Great Fortunes from Railroads Part 1

Great Fortunes from Railroads.

by Gustavus Myers.

CHAPTER I

THE SEIZURE OF THE PUBLIC DOMAIN

Before setting out to relate in detail the narrative of the ama.s.sing of the great individual fortunes from railroads, it is advisable to present a preliminary survey of the concatenating circ.u.mstances leading up to the time when these vast fortunes were rolled together.

Without this explanation, this work would be deficient in clarity, and would leave unelucidated many important points, the absence of which might puzzle or vex the reader.

Although industrial establishments, as exemplified by mills, factories and shops, much preceded the construction of railroads, yet the next great group of fortunes to develop after, and along with, those from land were the fortunes plucked from the control and manipulation of railroad systems.

THE LAGGING FACTORY FORTUNES.

Under the first stages of the old chaotic compet.i.tive system, in which factory warred against factory, and an intense struggle for survival and ascendency enveloped the whole tense sphere of manufacturing, no striking industrial fortunes were made.

Fortunate was that factory owner regarded who could claim $250,000 clear. All of those modern and complex factors offering such unbounded opportunities for gathering in spoils mounting into the hundreds of millions of dollars, were either unknown or in an inchoate or rudimentary state. Invention, if we may put it so, was just blossoming forth. Hand labor was largely prevalent. Huge combinations were undreamed of; paper capitalization as embodied in the fict.i.tious issues of immense quant.i.ties of bonds and stocks was not yet a part of the devices of the factory owner, although it was a fixed plan of the bankers and insurance companies.

The factory owner was the supreme type of that sheer individualism which had burst forth from the restraints of feudalism. He stood alone fighting his commercial contests with persistent personal doggedness. Beneath his occasional benevolence and his religious professions was a wild ardor in the checkmating or bankruptcy of his compet.i.tors. These were his enemies; he fought them with every mercantile weapon, and they him; and none gave quarter.

Apart from the destructive character of this incessant warfare, dooming many of the combatants, other intervening factors had the tendency of holding back the factory owners' quick progress-- obstacles and drawbacks copiously described in later and more appropriate parts of this work.

MIGHT OF THE RAILROAD OWNERS.

In contrast to the slow, almost creeping pace of the factory owners in the race for wealth, the railroad owners sprang at once into the lists of mighty wealth-possessers, armed with the most comprehensive and puissant powers and privileges, and vested with a sweep of properties beside which those of the petty industrial bosses were puny. Railroad owners, we say; the distinction is necessary between the builders of the railroads and the owners. The one might construct, but it often happened that by means of cunning, fraud and corruption, the builders were superseded by another set of men who vaulted into possession.

Looking back and summing up the course of events for a series of years, it may be said that there was created over night a number of ent.i.ties empowered with extraordinary and far-reaching rights and powers of ownership.

These ent.i.ties were called corporations, and were called into being by law. Beginning as creatures of law, the very rights, privileges and properties obtained by means of law, soon enabled them to become the dictators and masters of law. The t.i.tle was in the corporation, not in the individual; hence the men who controlled the corporation swayed the substance of power and ownership. The factory was usually a personal affair, owned by one man or in co-partnership; to get control of this property it was necessary to get the owner in a financial corner and force him to sell out, for, as a rule, he had no bond or stock issues. But the railroad corporation was a stock corporation; whoever secured control of a majority of the stock became the legal administrator of its policies and property. By adroit manipulation, intimidation, superior knavery, and the corrupt domination of law, it was always easy for those who understood the science of rigging the stock market, and that of strategic undermining, to wrest the control away from weak, or (treating the word in a commercial sense) incompetent, holders. This has been long shown by a succession of examples.

THE LEGALIZING OF CUNNING

Thus this situation, so singularly conflicting with the theoretical majesty of the law, was frequently presented: A band of men styling themselves a corporation received a perpetual charter with the most sweeping rights and properties. In turn, the law interposed no effective hindrance to the seizing of their possessions by any other group proving its power to grasp them. All of this was done under nominal forms of law, but differed little in reality from the methods during medieval times when any baron could take another baron's castle and land by armed force, and it remained his until a stronger man came along and proved his t.i.tle likewise.

