests of the country, in
corporations and other monopolies. We must not lose sight of the fact
that under our constitution the people are sovereign; that the will of
the majority expressed as provided by the fundamental law is supreme;
that all the rights, privileges, and powers possessed by man in his
normal state, are retained by the people, save such as they have
transferred to the different departments of the government, state and
national; that these rights, not so transferred, can be asserted and
enforced as occasion requires; that when those entrusted with the
administration of the government transcend or abuse the powers delegated
to them, and by so doing deprive the people of the rights they possess
under the constitution, the people are fully justified in resorting to
whatever means may be necessary for the restoration and protection of
those rights. In pursuing these necessary measures of relief, no injury
is done to a minority, or to any individual, for the foundation on which
our republic rests is equal and exact justice to all men, and the
equality of all men before the law. All acts of legislatures, and all
decisions of courts, which deny to the citizen, or to any class of
citizens, or to a particular trade, occupation, business, or profession,
the same privileges and protection granted to others, or which grant to
any class of citizens or to corporations privileges which infringe upon
the rights of others, are abuses of power and assumptions of authority
not delegated by the people to the government, or to any department of
it. It follows that any attempts of congress or legislatures to confer
upon any corporations grants of power which enable them to override the
rights reserved by the people, transcend the authority with which such
legislatures are clothed, and are not binding upon the public. As
agents, they have exceeded their power, and their acts do not bind their
principals. If an agent acts under special authority, his acts, within
the scope of his authority, are binding upon his principal; but if he
violates his instructions, and attempts to make a contract not warranted
by his letter of attorney, his acts have no binding force upon his
principal. The same is true of those men who are elected and appointed
to fill the different offices in the government. The constitution is
their letter of attorney. They are bound by it. When they act outside of
their instructions, as contained in that instrument, their acts are
void. This will be conceded. Even members of railroad companies will not
controvert this proposition. The real point is, Who is to decide when an
act is in conflict with the constitution? The answer is, the courts, for
such is the law. When complaint is made of usurpations of corporations,
we are told that they are only exercising the privileges conferred upon
them by law; that the courts have decided in their favor, and that from
these decisions there is no appeal; nor can any redress be obtained,
because the question has been settled in their favor by the highest
power in the land--the supreme court of the United States.
To this general rule of determining controverted questions there must be
some exceptions, unless we concede that supreme power is vested in the
courts, and that the constitution clothes them with all the attributes
of despotic governments. We have shown that judges of courts are
governed and controlled by the same influences which influence other
men; that they are not infallible; that their decisions are influenced
by surrounding circumstances; that education, association, and habits of
life, have an important bearing upon their minds, and not unfrequently
warp their judgments, and it is not treason to say that decisions of
state and federal courts prove that they are as liable to change their
views as are the majority of the people. The supreme power must have a
permanent lodgment somewhere. If it remains with the people, it does not
vest in the supreme court, and that court is but the agent of the
people, and acts for them when it decides upon the validity of a
statute, or defines the rights and duties of the people. Under our form
of government, certain rights and powers are conferred upon the general
government; these are all such as are necessary for our existence as a
nation; they are limited, and should be strictly construed, because all
powers and rights not expressly conferred upon the general government,
"are reserved to the states or to the people." The states being
sovereign, their power is superior to that of the general government,
save in those matters surrendered to it. Hence, the state governments
have a general, expressed, and implied jurisdiction in all matters not
surrendered, and state constitutions are to be liberally construed.
But over and above the powers vested in the general and state
governments, that God-given right of self-protection remains with the
people. This right they have never surrendered to legislatures or to
courts. If by the action of the legislature, or of congress, or of the
courts, the rights reserved to the people can be abridged, denied, or
destroyed, then we do not live under a republican, but are the subjects
of a despotic, government. If congress were to enact a law providing
that one-tenth of the annual income of each inhabitant in the land
should be paid to railroad corporations, and the supreme court of the
United States should decide the act to be constitutional, if it be true
that there is no appeal from these decisions, and that as good citizens
of the government we are obliged to accept them as valid and binding,
there could be no redress. This doctrine of submission we do not
indorse. Such a decision would cause the people to resort to the powers
and rights retained by them, and to make use of whatever means they
possessed to reverse or destroy the force and effect of such a decision.
They would be justified in resorting to nature's first law to rid
themselves of so unjust a decision. While no such law has been passed,
and no such decision has been made, laws have been enacted, and their
validity affirmed by the courts, which are paving the way for the
destruction of the civil and political rights of the people, and the
centralization of all power in the general government. By a series of
legislative enactments and decisions of courts, special privileges have
been conferred upon railroad companies antagonistic to, and destructive
of, the rights of the people. How are these rights to be restored? These
questions will now claim our attention.
All laws granting to railroad or other corporations organized for
pecuniary profit, special and exclusive privileges, which encroach upon
the rights of the public, should be repealed. The most prominent
argument against repeal exists in the doctrine that railroads are public
highways, and that a charter granted to a railroad corporation by the
legislature is in the nature of a contract, and is therefore
irrepealable. By the constant and persistent assertion of these
propositions, and by frequent adjudication of the questions, candor
compels us to admit that the current of judicial decisions supports this
doctrine. Yet as the ancient dogma of tyrants, "The king can do no
wrong," does not obtain in this country, we beg leave to call in
question the soundness of this doctrine. If railroads are public
highways, there can be no question as to the right of legislatures to
exercise the same control over them that they assert in regard to common
public roads. If they are public, private parties cannot have the
exclusive control of them; nor can the legislature grant away the rights
of the public by exclusive charters to private parties, for the reason
that the legislature (the department of government that enacts all
statutes) cannot, by the enactment of a statute, take from the whole
people one of the rights belonging to them and confer it upon a private
corporation. The legislature has no power to enact a statute declaring a
foundry, or mill, built by an individual or a company with private
capital (the absolute title vesting in such party) to be a public
foundry or mill. If such a statute were enacted, it would not change
the title to the property, nor would it prevent the owner from using and
enjoying it as his own, exclusively. Whether it be called public or
private would not change the nature of the ownership or convert the
interest into public property. No matter by what name it might be
called, it is still private property. The same is true of railroads.
They are built and owned by private corporations; are under the control
of their owners, who retain for their own use the earnings of their
roads. If these roads are public highways, then the legislature, acting
for the public good, occupies the anomalous position of granting
charters to private parties to construct public highways, and to own
them after their construction. The supreme court of the United States,
and the courts of some of the states, have decided that they are public
highways, and, according to the usual custom, these decisions are to be
received as final.
The courts having declared them public corporations does not change the
facts in the case. The facts still remain. The roads are owned and
controlled by private corporations. The title cannot be taken from them
arbitrarily. The companies receive the earnings of the roads, and every
fact contradicts the decision of the courts. If the courts were to
decide that a crow was white and _not_ black, we would acknowledge the
binding force of the decision, and admit, that by virtue of the
decision, the crow _is_ white. But when we look at the _fact_, we would
still insist that, notwithstanding the decision of the courts, the crow
is as black as it was before the decision was made. If the courts were
to decide that common highways were railroads, as a matter of law we
would accept the decision as final; but as a matter of fact we would
know that they were common highways. Railroads, owned and controlled by
private parties, are not public highways. If railroads are public
highways, then the other position, that the charters granted to railroad
companies are irrepealable, is not tenable--for the reason that the
legislature possesses full power to alter, amend, or repeal all laws
enacted for the benefit of the public. Public highways are public
property as much as public buildings, court-houses, school houses,
asylums, and other institutions created for the use and benefit of the
public. The legislature does not possess the power to vest in a company
the exclusive right to build and own any of these public buildings. If a
charter were granted for any such purpose, it could not be claimed that
it was in the nature of a contract between the state and the company,
absolutely binding upon all future legislation; that the company had
acquired, by virtue of its charter, rights that neither courts nor
future legislatures could disturb. Or suppose that a private company
should obtain a charter for constructing and owning all the highways
within a certain township or county, would it be contended that future
legislatures could not alter or repeal the charter? If railroads are
public highways, the companies constructing them must be subject to the
same laws and decisions that apply to all other matters of like public
character. Their charters are at all times under the control of the
legislative authority, and subject to be altered, amended, or repealed.
Being the component part of the government, of a public nature, the
doctrine that private parties can acquire rights in the nature of a
contract that cannot be disturbed without their consent is not tenable.
Whether railroads are to be considered as private property, or as public
highways, they are subject to the control of the legislature--because,
under the constitution, the power to create corporations by charter,
with absolute powers, does not exist. If the converse of this is true,
then legislatures could, by conferring special privileges upon
individuals and corporations, deprive the public of all attributes
of sovereignty, and place the entire government in the hands of
individuals and companies. The constitution has conferred no such
power upon any department of the government. If such power is
conferred, the constitution, instead of being the paramount law as
intended--establishing the rights of the people, controlling legislative
enactments, defining the powers of the different departments of the
government, and guaranteeing protection from unjust and oppressive laws,
and decisions of courts--is instead but an instrument to be used for the
enslavement of the people. The power to grant to private parties a
monopoly of any of the rights belonging to the whole people, or to
confer upon these private parties such exclusive privileges as will
infringe upon or take from the public, the rights that naturally
attach, or belong to, the whole people, was never conferred upon the
legislature of the state or nation. If legislatures have entered into
contracts with corporations, under which the rights belonging to the
people are transferred to such corporations, they have exceeded the
power vested in them, and the charters granted, so far as they infringe
upon the rights of the public, are null and void. The plea, that a
repeal or amendment of such charters would destroy vested rights, has no
force, because the power to make such grants or contracts is wanting.
Nor does the plea, that innocent third parties would suffer, add any
strength to the position. The corporations are the parties with whom
these innocent parties contract, and to whom they must look for the
fulfillment of their contracts. All acts of legislatures, granting to
railroad or other corporations, rights belonging to the whole people,
are subject to the control of future legislatures, and are repealable.
The only purpose for which a railroad charter should be granted is to
subserve the public interest. For this purpose the legislatures possess
the power to confer upon corporations such rights and privileges as are
necessary to enable them to have continued being, and to transact
business, but reserving at all times the right to control them and
reform abuses. Good faith on the part of railroad companies requires of
them fair and honest dealing with the people. Adopting the idea that the
public was to receive great benefit from the construction of railroads,
large grants of lands, subsidy bonds, local municipal subscriptions,
donations of money, and direct taxation, in different localities, have
been afforded the different companies for the purpose of aiding in the
construction of their roads. The benefit the public was to receive, and
which the companies agreed to afford, was the only consideration
expected by the people. This consideration the public has never
received. We have shown the course pursued by railroad companies, in
constructing their roads, watering their stock, and selling their bonds,
and the oppressions practiced by them to force from the people the means
for declaring dividends on fictitious stock, and to pay the interest on
the immense amounts of bonds issued and sold to the different
corporations. Assuming that their charters are contracts between
themselves and the states, they defy all efforts made by the people to
arrest their extortions. Our government being instituted for the
protection and benefit of the whole people, they possess the power, and
it is their right, to amend or repeal all laws that deny or abridge
their own rights. Railroad companies should be compelled to reduce their
stock to the actual cost of constructing their roads, and the rates of
charges for the transportation of freights and passengers should be
fixed by statute at such rates as would afford a fair dividend upon the
capital actually invested. The public should not be compelled to pay
interest or dividends on stock or bonds issued in excess of the actual
cost of the roads. The property of railroad companies should be taxed by
the same rules, and at the same rate, as the property of individuals. A
general supervision of all railroad corporations throughout the country
should be exercised by the respective state authorities. It may be said:
"All this is proper, but how will you accomplish it? All efforts
heretofore made in that direction have been defeated in the different
legislative bodies, or by the decisions of the courts." We are compelled
to admit that if future attempts at reform are to be measured by past
efforts, the prospect is not flattering. When relief bills have been
introduced into legislative bodies they have generally failed. Railroad
men have been able to defeat almost every attempt at reform. The idea
seems to have obtained in all legislative bodies that the men who built
railroads were self-denying; that they were philanthropists; that for
the purpose of developing the country, of affording speedy and cheap
transportation to the eastern markets of the products of the west, they
were sacrificing their personal comfort and wealth; and that the least
the people could do was to extend to them a helping hand--to grant them
local aid, to exempt them from taxes, to assist them in procuring the
right of way, and, instead of enacting laws to protect the people from
the abuses of railroad corporations, statutes should be enacted to
prevent any interference with the corporations, and allowing them
extraordinary privileges. Men who were elected to the legislature under
pledges to favor the passage of statutes for the protection of the
people against the encroachments of corporations, were found enlisted
in their favor, and these monopolies, instead of being restricted in
their powers, have continually received additional favors and
privileges.
When the people have appealed to the courts for redress, they have met
with defeat. Lengthy decisions have been written and published, setting
forth the great benefit of railroads, instructing the people that
railroad charters are contracts, and that unless courts decide in favor
of railroad companies "innocent third parties," who have purchased
railroad bonds, will sustain loss. Thus, through the legislative and
judicial departments of the government, the people are reduced to a
state of vassalage, with railroad corporations as their masters and
rulers.
Notwithstanding this gloomy outlook, the people still retain sufficient
power to correct the evil and to recover their constitutional rights.
The country is now divided into two parties. One party is composed of
the people, strong in nothing but numbers, and the determination to
battle for their rights. The other side is composed of corporations,
stock-jobbers, brokers, and capitalists, whose strength consists in the
organization and consolidation of their interests, their control of the
finances of the country, and of the different departments of the
government. The lines dividing these parties are clearly and distinctly
marked. Their interests are conflicting. The people now demand such
legal enactments as will restrict extortionate charges by railroad
companies, and compel them to pay their just share of taxes for the
support of the government. Legislators being elected for short terms,
being frequently called upon to render an account of their official acts
to their constituents, if the people are united and persistent, it will
not be difficult to procure the passage of such statutes as will compel
railroad companies to deal fairly and honestly with the public. To
effect reform, and obtain redress, the aid of another department of the
government must be obtained, to-wit: the courts of the country.
THIRD.--_The People have a Precedent for a Pledged Judiciary._ In
treating of the courts and their decisions, we are venturing upon
grounds that will subject us to criticism. The decision of a court of
last resort upon controverted questions is generally received as final.
In questions of constitutional law, or when the rights of the public or
of private parties are involved, the final decisions of our highest
tribunal are accepted by general consent, as the supreme law of the
land.
We look upon the judges of courts as men possessing superior legal
sagacity, and upon their decisions as embodying the highest wisdom. The
congress of the nation, or the legislatures of states, composed in part,
at least, of men of extensive legal knowledge, who have made the science
of government a life long study; who have carefully and critically
examined the provisions of the constitution; who have full knowledge of
the mischief to be remedied, or the rights to be enforced, carefully
digest, prepare, and after full discussion in their respective bodies,
enact a law which they believe will accomplish the intended purpose, and
at the same time contravene no provision of the constitution. An attempt
is made to enforce the law, and a question arises as to its
constitutionality, or its meaning and effects. The court is appealed to.
On this bench are sitting three, five, seven, or more judges. After
argument, this court, by a majority of one, decides the law
unconstitutional, giving to it an interpretation which defeats the
object for which it was enacted. The minority of the court dissent from
the opinion of the majority, and set forth at length the reasons for
such dissent. The fact that five judges concur in the majority opinion
and four dissent makes the decision of one man the supreme law of the
land. It annuls acts of congress and state legislatures, and makes the
opinions and decisions of four members of the court concurring with a
majority of congress of no avail. One man's opinion is the law for the
whole people. This we have shown in the action of the supreme court in
the legal tender cases. Now it is not considered out of place to
criticise the acts of congress or of legislatures, or the motives and
influences that govern and control those bodies in the enactment of
laws; yet it is looked upon as almost treasonable to refuse to accept
the decisions of courts as good law, or to discuss the motives and
influences leading to these decisions. In 1869 the supreme court of the
United States, by a majority of one judge, decided that treasury notes
were not legal tender for pre-existing debts. In 1871 the same court,
by a majority of one, decided that they were a legal tender for all
debts, public or private, save when there were special exceptions. So in
other questions in the United States courts, and in the courts of the
states, it has sometimes happened that the law of the land has been
changed by the change of one or two judges. In Iowa this is demonstrated
in the decisions of the supreme court upon the questions whether the
legislature could authorize the levy and collection of a special tax to
aid in the construction of railroads. We refer to these matters to show
that judges are not infallible, and that sitting as courts, they are apt
to differ as to the law and facts of the case. Instances are not wanting
when judges have been appointed and elected because of their views upon
certain questions, and when with the changes of the _personnel_ of the
court, its final decisions have been reversed, thus making the supreme
law of the land depend upon the election or appointment of one man to
the bench. The argument to be drawn from this is, that no such sanctity
surrounds the court or judges as forbids a scrutiny of their decisions
or the motives prompting them. But it is said, if you discuss the
motives underlying judicial decisions, you will debase the judiciary of
the country; that candidates for the bench, like those for legislative
or executive offices, will be selected because of their views respecting
certain interests and questions that may come before them for judicial
determination, and, like legislators they will be appointed or elected
because these views harmonize with those of certain classes or
interests. The answer to this is, that as a general rule, judges are now
appointed or elected because of their political views. In almost every
instance the man who is elected or appointed accords in his political
views with the majority, and indeed, men have been nominated and
elected, or appointed, as judges of courts because of their publicly
expressed opinions on some particular subject. The decisions of courts
upon constitutional and other questions change frequently. The most
important interests and rights of the people under the constitution and
laws of the country have been differently decided by the same court of
last resort in both national and state tribunals. The constitution has
been declared to mean one thing at one time, and a directly opposite
meaning has been given to the same clause at another term of the same
court, with but a few months intervening. An elasticity has been given
this instrument neither contemplated by its framers, nor calculated to
increase respect for it, or for the judiciary of the country. While we
would not advocate the policy of candidates for judicial offices
pledging themselves upon any question that may come before them for a
decision, we claim that the people should exact from every candidate a
pledge to "support, protect, and defend the constitution," to abstain
from the dangerous practice which now obtains of construing the
fundamental law of the land in favor of particular interests, and to
abstain from judicial legislation. More danger to the liberties of the
people is to be apprehended from the courts, than from any other source.
The constitution is inelastic, unchangeable, save by amendment in the
manner provided. No court should disregard it, nor warp its meaning. If
the rules of construction practiced of late are to be continued, its
sanctity is destroyed, and its provisions are no more binding than those
of a statute. It is the duty of courts to interpret the constitution,
but not to supply its (to them) seeming defects, or to override its
plain provisions. We all feel a deep interest in the election of
legislators, for the reason that all are to be affected by the laws
enacted, but we seem not to realize to its full importance the fact that
all laws passed by congress or a state legislature are liable to be
declared null and void by the courts; that the interpretation and
construction of statutes belong exclusively to the courts; that the men
elected to judicial positions, under the constitution, are clothed with
a power superior to that of the legislative and executive departments of
the government; that by a single decision the supreme court of the
state, or of the nation, can suspend or annul a statute which has been
in force for years, or that an interpretation of the constitution, long
acquiesced in, can be reversed and a new meaning given to it. Yet these
are facts, and from these decisions there is no appeal. The courts may
change their opinions upon constitutional questions at every term, and
the nation must receive their decisions as the supreme law.
We have said that the constitution is inelastic. It must remain so for
the protection of the rights of the people. If courts can change its
meaning as occasion requires, the will of the court and not the
constitution, is the supreme law of the land. The decisions of courts,
in the recent conflicts between railroad corporations and the people,
and upon the legal tender question, demonstrate that the will of the
court is already the supreme law of the land. One of the questions in
the determination of which the courts have substituted their will for
constitutional law, relates to the authority of state governments to aid
in the construction of railroads. The constitution of Iowa prohibits the
state from participating in or becoming a stockholder in any private
corporation or any corporation created for profit. Counties are,
necessarily, a part of the government; their creation and organization
are a necessity in the administration of the state government. While the
state is prohibited from aiding in the construction of railroads, the
courts have said that the constitution does not prohibit counties from
subscribing stock to railroad corporations and creating onerous debts in
payment therefor. In other words, while the constitution forbids any
participation on the part of the state, as a state, in the construction
of railroads, it is no violation of the fundamental law for the inferior
branches of the state government to become stockholders in the same
corporations. Though the whole state is forbidden to aid in the
construction of railroads, by dividing the state into counties, it is no
violation of the fundamental law for these counties to aid in their
construction. No one doubts that it was the intention of the framers of
the constitution to protect the people against the evils of oppressive
burdens always resulting from a participation of the public authorities
in the construction of railroads. The question of the authority of
counties to subscribe stock to railroads, in Iowa, has often been before
the courts. The decisions have been numerous, but not unanimous or
uniform. At no time has the supreme court of the state by unanimous
decision held that the power existed; but on several occasions the court
has united in deciding that the power did not exist, the
constitutionality of such right depending entirely upon who were elected
judges. Thus the fundamental law, which can only be changed by
amendment in the manner provided, has been held to permit or forbid
public aid in building railroads, as suited the peculiar views of the
men who had been elected judges. What was constitutional one day was
unconstitutional the next. The decision of the men who happened to
occupy seats upon the supreme bench, has been the supreme law, and not
the constitution. On the question of voting local aid to railroads the
supreme court decided that the act of the legislature authorizing such
aid was unconstitutional. In one year from that time the same supreme
court, three judges concurring, decided that the law was constitutional,
the reason of this variance being that in the interim two judges had
retired from the bench and two new ones been elected in their place.
Here, again, the will of the men who happened to be elected changed the
meaning of the constitution. The same curious history has been enacted
in many other states. When men who are interested in railroads, or who
desire that the public should aid in their construction, occupy seats on
the bench of the supreme court, the constitution is construed to allow
such aid, and where the judges are opposed to the allowance of such aid,
they decide the constitution does not authorize, but forbids it. In each
case the fundamental law is interpreted to suit the peculiar views of
the judges who occupy the bench, until it has ceased to have any binding
effect. With this state of facts, known to all men, it is not strange
that the people now demand pledges from men who aspire to judicial
station. When state constitutions are made to mean anything or nothing,
as suits the men whose duty it is to interpret them, and when laws are
pronounced constitutional or unconstitutional, as caprice or the
interests of corporations may prompt, "nature's first law,
self-preservation," demands that those who aspire to become judges of
courts should be controlled by the constitution rather than by their
personal views as to what it should be; and that they should be fully
committed and pledged to abstain from judicial constructions of the
constitution which abridge the rights of the people and increase the
power of corporations. While the decisions of the state courts have
tended to abridge the rights of the people and increase the already too
great power of corporations; while they have, in fact, decided that,
under the constitution, a citizen can be compelled to bestow a part of
what he possesses upon railroad corporations without an equivalent, the
greatest danger to the liberties of the people and the perpetuity of
republican government is to be apprehended from the supreme court of the
United States. It possesses, under the constitution, unlimited
jurisdiction upon all matters arising under the constitution and laws of
the United States, but not the same general jurisdiction that appertains
to state tribunals. Yet, as under the constitution it is a court of last
resort, and its members hold their offices for life, it is independent
of the people. Not only so, but it cannot be called to an account by any
department of the government, state or national. It possesses powers
superior to all other departments of the government; it rises above all
law, and becomes a law in itself. Its decisions being final, the whole
people must accept them as the supreme law of the land. No matter how
oppressive, or unjust, or absurd, the whole government and people must
accept these decisions as the highest law and authority in the land.
These facts, taken into consideration with some of its recent decisions
in favor of railroad corporations and other monopolies, raise the
question whether we are now governed by constitutional law or by the
edicts of the supreme court, promulgated in the guise of judicial
decisions.
Let us look at a few of these decisions, now in full force as the law of
the land. In the construction of railroads, counties, cities, and towns
have assisted by subscribing stock and levying taxes to pay such
subscription. State courts have decided that under the constitution and
laws of the states such subscription was unconstitutional, illegal, and
void. The power to afford such aid to railroad companies was derived
from state statutes, passed by virtue of the power presumed to be
conferred by the constitution. Following precedents which had been
established and recognized from the organization of our government, the
decisions of the state courts should have been final, and binding upon
the courts of the nation. Yet the supreme court of the United States, by
a bare majority of one, in violation of all precedent, assumed power not
conferred upon it by the constitution of the United States, annulled
state constitutions, disregarded state laws, and reversed and refused
to be bound by the decisions of state courts. The will of one man, who
happened to occupy a seat upon the supreme bench, is made the supreme
law of the land, not by virtue of any provision of the constitution, but
by trampling upon the rights of states and the people. When it is
remembered that their decisions were made in favor of corporations, and
that their effect was to compel the people to contribute a part of their
substance to help build up and strengthen monopolies, which have proved
to be oppressive task-masters, we are justified in saying that the
fundamental law of the land has been misinterpreted and the rights of
the people sacrificed. We assert that no provision of the constitution
can be shown that even indirectly authorizes taxation to aid in the
construction of railroads owned by private corporations. The idea is at
war with every principle of right and justice. When the supreme court of
the nation assumed to decide in favor of such authority, it occupied the
position and assumed the prerogative of an absolute monarch. The supreme
court of the United States was as much bound by the decision of the
state courts upon questions arising under state constitutions and laws
as were the courts of the states by the decisions of the federal courts
upon questions arising under the constitution and statutes of the United
States. The adoption of a different rule will subvert the principles of
our government, and, as a necessary result, the will of the supreme
court will become the supreme law of the land.
We might give other instances wherein the federal courts have overridden
state tribunals without warrant of law and in disregard of state rights;
but we pass to another question which is now engrossing public
attention, and upon which the supreme court has recently made a
decision. The question whether railroad corporations are public or
private has been before the supreme court. The court has passed upon it,
and decided that railroads are public highways; but it has not yet
decided that railroad corporations are public. No question connected
with railroads is of more importance to the people. If they are public
highways, then the legislatures of the states have full control of them,
and the roads are as much a part of the public or common property of
all the people, to be used as occasion requires, as are common highways.
Then the right to levy and collect taxes to aid in their construction,
or to wholly construct them, cannot be questioned. The supreme court of
the United States, in a very recent case appealed from the state of
Wisconsin, has decided that, for the purposes of taxation, railroads are
public highways. The opinion was delivered by Justice Strong, and is
ingenious as well as unique. We desire to call the reader's attention to
some portions of it, for the purpose of showing how the rights of the
people are protected by the judiciary of the United States. The opinion
pronounced by Justice Strong fully illustrates the fact that association
and education will influence the decisions of judges as well as those of
other men; and while we impute no improper motives to the judiciary of
the nation, we say that this decision disposes of some of the rights of
the people, supposed to be fully protected by the fundamental law, with
as little hesitation as would be manifested by an inferior court in a
case involving only the plainest legal points. The court says:
"The legislature cannot create a public debt, or levy a tax, or
authorize a municipal corporation to do so, in order to raise funds for
a mere private purpose. It cannot, in the form of a tax, take the money
of a citizen and give it to an individual, the public interest or
welfare being in no way connected with the transaction. The objects for
which money is raised by taxation must be public, and such as subserve
the common interest and well-being of the community required to
contribute."
That this is good law, all will admit; but what shall we say of the
following, copied from the same opinion:
"To justify the court in arresting the proceedings and declaring the tax
void, the absence of all _possible public interest_ in the purpose for
which the funds are raised must be clear and palpable--so clear and
palpable as to be perceptible by every mind at the first blush."
It is decided by the supreme court of the United States, that if there
is any "possible public interest" in the purposes for which a tax is
levied, then such levy of tax is constitutional, and this decision is to
be received as the supreme law of the land. Is this good law? The
public has an interest in toll-bridges, plank roads, ferries,
manufacturing companies, and many other enterprises prosecuted and
controlled by private corporations and individuals--are these all so
connected with the administration of the government as to be proper
objects of compulsory contributions for their support? The man who
crosses the bridge pays toll; the party driving over the plank road does
the same; the ferryman exacts fare--and all receive it, not for the
benefit of the public, but for their own private uses. Yet the public
have an interest in them. Are they public corporations? Suppose the
legislature of the state should, by statute, declare them public
corporations, under what provision of the constitution is found the
power to tax the people for their construction while they are owned and
controlled by private parties? Stage coaches and steamboats are owned by
private parties; they are common carriers, subject to be regulated and
controlled by law; the public have an interest in them; the legislature
can prescribe rules and regulations to be observed by them in the
prosecution of their business as common carriers. Can the people be
compelled to pay taxes for their support? No distinction exists between
common carriers by water or by land over ordinary highways and railroad
companies as to their rights and duties when the public are concerned,
except that railroads cannot be built until the companies building them
have procured the right of way. Private companies own the roads; they
sell and mortgage them; they receive all the profits, and control them
in their own interest. If a tax can be levied to aid in building
railroads owned by private parties, then taxes can be levied in amount
sufficient to build the entire road. If the decision is sound, its
results will prove most disastrous.
The people will be compelled to build the roads for private
corporations, and, after they are built, pay toll or fare for the
privilege of using them. The people pay for the roads, yet they do not
own them, and have no interest in them, or right to use them except upon
payment of such sums as the private corporations owning them may choose
to demand. We insist that no such power is vested in the legislatures or
in congress. If the power does exist--if the people can be compelled to
build railroads for private corporations--in the language of a
distinguished judge of the state of New York, "It is legal robbery, less
respectable than highway robbery, in this: that the perpetrator of the
latter assumes the danger and infamy of the act, while this act has the
shield of legislative responsibility." The effect of this decision is to
make railroad companies a component part of the government, to draw more
clearly the line between the people and the combination of monopolies
that now control the country. When the court of last resort in the
nation comes boldly to the front, and by an edict (for it cannot be
treated as a judicial decision) declares that unless there is an
"absence of all possible public interest, so clear and palpable as to be
perceptible by every mind at first blush," the power to levy and collect
taxes in aid of railroads owned and controlled by private corporations
exists, the people have reason to fear that the interests of railroads
and not the constitution of the country is the paramount law. But says
the court, "That railways, though constructed by private corporations
and owned by them, are public highways, has been the doctrine of nearly
all the courts ever since such conveniences for passage and
transportation have had an existence. Very early the question arose
whether a state's right of eminent domain could be exercised by a
private corporation created for the purpose of constructing a railway.
Clearly it could not, unless taking land for such a purpose was taking
land for public use. The right of eminent domain nowhere justifies the
taking of property for private use. Yet, it is a doctrine universally
accepted that a state legislature may authorize a private corporation to
take land for the construction of such road, making compensation to the
owner. What else does the doctrine mean if not that building a railway,
though it be built by a private corporation, is an act done for a public
use. And the reason why the use has always been held a public one is
that such a road is a public highway, whether made by the government
itself or by the agency of corporate bodies, or even by individuals,
when they obtain their power to construct it from legislative grant." If
the court had been employed as the attorneys of the parties seeking to
collect the tax, no more ingenious or partisan argument could have been
made for the claimants than is presented in this opinion. As a finishing
argument in favor of the taxing power, the court says: "Whether the use
of a railway is a public or a private one depends in no measure upon the
question who constructed it or who owns it." The court decides that
railroads are used for public purposes; that the right of eminent domain
attaches to them; that, being used for public purposes, and having the
right of eminent domain, they are public highways; and, being public
highways, taxes may be levied upon the people to aid private parties in
constructing them. We have quoted enough of this decision to give the
reader an idea of the train of reasoning resorted to by the court to
support the theory that railroads owned and controlled absolutely by
private parties are public highways, and that the people may be taxed to
build and maintain them. If the supreme court of the United States
possessed the power under the constitution to pass upon the
constitutionality of the law of the state of Wisconsin, we would be
compelled to accept this decision as the law of the case; to acknowledge
that as a question of law private railroads were public highways; yet,
as a matter of fact, we would still have to insist that they remained
private roads, over which the public could ride or ship freight upon
making compensation to the owners, just as they could ride or ship
freight upon a steamboat or common road wagon upon paying the required
amount to the owner or master. While legislatures grant to railroad
companies the right to appropriate the lands of others in procuring the
right of way, upon making compensation therefor, no part of the price
for this right of way is paid by the government or the public. It is
paid by the companies building the roads. We are not prepared to admit
that the grant of this privilege to railroad companies makes them a part
of the government, or that it clothes them with any of the attributes of
sovereignty. Taxes can only be levied for public purposes, for the
support of the government, and for the benefit of the public. The
compulsory payment of taxes to private corporations cannot be supported
upon any other basis than of our government being a despotism and not a
constitutional republic. We have before referred to the action and
decisions of the supreme court on questions arising between the people
and corporations, and only refer to it here for the purpose of showing
the necessity of reform. The action of the courts shows that, whatever
may have been their intention, they have departed from old constructions
of the constitution; that judicial legislation has superseded
constitutional restrictions and limitations, and that the personal views
of the judges constituting a majority of the court have become the
supreme law of the land.
Another noticeable fact is that the recently appointed judges are the
most prominent in this new departure. We make the assertion that the
supreme court of the United States does not possess the power under the
constitution to overrule or disregard the decision of a state court upon
questions arising under state laws and constitutions. No paragraph,
line, or syllable, of the constitution of the United States confers this
power upon the supreme court, save when the state law or constitution
contravenes some provision of the constitution of the United States, or
some statute passed in aid of constitutional provisions. If the reader
will examine the decisions from which we have been quoting, he will find
that the rights of the states and of the people, expressly guaranteed by
the constitution, have been, by a bold and unwarranted assumption by the
United States supreme court, obliterated. The decision of the supreme
court of a state, whose decision was final and binding upon the supreme
court of the United States, has been overruled and declared null and
void, not by virtue of any constitutional right vested in the United
States court, but by an assumption of power making the will of that
court the supreme law, and placing corporations beyond the control of
the states granting them their charters. The fact that the reason upon
which the decision is based appears in the nature of an apology for the
decision, while constitutional rights are lost sight of, proves the
truth of our assertion, that judges of courts are subject to influences
that control other men, and that the interest of monopolies and not the
constitutional rights of the people has a controlling influence in the
highest court in the nation. It also demonstrates the fact that no
thorough reform can be effected until the constitution of our common
country shall control the decisions of the courts.
In proof of the facts that the decisions of the supreme court of the
United States are not always controlled by the constitution, let us
again refer to the legal tender decisions. Here again, the opinion of a
bare majority of the court (five of the judges concurring and four
dissenting) establishes the law for forty millions of people, and does
violence to both the letter and spirit of the constitution. Under the
constitution the power to coin money and regulate its value is vested in
congress. The states are prohibited from coining money, and from making
anything but gold and silver coin a tender in payment of debts. The
letter of the constitution does not deny to congress the power to issue
paper money and make it a legal tender; but when we take into
consideration that the power is denied to the states, the conclusion is
irresistible that the power was intended to be denied to the general, as
well as to the state governments. While as a war measure the power might
be exercised, it certainly could not be in time of peace. Being one of
the extraordinary powers vested in congress in time of war, rising above
the constitutional restriction, if we may use the expression, governed
by the law of necessity, the power should not be enlarged by judicial
interpretation, nor should the plain letter of the acts of congress
passed as war measures be made to extend beyond its express provisions.
When the highest court in the nation decided that the legal tender act
was ultro-active in its operations, that court decided, in effect, that
under the constitution congress possessed the power to annul contracts
made between private citizens, that one might legally take from another
a part of his property without compensation. While that court has
uniformly decided that bonds obtained from counties, cities, and towns
fraudulently, and without consideration, must be paid, it decides that a
retroactive statute may be passed which takes a man's property without
consideration; and that congress, without any such power being conferred
by the constitution, can substitute a new standard of values. Not only
that congress can do this, but that the legal tender act extended beyond
its plain reading, and made paper money, a thing that is of no intrinsic
value, a legal tender for debts generally; that this paper was the
standard of values, and that coin, gold and silver, were but articles
of commerce, the value of which was fixed by this new paper standard. If
one not learned in the law had been called upon to interpret the
constitution he would have arrived at a different conclusion. If ten
years ago one learned in the law had been called upon to interpret the
meaning of the constitutional provision above referred to, he would,
without hesitation, have decided that such an act was unconstitutional.
If the eminent jurists who graced the supreme bench at any time since
the organization of our government had been required to decide as to the
validity of the statute, or to construe its terms, or declare its
meaning, a realizing sense of the obligation resting upon them, and of
the danger of violating the provisions of the constitution, would have
deterred them from making such a decision. When, in the winter of 1869,
the question was before the court, upon careful examination Chief
Justice Chase, who was the author of the statute under which the
question arose, and four other judges, decided that it only applied to
contracts made after its passage, and then only as a war measure. The
supreme court of the United States declared that the legal tender act
had no retro-active operation, and that, under the constitution, it
could not be extended beyond its terms. That to extend it further would
be a violation of the fundamental law. Here the matter should have
ended. The decision was and should have remained final. But it did not
meet the approval of corporation rings and Wall street gamblers. They
demanded a different decision, and their demand was gratified. To obtain
a reversal without a reconstruction of the court was not expected. It
was suddenly discovered that there was a necessity for an additional
judge. The reason given was that an even number of judges might divide
and no decision could be rendered. Hence the necessity for one more. It
was known to them that one judge was about to resign, and that one had
concurred in the decision which they desired reversed. Two judges were
to be appointed. If both were in favor of reversal, then five of the
nine would favor a reversal. (We have referred to this matter before,
and do it now for a purpose that will soon appear.) Two railroad
attorneys, Strong and Bradley, were recommended and appointed before the
close of the term of the court at which the legal tender decision had
been rendered. Notice was at once given that the legal tender case would
again be presented to the court for a decision. It was announced, both
before and after the appointment of Messrs. Strong and Bradley, that
they were committed to a reversal of the legal tender decision. Soon
after these _fresh caught railroad attorneys_ had taken their seats upon
the supreme bench, we find them redeeming the pledges the friends of a
reversal claimed had been made, and writing long arguments in favor of a
reversal of the opinion of Chief Justice Chase and the four other
eminent judges, in which argument they seem to disregard constitutional
restrictions, and to apologize for the opinions they pronounced,
declaring that treasury notes are a legal tender for all debts, save
those that are excepted in favor of the government. Thus by the
appointment of two judges, understood to be pledged to the railroad
interests, the supreme law of the United States makes paper "promises to
pay" a legal tender when contracts call for money; fixes this kind of
paper as the standard of values, and makes gold and silver coin articles
of commerce, and at the same time the constitution makes coin a legal
tender and the standard of values, and prohibits the states from making
anything but coin a legal tender. To serve a particular _interest_ and
benefit railroad corporations, the personal views of these two judges,
approved by three others, became the supreme law of the land, in
disregard of the plain letter of the constitution, as well as the
decisions of the same court upon the same statutes made but a few months
before.
We have been thus particular in referring to this decision and the means
used to procure it, for the purpose of showing that the idea of exacting
pledges of men who are candidates for judicial position is not new, and
that those who apparently look with alarm at what they are pleased to
term an innovation upon long established precedents, as well as an
attempt to destroy the independence of the courts of the country, have
themselves been successfully practicing the same thing, and securing the
election and appointment of judges whose views accorded with their own.
FOURTH.--_Judicial and Partisan Legislation Reviewed, and a Remedy
Suggested._--The consequence of special legislation in favor of
railroad corporations, the granting of subsidies of land and bonds, is
not what is claimed by the advocates of such legislation. It has placed
the whole producing interests of the country at the mercy of soulless
corporations. It has given railroad corporations title to, and absolute
control of, enough of the public land to make an empire of vast extent.
Lands that of right belong to the people, are owned by these
corporations, and instead of the nominal price fixed by the government
upon them, our pioneers, who settle and develop the country, must pay
whatever sum is demanded by these corporations, or content themselves
with such lands as they can find in less desirable localities.
It has given to railroad corporations the absolute control of the coal
lands of the country, so that in the future, as well as at the present
time, at all points where there is a scarcity of timber, the people are
compelled to pay such prices as are, and in the future will be, demanded
of them or perish with cold.
It has established an unequal and unjust system of taxation, by means of
which corporations are relieved from the payment of their just
proportion of the public taxes. It sanctions and supports bare frauds
upon the public, in permitting corporations to add to their capital
stock at pleasure, making the apparent cost of these roads much greater
than they really are, and permitting them to extort from the people for
transportation of freights sufficient amounts to pay the interest and
dividends on this "watered stock." It has taken from the people the
rights guaranteed to them by the constitution, and transferred their
rights to railroad companies. These are a part of the evil consequences
of partial and special legislation in favor of corporations; and they
could be speedily remedied, but for the decisions of the courts.
These decisions we have noticed, and have shown that whatever may have
been the intention of the courts rendering them, their tendency has been
to strengthen and uphold the mighty power asserted by corporations.
Where conflicts have arisen between counties and municipalities on the
one side, and these corporations on the other, the courts have treated
these railroad companies as private corporations, and have decided in
their favor. When the majority of a legislature, believing that
corporations were subject to legislative control, have attempted to
restrict their powers, and correct their abuses, the courts have said
their charters were in the nature of contracts, which the legislature
could not alter or amend, and the people have been compelled to submit.
When the question of the right to levy taxes for the purpose of building
railroads is to be decided, another phase of the question is presented.
All the courts agree that taxes cannot be levied for a private purpose.
The difficulty is met and overcome in this way:
_First._--It is announced that railroad corporations have the right of
eminent domain, that this right is an attribute of sovereignty; and for
this reason they must be considered public corporations. We have
referred to this already, but refer to it again for the purpose of
showing that the argument is not sound. The right of eminent domain is
possessed by the supreme power of the nation. It belongs to all
governments. Of right it is not inherent in, nor can it be acquired by,
any private person or corporation. If the right is ever exercised by any
corporation, company, or individual, it must be by the permission of the
governing power; in this country by legislative grant. If it belonged to
corporations they could exercise it without the consent of the
legislature. They could themselves decide how, when, and where they
would exercise it. They could prescribe the mode of condemning the
property of others to their own use, and no power in government could
question their acts. It will not be contended that without special
legislative enactment, railroad companies could appropriate the property
of others for the purpose of building their roads upon it. All will
agree that before they can do this, the legislature must confer the
right upon them. Does the act of granting to corporations the right to
build their roads through the property of others confer upon them any of
the attributes of sovereignty? If so, the legislature possesses the
power of granting its attributes to corporations or to any private
person. It would be immaterial whether a single person, a company, or a
corporation, desired to build a railroad. To make such person, company,
or corporation a part of the government, the legislature need but
delegate to the party desiring to build a railroad the right of eminent
domain; and from that moment the individual or corporation becomes a
part of the government. A moment's reflection will convince the reader
that the position is untenable. If one of the attributes of sovereignty
can be _farmed out_ to railroad corporations, another can be to some
other interest, and in process of time the government itself would
become a mere skeleton, having delegated all its powers to private
parties, remaining only a government in name. From time immemorial, the
legislature has granted to various parties the same kind of privileges
that are granted to railroad companies; yet it never was, and is not now
claimed, that because of such grants, the parties obtaining them became
public corporations, or that they were clothed with any of the
attributes of sovereignty. Ferry companies, plank-road companies, and
turnpike road companies, have been chartered with power to take the
property of others, and place their ferries, buildings, and roads upon
the property so taken, upon payment of the appraised value. In many of
the states laws have been enacted under which private parties have been
granted the same privilege. Persons building mills are permitted to
construct dams across streams and appropriate such portions of the
overflowed lands of adjoining owners to their own use, upon payment of
its value as found by appraisers. A and B, and their associates, desire
to build a mill; in the construction of their dam they cause the
backwater to flood the land of C. Under the provisions of the statute a
jury is called, who assess the value of the land of C so overflowed and
appropriated by A and B. The mill is built for the accommodation of the
public. All who desire to do so can take their grain to this mill and
have it ground upon payment of the required toll. The owners have, under
the statute, the same right of eminent domain that is conferred upon
railroad companies; and their mill is used expressly for grinding for
all who patronize it and pay the required toll. The owners of the
railroad, and the owners of the mill alike, serve the public. Both do it
for a pecuniary consideration. Both have the same right of appropriating
the property of others. Yet the railroad, under the decisions of the
courts, is a public corporation, while the mill is a private one. The
railroad corporation is clothed with one of the attributes of
sovereignty, while the owners of the mill retain their character as a
private corporation. No good reason appears for this distinction. While
we admit that the supreme court of the United States has decided that
because of the fact of legislatures having granted to railroad companies
the right to appropriate the lands of other persons to be used as
road-beds, they become public corporations, and that until reversed we
must accept it as the law, we contend that as long as the railroads are
owned and controlled by private parties, and their earnings are
appropriated and used exclusively for private purposes, the facts are in
direct conflict with the law as declared by the supreme court, and that
either the facts or the law must be changed before they harmonize.
