Wealth Against Commonwealth/23

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Wealth Against Commonwealth

Henry Demarest Lloyd (1847-1903)



Towns, like men, stamp themselves with marked traits. Toledo had an individuality which showed itself from the start. Its leading men clubbed together and borrowed money as early as 1832 to build one of the first railroads constructed west of the Alleghenies—the Erie and Kalamazoo, to connect Toledo and Adrian. When, in 1845, the steamboats on the lakes formed a combination, and discriminated against Toledo, the city through its council refused to submit, and appropriated $10,000 to get an independent boat to Buffalo. The city appropriated its credit and revenues to other important and costly enterprises, including four railroads, to keep it clear of the cruel mercies of private ownership of the highways. In 1889 it expended $200,000 to secure direct railway connections with the Pennsylvania and the Baltimore and Ohio railways for competition in rates with the Lake Shore Railroad.

As it had been authorized to do so by the State, the City Council of Toledo, April 29,1889, ordered gas bonds to the amount of $75,000 sold, that work on the city pipe line might begin. Before proceeding with the enterprise confided to them, the natural-gas trustees gave the private companies an opportunity to save themselves from the competition of the city. They asked them in writing if they would agree to furnish gas cheaply for a term of years, or if they would sell their entire plant to the city? They did this, as they expressed it, as " an honorable effort . . . to obtain cheaper gas without unnecessary expenditure, and without injury to established rights." After a delay of nearly a month a reply was received, refusing to enter into negotiations either for a reduction of charges or for the sale of the private plants to the city. The trustees then asked for a personal interview, but this was refused. Then when the city began preparations to sell its bonds, a cannonade was opened on it in the courts, the money-market, the gas-fields, the city government, the press, among the citizens, and everywhere. Injunctions were applied for in three courts, unsuccessfully in all instances. No injunction was ever granted in these or any other of the many suits brought for the purpose of enjoining the sale of the bonds. Courts will usually grant temporary injunctions awaiting a hearing on the merits when complainants will enter into ample bonds and indemnify defendants. But the parties instigating this litigation would not put up the necessary bonds. They thus could smirch the bonds without incurring any personal liability in so doing.

An expensive array of lawyers was sent before the United States courts to prevent the issue of the bonds on the ground that they were illegal, and the law under which they were issued unconstitutional. The principle involved had been frequently discussed and always upheld both by the Supreme Court of Ohio and the Supreme Court of the United States.[1]

"Does not your argument appear to be in conflict with the views of the Supreme Court of Ohio and the Supreme Court of the United States?" the judge asked. The counsel for the gas companies responded in substance: "If so, then so much the worse for the views of those courts."

As it was through the suffrage that the people of Toledo were able to do this, the attack was widened from an attack on the enterprise to one upon the sovereignty of the citizens which made it possible." Everybody votes in Ohio—in fact, too many people," said the lawyer who applied for an injunction against Toledo. If he had his way, he declared, there would be fewer voters, and he stigmatized the arguments of Toledo as those of John Most, the communist.

"Unquestionably," decided Judge Jackson, "the Legislature may authorize a city to furnish light, or facilities for transportation, or water to its citizens, with or without cost, as the Legislature or city may determine. . . Since the decision in Sharpless vs. Philadelphia it is no longer an open question whether municipalities may engage in enterprises such as the one contemplated by the act in question in this case. The act of January 22,1889, authorizing the city of Toledo to issue bonds for natural-gas purposes, is clearly within the general scope of legislative power, is for a public use and purpose, and is not in contravention of any of the provisions of the constitution. The court being of the opinion that the legislation is valid, it follows, of course, that the injunction applied for must be refused."[2] When the news of Judge Jackson's decision was telegraphed to Toledo nothing less than the booming of cannon could express the joy of the citizens. They sent this message to the just judge: "One hundred guns were fired to-night by the citizens of Toledo in honor of your righteous decision to-day." Judge Jackson again upheld the bonds at Toledo, January 14, 1890, when he again dismissed the case against the city "for want of equity, at cost of complainants."

