ROBBER BARONS
CHAPTER FOURTHE WINNING OF THE WEST
THAT a million men could return at once to the arts of peace, after Appomattox, showed clearly the immensity of the tasks to be done, the new machinery to be created—banks, mines, furnaces, shops, power houses—if the New Americans of 1865 would make their continent habitable. At the moment, as Henry Adams remembers it, they knew that they must remake a world of their own, upon a new scale of power, where figuratively they had not yet created a road or even learned to dig their own iron. “They had no time for thought,” he tells us, “save for that single fraction called a railway system.” This alone would require the energies of a generation. “The generation between 1865 and 1895 was already mortgaged to the railways and no one knew it better than the generation itself.”
Mortgaged, but without regret. When the news of Lee’s surrender was telegraphed everywhere, the numberless volunteers for the industrial revolution, as the Beards have written, “leaped forward as strong runners to the race.” The returned soldiers poured into the newly opened oil fields of Pennsylvania, the mines of Nevada and California ; they tilled the free land of the Mississippi Valley and of the Northwest ; they manned a thousand new industries which made the iron, steam and smoke of the next decade ; but in whole legions they lent their “oceanic, variegated, intense practical energies” to the building of the transcontinental railroads. (Here, as everywhere else, the forehanded young men who were to be their leaders had usually preceded them by at least four years.)
In exploiting their Great West the generation of the Civil War seemed as warlike as ever. Here in the open prairies and mountains the sweeping transition from a colonial and agrarian state of economy to an advanced phase of large-scale industry—all the swifter because so long retarded—seemed far more picturesque than its counterpart in the foot-worn marketplaces of the Eastern cities. The protagonists, armed to the teeth, flouting law, reckless of danger as of cost in gold and blood, seemed afterward both more “primitive” and more “heroic” than their circumspect contemporaries east of the Mississippi. The Western “empire-builders” were often dramatized as latter-day Conquistadores who had accomplished the “winning of the West”; and the poet Walt Whitman, writing at this time his “Democratic Vistas,” saluted their “extreme business energy, and . . . almost maniacal appetite for wealth . . . as parts of amelioration and progress, needed to prepare the very results I demand”!
The whole symbolism of this era attached itself to the construction of the transcontinental or Pacific railroads more than to any other of its multifarious activities. By spanning the continent between the two oceans, the nation was to be physically unified at last, its natural resources thoroughly absorbed, its Manifest Destiny achieved. Hence “the winning of the West,” by means of the transcontinental railroads, represented the heart and soul of the national industrial plan which engaged the whole people between 1865 and 1873. As in socialist Russia today, the vigorous progress of the railroad-builders delighted the popular imagination, was reported day by day in the newspapers of the principal cities, was attended with holiday-making, music and public orations in the towns along their line of march.
How was this plan to be carried out, how were the great railroad undertakings to be effected in the sparsely settled, virgin territories then known as “the Great American Desert,” where for a long time the traffic must remain unprofitable ? A generation before the visionary Thomas Benton had urged Congress to build the Pacific Railroad “as a national work, on a scale commensurate with its grandeur,” the use of it to be let out to companies, who would fetch and carry on the best terms. But by 1853, Stephen Douglas had convinced everyone that the Pacific Railroad should be built by private enterprise. To encourage such construction large pieces of the public domain, all the Western territories belonging to the republic, could be detached and turned over to the railroad-builders. These resources a John Quincy Adams had wished to retain for the nourishment and profit of the citizens at large. But the view that the untaxed lands of the government should be turned over to private enterprise gained adherents in every quarter. After the enactment of Lincoln’s Homestead Act, it was but a logical step to the grant of lands for the railroad systems projected during the war, and further of all the stone and timber on the lands they traversed, and of huge subsidies in cash or bonds. In this way canal-building had been encouraged earlier by the federal and state governments ; and when as in Illinois, by 1850, a railroad was favored instead of a canal, the land was donated to the railroad.1 Thus, for at least ten years before 1861, the railroads, especially in the West, were “land companies” which acquired their principal raw material through pure grants in return for their promise to build, and whose directors, combined with friendly statesmen such as Douglas, did a rushing land business in farm lands and town sites at rising prices. The technique of railroad-building was thoroughly established by 1862, when the war government with great haste passed the Pacific Railroad bill.2
A swarm of interested entrepreneurs buzzed about the corridors of Congress in the early days of the war in behalf of their favorite projects. Among them were respectable Yankee manufacturers of shovels (that would be needed to dig the roadbed), such as the Ames brothers ; financiers from New York, such as John J. Cisco, August Belmont and Thomas Durant ; light-headed visionaries such as Josiah Perham, promoter of “Perham’s People’s Pacific,” and George F. Train, the inveterate land and town boomer ; shrewd railroad managers like Thomas Scott and J. Edgar Thomson of the Pennsylvania company ; and storekeepers from the Sacramento Valley, such as Collis P. Huntington, the former watch-peddler, who represented himself as the head of the Central Pacific Railroad of California, capitalized at $8,500,000, but with nothing paid in. These men whispered in corners to the friendly and interested Congressmen, chorusing their demands for land, rights of way, and government bonds, reporting the clamor of the settlers for railroad lines, estimating the fabulous profits through land and construction work which might be won and promising much of these profits to those who entered the affair, whether they were plain citizens or Senators. ... It was among these first comers that the railroad captains were recruited for the great cause. And the Congressmen who had the courage to help them at the start, afterward known as “Railway Congressmen,” were also ready to take their part, though not too publicly, and expected their rewards.