_Second._--It has also been decided by the courts that railroads are
public highways (an absurdity on its face, that under the law railroads
are public highways, while they are owned and controlled by private
companies, who become public corporations because of one of the
attributes of sovereignty having been conferred upon them), and that,
because they are public highways, taxes can be levied upon the people
for building and repairing them. The fact being admitted that private
parties own and control railroads; that the government receives no part
of their earnings, and that neither the government nor private persons
can ride upon them without paying for the privilege, or procuring a
pass, and that no freights can be shipped over them without payment of
the amounts demanded, seems to conflict with the decisions of the
courts. Under the decisions of the supreme court, the property of the
citizen is taken from him without compensation, and bestowed upon a
private corporation, and the plain provision of the constitution has
received a new interpretation, which compels the property owners to
bestow a part of it on corporations without any consideration whatever.
The situation is about as follows: When a conflict arises between the
people and railroad corporations, or when the legislature attempts to
reform abuses practiced by them, the courts hold that railroad charters
are in the nature of contracts, and that the legislature can neither
alter, amend, or repeal them. The companies are then treated as private
corporations. In proof of this look at the following decision, of recent
date:--
"SUPREME COURT OF THE UNITED STATES.
"_The Wilmington & Weldon Railroad Company, Plaintiff in error, vs.
John A. Reid, Sheriff, etc.--In error to the Supreme Court of the
State of North Carolina._
"Mr. Justice Davis delivered the opinion of the court:--
"This is a writ of error to the supreme court of the state of North
Carolina, and brings up the question whether the recent legislation of
the state, concerning the collection of taxes, is, as it affects the
plaintiff in error, in violation of that provision of the constitution
of the United States which declares that no state shall pass any law
impairing the obligation of contracts. As early as 1833, the general
assembly of North Carolina incorporated the Wilmington & Weldon railroad
company, for the purpose of constructing a railroad in the state, and
inserted a provision in the charter 'that the property of said company,
and the shares therein, shall be exempted from any public charge or tax
whatsoever.' It has been so often decided by this court that a charter
of incorporation granted by a state creates a contract between the state
and the corporators, which the state cannot violate, that it would be a
work of supererogation to repeat the reasons on which the argument is
founded. It is true that when a corporation claims an exemption from
taxation, it must show that the power to tax has been clearly
relinquished by the state, and if there be a reasonable doubt about this
having been done, that doubt must be solved in favor of the state. (The
Binghampton Bridge Case, 3 Wallace.) If, however, the contract is plain
and unambiguous, and the meaning of the parties to it can be clearly
ascertained, it is the duty of the court to give effect to it, the same
as if it were a contract between private persons, without regard to its
supposed injurious effects upon the public interests.
"It may be conceded that it were better for the interests of the state
that the tax-paying power, which is one of the highest and most
important attributes of sovereignty, should on no occasion be
surrendered. In the nature of things, the necessities of the government
cannot always be foreseen, and in the changes of time the ability to
raise revenue from every species of property may be of vital importance
to the state, but the courts of the country are not the proper tribunals
to apply the corrective to improvident legislation of this character. If
there be no constitutional restraint on the action of the legislature on
this subject, there is no remedy, except through the influence of a wise
public sentiment, reaching and controlling the conduct of the law-making
power.
"There is no difficulty whatever in this case. The general assembly of
North Carolina told the Wilmington & Weldon railroad company, in
language which no one can misunderstand, that if they would complete the
work of internal improvement for which they were incorporated, their
property and the shares of their stockholders should be forever exempt
from taxation. This is not denied, but it is contended that the
subsequent legislation does not impair the obligation of the contract,
and this presents the only question in the case. The taxes imposed are
upon the franchise and rolling stock of the company, and upon lots of
land appurtenant to and forming part of the property of the company, and
necessary to be used in the successful operation of its business. It
certainly requires no argument to show that a railroad corporation
cannot perform the functions for which it was created without owning
rolling stock, and a limited quantity of real estate, and that these are
embraced in the general term property. Property is a word of large
import, and, in its application to this company, included all the real
and personal estate required by it for the successful prosecution of its
business. If it had appeared that the company had acquired either real
or personal estate beyond its legitimate wants, it is very clear that
such acquisitions would not be within the protection of the contract.
But no such case has arisen, and we are only called upon to decide upon
the case made by the record, which shows plainly enough that the company
has not undertaken to abuse the favor of the legislature.
"It is insisted, however, that the tax on the franchise is something
entirely distinct from the property of the corporation, and that the
legislature, therefore, was not inhibited from taxing it. This position
is equally unsound with the others taken in this case. Nothing is better
settled than that the franchise of a private corporation--which, in its
application to a railroad, is the privilege of running it and taking
fare and freight--is property, and of the most valuable kind, as it
cannot be taken for public use even, without compensation. (Redfield on
Railways, p. 129, sec. 70.) It is true it is not the same sort of
property as the rolling stock, road-bed, and depot grounds, but it is
equally with them covered by the general term, 'the property of the
company,' and, therefore, equally within the protection of the charter.
"It is needless to argue the question further. It is clear that the
legislation in controversy did impair the obligation of the contract
which the general assembly of North Carolina made with the plaintiff in
error, and it follows that the judgment of the supreme court must be
reversed. It is so ordered, and the cause is remanded for further
proceedings, in conformity with this opinion.
"D. W. MIDDLETON,
"C. S. C. U. S."
When the question of the right to levy taxes upon the people, for the
purpose of building railroads, is before the courts, they decide that
such right exists: First, because the right of eminent domain has been
conferred upon the company; and, second, because the railroads are
public highways; so, that, in every phase the question assumes, the
decisions of the courts are in favor of these corporations, and adverse
to the people.
Notwithstanding the fact that the decisions of the courts fix the status
of the railroad corporations as public in their nature, the real fact
remains that railroads are owned and controlled by private parties, and
it is a mere fiction of law to call them public; and while we accept the
decisions as law, the facts are unchanged. The effect of the legislation
to which we have referred is apparent to all. It has strengthened
corporations, enlarged their powers, and constantly encroaches upon the
rights of the people. So great has this evil become that almost the
entire population of the country, not under the control of or interested
in railroad corporations, are demanding a change of legislation, and
relief from the oppressions heaped upon them by these monopolies.
But the injuries inflicted upon the people by the decisions of the
courts are far greater than those resulting from legislation. By the
decisions of the supreme court of the United States, the distinction
between public and private rights has been obliterated; the constitution
of the country has become of no more binding force than statute laws.
State statutes and the decisions of state courts have been overridden
and annulled where the interests of corporations were to be subserved;
the settled decisions of the same court have been overruled, and a new
doctrine, in conflict with the settled interpretation of the fundamental
law of the land, has been announced, which makes the people the vassals
of railroad corporations. The rights of the people and the states have
been disregarded, and the edicts of the supreme court have been
substituted for constitutional law. By the decree of that court,
railroad corporations are clothed with the attributes of sovereignty,
and the people are compelled to pay taxes to aid in the construction of
their roads. That court has engaged in judicial legislation, and
fastened upon the people a despotic government, with railroad
corporations as their rulers. If it be true that railroad corporations
are public and not private, they are not subject to the control of state
courts or state legislatures. They are not by their charters, or the
powers derived from legislative grants, made public corporations, and if
they are public, they are made so by the decisions of the supreme court,
or by some assumed power not visible to the public eye. It is contended
by some, that if it is fully established that they are public
corporations, the state legislatures and the state courts can regulate
and control them. Is this so? Will not that fact take from the states
all jurisdiction over them? The decision making railroad corporations
public, also makes their roads public highways extending throughout the
country. It is claimed that the general government, having power to
regulate commerce between the states, can take control of all the
railroads in the United States. No power is conferred upon state
legislatures, in many of the states, to grant charters to railroad
companies, conferring upon them any sovereign powers. And by the
constitutions of some of the states they are deprived of the power of
aiding in any works of internal improvement. As a consequence, there
could not be uniform legislation among the states in relation to
railroads. Being public highways, and the corporations being also
public, the power of regulating and controlling them, and preventing
discrimination among the states, would belong to the general government,
and these powerful corporations, chartered by the state in which they
are located, could defy state authority. With a congress composed of
their friends, and a supreme court already committed to their interests,
the people would be powerless. But on the other hand, if (as we insist
is the fact) railroad companies are private corporations, then they are
within the jurisdiction, and subject to the control of, the authorities
of the states in which they are located. This we insist is the true
status of railroad corporations, and the courts, by their decisions,
cannot change this character. The decisions of the courts of the
different states and of the nation have not been of a character to
command the respect of the people, and unless we accept the last edict
of the supreme court of the nation, as the supreme law of the land, and
admit that it supersedes the constitutions and statutes of the states,
as well as the decisions of the state courts, it is difficult to
determine the character of railroad corporations and their relation to
the people. Accepting that decision as final, the constitution of the
United States is of but small value, and state governments are of but
little benefit to the people. Upon the various questions that have
arisen in connection with the construction of railroads, and the rights
of the people, and railroad corporations respectively, there has been
such confusion in the decisions of the courts, as well as contradiction,
reversals, and overrulings, that there now exists a necessity for the
regular issue of a judicial bulletin, like the market reports, that the
people may know what is the latest interpretation of the constitution.
By the supreme court of the state of Iowa, it was decided to be
constitutional for counties and cities to subscribe stock to railroad
companies, and that there was a statute authorizing such subscriptions.
By the same court it was decided, overruling the above named decision,
that the constitution did not confer the power to subscribe stock to
railroad companies, and that there was no law of the state authorizing
such subscription. The whole matter arose under the constitution and
laws of the state. The supreme court of the United States overruled this
last decision of the state courts, and decided that such subscription
was constitutional and was authorized by the laws of the state. The
courts of the states of Pennsylvania, Illinois, Indiana, Wisconsin,
Missouri, and others, made like decisions, and the supreme court of the
United States overruled them. The legislatures of some of the
states--Iowa, Wisconsin, and Michigan included, passed statutes
authorizing local aid in shape of a tax to be voted to railroad
companies. The supreme courts of these states decided that the statutes
were unconstitutional, and within fifteen months thereafter the supreme
court of Iowa decided that the Iowa act was constitutional. Like
decisions were made in some of the other states. In Wisconsin the state
courts decided the act was unconstitutional, and the supreme court of
the United States overruled that decision and decided that the act was
constitutional. Some of the state courts hold that railroad corporations
are private, whilst others decide that they are public. The supreme
court of the United States, by its decisions, clothes them with one of
the attributes of sovereignty, and declares that under the law they are
public corporations, and that their roads are public highways. The same
court, upon the legal tender issues, decided that treasury notes were
not legal tender for debts contracted before the enactment of the
statute providing for their issue. In a few months after that decision
was made, and after the friends of railroad corporations had so
reconstructed the court as to have a majority of the court in favor of a
re-hearing of the question, the same _high court_ decided that treasury
notes were not only legal tender for all debts (save those excepted by
the statutes), but that they were the standard of values. In all of the
above decisions made by the supreme court of the nation, either
reversing the decisions of the state courts, or reversing and overruling
its own decisions, such reversals and overrulings were in favor of the
corporations and against the people. When courts, whose duty it is to
declare the law and interpret the constitution, differ so widely and
change so often, it is not strange that the people should begin to look
with suspicion upon, and doubt the binding force of, these decisions;
and when it is received as a truth, that in the appointment of judges
care was taken to select men who were pledged to decide important issues
then pending, in accordance with the interests and expressed wishes of
railroad companies, it will not appear strange that the people, before
voting for a judge, should demand of him a pledge in favor of measures
advocated by them, or that he at least should pledge himself to abstain
from judicial legislation and from twisting the meaning of the
constitution to suit the views of the monopolists who are already
clothed with too much power. If it is important that men elected to
congress and state legislatures should be in sympathy with the people in
their struggle to regain their rights, now usurped by the different
monopolies of the country; and if it is necessary that the executive
departments of the state and national government should be filled with
men who are friends of the people and in favor of restricting
corporations within proper and legitimate bounds,--it is of vastly more
importance that the seats of justice, the courts of the country, should
be filled and controlled by men who, instead of deciding cases according
to their own personal views of what the constitution ought to be, will
accept it in letter and spirit as it is, and decide accordingly. An
inordinate desire to interpret the fundamental law, to give it a new
meaning, or, as it is commonly expressed, for amending the constitution
by judicial legislation, seems to have seized the courts, and has been
followed to such length as to make it almost impossible for even the
courts themselves to decide when an act is constitutional and when it is
not. A new decision is made as often as a new judge is appointed, not
unfrequently overruling the long settled decisions of the courts. These
decisions, no matter how absurd or unjust, must be accepted by the whole
country as the supreme law of the land. Of late years, by accident or
design, most of the decisions on questions of a general nature have been
adverse to the interests of the people, and in favor of monopolies.
Newly appointed judges, scarcely warm in their seats, have not hesitated
to overrule the decisions of "Marshall," of "Story," and "Chase;" to
disregard the views of "Webster," of "Adams," of "Jefferson," of
"Washington," and "Hamilton," on constitutional questions. Their own
personal views have been substituted for constitutional law, until the
protection that instrument is supposed to afford the private citizen is
entirely destroyed, and the absolute control of the government is
transferred to the few monopolists, who, under the sanction of the
courts, oppress the whole people. Whatever reform may be effected in the
legislative and executive departments of the government, no real reform
can obtain without a reformation of the courts.
FIFTH.--_The Effect of the Legal Tender Decision, and its
Antidote._--The power of congress to issue treasury notes and government
paper as a war measure, is not denied. The authority or the right, under
the constitution, to make government promises to pay (treasury notes)
legal tender, is not admitted. We have already treated of the legal
tender decisions; of the reconstruction of the court, and the means used
to secure the appointment of judges to insure a majority in favor of the
validity of the legal tender act, and its general application to all
debts save those excepted in the act, no matter at what time they were
contracted. We recur to this subject again for the purpose of showing
its effect upon the financial interests of the country. Whatever may
have been the views of congress in passing the act, or of the court in
declaring it constitutional, it has proved disastrous to the interests
of the people, and of great benefit to the corporate oligarchy that now
rules the country. Whatever may have been the views of the majority of
the court, or the motives that prompted and controlled that majority in
rendering the legal tender decisions, these decisions have proved
disastrous to the interests of the people, and added greatly to the
already great power of corporations and Wall street speculators. In our
commerce with foreign nations we are obliged to use _money_ or its
equivalent. While the acts of congress and the decisions of courts may
make treasury notes legal tender for all domestic debts, and all foreign
debts payable in this country, neither the acts of congress nor the
decisions of courts can have any power or controlling influence over
other nations. Debts due from us payable in foreign countries must be
paid in coin or its equivalent. Our governmental promises to pay will
not pass current as money in foreign countries, even though accompanied
and supported by the decision of the supreme court, deciding that they
are to be received by us as legal tender in all of our transactions. No
one will claim that treasury notes are money, or that they are of
intrinsic value. It is because the government is pledged to redeem this
class of paper with coin that it has a market value. All other nations
recognize coin--gold and silver--as the measure of values. It is the
standard for all other articles of barter or sale. It is _money_. All
other issues are but the representatives of money. Debts due from us,
payable in foreign countries, must be paid in money; legal tender will
not answer. But if debts due us from persons residing in other countries
are to be paid here, the debtors can take their money, buy our legal
tender at a discount of fifteen or twenty dollars to the hundred, and
discharge their debts, saving for themselves the difference between coin
and paper. The confidence we have in the promises of the government to
redeem in coin is all that makes treasury notes pass current, or gives
them a market value.
The hope of an early resumption of specie payment is blasted by the
legal tender decision. Its effect is to drain the United States of coin
in our commerce with foreign nations, thus making it impossible to
resume. Our coin grows less from day to day, and the secretary of the
treasury is obliged to sell gold in New York at short intervals and in
large amounts, in order to prevent the Wall street brokers making a
margin of twenty-five per cent or more between coin and government
paper. While stock jobbers and gold brokers make large profits in the
appreciated price of gold; and railroad companies, in paying their
bonds, make a net gain to the amount of the difference in value between
gold and legal tender currency, the farmers and producers suffer loss to
the amount of this difference in disposing of their products. When wheat
is sold for one dollar per bushel, the seller gets but eighty-four
cents, or just the value of treasury notes, and not one dollar in money,
as he imagines, because the dollar he gets has no intrinsic value, but
sells at its market worth, coin being the standard of values.
Another result of the legal tender decision is to make the value of farm
products dependent upon the operations of Wall street sharpers. Legal
tenders are the standard of values, says the court; coin and all
marketable articles have their values measured by treasury notes. The
price of treasury notes fluctuates. This fluctuation is not caused by
any real change in the relative value of coin and treasury notes, but
results from the dealings and operations in Wall street. If the "bulls"
corner gold, its value rises, or, more properly speaking, treasury notes
depreciate in value. When the "bears" control the market, the price of
treasury notes advances. This legal measure of values is constantly
changing, and with its rise and fall the prices of western products also
rise or fall. Railroads, railroad stocks and bonds, and the currency of
the country, as well as the coin, are all under the control of Wall
street operators, and as long as treasury notes are treated as legal
tender, these same operators will control the markets of the whole
country.
The legal tender acts and decisions, in effect, provide an irredeemable
paper currency for the people, and coin for the government. Duties on
imports must be paid in coin. Wall street brokers have the coin of the
country cornered; the importer must buy it of them; he pays it to the
government; government sells it to the broker, and he again sells it to
the importer. It cannot get into general use, because the brokers
preserve so great a margin between gold and paper as to drive all coin
from circulation. They monopolize the gold market, and, under the legal
tender decision, control the money market of the whole country. This
state of things must continue until the legal tender act is repealed or
the decisions of the supreme court are reversed.
The imagination cannot devise a more perfect system for the subjection
of the best interests of the people to the control of railroad and
monied corporations and companies, and Wall street brokers and gamblers.
It needed but the legal tender decision to make it perfect; to subject
the whole country to the rule of rings and combinations of unscrupulous
and dishonest men; to reduce the people to a state of vassalage more
degrading than that of the Russian serfs. In name we are a free people,
protected by the constitution of our country; in fact, we are the
servants of these giant monopolies. We retain of the proceeds of our
labor such portion as they graciously permit us to keep. With the
congress of the United States, and the legislatures of most of the
states, committed to their interests, and the supreme court of the
nation issuing its edicts in their favor, they can defy the people and
continue their oppressions.
SIXTH.--_Popular Measure of Relief Discussed.--The Nature of the Reform
Needed._--We recognize no higher human power than the will of the
people. When the servants of the people, elected and appointed to
represent their interests in legislative bodies, or to decide upon
questions affecting public interests, prove recreant to the trusts and
interests confided to them, the people--the sovereign power--can remove
them in the method provided by the fundamental law, or, if this cannot
be effected, then the people have the right, the God-given right, to
resort to nature's first law for self-preservation. If by legislation
the rights of the people are taken from them, then that power, retained
by the whole people to be exercised when their rights are refused
them--that power which is inherent in the supreme rulers of our
country--can be exercised. Under our system of government it should not
be asserted save in the last extremety. When all other means fail; when
redress can be obtained in no other way, then the people, as supreme
rulers, should arise in their majesty, and, by the exercise of their
reserved rights, _take_ what their servants have denied them. As a
people, we have not yet reached the point which would justify extreme
measures. While the different monopolies of which we have been treating,
by their shrewd management, by the use of their money, and by concert of
action, have obtained almost unlimited control of all the departments of
the government, numerically they comprise but a small part of the
population of the country. Their success is to be attributed to two
causes: their systematic organization, and their unlimited control of
the finances of the country. We might add, as a further cause of their
success, the inattention of a large majority of the people to the
political affairs of the country, and their willingness to follow a few
political leaders, to whom they seem to have entrusted the entire
control of the politics of the country. As a rule, we submit to wrongs
in the administration of the affairs of states, as well as the national
government, until we individually suffer from their mal-administration,
then, what has been termed the "sober second thought of the people"
manifests itself, and reforms are effected. The situation of the affairs
of the nation, and the great power that the monopolists have obtained in
the land, have aroused that "sober second thought," and never in the
history of our government has there been more urgent need of action on
the part of the people. Never were issues presented that demanded more
earnestly the united efforts of all who love and prize constitutional
liberty. The evils of which we have been treating can be remedied by
demanding of all who fill official positions a recognition of the
superior binding force of the constitution. It is not to be expected
that those men filling official places in the legislative and judicial
departments of the government, who, from interest and custom, have
become addicted to the habit of giving new meanings and interpretations
to the constitution, will reform the abuses that have been rapidly
accumulating, or that they will manifest any zeal or alacrity in
stripping the railroad corporations and other monopolies of the great
powers conferred upon them, or that any real reformation can be effected
without a thorough change of public servants. No matter what political
party has control of the government, or to what party the men selected
to fill the different offices belong, or with what political
organizations they affiliate, unless they acknowledge the superior
binding force of the fundamental law they should be requested to vacate
their official positions, and their places should be filled by men who
are willing to acknowledge the binding force of the constitution, and
will pledge themselves to abstain from judicial legislation. Men elected
to congress and state legislatures are the servants of the people,
elected to protect their interests; hence, their will should control the
action of members of congress and state legislatures. Being elected to
serve the people and not to promote selfish interests or support class
legislation, the people, before supporting any candidate for a
legislative office, should demand of him a pledge to labor for and
support only such measures as will tend to a restoration of the rights
that have been taken from and denied to them, and by special charters
and grants conferred upon corporations and other monopolies. Railroad
corporations being created by legislative grants, their business being
that of common carriers for hire, the legislature possesses full power
to enact such laws as will limit and restrict their charges for
transportation to a reasonable tariff, prohibit and punish extortions
and unjust discriminations, and provide for the swift infliction of
penalties whenever the laws are violated. Before the people elect any
man to a legislative office, he should pledge himself to support and
obey the requirements of the constitution, and to abstain from that bane
of a republican government, special class legislation. By supporting
only such men as would, in good faith, pledge themselves, as above
suggested, and who, as legislators, would abide by their pledges, unjust
discriminations would cease, and some of the rights of the people would
be restored. But reforms must extend beyond the points named. Railroad
companies being chartered and railroads constructed for the prosecution
of the business of common carriers, having received aid in lands and
bonds from the general government, and from states, counties, cities,
and towns, bonds and taxes, as well as special privileges not granted to
any other corporations, in contemplation of law, these companies are
bound to act honestly. It was never the intent of the legislatures (if
they acted in good faith) to create these powerful corporations, to
grant them extraordinary aid and privileges, and then allow them, by
false and fictitious reports as to the cost of their roads, to charge
unjust prices for carrying freights and passengers. By the watering
process to which we have referred, the pretended cost of the roads, as
shown from their reports, is often two or three times the actual cost,
and the rates that are charged for transportation are such as to pay
dividends not only on the cost of the road, but on the fictitious or
added stock. Indeed, in many cases the stock reported as paid up is not
paid in a legitimate manner; but when the company is organized, by
selling bonds it builds its road from the proceeds, and from the earning
of the road pays not only the interest on its bonds but accumulates a
surplus. This surplus is divided among the stockholders, not as
dividends on their paid-up stock, but is capitalized and stock issued to
subscribers. The road is made to pay the interest, and eventually the
principal, of the capital borrowed to build it, and also to earn money
enough to show a paid-up capital to the amount of the actual cost of the
road. This species of financiering on the part of the company is robbing
the people, and abusing the privileges conferred by the charter. No
thorough reform of the abuses practiced by railroad companies can be
effected until the legislatures, by statutes, compel each and every
company to purge its stock of every spurious dollar, so that the stock
of each company shall not appear to be in excess of the cost of its
road. If the legislature does not possess the power to do this, then it
has the power to create a corporation that, by arbitrarily increasing
its stock to any amount it may choose, can extort from the people
sufficient to pay the interest upon such amount, and defy the power of
its creator. The position is not sound. Any and all abuses practiced by
railroad corporations can be corrected by legislative enactment, unless
we admit that the creature is greater than the creator.
But it is claimed that if the legislatures should by statute compel
railroad companies to reduce their stock to the cost of constructing
their roads, or to their actual value, and then limit their tariff of
charges to reasonable rates, great injustice would be done the innocent
holders of their bonds; that such reduction would render it impossible
for them to pay either the interest or principal of these bonds; that
such statutes would impair the obligations of contracts; that many of
the bonds are held by widows and orphans, who would be ruined. This may
or may not be true. If true, who is responsible for it? Certainly not
the states or the people. Originally the bonds were purchased of the
railroad companies. If these companies by false representations have
obtained credit on their roads to two or three times their actual value,
the companies are the responsible parties, and not the public. While
innocent persons may suffer, their suffering results from their own
imprudence, or it is a misfortune occasioned by the fraud of the
railroad company. There is no justice in allowing these companies to
extort from the people money sufficient to relieve themselves from the
consequences of their frauds. A owns a farm worth $2,000; he represents
it to be worth $6,000, and by reason of this false representation
obtains from B a loan of $4,000, secured by a mortgage on this farm. He
fails to pay the money borrowed, and B forecloses his mortgage, and
sells the farm. It pays but one-half his judgment or decree. Would B
have any claim upon the public for the balance of his debt? He made his
own contract, and expected a profit on his investment, but was
disappointed. Under the law A had full authority to mortgage his land,
and B had the option of loaning his money to A and taking a mortgage. He
acted in good faith, and believed his security was ample, but was
mistaken. Is there any difference in principle between the case of A and
B and the purchasers of railroad bonds? Both parties will suffer loss
because of the fraud of the party with whom they dealt. Neither have any
claim upon the public in law or in equity, and both must look to the
parties with whom they contracted. The charters to railroad companies
empowered them to transact business, but did not empower them to commit
frauds, by mortgaging their roads for three times their actual value. To
require railroad companies to act honestly and charge reasonable rates
for carrying freights, does not impair the obligations of any contract.
Nor does it, to compel them to reduce their stock to what it actually
should be, measured by the value of their roads. The legislature should
be composed of men who are not embarrassed by personal interest, and who
have not received bribes. We do not claim that because of the fact that
men are stockholders or directors in railroad companies they are
disqualified for seats in the legislatures of states, or of congress.
But do insist that when men are elected for the express purpose of
advocating the increase of the already too great powers and privileges
conferred upon corporations, they prostitute their offices to base and
illegitimate purposes. When the sole aim of men elected to represent the
people is demonstrated to be to defeat every measure designed to relieve
them from the effect of unjust laws, and to correct abuses practiced by
the combined influence of corporations, they dishonor the place they
fill. The rights of the people can be neither restored nor preserved,
until legislatures are purged of this class of men. Men who receive any
remuneration from any man, class of men, or corporations, paid or
bestowed for the purpose of securing friendly legislation, are unfit to
represent the people. It makes no difference whether the consideration
is paid in money, or in _passes over the railroads_; it is given as a
_bribe_. Passes are called complimentary; they are accepted as
complimentary, yet it is a fact that these complimentary passes are
placed where they "will do the most good." They are given to
congressmen, legislators, judges of courts, and executive officers. If
it were necessary to offer proof that these passes were intended as
bribes, we need only look at the manner of their distribution to the
members of the last Iowa legislature. They were distributed among those
friendly to legislation in favor of railroads, and withheld from those
opposed to such legislation. If passes are purely complimentary, this
was wrong; but if they are given as _bribes_ it was the proper
distribution of them. The legislator who accepts a pass, and the party
giving it, should be punished under the provisions of the statutes
against "bribery and corruption in office." And the provisions of the
same statutes ought to be enforced against all persons holding official
positions in the states, and in the general government. If officers
cannot afford to pay for travel over railroads on their present
salaries, increase them so as to make them independent of railroad
companies, who estimate official integrity as being equal in value to a
pass over their respective roads. History demonstrates that in some
cases these passes have been received as full consideration for official
influence. Legislatures possess the power to regulate and control
railroad companies, and should exercise that power in every case of
abuse of their privileges by the railroad companies. Some deny the power
of legislatures to compel railroad companies to reduce their stock to
the actual cost of their roads. This power is lodged in some department
of government. We are not prepared to admit that these corporations are
supreme; that they can openly, and in defiance of law, and the rights of
the governing power, practice frauds, which, if practiced by an
individual, would consign him to prison. If the legislature does not
possess it, the courts certainly do, as we will hereafter demonstrate.
We have shown that by the manner of building roads with borrowed capital
obtained by sale of bonds, and by extortionate charges for
transportation, making their roads earn sufficient to pay dividends on
stock which had not been paid, as well as on the watered stock, the
railroad companies in the United States whose roads cost $2,456,230,000,
yet in fact representing the enormous sum of $6,236,638,749, in what
purports to be-paid-up capital stock, and bonds, were robbing the
people.
The question we are now discussing is, How to remedy these evils. Our
attempt thus far has been to demonstrate the fact that the remedy is
exclusively within the state authorities, and not in those of the United
States, and that railroad companies are private, and not public.
Adhering to these views, we contend that railroad companies are subject
to taxation at the same rate on the assessed value of their property as
an individual; and the legislature cannot adopt a different rule for
taxing railroad property without disregarding the letter and spirit of
the constitution. The chartering, regulating, and controlling of
railroad companies, and all corporations created for pecuniary profit,
must remain with the states. To concede the exercise of this power to
the national administration is to overturn republican government and
take from the people the rights and powers reserved to them and the
states; create a great central power without constitutional limit or
restitution, but governed by the personal views of those in office. We
have treated of this subject in the preceding pages, and refer to it
here in considering the remedies for the evils endured by the people. We
know that congress has granted charters to corporations organized for
pecuniary profit, and that United States courts have taken jurisdiction
of cases arising under state statutes, and disregarded the action of
state legislatures and state courts on questions affecting the interests
of railroad corporations, and have also decided that congress possesses
the power to charter railroad companies. But we do not recognize the
decisions as right, nor do we believe they will remain long unreversed.
The opinion generally prevails that railroad corporations have abused,
and are abusing, their charters; that they are oppressing the people;
that there must be a reform of the abuses practiced by them. But
differences of opinion exist as to the means to be applied. If we
recognize the people as the source of power, and that they retain all
the power they have not delegated to the government, the more nearly the
interests of the people and the companies approach each other, the more
closely they can be blended and united, and the more readily can abuses
be corrected. To divide their rights and interests; to provide different
governments, and rules of decisions for them; to make the people
amenable to state authority, while the United States authority takes
control of corporations, will create rival interests, and render
railroad companies independent of the people. If the congress of the
United States, claiming to have the constitutional right, should provide
by statute for transferring the exclusive control of railroad
corporations to the United States, an entire change of the relation
between the states and the general government would be the result. The
states would not have the power to redress any abuses of the charter
privileges granted to these companies, either by legislative enactment
or by judicial decisions. Railroad companies created by state
legislatures, and hitherto subject to the jurisdiction of the state
courts, would be released from all obligations to state government, and
from the control of state legislatures and courts. The congress of the
United States and the federal courts would have exclusive control and
jurisdiction over them, and constant confusion and conflicts of
jurisdiction would naturally follow. Such a course would confer upon
railroad companies still greater power, and place in their hands more
efficient means for oppressing the people. Another evil resulting from
such a course would be, that the whole corporate interest of the country
could combine and concentrate their whole influence for the purpose of
accomplishing any desired object. Now both congress and state
legislatures must be bought over to their support; but if the United
States government should take the whole control of corporations and
railroad companies, the whole railroad force of the country, from the
men who own, manage, and control this great interest, to the most
menial employés, could be directed to a single purpose--that of securing
congressional favor.
Now, state legislatures must be approached, and _persuaded_, as well as
congress; then a single legislative body, and that one the farthest
removed from the people, would be the only body to claim the attention
of this great corporate interest. When grants were once made to railroad
companies, and privileges conferred upon them, it would be simply
impossible to effect any change, no matter how oppressive they might be
upon the people. The idea that railroads are public highways, and that
railroad companies are public corporations, already obtains among
congressmen and in the supreme court of the United States. This is well
understood among railroad men, as well as the fact that there is an
increasing demand on the part of the people for the reform of the many
abuses that are now practiced by them. Hence their anxiety to have the
United States government assume control of railroad corporations. They
desire it for another reason: Most of the special favors and grants they
have received have been the result of bargain and sale. The same means
will be used in the future unless a thorough reform is effected, and it
will cost the corporate interests of the country less to deal with one
body representing all the states than it would to deal with the
legislatures of all the states. Another reason for this desire on the
part of railroad companies is, that the supreme court, as now formed, is
in full sympathy with them upon the points at issue between corporations
and the people.
Careful consideration and examination of this question will satisfy the
people that their only hope for the restoration and preservation of
their rights in the conflict now existing between themselves and the
railroad companies is in states retaining exclusive jurisdiction and
control of all the railroad corporations and railroads within their
respective borders. Another remedy suggested is, for the general
government to purchase and own all the railroads in the country, and
control them in the future. If this plan were feasible, it is of
doubtful wisdom. The purchase could not be made without the consent of
the owners of the roads. This consent could only be obtained upon
payment of the prices demanded, because railroad stock is not such
property as can be condemned for public use. It is not to be expected
that the companies owning the stocks and roads would sell for less than
cost; and this cost would be the amount of money represented by the
roads. This we have shown is over $6,000,000,000. To pay less than this
amount (being nearly three times their actual cost) would be aiding the
companies to defraud their creditors, for the reason that the roads are
the only security the bondholders have. The purchase of the roads would
increase the national debt to the amount paid for them, and impose
additional burdens in the shape of taxes upon the people. It would add
to the list of government officers and employés at least two hundred
thousand men, whose influence could be relied upon when the interests of
the people and those persons in office conflicted.
It may be said that the government would not operate the roads, but
would lease them. Would this afford relief? It would require two parties
to make the contract. The contractor would agree to pay a certain
stipulated amount for the use of the road. He would then fix his own
rate of charges for transportation, and being only a lessee, would be
virtually irresponsible. Government could not fix the price to be paid
for the use of the road, and also the tariff of charges. But the lessee
would demand the right to fix his own tariff in order that he might have
sufficient to make repairs, pay for the use of the road, and make his
profit. This system would be subject to the abuses of which the shippers
now complain. Irresponsible persons would often have control of these
roads, or a part of them, and a wide field would be open for fraud and
irregular practices. The wants of the people demand some other and
cheaper mode of transportation; either a cheaper system of building and
operating railroads, so that the tariffs can be reduced, or some new
method. The present roads may be superseded and another kind adopted. In
that case, the present railroad system would become of little value, and
would prove a loss to the government. Last of all, the general
government cannot go into the railroad business without contravening the
provisions of the constitution. In addition to the above reasons why the
government should not become the owner of the railroads, is this one,
which outweighs all others: It would place them entirely beyond the
control of the people. If the control of corporations is left to the
states, they are in the hands of the people; each county, town, and
neighborhood, can bring its influence to bear upon the questions at
issue. In the election of congressmen and other United States officers,
local issues are lost sight of. National questions engage the public
mind, while in the election of members of the state legislatures and
other state officers, local questions enter largely in the canvass.
Numerically, the monopolists are but a small fraction of the people;
their great strength lies in the control they have obtained over the
business and finances of the country. The people, united against the
monopolists, can elect whom they choose to any state office, and can
secure a majority in their favor. The remedy is in their own hands, and
by united action they cannot fail of success. If a reform is ever
effected, if the people ever regain their lost rights, they must
commence at the _ballot box_. The producers throughout the west and
south are largely in the majority; they can elect their own men. If they
fail to do so, if they do not themselves apply the remedy, they ought
not to complain of others because they do not apply it for them. There
need be no difficulty or delay in effecting reforms dependent upon
legislative action, provided the people are true to their own interests.
They elect their agents to act for them. If they do not elect men who
are with them in principle, sympathy, and feeling, they ought not to
complain.
But, says the reader, admitting that legislative reform can be
accomplished, how can the decisions of the courts be changed? This
question presents more difficulty. It has been the custom from time
immemorial for courts to be governed and controlled by precedents. This
is adopted in order that the law may be settled and certain. When
questions arise under statutes, the meaning of which is ambiguous,
resort is had to former decisions under like statutes, for a rule of
construction, and thus the law is _settled_. We accept the decision as
the law of the land, and to criticise it is seemed discourteous to the
court making it. To call in question the motives of the courts, or to
doubt their wisdom, is deemed rank "treason." The rule governing them
may be of ancient date; the reason for its adoption may have long since
ceased; the rule itself may be obsolete. Yet, to find a precedent for a
decision that outrages justice and is at war with the best interests of
the people, but in favor of the corporate interests of the country, this
old rule is dragged from its long repose and made the basis of new
decisions. Most of these old precedents originated in monarchical
countries, where all doubtful questions were construed in favor of the
crown, and where the rights of the people always yielded to kingly
prerogative. While precedents should have their true weight in
determining between private parties, when none of the great questions
arise affecting the national welfare, and while interpretations of the
constitution, acquiesced in for many years, should remain as the settled
law of the land, and be observed by the courts, the practice of solving
constitutional problems by resort to old monarchical precedents, and the
adoption of the reasoning of the high courts of the king's _exchequer_,
should not be tolerated in a republic. Our form of government is new.
Our courts should be the courts of the people, and not a _star chamber_
for the protection and perpetuation of the monarchical dogma, that "it
is absolutely essential to independent national existence that
government should have a firm hold of the two great sovereign
instrumentalities of the _sword_ and the _purse_," as was declared by
the supreme court of the United States, in December, 1871. Such
declarations are at war with our ideas of republican government. It has
no support save in despotic governments and decisions emanating from
them; yet it is the doctrine that must obtain, if the recent decisions
of the supreme court are to remain as the settled law of the nation. To
accept this doctrine as a final exposition of the relative rights of the
people and the government, is to acknowledge that the agents and
servants of the people, elected and appointed to office, become their
masters, clothed with imperial powers.
It is not only in the adoption of old precedents that the rights of the
people have been denied in courts, but by wresting the meaning of the
earlier decisions made by the distinguished men who graced the bench of
the supreme court in its earlier and purer days. The "Dartmouth College"
case was the first in which the rights of states or the people to
interfere with charter privileges was determined. We have given the
history of this case in preceding pages. It in no sense justifies or
supports the recent decisions of the court, as to the rights and
privileges of corporations organized for pecuniary profit. Yet, taking
the decision in that case as a precedent, the supreme court has
gradually encroached upon the rights of the people, until, under its
latest decisions, railroad corporations are public corporations, their
roads are public highways, and the property of all the tax-payers can be
taxed, and the taxes thus collected can be used by these private
corporations to pay for building and repairing their roads. This is the
latest new departure, and with the "Legal Tender" decision, makes the
interest of the whole people, as well as the value of their property,
depend upon the action of corporations.
No good reason can be shown why the decisions of courts should not be
subjected to criticism, the same as the acts of legislative bodies. The
courts are a co-ordinate branch of the government, but with a power
greater than that of the legislative and executive branches combined.
The decisions of courts render nugatory the acts of the other
departments of the government. To admit that the decisions of the
judiciary cannot be questioned, is to concede to it all the prerogatives
possessed by absolute tyrants. Not only have the people the right to
question the decisions of the courts, and if need be to examine the
motives which prompted them, but also to know the views of the men who
aspire to judicial positions, upon all questions of a general and public
nature. No candidate for judicial position should be expected to form an
opinion upon, or decide a question affecting the rights of parties until
it had been finally submitted. But, upon the great questions that
frequently arise affecting the public welfare, his views should be
publicly known. Let the people understand the views of the men seeking
for a seat on the bench, before his election, and judicial legislation
and partisan decisions will soon disappear. The judges of the supreme
court of the United States hold their offices for life, by appointment;
that court is further removed from the people than state courts. Reforms
are not easily effected. Judges recently appointed received their
appointment because of their understood views upon certain public
questions. The course of decisions of this court demonstrates that the
rights of the people are considered of less importance than the demands
of corporations, in cases of conflict. While the present system of
selecting these judges continues, with their life terms, it will be hard
for the people to regain their rights. There are times when, because of
oppressions, the people have the right to demand changes in the
fundamental law. At the present time they are demanding redress; they
are asking to be relieved from the unjust burdens imposed upon them by
companies and corporations, who are petted and supported by the supreme
court. But one certain means is left them, and that is an amendment to
the constitution, restricting their term to a certain number of years,
and providing for their election by the people. We could then free
ourselves from the burdens imposed upon us by this anti-republican
department of our national government, and take from corporations some
of their oppressive powers and privileges, now assured to them by the
decisions of the supreme court. If any relief is afforded the people
from the oppressions under which they now suffer, they must obtain it
through their own efforts. No other channel is now open. All of the
departments of the government, state and national, are more or less
controlled by the monopolies against which the farmers are now preparing
to fight. The silent ballot is the weapon to use; when used by a united
people victory is assured. It is more potent than all the appliances of
an army; more thorough in its execution than the bullet. It is the dread
of the unfaithful legislator, dishonest office-holder, and the unjust
judge. It strikes terror into the hearts of the unscrupulous men, who
are willing to sacrifice honor, country, and future happiness for the
purpose of amassing wealth, by extortions practiced upon the sweating,
toiling millions who till the ground. While partial relief may be
obtained through other channels, real, genuine, and lasting redress can
only be obtained by organized action at the polls.
