Kitabı oku: «Vanishing Landmarks», sayfa 6
CHAPTER XVI
GREED AND ITS PUNISHMENT
The government very properly interfered to curb aggression and extortion. That is a most appropriate function of government, but a very inappropriate end and can be carried too far.
Just cause for complaint did, does and always will exist. The Kingdom of Heaven has not yet been established by human agencies. Greed of gain, whetted by indulgence, led to practices in many instances reprehensible. Some of the big fellows who had achieved great things, and rightfully owned what they had accomplished, seemed to think they also owned the little things that others had done. Punishment became necessary and the government administered it wisely and with lavish hand. Not a few of the big boys were whipped in the presence of the infant class, a thing always gratifying to juniors. Thereupon, all the little people became hilarious over these just punishments and it became a pastime to get after “those higher up.” One of our distinguished senators is credited with the statement that the people changed the motto over their Temples of Justice to “Soak Him.” It soon became more difficult to secure the acquittal of an innocent man of affairs, than it had been to convict the guilty. Until time is no more the pendulum will continue to swing from one extreme to another.
PUNISHMENT A MEANS, NOT AN END
I know of no better illustration of the necessity of punishment and the desirability of quitting when its purpose is accomplished than an incident told me by a man who claimed to have been an eye-witness.
Back in the days when young men attended school until they were married, a theological student attempted to teach in a country district on the frontier of Ohio. The big boys became obstreperous. He urged them to treat him respectfully for he said he was studying for the ministry. The effect was as one might suppose. They carried him out, they washed his face in the snow, they dipped him in the creek until he gave up in despair.
Shortly thereafter, another youth applied. The director told him he could not maintain discipline. He said if he failed, it would cost the district nothing. Certificates to teach were then unknown. When the pupils assembled, they found him sitting at his desk reading. They looked him over, sized him up, thought him an easy mark and commenced pounding their desks and stamping their feet, and kept it up until nine o’clock. Then the new teacher laid aside his book, locked the door, put the key in his pocket and called school to order. The preliminaries having been unusual, silence was secured. He informed them they need not attempt to escape, for the windows were nailed down. Then, opening his carpet bag, he brought forth a revolver, a bowie knife and a blacksnake whip. Then after warning the pupils not to arise until their names were called, he summoned John Jones to the floor. With whip in one hand and revolver in the other, he proceeded to give private lessons. When through with John he called Bill Smith. He did not need to ask their names. After going some distance down his list, he told them they had probably learned more that day than they had ever learned in any one day in their lives, and perhaps as much as it was wise to attempt to learn in one day, adding: “When you come again, come expecting to obey the rules, attend to business and make no false motions. There will be no further exercises today.” They never knew whence he came nor where he went. He had performed his mission and wisely left future tasks to his successor.
I did not inquire concerning the subsequent history of that school, but I understand human nature enough to know that if his successors were men without plan or purpose or policy of their own, and only sought to repeat the popular practices of their predecessor, they permanently ruined that school. There was but one wise course. Without apologizing for what had been done, or lowering the standard of discipline, there should have been a return to the ordinary tasks of the schoolroom without unnecessary delay, for I declare to you that corporal punishment is not the purpose for which schools are established, nor are criminal prosecutions the aim and end for which governments are instituted among men. Both are essential at times, but let us hope that captains of industry and business men generally have learned their lesson sufficiently so that it shall not be necessary to continue indefinitely what was so admirably done a decade or more ago.
Unless punishment is discriminately administered, demoralization will follow, and if the big boys are whipped for no other purpose than to please the little folks, they will probably go fishing. And whenever the big boys of America take a day off, trouble ensues. Only a very few years ago, I saw a thousand men standing in line awaiting their turn for a cup of coffee and a slice of bread at the hands of charity. Business simply could not stand the lash incessantly applied. It had taken a day off.
Then the war came, abnormal demands were created and great prosperity ensued. But before the revival of industry, sufficient time elapsed to permit a fundamental economic principle to be elucidated in the greatest school of the world, the school of experience.
CHAPTER XVII
OBSTRUCTIVE LEGISLATION
While supervision and control of big business is essential, the trend has been in the direction of interference and in many instances inhibition.
While both political parties, and all administrations, profess great friendship for business, the treatment that both political parties have accorded business is well illustrated by the fable of the elephant that, in going through the jungle, stepped on a mother bird. When the elephant saw the havoc she had wrought, she called the orphaned chick and said: “This is deplorable. I did not intend to kill your mother. I am a mother myself and have the mother instinct. But the deed has been done and is past recall. Being unable to restore your mother I shall give my efforts to the task that your mother would perform if she were living.” So the elephant sat down on the chicks.
The American people have shown great aptitude and achieved unparalleled success in two distinct fields – baseball and business. During the period of development and successful prosecution of these two great national games, the rules of the game were made by experts in the respective games. Practical bankers made the rules of banking, experienced traffic men made rules governing transportation, and expert baseball players formulated the rules of that game. Business has suffered because of modern methods, and baseball will go where business had gone prior to the war, should the same policy be pursued and the committee that is to make the rules of baseball be selected under the direct primary system, from among those who never play the game, and seldom see it played, upon a platform demanding that strenuous playing shall cease, and that the score must be a tie regardless of errors.