In short order the Pacific Railroad bill was passed, and the two companies which undertook the colossal affair were given federal charters. The Union Pacific, building westward from the Missouri River, was granted 12,000,000 acres of unknown land, in alternate sections ten miles deep, and also $27,000,000 in 6 per cent, thirty-year government bonds as a first mortgage. The Central Pacific, building from the sea eastward to meet the Union Pacific, was similarly granted 9,000,000 acres of land and $24,000,000 in government bonds. Senator Henry Wilson of Massachusetts cried :
I give no grudging vote in giving away either money or land. I would sink $100,000,000 to build the road and do it most cheerfully, and think I had done a great thing for my country. What are $75,000,000 or $100,000,000 in opening a railroad across regions of this continent, that shall connect the people of the Atlantic and the Pacific, and bind us together. . . . Nothing ! As to the lands, I don’t begrudge them.3
Soon afterward the enthusiastic lawgivers donated 18,000,000 acres of land to the group headed by Thomas Scott, who proposed to build the Texas & Pacific Railroad along the Mexican border ; and 47,000,000 acres to another patriotic gentleman, Josiah Perham of Boston, who declared himself ready to build the Northern Pacific Railroad along the Canadian border. This and much more was freely given until 158,293,000 acres were disposed of, as much as whole kingdoms owned, and all the coal, copper, oil, gold, silver under them, all the timber and stone above them. But what was that ? Nothing if only the people of the Atlantic and Pacific might be united.
Men like Collis Huntington, Durant, the Ames brothers concealed their joy as well as they could. Huntington hastened to send the triumphant but cryptic message to his partner, Leland Stanford :
We have drawn the Elephant.
Truly it was a majestic booty, an elephantine plunder that fell almost unheeded into the hands of Huntington and his associates. Certain tribunes of the people, those often styled “demagogues,” protested a little, though they were soon overborne. A Senator Grimes might be heard exclaiming that “nearly all the grants of lands to railroads and wagon-roads find their way into the hands of rich capitalists.” A correspondent for the New York World went so far as to picture the lobbyists and agents of the Northern Pacific ring, sitting in the galleries of Congress while the railroad bills were being passed, “looking down on the scene like beasts of prey.” President Andrew Johnson, an old commoner, warned in his speeches in 1866 that “an aristocracy based on nearly two billions and a half of national securities has arisen in the Northern States to assume that political control which the consolidation of great financial and political interests formerly gave to the slave oligarchy. The war of finance is the next war we have to fight.” By such words, Lincoln’s successor only added to the fury of the storm against him ; for the war party, waving the bloody shirt, the triumph of its armies must be surmounted with the triumph of the Northern industrial economy.
Soon General Grant, for whose election everybody worked, as Henry Clews said, “because Wall Street business would boom,” was to put an end to such animadversions as Johnson’s. Smoking his favorite cigars in the palace of Jay Cooke, frequenting Jim Fisk and Jay Gould with a stolid delight, dazzled by the splendor of wealth as he was impressed by masses of artillery, Grant suffered the mounting “preëmptions” of his regime without a shadow of alarm. He knew only that the people wanted railroads ; and Huntington was ready to build them at his own terms. He could hardly have seen that parallel between the Great Barbecue of his time and the upheavals of feudal ages—between the transfer of ownership, by the popular sovereignty in America, in lands, forests, mineral deposits, harbor rights, franchises, to a small group of strong men, and the ancient acts of seizure by force and collusion—an analogy which was not drawn until nearly thirty years later by the philosophic Thorstein Veblen. Here certainly began that “absentee ownership” which rested thereafter upon a form of “divine right” as certainly as did the ancient feudalistic ground of “privilege and prescriptive tenure,” which is always traceable to seizure by force and collusion. Thenceforth the lords of these rich principalities or baronies, in railroads, oil, silver, copper, or iron, would own them, like the barons of old, as Veblen observed, “not by virtue of having produced or earned them . . . but because they own them."
2
In the remote California valleys news of the chartering of a Pacific railroad was received with jubilation by the Forty-niners. There, as everywhere else on the moving frontier, the settler cried for railroads ; “no music was sweeter to his ears than the whistle of the locomotive,” it was said. Through the state or territorial governments he pressed subsidies upon the promoters of such schemes ; town and county officials vied with each other to distribute lands, terminal sites, and even cash payments, raised by assessment. In California as throughout the prairies beyond the Mississippi, the coming of the Iron Horse meant to the squatter that he could, after skimming his land, sell it for subdivision and depart westward once again.
The completion of the long-desired transcontinental railroad climaxed the heroic age of the frontier and has remained a famous affair in our history, thanks to the celebrity of the Crédit Mobilier ring after 1871. But this cause célèbre related only to the eastward half (Union Pacific). The adventure of Huntington and his partners in building the western half of the line, the Central Pacific, as it was then known, across the Sierras to a junction near Great Salt Lake, easily merits an equal fame.
By 1860, Collis Huntington operated with great profit a large hardware store in Sacramento, in partnership with another pioneer from the East named Mark Hopkins. At this time the pair made the acquaintance of Leland Stanford, another aggressive figure of “virile power” who had also prospered by means of a store in San Francisco. Thanks to his previous legal training, Stanford became active in politics, attended the Republican presidential convention of 1860 as a delegate, and had himself elected governor of California the following year. These three were joined by a former peddler, ironworker and gold-miner, Charles Crocker, forming the Pacific Associates, to engage in business ventures together. The “quartet,” as they were often called, worked together in silence and tolerable harmony for a long period of years. Their abilities complemented each other. Huntington dominated the group, cool-headed, a tireless worker, bold and persistent, trusting no one, owning few friends ; also, according to Daggett’s partial account of him in his history of the Southern Pacific, he was reputed to be narrow, ruthless, untruthful, sarcastic, vindictive. Stanford, on the other hand, showed political sagacity in handling their relations with public and government. More vain and extravagant than Huntington, avid of public honors, he wielded political influence with subtlety not only at Sacramento, but also even at the National Capitol to which he came as Senator from California in 1887. It was said of him that “no she-lion defending her whelps or a bear her cubs will make a more savage fight than will Mr. Stanford in defense of his material interests.” Hopkins, in contrast with the others, was quiet, methodical, close-mouthed, always busy poring over their books, worrying over detail, the “inside man” for their operations. Charles Crocker, also something of a petty politician, was most useful outside, a huge, squat figure, weighing 265 pounds, driving forward their vast construction work, “always roaring up and down like a mad bull.” All of these men had made money quickly at their trade. Huntington and Stanford had each accumulated about $100,000 after only a few years in California. If the four men ever quarreled, out of jealousy or mutual fear, their dissension was kept silent ; they bore their consciences in common, kept each other’s secrets and preserved an unbroken discipline against the common enemy, wherever he might be.