How can the abuses of the transportation system be corrected? This
question is now having a practical test in Illinois, and is being
discussed throughout the country. It is being demonstrated that a _pro
rata_ tariff will not afford relief; and that some other means must be
adopted. What that may be, time will develop. No uniform _pro rata_
tariff would be just to either the companies or the people. The shipping
of way freights is always attended with more proportionate expense and
delay than at prominent and terminal points. The extensive shipper, who
loads a large number of cars for a single train, should be allowed more
favorable rates than the one who ships at some way station but one car
of freight at long intervals. The real cause of complaint is the
uniformly exorbitant rates charged for carrying freights, in connection
with the present warehouse and elevator system. The legislatures and the
courts are clothed with full power to prevent oppressive or unjust
charges for carrying freight. They care not how much per cent the
companies shall make upon their investments; but when their charges
amount to an abuse of their charter privileges the legislatures and the
courts can correct them. The rule established by railroad companies, to
force from shippers such rates as will pay interest or dividends upon an
amount of imaginary stock, is unjust. The process by which they increase
their stock to two or three times the amount invested is fraudulent. The
legislatures and the courts possess the power to compel railroad
companies to make a return of the actual amounts of money invested in
their respective roads, in order to determine whether their charges are
excessive and oppressive. Railroad companies being dependent upon state
legislatures for such grants as will enable them to construct their
roads, and being common carriers, the legislature can, by statute,
restrict the capital stock to the amount invested. If this course had
been adopted years ago many of the abuses now endured by the people
would have been prevented. Not only has the law-making power the right
to restrict the stock to the actual cost of the road, but it has also
the power to fix the maximum rates for transportation. Competition will
always have a controlling influence upon the price of any commodity, as
well as fixing the price of any species of services or labor. The
legislature has the power to enact statutes to prohibit the
consolidation of the business of railroad companies, or a combination
on their part to charge excessive tariffs; and the courts possess the
power to enforce the observance of such statutes by the infliction of
suitable penalties. In this connection the abuses practiced by the
dispatch companies may be considered. The railroad companies receive
their charters with the understanding and implied agreement on their
part that, as common carriers, they will deal honestly with the public,
and that they will furnish the necessary locomotives, cars, etc., for
the purpose of supplying the ordinary wants of the people. This they are
bound to furnish, and also to do the ordinary carrying of freights, for
a reasonable compensation.
We have already given a history of the dispatch lines, and told who
compose the companies, and how they do the business the railroad
companies agreed to transact when they obtained their charters. These
dispatch lines are a fraud upon the public, for which the companies
should be held responsible. Every dollar paid to them, in excess of the
regular rates of the railroad companies' regular tariff, can be
recovered from the companies. The fiction of hiring their roads and
locomotives to another company, and giving such company a monopoly of
the trade over their road, in order that higher rates may be charged, is
an abuse that the legislature can correct and the courts can punish. Of
the same nature are the "warehouse" and "elevator" combinations. Of
these we know what is open and visible; but of the internal workings and
divisions of the "pools," or, more properly speaking, the "spoils," we
know but little. We know that it is a means of oppression, and that it
compels farmers to sell to _inside_ men, or sacrifice the moiety of the
crop the railroad companies allow them to retain. In law, railroad
companies are bound to ship for all who pay the regular rates without
bestowing a bounty upon elevator and warehouse men; and they are also
bound to deliver the freight at such warehouses as the shippers direct.
For a refusal to do so, they are liable to the shipper for damages to
the amount of the loss suffered, and sums extorted. Shippers can compel
the companies to receive their freights on board their cars at regular
stations, and to deliver their freights at the place designated,
irrespective of any and all combinations to prevent it. To conclude
this whole matter, the people have the power to reform all the abuses
they suffer at the hands of these monopolies by the election of men to
legislative offices whose hands will not touch bribes, and by filling
the seats of justice with judges who are not so wedded to ancient
precedents as to do injustice rather than make a new departure; by men
whose chief object shall be to do equal and exact justice to all, and
not resort to judicial legislation and new interpretations of the
constitution in order to uphold and strengthen the power and advance the
interests of corporations already too powerful in the land.
In order to restore to the people the rights now denied them, and to
abridge the combined power of the monopolies who now rule the country,
the control of the finances must be taken from them. The financial
policy of the government, adopted during the late civil war as a war
measure, is still adhered to. The internal commerce of the whole country
is controlled by a few men--the same who own and operate the railroads
and rule the _business_ in "Wall street." The peculiar financial policy
of the government tends to concentrate the money of the country--to
gather it together, rather than to scatter it abroad. New York City
being the great commercial center, and the internal commerce of the
country, being under the control of a few men who make this metropolis
their principal place of business, with their vast lines of railroads
extending over the whole country, bringing to them a never-ceasing
stream of money, they are able to regulate the market value of almost
all articles of commerce, and to limit the supply of the circulating
medium as occasion serves. We have already shown the bad results of the
system upon the interests of the people, and do not intend to repeat it
here. Ordinarily, the laws of trade, of demand and supply, will regulate
and equalize the distribution of the circulating medium over the
country. Such will always be the case if no special causes exist to
prevent it. But with the railroad interest of the country controlled by
the same combination of men who "corner" all the coin in the country;
with the established policy of the government making depreciated paper
the only circulating medium, and the "legal tender" decision making this
depreciated currency the standard of values; with the constant
fluctuation of prices resulting from the above named causes--it is not
strange that these corporations and Wall street brokers control the
finances of the country. Until this control is taken from them, the
wrongs of the people cannot be redressed.
Money is said to be "power," and when a certain interest or locality has
the absolute control of this "power," all others must suffer. One means
of stripping railroad magnates and Wall street gamblers of this power
would be the resumption of "specie payment." As we have shown, under the
present financial and tariff policy of the country, this is out of the
question. With our legal tender decisions, our depreciated currency, and
our tariff system, the balance of trade is largely against us; our coin
is being shipped to other countries, not leaving us sufficient for the
purposes of resumption, or for circulation. Add to this the fact that
the Wall street brokers own or control most of what is in the country,
and the truth is patent that resumption cannot be effected until the
whole financial policy of the government is remodeled. Will an increase
of the banking facilities of the country under the present system
accomplish this object? We answer, No. An increase of banks, and of the
currency, would only afford temporary relief. Suppose $100,000,000
should be added to the present amount of currency, and that it should
all be distributed in the west and south. Wall street operators would
only have to increase their operations to gather the whole of it under
their control. They now, in their various ramifications, own and control
capital more than sufficient to pay the whole of the national debt and
leave them a large surplus. While the distribution of additional
currency through the country might afford them temporary relief, under
the combined management of railroad corporations and Wall street
brokers, and without any change in their present system, they could and
would soon absorb this surplus of currency, and resume the absolute
control of the finances of the country. The people would again be in
their power, with an additional burden imposed upon them, "to-wit"--the
payment of the interest on an additional $100,000,000 of government
bonds. Would a change in the banking system of the country take from
these monopolists the control of the finances of the country? This
would depend upon the character of the change. If the secretary of the
treasury, or his department, should retain the entire management of the
system, no real relief could be expected. While the general government
has the exclusive right to regulate the coinage and value of coin
(money), it is the assumption of power not delegated to vest in one man,
or department, the exclusive management of the finances of the entire
country, not only of the government, but of all private persons. We do
not comprehend the wisdom of fixing and limiting the amount of currency
the country may have for a circulating medium, and empowering one man to
decide, how, when, and where it shall be distributed. Conceding to the
general government the power to charter banks and issue treasury notes,
the power is not exclusive. There is no limit to the volume of gold and
silver, and if government should attempt to limit the amount of coin, it
could not do it. The laws of trade, the demand and supply, would fix the
amount. Under our present banking system, coin is driven from
circulation, and a definitely fixed amount of treasury notes and
government paper is all that the country is permitted to have for the
transaction of its whole business--and this amount must be placed just
where the comptroller of the currency shall determine.
The legal tender decisions have made the resumption of specie payment
impossible. The present banking system prevents an increase of currency
or treasury notes, and gives concentrated capital absolute and unlimited
control of the business of the country. Any other banking system, if
left under the same control, would be subject to the same objections. No
one department of the government, nor the whole government combined, can
determine the amount of currency necessary for transacting the business
of the country. Fixing the amount in the present banking act has
afforded the means to Wall street operators for "cornering" such amounts
of currency as would derange the market and depress prices. No valid
objection can be offered to what is known as the "free banking system."
Such a system, if generally adopted, would strip railroad corporations,
Wall street jobbers, and all other rings and combinations of men, of the
power to control the finances of the country. Another advantage would
result to the people: It would free them from the annual payment of from
$18,000,000 to $20,000,000 interest on government bonds purchased by
bankers and deposited with the treasury department. Such a system of
banking would reduce the margin between coin and currency and promote
the resumption of specie payment, and, instead of having only
depreciated paper as a circulating medium, we would have a currency
convertible into coin. The giant corporations and other monopolies that
now rule would be shorn of much of their strength, and the people would
be freed from their relentless grasp.
SEVENTH.--_Free Trade and Direct Taxation._--Our conclusion would not be
complete were we to omit a reference to the subject of tariff. Indeed,
it so interlaces the question of transportation and the construction of
railroads as to become an integral part of our discussion. Disclaiming
any partisan views of the question, we shall try to demonstrate that all
tariffs are unjust and oppressive. In a former chapter we have shown the
operations of our tariff, and some of its results. We now proceed to
demonstrate that the true rule in all our dealings and commercial
transactions is, _to sell where we can obtain the best prices, and to
purchase where we can obtain the desired article for the least money_.
Demand and supply should regulate the prices in our dealings, and
protective tariffs should be repealed. A "protection" that taxes
three-fourths or four fifths of the whole people, in order that the
remaining fraction may amass riches, is an oppression that ought not to
be tolerated. No class is more oppressed by protective tariffs than the
farmers and producers of the country. They do not ask, nor do they
receive any protection.
With high or protective tariffs, farmers and producers pay much more
than their just proportion to the support of the government. The
consumer simply pays tariff duties on what he consumes, while the
producer not only pays on what he consumes, but his product must pay a
large part of the duty upon what is consumed by others. The products of
the country are its wealth. No matter who is obliged to pay the duty in
the first instance, ultimately the producer must pay it. To illustrate
this proposition, let us take any given article produced, manufactured,
or constructed in the United States. There is a duty on some of the
material used in the manufacture of the reaper. The manufacturer pays
this duty, and adds it to the cost of the machine purchased by the
farmer. In the erection of factories, machine shops, furnaces, and
foundries, dutiable articles are used, all of which, in the end, must be
paid for from the products of the country. In the construction of
railroads, locomotives, cars, etc., iron and other articles are used
upon which there are high tariff rates. These duties are paid by the
companies in the first instance, the amounts paid are included in the
cost of the roads, and must be returned in shape of increased rates for
transportation over the roads. In the end these duties are paid by the
producer. Every bushel of wheat, corn, or other grain, shipped over a
railroad, pays part. Protective tariffs are so interwoven with the
construction of railroads and the internal commerce of the country that
they cannot be separated from the questions we have been discussing. All
tariff duties are direct charges upon the productions of this country,
and not on any other. Import duties are not paid by the people of the
country from whence the goods are imported, but by our own people. It
matters not who pays the tax in the first instance, in the end it must
be paid from the product of the country. The main product of our
country, especially of the west and south, being from the soil, it
follows that the farmer must pay by far the greatest portion of tariff
duties. The burdens imposed on him are more than his just share. In the
first place he pays directly the duty charged upon what he consumes, and
then pays, indirectly, much the larger part of the duties paid in the
first instance by others. He is charged with the cost of shipping his
grain to market, whether that market is in the United States or Europe,
and his product must pay the cost of shipping the return cargo from
Europe to America, with the addition of such protective duty as congress
may fix by statute. His product must bear the whole burden. "In other
words, the question of transportation is part and parcel of the tariff
question, and cannot be dealt with apart from it. Transportation is made
dear by the dearness of supplies; that is to say, the railroads are
taxed enormously, and, through the railroads, the farmers, for the
benefit of special industries. There can be no cheap transportation
without cheap iron, cheap cars, cheap stations; and, what is more, there
can be no market for American produce abroad so long as the sale of all
foreign commodities, except gold, is made as difficult as high duties
and vexatious custom house regulations can make it. Agricultural produce
at the west is now a glut; it must become more and more of a glut, if
either more railroads are opened or the cost of transportation on the
present roads is diminished, as long as new markets are not provided,
or, in other words, as long as access to the crowded regions of the Old
World is artificially impeded. Of course, there may come a time when
there will be population enough in the west to eat up all its corn and
pork; but, at the present rate of agricultural and railroad development,
this will not be witnessed by either the present generation or the next,
and the cry of the 'Granges' ought to be for a clearing of the outlets
to the Old World in all ways. To secure this, it is not enough to
cheapen transportation; we have to offer a market to the foreigner for
his commodities in order to get him to take ours."
As we have before remarked, the settled plan for raising revenue for the
support of the general government, is by import duties. By common
consent this plan has been accepted as the most feasible. While we have
been following this method from the organization of our government, by
legislation we have been making war upon foreign commerce, by imposing
tariffs for the protection and government of domestic manufactures. By
congressional enactment, we determine that we will support the
government by the collection of duties levied upon foreign imports; and
then we levy high rates of duties for the purpose of prohibiting these
foreign imports, and for building up and protecting home manufactures.
Under the present tariff, but for the fact that our own manufacturers
take advantage of the high rate of duties, and advance the price of
their own products, to the extent of the duty, foreign importations
would cease, and some other means would have to be adopted to supply the
revenue needed by the government. The only benefit thus far resulting
from our present high tariff is the enriching of a few men by the
imposition of unjust and unequal burdens upon the farming and producing
classes. It might be pertinent to inquire whether there is any justice
in any kind of tariff. All are bound to contribute their _pro rata_
share for the support of the government. In theory the property of the
country is taxed for this purpose. Such a system of taxation is just and
equitable, because it is uniform; the property of each individual pays
its _pro rata_ share, and the burden is equally divided. As we have
already shown, revenue derived from tariffs is a tax upon the labor of
the citizen, and not on the wealth or property of the country. The poor
man, the man who depends entirely upon his daily labor for the support
of himself and family, pays as much for the support of the government as
the man of immense wealth. His daily toil, considered in the light of
its value to the government, is taken as equivalent to the $500,000 of
the rich man. The industry and not the wealth of the country is made to
support the government when the revenue is derived from import duties.
No one will deny the right of the general government to provide for its
own support, nor its right to provide means to this end by the levy of
import duties; yet the wisdom of these duties does not so clearly
appear. The reader will have noticed that this method of raising revenue
operates unequally; that it gives to American manufacturers an absolute
monopoly of business; that the only reason why imports do not cease is
because the prices of American fabrics have been arbitrarily raised to
the highest point allowable without permitting the importer to undersell
the home-made article. The manufacturers, under the statute, having a
complete monopoly, are not slow in availing themselves of it, and, as a
natural result, the whole country is compelled to contribute to their
support. It may be asked: How would you provide for the support of the
government? We answer, by direct taxation, because this is a just and
equitable manner of raising revenue, compelling the wealth and property
of the country, and not the labor of the toiling millions, to support
the government. Because it will prove less expensive, and will do away
with custom houses and custom house officers, with the frauds,
swindling, and robbery, that now afflict the country. Because it will
open to us the markets of the world, and give us an outlet and market
for our agricultural products. Now the balance of trade is against us;
our country is being drained of its coin and its wealth; all productive
industries languish, because of our selfish policy of attempting to
become exclusive in our commerce.
We are content to trammel all dealings with foreign nations in the way
of barter, sale, and exchange, and send our coin to Europe, while we
use, as the representative of money, an irredeemable paper currency.
Free trade would enable us to increase our commerce and shipping on the
ocean; to arrest the stream of coin that is flowing from us to Europe;
to sell where we could obtain the best prices, and buy where we could
make the best bargains. We are in favor of direct taxation for the
support of the government, because it will simplify our revenue system,
and consequently require less revenue than is now needed. It will compel
more rigid economy in the administration of the government, and place
within the reach of the people the means of ascertaining how much is
annually expended by those in power. It will destroy one branch of the
system of monopolies that is robbing the agricultural and producing
classes of their substance. Let us not become alarmed at the thought of
this direct taxation. We accept it as the best method for raising
revenue for the support of state and municipal government, and no good
reason can be shown why the same method would not be best for the
general government. The amount to be paid by the men of wealth would be
in excess of what they now pay, because their property, and not what
they consume, would be the basis of taxation. But to the laborer with a
family, the mechanic, the farmer with small means, and to a majority of
men who now pay in shape of duties from $100 to $200 annually, the
amount required would be but a tithe of the sum now demanded. To learn
something of the rate per cent necessary to support the government, let
us look at the valuation of the property in the United States as
returned with the census in 1870. The actual amount as returned was
$14,178,486,732, call it in round numbers $15,000,000,000; a tax of one
per cent on this amount would produce a revenue of $150,000,000. The
above valuation is taken mainly from the returns made by assessors, and
is but little more than one-third of the real value. Let us double the
amount, then the value of the property in the United States will be
$30,000,000,000. By an examination of the returns it will be seen that
but little railroad property is included in the valuation. If this
property is added, the above amount will be largely increased. By
supposing the real value of the assessable property to be
$30,000,000,000; then a tax of one-half per cent would raise a revenue
of $150,000,000, a sum sufficient to pay all the necessary current
expenses of the government and leave something to apply on the national
debt. A tax of three-fourths per cent would raise a revenue of
$225,000,000, enough to support the government and pay the interest on
the whole of the national debt. Should the special tax be continued on
spirits and tobacco, then a tax of four mills would raise a sufficient
revenue for all legitimate governmental purposes. Now, a laboring man
must pay from the proceeds of his labor from thirty per cent upwards for
almost all his purchases of clothing for his family, and the same on
many other articles of consumption. If, in the course of a year, he
purchases to the amount of $150, of this sum, $50 is paid, indirectly,
it is true, but nevertheless it is paid, and is a tax. With direct
taxation, if his homestead should be worth $1,000, instead of paying $50
as he now does, he would pay five for the support of the government, and
the other forty-five dollars now paid by him from the proceeds of his
labor would be charged against the property of his rich neighbor. There
is no injustice in this method of raising revenue for the support of the
government, and its adoption would relieve the people from the
oppressions of a ring of wealthy monopolies who now control the entire
manufacturing industries of the country, and would allow the laws of
trade, of demand and supply, to fix the prices of manufactured articles.
No reason now exists for the continuance of a law that assures to the
manufacturer large dividends on his investments, while the farm products
must be sold and bartered for a nominal price. The producer asks no
protection save access to the market and the privilege of keeping for
his family and himself the net proceeds of his crops, without being
compelled to bestow one-third of it as a gratuity upon the already rich
and lordly manufacturer. This right the agriculturalists will never
enjoy until the old anti-republican theory of protective and revenue
tariffs is exploded, and the equal rights of all are vindicated. When
this tariff embargo on commerce is removed, when this blockade is
raised, and the producer can send his grain to Europe, and in return
receive such manufactured articles as he needs, without paying _royalty_
to some American lord, in shape of tariffs (ironically called
"protection") the producing classes will ask no other aid of government.
Then will appear the dawn of that universal brotherhood of man, which
sooner or later will illuminate the whole civilized world. With "free
trade" and direct taxation, a death blow will be given to monopolists,
and the burdens so long borne by the laboring and producing classes will
be lifted from them, and they will be permitted to enjoy the fruit of
their own labor.
EIGHTH.--_Patent Rights--Cash Payments Recommended in Place of Long
Standing Mortgages on the Genius of American Industry._--We have shown
some of the abuses connected with the patent system of the country, and
their effect upon the people. While the monopoly of inventions is not of
as great magnitude as some others of which we have treated, the
oppressions resulting from it are more annoying than many that engage
general attention. Inventions are patented because they are expected to
be of public benefit, and because it is but just that the inventor
should be rewarded for a discovery or invention that will advantage the
public generally, or individuals who may make use of the invention or
discovery. The monopoly given to the inventor, or discoverer, is to
enable him to compensate himself for the time, labor, and skill, as well
as the talent or genius bestowed upon the invention, and also to
encourage others to enter the lists as inventors or discoverers of new
and useful articles and principles. But our patent system was never
designed for giving a monopoly to any one who happened to shape a plow
handle different from those now in use, or who cut a thread used in
operating a sewing machine in a peculiar manner, or for the many
hundreds of trifling alterations made in many articles in general use,
or in the manner of using them. An examination of the list of patents
issued will demonstrate that not one in ten contains any new principle,
or is of any value to any one, save the patentee. The apparent ease with
which patents are obtained, and the indiscriminate manner of their
issue, is a great and growing evil that should be remedied. No patent
should be issued until a test had demonstrated its perfection and
usefulness. An examination of many articles on which letters patent have
been issued, coupled with the attempt to use them, discloses the fact
that the invention, if it ever could be of any particular value,
required further improvement to make it of such value, and that letters
patent had been issued for an undeveloped theory. If the invention had
been submitted to a practical test, this state of things would not have
occurred, and the public would not have been defrauded. Patented
articles enter so largely in the prosecution of all industrial pursuits
that it is of the utmost importance that they should be perfect in their
plans and construction, and that the government should assume some kind
of responsibility in all cases when letters patent are issued. Such
letters say in substance, that the patented article is new and useful,
and that it is reasonably fit for the work in the view of the inventor.
These letters patent are a letter of credit to the patentee; as a
license permitting him to sell his invention, and forbidding all persons
to sell or use the invention without his consent. Under the present law
it is simply a special favor, in shape of an exclusive right, granted to
an individual to defraud the persons with whom he deals. The law should
be so modified as to make the government or the examining officer
responsible in all cases when patents issued for pretended discoveries
or inventions prove to be neither new nor useful. If such were now the
law, there would be less complaint of frauds practiced by pretended
inventors, and the utter failure of patented articles to answer the
purposes for which they were intended. The law should be so amended as
to prevent oppressions and extortions in the sale and use of articles of
real merit, for which the inventor should be rewarded, and should have
an exclusive right to use and sell his invention. There should be some
limit to the price of the article. Government has given him an
exclusive right; he should be restricted to such prices as would fairly
compensate him for his discovery. His case is not like that of other
men, who in their dealings come in competition, and where this
competition and the laws of demand and supply fix the prices of the
commodities in which they deal. He has the whole business in his own
hands, and any attempt on the part of others to interfere with his
exclusive right is forbidden and punished. We have already stated that
machines sold in this country for $75 could be bought in England for
less than half that sum. Most of the articles and machines of different
kinds patented in this country, and used in Europe, are sold by the
patentees, their agents and assigns, at less than half the sums demanded
here at home. In Europe, where they have no monopoly, no exclusive
right, they come in competition with others; hence they sell at fair
prices. But in this country, where they have an exclusive right, they
extort from the purchaser from one hundred to five hundred per cent on
the cost of the article. This, government should prevent. But a better
way to adjust the whole matter between the public and the inventor would
be for the government to pay a premium according to merit, for all new
and useful inventions, and remove all restrictions. Let all be free to
make, use, and sell, not the invention, but the thing invented. This
course would require careful and thorough examination and experiment
before the principle was indorsed by the government, and the premium
paid. Or, if his invention proved to be new and useful, let government
pay to the inventor such sum as would fairly and liberally compensate
him, and give the invention to the public. Government has bestowed
immense grants of land upon railroad companies, for the avowed purpose
of assisting in the development of the country; with greater justice
could it bestow upon the whole people all useful discoveries and
inventions. Such a course, adopted and executed in good faith, would
make it impossible for adventurers, sharpers, and swindlers to impose
worthless inventions and pretended discoveries upon the government, and
then palm them off upon the people. Under the present system of
obtaining letters patent, the people are wronged and often cheated, and
for their wrongs the government is mainly responsible. Some other plan
should be adopted, which in its operations would liberally compensate
the inventor, and at the same time protect the people from extortions
practiced by the owners of valuable inventions, and also from the
thousands of adventurers who have been so fortunate as to obtain letters
patent upon pretended discoveries of principles neither new nor useful,
using their letters of credit for the purpose of defrauding the public.
CONCLUSION.--We now approach the end of our labors. We have sought to
present to the reader a candid statement of the different questions we
have discussed; to lay before him evidence of the great and growing
power of the men who are surely and swiftly getting control of the
departments of the government, and monopolizing the finances and
commerce of the whole country. In doing this we have endeavored to
direct attention to the exclusive and munificent grants made to railroad
companies, and to their abuse of these grants; to the means used by them
to get control of the legislative and judicial departments of the
government, and their apparent success in that direction; to the
abridgment of the rights of the people incident thereto; to the
dishonest and fraudulent practices of the men constructing, owning, and
operating railroads; to the disgraceful Credit Mobilier swindle, and its
influence upon the country; to the questionable position of some of the
men representing the people in congress; to the destruction of the
rights of the states and of the people; to the disregard of the
constitutional restrictions and safeguards when the interests of these
corporations were to be subserved; the purposes for which taxes should
be levied; to the nature of railroad corporations--that they are private
in their organization, and subject to the control of the people; to the
effect of the policy of affording local aid to railroad companies by
taxation, etc.; to the blighting influence attending municipal
subscriptions to railroad companies; to the impositions practiced in
transporting freights, and the warehouse and elevator abuses; to the
fraudulent increase of capital stock by railroad companies through the
watering process, and the extortions necessary to this dishonest
practice; to their relative immunity from the burdens imposed for the
support of government; to the strong grasp of consolidated capital upon
the legislation of the country; to the special privileges granted to
corporations by state legislatures; to the influence of these
corporations on the executive department of the government; to the
absolute control of the treasury and the finances enjoyed by
corporations and Wall street brokers, with the manner of doing business
in Wall street; to the influence of corporations in the selection of
judges of the supreme court, with the decisions following the
reconstruction of that court; to the banking and financial policy of the
government, and its bad results; to the tariff policy and its effect
upon the agricultural and producing classes; to the patent system and
its abuses; and finally to the fact demonstrated, that unless the many
abuses that have obtained in the land can be corrected, the people will
be justified in calling into action their inherent rights for regaining
those privileges refused to them, but conferred upon the corporations,
rings, and combinations which have obtained such great power in the
government. We do not claim that our work is free from errors. We have
sought to state the facts correctly. If they are inaccurate, the errors
are unintentional. It was not with the wish or intention of doing
injustice to any man, class of men, corporations, or officers of the
government, that we undertook this work; but with the firm belief and
strong conviction that the liberties of the people were being taken from
them, while a gigantic oligarchy was obtaining control of the
government. We believe the remedy is yet with the people; but to save
themselves prompt, speedy, and united action is imperative. We have
watched with increasing interest the growing power of corporations, for
years, hoping that the time would come when the people would awake to
the necessity of asserting their latent powers for the restoration of
their rights. The civil war and other great political questions have
engaged the public attention, while selfish and ambitious men have
combined and consolidated their wealth and corporate power for the
purpose of controlling the government and commerce of the country. Their
success has been such as to alarm the agricultural, the producing, and
laboring classes. The indications now are that active and aggressive war
will be waged against these oppressors of the people until they are
shorn of their great power and the rights of the people are restored.
Desiring to aid in this great reform, we have deemed the present a
favorable time to present this work to the public. While the combination
the people are now combatting is powerful--possessing a dangerous
influence over the legislative and judicial branches of the government,
well organized and vigorous, controlling the finances of the country and
holding our commerce in its grasp--strong in wealth, and in the extent
of its organization--notwithstanding these fearful facts, that old
republican truth still obtains, that "the people are the source of all
power." That power is now being aroused. The watchword now heard, is
"Equal and exact justice to all." That potent, though silent weapon, the
ballot, is a sure correction of all abuses when intelligently used. The
signs of the times are hopeful from the fact that, for the first time in
many years, the people, especially the agricultural, producing, and
laboring classes are taking the lead. They are reading, thinking and
acting independently of old political and partisan leaders; they are
exercising their rights as freemen. They have declared that "old things
shall be done away, and all things shall become new;" that the
government shall be taken out of the old political grooves in which it
has been running; that it shall assume new life, with the rights of the
people fully recognized. That when the rights of the people and of free
government on the one hand, and the privileges claimed by the combined
corporate interests of the country on the other, are at issue, these
rights shall not be made to yield to old precedents originating in
monarchial and despotic governments, in order that the privileges
claimed by corporations may be upheld.
The organization of the Patrons of Husbandry forms a nucleus around
which all reformers can rally. The reforms they seek will effect the
liberation of the whole people from the oppressions under which they now
suffer. Our aim is to aid in this work. We feel assured that there is an
irreconcilable conflict between the monopolies and the people; that the
powers and privileges assured to corporations are at war with republican
institutions, and hostile to the constitution of our country. To effect
reforms will require time. Some relief can be speedily obtained, but to
accomplish thorough reform, and bring the administration of the
government under the control of the people, will require that the
offices shall be filled by men whose education and pursuits have been
such as to place them in full sympathy with the people--men who will not
spend their time as legislators and judges in discussing federal
prerogatives, and classing our republican government with old time
despotisms. The doctrine that corporations are subject to legislative
control must be fully established as the fixed and settled policy of our
government. When this point is reached, the farmer will not be obliged
to divide his crops with railroad companies--and so with all other
abuses. The power to correct all abuses must remain with the people. The
prosperity of the people, the perpetuity of our form of government, the
rights of the states and the public can only be preserved by guarding
against all encroachments made upon free institutions, whether they
originate in congress or out of it--whether they are enunciated from the
bench of the supreme court, or from the stump. In these days when the
tendency is to a strong centralized government--when a few men control
the finance of the country--when the whole commerce of the country is
controlled by Wall Street gamblers--when special grants and privileges
are bestowed upon companies and individuals, and when the property of
each individual is insecure and liable to be assessed for the building
of railroads--at this time, there came from Justice Bradley of the
supreme court of the United States, these ominous words: "It is
absolutely essential to the independent national existence that
_government_ should have a firm hold on the two great sovereign
instruments of the _sword_ and the _purse_." This announcement is made
from the bench of the supreme court of the United States, on the
fifteenth of January, 1872. The government must have a firm hold on the
purse and sword. This is the declaration of the court made but a few
months before it decided that railroad corporations were public, and
that the property of private third parties of the whole people could be
taxed to build them. We claim that under our form of government the
people are the power to retain the control of the purse and sword; that
to place them together in the hands of those persons who fill, for the
time being, the government offices, is to take from the governing power
its rights. But when the people's purse and the government finances are
subject to the action of corporations and rings, the special favorites
of the courts, the people are imperatively called upon to arise and
assert their rights as freemen--to throw off this oppressive yoke--to
stamp with the seal of condemnation, not only the enunciation of such
anti-republican sentiment, but the judge who uttered it. The real
question at issue between the people and monopolies fostered and
protected by government is, whether the people shall rule, or remain the
servants and vassals of the monopolists. The final determination of this
question will decide whether we are to live under the republic planned
and formed for us by our revolutionary ancestors, or are to submit to
the oligarchy shaped for us by recent enactments and decisions in favor
of a class of men, who, for the sake of private gain, are overturning
and destroying our free institutions. The issue is fairly presented; the
lines distinctly drawn. The corporate hosts are marshaling their forces;
the people, under the lead of the tillers of the soil, are preparing for
battle.
When the Union was threatened with disruption, and the armies were about
to engage in conflict, they armed themselves with the death dealing
sword and gun. Hundreds of thousands of brave and patriotic men proved
their devotion to their country by the sacrifice of their lives for its
preservation. No such sacrifices are now demanded. In a legal,
constitutional manner, these corporations, rings, and combinations, can
be routed "horse, foot, and dragoons;" their friends "at court" can be
displaced; their paid agents and attorneys can be driven from the halls
of congress and state legislatures; their judges can be invited to
vacate their seats that others, elected by the votes of the people, may
fill them; and the standard of "equal rights" can be again reared aloft
without the use of bullets or the shedding of blood.
But after all these errors and abuses shall have been corrected, other
questions will arise. The farmer of the west and south must have cheap
transportation to the seaboard. It may be demonstrated that our present
system of building railroads will not answer the purpose because of the
great expense of constructing and operating them, and that other means
must be adopted. Under the constitution the general government has
exclusive maritime jurisdiction, and can make canals and slack water
navigation. History demonstrates that water transportation is always
cheapest. The government should provide for water transportation from
the great agricultural centres to the sea-board. This kind of
improvement the general government can lawfully make, and an expenditure
of a small part of the wealth bestowed upon private railroad
corporations would open up water channels, affording cheap
transportation from the west to the east and south. Grain and meats
could then be shipped to the sea-board at such rates as would warrant
their transportation to foreign markets, which, with the abolition of
protective duties, would furnish the farmer a good sale for his
products, and an opportunity of purchasing his supplies free from the
bounty he now pays the eastern manufacturer. With such means for
shipping the farm products of the west and south, with protective
tariffs abolished, and the financial policy of the nation so changed as
to furnish to the people the same kind of money used by the government,
with "specie payment" resumed, and the large margin between coin and
paper removed, prosperity would again attend farming pursuits, and
contentment would fill the land.
With all the advantages Providence has given us in this great country,
with the pure and simple republic bequeathed to us by the heroes and
statesmen of Seventy-Six, we ought to be a prosperous and happy people.
But, with the blighting curse of oppressive monopolies fastened upon us,
upheld by bought legislation and strengthened by the decisions of judges
and courts, who, from education, occupation, and sympathy with the
oppressors of the people, or from baser motives, have become the special
guardians of the monopolists, the laboring and producing classes find it
difficult to live, and, in many instances, are being reduced to absolute
want. The farmer has abundant harvests, but their value is absorbed in
oppressive charges for transportation to market, and he is bound down
with onerous and unequal taxes until his labor has ceased to be
remunerative. While this is true of most industrial pursuits, the
manufacturer, protected by the government, the moneyed men of Wall
street, who operate in gold and stocks, and the railroad men, who are
protected by the decisions of the courts of the country, all amass
princely fortunes--the result of special privileges bestowed upon them.
As a necessary consequence, the interests of the country are being
divided. A moneyed "nobility" are arrayed against the laboring and
producing classes. Special privileges, at war with republican
institutions, are granted them; their wealth is virtually exempted from
taxation, and they are fast becoming the governing power, while those
who produce the wealth of the country are compelled to spend their
strength and devote their lives to the business of adding to the wealth
of their oppressors. It may be asked why this state of things exists.
There are two reasons for it. First, the indifference manifested by the
people to the affairs of the government; their willingness to allow
others to direct and control the affairs of the nation, while they
devote their time to their own personal interests, seemingly forgetful
that they have any interest in national affairs, or in the
administration of their own state government, and permitting those who
now oppress them to shape legislation, and to obtain those grants and
privileges which have now become the means of their oppression. The
second cause is the disposition of those in power to override and
disregard constitutional restrictions. During the civil war the
constitution possessed no restrictive force. The law of necessity
governed; the personal will of those in office was the supreme law. Acts
of congress were passed with direct reference to a state of war, and
decisions of courts were controlled by the same causes. With the return
of peace these laws remained unrepealed; the decisions of courts
remained unreversed; constitutional restrictions were deemed irksome and
of little moment. Laws remained on our statute book which contravened
the plain provisions of the constitution, and the decisions of courts
have continued in the same channel, until the great charter of our civil
liberty, has become obsolete, and the personal opinions of courts, like
the edicts of a monarch, have become the supreme law. Under this
species of legislation, and this class of decisions, these great
oppressors of the country have grown up until their power is superior to
that of all other interests, and not unfrequently defies the law. The
first great reform to be effected is to re-establish the supremacy of
the constitution, and to demand of courts and legislators a strict
observance of its provisions. When this is effected, the rights of the
states and the people will be protected. The courts of the United
States, and all other departments of the government, must remember that
in our republican system the federal government is limited and
restricted to the exercise of such powers as are expressly delegated to
it, and that all attempts to confer special charters and privileges upon
private companies are usurpations. They must remember that we have no
government with kingly prerogatives; that in a republic the people
retain control of the _purse_ and _sword_, and that the liberties of the
people, the equality of all before the law, as well as the perpetuation
of republican institutions, are in the care and keeping of the sovereign
people.
That there should be some means adopted to arrest this great and growing
power of corporations is now forcibly demonstrated. Since writing the
preceding pages, still another fatal stab has been given to the
republic. Vanderbilt, the leader in the raid made by corporations upon
the liberties of the people, and also an operator in Wall street
gambling, has added to the other roads under his control the Lake Shore
& Michigan Southern railway, and now controls the commerce of the west
with the seaboard, and can fix the price of a barrel of flour, or bushel
of wheat or corn, and from his decision there is no appeal. Extending
these monopolies still further, Vanderbilt and his co-conspirators are
about to take control of all the telegraph lines in the country, and
dictate to the whole people the price to be paid for dispatches. Thus
these enemies of republican government are surely getting control of all
the business and commerce of the country. The finances, the carrying
trade, the produce market, the price and sale of manufactured articles,
and the means of communication between the different portions of the
country, are all passing into the hands of the enemies of the people. At
the present time if any railroad company attempts to act independently
and honestly, this combination of sharpers and swindlers make war upon
it and force it to surrender, or drive it into bankruptcy.
No wonder that the people are becoming alarmed, and are preparing for
the conflict. The attempt made to dissolve the Union was an open and
bold one. The people met the issue, and triumphed. The attempt made to
divide the country aroused the national patriotism. The attempt of this
great combination of monopolists to obtain absolute control of the
government, the finances, and commerce of the country, presents more
serious cause for alarm than did the attempt to dissolve the Union. Our
institutions cease to be of any value when they are perverted to means
of oppression. When men in high official positions trifle with the
liberties of the people and encourage their oppressors, an indignant
constituency should hurl them from power. If, knowing the wrongs that
are committed against us, the encroachments being made on our liberties,
the threatened and partially accomplished destruction of republican
institutions, we silently acquiesce, we are not freemen, and we deserve
to be held as the bond-servants of our oppressors for all time to come.
But while the people are long-suffering and patient under adversity,
there is a point beyond which their oppressors cannot venture without
arousing them to action. That point is now reached; the fiat of the
sovereign power in this land has gone forth; the voice of the people is
heard from all portions of our common country demanding redress, and
that the government shall be brought back to constitutional limits; that
the power of their oppressors shall be destroyed; that their rights as
freemen shall be restored to them; that the halls of legislation and the
courts of justice shall be filled by men who do not legislate for
bribes, and who administer justice without respect to persons or
interests, and prize constitutional restrictions and the liberties of
the people above the interests of corporations and rings formed to
oppress them. If redress cannot be obtained at the ballot-box; if the
influences which now control the government and business of the country
cannot be overcome; if redress is denied in legislative halls and in the
courts--then the people have the right, the "God-given right," to arise
in their sovereign power and take what their servants have refused to
give them. If reform cannot be obtained, or the wrongs of the people
redressed in any other method, a resort should be had to
_revolution_--peaceable, if possible, but such as will bring the country
back to the days of its purity, and compel all to acknowledge the
_sacred_ binding force of the constitution.
Having an abiding confidence that the reform being inaugurated by the
farmers of the country will advance to a triumphant issue, we present
this volume to the public, as an humble but honest champion of the
cause, acknowledging its imperfections, expecting criticisms and
condemnations from the monopolists and their dependents, but asking a
careful perusal and earnest consideration of the doctrine advocated.
APPENDIX.
CHAPTER I.
As our position on the "Legal Tender" decisions and their effect upon
the finances and commerce of the country have been controverted by some
of the _legal men_ to whom we have shown our manuscript, at the risk of
wearying the reader, we quote the dissenting opinions of the late Chief
Justice Chase, and his associates, on the points at issue in those
cases, feeling assured that these opinions fully sustain us. If our
views are correct as to the effect of these decisions upon the best
interests of the country, and their tendency to increase the power of
the combinations that now have such control over the different
departments of the government, as well as the financial and commercial
interests of the country, it follows that no real relief from the
oppressions under which the people are suffering can be obtained until
the legal tender statutes are repealed, and the latest decisions of the
supreme court as to their constitutionality and scope are reversed.
We have claimed that those decisions were in conflict with the
provisions of the constitution. Our position is supported by the
opinions quoted. We have said that the supreme court of the United
States was reorganized in the interests of railroad corporations and
other monopolies, before the legal tender questions were re-argued and
reversed. The opinions quoted sustain us in this particular. But we
desire the reader to examine these opinions and determine for himself.
CHAPTER II.
DISSENTING OPINION OF CHIEF JUSTICE CHASE.
We dissent from the argument and conclusion in the opinion just
announced.
The rule, by which the constitutionality of an act of congress passed in
the alleged exercise of an implied power is to be tried, is no longer,
in this court, open to question. It was laid down in the case of
_McCulloch_ v. _Maryland_, by Chief Justice Marshall, in these words:
"Let the end be legitimate, let it be within the scope of the
constitution, and all means which are appropriate, which are plainly
adapted to that end, which are not prohibited but consistent with the
letter and spirit of the constitution, are constitutional."
And it is the plain duty of the court to pronounce acts of congress not
made in the exercise of an express power nor coming within the
reasonable scope of this rule, if made in virtue of an implied power,
unwarranted by the constitution. Acts of congress not made in pursuance
of the constitution are not laws.
Neither of these propositions was questioned in the case of _Hepburn_ v.
_Griswold_. The judges who dissented in that case maintained that the
clause in the act of February 25th, 1862, making the United States notes
a legal tender in payment of debts, was an appropriate, plainly adapted
means to a constitutional end, not prohibited but consistent with the
letter and spirit of the constitution. The majority of the court as then
constituted, five judges out of eight, felt "obliged to conclude that an
act making mere promises to pay dollars a legal tender in payments of
debts previously contracted is not a means appropriate, plainly adapted,
really calculated to carry into effect any express power vested in
congress, is inconsistent with the spirit of the constitution, and is
prohibited by the constitution."
In the case of the _United States_ v. _De Witt_, we held unanimously
that a provision of the internal revenue law prohibiting the sale of
certain illuminating oil in the states was unconstitutional, though it
might increase the production and sale of other oils, and consequently
the revenue derived from them, because this consequence was too remote
and uncertain to warrant the court in saying that the prohibition was an
appropriate and plainly adapted means for carrying into execution the
power to lay and collect taxes.
We agree, then, that the question whether a law is a necessary and
proper means to execution of an express power, within the meaning of
these words as defined by the rule--that is to say, a means appropriate,
plainly adapted, not prohibited but consistent with the letter and
spirit of the constitution--is a judicial question. Congress may not
adopt any means for the execution of an express power that congress may
see fit to adopt. It must be a necessary and proper means within the
fair meaning of the rule. If not such it cannot be employed consistently
with the constitution. Whether the means actually employed in a given
case are such or not the court must decide. The court must judge of the
fact, congress of the degree of necessity.
A majority of the court, five to four, in the opinion which has just
been read, reverses the judgment rendered by the former majority of five
to three, in pursuance of an opinion formed after repeated arguments, at
successive terms, and careful consideration; and declares the legal
tender clause to be constitutional; that is to say, that an act of
congress making promises to pay dollars legal tender as coined dollars
in payment of pre-existing debts is a means appropriate and plainly
adapted to the exercise of powers expressly granted by the constitution,
and not prohibited itself by the constitution but consistent with its
letter and spirit. And this reversal, unprecedented in the history of
the court, has been produced by no change in the opinions of those who
concurred in the former judgment. One closed an honorable judicial
career by resignation after the case had been decided, after the opinion
had been read and agreed to in conference, and after the day when it
would have been delivered in court, had not the delivery been postponed
for a week to give time for the preparation of the dissenting opinion.
