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- Great Fortunes from Railroads - 4/57 -

had it not been for the quantities of cash poured into legislative pockets. The cash was the real eloquent persuader. In turn, the virtuous legislators, on being questioned by their constituents as to why they had voted such great subsidies, such immense land grants and such sweeping and unprecedented privileges to private corporations, could fall back upon the justification (and a legitimate one it seemed) that to get the railroads built, public encouragement and aid were necessary.

Many of the projectors of railroads were small tradesmen, landlords, mill owners, merchants, bankers, associated politicians and lawyers. Not infrequently, however, did it happen that some charters and grants were obtained by politicians and lawyers who, at best, were impecunious sharpers. Their greatest asset was a devious knowledge of how to get something for nothing. With a grandiloquent front and a superb bluff they would organize a company to build a railroad from this to that point; an undertaking costing millions, while perhaps they could not pay their board bill. An arrangement with a printer to turn out stock issues on credit was easy; with the promise of batches of this stock, they would then get a sufficient number of legislators to vote a charter, money and land.

After that, the future was rosy. Bankers, either in the United States or abroad, could always be found to buy out the franchise or finance it. In fact, the bankers, who themselves were well schooled in the art of bribery and other forms of corruption, [Footnote: "Schooled in the art of bribery."--In previous chapters many facts have been brought out showing the extent of corrupt methods used by the bankers. The great scandal caused in Pennsylvania in 1840 by the revelations of the persistent bribery carried on by the United States Bank for many years, was only one of many such scandals throughout the United States. One of the most characteristic phases of the reports of the various legislative investigating committees was the ironical astonishment that they almost invariably expressed at the "superior class" being responsible for the continuous bribery. Thus, in reporting in 1840, that $130,000 had been used in bribery in Pennsylvania by the United States Bank, an investigating committee of the Pennsylvania House of Representatives commented: "It is hard to come to the conclusion that men of refined education, and high and honorable character, would wink at such things, yet the conclusion is unavoidable." [Pa. House Journal, 1842, Vol. ii, Appendix, 172-531.] were often outwitted by this class of adventurers, and were only too glad to treat with them as associates, on the recognized commercial principle that success was the test of men's mettle, and that the qualities productive of such success must be immediately availed of.

In other instances a number of tradesmen and landowners would organize a company having, let us say, $250,000 among them. If they had proceeded to build a railroad with this sum, not many miles of rail would have been laid before they would have found themselves hopelessly bankrupt.

Their wisdom was that of their class; they knew a far better method. This was to use the powers of government, and make the public provide the necessary means. In the process of construction the $250,000 would have been only a mite. But it was quite enough to bribe a legislature. By expending this sum in purchasing a majority of an important committee, and a sufficient number of the whole body, they could get millions in public loans, vast areas of land given outright, and a succession of privileges worth, in the long run, hundreds upon hundreds of millions of dollars.


So the onslaught of corruption began and continued. Corruption in Ohio was so notorious that it formed a bitter part of the discussion in the Ohio Constitutional Convention of 1850-51. The delegates were droning along over insertions devised to increase corporation power. Suddenly rose Delegate Charles Reemelin and exclaimed: "Corporations always have their lobby members in and around the halls of legislation to watch and secure their interests. Not so with the people--they cannot act with that directness and system that a corporation can. No individual will take it upon himself to go to the Capitol at his own expense, to watch the representatives of the people, and to lobby against the potent influences of the corporation. But corporations have the money, and it is to their interest to expend it to secure the passage of partial laws." [Footnote: Ohio Convention Debates, 1850-51, ii: 174.]

Two years later, at one of the sessions of the Massachusetts Constitutional Convention, Delegate Walker, of North Brookfield, made a similar statement as to conditions in that State. "I ask any man to say," he asked, "if he believes that any measure of legislation could be carried in this State, which was generally offensive to the corporations of the Commonwealth? It is very rarely the case that we do not have a majority in the legislature who are either presidents, directors or stockholders in incorporated companies. This is a fact of very grave importance." [Footnote: Debates in the Massachusetts Convention, 1853, iii: 59.] Two-thirds of the property in Massachusetts, Delegate Walker pointed out, was owned by corporations.