An engineer named Judah, enflamed with the vision of a transcontinental road, held meetings in San Francisco in 1859 and 1860, at which he described his project in detail, outlining routes and gradients across the mountains. The Pacific Associates, attending one of Judah’s meetings, questioned him earnestly, heard him with excitement and from 1860 on laid their plans to have state and national subsidies turned over to them so that they might create the great iron highway to the East.
On horseback, Huntington and Crocker and Stanford, accompanied by the engineer, spied the ground, ascended the mountains of the coast range searching for the best routes leading eastward through the Nevada mining camps which they desired to link with the sea. At the top of the mountains, they halted, sat down and looked out at their wilderness of an empire. “At their feet was a precipice dropping down perpendicularly a quarter of a mile,” according to a Californian’s account. Never before in the memory of man had such a project been attempted. The engineer, Judah, though his actual experience was slight, assured them that it could be done—if government aid were obtained. For the cost would be terrible.
Was there money in it ? “What should two dry-goods merchants and two dealers in hardware, who knew nothing at first hand of railroad operations,” asks Daggett, “have cared about the administration of a railroad 800 miles long ?”—that is to say, longer than any yet known to man. But they saw great business—with the mining communities where “the glittering piles of gold and silver were to be seen from afar,” heaped up like bricks and stones at the mouth of the Bonanza mines, now connected only by mule with the seacoast. Hopefully they estimated the future traffic that would flow through their strong, close-fisted hands. They had little money, not $200,000 between them for the awful project. Yet they went on. Most of their capital the black-bearded Collis Huntington carried silently with him in his trunk, with his blue prints, on his delicate mission to Washington in 1861. In an incredibly short time he had won the prized federal charter for their Central Pacific Railroad.
A charter, and the federal government’s promise to pay in bonds for work in progress, at a rate running from $16,000 plus land grants over plains, to $48,000 for construction in the mountains, this was all that the empire builders had ; for Huntington in the Capitol had exhausted their whole initial fund of $200,000 in a manner of which he left no record. The local financiers, members of the San Francisco “bank ring,” among them Darius Ogden Mills, as well as the Bonanza kings of the Comstock, refused to invest in Huntington and Stanford’s railroad. “Why should we,” they said, “if we can get 24 per cent on our money here now in San Francisco ?”
Desperately hungry for money, the four confederates now fortunately developed a variety of tactics which yielded them a continual flood. Setting aside the first mortgage they had issued to the federal government, they began selling bonds of their own ; ultimately, over a long period of years some $27,000,000 was raised in this way. Then through the efforts of Stanford, who was now governor of the young state of California, they invoked the support of the state government and of the towns and counties along their route.
In May, 1863, a few weeks after building of the road had begun, elections were held in San Francisco over the question of a bond issue of $3,000,000 to be donated to the Central Pacific Railroad. Philip Stanford, brother of the Governor, drove up to the polls in a buggy. Calling on the crowd which swarmed about him to vote for the bond issue he drew gold pieces from a bag beside him and strewed them all around. The bond issue was voted by the people.
Confronted with all the awkward delays and uncertainties inherent in democratic institutions, the Associates, who were compelled to act with promptitude and union in such a great public work, quickly developed a technique of political action such as the situation demanded and, indeed, justified in their eyes. Breaches were opened in the defenses of the law ; clubs were improvised to swing over the heads of a constituency unaware of its interest and slow or doubtful in its policy. Where, in the East, Vanderbilt, then Fisk and Gould, found it most useful to work through intermediaries, such as William Tweed, who provided the expert political machinery necessary under universal suffrage, the Western empire-builders, simpler and ruder men, and by far less devious, seized upon this machinery themselves. The technique of this remarkable control, which will be discussed presently under another heading, involved a close control of the political and industrial interest of the group in order to overcome obstacles of all sorts. Soon the Pacific Associates wielded a tremendous power of “reward and punishment,” now propitiating, now menacing their opposition.
“It has cost money to fix things,” Huntington would say in his intramural correspondence, which he ordered burnt after being read. The passage of a bill involved “arguments” in the form of considerable sums of cash : “I believe with $200,000 we can pass our bill,” he wrote in one instance from Washington. He always calculated values nicely. The rights thus acquired would then be used in the bold and lavish Huntington-Stanford manner to evoke further drafts of capital. One by one the various communities and counties along the way were lined up, and their greed and fear of each other played upon adroitly. Soon San Francisco, Stockton, Sacramento, and other towns were all compelled to give rights of way, terminal and harbor sites, and to make stock or bond subscriptions ranging from $150,000 to $1,000,000—the last sum being levied upon San Francisco. Thus Huntington wrote in 1871 to his comrades that the Central Pacific was “out to get a lot of money from interested parties along the line between the Spadra and San Gregorio pass, if it would build the railroad.” His methods were clearly described by a member of the Constitutional Convention of 1878, who said :
They start out their railway track and survey their line near a thriving village. They go to the most prominent citizens of that village and say, “If you will give us so many thousand dollars we will run through here ; if you do not we will run by.” And in every instance where the subsidy was not granted this course was taken, and the effect was just as they said, to kill off the little town.
In moving accents the speaker dwelt upon the ruinous freezing-out of “Paradise, Stanislaus County,” which was overnight turned into “Poverty Flat” through the deliberate establishment of a depot, and hence another town, four miles further along the line, because the railroad “did not get what they wanted.” Then using the bluntest terms he charged : “They have blackmailed Los Angeles County $230,000 as a condition of doing that which the law compelled them to do.” Huntington, whatever his feelings in the matter, would have smiled inwardly at the underestimate of his work.
