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- Philip Dru: Administrator - 20/33 -
States. He also proposed making corporations share with the Government and States a certain part of their net earnings, public service corporations to a greater extent than others. Dru's plan contemplated that either the Government or the State in which the home or headquarters of any corporation was located was to have representation upon the boards of such corporation, in order that the interests of the National, State, or City Government could be protected, and so as to insure publicity in the event it was needful to correct abuses.
He had incorporated in the Franchise Law the right of Labor to have one representative upon the boards of corporations and to share a certain percentage of the earnings above their wages, after a reasonable per cent, upon the capital had been earned.[Footnote: See WHAT CO-PARTNERSHIP CAN DO below.] In turn, it was to be obligatory upon them not to strike, but to submit all grievances to arbitration. The law was to stipulate that if the business prospered, wages should be high; if times were dull, they should be reduced.
The people were asked to curb their prejudice against corporations. It was promised that in the future corporations should be honestly run, and in the interest of the stockholders and the public. Dru expressed the hope that their formation would be welcomed rather than discouraged, for he was sure that under the new law it would be more to the public advantage to have business conducted by corporations than by individuals in a private capacity. In the taxation of real estate, the unfair practice of taxing it at full value when mortgaged and then taxing the holder of the mortgage, was to be abolished. The same was to be true of bonded indebtedness on any kind of property. The easy way to do this was to tax property and not tax the evidence of debt, but Dru preferred the other method, that of taxing the property, less the debt, and then taxing the debt wherever found.
His reason for this was that, if bonds or other forms of debt paid no taxes, it would have a tendency to make investors put money into that kind of security, even though the interest was correspondingly low, in order to avoid the trouble of rendering and paying taxes on them. This, he thought, might keep capital out of other needful enterprises, and give a glut of money in one direction and a paucity in another. Money itself was not to be taxed as was then done in so many States.
THE RAILROAD PROBLEM
While the boards and commissions appointed by Administrator Dru were working out new tax, tariff and revenue laws, establishing the judiciary and legal machinery on a new basis and revising the general law, it was necessary that the financial system of the country also should be reformed. Dru and his advisers saw the difficulties of attacking this most intricate question, but with the advice and assistance of a commission appointed for that purpose, they began the formulation of a new banking law, affording a flexible currency, bottomed largely upon commercial assets, the real wealth of the nation, instead of upon debt, as formerly.
This measure was based upon the English, French and German plans, its authors taking the best from each and making the whole conform to American needs and conditions. Dru regarded this as one of his most pressing reforms, for he hoped that it would not only prevent panics, as formerly, but that its final construction would completely destroy the credit trust, the greatest, the most far reaching and, under evil direction, the most pernicious trust of all.
While in this connection, as well as all others, he was insistent that business should be honestly conducted, yet it was his purpose to throw all possible safeguards around it. In the past it had been not only harassed by a monetary system that was a mere patchwork affair and entirely inadequate to the needs of the times, but it had been constantly threatened by tariff, railroad and other legislation calculated to cause continued disturbance. The ever-present demagogue had added to the confusion, and, altogether, legitimate business had suffered more during the long season of unrest than had the law-defying monopolies.
Dru wanted to see the nation prosper, as he knew it could never have done under the old order, where the few reaped a disproportionate reward and to this end he spared no pains in perfecting the new financial system. In the past the railroads and a few industrial monopolies had come in for the greatest amount of abuse and prejudice. This feeling while largely just, in his opinion, had done much harm. The railroads were the offenders in the first instance, he knew, and then the people retaliated, and in the end both the capitalists who actually furnished the money to build the roads and the people suffered.
"In the first place," said Administrator Dru to his counsel during the discussion of the new financial system, "the roads were built dishonestly. Money was made out of their construction by the promoters in the most open and shameless way, and afterwards bonds and stocks were issued far in excess of the fraudulent so-called cost. Nor did the iniquity end there. Enterprises were started, some of a public nature such as grain elevators and cotton compresses, in which the officials of the railroads were financially interested. These favored concerns received rebates and better shipping facilities than their competitors and competition was stifled.