Long before the railroad had been accepted commercially as a feasible undertaking, the trading and land-owning cla.s.ses, as has been repeatedly pointed out, had demonstrated very successfully how the forms of government could be perverted to enrich themselves at the expense of the working population.

Taxation laws, as we have seen, were so devised that the burden in a direct way fell lightly on the shipping, manufacturing, trading, banking and land-owning cla.s.ses, while indirectly it was shoved almost wholly upon the workers, whether in shop, factory or on farm.

Furthermore, the constant response of Government, munic.i.p.al, State and National, to property interests, has been touched upon; how Government loaned vast sums of public money, free of interest, to the traders, while at the same time refusing to a.s.sist the impoverished and dest.i.tute; how it granted immunity from punishment to the rich and powerful, and inflicted the most drastic penalties upon poor debtors and penniless violators of the law; how it allowed the possessing cla.s.ses to evade taxation on a large scale, and effected summarily cruel laws permitting landlords to evict tenants for non- payment of rent. These and many other partial and grievously discriminative laws have been referred to, as also the refusal of Government to interfere in the slightest with the commercial frauds and impositions constantly practiced, with all their resulting great extortions, upon the defenceless ma.s.ses.

Of the long-prevailing frauds on the part of the capitalists in acquiring large tracts of public land, some significant facts have been brought out in preceding chapters. Those facts, however, are only a few of a ma.s.s. When the United States Government was organized, most of the land in the North and East was already expropriated. But immense areas of public domain still remained in the South and in the Middle West. Over much of the former Colonial land the various legislatures claimed jurisdiction, until, one after another, they ceded it to the National Government. With the Louisiana purchase, in 1805, the area of public domain was enormously extended, and consecutively so later after the Mexican war.

THE LAND LAWS AGAINST THE POOR

From the very beginning of the government, the land laws were arranged to discriminate against the poor settler. Instead of laws providing simple and inexpensive ways for the poor to get land, the laws were distorted into a highly effective mechanism by which companies of capitalists, and individual capitalists, secured vast tracts for trivial sums. These capitalists then either held the land, or forced settlers to pay exorbitant prices for comparatively small plots. No laws were in existence compelling the purchaser to be a _bona fide_ settler. Absentee landlordism was the rule. The capitalist companies were largely composed of Northern, Eastern and Southern traders and bankers. The evidence shows that they employed bribery and corruption on a great scale, either in getting favorable laws pa.s.sed, or in evading such laws as were on the statute books by means of the systematic purchase of the connivance of Land Office officials.

By act of Congress, pa.s.sed on April 21, 1792, the Ohio Land Company, for example, received 100,000 acres, and in the same year it bought 892,900 acres for $642,856.66. But this sum was not paid in money.

The bankers and traders composing the company had purchased, at a heavy discount, certificates of public debt and army land warrants, and were allowed to tender these as payment. [Footnote: U. S. Senate Executive Doc.u.ments, Second Session, Nineteenth Congress, Doc. No.

63.] The company then leisurely disposed of its land to settlers at an enormous profit. Nearly all of the land companies had banking adjuncts. The poor settler, in order to settle on land that a short time previously had been national property, was first compelled to pay the land company an extortionate price, and then was forced to borrow the money from the banking adjuncts, and give a heavy mortgage, bearing heavy interest, on the land. [Footnote: U. S.

Senate Doc.u.ments, First Session, Twenty-fourth Congress, 1835-36, Doc. No. 216: 16.] The land companies always took care to select the very best lands. The Government doc.u.ments of the time are full of remonstrances from legislatures and individuals complaining of these seizures, under form of law, of the most valuable areas. The tracts thus appropriated comprised timber and mineral, as well as agricultural, land.

VAST TRACTS SECURED BY BRIBERY.

One of the most scandalous land-company transactions was that involving a group of Southern and Boston capitalists. In January, 1795, the Georgia Legislature, by special act, sold millions of acres in different parts of the State of Georgia to four land companies.