The court was then full, but the vacancy caused by the resignation of
Mr. Justice Grier having been subsequently filled and an additional
justice having been appointed under the act increasing the number of
judges to nine, which took effect on the first Monday of December, 1869,
the then majority find themselves in a minority of the court, as now
constituted, upon the question.
Their convictions, however, remain unchanged. We adhere to the opinion
pronounced in _Hepburn_ v. _Griswold_. Reflection has only wrought a
firmer belief in the soundness of the constitutional doctrines
maintained, and in the importance of them to the country.
We agree that much of what was said in the dissenting opinion in that
case, which has become the opinion of a majority of the court as now
constituted, was correctly said. We fully agree in all that was quoted
from Chief Justice Marshall. We had indeed accepted, without reserve,
the definition of implied powers in which that great judge summed up his
argument, of which the language quoted formed a part. But if it was
intended to ascribe to us "the doctrine that when an act of congress is
brought to the test of this clause of the constitution," namely, the
clause granting the power of ancillary legislation, "its necessity must
be absolute, and its adaptation to the conceded purpose unquestionable,"
we must be permitted not only to disclaim it, but to say that there is
nothing in the opinion of the then majority which approaches the
assertion of any such doctrine. We did indeed venture to cite, with
approval, the language of Judge Story in his great work on the
constitution, that the words necessary and proper were intended to have
"a sense at once admonitory and directory," and to require that the
means used in the execution of an express power "should be _bona fide_,
appropriate to the end," and also ventured to say that the tenth
amendment, reserving to the states or the people all powers not
delegated to the United States by the constitution, nor prohibited by it
to the states, "was intended to have a like admonitory and directory
sense," and to restrain the limited government established by the
constitution from the exercise of powers not clearly delegated or
derived by just inference from powers so delegated. In thus quoting
Judge Story, and in this expression of our own opinion, we certainly did
not suppose it possible that we could be understood as asserting that
the clause in question "was designed as a restriction upon the ancillary
power incidental to every grant of power in express terms." It was this
proposition which "was stated and refuted" in _McCulloch_ v. _Maryland_.
That refutation touches nothing said by us. We assert only that the
words of the constitution are such as admonish congress that implied
powers are not to be rashly or lightly assumed, and that they are not to
be exercised at all, unless, in the words of Judge Story, they are
"_bona fide_ appropriate to the end," or, in the words of Chief Justice
Marshall, "appropriate, plainly adapted" to a constitutional and
legitimate end, and "not prohibited, but consistent with the letter and
spirit of the constitution."
There appears, therefore, to have been no real difference of opinion in
the court as to the rule by which the existence of an implied power is
to be tested, when _Hepburn_ v. _Griswold_ was decided, though the then
minority seem to have supposed there was. The difference had reference
to the application of the rule rather than to the rule itself.
The then minority admitted that in the powers relating to coinage,
standing alone, there is not "a sufficient warrant for the exercise of
the power" to make notes a legal tender, but thought them "not without
decided weight, when we come to consider the question of the existence
of this power as one necessary and proper for carrying into execution
other admitted powers of the government." This weight they found in the
fact that an "express power over the lawful money of the country was
confided to congress and forbidden to the states." It seemed to them not
an "unreasonable inference" that, in a certain contingency, "making the
securities of the government perform the office of money in the payment
of debts would be in harmony with the power expressly granted to coin
money." We perceive no connection between the express power to coin
money and the inference that the government may, in any contingency,
make its securities perform the functions of coined money, as a legal
tender in payment of debts. We have supposed that the power to exclude
from circulation notes not authorized by the national government might,
perhaps, be deduced from the power to regulate the value of coin; but
that the power of the government to emit bills of credit was an exercise
of the power to borrow money, and that its power over the currency was
incidental to that power and to the power to regulate commerce. This was
the doctrine of the _Veazie Bank_ v. _Fenno_, although not fully
elaborated in that case. The question whether the quality of legal
tender can be imparted to these bills depends upon distinct
considerations.
Was, then, the power to make these notes of the government--these bills
of credit--a legal tender in payments an appropriate, plainly adapted
means to a legitimate and constitutional end? or, to state the question
as the opinion of the then minority stated it, "Does there exist any
power in congress, or in the government, by express grant, in execution
of which this legal tender act was necessary and proper in the sense
here defined and under the circumstances of its passage?"
The opinion of the then minority affirmed the power on the ground that
it was a necessary and proper means, within the definition of the court,
in the case of _McCulloch_ v. _Maryland_, to carry on war, and that it
was not prohibited by the spirit or letter of the constitution, though
it was admitted to be a law impairing the obligation of contracts, and
notwithstanding the objection that it deprived many persons of their
property without compensation and without due process of law.
We shall not add much to what was said in the opinion of the then
majority on these points.
The reference made in the opinion just read, as well as in the argument
at the bar, to the opinions of the chief justice, when secretary of the
treasury, seems to warrant, if it does not require, some observations
before proceeding further in the discussion.
It was his fortune at the time the legal tender clause was inserted in
the bill to authorize the issue of United States notes and received the
sanction of congress, to be charged with the anxious and responsible
duty of providing funds for the prosecution of the war. In no report
made by him to congress was the expedient of making the notes of the
United States a legal tender suggested. He urged the issue of notes
payable on demand in coin or received as coin in payment of duties. When
the state banks had suspended specie payments, he recommended the issue
of United States notes receivable for all loans to the United States and
all government dues except duties on imports. In his report of December,
1862, he said that "United States notes receivable for bonds bearing a
secure specie interest are next best to notes convertible into coin,"
and after stating the financial measures which in his judgment were
advisable, he added: "The secretary recommends, therefore, no mere paper
money scheme, but on the contrary a series of measures looking to a safe
and gradual return to gold and silver as the only permanent basis,
standard, and measure of value recognized by the constitution." At the
session of congress before this report was made, the bill containing the
legal tender clause had become a law. He was extremely and avowedly
averse to this clause, but was very solicitous for the passage of the
bill to authorize the issue of United States notes then pending. He
thought it indispensably necessary that the authority to issue these
notes should be granted by congress. The passage of the bill was
delayed, if not jeoparded, by the difference of opinion which prevailed
on the question of making them a legal tender. It was under these
circumstances that he expressed the opinion, when called upon by the
committee of ways and means, that it was necessary; and he was not sorry
to find it sustained by the decisions of respected courts, not unanimous
indeed, nor without contrary decisions of state courts equally
respectable. Examination and reflection under more propitious
circumstances have satisfied him that this opinion was erroneous, and he
does not hesitate to declare it. He would do so, just as unhesitatingly,
if his favor to the legal tender clause had been at that time decided,
and his opinion as to the constitutionality of the measure clear.
Was the making of the notes a legal tender necessary to the carrying on
the war? In other words, was it necessary to the execution of the power
to borrow money? It is not the question whether the issue of notes was
necessary, nor whether any of the financial measures of the government
were necessary. The issuing of the circulation commonly known as
greenbacks was necessary, and was constitutional. They were necessary to
the payment of the army and the navy and to all the purposes for which
the government uses money. The banks had suspended specie payment, and
the government was reduced to the alternative of using their paper or
issuing its own.
Now it is a common error, and in our judgment it was the error of the
opinion of the minority in _Hepburn_ v. _Griswold_, and is the error of
the opinion just read, that considerations pertinent to the issue of
United States notes have been urged in justification of making them a
legal tender. The real question is, Was the making them a legal tender a
necessary means to the execution of the power to borrow money? If the
notes would circulate as well without as with this quality it is idle to
urge the plea of such necessity. But the circulation of the notes was
amply provided for by making them receivable for all national taxes, all
dues to the government, and all loans. This was the provision relied
upon for the purpose by the secretary when the bill was first prepared,
and his reflections since have convinced him that it was sufficient.
Nobody could pay a tax, or any debt, or buy a bond without using these
notes. As the notes, not being immediately redeemable, would undoubtedly
be cheaper than coin, they would be preferred by debtors and purchasers.
They would thus, by the universal law of trade, pass into general
circulation. As long as they were maintained by the government at or
near par value of specie they would be accepted in payment of all dues,
private as well as public. Debtors, as a general rule, would pay in
nothing else unless compelled by suit, and creditors would accept them
as long as they would lose less by acceptance than by suit. In new
transactions, sellers would demand and purchasers would pay the premium
for specie in the prices of commodities. The difference to them, in the
currency, whether of coin or of paper, would be in the fluctuations to
which the latter is subject. So long as notes should not sink so low as
to induce creditors to refuse to receive them because they could not be
said to be in any just sense payments of debts due, a provision for
making them a legal tender would be without effect except to discredit
the currency to which it was applied. The real support of note
circulation not convertible on demand into coin, is receivability for
debts due the government, including specie loans, and limitation of
amount. If the amount is smaller than is needed for the transactions of
the country, and the law allows the use in these transactions of but one
description of currency, the demand for that description will prevent
its depreciation. But history shows no instance of paper issues so
restricted. An approximation in limitation is all that is possible, and
this was attempted when the issues of United States notes were
restricted to one hundred and fifty millions. But this limit was soon
extended to four hundred and fifty millions, and even this was soon
practically removed by the provision for the issue of notes by the
national banking associations without any provision for corresponding
reduction in the circulation of United States notes; and still further
by the laws authorizing the issue of interest-bearing securities, made a
tender for their amount, excluding interest.
The best support for note circulation is not limitation, but
receivability, especially for loans bearing coin interest. This support
was given until the fall of 1864, when a loan bearing increased currency
interest, payable in three years and convertible into a loan bearing
less coin interest, was substituted for the six per cent and five per
cent loans bearing specie interest, for which the notes had been
previously received.
It is plain that a currency so supported cannot depreciate more than the
loans; in other words, below the general credit of the country. It will
rise or fall with it. At the present moment, if the notes were received
for five per cent bonds, they would be at par. In other words, specie
payments would be resumed.
Now, does making the notes a legal tender increase their value? It is
said that it does, by giving them a new use. The best political
economists say that it does not. When the government compels the people
to receive its notes, it virtually declares that it does not expect
them to be received without compulsion. It practically represents itself
insolvent. This certainly does not improve the value of its notes. It is
an element of depreciation. In addition, it creates a powerful interest
in the debtor class and in the purchasers of bonds to depress to the
lowest point the credit of the notes. The cheaper these become, the
easier the payment of debts, and the more profitable the investments in
bonds bearing coin interest.
On the other hand, the higher prices become, for everything the
government needs to buy, and the greater the accumulation of public as
well as private debt. It is true that such a state of things is
acceptable to debtors, investors in bonds, and speculators. It is their
opportunity of relief or wealth. And many are persuaded by their
representations that the forced circulation is not only a necessity but
a benefit. But the apparent benefit is a delusion and the necessity
imaginary. In their legitimate use, the notes are hurt not helped by
being made a legal tender. The legal tender quality is only valuable for
the purposes of dishonesty. Every honest purpose is answered as well and
better without it.
We have no hesitation, therefor, in declaring our conviction that the
making of these notes a legal tender was not a necessary or proper means
to the carrying on war or to the exercise of any express power of the
government.
But the absence of necessity is not our only, or our weightiest
objection to this legal tender clause. We still think, notwithstanding
the argument adduced to the contrary, that it does violate an express
provision of the constitution, and the spirit, if not the letter, of the
whole instrument. It cannot be maintained that legislation justly
obnoxious to such objections can be maintained as the exercise of an
implied power. There can be no implication against the constitution.
Legislation to be warranted as the exercise of implied powers must not
be "prohibited, but consistent with the letter and spirit of the
constitution."
The fifth amendment provides that no person shall be deprived of life,
liberty, or property without compensation or due process of law. The
opinion of the former minority says that the argument against the
validity of the legal tender clause, founded on this constitutional
provision, is "too vague for their perception." It says that a
"declaration of war would be thus unconstitutional," because it might
depreciate the value of property; and "the abolition of tariff on sugar,
or iron," because it might destroy the capital employed in those
manufactures; and "the successive issues of government bonds," because
they might make those already in private hands less valuable. But it
seems to have escaped the attention of the then minority that to declare
war, to lay and repeal taxes, and to borrow money, are all express
powers, and that the then majority were opposing the prohibition of the
constitution to the claim of an implied power. Besides, what resemblance
is there between the effect of the exercise of these express powers and
the operation of the legal tender clause upon pre-existing debts? The
former are indirect effects of the exercise of undisputed powers. The
latter acts directly upon the relations of debtor and creditor. It
violates that fundamental principle of all just legislation that the
legislature shall not take the property of A and give it to B. It says
that B, who has purchased a farm of A for a certain price, may keep the
farm without paying for it, if he will only tender certain notes which
may bear some proportion to the price, or be even worthless. It seems to
us that this is a manifest violation of this clause of the constitution.
We think also that it is inconsistent with the spirit of the
constitution in that it impairs the obligation of contracts. In the
opinion of the then minority it is frankly said: "Undoubtedly it is a
law impairing the obligation of contracts made before its passage," but
it is immediately added: "While the constitution forbids the states to
pass such laws, it does not forbid congress," and this opinion, as well
as the opinion just read, refers to the express authority to establish a
uniform system of bankruptcy as a proof that it was not the intention of
the constitution to withhold that power. It is true that the
constitution grants authority to pass a bankrupt law, but our inference
is, that in this way only can congress discharge the obligation of
contracts. It may provide for ascertaining the inability of debtors to
perform their contracts, and, upon the surrender of all their property
may provide for their discharge. But this is a very different thing
from providing that they may satisfy contracts without payment, without
pretence of inability, and without any judicial proceeding.
That congress possesses the general power to impair the obligation of
contracts is a proposition which, to use the language of Chief Justice
Marshall, "must find its vindication in a train of reasoning not often
heard in courts of justice." "It may well be added," said the same great
judge, "whether the nature of society and of government does not
prescribe some limits to legislative power; and, if any be prescribed,
where they are to be found, if the property of an individual, fairly and
honestly acquired, can be seized without compensation? To the
legislature all legislative power is granted, but the question whether
the act of transferring the property of an individual to the public is
in the nature of a legislative power is well worthy of serious
reflection."
And if the property of an individual cannot be transferred to the
public, how much less to another individual?
These remarks of Chief Justice Marshall were made in a case in which it
became necessary to determine whether a certain act of the legislature
of Georgia was within the constitutional prohibition against impairing
the obligation of contracts. And they assert fundamental principles of
society and government in which that prohibition had its origin. They
apply with great force to the construction of the constitution of the
United States. In like manner and spirit Mr. Justice Chase had
previously declared that "an act of the legislature contrary to the
great first principles of the social compact cannot be considered a
rightful exercise of legislative authority." Among such acts he
instances "a law that destroys or impairs the lawful private contracts
of citizens." Can we be mistaken in saying that such a law is contrary
to the spirit of a constitution ordained to establish justice? Can we be
mistaken in thinking that if Marshall and Story were here to pronounce
judgment in this case they would declare the legal tender clause now in
question to be prohibited by and inconsistent with the letter and spirit
of the constitution?
It is unnecessary to say that we reject wholly the doctrine, advanced
for the first time, we believe, in this court, by the present majority,
that the legislature has any "powers under the constitution which grow
out of the aggregate of powers conferred upon the government, or out of
the sovereignty instituted by it." If this proposition be admitted, and
it be also admitted that the legislature is the sole judge of the
necessity for the exercise of such powers, the government becomes
practically absolute and unlimited.
Our observations thus far have been directed to the question of the
constitutionality of the legal tender clause and its operation upon
contracts made before the passage of the law. We shall now consider
whether it be constitutional in its application to contracts made after
its passage. In other words, whether congress has power to make anything
but coin a legal tender.
And here it is well enough again to say that we do not question the
authority to issue notes or to fit them for a circulating medium, or to
promote their circulation by providing for their receipt in payment of
debts to the government, and for redemption either in coin or in bonds;
in short, to adapt them to use as currency. Nor do we question the
lawfulness of contracts stipulating for payment in such notes, or the
propriety of enforcing the performance of such contracts by holding the
tender of such currency, according to their terms, sufficient. The
question is, Has congress power to make the notes of the government,
redeemable or irredeemable, a legal tender without contract and against
the will of the person to whom they are tendered? In considering this
question we assume as a fundamental proposition that it is the duty of
every government to establish a standard of value. The necessity of such
a standard is indeed universally acknowledged. Without it the
transactions of society would become impossible. All measures, whether
of extent, or weight, or value, must have certain proportions of that
which they are intended to measure. The unit of extent must have certain
definite length, the unit of weight certain definite gravity, and the
unit of value certain definite value. These units, multiplied or
subdivided, supply the standards by which all measures are properly
made. The selection, therefore, by the common consent of all nations, of
gold and silver as the standard of value was natural, or, more
correctly speaking, inevitable. For whatever definitions of value
political economists may have given, they all agree that gold and silver
have more value in proportion to weight and size, and are less subject
to loss by wear or abrasion than any other material capable of easy
subdivision and impression, and that their value changes less and by
slower degrees, through considerable periods of time, than that of any
other substance which could be used for the same purpose. And these are
qualities indispensable to the convenient use of the standard required.
In the construction of the constitutional grant of power to establish a
standard of value, _every presumption_ is, therefore, against that which
would authorize the adoption of any other materials than those
sanctioned by universal consent.
But the terms of the only express grant in the constitution of power to
establish such a standard leave little room for presumptions. The power
conferred is the power to coin money, and these words must be understood
as they were used at the time the constitution was adopted. And we have
been referred to no authority which at that time defined coining
otherwise than as minting or stamping metals for money; or money
otherwise than as metal coined for the purposes of commerce. These are
the words of Johnson, whose great dictionary contains no reference to
money of paper.
It is true that notes issued by banks, both in England and America, were
then in circulation, and were used in exchanges, and in common speech
called money, and that bills of credit, issued both by congress and by
the states, had been recently in circulation under the same general
name; but these notes and bills were never regarded as real money, but
were always treated as its representatives only, and were described as
currency. The legal tender notes themselves do not purport to be
anything else than promises to pay money. They have been held to be
securities, and therefore exempt from state taxation; and the idea that
it was ever designed to make such notes a standard of value by the
framers of the constitution is wholly new. It seems to us impossible
that it could have been entertained. Its assertion seems to us to
ascribe folly to the framers of our fundamental law, and to contradict
the most conspicuous facts in our public history.
The power to coin money was a power to determine the fineness, weight,
and denominations of the metallic pieces by which values were to be
measured; and we do not perceive how this meaning can be extended
without doing violence to the very words of the constitution by imposing
on them a sense they were never intended to bear. This construction is
supported by contemporaneous and all subsequent action of the
legislature; by all the recorded utterances of statesmen and jurists,
and the unbroken tenor of judicial opinion until a very recent period,
when the excitement of the civil war led to the adoption, by many, of
different views.
The sense of the convention which framed the constitution is clear, from
the account given by Mr. Madison of what took place when the power to
emit bills of credit was stricken from the reported draft. He says
distinctly that he acquiesced in the motion to strike out, because the
government would not be disabled thereby from the use of public notes,
so far as they would be safe and proper, while it cut off the pretext
for a paper currency, and particularly for making the bills a tender
either for public or private debts. The whole discussion upon bills of
credit proves, beyond all possible question, that the convention
regarded the power to make notes a legal tender as absolutely excluded
from the constitution.
The papers of the Federalist, widely circulated, in favor of the
ratification of the constitution, discuss briefly the power to coin
money, as a power to fabricate metallic money, without a hint that any
power to fabricate money of any other description was given to congress;
and the views which it promulgated may be fairly regarded as the views
of those who voted for adoption.
Acting upon the same views, congress took measures for the establishment
of a mint, exercising thereby the power to coin money, and has continued
to exercise the same power, in the same way, until the present day. It
established the dollar as the money unit, determined the quantity and
quality of gold and silver of which each coin should consist, and
prescribed the denominations and forms of all coins to be issued. Until
recently no one in congress ever suggested that that body possessed
power to make anything else a standard of value.
Statesmen who have disagreed widely on other points have agreed in the
opinion that the only constitutional measures of value are metallic
coins, struck as regulated by the authority of congress. Mr. Webster
expressed not only his opinion but the universal and settled conviction
of the country when he said: "Most unquestionably there is no legal
tender, and there can be no legal tender in this country, under the
authority of this government or any other, but gold and silver, either
the coinage of our mints or foreign coin at rates regulated by congress.
This is a constitutional principle, perfectly plain and of the very
highest importance. The states are prohibited from making anything but
gold and silver a tender in payment of debts, and although no such
express prohibition is applied to congress, _yet as congress has no
power granted to it in this respect but to coin money and regulate the
value of foreign coin_, it clearly has no power to substitute paper or
anything else for coin as a tender in payment of debts and in discharge
of contracts."
And this court, in _Gwin_ v. _Breedlove_, said: "_By the constitution of
the United States gold and silver coin_ made current by law _can only be
tendered_ in payment of debts." And in _The United States_ v.
_Marigold_, this court, speaking of the trust and duty of maintaining a
uniform and pure metallic standard of uniform value throughout the
Union, said: "The power of coining money and regulating its value _was
delegated to congress by the constitution for the very purpose_, as
assigned by the framers of that instrument, _of creating and preserving
the uniformity and purity of such a standard of value_."
The present majority of the court say that legal tender notes "have
become the universal measure of values," and they hold that the
legislation of congress, substituting such measures for coin by making
the notes a legal tender in payment, is warranted by the constitution.
But if the plain sense of words, if the contemporaneous exposition of
parties, if common consent in understanding, if the opinions of courts
avail anything in determine the meaning of the constitution, it seems
impossible to doubt that the power to coin money is a power to
establish a uniform standard of value, and that no other power to
establish such a standard, by making notes a legal tender, is conferred
upon congress by the constitution.
My brothers Clifford and Field concur in these views, but in
consideration of the importance of the principles involved will deliver
their separate opinions. My brother Nelson also dissents.
CHAPTER III.
DISSENTING OPINION OF JUSTICE CLIFFORD.
Money, in the constitutional sense, means coins of gold and silver
fabricated and stamped by authority of law as a measure of value,
pursuant to the power vested in congress by the constitution.
Coins of copper may also be minted for small fractional circulation, as
authorized by law and the usage of the government for eighty years, but
it is not necessary to discuss that topic at large in this
investigation.
Even the authority of congress upon the general subject does not extend
beyond the power to coin money, regulate the value thereof and of
foreign coin.
Express power is also conferred upon congress to fix the standard of
weights and measures, and of course that standard, as applied to future
transactions, may be varied or changed to promote the public interest,
but the grant of power in respect to the standard of value is expressed
in more guarded language, and the grant is much more restricted.
Power to fix the standard of weights and measures is evidently a power
of comparatively wide discretion, but the power to regulate the value of
the money authorized by the constitution to be coined is a definite and
precise grant of power, admitting of very little discretion in its
exercise, and is not equivalent, except to a very limited extent, to the
power to fix the standard of weights and measures, as the money
authorized by that clause of the constitution is coined money, and as a
necessary consequence must be money of actual value, fabricated from the
precious metals generally used for that purpose at the period when the
constitution was framed.
Coined money, such as is authorized by that clause of the instrument,
consists only of the coins of the United States fabricated and stamped
by authority of law, and is the same money as that described in the next
clause of the same section as the current coins of the United States,
and is the same money also as "the gold and silver coins" described in
the tenth section of the same article, which prohibits the states from
coining money, emitting bills of credit, or making "anything but gold
and silver coin a tender in payment of debts."
Intrinsic value exists in gold and silver, as well before as after it is
fabricated and stamped as coin, which shows conclusively that the
principal discretion vested in congress under that clause of the
constitution consists in the power to determine the denomination,
fineness, or value and description of the coins to be struck, and the
relative proportion of gold or silver, whether standard or pure, and the
proportion of alloy to be used in minting the coins, and to prescribe
the mode in which the intended object of the grant shall be accomplished
and carried into practical effect.
Discretion, to some extent, in prescribing the value of the coins
minted, is beyond doubt vested in congress, but the plain intent of the
constitution is that congress, in determining that matter, shall be
governed chiefly by the weight and intrinsic value of the coins, as it
is clear that if the stamped value of the same should much exceed the
real value of gold and silver not coined, the minted coins would
immediately cease to be either current coins or a standard of value as
contemplated by the constitution. Commercial transactions imperiously
require a standard of value, and the commercial world, at a very early
period in civilization, adopted gold and silver as the true standard for
that purpose, and the standard originally adopted has ever since
continued to be so regarded by universal consent to the present time.
Paper emissions have, at one time or another, been authorized and
employed as currency by most commercial nations, and by no government,
past or present, more extensively than by the United States, and yet it
is safe to affirm that all experience in its use as a circulating medium
has demonstrated the proposition that it cannot by any legislation,
however stringent, be made a standard of value or the just equivalent of
gold and silver. Attempts of the kind have always failed, and no body
of men, whether in public or private stations, ever had more instructive
teachings of the truth of that remark than the patriotic men who framed
the federal constitution, as they had seen the power to emit bills of
credit freely exercised during the war of the Revolution, not only by
the confederation, but also by the states, and knew from bitter
experience its calamitous effects and the utter worthlessness of such a
circulating medium as a standard of value. Such men so instructed could
not have done otherwise than they did do, which was to provide an
irrepealable standard of value, to be coined from gold and silver,
leaving as little upon the subject to the discretion of congress as was
consistent with a wise forecast and an invincible determination that the
essential principles of the constitution should be perpetual as the
means to secure the blessings of liberty to themselves and their
posterity.
Associated as the grant to coin money and regulate the value thereof is
with the grant to fix the standard of weights and measures, the
conclusion, when that fact is properly weighed in connection with the
words of the grant, is irresistible that the purpose of the framers of
the constitution was to provide a permanent standard of value which
should, at all times and under all circumstances, consist of coin,
fabricated and stamped, from gold and silver, by authority of law, and
that they intended at the same time to withhold from congress, as well
as from the States, the power to substitute any other money as a
standard of value in matters of finance, business, trade, or commerce.
Support to that view may also be drawn from the last words of the clause
giving congress the unrestricted power to regulate the value of foreign
coin, as it would be difficult if not impossible to give full effect to
the standard of value prescribed by the constitution, in times of
fluctuation, if the circulating medium could be supplied by foreign
coins not subject to any congressional regulation as to their value.
Exclusive power to regulate the alloy and value of the coin struck by
their own authority, or by the authority of the states, was vested in
congress under the confederation, but the congress was prohibited from
enacting any regulation as to the value of the coins unless nine states
assented to the proposed regulation.
Subject to the power of congress to pass such regulations it is
unquestionably true that the states, under the confederation as well as
the United States, possessed the power to coin money, but the
constitution, when it was adopted, denied to the states all authority
upon the subject, and also ordained that they should not make anything
but gold and silver coin a tender in payment of debts.
Beyond all doubt the framers of the constitution intended that the money
unit of the United States, for measuring values, should be one dollar,
as the word dollar in the plural form is employed in the body of the
constitution, and also in the seventh amendment, recommended by congress
at its first session after the constitution was adopted. Two years
before that, to-wit, July 6, 1785, the congress of the confederation
enacted that the money unit of the United States should "be one dollar,"
and one year later, to-wit, August 8, 1786, they established the
standard for gold and silver, and also provided that the money of
account of the United States should correspond with the coins
established by law.
On the 4th of March, 1789, congress first assembled under the
constitution, and proceeded without unnecessary delay to enact such laws
as were necessary to put the government in operation which the
constitution had ordained and established. Ordinances had been passed
during the confederation to organize the executive departments, and for
the establishment of a mint, but the new constitution did not perpetuate
any of those laws, and yet congress continued to legislate for a period
of three years before any new law was passed prescribing the money unit
or the money of account, either for "the public offices" or for the
courts. Throughout that period it must have been understood that those
matters were impliedly regulated by the constitution, as tariffs were
enacted, tonnage duties imposed, laws passed for the collection of
duties, the several executive departments created, and the judiciary of
the United States organized and empowered to exercise full jurisdiction
under the constitution.
Duties of tonnage and import duties were required, by the act of the
31st of July, 1789, to be paid "in gold and silver coin," and congress,
in the same act, adopted comprehensive regulations as to the value of
foreign coin, but no provision was made for coining money or for a
standard of value, except so far as that subject is involved in the
regulation as to the value of foreign coin, or for a money unit, nor was
any regulation prescribed as to the money of account. Revenue for the
support of the government, under those regulations, was to be derived
solely from duties of tonnage and import duties, and the express
provision was that those duties should be collected in gold and silver
coin.
Legislation under the constitution had proceeded thus far before the
treasury department was created. Treasury regulations for the
collection, safe-keeping, and disbursement of the public moneys became
indispensable, and congress, on the 2d September, 1789, passed the act
to establish the treasury department, which has ever since remained in
force. By that act, the secretary of the treasury is declared to be the
head of the department, and it is made his duty, among other things, to
digest and prepare plans for the improvement and management of the
public finances and for the support of the public credit; to prepare and
report estimates of the public revenue and of the public expenditures;
to superintend the collection of the revenue; to prescribe forms of
keeping and stating accounts and for making returns; to grant all
warrants for moneys to be issued from the treasury, in pursuance of
appropriations by law, and to perform all such services relative to the
finances as he shall be directed to perform.
Moneys collected from duties of tonnage and from import duties
constituted at that period the entire resources of the national
treasury, and the antecedent act of congress, providing for the
collection of those duties, imperatively required that all such duties
should be paid in gold and silver coin, from which it follows that the
moneys mentioned in the act creating the treasury department were moneys
of gold and silver coin which were collected as public revenue from the
duties of tonnage and import duties imposed by the before-mentioned
prior acts of congress. Appropriations made by congress were understood
as appropriations of moneys in the treasury, and all warrants issued by
the secretary of the treasury were understood to be warrants for the
payment of gold and silver coin. Forms for keeping and stating accounts,
and for making returns, and for warrants for moneys to be issued from
the treasury were prescribed, and in all those forms the secretary of
the treasury adopted the money unit recognized in the constitution, and
which had been ordained four years before by the congress of the
confederation.
Argument to show that the national treasury was organized on the basis
that the gold and silver coins of the United States were to be the
standard of value is unnecessary, as it is a historical fact which no
man or body of men can ever successfully contradict. Public attention
had been directed to the necessity of establishing a mint for the
coinage of gold and silver, several years before the convention met to
frame the constitution, and a committee was appointed by the congress of
the confederation to consider and report upon the subject. They reported
on the 21st February, 1782, more than a year before the treaty of peace,
in favor of creating such an establishment, and on the 16th of October,
1786, the congress adopted an ordinance providing that a mint should be
established for the coinage of gold, silver, and copper, agreeable to
the resolves of congress previously mentioned, which prescribed the
standard of gold and silver, and recognized the money unit established
by the resolves passed in the preceding year.
Congressional legislation organizing the new government had now
progressed to the point where it became necessary to re-examine that
subject and to make provision for the exercise of the power to coin
money, as authorized by the constitution. Pursuant to that power,
congress, on April 2d, 1792, passed the act establishing a mint for the
purpose of a national coinage, and made provisions, among other things,
that coins of gold and silver, of certain fineness and weight, and of
certain denominations, value, and descriptions, should be from time to
time struck and coined at the said mint. Specific provision is there
made for coining gold and silver coins, as follows: First, gold coins,
to-wit: Eagles of the value of ten dollars or units; half-eagles of the
value of five dollars; quarter-eagles of the value of two and a half
dollars, the act specifying in each case the number of grains and
fractions of a grain the coin shall contain, whether fabricated from
pure or standard gold. Second, silver coins, to-wit; "DOLLARS OR UNITS,"
each to contain 371 grains and 4/16ths parts of a grain of pure silver,
or 416 grains of standard silver. Like provision is also made for the
coinage of half-dollars, quarter-dollars, dimes, and half-dimes, and
also for the coinage of certain copper coins, but it is not necessary to
enter much into those details in this case.
Provision, it must be conceded, is not there made, in express terms,
that the money unit of the United States shall be one dollar, as in the
ordinance passed during the confederation, but the act under
consideration assumes throughout that the coin called dollar is the coin
employed for that purpose, as is obvious from the fact that the words
dollars and units are treated as synonymous, and that all the gold coins
previously described in the same section are measured by that word as
the acknowledged money unit of the constitution. Very strong doubts are
entertained whether an act of congress is absolutely necessary to
constitute the gold and silver coins of the United States, fabricated
and stamped as such by the proper executive officers of the mint, a
legal tender in payment of debts. Constituted, as such coins are, by the
constitution, the standard of value, the better opinion would seem to be
that they become legal tender for that purpose, if minted of the
required weight and fineness, as soon as they are coined and put in
circulation by lawful authority, but it is unnecessary to decide that
question in this case, as the congress, by the 16th section of the act
establishing a mint, provided that all the gold and silver coins which
shall have been struck at, and issued from, the said mint shall be a
lawful tender in all payments whatsoever--those of full weight
"according to the respective values herein declared, and those of less
than full weight at values proportioned to their respective weights."
Such a regulation is at all events highly expedient, as all experience
shows that even gold and silver coins are liable to be diminished in
weight by wear and abrasion, even if it is not absolutely necessary in
order to constitute the coins, if of full weight, a legal tender.
Enough has already been remarked to show that the money unit of the
United States is the coined dollar, described in the act establishing
the mint, but if more be wanted it will be found in the twentieth
section of that act, which provides that the money of account of the
United States shall be expressed in dollars or units, dimes or tenths,
&c., and that all accounts in the public offices, and all proceedings in
the federal courts, shall be kept and had in conformity to that
regulation.
Completed, as the circle of measures adopted by congress were, to put
the new government into successful operation, by the passage of that
act, it will be instructive to take a brief review of the important
events which occurred within the period of ten years next preceding its
passage, or of the ten years next following the time when that measure
was first proposed in the congress of the confederation. Two reasons
suggest the 21st of February, 1782, as the time to commence the review,
in addition to the fact that it was on that day that the committee of
congress made their report approving of the project to establish a
national mint. They are as follows: (1) Because that date just precedes
the close of the war of the Revolution; and (2) because the date at the
same time extends back to a period when all America had come to the
conclusion that all the paper currency in circulation was utterly
worthless, and that nothing was fit for a standard of value but gold and
silver coin fabricated and stamped by the national authority. Discussion
upon the subject was continued, and the ordinance was passed, but the
measure was not put in operation, as the convention met the next year,
and the constitution was framed, adopted, and ratified, the president
and the members of congress were elected, laws were passed, the judicial
system was organized, the executive departments were created, the
revenue system established, and provision was made to execute the power
vested in congress to coin money and provide a standard of value, as
ordained by the constitution.
Perfect consistency characterizes the measures of that entire period in
respect to the matter in question, and it would be strange if it had
been otherwise, as the whole series of measures were to a very large
extent the doings of the same class of men, whether the remark is
applied to the old congress, or the convention which framed the
constitution, or to the first and second sessions of the new congress,
which passed the laws referred to and put the new system of government
under the constitution into full operation. Wise and complete as those
laws were, still some difficulties arose, as the several states had not
adopted the money unit of the United States, nor the money of account
prescribed by the twentieth section of the act establishing the mint.
Such embarrassments, however, were chiefly felt in the federal courts,
and they were not of long continuance, as the several states, one after
another, in pretty rapid succession, adopted the new system established
by congress both as to the money unit and the money of account.
Virginia, December 19th, 1792, re-enacted that section in the act of
congress without any material alteration, and New Hampshire, on the 20th
of February, 1794, passed a similar law. Massachusetts adopted the same
provision the next year, and so did Rhode Island and South Carolina.
Georgia concurred on the 22d of February, 1796, and New York on the 27th
of January, 1797, and all the other states adopted the same regulation
in the course of a few years. State concurrence was essential in those
particulars to the proper working of the new system, and it was
cheerfully accorded by the state legislatures without unnecessary delay.
Congress established as the money unit the coin mentioned in the
constitution, and the one which had been adopted as such seven years
before in the resolve passed by the congress of the confederation.
Dollars, and decimals of dollars, were adopted as the money of account
by universal consent, as may be inferred from the unanimity exhibited by
the states in following the example of congress. Nothing remained for
congress to do to perfect the new system but to execute the power to
coin money and regulate the value thereof, as it is clear that the
constitution makes no provision for a standard of value unless the power
to establish it is conferred by that grant.
Power to fix the standard of weights and measures is vested in congress
by the constitution in plain and unambiguous terms, and it was never
doubted, certainly not until within a recent period, that the power
conferred to coin money or to fabricate and stamp coins from gold and
silver, which in the constitutional sense is the same thing, together
with the power to determine the fineness, weight, and denominations of
the moneys coined, was intended to accomplish the same purpose as to
values. Indubitably it was so understood by congress in prescribing the
various regulations contained in the act establishing the national mint,
and it continued to be so understood by all branches of the
government--executive, legislative, and judicial--and by the whole
people of the United States, for the period of seventy years from the
passage of that act.
New regulations became necessary, and were passed in the meantime,
increasing slightly the proportion of alloy used in fabricating the gold
coins, but if those enactments are carefully examined, it will be found
that no one of them contains anything inconsistent in principle with the
views here expressed. Gold, at the time the act establishing the mint
became a law, was valued 15 to 1 as compared with silver, but the
disparity in value gradually increased, and to such an extent that the
gold coins began to disappear from circulation, and, to remedy that
evil, congress found it necessary to augment the _relative_ proportion
of alloy by diminishing the required amount of gold, whether pure or
standard. Eagles coined under that act were required to contain each two
hundred and thirty-two grains of pure gold, or two hundred and
fifty-eight grains of standard. Three years later congress enacted that
the standard for both gold and silver coins should thereafter be such
that, of one thousand parts by weight, nine hundred should be of pure
metal and one hundred of alloy, by which the gross weight of the dollar
was reduced to four hundred and twelve and a half grains, but the
fineness of the coins was correspondingly increased, so that the money
unit remained of the same intrinsic value as under the original act.
Apply that rule to the eagle, and it will be seen that its gross weight
would be increased, as it was in fact by that act, but it continued to
contain, as under the preceding act, two hundred and thirty grains of
pure gold and no more, showing conclusively that no change was made in
the value of the coins.
Double eagles and gold dollars were authorized to be "struck and coined"
at the mint, by the act of March 3, 1849, but the standard established
for other gold coins was not changed, and the provision was that the new
coins should also be legal tender for their coined value.
Fractional silver coins were somewhat reduced in value by the act of
February 21st, 1853, but the same act provided to the effect that the
silver coins issued in conformity thereto should not be a legal tender
for any sum exceeding five dollars, showing that the purpose of the
enactment was to prevent the fractional coins, so essential for daily
use, from being hoarded or otherwise withdrawn from circulation.
Suppose it be conceded, however, that the effect of that act was
slightly to debase the fractional silver coins struck and coined under
it, still it is quite clear that the amount was too inconsiderable to
furnish any solid argument against the proposition that the standard of
value in the United States was fixed by the constitution, and that such
was the understanding, both of the government and of the people of the
United States, for a period of more than seventy years from the time the
constitution was adopted and put in successful operation under the laws
of congress. Throughout that period the value of the money unit was
never diminished, and it remains to-day, in respect to value, what it
was when it was defined in the act establishing the mint, and it is safe
to affirm that no one of the changes made in the other coins, except
perhaps the fractional silver coins, ever extended one whit beyond the
appropriate limit of constitutional regulation.
Treasury notes, called United States notes, were authorized to be issued
by the act of February 25th, 1862, to the amount of $150,000,000, on the
credit of the United States, but they were not to bear interest, and
were to be made payable to bearer at the treasury. They were to be
issued by the secretary of the treasury, and the further provision was
that the notes so issued should be lawful money and legal tender in
payment of all debts, public and private, within the United States,
except duties on imports and interest upon bonds and notes of the United
States, which the act provides "shall be paid in coin." Subsequent acts
passed for a similar purpose also except "certificates of indebtedness
and of deposit," but it will not be necessary to refer specially to the
other acts, as the history of that legislation is fully given in the
prior decision of this court upon the same subject.
Strictly examined it is doubtful whether either of the cases before the
court present any such questions as those which have been discussed in
the opinion of the majority of the court just read; but suppose they do,
which is not admitted, it then becomes necessary to inquire in the first
place whether those questions are not closed by the recorded decisions
of this court. Two questions are examined in the opinion of the majority
of the court: (1.) Whether the legal tender acts are constitutional as
to contracts made before the acts were passed. (2.) Whether they are
valid if applied to contracts made since their passage.
Assume that the views here expressed are correct, and it matters not
whether the contract was made before or after the act of congress was
passed, as it necessarily follows that congress cannot, under any
circumstances, make paper promises, of any kind, a legal tender in
payment of debts. Prior to the decision just pronounced it is conceded
that the second question presented in the record was never determined by
this court, except as it is involved in the first question, but it is
admitted by the majority of the court that the first question, that is
the question whether the acts under consideration are constitutional as
to contracts made before their passage, was fully presented in the case
of _Hepburn_ v. _Griswold_, and that the court decided that an act of
congress making mere paper promises to pay dollars a legal tender in
payment of debts previously contracted is unconstitutional and void.
Admitted or not, it is as clear as anything in legal decision can be
that the judgment of the court in that case controls the first question
presented in the cases before the court, unless it be held that the
judgment in that case was given for the wrong party and that the opinion
given by the chief justice ought to be overruled.
Attempt is made to show that the second question is an open one, but the
two, in my judgment, involve the same considerations, as congress
possesses no other power upon the subject than that which is derived
from the grant to coin money, regulate the value thereof and of foreign
coin. By that remark it is not meant to deny the proposition that
congress in executing the express grants may not pass all laws which
shall be necessary and proper for carrying the same into execution, as
provided in another clause of the same section of the constitution. Much
consideration of that topic is not required, as the discussion was
pretty nearly exhausted by the chief justice in the case of _Hepburn_ v.
_Griswold_, which arose under the same act and in which he gave the
opinion. In that case the contract bore date prior to the passage of the
law, and he showed conclusively that it could never be necessary and
proper, within the meaning of the constitution, that congress, in
executing any of the express powers, should pass laws to compel a
creditor to accept paper promises as fulfilling a contract for the
payment of money expressed in dollars. Obviously the decision was
confined to the case before the court, but I am of the opinion that the
same rule must be applied whether the contract was made before or after
the passage of the law, as the contract for the payment of money,
expressed in dollars, is a contract to make the payment in such money as
the constitution recognizes and establishes as a standard of value.
Money values can no more be measured without a standard of value than
distances without a standard of extent, or quantities without a standard
of weights or measures, and it is as necessary that there should be a
money unit as that there should be a unit of extent, or of weight, or
quantity.