In 1868, the former “pueblo” of Los Angeles in Southern California, feeling its present circumstances confining and its future career vast, gave financial assistance to the construction of the Los Angeles & San Pedro Railroad. When shortly thereafter it was learned that the Pacific Associates were planning a new railroad line from San Francisco, by a southerly route, to the East, the citizens of Los Angeles clamored to have the line pass through their town. The place was a potential seaport moreover, some said a future metropolis of 25,000 like San Francisco, though it had only 6,000 population. Collis P. Huntington, head of the proposed subsidiary, the “Southern Pacific,” then announced his terms : Let the railroad be given 5 per cent of the assessed valuation of all Los Angeles County. To this the citizens readily agreed. They passed over to the Southern Pacific $200,000 in stock of the Los Angeles & San Pedro Railroad, about $377,000 in cash (through an issue of municipal bonds), sixty acres of ground for a depot. In all these donations amounted to more than $100 for every man, woman, child and Indian in the town.
The levies upon the various towns and counties of California were indispensable to the Associates, since they were operating upon a “shoestring.” In order to begin the first construction, Gustavus Myers relates, they used the money wrested from Sacramento and Placer County, an amount of $848,000. Then this completed, they were able to demand the federal mileage subsidy for the first short section. By repeating the process they were able to build the entire road without using a dollar of their own.4
January 8, 1863, construction was begun on the Central Pacific with the pomp and ceremony which in those days seemed to accompany every phase of development of our national industrial plan. Though it was raining hard enough over the Sacramento Valley to dampen the cheerfulest spirits, a great crowd, including hundreds of Chinese, had turned out at the levees of the river—all of them standing upon hay to keep their feet dry. Flags were waved, guns were fired, a brass band made brave music ; and then, at the proper moment, Governor Stanford seized a shovel and deposited the first earth for the embankment. The impetuous Crocker promptly called for nine cheers and the Central Pacific Railroad had begun building from the West Coast.
For four years, without pause, three thousand Irishmen and ten thousand Chinese coolies toiled away through desert heat and mountain cold or snow. Ever afterward, Huntington would be especially grateful to the Chinese, who worked for $1 a day, about half the wages of white men and were ready to kill themselves for this ; he was a constant advocate of unrestricted Chinese immigration, since to the muscular backs of Orientals he always attributed the successful building of a great part of the transcontinental system.
What should three dry-goods merchants and a peddler have known about building a railroad ? Their engineers never found the best route for them until long years had passed. Judah’s line went northward out of Sacramento, through Summit Valley and Truckee Lake in the Central Sierras, ascending nearly 7,000 feet from water level at a steep gradient of 116 feet, or 2 per cent per mile on the average. Then it continued in a direct line to the Washoe Mountain mining region, near Carson City, across Nevada, through Humboldt Sink to the Great Salt Lake of Utah. A superior route, forty miles to the north, at Beckwourth Pass, was ignored ; it rose at the maximum to a height that was 2,000 feet lower than the other pass, and its grade averaged 1 per cent per mile.
The work was carried on with a heedless abandon. It was sometimes found necessary to shift whole sections of the mountain line from one side of a valley to the other. In the severe winter weather of the mountain summits, tunnels had to be driven by the workers through the snow to the rock face, snow-sheds and galleries improvised to prevent settling, blasting operations had to be done over frozen ground, which must be reworked in the spring thaw. The haste of this great railroad construction—paralleled by the Union Pacific to the eastward—was afterward estimated by government experts to have caused a waste of between 70 and 75 per cent of the expenditure as against the normal rate of construction. Yet at the time there was little bewailing the cost of the American system of empire-building by private enterprise, owing to the general enthusiasm which attended its progress everywhere throughout the young and growing industrial nation. Like the enthusiastic Senator from Massachusetts, no one regretted the railroads’ cost, and like the honorable Senator everyone hurried to invest if he could in the stocks of the construction companies which gave them life.
For the tremendous waste was due to no stupidity on the part of the Huntington ring, who carefully spared themselves from loss by ingenious safeguards. Before they had proceeded a hundred miles, they resorted to the clever corporate device also used by the Union Pacific ring, of creating a separate construction company, called the “Credit & Finance Corporation,” which had sole right to purchase all material and carry out all building work for their road. It was to an alter ego of the Central Pacific, of which Huntington, Stanford, Crocker and Hopkins were the sole directors and stockholders, that approximately $79,000,000 in bonds, stock and cash received from government and investors were paid over for building work. Of this sum experts later estimated that upward of $36,000,000 was in excess of a reasonable cost of the affair, and was lost entirely, that is, “lost” to the same principals. But this estimate does not include the value of water frontage, as in Oakland and other river and coast cities, which fell into the hands of the Associates.
The great losses, fixed in an enduring capitalization, would be borne by future ages of Americans, but naturally concerned the enthusiastic railroad captains little at the moment. There were instances where in their strenuous progress they encountered existing lines, such as the Sacramento Valley Railroad built for a short distance in 1859, through a rich region. Faced with the option of buying, they instead built their own line around it over a somewhat lengthier distance in a queer and crazy course through the same valley, “because it was cheaper to build at the government expense than to buy a railroad already existing. . . .” The fruits of the great project went to the construction company, one authority holds. “The Federal government seems . . . to have assumed the major portion of the risk and the Associates seem to have derived the profits.”
Power such as they had foreseen but dimly came to the hands of the empire-builders as their railroad advanced and the Pacific Slope grew in wealth and population. The rugged topography of the state lent itself to their plans. By seizing one valley, or the passageway to it, they brought an adjacent one into their effective control, as the medieval barons had done of old by setting their castles upon the heights overlooking the rivers of Europe, or closing the mountain passes. Their network of branch lines was spread throughout the Pacific Slope, through the payment of proper ransoms by the communities which required such outlets as a matter of life and death. But more ingenious, the new barons who held the only overland route to the Pacific connected these lines with water-front facilities, which they, upon a large scale, wrested from the coast cities by the threat of extinction. Thus they would be in position to deal with the competition of the sea-carrying trade.