The people of the State were convinced that this purchase had been obtained by bribery. It was made an election issue, and a Legislature, comprising almost wholly new members, was elected. In February, 1796, this Legislature pa.s.sed a rescinding act, declaring the act of the preceding year void, on the ground of its having been obtained by "improper influence." In 1803 the tracts in question were transferred by the Georgia Legislature to the United States Government.

The Georgia Mississippi Land Company was one of the four companies.

In the meantime, this company had sold its tract, for ten cents an acre, to the New England Mississippi Land Company. Although committee after committee of Congress reported that the New England Mississippi Land Company had paid little or no actual part of the purchase price, yet that company, headed by some of the foremost Boston capitalists, lobbied in Congress for eleven years for an act giving it a large indemnity. Finally, in 1814, Congress pa.s.sed an indemnification act, under which the eminent Bostonians, after ten years more lobbying, succeeded in getting an award from the United States Treasury of $1,077,561.73. The total amount appropriated by Congress on the pretense of settling the claims of the various capitalists in the "Yazoo Claims" was $1,500,000. [Footnote: Senate Doc.u.ments, Eighteenth Congress, Second Session, 1824-25, Vol. ii, Doc. No. 14, and Senate Doc.u.ments, Twenty-fourth Congress, 1836-37, Vol. ii, No.

212. After the grants were secured, the companies attempted to swindle the State of Georgia by making payments in depreciated currency. Georgia refused to accept it. When the grant was rescinded, both houses of the Georgia Legislature marched in solemn state to the Capitol front and burned the deed.] The ground upon which this appropriation was made by Congress was that the Supreme Court of the United States had decided that, irrespective of the methods used to obtain the grant from the Georgia Legislature, the grant, once made, was in the nature of a contract which could not be revoked or impaired by subsequent legislation. This was the first of a long line of court decisions validating grants and franchises of all kinds secured by bribery and fraud.

It was probably the scandal arising from the bribery of the Georgia Legislature that caused popular ferment, and crystallized a demand for altered laws. In 1796 Congress declared its intention to abandon the prevailing system of selling millions of acres to companies or individuals. The new system, it announced, was to be one adapted to the interests of both capitalist and poor man. Land was thereafter to be sold in small quant.i.ties on credit. Could the mechanic or farmer demand a better law? Did it not hold out the opportunity to the poorest to get land for which payment could be gradually made?

But this law worked even better to the advantage of the capitalist cla.s.s than the old. By bribing the land officials the capitalists were able to cause the choicest lands to be fraudulently withheld, and entered by dummies. In this way, vast tracts were acquired.

Apparently the land entries were made by a large number of intending settlers, but these were merely the intermediaries by which capitalists secured great tracts in the form of many small allotments. Having obtained the best lands, the capitalists then often held them until they were in demand, and forced actual settlers to pay heavily for them. During all of this time the capitalists themselves held the land "on credit." Some of them eventually paid for the lands out of the profits made from the settlers, but a great number of the purchasers cheated the Government almost entirely out of what they owed. [Footnote: On Sept. 30, 1822, "credit purchasers"

owed the Government: In Ohio, $1,260,870.87; in Indiana, $1,212,815.28; in Illinois, $841,302.80; in Missouri, $734,108.87; in Alabama, $5,760,728.01; in Mississippi, $684,093.50; and in Michigan, $50,584.82--a total of nearly $10,550,000. (Executive Reports, First Session, Eighteenth Congress, 1824, Report No. 61.) Most of these creditors were capitalist land speculators.]

The capitalists of the period contrived to use the land laws wholly to their own advantage and profit. In 1824, the Illinois Legislature memorialized Congress to change the existing laws. Under them, it recited, the best selections of land had been made by non-resident speculators, and it called upon Congress to pa.s.s a law providing for selling the remaining lands at fifty cents an acre. [Footnote: U. S.

Senate Doc.u.ments, Second Session, Eighteenth Congress, 1824-25, Vol.

ii, Doc. No. 25.] Other legislatures pet.i.tioned similarly. Yet, notwithstanding the fact that United States officials and committees of Congress were continually unearthing great frauds, no real change for the benefit of the poor settler was made.

GREAT EXTENT OF THE LAND FRAUDS.