Credit currency, whether issued by the states or the United States, or
by private corporations or individuals, is not recognized by the
constitution as the standard of value, nor can it be made such by any
law which congress or the states can pass, as the laws of trade are
stronger than any legislative enactment. Commerce requires a standard of
value, and all experience warrants the prediction that commerce will
have it, whether the United States agree or disagree, as the laws of
commerce in that respect are stronger than the laws of any single nation
of the commercial world. Values cannot be measured without a standard
any more than time or duration, or length, surface, or solidity, or
weight, gravity, or quantity. Something in every such case must be
adopted as a unit which bears a known relation to that which is to be
measured, as the dollar for values, the hour for time or duration, the
foot of twelve inches for length, the yard for cloth measure, the square
foot or yard for surface, the cubic foot for solidity, the gallon for
liquids, and the pound for weights; the pound avoirdupois being used in
most commercial transactions and the pound troy "for weighing gold and
silver and precious stones, except diamonds."
Unrestricted power "to fix the standard of weights and measures" is
vested in congress, but until recently congress had not enacted any
general regulations in execution of that power. Regulations upon the
subject existed in the states at the adoption of the constitution, the
same as those which prevailed at that time in the parent country, and
Judge Story says that the understanding was that those regulations
remained in full force, and that the states, until congress should
legislate, possessed the power to fix their own weights and measures.
Power to coin money and regulate the value of domestic and foreign coin
was vested in the national government to produce uniformity of value and
to prevent the embarrassments of a perpetually fluctuating and variable
currency.
Money, says the same commentator, is the universal medium _or common
standard_ by a comparison with which the value of all merchandise may be
ascertained; and he also speaks of it as "a sign which represents the
respective values of all other commodities." Such a power, that is the
power to coin money, he adds, is one of the ordinary prerogatives of
sovereignty, and is almost universally exercised in order to preserve a
proper circulation of good coin, of a known value, in the home market.
Interests of such magnitude and pervading importance as those involved
in providing for a uniform standard of value throughout the Union were
manifestly entitled to the protection of the national authority, and in
view of the evils experienced for the want of such a standard during the
war of the revolution, when the country was inundated with floods of
depreciated paper, the members of the convention who framed the
constitution did not hesitate to confide the power to congress, not only
to coin money and regulate the value thereof, but also the power to
regulate the value of foreign coin, which was denied to the congress of
the confederation.
Influenced by these considerations and others expressed in the opinion
of the chief justice, this court decided in the case referred to, that
the act of congress making the notes in question "lawful money and a
legal tender in payment of debts" could not be vindicated as necessary
and proper means for carrying into effect the power vested in congress
to coin money and regulate the value thereof, or any other express power
vested in congress under the constitution. Unless that case, therefore,
is overruled, it is clear, in my judgment, that both the cases before
the court are controlled by that decision. Controversies determined by
the supreme court are finally and conclusively settled, as the decisions
are numerous that the court cannot review and reverse their own
judgments.
But where the parties are different, it is said the court, in a
subsequent case, may overrule a former decision, and it must be admitted
that the proposition, in a technical point of view, is correct. Such
examples are to be found in the reported decisions of the court, but
they are not numerous, and it seems clear that the number ought never to
be increased, especially in a matter of so much importance, unless the
error is plain and upon the clearest convictions of judicial duty.
Judgment was rendered for the plaintiff in that case on the 17th of
September, 1864, in the highest court of the state, and on the 23d of
June in the succeeding year the defendants sued out a writ of error, and
removed the cause into this court for re-examination. Under the regular
call of the docket, the case was first argued at the December term,
1867, but at the suggestion of the attorney general an order was passed
that it be re-argued, and the case was accordingly continued for that
purpose. Able counsel appeared at the next term, and it was again
elaborately argued on both sides. Four or five other cases were also on
the calendar, supposed at that time to involve the same constitutional
questions, and those cases were also argued, bringing to the aid of the
court an unusual array of counsel of great learning and eminent
abilities. Investigation and deliberation followed, authorities were
examined, and oft-repeated consultations among the justices ensued, and
the case was held under advisement as long as necessary to the fullest
examination by all the justices of the court, before the opinion of the
court was delivered. By law, the supreme court at that time consisted
of the chief justice and seven associate justices, the act of congress
having provided that no vacancy in the office of associate justice
should be filled until the number should be reduced to six. Five of the
number, including the chief justice, concurred in the opinion in that
case, and the judgment of the state court was affirmed, three of the
associate justices dissenting. Since that time one of the justices who
concurred in that opinion of the court has resigned, and congress having
increased the number of associate justices to eight, the two cases
before the court have been argued, and the result is that the opinion
delivered in the former case is overruled, five justices concurring in
the present opinion and four dissenting. Five justices concurred in the
first opinion, and five have overruled it. Persuaded that the first
opinion was right, for the reasons already assigned, it is not possible
that I should concur in the second, even if it were true that no other
reasons of any weight could be given in support of the judgment in the
first case, and that the conclusion there reached must stand or fall
without any other support. Many other reasons, however, may be invoked
to fortify that conclusion, equally persuasive and convincing with those
to which reference has been made.
All writers upon political economy agree that money is the universal
standard of value, and the measure of exchange, foreign and domestic,
and that the power to coin and regulate the value of money is an
essential attribute of national sovereignty. Goods and chattels were
directly bartered, one for another, when the division of labor was first
introduced, but gold and silver were adopted to serve the purpose of
exchange by the tacit concurrence of all nations at a very early period
in the history of commercial transactions. Commodities of various kinds
were used as money at different periods in different countries, but
experience soon showed the commercial nations that gold and silver
embodied the qualities desirable in money in a much greater degree than
any other known commodity or substance. Daily experience shows the truth
of that proposition, and supersedes the necessity of any remarks to
enforce it, as all admit that a commodity to serve as a standard of
value and a medium of exchange must be easily divisible into small
portions; that it must admit of being kept for an indefinite period
without deteriorating; that it must possess great value in small bulk,
and be capable of being easily transported from place to place; that a
given denomination in money should always be equal in weight and
quality, or fineness, to other pieces of money of the same denomination,
and that its value should be the same or as little subject to variation
as possible. Such qualities, all agree, are united in a much greater
degree in gold and silver than in any other known commodity, which was
as well known to the members of the convention who framed the
constitution as to any body of men since assembled, and intrusted to any
extent with the public affairs. They not only knew that the money of the
commercial world was gold and silver, but they also knew, from bitter
experience, that paper promises, whether issued by the states or the
United States, were utterly worthless as a standard of value for any
practical purpose.
Evidence of the truth of these remarks, of the most convincing character
is to be found in the published proceedings of that convention. Debate
upon the subject first arose when an amendment was proposed to prohibit
the states from emitting bills of credit or making anything but gold and
silver coin a tender in payment of debts, and from the character of that
debate, and the vote on the amendment, it became apparent that paper
money had but few, if any friends in the convention. Article seven of
the draft of the constitution as reported to the convention, contained
the clause, "and emit bills on the credit of the United States,"
appended to the grant of power vested in congress to borrow money, and
it was on the motion to strike out that clause that the principal
discussion in respect to paper money took place. Mr. Madison inquired if
it would not be sufficient to prohibit the making such bills a tender,
as that would remove the temptation to emit them with unjust views.
Promissory notes, he said, in that shape, that is when not a tender,
"may in some emergencies be best." Some were willing to acquiesce in the
modification suggested by Mr. Madison, but Mr. Morris, who submitted the
motion, objected, insisting that if the motion prevailed there would
still be room left for the notes of a responsible minister, which, as he
said, "would do all the good without the mischief." Decided objections
were advanced by Mr. Ellsworth, who said he thought the moment a
favorable one "to shut and bar the door against paper money;" and others
expressed their opposition to the clause in equally decisive language,
even saying that they would sooner see the whole plan rejected than
retain the three words, "and emit bills." Suffice it to say, without
reproducing the discussion, that the motion prevailed--nine states to
two--and the clause was stricken out and no attempt was ever made to
restore it. Paper money, as legal tender, had few or no advocates in the
convention, and it never had more than one open advocate throughout the
period the constitution was under discussion, either in the convention
which framed it, or in the conventions of the states where it was
ratified. Virginia voted in the affirmative on the motion to strike out
that clause, Mr. Madison being satisfied that if the motion prevailed it
would not have the effect to disable the government from the use of
treasury notes, and being himself in favor of cutting "_off the pretext
for a paper currency, and particularly for making the bills a tender,
either for public or private debts_." When the draft for the
constitution was reported the clause prohibiting the states from making
anything but gold and silver a tender in payment of debts contained an
exception, "in case congress consented," but the convention struck out
the exception and made the prohibition absolute, one of the members
remarking that it was a favorable moment to crush out paper money, and
all or nearly all of the convention seemed to concur in the sentiment.
Contemporaneous acts are certainly evidence of intention, and if so, it
is difficult to see what more is needed to show that the members of that
convention intended to withhold from the states, and from the United
States, all power to make anything but gold and silver a standard of
value, or a tender in payment of debts. Equally decisive proof to the
same effect is found in the debates which subsequently occurred in the
conventions of the several states, to which the constitution, as
adopted, was submitted for ratification. Mr. Martin thought that the
states ought not to be totally deprived of the right to emit bills of
credit, but he says "that the convention was so smitten with the paper
money dread that they insisted that the prohibition should be absolute."
Currency is a word much more comprehensive than the word money, as it
may include bank bills and even bills of exchange as well as coins of
gold and silver, but the word money, as employed in the grant of power
under consideration, means the coins of gold and silver, fabricated and
stamped as required by law, which, by virtue of their intrinsic value,
as universally acknowledged, and their official origin, become the
medium of exchange and the standard by which all other values are
expressed and discharged. Support to the proposition that the word
money, as employed in that clause, was intended to be used in the sense
here supposed is also derived from the language employed in certain
numbers of the Federalist, which, as is well known, were written and
published during the period the question whether the states would ratify
the constitution was pending in their several conventions. Such men as
the writers of those essays never could have employed such language if
they had entertained the remotest idea that congress possessed the power
to make paper promises a legal tender.
Like support is also derived from the language of Mr. Hamilton in his
celebrated report recommending the incorporation of a national bank. He
first states the objection to the proposed measure, that banks tend to
banish the gold and silver of the country; and secondly he gives the
answer to that objection made by the advocates of the bank, that it is
immaterial what serves the purpose of money, and then says that the
answer is not entirely satisfactory, as the permanent increase or
decrease of the precious metals in a country can hardly ever be a matter
of indifference. "As the commodity taken in lieu of every other, it
(coin) is a species of the most effective wealth, and as the money of
the world it is of great concern to the state that it possesses a
sufficiency of it to face any demands which the protection of its
external interests may create." He favored the incorporation of a
national bank, with power to issue bills and notes _payable on demand in
gold and silver_, but he expressed himself as utterly opposed to paper
emissions by the United States, characterizing them as so liable to
abuse and even so certain of being abused that the government ought
never to trust itself "with the use of so seducing and dangerous an
element." Opposed as he was to paper emissions by the United States,
under any circumstances, it is past belief that he could ever have
concurred in the proposition to make such emissions a tender in payment
of debts, either as a member of the convention which framed the
constitution or as the head of the treasury department. Treasury notes,
however, have repeatedly been authorized by congress, commencing with
the act of 30th of June, 1812, but it was never supposed before the time
when the several acts in question were passed that congress could make
such notes a legal tender in payment of debts. Such notes, it was
enacted, should be received in payment of all duties and taxes laid, and
in payment for public lands sold by the Federal authority. Provision was
also made in most or all of the acts that the secretary of the treasury,
with the approbation of the president, might cause treasury notes to be
issued, at the par value thereof, in payment of services, of supplies,
or of debts for which the United States were or might be answerable by
law, to such person or persons as should be _willing to accept the same_
in payment, but it never occurred to the legislators of that day that
such notes could be made a legal tender in discharge of such
indebtedness, or that the public creditor could be compelled to accept
them in payment of his just demands.
Financial embarrassments, second only in their disastrous consequences
to those which preceded the adoption of the constitution, arose towards
the close of the last war with Great Britain, and it is matter of
history that those embarrassments were too great and pervading to be
overcome by the use of treasury notes or any other paper emissions
without a specie basis. Expedients of various kinds were suggested, but
it never occurred either to the executive or to congress that a remedy
could be found by making treasury notes, as then authorized, a legal
tender, and the result was that the second bank of the United States was
incorporated. Paper currency, it may be said, was authorized by that
act, which is undoubtedly true; and it is also true that the bills or
notes of the bank were made receivable in all payments to the United
States, if the same were at the time payable on demand, but the act
provided that the corporation should not refuse, under a heavy penalty,
the payment in gold and silver, of any of its notes, bills, or
obligations, nor of any moneys received upon deposit in the bank or in
any of its offices of discount and deposit.
Serious attempt is made, strange to say, to fortify the proposition that
the acts in question are constitutional from the fact that congress, in
providing for the use of treasury notes, and in granting the charters to
the respective national banks, made the notes and bills receivable in
payment of duties and taxes, but the answer to the suggestion is so
obvious that it is hardly necessary to pause to suggest its refutation.
Creditors may exact gold and silver or they may waive the right to
require such money, and accept credit currency, or commodities, other
than gold and silver, and the United States, as creditors, or in the
exercise of their express power to lay and collect taxes, duties,
imposts, and excises, may, if they see fit, accept the treasury notes or
bank bills in such payments as substitutes for the constitutional
currency. Further discussion of the proposition is unnecessary, as it is
plainly destitute of any merit whatever.
Resort was also had to treasury notes in the revulsion of 1837, and
during the war with Mexico, and also in the great revulsion of 1857, but
the new theory that congress could make treasury notes a legal tender
was not even suggested, either by the president or by any member of
congress.
Seventy years are included in this review, even if the computation is
only carried back to the passage of the act establishing the mint, and
it is clear that there is no trace of any act, executive or legislative,
within that period, which affords the slightest support to the new
constitutional theory that congress can by law constitute paper
emissions a tender in payment of debts. Even Washington, the father of
our country, refused to accept paper money in payment of debts,
contracted before the war of independence, and the proof is full to the
point that Hamilton, as well as Jefferson and Madison, was opposed to
paper emissions by the national authority.
Sufficient also is recorded in the reports of the decisions of this
court to show that the court, from the organization of the judicial
system to the day when the judgments in the cases before the court were
announced, held opinions utterly opposed to such a construction of the
constitution as would authorize congress to make paper promises a legal
tender as between debtor and creditor. Throughout that period the
doctrine of the court has been, and still is, unless the opinion of the
court just read constitutes an exception, that the government of the
United States, as ordained and established by the constitution, is a
government of enumerated powers; that all the powers not delegated to
the United States by the constitution, nor prohibited by it to the
states, are reserved to the states respectively or to the people; that
every power vested in the Federal government under the constitution is
in its nature sovereign, and that congress may pass all laws necessary
and proper to carry the same into execution, or, in other words, that
the power being sovereign includes, by force of the term, the requisite
means, fairly applicable to the attainment of the contemplated end,
which are not precluded by restrictions or exceptions expressed or
necessarily implied, and not contrary to the essential ends of political
society.
Definitions slightly different have been given by different jurists to
the words "necessary and proper," employed in the clause of the
constitution conferring upon congress the power to pass laws for
carrying the express grants of power into execution, but no one ever
pretended that a construction or definition could be sustained that the
general clause would authorize the employment of such means in the
execution of one express grant as would practically nullify another or
render another utterly nugatory. Circumstances made it necessary that
Mr. Hamilton should examine that phrase at a very early period after the
constitution was adopted, and the definition he gave to it is as
follows: "All the means requisite and fairly applicable to the
attainment of the end of such power which are not precluded by
restrictions and exceptions specified in the constitution, and not
contrary to the essential ends of political society." Twenty-five years
later the question was examined by the supreme court and authoritatively
settled, the chief justice giving the opinion. His words were: "Let the
end be legitimate, let it be within the scope of the constitution, and
all means which are appropriate, which are plainly adapted to that end,
and which are not prohibited but consistent with the letter and spirit
of the constitution, are constitutional."
Substantially the same definition was adopted by the present chief
justice in the former case, in which he gave the opinion of the court,
and there is nothing contained in the Federal reports giving the
slightest sanction to any broader definition of those words. Take the
definition given by Mr. Hamilton, which, perhaps, is the broadest, if
there is any difference, and still it is obvious that it would give no
countenance whatever to the theory that congress, in passing a law to
execute one express grant of the constitution, could authorize means
which would nullify another express grant, or render it nugatory for the
attainment of the end which the framers of the constitution intended it
should accomplish.
Authority to coin money was vested in congress to provide a permanent
national standard of value, everywhere the same, and subject to no
variation except what congress shall make under the power to regulate
the value thereof, and it is not possible to affirm, with any hope that
the utterance will avail in the argument, that the power to coin money
is not an express power, and if those premises are conceded it cannot be
shown that congress can so expand any other express power by implication
as to nullify or defeat the great purposes which the power to coin money
and establish a standard of value was intended to accomplish.
Government notes, it is conceded, may be issued as a means of borrowing
money, because the act of issuing the notes may be, and often is, a
requisite means to execute the granted power, and being fairly
applicable to the attainment of the end, the notes, as means, may be
employed, as they are not precluded by any restrictions or exceptions,
and are not repugnant to any other express grant contained in the
constitution. Light-houses, buoys, and beacons may be erected under the
power to regulate commerce, but congress cannot authorize an officer of
the government to take private property for such a purpose without just
compensation, as the exercise of such a power would be repugnant to the
fifth amendment. Power to lay and collect taxes is conferred upon
congress, but the congress cannot tax the salaries of the state judges,
as the exercise of such a power is incompatible with the admitted power
of the states to create courts, appoint judges, and provide for their
compensation.
Congress may also impose duties, imposts, and excises to pay the debts
and provide for the common defence and general welfare, but the congress
cannot lay any tax or duty on articles exported from any state, nor can
congress give any preference by any regulation of commerce or revenue to
the ports of one state over those of another, as the exercise of any
such power is prohibited by the constitution. Exclusive power is vested
in congress to declare war, to raise and support armies, to provide and
maintain a navy, and to make rules for the government and regulation of
the land and naval forces. Appropriations to execute those powers may be
made by congress, but no appropriations of money to that use can be made
for a longer term than two years, as an appropriation for a longer term
is expressly prohibited by the same clause which confers the power to
raise and support armies. By virtue of those grants of power congress
may erect forts and magazines, may construct navy-yards and dock-yards,
manufacture arms and munitions of war, and may establish depots and
other needful buildings for their preservation, but the congress cannot
take private property for that purpose without making compensation to
the owner, as the constitution provides that private property shall not
be taken for public use without just compensation.
Legislative power under the constitution can never be rightfully
extended to the exercise of a power not granted nor to that which is
prohibited, and it makes no difference whether the prohibition is
express or implied, as an implied prohibition, when once ascertained, is
as effectual to negative the right to legislate as one that is
expressed; the rule being that congress, in passing laws to carry the
express powers granted into execution, cannot select any means as
requisite for that purpose or as fairly applicable to the attainment of
the end, which are precluded by restrictions or exceptions contained in
the constitution, or which are contrary to the essential ends of
political society.
Concede these premises, and it follows that the acts of congress in
question cannot be regarded as valid unless it can be held that the
power to make paper emissions a legal tender in payment of debts can
properly be implied from the power to coin money, and that such
emissions, when enforced by such a provision, become the legal standard
of value under the constitution. Extended discussion of the first branch
of the proposition would seem to be unnecessary, as the dissenting
justices in the former case abandoned that point and frankly stated in
the dissenting opinion delivered that they were not able to see in those
clauses, "standing alone, a sufficient warrant for the exercise of this
power." Through their organ on the occasion they referred to the power
to declare war, to suppress insurrection, to raise and support armies,
to provide and maintain a navy, to borrow money, to pay the debts of the
Union, and to provide for the common defence and general welfare, as
grants of power conferred in separate clauses of the constitution.
Reference was then made in very appropriate terms to the exigencies of
the treasury during that period and the conclusion reached, though
expressed interrogatively, appears to be that the provision making the
notes a legal tender was a necessary and proper one as conducing
"towards the purpose of borrowing money, of paying debts, of raising
armies, of suppressing insurrection," or, as expressed in another part
of the same opinion, the provision was regarded as "necessary and proper
to enable the government to borrow money to carry on the war."
Suggestions or intimations are made in one or more of the opinions given
in the state courts that the power assumed by congress may be vindicated
as properly implied from the power to coin money, but inasmuch as that
assumption was not the ground of the dissent in the former case, and as
the court is not referred to any case where a court affirming the
validity of the acts of congress in question has ventured to rest their
decision upon that theory, it does not appear to be necessary to
protract the discussion upon that point.
Such notes are not declared in the acts of congress to be a standard of
value, and if they were the provision would be as powerless to impart
that quality to the notes as were the processes of the alchemist to
convert chalk into gold, or the contrivances of the mechanic to organize
a machine and give it perpetual motion. Gold and silver were adopted as
the standard of value, even before civil governments were organized, and
they have always been regarded as such to the present time, and it is
safe to affirm that they will continue to be such by universal consent,
in spite of legislative enactments and of judicial decisions. Treasury
notes, or the notes in question, called by what name they may be, never
performed that office, even for a day, and it may be added that neither
legislative enactments nor judicial decisions can compel the commercial
world to accept paper emissions of any kind as the standard of value by
which all other values are to be measured. Nothing but money will in
fact perform that office, and it is clear that neither legislative
enactments nor judicial decisions can perform commercial
impossibilities. Commodities undoubtedly may be exchanged as matter of
barter, or the seller may accept paper promises instead of money, but it
is nevertheless true, as stated by Mr. Huskisson, that money is not only
the _common measure_ and _common representative_ of all other
commodities, but also the common and universal equivalent. Whoever buys,
gives, whoever sells, receives such a quantity of pure gold or silver as
is equivalent to the article bought or sold; or if he gives or receives
paper instead of money, he gives and receives that which is valuable
only as it stipulates the payment of a given quantity of gold or silver.
"Most unquestionably," said Mr. Webster, "there is no legal tender, and
there can be no legal tender, in this country, under the authority of
this government, or any other, but gold and silver. * * This is a
constitutional principle, perfectly plain and of the very highest
importance." He admitted that no such express prohibition was contained
in the constitution, and then proceeded to say: "As Congress has no
power granted to it in this respect but to coin money and to regulate
the value of foreign coins, _it clearly has no power to substitute
paper_ or anything else for coin as a tender in payment of debts and in
discharge of contracts," adding that "Congress has exercised the power
fully in both its branches. It has coined money and still coins it, it
has regulated the value of foreign coins and still regulates their
value. The legal tender, therefore, THE CONSTITUTIONAL STANDARD OF
VALUE, IS ESTABLISHED AND CANNOT BE OVERTHROWN." Beyond peradventure he
was of the opinion that gold and silver, at rates fixed by congress,
constituted the legal standard of value, and that neither congress nor
the states had authority to establish any other standard in its place.
Views equally decisive have been expressed by this court in a case where
the remarks were pertinent to the question presented for decision.
Certain questions were certified here which arose in the circuit court
in the trial of an indictment in which the defendant was charged with
having brought into the United States from a foreign place, with intent
to pass, utter, publish, and sell certain false, forged, and counterfeit
coins, made, forged, and counterfeited in the resemblance and similitude
of the coins struck at the mint. Doubts were raised at the trial whether
congress had the power to pass the law on which the indictment was
founded. Objection was made that the acts charged were only a fraud in
traffic, and, as such, were punishable, if at all, under the state law.
Responsive to that suggestion the court say that the provisions of the
section "appertain rather to the execution of an important trust
invested by the constitution, and to the obligation to fulfil that trust
on the part of the government, namely, the trust and the duty of
creating and maintaining _a uniform and pure metallic standard of value
throughout the Union_; that the power of coining money and of regulating
its value was delegated to congress by the constitution for the very
purpose of _creating and preserving the uniformity and purity of such a
standard of value_, and on account of the impossibility which was
foreseen of otherwise preventing the inequalities and the confusion
necessarily incident to the different views of policy which in different
communities would be brought to bear on this subject. The power to coin
money being thus given to congress, founded on public necessity, it must
carry with it the correlative power of protecting the creature and
object of that power." Appropriate suggestions follow as to the right of
the government to adopt measures to exclude counterfeits and prevent the
true coin from being substituted by others of no intrinsic value, and
the justice delivering the opinion then proceeds to say, that congress
"having emitted a circulating medium, _a standard of value indispensable
for the purposes of the community_ and for the action of the government
itself, the congress is accordingly authorized and bound in duty to
prevent its debasement and expulsion and the destruction of the general
confidence and convenience by the influx and substitution of a spurious
coin in lieu of the constitutional currency."
Equally decisive views were expressed by the court six years earlier, in
the case of _Gwin_ v. _Breedlove_, in which the opinion of the court was
delivered by the late Mr. Justice Catron, than whom no justice who ever
sat in the court was more opposed to the expression of an opinion on a
point not involved in the record.
No state shall coin money, emit bills of credit, or make anything but
gold and silver a tender in payment of debts. These prohibitions, said
Mr. Justice Washington, associated with the powers granted to congress
to coin money and regulate the value thereof and foreign coin, most
obviously constitute members of the same family, being upon the same
subject and governed by the same policy. This policy, said the learned
justice, was to provide and fix a uniform standard of value throughout
the United States, by which the commercial and other dealings between
the citizens thereof, or between them and foreigners, as well as the
moneyed transactions of the government, should be regulated. Language so
well chosen and so explicit cannot be misunderstood, and the views
expressed by Mr. Justice Johnson in the same case are even more
decisive. He said the prohibition in the constitution to make anything
but gold or silver coin a tender in payment of debts is _express and
universal_. The framers of the constitution regarded it as an evil to be
repelled without modification, and that they have therefore left nothing
to be inferred or deduced from construction on the subject.
Recorded as those opinions have been for forty-five years, and never
questioned, they are certainly entitled to much weight, especially as
the principles which are there laid down were subsequently affirmed in
two cases by the unanimous opinion of this court.
Strong support to the view here taken is also derived from the case of
_Craig_ v. _Missouri_, last cited, in which the opinion was given by the
chief justice. Loan certificates issued by the state were the
consideration of the note in suit in that case, and the defence was that
the certificates were bills of credit, and that the consideration of the
note was illegal. Responsive to that defence the plaintiff insisted that
the certificates were not bills of credit, because they had not been
made a legal tender, to which the court replied, that the emission of
bills of credit and the enactment of tender laws were distinct
operations, independent of each other; that both were forbidden by the
constitution; that the evils of paper money did not result solely from
the quality of its being made a tender in payment of debts; that that
quality might be the _most pernicious_ one, but that it was not an
essential quality of bills of credit nor the only mischief resulting
from such emissions.
Remarks of the chief justice in the case of _Sturges_ v. _Crowninshield_
may also be referred to as even more explicit and decisive to the same
conclusion than anything embodied in the other cases. He first
describes, in vivid colors, the general distress which followed the war
in which our independence was established. Paper money, he said, was
issued, worthless lands and other property of no use to the creditor
were made a tender in payment of debts, and the time of payment
stipulated in the contract was extended by law. Mischief to such an
extent was done, and so much more was apprehended, that general distrust
prevailed, and all confidence between man and man was destroyed. Special
reference was made to those grievances by the chief justice, because it
was insisted that the prohibition to pass laws impairing the obligation
of contracts ought to be confined by the court to matters of that
description, but the court was of a different opinion, and held that the
convention intended to establish a great principle, that contracts
should be inviolable, that the provision was intended "to prohibit the
use of any means by which the same mischief might be produced." He
admitted that that provision was not intended to prevent the issue of
paper money, as that evil was remedied and the practice prohibited by
the clause forbidding the states to "emit bills of credit," inserted in
the constitution expressly for that purpose, and he also admitted that
the prohibition to emit bills of credit was not intended to restrain the
states from enabling debtors to discharge their debts by the tender of
property of no real value to the creditor, "because for that subject
also particular provision is made" in the constitution; but he added,
"NOTHING BUT GOLD AND SILVER COIN CAN BE MADE A TENDER IN PAYMENT OF
DEBTS."
Utterances of the kind are found throughout the reported decisions of
this court, but there is not a sentence or word to be found within those
volumes, from the organization of the court to the passage of the acts
of congress in question, to support the opposite theory.
Power, as before remarked, was vested in the congress under the
confederation to borrow money and emit bills of credit, and history
shows that the power to emit such bills had been exercised, before the
convention which framed the constitution assembled, to an amount
exceeding $350,000,000. Still the draft of the constitution, as
reported, contained the words, "and to emit bills," appended to the
clause authorizing congress to borrow money. When that clause was
reached, says Mr. Martin, a motion was made to strike out the words, "to
emit _bills of credit_;" and his account of what followed affords the
most persuasive and convincing evidence that the convention, and nearly
every member of it, intended to put an end to the exercise of such a
power. Against the motion, he says, we urged that it would be improper
to deprive the congress of that power; that it would be a novelty
unprecedented to establish a government which should not have such
authority; that it was impossible to look forward into futurity so far
as to decide that events might not happen that would render the exercise
of such a power absolutely necessary, &c. But a majority of the
convention, he said, being wise beyond every event, and being willing to
risk any political evil rather than admit the idea of a paper emission
_in any possible case_, refused to trust the authority to a government
to which they were lavishing the most unlimited powers of taxation, and
to the mercy of which they were willing blindly to trust the liberty and
property of the citizens of every state in the Union, _and "they erased
that clause from the system_."
More forcible vindication of the action of the convention could hardly
be made than is expressed in the language of the Federalist, and the
authority of Judge Story warrants the statement that the language there
employed is "justified by almost every contemporary writer," and is
"attested in its truth by facts" beyond the influence of every attempt
at contradiction. Having adverted to those facts, the commentator
proceeds to say, "that the same reasons which show the necessity of
denying to the states the power of regulating coin, prove with equal
force that they ought not to be at liberty to substitute a paper medium
instead of coin."
Emissions of the kind were not declared by the Continental congress to
be a legal tender, but congress passed a resolution declaring that they
ought to be a tender in payment of all private and public debts, and
that a refusal to receive the tender ought to be an extinguishment of
the debt, and recommended the states to pass such laws. They even went
further, and declared that whoever should refuse to receive the paper as
gold or silver should be deemed an enemy to the public liberty; but our
commentator says that these measures of violence and terror, so far from
aiding the circulation of the paper, led on to still further
depreciation. New emissions followed and new measures were adopted to
give the paper credit by pledging the public faith for its redemption.
Effort followed effort in that direction, until the idea of redemption
at par was abandoned. Forty for one was offered, and the states were
required to report the bills under that regulation, but few of the old
bills were ever reported, and of course few only of the contemplated new
notes were issued, and the bills in a brief period ceased to circulate,
and in the course of that year quietly died in the hands of their
possessors.
Bills of credit were made a tender by the states, but all such, as well
as those issued by the congress, were dead in the hands of their
possessors before the convention assembled to frame the constitution.
Intelligent and impartial belief in the theory that such men, so
instructed, in framing a government for their posterity as well as for
themselves, would deliberately vest such a power, either in congress or
the states, as a part of their perpetual system, can never in my
judgment be secured in the face of the recorded evidences to the
contrary which the political and judicial history of our country
affords. Such evidence, so persuasive and convincing as it is, must
ultimately bring all to the conclusion that neither the congress nor the
states can make anything but gold or silver coin a tender in payment of
debts.
Exclusive power to coin money is certainly vested in congress, but "no
amount of reasoning can show that executing a promissory note and
ordering it to be taken in payment of public and private debts is a
species of coining money."
Complete refutation of such theory is also found in the dissenting
opinion in the former case, in which the justice who delivered the
opinion states that he is not able to deduce the power to pass the laws
in question from that clause of the constitution, and in which he
admits, without qualification, that the provision making such notes a
legal tender does undoubtedly impair the "obligation of contracts made
before its passage." Extended argument, therefore, to show that the acts
in question impair the obligation of contracts made before their passage
is unnecessary, but the admission stops short of the whole truth, as it
leaves the implication to be drawn that the obligation of subsequent
contracts is not impaired by such legislation. Contracts for the payment
of money, whether made before or after the passage of such a provision,
are contracts, if the promise is expressed in dollars, to pay the
specified amount in the money recognized and established by the
constitution as the standard of value, and any act of congress which in
theory compels the creditor to accept paper emissions, instead of the
money so recognized and established, impairs the obligation of such a
contract, no matter whether the contract was made before or after the
act compelling the creditor to accept such payment, as the constitution
in that respect is a part of the contract, and by its terms entitles the
creditor to demand payment in the medium which the constitution
recognizes and establishes as the standard of value.
Evidently the word dollar, as employed in the constitution, means the
money recognized and established in the express power vested in congress
to coin money, regulate the value thereof and of foreign coin, the
framers of the constitution having borrowed and adopted the word as
used by the Continental congress in the ordinance of the 6th of July,
1785, and of the 8th August, 1786, in which it was enacted that the
money unit of the United States should be "one dollar," and that the
money of account should be dollars and fractions of dollars, as
subsequently provided in the ordinance establishing a mint.
Repeated decisions of this court, of recent date, have established the
rule that contracts to pay coined dollars can only be satisfied by the
payment of such money, which is precisely equivalent to a decision that
such notes as those described in the acts of congress in question are
not the money recognized and established by the constitution as the
standard of value, as the money so recognized and established, if the
contract is expressed in dollars, will satisfy any and every contract
between party and party. Beyond all question the cases cited recognize
"the fact accepted by all men throughout the world, that value is
inherent in the precious metals; that gold and silver are in themselves
values, and being such, and being in other respects best adapted to the
purpose, are _the only proper measures of value_; that these values are
determined by weight and purity, and that form and impress are simply
certificates of value, worthy of absolute reliance only because of the
known integrity and good faith of the government which" put them in
circulation.
When the intent of the parties as to the medium of payment is clearly
expressed in a contract, the court decide, in _Butler_ v. _Horwitz_,
above cited, that damages for the breach of it, whether made before or
since the enactment of these laws, may be properly assessed so as to
give effect to that intent, and no doubt is entertained that that rule
is correct. Parties may contract to accept payment in treasury notes, or
specific articles, or in bank bills, and if they do so they are bound to
accept the medium for which they contracted, provided the notes,
specific articles, or bills are tendered on the day the payment under
the contract becomes due, and it is clear that such a tender, if
seasonable and sufficient in amount, is a good defence to the action.
Decided cases also carry the doctrine much further, and hold, even where
the contract is payable in money and the promise is expressed in
dollars, that a tender of bank bills is a good tender if the party to
whom it was made placed his objections to receiving it wholly upon the
ground that the amount was not sufficient.
Grant all that, and still it is clear that where the contract is for the
payment of a certain sum of money, and the promise is expressed in
dollars, or in coined dollars, the promisee, if he sees fit, may
lawfully refuse to accept payment in any other medium than gold and
silver, made a legal tender by act of congress passed in pursuance of
that provision of the constitution which vests in congress the power to
coin money, regulate the value thereof and of foreign coin.
Foreign coin of gold and silver may be made a legal tender, as the power
to regulate the value thereof is vested in congress as well as the power
to regulate the value of the coins fabricated and stamped at the mint.
Opposed, as the new theory is, by such a body of evidence, covering the
whole period of our constitutional history, all tending to the opposite
conclusion, and unsupported as the theory is by a single historical
fact, entitled to any weight, it would seem that the advocates of the
theory ought to be able to give it a fixed domicile in the constitution,
or else be willing to abandon it as a theory without any solid
constitutional foundation. Vagrancy in that behalf, if conceded, is
certainly a very strong argument at this day, that the power does not
reside in the constitution at all, as if the fact were otherwise, the
period of eighty-five years which has elapsed since the constitution was
adopted is surely long enough to have enabled its advocates to discover
its locality and to be able to point out its home to those whose
researches have been less successful and whose conscientious convictions
lead them to the conclusion that, as applied to the constitution, it is
a myth without a habitation or a name.
Unless the power to enact such a provision can be referred to some one
or more of the express grants of power to congress, as the requisite
means, or as necessary and proper for carrying such express power or
powers into execution, it is usually conceded that the provision must be
regarded as unconstitutional, as it is not pretended that the
constitution contains any express grant of power authorizing such
legislation. Powers not granted cannot be exercised by congress, and
certainly all must agree that no powers are granted except what are
expressed or such as are fairly applicable as requisite means to attain
the end of a power which is granted, or, in other words, are necessary
and proper to carry those which are expressed into execution.
Pressed by these irrepealable rules of construction, as applied to the
constitution, those who maintain the affirmative of the question under
discussion are forced to submit a specification. Courts, in one or more
cases, have intimated that the power in question may be implied from the
express power to coin money, but inasmuch as no decided case is referred
to where the judgment of the court rests upon that ground, the
suggestion will be dismissed without further consideration, as one
involving a proposition too latitudinous to require refutation. Most of
the cases referred to attempt to deduce the power to make such paper
emissions a legal tender from the express power to borrow money, or from
the power to declare war, or from the two combined, as in the dissenting
opinion in the case which is now overruled.
Authority, it is conceded, exists in congress to pass laws providing for
the issue of treasury notes, based on the national credit, as necessary
and proper means for fulfilling the end of the express power to borrow
money, nor can it be doubted at this day, that such notes, when issued
by the proper authority, may lawfully circulate as credit currency, and
that they may, in that conventional character, be lawfully employed, if
the act authorizing their issue so provides, to pay duties, taxes, and
all the public exactions required to be paid into the national treasury.
Public creditors may also be paid in such currency by their own consent,
and they may be used in all other cases, where the payment in such notes
comports with the terms of the contract. Established usage founded upon
the practice of the government, often repeated, has sanctioned these
rules, until it may now be said that they are not open to controversy,
but the question in the cases before the court is whether the congress
may declare such notes to be lawful money, make them a legal tender, and
impart to such a currency the quality of being a standard of value, and
compel creditors to accept the payment of their debts in such a
currency as the equivalent of the money recognized and established by
the constitution as the standard of value by which the value of all
other commodities is to be measured. Financial measures, of various
kinds, for borrowing money to supply the wants of the treasury, beyond
the receipts from taxation and the sales of the public lands, have been
adopted by the government since the United States became an independent
nation. Subscriptions for a loan of twelve millions of dollars were, on
the 4th of August, 1790, directed to be opened at the treasury, to be
made payable in certificates issued for the debt according to their
specie value. Measures of the kind were repeated in rapid succession for
several years, and laws providing for loans in one form or another
appear to have been the preferred mode of borrowing money, until the
30th of June, 1812, when the first act was passed "to authorize the
issue of treasury notes".
Loans had been previously authorized in repeated instances, as will be
seen by the following references, to which many more might be added.
Earnest opposition was made to the passage of the first act of congress
authorizing the issue of treasury notes, but the measure prevailed, and
it may be remarked that the vote on the occasion was ever after regarded
as having settled the question as to the constitutionality of such an
act. Five millions of dollars were directed to be issued by that act,
and the secretary of the treasury, with the approbation of the
president, was empowered to cause such portion of the notes as he might
deem expedient to be issued at par "to such public creditors _or other
persons as may choose to receive such notes in payment_," it never
having occurred to any one that even a public creditor could be
compelled to receive such notes in payment except by his own consent.
Twenty other issues of such notes were authorized by congress in the
course of the fifty years next after the passage of that act and before
the passage of the acts making such notes a legal tender, and every one
of such prior acts, being twenty in all, contains either in express
words or by necessary implication, an equally decisive negation to the
new constitutional theory that congress can make paper emissions either
a standard of value or a legal tender. Superadded to the conceded fact
that the constitution contains no express words to support such a
theory, this long and unbroken usage, that treasury notes shall not be
constituted a standard of value nor be made a tender in payment of
debts, is entitled to great weight, and when taken in connection with
the persuasive and convincing evidence, derived from the published
proceedings of the convention, that the framers of the constitution
never intended to grant any such power, and from the recorded sentiments
of the great men whose arguments in favor of the reported draft procured
its ratification, and supported as that view is by the repeated
decisions of this court, and by the infallible rule of interpretation
that the language of one express power shall not be so expanded as to
nullify the force and effect of another express power in the same
instrument, it seems to me that it ought to be deemed final and
conclusive that congress cannot constitute such notes or any other paper
emissions a constitutional standard of value, or make them a legal
tender in payment of debts--especially as it covers the period of two
foreign wars, the creation of the second national bank, and the greatest
financial revulsions through which our country has ever passed.
Guided by the views expressed in the dissenting opinion in the former
case, it must be taken for granted that the legal tender feature in the
acts in question was placed emphatically, by those who enacted the
provision, upon the necessity of the measure to the further borrowing of
money and maintaining the army and navy, and such appears to be the
principal ground assumed in the present opinion of the court. Enough
also appears in some of the interrogative sentences of the dissenting
opinion to show that the learned justice who delivered it intended to
place the dissent very largely upon the same ground.
Nothing need be added, it would seem, to show that the power to make
such notes a standard of value and a legal tender cannot be derived from
the power to borrow money, without so expanding it by implication as to
nullify the power to coin money and regulate its value, nor without
extending the scope and operation of the power to borrow money to an
object never contemplated by the framers of the constitution; and if so,
then it only remains to inquire whether it may be implied from the
power to declare war, to raise and support armies, or to provide and
maintain a navy, or "to enable the government to borrow money to carry
on the war," as the phrase is in the dissenting opinion in the former
case.
Money is undoubtedly the sinews of war, but the power to raise money to
carry on war, under the constitution, is not an implied power, and
whoever adopts that theory commits a great constitutional error.
Congress may declare war and congress may appropriate all moneys in the
treasury to carry on the war, or congress may coin money for that
purpose, or borrow money to any amount for the same purpose, or congress
may lay and collect taxes, duties, imposts, and excises to replenish the
treasury, or may dispose of the public lands or other property belonging
to the United States, and may in fact, by the exercise of the express
powers of the constitution, command the whole wealth and substance of
the people to sustain the public credit and prosecute the war to a
successful termination. Two foreign wars were successfully conducted by
means derived from those sources, and it is not doubted that those
express powers will always enable congress to maintain the national
credit and defray the public expenses in every emergency which may
arise, even though the national independence should be assailed by the
combined forces of all the rest of the civilized world. All remarks,
therefore, in the nature of entreaty or appeal, in favor of an implied
power to fulfil the great purpose of national defence or to raise money
to prosecute a war, are a mere waste of words, as the most powerful and
comprehensive means to accomplish the purpose for which the appeal is
made are found in the express powers vested in congress to lay and
collect taxes, duties, imposts, and excises without limitation as to
amount, to borrow money also without limitation, and to coin money,
dispose of the public lands, and to appropriate all moneys in the public
treasury to that purpose.
Weighed in the light of these suggestions, as the question under
discussion should be, it is plain, not only that the exercise of such an
implied power is unnecessary to supply the sinews of war, but that the
framers of the constitution never intended to trust a matter of such
great and vital importance as that of raising means for the national
defence or for the prosecution of a war to any implication whatever, as
they had learned from bitter experience that the great weakness of the
confederation during the war for independence consisted in the want of
such express powers. Influenced by those considerations the framers of
the constitution not only authorized congress to lay and collect taxes,
duties, imposts, and excises to any and every extent, but also to coin
money and to borrow money without any limitation as to amount, showing
that the argument that to deny the implied power to make paper emissions
a legal tender will be to cripple the government, is a mere chimera,
without any solid constitutional foundation for its support.