Traffic was sparse to begin with, but this mounted steadily, as the rich lands they held were purchased and cultivated by new immigrants, and as the people of the West Coast, “joying and sorrowing,” at labor and love-making, brought forth innumerable children. The millions of acres of forest, ranch and vineyard owned by the quartet rose to incalculable value. But with the immense wealth and power they had gained, which as they now comprehended was nothing less than that of monopoly, the Huntington ring held passenger rates to 10 cents per mile, and made freight rates the highest in America. Through the most hazardous periods of their venture, as they pushed forward with prodigious energy and took undeniably great risks, their monopoly saved them from disaster.
No public opinion had opposed their strategy. Those who tended to complain of high prices, or protest against their monopoly of the vital highways of all trade, were as likely to seek positions of advantage to themselves in the new hierarchy, according to contemporary report. The complaisance of the population, their approval of the great construction, is reflected in the success of the tactics which Huntington and Stanford employed.
Nothing checked the hegemony of the quartet over the whole coast region nor limited the mounting tributes paid to them from all quarters, once they had made juncture with the eastern half of the Pacific Railroad ; nothing save the approach of other barons who designed to capture their Western fastnesses themselves. Wary, sleeplessly vigilant, Collis Huntington, the leading spirit of the group, scanned all the mountain passes through which entrance might be made, with an eternal fear. By laying aside a large part of the moneys which came to them as a “war chest” to be held in readiness for all for all emergencies, he set an example which other giant monopolists would follow instinctively. Then he repaired to Washington during the tumultuous years under Grant, to watch over lawmakers as well as potential rivals who clamored for charters and subsidies, and who threatened to cut into the northern and southern portions of his domain.
3
Like its western half, the Union Pacific pushed forward with unexampled speed after 1865. Winter and summer, engineers heading their armies, largely made up of war veterans, proceeded from the 100th meridian westward through the Cheyenne Pass, and laid five miles of track a day, while the Central Pacific gangs labored at almost the same speed to meet them. The whole episode, source of many picturesque legends, was rightly seen as a stirring adventure in construction into which the whole nation threw itself with all its heart once its energies had been released from war. By 1867 a horde of 20,000 laborers worked with a veritable frenzy to complete the historic task.
From the hills and behind cover the red-skinned natives watched the march of the invaders through Nebraska and Wyoming. Fortunately they did not know how to tear up the heavy iron rails which cut through their prairies like bands of pain, to grip them forever. Instead they repeatedly harried and raided the building crews, who thrust them toward the Pacific Ocean. Sometimes the marauders captured a whole train, slaughtering all its crew, smashing its locomotive and burning its cars. But the workers pressed on, armed with rifles as well as picks and axes. Before their advance through the rugged Cheyenne Pass and the Laramie Hills of Wyoming picket-lines of troops extended themselves steadily. But more than the wrath of Indians, the fearful hardships of intense heat in the desert, of extreme cold in the mountains took heavy toll of the hard-driven toilers, hundreds of whom left their bones forever along the line of the Union Pacific. Yet no misadventures, obstacles or hazards, no rigors of climate were permitted to halt the furious pace of these armies of workers who were building industrial pyramids for the new age.
The camp-settlements along the transcontinental road, fleeting cities thrown up for the winter, are always remembered, always pictured in the tableaux of these later pioneers who rested and warmed themselves here. The main street, deep in sand, ran between hastily erected shanties which held either saloons or provision stores. The regular influx of sutlers, gamblers, and prostitutes, attended with the frequent shedding of blood, gave these encampments the name “Hell-on-Wheels.” For they were mobile : in the spring, the land-jobbers who had been selling subdivisions, the shrewd hucksters, tapsters and harlots would be gone, leaving the “metropolis” of yesterday to bleach silently in the sun.
Again the construction armies thundered forward through the “Great American Desert,” pouring out their labor, sweat and blood in that massive blundering manner with which Grant hammered through the Wilderness of Virginia. Fearful errors were made and were expiated. Through the Laramie Hills the dead-level grade built in such prodigious haste created losses estimated up to $10,000,000. Money was borrowed by the projectors in New York and Philadelphia at 18 and 19 per cent. The soft American iron rails which were solely used at a prohibitive cost must soon be replaced by the Bessemer steel, already used in England. Yet in this patriotic project of spanning the continent, who reckoned the cost ? Not the friendly government inspectors who turned their eyes away ; nor the stockholders and directors of the Credit Mobilier in New York and Washington ; nor the homesteaders who cried for railroads ; nor all the laborers who had been wrought up to a wild pitch ; and least of all the proud onlooking nation which had news of the affair day by day, flashed along the new telegraph lines to the world’s press.
By 1867 the building forces of both lines laid on some days eight miles of track. It was not clearly determined at first where the two lines were to meet. Nearing the end their rivalry ran high ; a strong spirit of hostility was communicated to the crews by the masters and engineers in charge, as each side from east or west tried to control a larger share of the transcontinental system, and thus obtain a larger subsidy. Near Ogden, outside of Salt Lake City, the construction crews paralleled each other. The Irish workers of the Union Pacific took the competition so seriously that from their lower level they exploded blasts under the Chinese workers of Huntington’s Central Pacific, which the latter returned in kind, burying several Irishmen.
At last on May 10, 1869, after five years, the two lines met at Promontory Point, Utah. Spikes of gold and silver were driven into the joining tracks, and the through lines from the Missouri River (at Omaha) to the Pacific Ocean (at San Francisco) had been completed. The first locomotive from the Atlantic and the first locomotive from the Pacific Coast stood impassively facing each other, while music blared, orators shouted, soldiers dipped their flags and fired salvos, and Indians on horseback looked on from the edges of the crowd in mystification. The whole country, from President Grant in the White House to the newsboy who sold extras, John Moody relates, celebrated this achievement. “Chicago held a parade several miles long ; in New York City the chimes of Trinity were rung ; and in Philadelphia the old Liberty Bell in Independence Hall was tolled again.” The nation exulting over the completion of the greatest railroad in the world, an iron bridge uniting its two mighty oceans, gave itself over to holiday-making. It was the high, youthful moment of a heroic, strenuous, constructive epoch ; landmark in a gigantic national industrial plan, conducted with sublime unconsciousness of the cost in money and human values.
