We are pleased to present, in installments, a very rare yet significant book written by former Congressman Henry George Jr. in 1905.
Earlier installments are available at the Progress Report Archive.
more of CHAPTER 25, TO STOP TAXATION EVILS, GRANTS AND IMMUNITIES
Let us pass to the third class of privileges, that of special government grants.
Observe transportation. It will be remembered that before he became an iron and steel master, Mr. Carnegie was a railroad man. He was the western superintendent of the Pennsylvania Railroad, stationed at Pittsburg, a city established at the junction of the Allegheny and Monongahela rivers, in the heart of the iron ore, soft coal and natural gas belt. At this period the Standard Oil Company was commencing its notorious career through the use of the railroad rebate. That insidious form of favor had not as yet so proved its deadly power as to arouse general and bitter resentment and cause the making of express laws to prohibit it. But that proof came soon. For the rebate principle was simply for favored users to receive back secretly from the railroad part of the payment openly made on shipments under the regular published schedule of rates -- the rates charged to all rival shippers.
Mr. Carnegie was not unfamiliar with the workings of the rebate principle, and it is scarcely probable that he and the highest officials of the Pennsylvania Road did not avail themselves of it when, organized as an outside group, they jointly went into iron and steel bridge and rail making with large and successive contracts from the Pennsylvania, Fort Wayne and other roads.
If the various Carnegie iron and steel companies did not have the advantage of the rebate after it had been prohibited by law, yet they did have a similar advantage -- a discriminating rate. For, owing to the stimulus of special contracts for products and rebates on the shipping of the latter, together with the natural energy and abilities of Mr. Carnegie and the men associated with him, the Carnegie plants in the development of the trade rapidly grew into great establishments. They became the larger when the policy was commenced of acquiring all the best quality and most conveniently placed natural materials. With an immense output from his furnaces and mills at his disposal, Mr. Carnegie could demand in lieu of rebates, special rates from the railroads, on the ground that he was a bigger shipper than other steel makers. Even to this day the railroad managements do not hesitate to say that they should make a lower rate to the large than to the small shipper.
Ultimately the Carnegie amalgamation acquired or built short, connecting railroads. One of these runs between Pittsburg and Lake Erie. In conjunction with it a fleet of boats is operated for the carriage of ore and products. The United States Steel Corporation, which absorbed the Carnegie combination, now possesses these roads and boats and other roads and boats besides, joining the steel plants with the several important railroad systems.
In these circumstances it is idle to suppose that the railroads do not offer an important advantage to the Steel Trust, as against the smaller steel manufacturing shipper.
And the Steel Trust is but a single type of the favored ones.
We have seen how the Standard Oil Company, starting with secret railroad contracts for big rebates in consideration of large guaranteed shipments of oil, had merely to arrange to supply refined oil to the distributing centers in great quantities at low prices to destroy its rival refiners. Having killed or absorbed competing refineries, and thus obtained control of the refining of oil, the Standard then proceeded to discriminate against, to bully, or to cajole oil well owners, until it acquired a vast source of supply. Controlling this source, and the refining, it was then possible, using the railroad rates as an additional club, to embarrass the pipe lines and soon to absorb them.
Then possessing the oil lands -- or at least the most convenient of them -- the refineries and the pipe lines, the Standard successfully demanded larger rebates or discriminations from first one railroad and then another, the penalty of refusal being reduction of the great Standard shipments. The enormous profits obtained in this way enabled the Standard-Rockefeller group to enter the railroad world as large stockholders, bond owners, directors, controllers and manipulators, and from the railroad to enter the banking, the stock-speculating and the stock-juggling worlds, and also a considerable number of industrial lines.