Comprehensive, however, as the power of Federal taxation is, being
without limitation as to amount, still there are some restrictions as to
the manner of its exercise, and some exceptions as to the objects to
which it may be applied. Bills for raising revenue must originate in the
house of representatives; duties, imposts, and excises must be uniform
throughout the United States; direct taxes must be apportioned according
to numbers; regulations of commerce and revenue shall not give any
preference to the ports of one state over those of another; nor shall
vessels bound to or from one state be obliged to enter, clear, or pay
duties in another; nor shall any tax or duty be laid on articles
exported from any state.
Preparation for war may be made in peace, but neither the necessity for
such preparation nor the actual existence of war can have the effect to
abrogate or supersede those restrictions, or to empower congress to tax
the articles excepted from taxation by the constitution. Implied
exceptions also exist, limiting the power of federal taxation as well as
that of the states, and when an exception of that character is
ascertained the objects falling within it are as effectually shielded
from taxation as those falling within an express exception, for the
plain reason that the "government of the United States is acknowledged
by all to be one of enumerated powers," from which it necessarily
follows that powers not granted cannot be exercised.
Moneys may be raised by taxes, duties, imposts, and excises to carry on
war as well as to pay the public debt or to provide for the common
defence and general welfare, but no appropriation of money to that use
can be made for a period longer than two years, nor can congress, in
exercising the power to levy taxes for that purpose, or any other,
abrogate or supersede those restrictions, exceptions, and limitations,
as they are a part of the constitution, and as such are as obligatory in
war as in peace, as any other rule would subvert, in time of war, every
restriction, exception, limitation, and prohibition in the constitution,
and invest congress with unlimited power, even surpassing that possessed
by the British parliament.
Congress may also borrow money to carry on war, without limitation, and
in exercising that express power may issue treasury notes as the
requisite means for carrying the express power into execution, but
congress cannot constitute such notes a standard of value nor make them
a legal tender, neither in time of war nor in time of peace, for at
least two reasons, either of which is conclusive that the exercise of
such a power is not warranted by the constitution: (1.) Because the
published proceedings of the convention which adopted the constitution,
and of the state conventions which ratified it, show that those who
participated in those deliberations never intended to confer any such
power. (2.) Because such a power, if admitted to exist, would nullify
the effect and operation of the express power to coin money, regulate
the value thereof and of foreign coin; as it would substitute a paper
medium in the place of gold and silver coin, which in itself, as
compared with coin, possesses no value, is not money, either in the
constitutional or commercial sense, but only a promise to pay money, is
never worth par, and often much less, even as domestic exchange, and is
always fluctuating and never acknowledged either as a medium of exchange
or a standard of value in any foreign market known to American commerce.
Power to issue such notes, it is conceded, exists without limitation,
but the question is whether the framers of the constitution intended
that congress, in the exercise of that power or the power to borrow
money, whether in peace or war, should be empowered to constitute paper
emissions, of any kind, a standard of value, and make the same a legal
tender in payment of debts. Mere convenience, or even a financial
necessity in a single case, cannot be the test, but the question is,
What did the framers of the constitution intend at the time the
instrument was adopted and ratified?
Constitutional powers, of the kind last mentioned--that is, the power to
ordain a standard of value and to provide a circulating medium for a
legal tender--are subject to no mutations of any kind. They are the same
in peace and in war. What the grants of power meant when the
constitution was adopted and ratified they mean still, and their meaning
can never be changed except as described in the fifth article providing
for amendments, as the constitution "is a law for rulers and people,
equally in war and in peace, and covers with the shield of its
protection all classes of men and under all circumstances."
Delegated power ought never to be enlarged beyond the fair scope of its
terms, and that rule is emphatically applicable in the construction of
the constitution. Restrictions may at times be inconvenient, or even
embarrassing, but the power to remove the difficulty by amendment is
vested in the people, and if they do not exercise it, the presumption is
that the inconvenience is a less evil than the mischief to be
apprehended if the restriction should be removed and the power extended,
or that the existing inconvenience is the least of the two evils; and it
should never be forgotten that the government ordained and established
by the constitution is a government "of limited and enumerated powers,"
and that to depart from the true import and meaning of those powers is
to establish a new constitution or to do for the people what they have
not chosen to do for themselves, and to usurp the functions of a
legislator and desert those of an expounder of the law. Arguments drawn
from impolicy or inconvenience, says Judge Story, ought here to be of no
weight, as "the only sound principle is to declare _ita lex scripta
est_, to follow and to obey."
For these reasons I am of the opinion that the judgment in each of the
cases before the court should be reversed.
CHAPTER IV.
DISSENTING OPINION OF JUSTICE FIELD.
Whilst I agree with the chief justice in the views expressed in his
opinion in these cases, the great importance which I attach to the
question of legal tender induces me to present some further
considerations on the subject.
Nothing has been heard from counsel in these cases, and nothing from the
present majority of the court, which has created a doubt in my mind of
the correctness of the judgment rendered in the case of _Hepburn_ v.
_Griswold_, or of the conclusions expressed in the opinion of the
majority of the court as then constituted. That judgment was reached
only after repeated arguments were heard from able and eminent counsel,
and after every point raised on either side had been the subject of
extended deliberation.
The questions presented in that case were also involved in several other
cases, and had been elaborately argued in them. It is not extravagant to
say that no case has ever been decided by this court since its
organization, in which the questions presented were more fully argued or
more maturely considered. It was hoped that a judgment thus reached
would not be lightly disturbed. It was hoped that it had settled
forever, that under a constitution ordained, among other things, "to
establish justice," legislation giving to one person the right to
discharge his obligations to another by nominal instead of actual
fulfillment, could never be justified.
I shall not comment upon the causes which have led to a reversal of that
judgment. They are patent to every one. I will simply observe that the
chief justice and the associate justices, who constituted the majority
of the court when that judgment was rendered, still adhere to their
former convictions. To them the reasons for the original decision are
as cogent and convincing now as they were when that decision was
pronounced; and to them its justice, as applied to past contracts, is as
clear to-day as it was then.
In the cases now before us the questions stated, by order of the court,
for the argument of counsel, do not present with entire accuracy the
questions actually argued and decided. As stated, the questions are:
1st. Is the act of congress known as the legal tender act constitutional
as to contracts made before its passage? 2d. Is it valid as applicable
to transactions since its passage?
The act thus designated as the legal tender act is the act of congress
of February 25th, 1862, authorizing the issue of United States notes,
and providing for their redemption or funding, and for funding the
floating debt of the United States; and the questions, as stated, would
seem to draw into discussion the validity of the entire act; whereas,
the only questions intended for argument, and actually argued and
decided, relate--1st, to the validity of that provision of the act which
declares that these notes shall be a legal tender in payment of debts,
as applied to private debts and debts of the government contracted
previous to the passage of the act; and 2d, to the validity of the
provision as applied to similar contracts subsequently made. The case of
_Parker_ v. _Davis_ involves the consideration of the first question;
and the case of _Knox_ v. _Lee_ is supposed by a majority of the court
to present the second question.
No question was raised as to the validity of the provisions of the act
authorizing the issue of the notes, and making them receivable for dues
to the United States; nor do I perceive that any objection could justly
be made at this day to these provisions. The issue of the notes was a
proper exercise of the power to borrow money, which is granted to
congress without limitation. The extent to which the power may be
exercised depends, in all cases, upon the judgment of that body as to
the necessities of the government. The power to borrow includes the
power to give evidences of indebtedness and obligations of repayment.
Instruments of this character are among the securities of the United
States mentioned in the constitution. These securities are sometimes in
the form of certificates of indebtedness, but they may be issued in any
other form, and in such form and in such amounts as will fit them for
general circulation, and to that end may be made payable to the bearer
and transferable by delivery. The form of notes, varying in amounts to
suit the convenience or ability of the lender, has been found by
experience a convenient form, and the one best calculated to secure the
readiest acceptance and the largest loan. It has been the practice of
the government to use notes of this character in raising loans and
obtaining supplies from an early period in its history, their receipt by
third parties being in all cases optional.
In June, 1812, congress passed an act which provided for the issue of
treasury notes, and authorized the secretary of the treasury, with the
approbation of the president, "to borrow from time to time, not under
par, such sums" as the president might think expedient, "on the credit
of such notes."
In February, 1813, congress passed another act for the issue of treasury
notes, declaring "that the amount of money borrowed or obtained by
virtue of the notes" issued under its second section should be a part of
the money authorized to be borrowed under a previous act of the same
session. There are numerous other acts of a similar character on our
statute books. More than twenty, I believe, were passed previous to the
legal tender act.
In all of them the issue of the notes was authorized as a means of
borrowing money, or obtaining supplies, or paying the debts of the
United States, and in all of them the receipt of the notes by third
parties was purely voluntary. Thus, in the first act, of June, 1812, the
secretary of the treasury was authorized not only to borrow on the
notes, but to issue such notes as the president might think expedient
"in payment of supplies or debts due by the United States to such public
creditors or other persons" as might "_choose to receive such notes in
payment at par_." Similar provisions are found in all the acts except
where the notes are authorized simply to take up previous loans.
The issue of the notes for supplies purchased or services rendered at
the request of the United States is only giving their obligations for
an indebtedness thus incurred; and the same power which authorizes the
issue of notes for money must also authorize their issue for whatever is
received as an equivalent for money. The result to the United States is
the same as if the money were actually received for the notes and then
paid out for the supplies or services.
The notes issued under the act of congress of February 25th, 1862,
differ from the treasury notes authorized by the previous acts to which
I have referred in the fact that they do not bear interest and do not
designate on their face a period at which they shall be paid, features
which may affect their value in the market but do not change their
essential character. There cannot be, therefore, as already stated, any
just objection at this day to the issue of the notes, nor to their
adaptation in form for general circulation.
Nor can there be any objection to their being made receivable for dues
to the United States. Their receivability in this respect is only the
application to the demands of the government, and demands against it, of
the just principle which is applied to the demands of individuals
against each other, that cross-demands shall offset and satisfy each
other to the extent of their respective amounts. No rights of third
parties are in any respect affected by the application of the rule here,
and the purchasing and borrowing power of the notes are greatly
increased by making them thus receivable for the public dues. The
objection to the act does not lie in these features; it lies in the
provision which declares that the notes shall be "a legal tender in
payment of all debts, public and private," so far as that provision
applies to private debts, and debts owing by the United States.
In considering the validity and constitutionality of this provision, I
shall in the first place confine myself to the provision in its
application to private debts. Afterwards I shall have something to say
of the provision in its application to debts owing by the government.
In the discussions upon the subject of legal tender the advocates of the
measure do not agree as to the power in the constitution to which it
shall be referred; some placing it upon the power to borrow money, some
on the coining power, and some on what is termed a resulting power from
the general purposes of the government; and these discussions have been
accompanied by statements as to the effect of the measure, and the
consequences which must have followed had it been rejected, and which
will now occur if its validity be not sustained, which rest upon no
solid foundation, and are not calculated to aid the judgment in coming
to a just conclusion.
In what I have to say I shall endeavor to avoid any such general and
loose statements, and shall direct myself to an inquiry into the nature
of these powers to which the measure is referred, and the relation of
the measure to them.
Now if congress can, by its legislative declaration, make the notes of
the United States a legal tender in payment of private debts--that is,
can make them receivable against the will of the creditor in
satisfaction of debts due to him by third parties--its power in this
respect is not derived from its power to borrow money, under which the
notes were issued. That power is not different in its nature or
essential incidents from the power to borrow possessed by individuals,
and is not to receive a larger definition. Nor is it different from the
power often granted to public and private corporations. The grant, it is
true, is usually accompanied in these latter cases with limitations as
to the amount to be borrowed, and a designation of the objects to which
the money shall be applied--limitations which in no respect affect the
nature of the power. The terms "power to borrow money" have the same
meaning in all these cases, and not one meaning when used by
individuals, another when granted to corporations, and still a different
one when possessed by congress. They mean only a power to contract for a
loan of money upon considerations to be agreed between the parties. The
amount of the loan, the time of repayment, the interest it shall bear,
and the form in which the obligation shall be expressed are simply
matters of arrangement between the parties. They concern no one else. It
is no part or incident of a contract of this character that the rights
or interests of third parties, strangers to the matter, shall be in any
respect affected. The transaction is completed when the lender has
parted with his money, and the borrower has given his promise of
repayment at the time, and in the manner, and with the securities
stipulated between them.
As an inducement to the loan, and security for its repayment, the
borrower may of course pledge such property or revenues, and annex to
his promises such rights and privileges as he may possess. His
stipulations in this respect are necessarily limited to his own
property, rights, and privileges, and cannot extend to those of other
persons.
Now, whether a borrower--be the borrower an individual, a corporation,
or the government--can annex to the bonds, notes, or other evidences of
debt given for the money borrowed, any quality by which they will serve
as a means of satisfying the contracts of other parties, must
necessarily depend upon the question whether the borrower possesses any
right to interfere with such contracts, and determine how they shall be
satisfied. The right of the borrower in this respect rests upon no
different foundation than the right to interfere with any other property
of third parties. And if it will not be contended, as I think I may
assume it will not be, that the borrower possesses any right, in order
to make a loan, to interfere with the tangible and visible property of
third parties, I do not perceive how it can be contended that he has any
right to interfere with their property when it exists in the form of
contracts. A large part of the property of every commercial people
exists in that form, and the principle which excludes a stranger from
meddling with another's property which is visible and tangible, equally
excludes him from meddling with it when existing in the form of
contracts.
That an individual or corporation borrowing possesses no power to annex
to his evidences of indebtedness any quality by which the holder will be
enabled to change his contracts with third parties, strangers to the
loan, is admitted; but it is contended that congress possesses such
power because, in addition to the express power to borrow money, there
is a clause in the constitution which authorizes congress to make all
laws "necessary and proper" for the execution of the powers enumerated.
This clause neither augments nor diminishes the expressly designated
powers. It only states in terms what congress would equally have had the
right to do without its insertion in the constitution. It is a general
principle that a power to do a particular act includes the power to
adopt all the ordinary and appropriate means for its execution. "Had the
constitution," says Hamilton, in the Federalist, speaking of this
clause, "been silent on this head, there can be no doubt that all the
particular powers requisite as a means of executing the general powers
would have resulted to the government by unavoidable implication." No
axiom is more clearly established in law or in reason, that whenever the
end is required the means are authorized; whenever a general power to do
a thing is given, every particular power necessary for doing it is
included.
The subsidiary power existing without the clause in question, its
insertion in the constitution was no doubt intended, as observed by Mr.
Hamilton, to prevent "all cavilling refinements" in those who might
thereafter feel a disposition to curtail and evade the legitimate
authorities of the Union; and also, I may add, to indicate the true
sphere and limits of the implied powers.
But though the subsidiary power would have existed without this clause,
there would have been the same perpetually recurring question as now, as
to what laws are necessary and proper for the execution of the expressly
enumerated powers.
The particular clause in question has at different times undergone
elaborate discussions in congress, in cabinets, and in the courts. Its
meaning was much debated in the first congress upon the proposition to
incorporate a national bank, and afterwards in the cabinet of
Washington, when that measure was presented for his approval. Mr.
Jefferson, then secretary of state, and Mr. Hamilton, then secretary of
the treasury, differed widely in their construction of the clause, and
each gave his views in an elaborate opinion. Mr. Jefferson held that the
word "necessary" restricted the power of congress to the use of those
means, without which the grant would be nugatory, thus making necessary
equivalent to indispensable.
Mr. Hamilton favored a more liberal, and in my judgment, a more just
interpretation, and contended that the terms "necessary and proper"
meant no more than that the measures adopted must have an obvious
relation as a means to the end intended. "If the end," he said, "be
clearly comprehended within any of the specified powers, and if the
measure have an obvious relation to that end, and is not forbidden by
any particular provision of the constitution, it may safely be deemed to
come within the compass of the national authority." "There is also," he
added, "this further criterion which may materially assist the decision:
Does the proposed measure abridge a pre-existing right of any state, or
of any individual? If it does not, there is a strong presumption in
favor of its constitutionality; and slighter relations to any declared
object may be permitted to turn the scale." From the criterion thus
indicated it would seem that the distinguished statesman was of opinion
that a measure which did interfere with a pre-existing right of a state
or an individual would not be constitutional.
The interpretation given by Mr. Hamilton was substantially followed by
Chief Justice Marshall, in _McCulloch_ v. _the State of Maryland_, when,
speaking for the court, he said that if the end to be accomplished by
the legislation of congress be legitimate, and within the scope of the
constitution, "all the means which are appropriate, which are plainly
adapted to that end, and which are not prohibited, but are consistent
with the letter and spirit of the constitution, are constitutional." The
chief justice did not, it is true, in terms declare that legislation
which is not thus appropriate, and plainly adapted to a lawful end, is
unconstitutional, but such is the plain import of the argument advanced
by him; and that conclusion must also follow from the principle that,
when legislation of a particular character is specially authorized, the
opposite of such legislation is inhibited.
Tested by the rule given by Mr. Hamilton, or by the rule thus laid down
by this court through Mr. Chief Justice Marshall, the annexing of a
quality to the promises of the government for money borrowed, which will
enable the holder to use them as a means of satisfying the demands of
third parties, cannot be sustained as the exercise of an appropriate
means of borrowing. That is only appropriate which has some relation of
fitness to an end. Borrowing, as already stated, is a transaction by
which, on one side, the lender parts with his money, and on the other
the borrower agrees to repay it in such form and at such time as may be
stipulated. Though not a necessary part of the contract of borrowing, it
is usual for the borrower to offer securities for the repayment of the
loan. The fitness which would render a means appropriate to this
transaction thus considered must have respect to the terms which are
essential to the contract, or to the securities which the borrower may
furnish as an inducement to the loan. The quality of legal tender does
not touch the terms of the contract of borrowing, nor does it stand as a
security for the loan. A security supposes some right or interest in the
thing pledged, which is subject to the disposition of the borrower.
There has been much confusion on this subject from a failure to
distinguish between the adaptation of particular means to an end and the
effect, or supposed effect, of those means in producing results desired
by the government. The argument is stated thus: the object of borrowing
is to raise funds; the annexing of the quality of legal tender to the
notes of the government induces parties the more readily to loan upon
them; the result desired by the government--the acquisition of funds--is
thus accomplished; therefore, the annexing of the quality of legal
tender is an appropriate means to the execution of the power to borrow.
But it is evident that the same reasoning would justify, as appropriate
means to the execution of this power, any measures which would result in
obtaining the required funds. The annexing of a provision by which the
notes of the government should serve as a free ticket in the public
conveyances of the country, or for ingress into places of public
amusement, or which would entitle the holder to a percentage out of the
revenues of private corporations, or exempt his entire property, as well
as the notes themselves, from state and municipal taxation, would
produce a ready acceptance of the notes. But the advocate of the most
liberal construction would hardly pretend that these measures, or
similar measures touching the property of third parties, would be
appropriate as a means to the execution of the power to borrow. Indeed,
there is no invasion by government of the rights of third parties which
might not thus be sanctioned upon the pretence that its allowance to the
holder of the notes would lead to their ready acceptance and produce the
desired loan.
The actual effect of the quality of legal tender in inducing parties to
receive them was necessarily limited to the amount required by existing
debtors, who did not scruple to discharge with them their pre-existing
liabilities. For moneys desired from other parties, or supplies required
for the use of the army or navy, the provision added nothing to the
value of the notes. Their borrowing power or purchasing power depended,
by a general and a universal law of currency, not upon the legal tender
clause, but upon the confidence which the parties receiving the notes
had in their ultimate payment. Their exchangeable value was determined
by this confidence, and every person dealing in them advanced his money
and regulated his charges accordingly.
The inability of mere legislation to control this universal law of
currency is strikingly illustrated by the history of the bills of credit
issued by the Continental congress during our Revolutionary war. From
June, 1775, to March, 1780, these bills amounted to over $300,000,000.
Depreciation followed as a natural consequence, commencing in 1777, when
the issues only equalled $14,000,000. Previous to this time, in January,
1776, when the issues were only $5,000,000, congress had, by resolution,
declared that if any person should be "so lost to all virtue and regard
to his country" as to refuse to receive the bills in payment, he should,
on conviction thereof by the committee of the city, county, or district,
or, in case of appeal from their decision, by the assembly, convention,
council, or committee of safety of the colony where he resided, be
"deemed, published, and treated as an enemy of his country, and
precluded from all trade or intercourse with the inhabitants" of the
colonies.
And in January, 1777, when as yet the issues were only $14,000,000,
congress passed this remarkable resolution:
"_Resolved_, That all bills of credit emitted by authority of congress
ought to pass current in all payments, trade, and dealings in these
states, and be deemed in value equal to the same nominal sums in Spanish
milled dollars, and that whosoever shall offer, ask, or receive more in
the said bills for any gold or silver coins, bullion, or any other
species of money whatsoever, than the nominal sum or amount thereof in
Spanish milled dollars, or more in the said bills for any lands,
houses, goods, or commodities whatsoever than the same could be
purchased at of the same person or persons in gold, silver, or any other
species of money whatsoever, or shall offer to sell any goods or
commodities for gold or silver coins or any other species of money
whatsoever and refuse to sell the same for the said continental bills,
every such person ought to be deemed an enemy to the liberty of these
United States and to forfeit the value of the money so exchanged, or
house, land, or commodity so sold or offered for sale. And it is
recommended to the legislatures of the respective states to enact laws
inflicting such forfeitures and other penalties on offenders as
aforesaid as will prevent such pernicious practices. That it be
recommended to the legislatures of the United States to pass laws to
make the bills of credit issued by the congress a lawful tender in
payments of public and private debts, and a refusal thereof an
extinguishment of such debts; that debts payable in sterling money be
discharged with continental dollars at the rate of 4_s._ 6_d._ sterling
per dollar, and that in discharge of all other debts and contracts
continental dollars pass at the rate fixed by the respective states for
the value of Spanish milled dollars."
The several states promptly responded to the recommendations of congress
and made the bills a legal tender for debts and the refusal to receive
them an extinguishment of the debt.
Congress also issued, in September, 1779, a circular addressed to the
people on the subject, in which they showed that the United States would
be able to redeem the bills, and they repelled with indignation the
suggestion that there could be any violation of the public faith. "The
pride of America," said the address, "revolts from the idea; her
citizens know for what purposes these emissions were made, and have
repeatedly plighted their faith for the redemption of them; they are to
be found in every man's possession, and every man is interested in their
being redeemed; they must, therefore, entertain a high opinion of
American credulity who suppose the people capable of believing, on due
reflection, that all America will, against the faith, the honor, and the
interest of all America, be ever prevailed upon to countenance, support,
or permit so ruinous, so disgraceful a measure. We are convinced that
the efforts and arts of our enemies will not be wanting to draw us into
this humiliating and contemptible situation. Impelled by malice and the
suggestions of chagrin and disappointment at not being able to bend our
necks to the yoke, they will endeavor to force or seduce us to commit
this unpardonable sin in order to subject us to the punishment due to
it, and that we may thenceforth be a reproach and a by-word among the
nations. Apprised of these consequences, knowing the value of national
character, and impressed with a due sense of the immutable laws of
justice and honor, it is impossible that America should think without
horror of such an execrable deed."
Yet in spite of the noble sentiments contained in this address, which
bears the honored name of John Jay, then president of congress and
afterwards the first chief justice of this court, and in spite of legal
tender provisions and harsh penal statutes, the universal law of
currency prevailed. Depreciation followed until it became so great that
the very idea of redemption at par was abandoned.
Congress then proposed to take up the bills by issuing new bills on the
credit of the several states, guaranteed by the United States, not
exceeding one-twentieth of the amount of the old issue, the new bills to
draw interest and be redeemable in six years. But the scheme failed, and
the bills became, during 1780, of so little value that they ceased to
circulate and "quietly died," says the historian of the period, "in the
hands of their possessors."
And it is within the memory of all of us that during the late rebellion
the notes of the United States issued under the legal tender act rose in
value in the market as the successes of our arms gave evidence of an
early termination of the war, and that they fell in value with every
triumph of the Confederate forces. No legislation of congress declaring
these notes to be money instead of representatives of money or credit
could alter this result one jot or tittle. Men measured their value not
by congressional declaration, which could not alter the nature of
things, but by the confidence reposed in their ultimate payment.
Without the legal tender provision the notes would have circulated
equally well and answered all the purposes of government--the only
direct benefit resulting from that provision arising, as already stated,
from the ability it conferred upon unscrupulous debtors to discharge
with them previous obligations. The notes of state banks circulated
without possessing that quality and supplied a currency for the people
just so long as confidence in the ability of the banks to redeem the
notes continued. The notes issued by the national bank associations
during the war, under the authority of congress, amounting to
$300,000,000, which were never made a legal tender, circulated equally
well with the notes of the United States. Neither their utility nor
their circulation was diminished in any degree by the absence of a legal
tender quality. They rose and fell in the market under the same
influences and precisely to the same extent as the notes of the United
States, which possessed this quality.
It is foreign, however, to my argument, to discuss the utility of the
legal tender clause. The utility of a measure is not the subject of
judicial cognizance, nor, as already intimated, the test of its
constitutionality. But the relation of the measure as a means to an end,
authorized by the constitution, is a subject of such cognizance, and the
test of its constitutionality, when it is not prohibited by any specific
provision of that instrument, and is consistent with its letter and
spirit. "The degree," said Hamilton, "in which a measure is necessary,
can never be a test of the _legal right_ to adopt it. That must be a
matter of opinion, and can only be a test of expediency. The relation
between the means and the end, between the nature of a _means_ employed
toward the execution of the power and the _object_ of that power, must
be the criterion of unconstitutionality; not the more or less of
necessity or utility."
If this were not so, if congress could not only exercise, as it
undoubtedly may, unrestricted liberty of choice among the means which
are appropriate and plainly adapted to the execution of an express
power, but could also judge, without its conclusions being subject to
question in cases involving private rights, what means are thus
appropriate and adapted, our government would be, not what it was
intended to be, one of limited, but one of unlimited powers.
Of course congress must inquire in the first instance, and determine
for itself not only the expediency, but the fitness to the end intended,
of every measure adopted by its legislation. But the power of this
tribunal to revise these determinations in cases involving private
rights has been uniformly asserted, since the formation of the
constitution to this day, by the ablest statesmen and jurists of the
country.
I have thus dwelt at length upon the clause of the constitution
investing congress with the power to borrow money on the credit of the
United States, because it is under that power that the notes of the
United States were issued, and it is upon the supposed enhanced value
which the quality of legal tender gives to such notes, as the means of
borrowing, that the validity and constitutionality of the provision
annexing this quality are founded. It is true that, in the arguments of
counsel, and in the several opinions of different state courts, to which
our attention has been called, and in the dissenting opinion in
_Hepburn_ v. _Griswold_, reference is also made to other powers
possessed by congress, particularly to declare war, to suppress
insurrection, to raise and support armies, and to provide and maintain a
navy; all of which were called into exercise and severely taxed at the
time the legal tender act was passed. But it is evident that the notes
have no relation to these powers, or to any other powers of congress,
except as they furnish a convenient means for raising money for their
execution. The existence of the war only increased the urgency of the
government for funds. It did not add to its powers to raise such funds,
or change, in any respect, the nature of those powers or the
transactions which they authorized. If the power to engraft the quality
of legal tender upon the notes existed at all with congress, the
occasion, the extent, and the purpose of its exercise were mere matters
of legislative discretion; and the power may be equally exerted when a
loan is made to meet the ordinary expenses of government in time of
peace, as when vast sums are needed to raise armies and provide navies
in time of war. The wants of the government can never be the measure of
its powers.
The constitution has specifically designated the means by which funds
can be raised for the uses of the government, either in war or peace.
These are taxation, borrowing, coining, and the sale of its public
property. Congress is empowered to levy and collect taxes, duties,
imposts, and excises, to any extent which the public necessities may
require. Its power to borrow is equally unlimited. It can convert any
bullion it may possess into coin, and it can dispose of the public lands
and other property of the United States, or any part of such property.
The designation of these means exhausts the powers of congress on the
subject of raising money. The designation of the means is a negation of
all others, for the designation would be unnecessary and absurd if the
use of any and all means were permissible without it. These means
exclude a resort to forced loans, and to any compulsory interference
with the property of third persons, except by regular taxation in one of
the forms mentioned.
But this is not all. The power to "coin money" is, in my judgment,
inconsistent with and repugnant to the existence of a power to make
anything but coin a legal tender. To coin money is to mould metallic
substances having intrinsic value into certain forms convenient for
commerce, and to impress them with the stamp of the government
indicating their value. Coins are pieces of metal, of definite weight
and value, thus stamped by national authority. Such is the natural
import of the terms, "to coin money," and "coin;" and if there were any
doubt that this is their meaning in the constitution, it would be
removed by the language which immediately follows the grant of the
"power to coin," authorizing congress to regulate the value of the money
thus coined, and also "of foreign coin," and by the distinction made in
other clauses between coin and the obligations of the general government
and of the several states.
The power of regulation conferred is the power to determine the weight
and purity of the several coins struck, and their consequent relation to
the monetary unit which might be established by the authority of the
government--a power which can be exercised with reference to the
metallic coins of foreign countries, but which is incapable of execution
with reference to their obligations or securities.
Then, in the clause of the constitution immediately following,
authorizing congress "to provide for the punishment of counterfeiting
the securities and current coin of the United States," a distinction
between the obligations and coins of the general government is clearly
made. And in the tenth section, which forbids the states to "coin money,
emit bills of credit, and make anything but gold and silver coin a
tender in payment of debts," a like distinction is made between coin and
the obligations of the several states. The terms gold and silver, as
applied to the coin, exclude the possibility of any other conclusion.
Now, money, in the true sense of the term, is not only a medium of
exchange, but it is a standard of value by which all other values are
measured. Blackstone says, and Story repeats his language: "Money is a
universal medium or common standard, by a comparison with which the
value of all merchandise may be ascertained, or it is a sign which
represents the respective values of all commodities." Money being such
standard, its coins or pieces are necessarily a legal tender to the
amount of their respective values for all contracts or judgments payable
in money, without any legislative enactment to make them so. The
provisions in the different coinage acts that the coins to be struck
shall be such legal tender, are merely declaratory of their effect when
offered in payment, and are not essential to give them that character.
The power to coin money is, therefore, a power to fabricate coins out of
metal as money, and thus make them a legal tender for their declared
values as indicated by their stamp. If this be the true import and
meaning of the language used, it is difficult to see how congress can
make the paper of the government a legal tender. When the constitution
says that congress shall have the power to make metallic coins a legal
tender, it declares in effect that it shall make nothing else such
tender. The affirmative grant is here a negative of all other power over
the subject.
Besides this, there cannot well be two different standards of value, and
consequently two kinds of legal tender for the discharge of obligations
arising from the same transactions. The standard or tender of the lower
actual value would in such case inevitably exclude and supersede the
other, for no one would use the standard or tender of higher value when
his purpose could be equally well accomplished by the use of the other.
A practical illustration of the truth of this principle we have all seen
in the effect upon coin of the act of congress making the notes of the
United States a legal tender. It drove coin from general circulation,
and made it, like bullion, the subject of sale and barter in the market.
The inhibition upon the states to coin money and yet to make anything
but gold and silver coin a tender in payment of debts, must be read in
connection with the grant of the coinage power to congress. The two
provisions taken together indicate beyond question that the coins which
the national government was to fabricate; and the foreign coins, the
valuation of which it was to regulate, were to consist principally, if
not entirely, of gold and silver.
The framers of the constitution were considering the subject of money to
be used throughout the entire Union when these provisions were inserted,
and it is plain that they intended by them that metallic coins
fabricated by the national government, or adopted from abroad by its
authority, composed of the precious metals, should everywhere be the
standard and the only standard of value by which exchanges could be
regulated and payments made.
At that time gold and silver moulded into forms convenient for use and
stamped with their value by public authority, constituted, with the
exception of pieces of copper for small values, the money of the entire
civilized world. Indeed these metals divided up and thus stamped always
have constituted money with all people having any civilization, from the
earliest periods in the history of the world down to the present time.
It was with "four hundred shekels of silver, current money with the
merchant," that Abraham bought the field of Machpelah, nearly four
thousand years ago. This adoption of the precious metals as the subject
of coinage,--the material of money by all peoples in all ages of the
world,--has not been the result of any vagaries of fancy, but is
attributable to the fact that they of all metals alone possess the
properties which are essential to a circulating medium of uniform value.
"The circulating medium of a commercial community," says Mr. Webster,
"must be that which is also the circulating medium of other commercial
communities, or must be capable of being converted into that medium
without loss. It must also be able not only to pass in payments and
receipts among individuals of the same society and nation, but to adjust
and discharge the balance of exchanges between different nations. It
must be something which has a value abroad as well as at home, by which
foreign as well as domestic debts can be satisfied. The precious metals
alone answer these purposes. They alone, therefore, are money, and
whatever else is to perform the functions of money must be their
representative and capable of being turned into them at will. So long as
bank paper retains this quality it is a substitute for money. Divested
of this nothing can give it that character."
The statesmen who framed the constitution understood this principle as
well as it is understood in our day. They had seen in the experience of
the Revolutionary period the demoralizing tendency, the cruel injustice,
and the intolerable oppression of a paper currency not convertible on
demand into money, and forced into circulation by legal tender
provisions and penal enactments. When they therefore were constructing a
government for a country, which they could not fail to see was destined
to be a mighty empire, and have commercial relations with all nations, a
government which they believed was to endure for ages, they determined
to recognize in the fundamental law as the standard of value, that which
ever has been and always must be recognized by the world as the true
standard, and thus facilitate commerce, protect industry, establish
justice, and prevent the possibility of a recurrence of the evils which
they had experienced and the perpetration of the injustice which they
had witnessed. "We all know," says Mr. Webster, "that the establishment
of a sound and uniform currency was one of the greatest ends
contemplated in the adoption of the present constitution. If we could
now fully explore all the motives of those who framed and those who
supported that constitution, perhaps we should hardly find a more
powerful one than this."
And how the framers of the constitution endeavored to establish this
"sound and uniform currency" we have already seen in the clauses which
they adopted providing for a currency of gold and silver coins. Their
determination to sanction only a metallic currency is further evident
from the debates in the convention upon the proposition to authorize
congress to emit bills on the credit of the United States. By bills of
credit, as the terms were then understood, were meant paper issues,
intended to circulate through the community for its ordinary purposes as
money, bearing upon their face the promise of the government to pay the
sums specified thereon at a future day. The original draft contained a
clause giving congress power to "borrow money and emit bills on the
credit of the United States," and when the clause came up for
consideration, Mr. Morris moved to strike out the words "and emit bills
on the credit of the United States," observing that "if the United
States had credit, such bills would be unnecessary; if they had not,
unjust and useless." Mr. Madison inquired whether it would not be
"sufficient to prohibit the making them a legal tender." "This will
remove," he said, "the temptation to emit them with unjust views, and
promissory notes in that shape may in some emergencies be best." Mr.
Morris replied that striking out the words would still leave room for
"notes of a responsible minister," which would do "all the good without
the mischief." Mr. Gorham was for striking out the words without
inserting any prohibition. If the words stood, he said, they might
"suggest and lead to the measure," and that the power, so far as it was
necessary or safe, was "involved in that of borrowing." Mr. Mason said
he was unwilling "to tie the hands of congress," and thought congress
"would not have the power unless it were expressed." Mr. Ellsworth
thought it "a favorable moment to shut and bar the door against paper
money." "The mischiefs," he said, "of the various experiments which had
been made were now fresh in the public mind and had excited the disgust
of all the respectable part of America. By withholding the power from
the new government, more friends of influence would be gained to it than
by almost anything else. Paper money can in no case be necessary. Give
the government credit, and other resources will offer. The power may do
harm, never good." Mr. Wilson thought that "it would have a most
salutary influence on the credit of the United States to remove the
possibility of paper money." "This expedient," he said, "can never
succeed whilst its mischiefs are remembered, and as long as it can be
resorted to it will be a bar to other resources." Mr. Butler was urgent
for disarming the government of such a power, and remarked "that paper
was a legal tender in no country in Europe." Mr. Mason replied that if
there was no example in Europe there was none in which the government
was restrained on this head, and he was averse "to tying up the hands of
the legislature altogether." Mr. Langdon preferred to reject the whole
plan than retain the words.
Of those who participated in the debates, only one, Mr. Mercer,
expressed an opinion favorable to paper money, and none suggested that
if congress were allowed to issue the bills their acceptance should be
compulsory--that is, that they should be made a legal tender. But the
words were stricken out by a vote of nine states to two. Virginia voted
for the motion, and Mr. Madison has appended a note to the debates,
stating that her vote was occasioned by his acquiescence, and that he
"became satisfied that striking out the words would not disable the
government from the use of public notes, as far as they could be safe
and proper; and would only cut off the pretext for a _paper currency_
and particularly for making the bills _a tender_ either for public or
private debts."
If anything is manifest from these debates it is that the members of the
convention intended to withhold from congress the power to issue bills
to circulate as money--that is, to be receivable in compulsory payment,
or, in other words, having the quality of legal tender--and that the
express power to issue the bills was denied, under an apprehension that
if granted it would give a pretext to congress, under the idea of
declaring their effect, to annex to them that quality. The issue of
notes simply as a means of borrowing money, which of course would leave
them to be received at the option of parties, does not appear to have
been seriously questioned. The circulation of notes thus issued as a
voluntary currency and their receipt in that character in payment of
taxes, duties, and other public expenses, was not subject to the
objections urged.
I am aware of the rule that the opinions and intentions of individual
members of the convention, as expressed in its debates and proceedings,
are not to control the construction of the plain language of the
constitution or narrow down the powers which that instrument confers.
Members, it is said, who did not participate in the debate may have
entertained different views from those expressed. The several state
conventions to which the constitution was submitted may have differed
widely from each other and from its framers in their interpretation of
its clauses. We all know that opposite opinions on many points were
expressed in the conventions, and conflicting reasons were urged both
for the adoption and the rejection of that instrument. All this is very
true, but it does not apply in the present case, for on the subject now
under consideration there was everywhere, in the several state
conventions and in the discussions before the people, an entire
uniformity of opinion, so far as we have any record of its expression,
and that concurred with the intention of the convention, as disclosed by
its debates, that the constitution withheld from congress all power to
issue bills to circulate as money, meaning by that bills made receivable
in compulsory payment, or, in other words, having the quality of legal
tender. Every one appears to have understood that the power of making
paper issues a legal tender, by congress or by the states, was
absolutely and forever prohibited.
Mr. Luther Martin, a member of the convention, in his speech before the
Maryland legislature, as reported in his letter to that body, states the
arguments urged against depriving congress of the power to emit bills of
credit, and then says that a "majority of the convention, being wise
beyond every event, and being willing to risk any political evil rather
than admit the idea of a paper emission in any possible case, refused to
trust this authority to a government to which they were lavishing the
most unlimited powers of taxation and to the mercy of which they were
willing blindly to trust the liberty and property of the citizens of
every state in the Union, _and they erased that clause from the
system_."
Not only was this construction given to the constitution by its framers
and the people in their discussions at the time it was pending before
them, but until the passage of the act of 1862, a period of nearly
three-quarters of a century, the soundness of this construction was
never called in question by any legislation of congress or the opinion
of any judicial tribunal. Numerous acts, as already stated, were passed
during this period, authorizing the issue of notes for the purpose of
raising funds or obtaining supplies, but in none of them was the
acceptance of the notes made compulsory. Only one instance have I been
able to find in the history of congressional proceedings where it was
even suggested that it was within the competency of congress to annex to
the notes the quality of legal tender, and this occurred in 1814. The
government was then greatly embarrassed from the want of funds to
continue the war existing with Great Britain, and a member from Georgia
introduced into the house of representatives several resolutions
directing an inquiry into the expediency of authorizing the secretary of
the treasury to issue notes convenient for circulation and making
provision for the purchase of supplies in each state. Among the
resolutions was one declaring that the notes to be issued should be a
legal tender for debts due or subsequently becoming due between citizens
of the United States and between citizens and foreigners. The house
agreed to consider all the resolutions but the one containing the legal
tender provision. That it refused to consider by a vote of more than two
to one.
As until the act of 1862 there was no legislation making the acceptance
of notes issued on the credit of the United States compulsory, the
construction of the clause of the constitution containing the grant of
the coinage power never came directly before this court for
consideration, and the attention of the court was only incidentally
drawn to it. But whenever the court spoke on the subject, even
incidentally, its voice was in entire harmony with that of the
convention.
Thus, in _Gwin_ v. _Breedlove_, where a marshal of Mississippi,
commanded to collect a certain amount of dollars on execution, received
the amount in bank notes, it was held that he was liable to the
plaintiff in gold and silver. "By the constitution of the United
States," said the court, "gold or silver coin made current by law can
only be tendered in payment of debts."
And in the case of the _United States_ v. _Marigold_, where the question
arose whether congress had power to enact certain provisions of law for
the punishment of persons bringing into the United States counterfeit
coin with intent to pass it, the court said: These provisions "appertain
to the execution of an important trust invested by the constitution, and
to the obligation to fulfil that trust on the part of the government,
namely, the trust and the duty of creating and maintaining a uniform and
pure metallic standard of value throughout the Union. The power of
coining money and of regulating its value was delegated to congress by
the constitution for the very purpose, as assigned by the framers of
that instrument, of creating and preserving the uniformity and purity of
such a standard of value, and on account of the impossibility which was
foreseen of otherwise preventing the inequalities and the confusion
necessarily incident to different views of policy, which in different
communities would be brought to bear on this subject. The power to coin
money being thus given to congress, founded on public necessity, it must
carry with it the correlative power of protecting the creature and
object of that power."
It is difficult to perceive how the trust and duty here designated, of
"creating and maintaining a uniform and metallic standard of value
throughout the Union," is discharged, when another standard of lower
value and fluctuating character is authorized by law, which necessarily
operates to drive the first from circulation.
In addition to all the weight of opinion I have mentioned we have, to
the same purport, from the adoption of the constitution up to the
passage of the act of 1862, the united testimony of the leading
statesmen and jurists of the country. Of all the men who, during that
period, participated with any distinction in the councils of the nation,
not one can be named who ever asserted any different power in congress
than what I have mentioned. As observed by the chief justice, statesmen
who disagreed widely on other points agreed on this.
Mr. Webster, who has always been regarded by a large portion of his
countrymen as one of the ablest and most enlightened expounders of the
constitution, did not seem to think there was any doubt on the subject,
although he belonged to the class who advocated the largest exercise of
powers by the general government. From his first entrance into public
life, in 1812, he gave great consideration to the subject of the
currency, and in an elaborate speech in the senate, in 1836, he said:
"Currency, in a large and perhaps just sense, includes not only gold and
silver and bank bills, but bills of exchange also. It may include all
that adjusts, exchanges, and settles balances in the operations of trade
and business; but if we understand by currency the legal money of the
county, and that which constitutes a lawful tender for debts, and is the
statute measure of value, then undoubtedly nothing is included but gold
and silver. Most unquestionably there is no legal tender, and there can
be no legal tender in this country, under the authority of this
government or any other, but gold and silver--either the coinage of our
own mints or foreign coins, at rates regulated by congress. This is a
constitutional principle perfectly plain, and of the very highest
importance. The states are expressly prohibited from making anything but
gold and silver a tender in payment of debts, and, although no such
express prohibition is applied to congress, yet, as congress has no
power granted to it in this respect but to coin money, and to regulate
the value of foreign coins, it clearly has no power to substitute paper,
or anything else, for coin, as a tender in payment of debts and in
discharge of contracts. Congress has exercised this power fully in both
its branches. It has coined money, and still coins it; it has regulated
the value of foreign coins, and still regulates their value. The legal
tender, therefore, the constitutional standard of value, is established
and cannot be overthrown. To overthrow it would shake the whole system."