The promoters of the affair too had their reasons for celebration. These elegant, silk-hatted gentlemen, in the marketplaces of Philadelphia and New York, or the corridors of Washington, had also achieved miracles of pioneering in “high finance.” Through the device of the “holding company” (borrowed from French authors of a famous “bubble”) they had set up the Credit Mobilier, into whose chest the gains from contracts for the whole Union Pacific building had flowed. During the fever of post-war prosperity Durant and the Ames brothers and their associates had been able to lift the capitalization in bonds and stocks of the railroad from an estimated $50,000,000 to $111,000,000 distributed throughout the world in the fervid manner of Jay Cooke’s government loans. The proceeds from government bonds, security sales, and sales of lands and town sites had all been swallowed up in the mounting costs of building or in other ways. For this work the directors of the Union Pacific had ingeniously contracted with themselves at prices which rose from $80,000 to $90,000 and $96,000 a mile, twice the maximum estimates of engineers ; so that the total cost eventually was $94,000,000. In after years no authorities or technicians, neither engineers nor accountants would ever be able to explain satisfactorily why the railroad had cost more than $44,000,000 to build, some $50,000,000 being left forever unaccounted for.
By chance the Union Pacific in 1864 had as its chief engineer Peter A. Dey, an able and honest technician. He estimated the cost of building the first hundred miles at $30,000 per mile, and for the second hundred miles $27,000 per mile. Durant, vice-president and active head of the company, objected strenuously to such estimates, and Dey unwillingly raised his estimate to $50,000, then suddenly resigned. The contract was then given over to one Hoxie, who followed Dey’s first specification carefully, but “expended” about three times as much cash as he called for ! Here alone, one may account for the disappearance of $6,000,000 in two hundred miles of construction.
Hence the jubilation of the Union Pacific ring. For what profits could they have awaited, if they had confined themselves purely to trafficking in freight or passengers through the empty prairies ? They regarded themselves as “empire-builders.” The affair had received the political benediction of statesmen of both parties, among them a Speaker of the House and future President, Garfield, a future Vice-President, Schuyler Colfax, and an assortment of cabinet officials, Senators and Congressmen, such as Boutwell, “Pig-Iron” Kelley, Bingham, Allison and the enthusiastic Henry Wilson. These then were the stockholders of the Credit Mobilier, or the underlying Union Pacific, purchasing for nothing or little, through Oakes Ames, himself a representative from Massachusetts, who felt that the ownership in such a vast, patriotic venture should be distributed “where it will do most good for us.” He had written privately in 1867 : “We want more friends in this Congress,” adding with unsurpassed worldly wisdom, “There is no difficulty in getting men to look after their own property.” This Credit Mobilier stock had cost the “Railway Congressmen” nothing. But when on December 12, 1867, the Credit Mobilier declared its first dividend—$2,500,000 in Union Pacific bonds, and the same in stock, or 100 per cent on the capital !—Credit Mobilier stock “boomed” to $260 a share, the enriched statesmen brimmed over with their deep “friendship”; scarcely able to hide their triumph, a crowd of millionaires emerged from the Union Pacific adventure, who were to lend character to the happily turbulent period of reconstruction and industrial revolution.
4
The tall talk concerning the Pacific Railroad projects and the land rushes they opened, the gargantuan feats of town-jobbing and stockjobbing, spreading everywhere, quickly brought imitators and formidable rivals of the first transcontinental line. Charters of all kinds were applied for in Washington and the state capitols. To the alarm of Collis Huntington, the construction of the Texas & Pacific Railroad had been authorized to a group of Pennsylvanians, headed by Thomas Scott, and including Andrew Carnegie. Then, the famous Northern Pacific charter, with its 47,000,000 acres of Northwestern land, which had been hawked about for years, suddenly in 1869 fell into the hands of Jay Cooke, the “Tycoon” himself.
The financier of the Civil War, though flushed with his glorious victories, had at first cautiously resisted the railroad fever of the day. But the astute investment of his war profits in some 40,000 acres of Minnesota land, at the present site of the city of Duluth, had led him to become interested in the railroad lines of the region, especially the new Lake Superior & Mississippi Railroad, which ran from Lake Superior to St. Paul, 140 miles distant. With their usual zestful tactics Cooke & Co. had arranged to sell $4,000,000 in bonds for this road, which were secured by the land grants it had received. In the Western land operations, Cooke’s field agents reported the facts, Cooke selected the lands, in Oregon and the Northwestern wilderness, and his newspaper men wrote the songs or broadcast alluring reports of the frontier. One of these lieutenants, named Sarn Wilkerson, an associate of Horace Greeley and of Henry Ward Beecher, and known as a “universal journalistic genius,” wrote pamphlets for Cooke which were so impassioned, that their author confessed that he himself “wanted to go right off to Minnesota.” This he had done, traveling West with a party of Cooke’s partners and engineers from the Great Lakes through the country which General Sherman warned was “as bad as God ever made or anybody can scare up this side of Africa,” as far as Puget Sound, the “Mediterranean of the Northwest.” The whole region Wilkerson wrote back was a “vast wilderness waiting like a rich heiress to be appropriated and enjoyed.” From Puget Sound he reported in perfervid accents :
There is nothing on the American continent equal to it. Such timber—such soil—such orchards—such fish—such climate—such coal—such harbors—such rivers. . . . And the whole of it is but the Western terminus of our railroad. The empire of the Pacific Coast is to be enthroned on Puget Sound. Nothing can prevent this—nothing. . . There is no end to the possibilities of wealth here. . . . Jay, we have got the biggest thing on earth. Our enterprise is an inexhaustible gold mine.
The rumors spread that Sam Wilkerson and his party “had found orange groves and monkeys” in his route through Idaho, Montana, and the Bad Lands of Dakota. And it is as much to his enthusiasm as to anything else that the country through which he passed was soon denominated “Jay Cooke’s Banana Belt.”