The land frauds were great and incessant. In a long report, the United States Senate Committee on Public Lands, reporting on June 20, 1834, declared that the evidence it had taken established the fact that in Ohio and elsewhere, combinations of capitalist speculators, at the public sales of lands, had united for the purpose of driving other purchasers out of the market and in deterring poor men from bidding. The committee detailed how these companies and individuals had fraudulently bought large tracts of land at $1.25 an acre, and sold the land later at exorbitant prices. It showed how, in order to accomplish these frauds, they had bought up United States Land Office Registers and Receivers. [Footnote 8: U. S. Senate Doc.u.ments, First Session, Twenty-third Congress, 1833-34, Vol. vi, Doc. No. 461:1-91.]

Another exhaustive report was handed in by the United States Senate Committee on Lands, on March 3, 1835. Many of the speculators, it said, filled high offices in States where public lands bought by them were located; others were people of "wealth and intelligence." All of them "naturally united to render this investigation odious among the people." The committee told how an attempt had been made to a.s.sa.s.sinate one of its members. "The first step," it set forth, "necessary to the success of every scheme of speculation in the public lands, is to corrupt the land officers, by a secret understanding between the parties that they are to receive a certain portion of the profits." [Footnote: U. S. Senate Doc.u.ments, Second Session, Twenty-third Congress, Vol. iv, Doc. No. 151: 2.] The committee continued:

The States of Alabama, Mississippi and Louisiana have been the princ.i.p.al theatre of speculations and frauds in buying up the public lands, and dividing the most enormous profits between the members of the different companies and speculators. The committee refers to the depositions of numerous respectable witnesses to attest the various ramifications of these speculations and frauds, and the means by which they have been carried into effect.... [Footnote: Ibid., 3]

Describing the great frauds in Louisiana, Benjamin F. Linton, U. S.

District Attorney for the Western District of Louisiana, wrote, on August 25, 1835, to President Jackson: "Governments, like corporations, are considered without souls, and according to the code of some people's morality, should be swindled and cheated on every occasion." Linton gave this picture of "a notorious speculator who has an immense extent of claims":

He could be seen followed to and from the land office by crowds of free negroes, Indians and Spaniards, and the very lowest dregs of society, in the counties of Opelousas and Rapides, with their affidavits already prepared by himself, and sworn to before some justice of the peace in some remote county. These claims, to an immense extent, are presented and allowed. And upon what evidence?

Simply upon the evidence of the parties themselves who desire to make the entry! [Footnote: U. S. Senate Doc.u.ments, Second Session, Twenty- fourth Congress, 1836-37, Vol. ii, Doc. No. 168: 5.]

The "credit" system was gradually abandoned by the Government, but the auction system was retained for decades. In 1847, the Government was still selling large tracts at $1.25 an acre, nominally to settlers, actually to capitalist speculators or investors. More than two million acres had been sold every year for a long period. The House Committee on Public Lands, reporting in 1847, disclosed how most of the lands were bought up by capitalists. It cited the case of the Milwaukee district where, although 6,441 land entries had been made, there were only forty actual settlers up to 1847. "This clearly shows," the committee stated, "that those who claimed the land as settlers, are either the tools of speculators, to sequester the best lands for them... or the claim is made on speculation to sell out."

[Footnote: Reports of Committees, First Session, Thirtieth Congress, 1847-48, Vol. iii, Report No. 732:6.]

The policy of granting enormous tracts of land to corporations was revived for the benefit of ca.n.a.l and railroad companies. The first railroad company to get a land grant from Congress was the Illinois Central, in 1850. It received as a gift 2,595,053 acres of land in Illinois. Actual settlers had to pay the company from $5 to $15 an acre.

Large areas of land bought from the Indian tribes by the Government, almost at once became the property of ca.n.a.l or railroad corporations by the process of Government grants. A Congressional doc.u.ment in 1840 (Senate Doc.u.ment No. 616) made public the fact that from the establishment of the Federal Government to 1839, the Indian tribes had ceded to the Government a total of 442,866,370 acres. The Indian tribes were paid either by grants of land elsewhere, or in money and merchandise. For those 442,866,370 acres they received exchange land valued at $53,757,400, and money and merchandise amounting to $31,331,403.