If, now, we consider the history of the times when the constitution was
adopted; the intentions of the framers of that instrument, as shown in
their debates; the contemporaneous exposition of the coinage power in
the state conventions assembled to consider the constitution, and in the
public discussions before the people; the natural meaning of the terms
used; the nature of the constitution itself as creating a government of
enumerated powers; the legislative exposition of nearly three-quarters
of a century; the opinions of judicial tribunals, and the recorded
utterances of statesmen, jurists, and commentators, it would seem
impossible to doubt that the only standard of value authorized by the
constitution was to consist of metallic coins struck or regulated by the
direction of congress, and that the power to establish any other
standard was denied by that instrument.
There are other considerations besides those I have stated, which are
equally convincing against the constitutionality of the legal tender
provision of the act of February 25th, 1862, so far as it applies to
private debts and debts by the government contracted previous to its
passage. That provision operates directly to impair the obligation of
such contracts. In the dissenting opinion, in the case of _Hepburn_ v.
_Griswold_, this is admitted to be its operation, and the position is
taken that, while the constitution forbids the states to pass such laws,
it does not forbid congress to do this, and the power to establish a
uniform system of bankruptcy, which is expressly conferred, is mentioned
in support of the position. In some of the opinions of the state courts,
to which our attention has been directed, it is denied that the
provision in question impairs the obligation of previous contracts, it
being asserted that a contract to pay money is satisfied, according to
its meaning, by the payment of that which is money when the payment is
made, and that if the law does not interfere with this mode of
satisfaction, it does not impair the obligation of the contract. This
position is true so long as the term money represents the same thing in
both cases or their actual equivalents, but it is not true when the term
has different meanings. Money is a generic term, and contracts for money
are not made without a specification of the coins or denominations of
money, and the number of them intended, as eagles, dollars, or cents;
and it will not be pretended that a contract for a specified number of
eagles can be satisfied by a delivery of an equal number of dollars,
although both eagles and dollars are money; nor would it thus be
contended, though at the time the contract matured the legislature had
determined to call dollars eagles. Contracts are made for things, not
names or sounds, and the obligation of a contract arises from its terms
and the means which the law affords for its enforcement.
A law which changes the terms of the contract, either in the time or
mode of performance, or imposes new conditions, or dispenses with those
expressed, or authorizes for its satisfaction something different from
that provided, is a law which impairs its obligation, for such a law
relieves the parties from the moral duty of performing the original
stipulations of the contract, and it prevents their legal enforcement.
The notion that contracts for the payment of money stand upon any
different footing in this respect from other contracts appears to have
had its origin in certain old English cases, particularly that of mixed
money, which were decided upon the force of the prerogative of the king
with respect to coin, and have no weight as applied to powers possessed
by congress under our constitution. The language of Mr. Chief Justice
Marshall in _Faw_ v. _Marsteller_, which is cited in support of this
notion, can only be made to express concurrence with it when detached
from its context and read separated from the facts in reference to which
it was used.
It is obvious that the act of 1862 changes the terms of contracts for
the payment of money made previous to its passage, in every essential
particular. All such contracts had reference to metallic coins, struck
or regulated by congress, and composed principally of gold and silver,
which constituted the legal money of the country. The several coinage
acts had fixed the weight, purity, forms, impressions, and denominations
of these coins, and had provided that their value should be certified by
the form and impress which they received at the mint.
They had established the dollar as the money unit, and prescribed the
grains of silver it should contain, and the grains of gold which should
compose the different gold coins. Every dollar was therefore a piece of
gold or silver certified to be of a specified weight and purity, by its
form and impress. A contract to pay a specified number of dollars was
then a contract to deliver the designated number of pieces of gold or
silver of this character; and, by the laws of congress and of the
several states the delivery of such dollars could be enforced by the
holder.
The act of 1862 changes all this; it declares that gold or silver
dollars need not be delivered to the creditor according to the
stipulations of the contract; that they need not be delivered at all;
that promises of the United States, with which the creditor has had no
relations, to pay these dollars, at some uncertain future day, shall be
received in discharge of the contracts--in other words, that the holder
of such contracts shall take in substitution for them different
contracts with another party, less valuable to him, and surrender the
original.
Taking it, therefore, for granted that the law plainly impairs the
obligation of such contracts, I proceed to inquire whether it is for
that reason, subject to any constitutional objection. In the dissenting
opinion in _Hepburn_ v. _Griswold_, it is said, as already mentioned,
that the constitution does not forbid legislation impairing the
obligation of contracts.
It is true there is no provision in the constitution forbidding in
express terms such legislation. And it is also true that there are
express powers delegated to congress, the execution of which necessarily
operates to impair the obligation of contracts. It was the object of the
framers of that instrument to create a national government competent to
represent the entire country in its relations with foreign nations, and
to accomplish by its legislation measures of common interest to all the
people, which the several states, in their independent capacities, were
incapable of effecting, or if capable, the execution of which would be
attended with great difficulty and embarrassment. They, therefore,
clothed congress with all the powers essential to the successful
accomplishment of these ends, and carefully withheld the grant of all
other powers. Some of the powers granted, from their very nature,
interfere in their execution with contracts of parties. Thus war
suspends intercourse and commerce between citizens or subjects of
belligerent nations; it renders, during its continuance, the performance
of contracts previously made unlawful. These incidental consequences
were contemplated in the grant of the war power. So the regulation of
commerce and the imposition of duties may so affect the prices of
articles imported or manufactured as to essentially alter the value of
previous contracts respecting them; but this incidental consequence was
seen in the grant of the power over commerce and duties. There can be no
valid objection to laws passed in execution of express powers that
consequences like these follow incidentally from their execution. But it
is otherwise when such consequences do not follow incidentally, but are
directly enacted.
The only express authority for any legislation affecting the obligation
of contracts is found in the power to establish a uniform system of
bankruptcy, the direct object of which is to release insolvent debtors
from their contracts upon the surrender of their property. From this
express grant in the constitution I draw a very different conclusion
from that drawn in the dissenting opinion in _Hepburn_ v. _Griswold_,
and in the opinion of the majority of the court just delivered. To my
mind it is a strong argument that there is no general power in congress
to interfere with contracts--that a special grant was regarded as
essential to authorize a uniform system of bankruptcy. If such general
power existed, the delegation of an express power in the case of
bankrupts was unnecessary. As very justly observed by counsel, if this
sovereign power could be taken in any case without express grant, it
could be taken in connection with bankruptcies, which might be regarded
in some respects as a regulation of commerce made in the interest of
traders.
The grant of a limited power over the subject of contracts necessarily
implies that the framers of the constitution did not intend that
congress should exercise unlimited power, or any power less restricted.
The limitation designated is the measure of congressional power over the
subject. This follows from the nature of the instrument as one of
enumerated powers.
The doctrine that where a power is not expressly forbidden it may be
exercised, would change the whole character of our government. As I read
the writings of the great commentators and the decisions of this court,
the true doctrine is the exact reverse, that if a power is not in terms
granted, and is not necessary and proper for the exercise of a power
thus granted, it does not exist.
The position that congress possesses some undefined power to do anything
which it may deem expedient, as a resulting power from the general
purposes of the government, which is advanced in the opinion of the
majority, would of course settle the question under consideration
without difficulty, for it would end all controversy by changing our
government from one of enumerated powers to one resting in the
unrestrained will of congress.
"The government of the United States," says Mr. Chief Justice Marshall,
speaking for the court in _Martin_ v. _Hunter's Lessee_, "can claim no
powers which are not granted to it by the constitution, and the powers
actually granted must be such as are expressly given or given by
necessary implication." This implication, it is true, may follow from
the grant of several express powers as well as from one alone, but the
power implied must, in all cases, be subsidiary to the execution of the
powers expressed. The language of the constitution respecting the writ
of habeas corpus, declaring that it shall not be suspended unless, when
in cases of rebellion or invasion, the public safety may require it, is
cited as showing that the power to suspend such writ exists somewhere in
the constitution; and the adoption of the amendments is mentioned as
evidence that important powers were understood by the people who adopted
the constitution to have been created by it, which are not enumerated,
and are not included incidentally in any of those enumerated.
The answer to this position is found in the nature of the constitution,
as one of granted powers, as stated by Mr. Chief Justice Marshall. The
inhibition upon the exercise of a specified power does not warrant the
implication that, but for such inhibition, the power might have been
exercised. In the convention which framed the constitution a proposition
to appoint a committee to prepare a bill of rights was unanimously
rejected, and it has been always understood that its rejection was upon
the ground that such a bill would contain various exceptions to powers
not granted, and on this very account would afford a pretext for
asserting more than was granted. In the discussions before the people,
when the adoption of the constitution was pending, no objection was
urged with greater effect than this absence of a bill of rights, and in
one of the numbers of the Federalist, Mr. Hamilton endeavored to combat
the objection. After stating several reasons why such a bill was not
necessary, he said: "I go further and affirm that bills of rights, in
the sense and to the extent they are contended for, are not only
unnecessary in the proposed constitution, but would even be dangerous.
They would contain various exceptions to powers not granted, and on this
very account would afford a colorable pretext to claim more than were
granted. For why declare that things shall not be done which there is no
power to do? Why, for instance, should it be said that the liberty of
the press shall not be restrained when no power is given by which
restrictions may be imposed? I will not contend that such a provision
would confer a regulating power, but it is evident that it would furnish
to men disposed to usurp a plausible pretence for claiming that power.
They might urge, with a semblance of reason, that the constitution ought
not to be charged with the absurdity of providing against the abuse of
an authority which was not given, and that the provision against
restraining the liberty of the press afforded a clear implication that a
right to prescribe proper regulations concerning it was intended to be
vested in the national government. This may serve as a specimen of the
numerous handles which would be given to the doctrine of constructive
powers by the indulgence of an injudicious zeal for bills of right."
When the amendments were presented to the states for adoption they were
preceded by a preamble stating that the conventions of a number of the
states had, at the time of their adopting the constitution, expressed a
desire "in order to prevent _misconception or abuse_ of its powers, that
further declaratory and restrictive clauses should be added."
Now, will any one pretend that congress could have made a law respecting
an establishment of religion or prohibiting the free exercise thereof,
or abridging the freedom of speech, or the right of the people to
assemble and petition the government for a redress of grievances, had
not prohibitions upon the exercise of any such legislative power been
embodied in an amendment?
How truly did Hamilton say that had a bill of rights been inserted in
the constitution, it would have given a handle to the doctrine of
constructive powers. We have this day an illustration in the opinion of
the majority of the very claim of constructive power which he
apprehended, and it is the first instance, I believe, in the history of
this court, when the possession by congress of such constructive power
has been asserted.
The interference with contracts by the legislation of the several states
previous to the adoption of the constitution was the cause of great
oppression and injustice. "Not only," says Story, "was paper money
issued and declared to be a tender in payment of debts, but laws of
another character, well known under the appellation of tender laws,
appraisement laws, instalment laws, and suspension laws, were from time
to time enacted, which prostrated all private credit and all private
morals. By some of these laws the due payment of debts was suspended;
debts were, in violation of the very terms of the contract, authorized
to be paid by instalments at different periods; property of any sort,
however worthless, either real or personal, might be tendered by the
debtor in payment of his debts, and the creditor was compelled to take
the property of the debtor, which he might seize on execution, at an
appraisement wholly disproportionate to its known value. Such grievances
and oppressions and others of a like nature were the ordinary results of
legislation during the Revolutionary war and the intermediate period
down to the formation of the constitution. They entailed the most
enormous evils on the country and introduced a system of fraud,
chicanery, and profligacy, which destroyed all private confidence and
all industry and enterprise."
To prevent the recurrence of evils of this character not only was the
clause inserted in the constitution prohibiting the states from issuing
bills of credit and making anything but gold and silver a tender in
payment of debts, but also the more general prohibition, from passing
any law impairing the obligation of contracts. "To restore public
confidence completely," says Chief Justice Marshall, "it was necessary
not only to prohibit the use of particular means by which it might be
effected, but to prohibit the use of any means by which the same
mischief might be produced. The convention appears to have intended to
establish a great principle, that contracts should be inviolable."
It would require very clear evidence, one would suppose, to induce a
belief that with the evils resulting from what Marshall terms the system
of lax legislation following the Revolution, deeply impressed on their
minds, the framers of the constitution intended to vest in the new
government created by them this dangerous and despotic power, which they
were unwilling should remain with the states, and thus widen the
possible sphere of its exercise.
When the possession of this power has been asserted in argument (for
until now it has never been asserted in any decision of this court), it
has been in cases where a supposed public benefit resulted from the
legislation, or where the interference with the obligation of the
contract was very slight. Whenever a clear case of injustice, in the
absence of such supposed public good, is stated, the exercise of the
power by the government is not only denounced but the existence of the
power is denied. No one, indeed, is found bold enough to contend that if
A has a contract for one hundred acres of land, or one hundred pounds of
fruit, or one hundred yards of cloth, congress can pass a law compelling
him to accept one-half of the quantity in satisfaction of the contract.
But congress has the same power to establish a standard of weights and
measures as it has to establish a standard of value, and can, from time
to time, alter such standard. It can declare that the acre shall consist
of eighty square rods instead of one hundred and sixty, the pound of
eight ounces instead of sixteen, and the foot of six inches instead of
twelve, and if it could compel the acceptance of the same _number_ of
acres, pounds, or yards, after such alteration, instead of the actual
_quantity_ stipulated, then the acceptance of one-half of the quantity
originally designated could be directly required without going through
the form of altering the standard. No just man could be imposed upon by
this use of words in a double sense, where the same names were applied
to denote different quantities of the same thing, nor would his
condemnation of the wrong committed in such case be withheld, because
the attempt was made to conceal it by this jugglery of words.
The power of congress to interfere with contracts for the payment of
money is not greater or in any particular different from its power with
respect to contracts for lands or goods. The contract is not fulfilled
any more in one case than in the other by the delivery of a thing which
is not stipulated, because by legislative action it is called by the
same name. Words in contracts are to be construed in both cases in the
sense in which they were understood by the parties at the time of the
contract.
Let us for a moment see where the doctrine of the power asserted will
lead. Congress has the undoubted right to give such denominations as it
chooses to the coins struck by its authority, and to change them. It can
declare that the dime shall hereafter be called a dollar, or, what is
the same thing, it may declare that the dollar shall hereafter be
composed of the grains of silver which now compose the dime. But would
anybody pretend that a contract for dollars, composed as at present,
could be satisfied by the delivery of an equal number of dollars of the
new issue? I have never met any one who would go to that extent. The
answer always has been that would be too flagrantly unjust to be
tolerated. Yet enforcing the acceptance of paper promises or paper
dollars, if the promises can be so called, in place of gold or silver
dollars, is equally enforcing a departure from the terms of the
contract, the injustice of the measure depending entirely upon the
actual value at the time of the promises in the market. Now reverse the
case. Suppose congress should declare that hereafter the eagle should be
called a dollar, or that the dollar should be composed of as many grains
of gold as the eagle, would anybody for a moment contend that a contract
for dollars, composed as now of silver, should be satisfied by dollars
composed of gold? I am confident that no judge sitting on this bench,
and, indeed, that no judge in Christendom could be found who would
sanction the monstrous wrong by decreeing that the debtor could only
satisfy his contract in such case by paying ten times the value
originally stipulated. The natural sense of right which is implanted in
every mind would revolt from such supreme injustice. Yet there cannot
be one law for debtors and another law for creditors. If the contract
can at one time be changed by congressional legislation for the benefit
of the debtor it may at another time be changed for the benefit of the
creditor.
For acts of flagrant injustice such as those mentioned there is no
authority in any legislative body, even though not restrained by any
express constitutional prohibition. For as there are unchangeable
principles of right and morality, without which society would be
impossible, and men would be but wild beasts preying upon each other, so
there are fundamental principles of eternal justice, upon the existence
of which all constitutional government is founded, and without which
government would be an intolerable and hateful tyranny. There are acts,
says Mr. Justice Chase, in _Calder_ v. _Bull_, which the federal and
state legislatures cannot do, without exceeding their authority. Among
these he mentions a law which punishes a citizen for an innocent action;
a law that destroys or impairs the lawful private contracts of citizens;
a law that makes a man a judge in his own cause; and a law that takes
the property from A and gives it to B. "It is against all reason and
right," says the learned justice, "for a people to intrust a legislature
with such powers; and therefore it cannot be presumed that they have
done it. The genius, the nature, and the spirit of our state governments
amount to a prohibition of such acts of legislation, and the general
principles of law and reason forbid them. The legislature may enjoin,
permit, forbid, and punish; they may declare new crimes, and establish
rules of conduct for all its citizens in future cases; they may command
what is right and prohibit what is wrong, but they cannot change
innocence into guilt, or punish innocence as a crime, or violate the
rights of an antecedent lawful private contract, or the right of private
property. To maintain that our federal or state legislatures possess
such powers, if they had not been expressly restrained, would, in my
opinion, be a political heresy, altogether inadmissible in our free
republican governments."
In _Ogden_ v. _Saunders_, Mr. Justice Thompson, referring to the
provisions in the constitution forbidding the states to pass any bill
of attainder, _ex post facto_ law, or law impairing the obligation of
contracts, says: "Neither provision can strictly be considered as
introducing any new principle, but only for greater security and safety
to incorporate into this charter provisions admitted by all to be among
the first principles of government. No state court would, I presume,
sanction and enforce an _ex post facto_ law if no such prohibition was
contained in the constitution of the United States; so, neither would
retrospective laws, taking away vested rights, be enforced. Such laws
are repugnant to those fundamental principles upon which every just
system of laws is founded. It is an elementary principle, adopted and
sanctioned by the courts of justice in this country and in Great
Britain, whenever such laws have come under consideration, and yet
retrospective laws are clearly within this prohibition."
In _Wilkeson_ v. _Leland_, Mr. Justice Story, whilst commenting upon the
power of the legislature of Rhode Island under the charter of Charles
II. said: "The fundamental maxims of a free government seem to require
that the rights of personal liberty and private property should be held
sacred. At least no court of justice in this country would be warranted
in assuming that the power to violate and disregard them, a power so
repugnant to the common principles of justice and civil liberty, lurked
under any general grant of legislative authority, or ought to be implied
from any general expressions of the will of the people. The people ought
not to be presumed to part with rights so vital to their security and
well-being without very strong and direct expressions of such an
intention."
Similar views to these cited from the opinions of Chase, Thompson,
Story, and Marshall, are found scattered through the opinions of the
judges who have preceded us on this bench. As against their collective
force the remark of Mr. Justice Washington, in the case of _Evans_ v.
_Eaton_, is without significance. That was made at _nisi prius_ in
answer to a motion for a nonsuit in an action brought for an
infringement of a patent right. The state of Pennsylvania had, in March
1787, which was previous to the adoption of the constitution, given to
the plaintiff the exclusive right to make, use, and vend his invention
for fourteen years. In January, 1808, the United States issued to him a
patent for the invention for fourteen years from that date. It was
contended, for the nonsuit, that after the expiration of the plaintiff's
privilege granted by the state, the right to his invention became
invested in the people of the state, by an implied contract with the
government, and, therefore, that congress could not consistently with
the constitution grant to the plaintiff an exclusive right to the
invention. The court replied that neither the premises upon which the
motion was founded, nor the conclusion, could be admitted; that it was
not true that the grant of an exclusive privilege to an invention for a
limited time implied a binding and irrevocable contract with the people
that at the expiration of the period limited the invention should become
their property; and that even if the premises were true, there was
nothing in the constitution which forbade congress to pass laws
violating the obligation of contracts.
The motion did not merit any consideration, as the federal court had no
power to grant a nonsuit against the will of the plaintiff in any case.
The expression under these circumstances of any reason why the court
would not grant the motion, if it possessed the power, was aside the
case, and is not, therefore, entitled to any weight whatever as
authority. It was true, however, as observed by the court, that no such
contract with the public, as stated, was implied, and inasmuch as
congress was expressly authorized by the constitution to secure for a
limited time to inventors the exclusive right to their discoveries, it
had the power in that way to impair the obligation of such a contract,
if any had existed. And this is perhaps, all that Mr. Justice Washington
meant. It is evident from his language in _Ogden_ v. _Saunders_, that he
repudiated the existence of any general power in congress to destroy or
impair vested private rights.
What I have heretofore said respecting the power of congress to make the
notes of the United States a legal tender in payment of debts contracted
previous to the act of 1862, and to interfere with contracts, has had
reference to debts and contracts between citizens. But the same power
which is asserted over these matters is also asserted with reference to
previous debts owing by the government, and must equally apply to
contracts between the government and the citizen. The act of 1862
declares that the notes issued shall be a legal tender in payment of
_all debts, public and private_, with the exception of duties on imports
and interest on the public debt. If they are a legal tender for
antecedent private debts, they are also a legal tender for such debts
owing by the United States, except in the cases mentioned. That any
exception was made was a mere matter of legislative discretion. Express
contracts for the payment of gold or silver have been maintained by this
court, and specifically enforced on the ground that, upon a proper
construction of the act of 1862, in connection with other acts, congress
intended to except these contracts from the operation of the legal
tender provision. But the power covers all cases if it exists at all.
The power to make the notes of the United States the legal equivalent to
gold and silver necessarily includes the power to cancel with them
specific contracts for gold as well as money contracts generally. Before
the passage of the act of 1862, there was no legal money except that
which consisted of metallic coins, struck or regulated by the authority
of congress. Dollars then meant, as already said, certain pieces of gold
or silver, certified to be of a prescribed weight and purity by their
form and impress received at the mint. The designation of dollars, in
previous contracts, meant gold or silver dollars as plainly as if those
metals were specifically named.
It follows, then, logically, from the doctrine advanced by the majority
of the court as to the power of congress over the subject of legal
tender, that congress may borrow gold coin upon a pledge of the public
faith to repay gold at the maturity of its obligations, and yet, in
direct disregard of its pledge, in open violation of faith, may compel
the lender to take, in place of the gold stipulated, its own promises;
and that legislation of this character would not be in violation of the
constitution, but in harmony with its letter and spirit.
The government is, at the present time, seeking in the markets of the
world a loan of several hundred millions of dollars in gold, upon
securities containing the promises of the United States to repay the
money, principal and interest, in gold; yet this court, the highest
tribunal of the country, this day declares, by its solemn decision, that
should such loan be obtained, it is entirely competent for congress to
pay it off, not in gold, but in notes of the United States themselves,
payable at such time and in such manner as congress may itself
determine, and that legislation sanctioning such gross breach of faith
would not be repugnant to the fundamental law of the land.
What is this but declaring that repudiation by the government of the
United States of its solemn obligations would be constitutional?
Whenever the fulfilment of the obligation in the manner stipulated is
refused, and the acceptance of something different from that stipulated
is enforced against the will of the creditor, a breach of faith is
committed; and to the extent of the difference of value between the
thing stipulated and the thing which the creditor is compelled to
receive, there is repudiation of the original obligation. I am not
willing to admit that the constitution, the boast and glory of our
country, would sanction or permit any such legislation. Repudiation in
any form, or to any extent, would be dishonor, and for the commission of
this public crime no warrant, in my judgment, can ever be found in that
instrument.
Some stress has been placed in argument in support of the asserted power
of congress over the subject of legal tender in the fact that congress
can regulate the alloy of the coins issued under its authority, and has
exercised its power in this respect without question, by diminishing in
some instances, the actual quantity of gold or silver they contain.
Congress, it is assumed, can thus put upon the coins issued other than
their intrinsic value; therefore, it is argued, congress may, by its
declaration, give a value to the notes of the United States, issued to
be used as money, other than that which they actually possess.
The assumption and the inference are both erroneous, and the argument
thus advanced is without force, and is only significant of the weakness
of the position which has to rest for its support on an assumed
authority of the government to debase the coin of the country.
Undoubtedly congress can alter the value of the coins issued by its
authority by increasing or diminishing, from time to time, the alloy
they contain, just as it may alter, at its pleasure, the denominations
of the several coins issued, but there its power stops. It cannot make
these altered coins the equivalent of the coins in their previous
condition; and, if the new coins should retain the same names as the
original, they would only be current at their true value. Any
declaration that they should have any other value would be inoperative
in fact, and a monstrous disregard by congress of its constitutional
duty. The power to coin money, as already declared by this court, is a
great trust devolved upon congress, carrying with it the duty of
creating and maintaining a uniform standard of value throughout the
Union, and it would be a manifest abuse of this trust to give to the
coins issued by its authority any other than their real value. By
debasing the coins, when once the standard is fixed, is meant giving to
the coins, by their form and impress, a certificate of their having a
relation to that standard different from that which, in truth, they
possess; in other words, giving to the coins a false certificate of
their value. Arbitrary and profligate governments have often resorted to
this miserable scheme of robbery, which Mill designates as a shallow and
impudent artifice, the "least covert of all modes of knavery, which
consists in calling a shilling a pound, that a debt of one hundred
pounds may be cancelled by the payment of one hundred shillings."
In this country no such debasement has ever been attempted, and I feel
confident that none will ever be tolerated. The changes in the quantity
of alloy in the different coins has been made from time to time, not
with any idea of debasing them, but for the purpose of preserving the
proper relative value between gold and silver. The first coinage act,
passed in 1792, provided that the coins should consist of gold, silver,
and copper--the coins of cents and half-cents consisting of copper, and
the other coins consisting of gold and silver--and that the relative
value of gold and silver should be as fifteen to one, that is, that an
ounce of gold should be taken as the equal in value of fifteen ounces of
silver.
In progress of time, owing to the increased production of silver,
particularly from the mines of Mexico and South America, this relative
value was changed. Silver declined in relative value to gold until it
bore the relation of one to sixteen instead of one to fifteen. The
result was that the gold was bought up as soon as coined, being worth
intrinsically sixteen times the value of silver, and yet passing by law
only at fifteen times such value, and was sent out of the country to be
recoined. The attention of congress was called to this change in the
relative value of the two metals and the consequent disappearance of
gold coin. This led, in 1834, to an act adjusting the rate of gold coin
to its true relation to silver coin.
The discovery of gold in California, some years afterwards, and the
great production of that metal, again changed in another direction the
relative value of the two metals. Gold declined, or in other words,
silver was at a premium, and as gold coin before 1834 was bought up, so
now silver coin was bought up, and a scarcity of small coin for change
was felt in the community. Congress again interfered, and in 1853
reduced the amount of silver in coins representing fractional parts of a
dollar, but even then these coins were restricted from being a legal
tender for sums exceeding five dollars, although the small silver coins
of previous issue continued to be a legal tender for any amount. Silver
pieces of the denomination of three cents had been previously authorized
in 1851, but were only made a tender for sums of thirty cents and under.
These coins did not express their actual value, and their issue was soon
stopped, and in 1853 their value was increased to the standard of coins
of other fractional parts of a dollar.
The whole of this subject has been fully and satisfactorily explained in
the very able and learned argument of the counsel who contended for the
maintenance of the original decision of this court in _Hepburn_ v.
_Griswold_. He showed by the debates that congress has been moved, in
all its actions under the coinage power, only by an anxious desire to
ascertain the true relative value of the two precious metals, and to fix
the coinage in accordance with it; and that in no case has any deviation
from intrinsic value been permitted except in coins for fractional parts
of a dollar, and even that has been only of so slight a character as to
prevent them from being converted into bullion, the actual depreciation
being made up by their portability and convenience.
It follows, from this statement of the action of congress in altering at
different times the alloy of certain coins, that the assumption of power
to stamp metal with an arbitrary value and give it currency, does not
rest upon any solid foundation, and that the argument built thereon goes
with it to the ground.
I have thus far spoken of the legal tender provision with particular
reference to its application to debts contracted previous to its
passage. It only remains to say a few words as to its validity when
applied to subsequent transactions.
So far as subsequent contracts are made payable in notes of the United
States, there can of course be no objection to their specific
enforcement by compelling a delivery of an equal amount of the notes, or
by a judgment in damages for their value as estimated in gold or silver
dollars, nor would there be any objection to such enforcement if the
legal tender provision had never existed. From the general use of the
notes throughout the country and the disappearance of gold and silver
coin from circulation, it may perhaps be inferred in most cases, that
notes of the United States are intended by the parties where gold or
silver dollars are not expressly designated, except in contracts made in
the Pacific states, where the constitutional currency has always
continued in uses. As to subsequent contracts, the legal tender
provision is not as unjust in its operation as when applied to past
contracts, and does not impair to the same extent private rights. But so
far as it makes the receipt of the notes, in absence of any agreement of
the parties, compulsory in payment of such contracts, it is, in my
judgment, equally unconstitutional. This seems to me to follow
necessarily from the duty already mentioned cast upon congress by the
coinage power,--to create and maintain a uniform metallic standard of
value throughout the Union. Without a standard of value of some kind,
commerce would be difficult, if not impossible, and just in proportion
to the uniformity and stability of the standard is the security and
consequent extent of commercial transactions. How is it possible for
congress to discharge its duty by making the acceptance of paper
promises compulsory in all future dealings--promises which necessarily
depend for their value upon the confidence entertained by the public in
their ultimate payment, and the consequent ability of the holder to
convert them into gold or silver--promises which can never be uniform
throughout the Union, but must have different values in different
portions of the country; one value in New York, another at New Orleans,
and still a different one at San Francisco.
Speaking of paper money issued by the states,--and the same language is
equally true of paper money issued by the United States--Chief Justice
Marshall says, in _Craig_ v. _The State of Missouri_: "Such a medium has
been always liable to considerable fluctuation. Its value is continually
changing; and these changes, often great and sudden, expose individuals
to immense loss, are the sources of ruinous speculations, and destroy
all confidence between man and man. To cut up this mischief by the
roots, a mischief which was felt by the United States, and which deeply
affected the interest and prosperity of all, the people declared in
their constitution that no state should emit bills of credit."
Mr. Justice Washington, after referring, in _Ogden_ v. _Saunders_, to
the provision of the constitution declaring that no state shall coin
money, emit bills of credit, make anything but gold and silver coin a
tender in payment of debts, says: "These prohibitions, associated with
the powers granted to congress 'to coin money and to regulate the value
thereof, and of foreign coin,' most obviously constitute members of the
same family, being upon the same subject and governed by the same
policy. This policy was to provide a fixed and uniform standard of value
throughout the United States, by which the commercial and other dealings
between the citizens thereof, or between them and foreigners, as well as
the moneyed transactions of the government, should be regulated. For it
might well be asked, Why vest in congress the power to establish a
uniform standard of value by the means pointed out, if the states might
use the same means, and thus defeat the uniformity of the standard, and
consequently the standard itself? And why establish a standard at all
for the government of the various contracts which might be entered into,
if those contracts might afterwards be discharged by a different
standard, or by that which is not money, under the authority of state
tender laws? It is obvious, therefore, that these prohibitions in the
tenth section are entirely homogeneous, and are essential to the
establishment of a uniform standard of value in the formation and
discharge of contracts."
It is plain that this policy cannot be carried out, and this fixed and
uniform metallic standard of value throughout the United States be
maintained, so long as any other standard is adopted, which of itself
has no intrinsic value and is forever fluctuating and uncertain.
For the reasons which I have endeavored to unfold, I am compelled to
dissent from the judgment of the majority of the court. I know that the
measure, the validity of which I have called in question, was passed in
the midst of a gigantic rebellion, when even the bravest hearts
sometimes doubted the safety of the republic, and that the patriotic men
who adopted it did so under the conviction that it would increase the
ability of the government to obtain funds and supplies, and thus advance
the national cause. Were I to be governed by my appreciation of the
character of those men, instead of my views of the requirements of the
constitution, I should readily assent to the views of the majority of
the court. But, sitting as a judicial officer, and bound to compare
every law enacted by congress with the greater law enacted by the
people, and being unable to reconcile the measure in question with that
fundamental law, I cannot hesitate to pronounce it as being, in my
judgment, unconstitutional and void.
In the discussions which have attended this subject of legal tender
there has been at times what seemed to me to be a covert intimation,
that opposition to the measure in question was the expression of a
spirit not altogether favorable to the cause, in the interest of which
that measure was adopted. All such intimations I repel with all the
energy I can express. I do not yield to any one in honoring and
reverencing the noble and patriotic men who were in the councils of the
nation during the terrible struggle with the rebellion. To them belong
the greatest of all glories in our history,--that of having saved the
Union, and that of having emancipated a race. For these results they
will be remembered and honored so long as the English language is spoken
or read among men. But I do not admit that a blind approval of every
measure which they may have thought essential to put down the rebellion
is any evidence of loyalty to the country. The only loyalty which I can
admit consists in obedience to the constitution and laws made in
pursuance of it. It is only by obedience that affection and reverence
can be shown to a superior having a right to command. So thought our
great Master when he said to his disciples: "If ye love me, keep my
commandments."
CHAPTER V.
GOVERNMENT CONTROL OF RAILROADS.
Since concluding what we desired to say on the subject of controlling
and regulating railroads and railroad corporations, our attention has
been directed to a circular from _The New York Nation_, of July 27th,
1873, entitled: "The Railroad Discussion, and Common Sense." This
singular article challenges attention. If it is put forth in the
interest of railroad corporations, we can readily account for the views
expressed, and the covert foreshadowing of national control of
railroads; but if it be published and circulated in the interest of the
people as _The Nation_ would have us understand, it is not calculated to
assist them in their efforts at reform, but on the contrary will tend to
divide and distract their counsels, and delay the relief sought.
We copy the circular, that the reader may judge of its merits, and to
give a more intelligent understanding of our remarks upon it:--
THE RAILROAD DISCUSSION AND COMMON SENSE--THE LATEST DEVICE FOR
FIXING RATES OF TRANSPORTATION.
(From the Nation [N. Y.] of July 17.)
We have followed, and shall continue to follow, the "farmers' movement"
with great interest, but it must be confessed that it seems at times of
no little difficulty, owing to the very heterogeneous composition of the
organizations which are carrying it on, and the wide diversity of their
character and avowed aims. When Judge Lawrence was turned out of office
in Illinois by the "Grangers," and Judge Craig put in his place, we took
it for granted that they were going to deliver themselves from the
tyranny of the railroads by putting judges on the bench pledged to
interpret the state constitution in a particular way, or in other
words, as one of the local papers put it, by showing that "the people"
were superior to both laws and judges. It has, however, since been
stoutly denied that this interference with the bench was anything more
than a local accident, and we have been assured that the farmers seek
changes of a much more legitimate character, and resting on more solid
foundations than the creation of a subservient judiciary. The recent
platforms have certainly had a much wider sweep than the earlier ones,
and, unless language has been strangely abused in making them, embrace
grave modifications in fiscal as well as in railroad legislation. But
the question how to reduce the railroads to the condition of public
highways, controllable by and existing solely or mainly for the
convenience of the community, is still apparently as far from solution
as ever. It is by no means surprising that this should be the case, but
that it is the case we are forced to conclude by the extraordinary
character of the latest plan propounded by the reformers, which has had
sufficient plausibility to command the approval of so sober-minded a
paper as the Chicago _Tribune_.
The farmers have been accused, partly in consequence of their escapade
about the judges in Illinois, of seeking to rob the railroad companies
of their lawful earnings by forcing them to carry on their business at a
loss, under the operation of cast-iron rules, drawn up without reference
to its peculiar nature. This was a charge of which the farmers soon
began to see the gravity, and they accordingly now announce that they
have no scheme of spoliation or confiscation in their minds, but that
they have at last hit upon a mode of ascertaining what are "reasonable
rates," which consists in discovering what was the amount of capital
"actually invested in constructing and operating the roads," and
treating a fair percentage of this as a proper return to the
stockholders, and all charges which bring in more than this as
"unreasonable," and therefore open to prohibition by the courts and
state legislatures. Under this theory of railroad property, all stock
which does not represent money actually invested is treated as
"fictitious," and all attempts to earn dividends on such stock as
attempts at extortion. For instance--to put a case of frequent
occurrence--a corporation obtains a charter for a road which will cost
two million dollars to build. It accordingly borrows the two millions on
mortgage bonds, and constructs the road, while the members divide among
themselves two millions of stock more, and they work the road so as to
make it pay interest on the four millions. The farmers now say that no
road shall be so worked as to pay interest on anything but the proceeds
of the bonds, or, in other words, the actual cost of construction and
equipment. This, stripped of details, is the new plan, as gravely
propounded by the Chicago _Tribune_.
Now, if anybody will get up and propose a general railroad act of this
nature, applicable to all roads hereafter to be built, we think we can
promise that he will have the hearty support of everybody who has
seriously reflected on the railroad problem. Forbid the construction of
any road except with the proceeds of paid-up stock, and forbid any
higher dividends than a certain fixed percentage on this amount, and we
shall have a rule of which nobody can complain. We do not believe that a
single mile of railroad would ever be constructed under such a rule in a
new and thinly settled country like the west or south. Safe investments
are not so scarce as to induce people to go into one of the most unsafe
of investments, and one promising in most cases no return at all for
several years, for the mere chance of seven or even ten per cent at the
outside. But we should, nevertheless, be heartily glad to see the plan
tried, and believe it would, by stopping railroad construction for the
present, bring the western farmers to a healthier comprehension of their
relations to the roads, and railroad companies to a healthier
comprehension of their relations to the community, and might tend to a
solution of the railroad problem, which would be both permanent and
satisfactory.
But the application of any such rule now to roads _already in operation_
would be spoliation pure and simple--spoliation as flagrant as any ever
proposed by Karl Marx or Ben. Butler; if any attempt were made to carry
it out, it would produce perhaps the greatest financial crash ever
witnessed. It has in the first place that leading characteristic of Ben.
Butler's greenback scheme, that it would not only violate a tacit pledge
made by the state to individuals, but it would deprive men of rewards
already earned by running great risks. When a railroad constructed for
two million dollars is made to earn interest on four millions, the case
is precisely similar to that of a government which in a time of great
danger and perplexity sells seven per cent bonds at fifty; and the
present proposal of the farmers resembles Butler's plan of paying the
bondholders in 1870 what they gave for their bonds in 1862. In fact, it
is the old-fashioned game on a great scale of "Heads I win, tails you
lose." The west has, during the past thirty years, wanted railroads,
which there was a very small chance of making profitable for a long
time. It encouraged eastern men and foreigners to make them in any way
they pleased, running whatever risk there was, and pocketing whatever
gain there might be, and they were made. The investment then was one of
great danger and difficulty; _to treat it now as one of no danger and no
difficulty would, be simply swindling_. The word is hard, but the times
demand plain speech. This was perhaps a bad mode of securing lines of
communication, but the laws allowed it and encouraged it, and the people
applauded it, and it is now a contract as binding in morals as in law.
It is open to us to turn over a new leaf, and permit no more roads to be
made in that way, but it is not open to us to treat those who lent us
their money as dupes. As there has been enough of this sharp practice
already, more of it would seriously shake the foundations of social
order.
In the second place, as regards the older roads, it is not possible for
"the people" or anybody else to ascertain what is the exact amount on
which, in abstract justice, the earnings ought to pay interest. The
stock, whether "fictitious" or not, has in most cases passed out of the
hands of the original holders. It has been sold and resold, in open
market, under the most solemn guarantees known to civilized society,
with the understanding that it represented the _bona fide_ ownership of
the roads, with all their earnings, possible as well as actual. The
laws, the courts, and public opinion, assured to it this character
without reservation or qualification. In this character it has passed
into the hands of widows, orphans, and helpless people generally, of
charitable corporations, of colleges, banks, and institutions of all
kinds by which the affairs of the community are administered. To throw
any doubt on its value now would be to cause an amount of misery and
alarm which no thinking man could contemplate without a shudder. If the
state wants to make the railroads common highways, it has the right to
take them, but at their market value, paying the owners what other
people would pay them, and not enquiring curiously and knavishly into
the original cost. Between honest parties to a bargain, that, to use a
homely phrase, is "Neither here or there." The people ought,
undoubtedly, to have looked forward a little when they first began to
grant charters; but not having done so, they ought not to now throw on
others the whole damage done by their own laches.
Though last, not least, much of the outcry over the high rates charged
by railroads is due to an immense but deeply seated popular delusion as
to the value of railroad property. When one puts his newspaper aside,
and sits down calmly to examine the receipts which the farmers are so
anxious to have cut down, the proposal we are discussing assumes a
somewhat ludicrous aspect. We have before us the last issue of "Poor's
Railroad Manual," which certainly ought to be perfectly studied before
the minds of the public are filled with wild and revolutionary notions
about railroad property. There were in operation last year in the United
States, 57,323 miles of railroad, the net earnings of which bore to the
_cost_ of the roads the relation of 5.20 per cent, and to the capital
stock of 3.21. This means simply that the work of transportation in the
United States is, on the average, already done at a loss to the owners
of the lines, or, in other words, vastly more cheaply to the public than
there is the least likelihood of its being done in any other way--an
assertion which anybody may verify by examining the accounts of the New
York state canals. Now, fancy anybody seriously proposing to capitalists
to construct railroads, as most of the western railroads were
constructed, through a howling wilderness, for _the chance_ of five and
a half per cent, whenever the earnings allowed it; and fancy what
subjects for spoliation are presented by the bloated owners of railroad
property who pocket on the average less than four per cent on the face
value of their stock. Let us add, finally, that no corporation should be
restricted by law to a certain rate of earnings, unless it contracts
freely to do the work on those terms or has a minimum guaranteed to it
by the state. In short, the railroad question, we would remind the
Chicago _Tribune_, is not simply a question of dollars and cents. It is
a question of morality in its highest and most important phases, and one
the settlement of which must touch the security of all property, and
affect the value of constitutions as safeguards of individual rights.
We have gone on for thirty years treating railroads as private property,
and permitting and encouraging their construction by private enterprise.
Out of this numerous abuses have grown up which ought to be remedied.
The corporations have grown too powerful; their influence in politics is
corrupting; the power of directors in the management is too great. For
the reform of all this, careful legislation _preceded by careful
inquiry_ is necessary. The prohibition of special legislation would do
much to abate the corruption. Some means ought also to be devised for
protecting the minority of the stockholders against the despotic power,
which in some cases amounts to virtual confiscation, of those holding a
bare majority of the stock, or, in other words, of giving stockholders
the means of actually superintending the management of their own
property and defending themselves against "rings" and "raids." Moreover,
the power of directors to do anything but work the road ought to be
diminished. Their discretion as regards extensions, combinations,
consolidations, leases, and purchases, ought to be greatly reduced, if
not destroyed. This involves two things not easily supplied. One is wise
legislation, and the other honest government inspection. How far we are
from both is best shown by the Illinois attempt at reform, which
consists at present in taking the working of the roads out of the hands
of the exceedingly able body of trained business men who now have charge
of it, and compelling them to use a crazy table of "rates" drawn up by a
mob of excited and ignorant politicians. If we are not prepared for
this, the alternative, and the only one, is the purchase of the
railroads by the state, and their management by our Murphys and Caseys.