On the map which was unfolded to potential investors there spread in the shape of a great banana the stupendous province which had been granted to the Northern Pacific Railroad, and which by the purchase of stock control at 15 cents a share in 1869 had fallen at last into the hands of the famous banker. This domain, as large as a European kingdom, Wilkerson promised, was to be “the chained slave of the Northern Pacific Railroad”—though at the same time he begged his employer “to pray for his scalp.” A swarm of adventurers and land-dealers now surrounded Cooke beseeching him to create the new Northwest Passage, to buy iron or contract labor or bridges from them. And at last one day, while his associates flung their hats to the ceiling with joy, the Tycoon announced his determination to undertake the building of the second transcontinental railroad.
His goal was to raise $100,000,000 in bonds to finance the construction, an operation which no other American would have dared. “At his bidding the American people would lay their hoards at his feet,” everyone felt. The Rothschilds whom he approached withheld their aid, with a European war clearly impending. However the most distinguished statesmen, capitalists and publicists clamored to join the $5,000,000 pool which Cooke now formed. Chief Justice Chase offered himself as president of the company at a “good salary.” The roster of its stockholders included, besides numerous men of money, Schuyler Colfax, Rutheford Hayes, Hugh McCulloch, as well as Horace Greely and Henry Ward Beecher. Greeley was put down on the subscription list for $20,000 and Beecher for $15,000, in return for which both were to exert their influence on the public mind, Beecher’s efforts consisting of glowing reports in his Christian Union. The favorable reviews of a Philadelphia and a Washington newspaper were arranged for $4,666.66 ; while the private secretary of President Grant, General Horace Porter, offered his friendly offices in return for a similar consideration “with alacrity.”
The Northern Pacific’s franchise carried with it no money subsidies from the government, in view of the enormous quantity of land granted to it. Yet early in 1870, its friends conducted a “whirlwind lobby” in Congress, for a new Northern Pacific bill, granting many extensions of the original rights. Here they were opposed by rival interests, seeking favors for a “Southern Pacific” headed ostensibly by General Fremont, the Pathfinder, and supported by the influential Speaker James G. Blaine. But Blaine was won over by kindly services such as “a not too careful scrutiny of real estate and other unrealizable collateral” against which a loan was advanced by the Washington house of Jay Cooke & Co.; and President Grant himself, into whose confidence Cooke’s brother Henry had long ago wormed himself, “was firm as a rock” in support of their bill. The Congressmen were on the alert, with the richest bankers in the country concerned in the fate of the bill ; though assured that they were “furthering the cause of civilization” in the territories, many of them were found to be “hungering for arguments more substantial,” as Henry Cooke said, and were contented only with fractional shares in the pool.
So the Northern Pacific bill of 1870 was rushed through, and with it an extraordinary and complex agreement, by which Jay Cooke & Co. were to be its sole fiscal agents, were to receive $200 in stock for every $1,000 bond sold, and were to sell the bonds at a fee of 12 per cent. Hard terms ! Not only was the enterprise gigantic, but the reward of the bankers in fees, sections of land and town sites was estimated in sums which, a short time before, had never been known to be gathered in so few hands. In Congress, a single watchdog, Senator Harlan, protested vehemently against the practices of the railroad’s land companies of locating depots wherever they pleased. “Is it not enough that you give them a vast quantity of public lands to be sold for agricultural purposes ? Must they be permitted to ruin the towns and enhance their own lots ?” The Philadelphia Ledger, controlled by Cooke’s envious rival, Anthony Drexel, opened fire upon the whole scheme as another “South Sea Bubble.” But these warning voices were soon overborne by the clanking and thundering of Jay Cooke’s juggernaut, which was fully under way in the spring of 1870.
The building work, headed by the able railroad engineer, Milnor Roberts, was pushed rapidly through the mud of Minnesota toward the Red River at the Canadian border. Soon rumors of corruption drifted back to Philadelphia, of quarrels for favor between jealous towns, of “jackals and vultures” preying upon the road through construction companies. Cooke’s own partners fulminated privately against esteemed officers who were “in a ring to get rich out of the business of furnishing supplies,” or complained of gambling, liquor dens and brothels opened along the route of the empire-builders.
But the bankers through their branch in New York, Philadelphia, Washington and London were selling $1,000,000 in bonds each month, sending a soothing flood of gold to the Northwest which quieted the nerves of the railroad men. In Europe Cooke’s agents pressed for a great foreign loan, inviting representatives of German and Dutch banks to Philadelphia to be dined and wined at the master’s palace of Ogontz, then to be sent off upon a conducted junketing party through the territories of his railroad. These parties were sometimes carefully diverted by shrewd orders from traversing the “arid, alkaline, sage brush deserts” which might have left them fatigued and disgusted “with impressions . . . utterly impossible to dispel.” Thus a few millions were wrung from the wary Germans and Dutch too, despite the ill-odor into which American railroads were now falling.
A superhuman effort, however, was necessary if savings were to be gathered from the capital-hungry Americans themselves, during times which began to be disturbed by financial earthquakes in New York, war in France, devastating fires in Chicago. For this effort, Jay Cooke, who had popularized government war bonds in every hamlet and as far off as California, where the war had been only dimly glimpsed, was ready. A mighty propaganda was unloosed by the Tycoon which was designed to further immigration, land and bond sales and whose din dominated the deep uproar of the whole era.
Cooke brought pressure to bear upon the great newspapers of the country, the New York World, Times, Herald and Sun, the Hartford Courant, the Chicago Post. The writers of these journals were caressed with a hundred delicate attentions such as invitations to his home or cases of wine from his private Catawba vineyards in Ohio. In his own banking rooms he organized a perpetual exhibition of the grains, fruits and minerals of the Northwest territories. An army of his traveling agents swept the country, including clergymen, lawyers, and shopkeepers who spread his maps, pamphlets and notices, and peddled his goods as a side line. And sometimes the Tycoon himself went on selling expeditions among masters of money in person.