Instead of permitting practical bankers to apply fundamental banking principles, we have forty-nine distinct sets of statutory rules, one for each state and one for the union of states, enacted by men some of whom have no more knowledge of banking than they have of aeronautics, and frequently administered by those whose tenure of office depends upon the amount of trouble they can make.
We legislate to prevent monopolies and for the ostensible purpose of encouraging competition, but the rules of banking are well nigh prohibitive of the creation of new competitive concerns. The president of one of the largest banking institutions in the United States, whose operations extend into every state, told me that he had refused a loan to Phil Armour except upon collateral that could be sold on the stock exchange of any city, and in the same conversation said there was not a loan in his institution except upon listed collateral. Only big concerns can furnish that class of security.
Suppose you were to build a packing house costing one million dollars and should make a bond issue of five hundred thousand dollars so as to have collateral. The officers of no bank would care to lend on those bonds. To do so would be to rely upon their judgment, and some little bank examiner would report that the bank had loaned on collateral that had no market value. Thereupon the Banking Department would write criticising the loan and directing that the letter be read to the board and a certain number of directors sign a reply. The course of least resistance is to refuse all loans except to monopolies or upon stock exchange collateral.
Not long ago a friend applied to one of the large banking institutions in New York City for a loan upon unlisted securities. The president took from his desk a certificate of stock of a certain railroad and said: “I do not believe this stock worth the paper it is printed on, but I will lend money upon it. I believe your securities are absolutely good but I will not lend a dollar upon them.”
The reason was sensible, and the banker was wise when banking laws and the rules of banking departments are considered. The railroad stock was listed and dealt in every hour. Hence the public assumed it had value, and it could be sold on the stock exchange for a price that fluctuated little. Its intrinsic value, if any, was problematic, but it did have a market value. The security offered was not listed. In the opinion of the banker it had abundant intrinsic value, but since it did not have a market value on the stock exchange, he did not feel justified in inviting criticism from the Banking Department by relying upon his judgment. It is difficult for a new concern to get credit and without credit no concern can live.
BECAUSE ONE HORSE KICKS SHALL WE HAMSTRING THE WHOLE DROVE?
To a greater or less degree, the same policy has been applied to nearly all important branches of business. The rules for the operation of railroads and insurance companies are both complex and conflicting. The books have to be kept to conform to the legislative requirements of every state in which the concern does business.
A certain express company formerly employed one attorney at two thousand dollars a year. It now maintains a legal department occupying an entire floor of an office building, and the officers of the company are in daily consultation lest they violate some state or federal statute and go to the penitentiary.
The president of an insurance company told me that if he did in Missouri what he was required to do in Texas, the penitentiary would await him, while if he omitted it in Texas, his punishment would be equally modest.
Severity of punishment in the United States has not yet reached the limit witnessed in France late in the eighteenth century when direct government was carried to its logical extreme. At that time the death penalty was prescribed for those who took food products out of circulation and kept them stored without daily and publicly offering them for sale. Failing to make a true declaration of the amount of goods on hand for eight days, and retaining a larger stock of bread than was necessary for daily wants, were punishable by death. Death also awaited the farmer who did not market his grain weekly and the merchant who failed to keep his shop open for business. We may or may not go to this extreme in America. I do not at the moment recall any punishment at the present time in this country more severe than six months in jail and a fine of five hundred dollars for spitting on the sidewalk.
CHAPTER XVIII
THE INEVITABLE RESULT
As soon as the government changed its policy and denied exceptional rewards for exceptional risks virile Americans refused to assume these risks and internal improvements ceased. A distinction is drawn between pioneer capital and improvement capital.
The effect of this changed attitude toward internal improvement and business generally is exactly what every thoughtful person foresaw. No railroad construction worth mentioning has been begun in the last decade. A few unimportant extensions have been made. About five years ago, John D. Spreckels attempted the construction of a road from San Diego to the Imperial Valley, but a possible six percent return, if it proved a success, and total loss if it failed, did not prove inviting to capital. Facing disaster, he turned it over to one of the old established lines to be builded on the accumulated credit of that system.
The United States was never in such great need of additional transportation as during the last ten years and never before was so little done to supply it. James J. Hill, the great empire builder of the Northwest, used to furnish figures to prove that we must invest two billion dollars new capital per annum to keep pace with the development of the country. It did not require a sage or a seer to discern that if we multiplied production from farm and factory, mill and mine, indefinitely, and failed to provide transportation facilities, we would ultimately reach a time when crops would rot on the ground while those who had grown them would be freezing and coal miners starving. Truly, the American people are “kin-folks.”
For more than three years, liberty hung in the balance simply because the United States, with all her development, had failed to keep her transportation facilities abreast of her production.