We shall not argue against this at present, for obvious reasons. But
this, whatever difficulties it may present, is the only honorable way
of escaping the necessity of such reforms in the present system as we
have indicated above. Whatever the evils of our railroad system, they
are not to be met or removed by fraud.
_First._ _The Nation_ says that it has "followed the 'farmers' movement'
with great interest, and with no little difficulty, owing to the
heterogeneous composition of the organizations which are carrying it on,
and the wide diversity of their character and avowed aims." The thought
suggested is, that because the farmers are not united in their views
relative to the best means to effect reform, because of the
heterogeniety of their composition, the author of the circular could not
understand their objects and aims. Unity of thought and action is rarely
found in any body of men, even when few in number, during the discussion
of ends sought to be obtained. Such unity cannot be expected in the
first stages of the organization, and discussions of plans for future
action. When the people living in various parts of the country, in
different states, with diverse interests, but all having in view the
accomplishment of a common end, attempt to unite their efforts, it would
be too much to expect that they would harmonize at the outset in their
views, or that they would not commit some errors. The "farmers'
movement" is in its incipiency; it maybe said to be now only preparing
for action, and it is yet too soon to look for united effort. The first
assertion of the circular is only a covert thrust at the "farmers'
movement"--an attempt to impress upon the public mind the belief that it
is the effort of an irresponsible _mob_ or _rabble_ to defy law and
override the rights of other classes, and especially of railroad
corporations. Hence _The Nation_ is desirous of talking "common sense,"
and in its opening discloses its "common sense" to be a plea in behalf
of railroad corporations.
_Second._ The circular casts odium on the efforts now being made to
correct the abuses practiced by railroad corporations, by the use of the
following language; "When Judge Lawrence was turned out of office in
Illinois by the Grangers, and Judge Craig was put in his place, we took
it for granted that they were going to deliver themselves from the
tyranny of railroads by putting judges on the bench pledged to interpret
the state constitution in a particular way, or, in other words, as a
local paper has it, by showing that 'the people were superior to both
laws and judges.'" Is it true that "Judge Lawrence was turned out of
office?" He was a candidate for re-election, but a majority of the
people voted for another man. Judge Craig was elected to office in the
constitutional method, and took the seat formerly occupied by Judge
Lawrence. The people did not "turn him out," but in the legal method,
when his term had expired, elected another man. But, says the circular,
"we took it for granted that they (the Grangers) were going to deliver
themselves," etc. There were no other judges to be elected, and there
was nothing in the election of Craig that would warrant _The Nation_ in
arriving at the conclusion that control of the state was to be taken,
and judges elected pledged to decide constitutional questions in a
particular way. The idea is put prominently forth that the people who
are attempting reform are a heterogeneous, irresponsible, body of men--a
mob, who, by the mere strength of numbers, are going to overturn all
law, pack the courts, and rule as mere caprice should dictate. This was
taken for granted, because the people had elected one judge whom they
believed was in sympathy with them. By the same rule we are warranted in
assuming that the appointment of two judges in sympathy with the
railroad interest of the county will revolutionize this whole
government, and that all judges to be hereafter appointed will be
pledged to decide all constitutional questions in favor of railroads.
The author of this circular, however, is forced to admit that he was
mistaken in his conclusions, and that the farmers "seek changes of a
more legitimate character, and resting on a more solid formation than
the creation of a subservient judiciary." While the people of the whole
country knew and fully understood that the objects the farmers were
seeking to accomplish were relief from the oppressions and extortions
practiced by railroad companies; while the agricultural, political, and
religious press of the land had been discussing the various
propositions, and conventions of farmers and mechanics were meeting, and
platforms and principles were being published, and the Patrons of
Husbandry were discussing at public meetings and in the newspapers the
best means for adoption, the author of this circular, who is now coming
to the front as the champion of railroad corporations, or of the people,
or of both, and is scattering his circular throughout the land, had
heard nothing of the movement, and took it for granted that all that was
sought by the "Grangers" was to elect "judges pledged to decide
constitutional questions in a particular way;" and it required the
"recent platforms" to admonish him that the Grangers looked to a reform
of the abuses connected with the railroads and finances of the country.
With the new light our author received from the "platforms," he hastens
to illuminate the public mind on this "vexed" railroad question. Having
now mastered the situation, the writer takes it for granted that the
all-important question is, "How to reduce railroads to the condition of
public highways, controllable and existing solely or mainly for the
convenience of the community," and concludes that the question is "as
far from solution as ever."
It matters little whether railroads are considered "public highways" or
private property. The name by which they are known will not make any
difference. The real question is, how to make them subserve the objects
for which they were intended, and at the same time afford a fair
remuneration to the persons owning them. Some of the courts have already
decided that the railroads of the country are public highways; but such
decisions afford no relief. _The Nation_ does not give us its opinion,
nor does it seem to be aware that the supreme court of the United States
has decided that railroads are public highways.
_Third._ _The Nation_ says that "The farmers have been accused partly
because of their escapade about the judges of Illinois, of seeking to
rob the railroad companies of their lawful earnings, by forcing them to
carry on their business at a loss, under the operation of cast-iron
rules, drawn up without reference to its peculiar nature; that the
farmers virtually acknowledged this charge when they saw its gravity,
and that they accordingly now announce that they have no scheme of
spoliation or confiscation in their minds, but have at last hit upon a
mode of ascertaining what are 'reasonable rates,' which consists in
discovering what was the amount of capital invested in constructing and
operating the roads, and treating a fair per cent on this as a proper
return to the stockholders, and all charges which bring in more than
this as 'unreasonable,' and therefore open to prohibition by the courts
and state legislatures." _The Nation_ admits that this rule applied to
companies hereafter organized, and roads hereafter built, would be just,
and assures us that everybody would approve of such a law. Let the road
be built with the proceeds of paid-up stock, and restricted to a fair
per cent dividend on such paid stock, and _The Nation_ will approve. To
verify its hearty indorsement of this plan, it tells us in the next
sentence that it does "not believe that a single mile of railroad would
ever be constructed under such a rule in a new and thinly-settled
country like the west and south." It would be glad to see it tried,
believing "it would stop building railroads for the present, bring
western farmers to a healthier comprehension of their relation to the
roads, and railroad companies to a healthier comprehension of their
relation to the community, and might tend to a solution of the railroad
problem which would be both permanent and satisfactory." It gives as a
reason why no roads would be built, that capitalists would not invest
their money on unsafe security, or where the return would be uncertain.
The logical deduction is, that if railroad companies are limited in the
amount of their stock to the actual cost of the roads, no money can be
obtained to build them; but if the company is allowed to add fictitious
stock--to "water" it at pleasure, then capital can be had.
We do not discover the force of this reasoning. Railroads are usually
constructed with borrowed capital. The capitalist loaning his money
loans it on what he believes to be advantageous terms and good security.
If a road cost $2,000,000, and is built with borrowed capital, we cannot
readily see how the security is improved by issuing to the stockholders
certificates for $2,000,000 of stock, no part of which has been paid.
True, it may have the effect to place the road in the hands of men who
are experienced in operating roads, capitalizing their earnings and
watering stocks, borrowing money on bonds, and loading the road with a
burden that can only be supported by extortion; but it does not increase
the value of the security held by the lender, nor does it enhance the
value of the road. The less burden in the way of debts there is resting
on a road, the more valuable are its stock and bonds. We confess we
cannot discover the strength of _The Nation's_ argument. It seems to
take it for granted that railroads can only be constructed by the class
of men who now monopolize the business; in other words, that the class
of unscrupulous men who have reduced the organizing of railroad
companies and the manner of obtaining capital for the construction of
roads to a system, are the only men who can undertake any railroad
enterprise. It looks upon the south and west as destitute of men
competent to organize a railroad company, or to procure means for the
construction of railroads, or to construct them when the capital has
been obtained. It regards the home construction of railroads in these
sections as out of the question. It concludes that the method now
adopted for procuring capital and constructing railroads is the only one
that can be adopted. It forgets that in purer and simpler times
railroads were built and owned by the parties living along their lines;
that the process of adding large amounts of stock by watering was not
then discovered, and that without these fictitious additions fair
returns were made for the amounts invested. After all, railroads are
only built when and where the business of the country requires them,
save where large bounties are paid. In the west and south, where the
business of certain localities and districts require a railroad, it will
be built, even if the legislature should require the owners and
stockholders to become so far honest as to limit their stock to the
actual cost of the road, and to compel stockholders to pay up before
obtaining certificates for their stock. It does not require these
professional men to organize and control railroad companies, or the
roads after construction.
But for the interference of rings formed to prevent such a consummation,
any company of men who desire a railroad in their locality, by pursuing
an honest course, could organize a company and build their road. If the
amount of stock necessary to build the road was in good faith
subscribed, and the same was being paid up as the construction of the
road progressed, any reasonable amount of money could be obtained by
such company by making an honest showing to capitalists. The demand for
railroads would be as regularly supplied, as for any other article of
necessity. The laws of trade would regulate their construction. In all
such cases capitalists would have the best of security, and the roads
would pay fair dividends on paid-up capital and interest on the sum
borrowed for legitimate purposes. But if there were no legitimate call
for the road, if it were intended as a fraud, by a set of educated
sharpers who desired to receive large dividends on stock not paid up, or
to borrow money by the sale of bonds in an amount double the cost or
value of the road when completed, then it could not be built under the
_new rules_ and _The Nation's_ prediction would be verified. Any
legitimate business not "cornered" or controlled by combinations or
rings can be successfully prosecuted, and to say, as does _The Nation_
in substance, that if railroad companies are forbidden to act
dishonestly and corruptly, no more railroads will be constructed, is an
admission that the whole system is a fraud, and is a strong argument in
favor of immediate, prompt, and efficient action on the part of state
legislatures and of the courts. If men must become dishonest in order to
build and operate railroads successfully, the whole system is rotten and
should be destroyed, and an honest plan substituted.
_Fourth._ But says _The Nation_: "The application of any such rule
to roads _already in operation_, would be spoliation, pure and
simple. * * * * It would not only violate a tacit pledge made by the
state to individuals, but would deprive men of rewards already earned by
running great risks." This is the old argument in favor of railroad
companies, but with this difference: It makes the state a party to the
dishonest practices of men who have enriched themselves at the expense
of the public, and those to whom they have sold their bonds. We venture
the assertion that, with few exceptions, all railroads in the United
States that have been honestly and prudently managed have earned a fair
per cent on the capital actually expended in building, equipping, and
operating them, and that a scale of tariffs greatly less than the rates
now charged would, as a rule, afford fair dividends on the actual cost
of the roads. No instances can be shown, where the states, in granting
charters to railroad companies, directly or in the passage of general
incorporation statutes, have given to the companies the right to commit
frauds upon the parties with whom they deal by using their credit to
build their roads, and without payment of their subscriptions issue to
themselves certificates as for paid-up stock. In all cases, individual
stockholders are made liable for the debts to the amount of their stock.
In contemplation of law the stock is paid up, and the roads are
constructed by using the capital derived from this source. The stock is
supposed to amount to as much as the cost of the road. The state, in
giving the company a corporate or artificial being, enters into no
agreement, express or implied, to make good the contract of the company,
or to be responsible for their misconduct, further than to exercise such
control over them as to prevent or reform abuses, by compelling them to
act honestly--being the same control exercised over all other persons
within its jurisdiction. The creditors of railroad corporations have no
stronger claim on the state in case of the non-fulfillment of contracts
by railroad companies, or in cases of fraudulent and dishonest
practices, than have the creditors of individuals. If a man worth $2,000
represents himself to be worth $4,000, knowing that his representations
are false, and obtains credit upon his property for twice its real
value, he violates the law, can be punished criminally, and is also
responsible in a civil action; but his creditor has no claim upon the
state for payment of the sum loaned or credit given on those
representations. Is the claim different when a railroad corporation is
the party obtaining the credit? Is the state under any greater
obligations in one case than in the other? But _The Nation_ says the
custom of doing business on this plan has obtained and been in use for
thirty years, and from this draws an argument in favor of its
legitimacy. Does this fact make it honest? or change the relation of the
state to these corporations? A man has followed horse-stealing for
thirty years, and is at last detected; he has been in the habit of
selling his stolen horses to innocent parties; they have been reclaimed
by the owners; can the purchasers, because this thief has so long
followed his pursuit, claim compensation from the state? A man obtains
goods under false pretenses, and before the owner can reclaim them,
sells them to a third party; can the person defrauded claim compensation
from the state? We cannot discover the distinction between the cases
stated and that of railroad companies, who by falsely pretending that
they have paid up their capital stock, obtain money on their bonds for
an amount greater than the value of their entire roads. They all commit
crimes for which they are liable to be punished, and all are liable in
law to make good their contracts; but in neither case is there any
pecuniary liability imposed upon the state or the public. Nor would the
application of the rule to railroad companies already in existence, who
have built their roads, be "spoliation pure and simple." It never can be
wrong to compel men to do right. If railroad companies, by arbitrarily
increasing their capital stock, and issuing certificates therefor
without payment of any part of it, as is the general rule among them,
are receiving dividends on such stock, justice to the public demands
that the state legislatures should compel them to purge their stock, and
at once cancel all such spurious and illegitimate issues. The duty the
state government owes to the public demands this, that the oppressions
under which the people suffer may be prevented in the future. But "it
would deprive men of rewards already earned by running great risks."
What these "great risks" are, is not readily seen. They certainly have
not risked their money; they built their roads on borrowed capital, and
have declared dividends to themselves on stock they have never paid.
They extort from the public, in charges for transportation, money
sufficient to pay the interest on the money borrowed for building their
roads, and to pay dividends on their stock that has not cost them
anything, and if they have run any risks they are the same that all men,
who violate the law, have ventured upon. The pecuniary risks are all
taken by the parties from whom they borrow.
_The Nation_ says that the west during thirty years has wanted
railroads, and that there was small chance of making them profitable for
a long time. That "it encouraged eastern men and foreigners to make
them in any way they pleased, running whatever risks existed, and
pocketing whatever gain there might be--and they were made." The people
of the west have vivid recollections of the manner in which the means
were raised to make their railroads. They took large amounts of stock,
and voted large amounts of local aid for which they were to receive
stock and dividends. After contributing sufficient to pay at least
one-half of the entire cost of their roads, their eastern _friends_
mortgaged their roads and sold them out, and the "people of the west"
got neither stock nor dividends, but they are to-day paying taxes to
discharge debts contracted by them in building their roads after having
been swindled by their _eastern friends_ out of values, amounting in
Iowa alone, to not less than $4,000,000. _The Nation_ further says that
"the investment then was one of great danger and difficulty; _to treat
it now as one of no difficulty and no danger, would be simple
swindling_." This journal evidently knew but little of the real facts in
the case, or it would not have made this assertion. But if we admit that
the undertaking was both dangerous and difficult, does that exempt from
all responsibility the adventurers who came west and _fattened_ off of
the simplicity of the people? Does it absolve them from the effects of
their dishonest acts? Are the states pledged to make good the dishonest
contracts of these adventurers because of the danger or difficulty they
run?
While the law should regulate the action of all railroad companies,
would it be "simple swindling" for the legislature to compel these
pioneer adventurers to purge their companies of fictitious or "watered"
stock, or limit their rate of charges? We do not believe that the
legislature ever intended to charter railroad companies to prey upon the
people at pleasure and without restriction, nor is it true that any
injustice would be done in compelling companies, whose roads are
constructed, to reduce their stocks to the amounts actually invested in
their roads, and to limit their rates of charges to a fair and
reasonable compensation for the money so invested. Nor would it shake
the foundations of social order to compel these men to act honestly.
But another difficulty is suggested in this circular. Our author says:
"It is not possible for 'the people' or anybody else to ascertain the
_exact_ amount, on which, in abstract justice, the earnings ought to pay
interest." True, it may be hard to ascertain what is the "exact" amount,
but this fact presents no great difficulty. It is now known to nearly
everybody about what railroads cost per mile. When a road that we know,
in the nature of things, could not have cost more than $35,000 per mile,
is by the "watering" process shown to have cost the sum of $75,000, it
would not be difficult to approximate the amount of stock that should be
cancelled; nor need the fact that the exact amount cannot be ascertained
prevent legislative action. In all cases a large margin to cover any
doubts might be allowed to the companies, and still great reductions
could be made.
_Fifth._ _The Nation_, as it progresses, becomes more earnest. It takes
up the oft repeated cry of "innocent purchasers," "widows and orphans,"
with their all invested in railroad stock. "Charitable corporations and
banks" have invested in railroad stocks and "helpless people generally."
It tells us that "this stock has been sold and resold, in open market,
under the most solemn guarantees known to civilized society, with the
understanding that it represents the _bona fide_ ownership of the roads,
with all their earnings, possible as well as actual. The laws, the
courts, and public opinion, assured to it this character without
reservation or qualification. * * * To throw any doubt on its value now
would be to cause an amount of misery and alarm which no thinking man
could contemplate without a shudder." That some parties would suffer
financially by compelling railroad companies to reduce their stock to an
honest standard cannot be denied, and in some cases it might work
absolute financial ruin. But that any considerable amount of railroad
stock is held and owned by poor people is rather improbable, and that
"helpless people generally" deal in railroad stock is not true. That
some purchases are made by innocent parties may also be true; yet in
this day and age when the fact that at least one-half of all railroad
stock is mere fiction and has no intrinsic value is known to the public
generally, a third party must be "innocent" indeed to purchase it
without knowing that its value is imaginary rather than real.
Most of the stocks and bonds of railroad companies are sold in Wall
Street by the owners and managers, acting in their character of brokers
and stock gamblers. The innocent third parties are generally the dupes
of these brokers who are on the lookout for the unwary. These dupes are
caught and stripped and turned loose without remorse, when the managers
of the great railroad interests of the country are "loading or
unloading," and no complaint is heard. The "innocents" are robbed
without exciting a passing remark; but when an attempt is made to
relieve the people from the onerous burdens imposed upon them, we hear
on all sides the cry of "innocent purchasers!" and of the great wrongs
about to be committed. They virtually admit their own dishonesty, but
say in substance: "We have duped others and you must permit us to rob
the people in order that 'innocent' third parties may not suffer." This
is the pith of _The Nation's_ argument. It goes further, and says: The
law and the courts have sanctioned this dishonest course, and because of
this, the same raid upon the rights of the people must be allowed to
continue without interruption.
Neither the people nor the state are in any manner responsible for the
acts of these railroad managers. All contracts for the sale of bonds or
stocks are in the first instance made with the companies or their
agents. They are responsible to the parties holding their bonds or
stocks. Their roads are liable to their full value, and each stockholder
is liable to the amount of stock he owns, and to that extent must make
good the contracts made by the managers of the road. The purchaser had
the means of knowing the value of the stock he purchased. If he suffer,
his suffering is the result of the fraud of the directors of the road,
and of his own negligence. None of these causes affect the right of the
state to regulate the company, and to compel it to act honestly.
The cry of "innocent purchasers" will not avail. While the people can
sympathize with those who are defrauded by the dishonest acts of the
companies, and appreciate the helpless condition of widows and orphans
who have lost by railroad rascality, the facts will demonstrate that
they are few in number, unless we include among the "widows and orphans"
Commodore Vanderbilt, Col. Tom. Scott, Daniel Drew, Jay Gould, and the
Wall street brokers generally, who own and control most of the railroad
stocks. If we admit all that is stated in the circular, the right of the
people to be protected against the impositions and oppressions of the
railroad companies remains unchanged, and the legislature, acting for
the whole people, can control the management of the companies so far as
it affects the public. If the doctrine advocated by the circular be
true, railroad corporations are now able to defy the government and the
people.
_Sixth._ _The Nation_, in its circular letter, says: "If the state wants
to make the railroads common highways, it has the right to take them,
but at their market value, paying the owners what other people would pay
them, and not inquiring curiously and knavishly into their original
cost. Between honest parties to a bargain, that, to use a common phrase,
is neither here nor there." We get more light as we advance. As we
understand the principles of our government, the states possess the
right of eminent domain. But they have no power to buy and sell, like
corporations or individuals. They may condemn private property for
public use, if the public good requires it. The value of property for
public use is ascertained in the manner prescribed by statute. _The
Nation_ is inconsistent. It says in one paragraph that the state has no
lawful right to regulate railroads and restrict the action of railroad
companies in the issuing of stock, etc., and then declares that the
state can take the railroads from the companies should it desire to do
so. But for cool assurance _The Nation_ is entitled to the champion belt
when it says the state _must_ take the roads at their market value--at
what other people would pay for them--without inquiring "curiously and
knavishly" into the original cost! In other words, these corporations
are so potent that should the state attempt to exercise its right of
eminent domain, they can dictate the terms upon which they would be
willing to surrender their roads to the public. The terms are that the
state must pay the companies' value for all the watered stock with
which they have loaded their roads, as well as for all the bonds the
companies have sold, and do this _without asking questions_. If the
people or the states should stop to inquire into their cost, they would
be acting knavishly. True, the companies could not build their roads
without special grants from state legislatures, but having obtained the
privilege of locating their roads where they pleased, and having, by
false pretences, obtained local aid and defrauded the people who helped
to build the roads; having piled up their fictitious stock by the
billion, and by onerous and dishonest charges reduced the farming
population to poverty, their champion, _The Nation_, tells the states:
"If you want the railroads, you can take them, but you must not be
curious to know what they cost; this would be a knavish act; you can
have them by paying the companies the full amount of money they claim to
have invested, including fictitious and watered stock." This kind of
impudence is sublime. The railroad companies, through this _hired
spokesman_, propose to quit business provided the states will pay them
just what they are pleased to call the value of their roads, and ask no
questions. It is usual for the thief, when seeking immunity for his
crimes, to propose to return a part of the stolen property, but these
corporations, who have been robbing the states and the people for years,
offer to close their career by forcing upon the parties robbed what is
left of their booty, provided the states will pay to them not only the
cost of the roads, but allow them par value for all their bogus or
fictitious stock.
They propose to compel the states to adopt a new rule--the rule that
governs operations in Wall street. They will "bull" their stock to the
highest point, and force the states to purchase at these high figures.
_The Nation_ says that "The people ought undoubtedly to have looked
forward a little when they first began to grant charters; but, not
having done so, they ought not now throw on others the whole damage done
by their own _laches_." The conclusion is that because they dealt with
railroad companies as they deal with honest men, and did not provide in
advance for the punishment of all conceivable dishonest practices on the
part of the officers of the companies, _therefore_ the people are the
guilty parties and should reward the innocent railroad companies by
paying them real dollars for the imaginary dollars they have added to
their stock. The railroad companies took an undue advantage of the
people, but that is "neither here nor there;" the companies must get
from the states all that they please to demand for their roads. This is
the "common sense" _The Nation_ presents to the people.
The power of the states, under the constitution, to purchase, is not
doubted by this advocate of the railroad interest, nor does he, in his
"common sense," consider the immense tax that the purchase of the
railroads would entail upon the people.
_Seventh._ _The Nation_ says that "Much of the outcry over the high
rates charged by railroads is due to an immense but deeply-seated
popular delusion as to the value of railroad property." The reader is
then referred to Poor's Railroad Manual for the value of railroad
property, but _The Nation_ fails to state that in this Manual the value
of all railroads is given as furnished by the companies themselves; it
includes all their watered stock and bonds with which the roads are
"loaded," and does not purport to give the actual cost of any road. The
book, too, is published in the interest of the companies, and for the
purpose of inflating rather than giving the true value of the roads.
From this Manual it appears that dividends do not average more than five
per cent on the stock. When it is remembered that every dollar invested
in railroads (taking all the roads in the United States) represents two
additional dollars, or that by the increase of stock and issuing of
bonds, the reported cost is three times the actual cost of the roads, a
dividend of five per cent is equivalent to fifteen per cent on the
actually paid-up honest capital, it would appear that _The Nation_, and
not the people, is laboring under "a deep-seated delusion." _The Nation_
is not informed upon the subject, or desires to present an unfair view
of it. In the Manual to which reference is made, the New York organ will
find the statement that railroads can afford to carry freights for one
and one-fourth per cent per ton per mile. This is their own statement.
What _are_ their charges? Recently they have been reducing their rates.
As published, old rates from New York to Chicago were one dollar per
hundred-weight. This has been reduced to seventy-five cents by the
managers of the Grand Trunk lines. By the new scale the rates charged
are about double what the Manual fixes as "paying," and yet _The Nation_
thinks that because the farmers desire lower rates, the question of
reduction assumes a "somewhat ludicrous aspect." We are advised to
examine Poor's Railroad Manual before we permit our minds to be filled
with revolutionary notions about railroads. The farmer should presume
that the advantage is all on his side when railroad companies charge him
_only_ seventy-five cents for carrying a bushel of wheat from Iowa to
New York, and that at present rates railroad companies are making little
or nothing, and are running great risks. These are proper deductions
from the circular of _The Nation_. Having presented the whole case to
its own satisfaction, it gives reign to fancy, and says: "Now fancy
anybody seriously proposing to capitalists to construct railroads, as
most of the western railroads were constructed, _through a howling
wilderness_, for the _chance_ of five and a half per cent whenever the
earnings of the road allowed it; and fancy what subjects for spoliation
are presented by these bloated owners of railroad property, who pocket
on the average less than four per cent _on the par value of their
stock_,"--to which we might add, "including more than one billion of
dollars for which they never paid one cent." The fact that these
self-denying railroad men are constantly extending their roads, buying
and leasing all that they can get control of, for the purpose of more
effectually controlling the government and enslaving the people, and are
devoting all the earnings of their roads to these objects, are not
deemed worthy of notice by this champion of the railroad interest. We
know as a fact, that the leading and controlling railroad men are
spending their whole energy and their money to this end. These men are
fast consolidating the whole railroad interest. We also know, that
companies that are content to divide their earnings, rather than extend
their roads, make large dividends, and leave a surplus to be
capitalized. The "common sense" of _The Nation_ does not strike us with
its intended force. _The Nation_ evidently has but a limited knowledge
of the west. The fancy sketch of self-denying railroad men constructing
railroads "_through a howling wilderness_," is finely drawn; but it
exists only in the mind of _The Nation_. If this writer had been
speaking of the mountain gorges and desolate pine plains which vex and
impoverish the Boston & Albany track from Albany to Worcester, he might
be excused for his words; but the "howling wilderness" does not apply to
the cultivated prairies, whose enterprising farmers helped to build the
roads now so bitterly and justly complained of, and it describes the
domain of no western road save where the companies obtained, through
legislative and congressional aid, enough of the people's land to
construct the roads.
_Eighth._ As a last point _The Nation_ says, that "no corporation should
be restricted by law to a certain rate of earnings unless it consents
freely to do such work on those terms, or has a minimum guaranteed to it
by the state." The state possesses no power to guarantee to any private
corporation any rate of dividends; nor would it be just to compel the
people to donate a part of their earnings to railroad companies, or to
any other private parties. In our judgment, the state has the
constitutional right to regulate and control all private corporations
and, when the good of the public demands it, to restrict the rates
charged by railroad companies for carrying freights and passengers. We
admit that "the questions connected with the regulation of railroads are
questions of morality, in their highest and most important phases, the
settlement of which must touch the security of all property, and affect
the value of constitutions as safeguards of individual rights." We go
further, and say that in the management of railroads, and the favors
shown to the companies, the constitutional rights of individuals have
already been measurably destroyed, and that the most important question
now is, How can those rights be restored and no injustice be done to
railroad companies? These questions we have already discussed, and will
only add that the sole remedy to be applied is legislative limitation
and restriction. The abuses now practiced by railroad companies must be
corrected. The legislatures have the power and it is their duty to
restrict the scale of charges to such rates as will afford a fair
remuneration to the companies on their investments, and at the same time
protect the people from the extortions of soulless corporations. This
power can be exercised over the companies now in being as well as over
those to be hereafter organized.
We have devoted this chapter to an examination of the views of _The
Nation_ for the reason that, in the form of a circular, they have been
widely distributed, and are designed to distract and divide those who
are seeking relief from the oppressions of this railroad monopoly, and
because the writer treats the "Farmers' Movement," the "Grangers," and
"the people" with undisguised derision and contempt. The farmers are
characterized as a _mob_ of politicians--an irresponsible body--ignorant
and careless of the rights of others, and represented as claiming a
superiority to courts and laws. The idea that the people, farmers, or
grangers have not sufficient knowledge to take the lead in any attempt
to reform the abuses under which they suffer, is put prominently forth.
The attempt at reform in Illinois is referred to in the following words,
in speaking of the remedy for present abuses: "How far we are from both
(_i. e._, ascertaining and applying the remedy) is best shown by the
Illinois attempt at reform, which consists at present in taking the
working of the roads out of the hands of the exceedingly able body of
trained business men who have charge of it, and compelling them to use a
crazy table of 'rates' drawn up by a _mob_ of excited and ignorant
politicians." The prevailing notion which has obtained in some parts of
the country, that farmers and working men are not qualified to act in
matters of a public nature, is reflected throughout the circular, and
the rights and privileges of railroad corporations are spread before the
reader in what is termed a "common sense" manner. The object of all this
is apparent: It is to impress upon the public mind the idea that the
people are not equal to the occasion, and that no reform can be
effected.
CHAPTER VI.
THE INFLUENCE OF MONOPOLIES UPON LABOR.
It is a self-evident proposition, that the wealth of a country lies in
its products, and that the quantity of its products depends directly
upon the amount of labor employed. The diverse interests and pursuits in
our country afford opportunity for the employment of an immense number
of laborers. Indeed, the persons employed in manual labor in the various
industrial pursuits of the country number more than one-half of the
whole population. This great army of laborers is engaged in agricultural
and horticultural pursuits; its rank labors in shops, factories,
furnaces, mines, stores, and offices, upon railroads and canals, and in
vessels, and in the numerous other relations requiring their services.
Their right to fair remunerative prices for their labor is admitted by
all. Whether that remuneration is paid in money, as when the labor is
hired, or shares in the product of its creation, the workman should
receive a just reward for his services. No onerous taxes, duties, or
restrictions, should be imposed upon labor. The profits derived from
labor should belong to the laborer. When capital and labor unite in
producing, a fair division of the product should be made. Any system
that gives the whole product to the capitalist, except the small stipend
paid for the time the laborer is employed, is oppressive. We are not an
advocate of a division or distribution of the wealth of the country
among all classes and pursuits, but contend that it is but just that the
operatives in the factory, the forgers of the foundry, the skilled
artificers of the machine shop, the miners who extract wealth from the
earth, the laborers who build and operate railroads, canals, etc., and,
in short, all whose work and skill, combined with capital, produce a
profit, should receive a fair proportion of the profit thus created.
Prosperity and contentment can only be found where all industrial
pursuits prove remunerative; where manual labor not only supports the
laborer, but enables him to acquire a competence in process of time.
That division of labor and capital which compels the laborer to toil
daily to keep want from his door, and is so inflexible that the sickness
of a single day entails the loss of necessaries to his family, is a
species of slavery. When by the customs of the country, or by its laws,
the line dividing labor and capital is so clearly defined, that the
laborer, by a life-time of toil, can accumulate nothing, while the
capitalist employing him realizes from ten to one hundred per cent per
annum upon the amount invested, the one is but coining the life-blood of
the other, and the laborer is but little better than a bond-servant.
From time immemorial, those who obtain their support by manual labor
have received less attention from government than any other class.
Indeed, in all monarchial governments they are left out of
consideration, except as their labor can be made useful in advancing the
interests of the superior classes. In our own country there has existed
a prejudice against the laboring classes. Especially was this so in the
south until the abolition of slavery. As a nation, we have been apt to
follow old opinions, and look upon labor as degrading, and the laborer
as a menial. This prejudice still exists to a great degree, and our boys
seek speculative rather than legitimate industrial employments. While in
theory all men are considered equal in our country, practically the old
feudal distinction is kept up. We have no titled aristocracy in America,
but we are fast creating an aristocracy of wealth and pursuits. While
labor is the motive-power, and manual laborers the engineers who keep
the car of progress moving forward, they receive less consideration from
the hands of government than the loungers and speculators. While acts of
congress and state legislatures, designed to benefit the wealthy
capitalists, are of frequent date, but few can be found designed or
enacted in the interest of the laboring classes. Special legislation in
favor of the capitalists, corporations, and manufacturers, has been the
rule; legislation in the interest of the laboring classes the exception.
The _dignity_ that should attach to labor is entirely wanting, and the
respect the laborer should command is not accorded to him. Not that he
is looked upon as the inferior of other men, but that in all matters
affecting the public welfare, the interests of the capitalist, the large
operator, the banker, manufacturer, and corporations generally, claim
special attention, while the real wealth-producing portion of the people
is neglected. This is not the result of any design on the part of those
engaged in other pursuits--it results from the fact that capital pays
particular attention to its own interests, while labor is content to let
other interests take control of the government, of all public matters,
and of even its own pursuits, quietly accepting a secondary position,
and neglecting to claim the consideration and respect to which it is
entitled from its intimate connection with the capital of the country
and the body politic.
The laborer's political existence is seldom felt save at elections, when
the strongest _vote_ decides the day, and then generally in the blind
following of its file leaders. The reforms promised to labor on these
occasions are seldom realized, and the laborer, without asserting his
rights as a freeman, is too apt to continue in the old, beaten track,
sometimes complainingly, it is true, but willing and ready to be
directed by his party or employer, whenever his help is needed. All of
which is calculated to widen the line dividing capital and labor, and to
increase the wealth and power of the capitalist.
Let us illustrate: The capitalist is engaged in manufacturing, and
wishes protection from the government. The question of protective
tariffs is one of the issues of the campaign. He employs one hundred
voters. He makes known to them his wishes, and explains to them the
benefits he expects to receive. They wish to oblige their employer and
accept his views as correct, and all cast their votes for what they are
led to believe will be his benefit. They are not less intelligent than
other men, but instead of acting independently they wish to please their
employer. By this act, they involuntarily take an inferior place among
men, and lower their dignity. While they have by their action enabled
the manufacturer to increase his gains, by the success of a protective
tariff, they have secured nothing for themselves, not even an advance of
wages, unless their employer voluntarily allows such an advance. He is
aided by legislative enactment through their votes, and can demand
additional profit for the product of their labor; but the act is of no
personal benefit to them. All they receive, if anything, is voluntarily
allowed by the capitalist employing them. Had they examined for
themselves they might have discovered that the act which benefited him
was detrimental to their own interests. The same illustration will apply
to all pursuits requiring capital and labor. The consolidation of any
business so as to destroy or prevent competition is detrimental to the
interests of labor. Monopolies, of whatever kind, are encroachments upon
the interests of those who depend upon manual labor for support.
Railroad corporations in the United States employ not less than two
hundred thousand men. This large number of men have no interest in these
corporations excepting the wages paid to them. Subtract the sums they so
receive, and their daily labor still adds to the wealth of these
powerful corporations. They are employed to perform manual labor; they
are free and independent citizens of this republic. Their employers do
not have any claim upon them for anything but their labor. Yet, as a
general rule, in all matters affecting the interests of railroad
corporations, when the issue is made at the ballot box, these men are
found voting as their employers desire, too often without giving the
matter due attention, and not unfrequently in support of measures which
are at war with their own best interests. In thus voting they are
influenced by what they deem proper motives; they desire to gratify
their employers. This state of things is also most strikingly presented
in local and municipal elections, when certain measures are to be
carried. In such cases, as a general rule, the person or officer
controlling or employing men votes them "solid" on the side of the
question he supports. In the cases we have given, as well as in all
others of a like character, where any combination or corporation desires
to influence or carry certain measures, the undivided support of the
employees is expected. So long has this manner of voting been practiced,
it has grown into a custom; for the employee, if he refuses to observe
it, does so at the risk of losing his employment. We have referred to
these things, not for the purpose of showing that the men engaged in
manual labor are inferior to other men, or to prove that they act from
improper motives, but to demonstrate our proposition that they do not
think and act independently in matters of public concern, and are
indifferent to their own best interests. That while other interests
procure special favors from government, the laboring classes are content
to occupy an inferior position, and even give their support to measures
tending to degrade rather than to ennoble them. Because of these things,
the laboring classes, as a general rule, are treated by those who are
getting control of the capital and business of the country as inferior
beings, and labor is not classed by them as of honorable calling.
The creation of privileged classes in our country is to be deprecated.
The centralization of wealth and the grading of the standing of men by
the amount of money they possess; the creation of great corporations,
with power to control the business and finances of the country, now
threaten to overthrow our republican institutions. But equally to be
dreaded is the indifference manifested by the laboring classes in
asserting and protecting their rights. Practically, so far as the
business of the country is concerned, the line between capital and labor
is now sharply drawn, and in the administration of the government, the
old-time dogma, that the class controlling the wealth of the country
should rule, while those who labor for a support are to remain "hewers
of wood and drawers of water," is fast assuming tangible form, and
unless the far-reaching and grasping policy of monopolies is checked by
the laboring and producing classes, the absolute control of the
government will pass from the people into the hands of their oppressors.
By the action of railroad corporations; the special legislation in favor
of certain interests; the monopolies given to manufacturers, and the
action of the Wall street brokers, the wealth of the country has become
centralized, and is controlled by and in the interests of the
monopolists, who, because of their combinations, also control the value
of labor throughout the country. The influence of the laboring classes
is made to subserve the purposes of monopolists. The manufacturer,
protected by government, enjoys all the profit accruing from the labor
of the operatives, and uses the influence incident to his position to
strengthen his interests by controlling their suffrages.
In all the different labor-employing pursuits, the political privileges
enjoyed by the employe are directed and controlled by the employer in
his own interest; the whole mental and physical structure of the laborer
is used in advancing his employer's interest. Because of this law of
capital, the comparatively few men now controlling the railroads of the
country, our manufacturers and other great interests which have become
the special favorites of those in power, have obtained an almost
unlimited influence over the best interests of the country. They have
been able to entrench themselves in their strongholds, and compel all
the agricultural, the commercial and other industrial pursuits to
contribute to their already dangerous power. The great army of laborers,
instead of controlling the political affairs of the country in their own
interest, become the instruments in the hands of the monopolists of
their own oppression. With sufficient strength to shape the whole policy
of the government they are content to let others control them, while
they toil from day to day for the small compensation allowed them, and
derive no benefit from the proceeds of their labor.
If the capital and labor of the country were combined, so that the
products could be divided and a fair proportion allowed to the laborer,
his social and financial condition would be improved, and the power of
the few who now control the government in their own interest would be
destroyed. While the duty of providing for himself and family is imposed
upon every one, in _this country_ every citizen has another important
duty to perform: the duty of aiding in the preservation of republican
government and the equal rights of all the people. Those who become
indifferent to these objects and duties, and allows selfish or ambitious
men to get the control of the government, and prostitute it to their own
purposes, are the authors of their own sufferings. And those who permit
themselves to become instruments in the hands of the people's oppressors
for the continuance of oppression, commit great wrongs to themselves and
their country.
The public opinion that accords to the Wall street stock gambler a
place among honorable men, and allows him to shape the financial policy
of the country, that allows him to live outside of prison walls, is
corrupted and perverted. Yet there is no class of men in the whole
country who have so great an influence over the government and the
commercial and financial interests as the Wall street brokers.
No class of citizens should command greater respect than that engaged in
manual labor, nor should any other class exercise a more potent
influence in the nation; yet, as a matter of fact, no class receives so
little consideration or has less influence in national affairs. While
great interests with concentrated wealth, requiring no special aids from
government, are constantly receiving them, the interests of the laboring
and producing classes receive no special care or attention. While
railroad corporations and other great monopolies are vigilant in
protecting and strengthening their interests, the laboring classes are
indifferent as to what is to be their future.
While other interests are extending their influence, the interests of
the laborers are neglected, and the laborers themselves are content to
occupy inferior places in the body politic. While labor is the means,
and the _laborer_ the _power_ that developes and enriches the country,
the _interests_ of the laborers languish, while those of the speculator,
the stock broker, and capitalist, _prosper_. Before we can become a
prosperous, contented, and happy people, all honorable pursuits must
have equal rights before the law. Special and class legislation must be
abandoned, and the _dignity_ of labor must be fully vindicated.
But it may be asked, How are these things to be accomplished? We answer:
1st. By laborers asserting their right to think and act as independent
men; by giving their employers to understand that they do not hire their
intellects, their _rights_ as citizens, but only their physical force;
that while they labor for their employers, they preserve their
individuality and self-respect; by giving their employers to understand
that they are only paid for manual labor, and that they are not
bondsmen. 2d. By demanding for labor such remuneration as will allow the
laborer to share in the profits resulting from his toil, either by
treating it as an investment in the business in which it is employed, or
by the payment of such compensation as will allow a surplus for
investment--refusing to wear out their lives in procuring a bare
subsistence. 3d. By the diffusion of knowledge among the laboring
classes, especially of the theory and objects of our government, and the
relation sustained by the laboring classes to the government, and by
demanding for themselves due respect and consideration on the part of
those engaged in other pursuits; by demanding of legislatures and of
congress the enactment of such statutes as shall not impose taxes upon
their labor for the benefit of other pursuits, and such as shall require
all taxes levied for any purpose to be levied upon the _property_ and
_not the labor_ of the country. 4th. By demanding the unconditional
repeal of all statutes which confer upon individuals, classes,
companies, corporations, or callings, special bounties, grants,
privileges, or profits which in their operations act oppressively upon
the laboring and producing classes. And lastly, to strive to eradicate
the ancient and continuing prejudice against labor, and to vindicate the
truth of the often repeated declaration of eminent men: "That the person
engaged in manual labor is following the most ancient as well as the
most noble calling."
These objects can all be accomplished by united and intelligent action.
The false, yet popular, idea that a man's respectability among his
fellows is graduated by the extent of his possessions, and his political
standing scaled by the amount of his money, can be obliterated, and
merit alone will become the rule by which to measure the man. The
laboring man with intellect and personal merit will supersede the man
who has money but lacks mind, in the social and political world.
When the laboring classes, including the farmers and mechanics, shall
boldly step into the front ranks they will make their influence felt;
reforms will be the order of the day; trading and dishonest politicians
will be suffered to go into retirement; courts committed to the
interests of monopolies will be reformed, and the law will be
administered by judges who will not pervert the plain letter and spirit
of the constitution for the purpose of upholding unjust laws; the
monopolists who now rule and ruin the country will be shorn of their
power, the producer and laborer will receive for their labor and
products fair value in money, and will not be obliged to receive payment
in depreciated paper, while the speculator, the broker, and the
government buy and sell gold and silver as articles of commerce. The
agriculturalist, the mechanic, and laborer will be the _peers_ of the
men who are now forming an aristocracy of wealth; the laws will be
faithfully and honestly administered, and peace and prosperity will fill
the land.
*** End of this LibraryBlog Digital Book "Monopolies and the People" ***
Copyright 2023 LibraryBlog. All rights reserved.