See what the railroads have done for the Meat Trust. They have given special rates and special despatch to lines of stock and refrigerator cars owned by a combination of great meat packers, whose headquarters are in Chicago and Kansas City. As a consequence, not only have these packers been able to undersell and destroy general competitors, but, because they have had no rivals, they have further been able to put down the prices they would pay ranchmen for stock on the hoof; while, on the other hand, they have, owing to their great control of the general supply, put up prices to the consumer of dressed meat. Indeed, they have been able in a multitude of instances to destroy local rivalry by refusing to supply with their products retail butchers who dealt in similar products from any other source.
Growing out of this, we have seen the scandals that have come to light in the carriage of fruit -- how the Meat Trust, with the knowledge and help of the Santa Fe and the Southern Pacific railroads, dictated terms and took control of the very important southern California fruit-carrying trade. The Meat Trust's refrigerator cars had advantage over all others, indeed, practically monopolizing that kind of traffic.
Every one with the least experience in railroad affairs knows that the railroads, as they are operated, work for the overwhelming advantage of certain great shippers, just as if certain city merchants with much trucking to do should have a monopoly of horse-drawn vehicles, while their competitors were unable to get anything save man-pushed wheelbarrows.
Besides this discrimination which works such a hardship against general industrial and commercial businesses and to the advantage of an inside favored few, the railroads bear with great weight and manifest inconvenience upon the multitude of travelers. The policy is not to give the maximum of accommodation at the minimum of charge, but the reverse -- the minimum of accommodation at the maximum charge. Instead of being capacious, convenient public highways, compatible with advancing civilization, they are of the nature of old-fashioned toll-roads, where gates swung open only on the payment of high charges, regardless of the condition of the roadways.
The question is, How shall the railroad service be divorced from these evils?
Surely not by the appointment of courts or commissions to fix rates or otherwise radically interfere with their management, if the ownership and control of these railroads are to remain in private hands. Either the people as a whole must assume ownership and management of these public steel highways, as they have of the other highways, or else they must let private ownership and management alone.
Experience shows that all public partnerships with private monopolies are signally detrimental to public interest. Everybody's interest becomes nobody's interest, while the private interest is always alive and active, turning all things to its own profit. The establishing of regulating courts and commissions is only to set up instruments to be used by the railroad companies against the public, for the railroads will devote themselves with keenness and assiduity to the business of electing, having appointed, buying, or otherwise controlling the judges and commissioners.
The recent exhibition of a New York State Railroad Commissioner who desired reappointment should be a warning. He presented to the Governor a petition signed by the presidents or other high officials of the largest railroad companies in the State, and of bankers and speculators dealing in railroad corporation securities! How could such a man adjust railroad fares or look to the convenience of the public, save as his patrons, the railroads, should approve?
Therefore railroads and all other forms of public highway, where free competition cannot be maintained, should not be in private, but in public hands. And this applies to local as well as to inter-community and inter-State roads. It further applies to pipe lines and tunnel lines and wire lines of whatever kind used in the service of the public.
A broad principle to be laid down is that all natural monopolies -- enterprises which are indispensable to civilization, but which are not open to general and permanent competition, and which of necessity must center in few hands, should be publicly owned and controlled. Any departure from this principle can only be on the ground of expediency, which is invariably weak and dangerous.
If it be said that the people are not to be trusted with functions so vital to complex civilized life, then it is also to be said that they are not to be trusted with self-government. Of course, if they undertake to conduct railroads, they must be watchful of their public servants. This is only the same as saying that if they venture on self-government they must be vigilant to govern, and not to be governed.
But it is always to be remembered that with the removal of the railroads and other public highways from private ownership and control, a great, confusing, corrupting element in the general politics in America will be removed. The considerable addition to the civil servants that public operation will bring, will, in its detrimental effect on politics, be as nothing against the influence of a few railroad princes, who now, gathering around a table in a private office, and discussing political situations, actual and desirable, can sign checks for ten, fifty, a hundred thousand, or even, if need be, for a million dollars for "campaign expenses."
Therefore all direct Government grants to public service corporations or to individuals having public service in view should at once stop; and all such grants hitherto made should be revoked or taken over into public hands.
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