We had no merchant marine and during the entire period of the war were dependent largely upon the Allies to transport our troops and our munitions. Adverse marine laws had been passed rendering it impossible to sail an American ship in deep sea transportation except at great loss even if the ship had cost nothing whatever. It became necessary for the government to take possession of the railroads in order to avoid the effect of statutes filled with restrictive and prohibitive provisions. If the railroads had been operated under private ownership as the government is now operating them, every railroad president in the United States would be in the penitentiary. The roads asked an increase of fifteen percent in freight rates, which raised a furore of objection from both shipper and public, and it was denied. Government control and operation resulted in a loss of seventy million dollars the first month. Then both freight and passenger rates were increased twenty-five percent, generally, and in many instances, one hundred percent, and no one murmured. And still the loss continues. It was four hundred million dollars the first year of government operation.
WILL WE EVER BUILD MORE ROADS?
If someone should predict that the last railroad ever to be built in the United States of America, has been built, are you prepared to question its correctness? Will it be necessary to change our policy if more roads are to be builded?
Listen! Will you invest money in railroad construction, knowing that if it succeeds you will be allowed no more than six or eight percent on the money wisely spent, and that if, through misfortune or want of foresight, it fails, you will lose everything? The theory of public utility commissions generally, is that if money is unwisely invested it ought to be lost, and when it is wisely invested, it should earn about six percent.
Suppose you and I install a hydraulic power plant and build our dam according to plans and specifications prepared by a reputable engineer. Then a flood destroys it and demonstrates that the money was unwisely spent and, therefore, according to these commissions, should be lost. If the dam stands the strain, and if it was wisely placed, and if it be economically operated, we will be allowed six percent. Are you ready to join in an enterprise of this character? If you will not, who will?
Suppose a promoter presents to you an engineer’s report made from a preliminary survey of a railroad extending, let us say, from St. Louis, around through Arkansas and Texas to Galveston. I am informed that such a report exists, and that it shows that the road will go through the largest body of uncut white oak in the world, extensive pine forests, tap that belt of zinc ore extending south from Joplin, Missouri, make available large coal measures, iron deposits and agricultural areas now obtainable at less than twenty dollars per acre, but which with proper transportation facilities, and a progressive citizenship, would be worth two hundred dollars per acre. The engineer estimates that the road when completed will earn twenty percent on the cost of construction, and you are asked to buy some of the stock at par. The statutes of most states forbid the sale of even initial stock issues for less than par. How much of this stock will you take? Will your neighbors and friends want some? How much stock in an unbuilt railroad do you think can be sold at any price when good farm lands adjacent can be bought at twenty-five percent of par?
While the wisdom of the modern law-maker prohibits the sale of stock at less than par few if any statutes have been enacted, limiting the price at which bonds may be sold. Suppose you are offered bonds instead of stock. Possibly you can get the bonds at less than par. What will you pay, and how large a block do you desire? Remember, the road has not yet been built. The money must be placed in the bank to be used in construction and you must wait for your interest until the road has earned it. If you will not buy, will your neighbors?
It will help to solve these problems if you recognize early in your calculations that men with much money are not much bigger fools than we with little. If you and I will not invest in railroad construction under present conditions, men of means and experience will not, and the last railroad ever to be built beneath the Stars and Stripes is now in operation unless – unless!
THE OLD WAY
During the half century and more of the unparalleled growth and development of the United States, bonds of unbuilt railroads were offered with fifty percent or more of stock as a bonus. The estimates indicated that the roads would earn not only interest on the bonds but dividends on the stock, and a portion of the unearned increment resulting from development was in this way awarded to those who took the risks. Investors were thus encouraged to expect reasonable returns, plus fifty percent or more of water. The promoters who had paid the expenses of preliminary surveys (often abandoned as worthless) also labored with hopes of great gain if they should discover a meritorious proposition. Those who bought and occupied the lands contiguous to new roads endured some hardships but took no risks and yet expected to add at least four hundred percent of water to their investments. They realized in most instances more than one thousand percent profit on the original cost.
Does anyone doubt that a return to the policy of apportioning unearned increment equitably among those who shall in any way contribute to the general result will revive internal improvements? No one asks, and no one would consent, that all the unearned increment should go to the stockholders of a railroad. Every one favors governmental supervision and control of rates. The point where a few diverge from the mass is in recommending that those whose vision and courage are solely responsible for development, shall have an equitable share of the unearned increment.
Lest I be misunderstood, I desire to state parenthetically that I have never owned a railroad bond or a share of railroad stock; and I have never promoted a railroad or been employed in any capacity by a railroad. Most of what little I now possess, I have made by watering the capitalization of real estate. Occasionally, in times past, when I have known of a railroad about to be constructed, and have recognized an opportunity to make a little money through another man’s vision, on another man’s courage and at the other man’s risk, I have purchased a little contiguous real estate, watered the capitalization from one hundred to one thousand percent, and then insisted that the road should haul me and my produce at cost plus six percent.
