Monopolies and the People Part 3

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 a.s.sist, 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 ill.u.s.trations.

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 t.i.tle 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 ill.u.s.trations 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 antic.i.p.ated 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 pa.s.sing 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 cla.s.ses 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 pa.s.s, 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 a.s.signments can easily be accounted for. All of the stockholders of the company, at the time the contract was made with Oakes Ames, by indors.e.m.e.nt 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 a.s.signments:

THE "OAKES AMES CONTRACT."--ITS a.s.sIGNMENTS 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 a.s.signs 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 a.s.signs, 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 a.s.signs, 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 a.s.signs, is to receive from the company and enjoy the benefits of all existing contracts, and shall a.s.sure 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 a.s.signs, 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-cla.s.s 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 a.s.sistants, 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 a.s.signs, 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 a.s.signs 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 a.s.signs, 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 a.s.signs, 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 a.s.signs, 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 pa.s.senger 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.