Cooke and his partners had the refusal of all town sites or terminus land along the Northern Pacific route. To populate their land, they engaged agents such as the German emigre Henry Villard, who brought thousands of settlers from old Europe, causing an advance of 750 per cent in the land companies’ stock. Since the 1850s, Horace Greeley, who had visited California with delight, had been shouting his slogan : “Go West !” Along the route of the Union Pacific and the Northern Pacific, his disciples, the landboomers, staked out new streets in many a newly erected “Olympia” or “Paris” or “Athens” and wrote home countless letters calling all their friends to join them. For the Northern Pacific, men like Sam Wilkerson advertised the climate of the Northwest region as “a cross between Paris and Venice,” while on behalf of the Union Pacific and its land company, the Crédit Foncier announcements were inserted in newspapers throughout the country which read as follows :
Prosperity, Independence, Freedom, Manhood in its highest sense, peace of mind and all the comforts and luxuries of life are awaiting you. . . . Throw down the yardstick and come out here if you would be men. Bid good-by to the theater and turn your backs on the crowd in the street !
How many regret the non-purchase of that lot in Buffalo, that acre in Chicago, that quarter-section in Omaha ? A $50 lot may prove a $5,000 investment.
PARIS TO PEKIN IN THIRTY DAYS
Passengers for China this way ! . . . The Rocky Mountain excursion of statesmen and capitalists pronounce the Pacific Railroad a great fact. . . . The Crédit Mobilier a national reality, the Crédit Foncier an American institution.
But the noise made by Jay Cooke was greater by far. The maps, the pamphlets distributed everywhere made Jay Cooke’s “Banana Belt” universally celebrated, while Duluth was immortalized as the “Zenith City of the Unsalted Seas.” So filled up were the people, the historian Oberholtzer relates, with “isothermal lines, comparative latitudes and glowing facts about climates, crops and distances from New York, Liverpool and Shanghai of new cities set in concentric circles upon the American Northwest,” that they were growing weary of such legends, and were ready to enjoy the satire of the Kentucky Congressman, J. Proctor Knott. Rising from his seat in the House, on January 27, 1871, during debate on a land bill, Knott made a memorable speech which derived inspiration from Cooke’s Man Friday, Wilkerson, and in which he referred to Duluth as the “name for which his soul had panted for years as the hart panteth for the fresh water brooks.” He continued :
The symmetry and perfection of our planetary system would be incomplete without it. I see it represented on this map that Duluth is situated exactly half-way between the latitudes of Paris and Venice, so that gentlemen who have inhaled the exhilarating airs of the one, or basked in the golden sunlight of the other, may see at a glance that Duluth must be a place of untold delights, a terrestrial paradise fanned by the balmy zephyrs of an eternal spring, clothed in the gorgeous sheen of ever-blooming flowers and vocal with the silvery melody of nature’s choicest songsters. . . .
Then the extravagant Congressman closed by evoking a “Banana Belt” in the terms of Byron’s adaptation from Goethe :
Know ye the land of the cedar and vine
Where the flowers ever blossom, the beams ever shine,
. . . Where the citron and olive are fairest of fruit
And the voice of the nightingale never is mute ;
Where the tints of the earth and the hues of the sky
In color though varied, in beauty may vie ? . . .
In the midst of its booming and clattering labors of empire-building, the country at large heard the message of Knott repeated and reprinted everywhere, and became convulsed in one nation-wide roar of laughter.
1 Inasmuch as the railroad lands, received without cost, could be disposed of at from $1.25 to $30 an acre by the promoters of “chains of cities,” there was clearly room for private initiative and enterprise. But where the risks to capital were considered too great, the local, state or national government often underwrote the venture further by issuing bonds, which were an obligation upon the community or nation thereafter, and turning these over to the railroad captains. William Z. Ripley, an authority in this field, estimates conservatively that three-fifths of the cost of the railroads was originally borne by government, some $707,000,000 in cash, $335,000,000 in land ; while recent historians, Hacker and Kendrick, in “The United States since 1865,” estimate that the American railway system could scarcely have been developed “had it not been for the generosity of the federal, state and local governments.”
2 First, the railroad was organized by the “projectors” upon a blue print, and a charter obtained, involving free land grants, sometimes in alternate sections running from six to ten miles on either side of the line. Then a land company, owned by the directors of the railroad, was incorporated to develop and sell its lands. With the proceeds of the land sales, in addition to that from government subsidies, and finally from the sale of mortgage bonds in Europe, building was begun. This in turn was done by a construction company, also owned by the directors, and with a characteristic abandon, a fearlessness of high cost or error, that the early railroad-builders were famous for. Loss through extravagance by the construction company was borne with composure, since it affected nothing but the future of the railroad, whose capital stock usually represented nothing and cost the directors of the enterprise nothing.
3 The use of public lands to promote economic development had long been advocated by the leaders of all parties. As long ago as 1828, Daniel Webster had said in a speech at Faneuil Hall :
“In most of these new States of the West, the United States are yet the proprietors of vast bodies of lands. Through some of these states and through some of these same public lands, the local authorities have prepared to carry expensive canals for the general benefit of the country. Some of these undertakings have been attended with great expense, and have subjected the States to large debts and heavy taxation. The lands of the United States being exempted from all taxation, of course, bear no part of this burden. Looking at the United States, therefore, as a great landed proprietor, essentially benefited by these improvements, I have felt no difficulty in voting for appropriation of parts of these lands as a reasonable contribution by the United States to these general objects.” (“Works,” Vol. I, p. 169.)
4 “A railroad company approaches a small town as a highwayman approaches his victim. The threat, `If you do not accede to our terms we will leave your town two or three miles to one side !’ is as efficacious as the `Stand and deliver,’ when backed by a cocked pistol. For the threat of the railroad company is not merely to deprive the town of the benefits which the railroad might give ; it is to put it in a far worse position than if no railroad had been built. . . . And just as robbers unite to plunder in concert and divide the spoil, so do the trunk lines of railroads unite to raise rates and pool their earnings, or the Pacific roads form a combination with the Pacific Mail Steamship Company by which toll gates are virtually established on land and ocean.” Henry George, “Progress and Poverty,” 1879, pp. 192-193.