"Iron mines and mills, lumber mills and yards, coal mines and yards, etc., etc., went into their rapacious maw, and the managers considered the railroads a private snap and 'the public be damned.'
"These things," continued Dru, "did not constitute their sole offense, for, as you all know, they lobbied through legislatures the most unconscionable bills, giving them land, money and rights to further exploit the public.
"But the thing that, perhaps, aroused resentment most was their failure to pay just claims. The idea in the old days, as you remember, was to pay nothing, and make it so expensive to litigate that one would prefer to suffer an injustice rather than go to court. From this policy was born the claim lawyer, who financed and fought through the courts personal injury claims, until it finally came to pass that in loss or damage suits the average jury would decide against the railroad on general principles. In such cases the litigant generally got all he claimed and the railroad was mulcted. There is no estimating how much this unfortunate policy cost the railroads of America up to the time of the Revolution. The trouble was that the ultimate loss fell, not on those who inaugurated it but upon the innocent stock and bondholder of the roads.
"While the problem is complicated," he continued, "its solution lies in the new financial system, together with the new system of control of public utilities."
To this end, Dru laid down his plans by which public service corporations should be honestly, openly and efficiently run, so that the people should have good service at a minimum cost.
Primarily the general Government, the state or the city, as the case might be, were to have representation on the directorate, as previously indicated. They were to have full access to the books, and semi-annually each corporation was to be compelled to make public a full and a clear report, giving the receipts and expenditures, including salaries paid to high officials. These corporations were also to be under the control of national and state commissions.
While the Nation and State were to share in the earnings, Dru demanded that the investor in such corporate securities should have reasonable profits, and the fullest protection, in the event states or municipalities attempted to deal unfairly with them, as had heretofore been the case in many instances.
The Administrator insisted upon the prohibition of franchise to "holding companies" of whatsoever character. In the past, he declared, they had been prolific trust breeders, and those existing at that time, he asserted, should be dissolved.
Under the new law, as Dru outlined it, one company might control another, but it would have to be with the consent of both the state and federal officials having jurisdiction in the premises, and it would have to be clear that the public would be benefited thereby. There was to be in the future no hiding under cover, for everything was to be done in the open, and in a way entirely understandable to the ordinary layman.
Certain of the public service corporations, Dru insisted, should be taken over bodily by the National Government and accordingly the Postmaster General was instructed to negotiate with the telegraph and telephone companies for their properties at a fair valuation. They were to be under the absolute control of the Postoffice Department, and the people were to have the transmission of all messages at cost, just as they had their written ones. A parcel post was also inaugurated, so that as much as twelve pounds could be sent at cost.
The further Administrator Dru carried his progress of reform, the more helpful he found Selwyn. Dru's generous treatment of him had brought in return a grateful loyalty.
One stormy night, after Selwyn had dined with Dru, he sat contentedly smoking by a great log fire in the library of the small cottage which Dru occupied in the barracks.
"This reminds me," he said, "of my early boyhood, and of the fireplace in the old tavern where I was born."
General Dru had long wanted to know of Selwyn, and, though they had arranged to discuss some important business, Dru urged the former Senator to tell him something of his early life.
Selwyn consented, but asked that the lights be turned off so that there would be only the glow from the fire, in order that it might seem more like the old days at home when his father's political cronies gathered about the hearth for their confidential talks.
And this was Selwyn's story:--
My father was a man of small education and kept a tavern on the outer edge of Philadelphia. I was his only child, my mother dying in my infancy. There was a bar connected with the house, and it was a rendezvous for the politicians of our ward. I became interested in politics so early that I cannot remember the time when I was not. My father was a temperate man, strong-willed and able, and I have often wondered since that he was content to end his days without trying to get
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