In 1857 an acrimonious debate ensued in the Iowa Constitutional Convention over an attempt to give further extraordinary power to the railroads. Already the State of Iowa had incurred $12,000,000 in debts in aiding railroad corporations. "I fear," said Delegate Traer, "that it is very often the case that these votes (on appropriations for railroads) are carried through by improper influences, which the people, if left alone, would, upon mature reflection, never have adopted." [Footnote: Constitutional Debates, Iowa, 1857, ii: 777.]


These are but a very few of the many instances of the debauching of every legislature in the United States. No matter how furiously the people protested at this giving away of their resources and rights, the capitalists were able to thwart their will on every occasion. In one case a State legislature had been so prodigal that the people of the State demanded a Constitutional provision forbidding the bonding of the State for railroad purposes. The Constitutional Convention adopted this provision. But the members had scarcely gone to their homes before the people discovered how they had been duped. The amendment barred the State from giving loans, but (and here was the trick) it did not forbid counties and municipalities from doing so. Thereupon the railroad capitalists proceeded to have laws passed, and bribe county and municipal officials all over the State to issue bonds and to give them terminal sites and other valuable privileges for nothing. In every such case the railroad owners in subsequent years sneaked legislation through in practically every State, or resorted to subterfuges, by which they were relieved from having to pay back those loans.

Hundreds of millions of dollars, exacted from the people in taxation, were turned over to the railroad corporations, and little of it was ever returned. As for the land grants to railroads, they reached colossal proportions. From 1850 to 1872 Congress gave not less than 155,504,994.59 acres of the public domain either direct to railroad corporations, or to the various States, to be transferred to those corporations.

Much of this immense area was given on the condition that unless the railroads were built, the grants were to be forfeited. But the capitalists found no difficulty in getting a thoroughly corrupt Congress to extend the period of construction in cases where the construction had not been done. Of the 155,000,000 acres, a considerable portion of it valuable mineral, coal, timber and agricultural land, only 607,741 acres were forfeited by act of Congress, and even much of these were restored to the railroads by judicial decisions. [Footnote: The principal of these decisions was that of the Supreme Court of the United States in the case of Schluenberg vs. Harriman (Wallace's Supreme Court Reports, xxi:44). In many of the railroad grants it was provided that in case the railroad lines were not completed within certain specified times, the lands unsold or unpatented should revert to the United States. The decision of the Supreme Court of the United States practically made these provisions nugatory, and indirectly legalized the crassest frauds.

The original grants excluded mineral lands, but by a subsequent fraudulent official construction, coal and iron were declared not to be covered by the term mineral.

Commissioner Sparks of the U. S. General Land Office estimated in 1885 that, in addition to the tens of millions of acres the railroad corporations had secured by fraud under form of law, they had overdrawn ten million acres, "which vast amount has been treated by the corporations as their absolute property, but is really public land of the United States recoverable to the public domain." (House Executive Docs., First Session, Forty-ninth Congress, 1885-86, ii:184.) It has never been recovered.]

That Congress, not less than the legislatures, was honeycombed with corruption is all too evident from the disclosures of many investigations--disclosures to which we shall have pertinent occasion to refer later on. Not only did the railroad corporations loot in a gigantic way under forms of law, but they so craftily drafted the laws of both Nation and the States that fraud at all times was easy.


Not merely were these huge areas of land obtained by fraud, but after they were secured, fraud was further used to evade taxation. And by donations of land is not meant only that for intended railroad use or which could be sold by the railroads. In some cases, notably that of the Union Pacific Railroad, authority was given to the railroad by acts passed in 1862 and 1864 to take all of the material, such as stone, timber, etc., needed for construction, from the public lands. So, in addition to the money and lands, much of the essential material for building the railroads was supplied from the public resources. No sooner had they obtained their grants, than the railroad corporations had law after law passed removing this restriction or that reservation until they became absolute masters of hundreds of millions of acres of land which a brief time before had been national property.

"These enormous tracts," wrote (in 1886) William A. Phillips, a member of the Committee on Public Lands of the Forty-third Congress, referring to the railroad grants, "are in their disposition subject to the will of the railroad companies. They can dispose of them in enormous tracts if they please, and there is not a single safeguard to secure this portion of the national domain to cultivating yeomanry." The whole machinery of legislation was not only used to exclude the farmer from getting the land, and to centralize its ownership in corporations, but was additionally employed in relieving these corporations from taxation on the land thus obtained by fraud. "To avoid taxation," Phillips goes on, "the railroad land grant companies had an amendment enacted into law to the effect that they should not obtain their patents until they had paid a small fee to

Great Fortunes from Railroads - 4/57

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