The favorable decision by Judge Jackson, although an appeal was taken, made it possible for the city to sell the $75,000 bonds which had been issued by order of the Council. The bonds brought par, interest, and over $2000 premium. With the money thus procured the city's Board of Natural Gas Trustees began operations. Their opponents had spread far and loud among the voters before the election—among those who would be likely to buy the bonds, everywhere it would hurt—the assertion that all the territory that was good had been bought up by them, and the city's trustees would not be able to get any. One of the companies had no less than 140,000 acres of gas lands in its possession or under contract, at a cost in rentals and royalties of $100,000 a year.[3] But the city trustees, even with the small sum at their command, were able to secure at the very beginning wells with a capacity more than four times as great as the private companies had had when the latter began the investment of a million or more to lay their pipe lines to Toledo.[4] Together with this supply the city trustees got 650 acres about 35 miles from Toledo of as choice gas territory as there was in Ohio, almost all of it undrilled, and they had offers amounting to 5000 acres more within piping distance from the city. The city's trustees made their purchases with success, and received the laudations of their constituents for having got lands and wells at better prices than the private companies.

August 26, 1889, after a decision in the United States courts that there was no ground on which to object to the issue of the bonds, the City Council voted the issue of the remaining $675,000.

Defeated in the public debate which preceded the decision of Toledo to supply itself; defeated at the State Capitol; defeated at the polls of Toledo time and again—every time; defeated in the Common Council; defeated in the gas-fields; defeated in the courts of their own choosing, the opponents of the city, thorough as only the very good or the very bad can be, refused to submit. When the two corporations, in 1886, were seeking the franchise indispensable for doing business m Toledo, they said to the Board of Aldermen: "We ask no exclusive privilege. . . . We cannot have too many gas companies." They also said: "If the city desires to furnish its own gas, there is nothing in this ordinance to hinder it. We are ready and willing at any time to enter into competition with the city or any other company." They said, on the same occasion, in answer to apprehensions which had been expressed about the danger of putting the fuel supply of the city into the hands of a monopoly: "You can go before the Legislature and obtain the right to issue bonds for furnishing yourselves with gas." It was by these assurances the companies induced the Common Council to grant them gratuitously the very valuable franchises they were seeking.

The right of the people to compete was not left to these assurances. It was specifically and formally asserted in the ordinance of July 5,1887, fixing rates. This was the ordinance to procure which the gas company suspended its operations in mid-course, and declared it would not continue unless the prices which it wanted were made. The ordinance was, in fact, prepared by the company. It said: "Provided that nothing herein contained shall be construed as granting to existing companies any exclusive rights or privileges, or prevent any other company from furnishing natural gas to the citizens of said city." But the same learned counsel who, in behalf of the companies, had assured the city that "there was nothing in this ordinance to hinder it," went before the United States Court and pleaded that ordinance as good reason for the intervention of the Federal Government to prevent the city from going on with its enterprise.

The only morning paper—an able advocate of the city pipe line—suddenly changed owners and opinions. Among its new directors were two of the lawyers of the trust opposing the city, a director in one of its companies, and, besides them, the manager, a contract editor from Pennsylvania. His sole conspicuity there had been won in turning against the people of the oil regions a paper which had been their staunchest defender. This Toledo daily, in its espousal of the cause of the city, had been firing hot shot like this against the oil combination: "It wants a monopoly of the natural-gas business. This is what it is driving at." Under its new management it roared like a sucking dove, thus: "It is fashionable with demagogues and men who are not capable of appreciating the worth of brains in business to howl against it"—the oil combination—"as a grasping, grinding monopoly." Just after the people had decided in favor of the pipe line, and only a few days before it changed owners, it had said: "All manner of influences were brought to bear to defeat this proposition. . . . All the plausible falsehoods that could be invented, and all the money that could be used, were industriously employed, but the people saw the situation in its true light, and the majority voted right." It now made the defeat of the city's pipe line the chief aim of its endeavors. In this work "no rule or principle recognized in decent journalism was respected."

In all the history of Toledo no interest on its bonds had ever been defaulted or delayed; no principal ever unpaid at maturity. The city was prosperous, its growth steady; its debt growing less year by year in proportion to its population and wealth. Its bonds ranked among the choicest investments, and commanded a premium in the money-market.[5] But the credit and fair fame of the city were now overwhelmed with wholesale vituperation by this paper, and others elsewhere under similar control. Articles were carefully prepared for this purpose by skilled writers. These were then copied from one newspaper to another. By some arrangement insertion was obtained for them in financial journals in New York and in London, and in other foreign capitals. The Toledo organ declared that Toledo was an unsafe place for the investment of capital in any form. Its public affairs were said to be run by a set of "demagogues and speculators," whose administration was "piratical mob rule." The city pipe line was a "monstrous job," and the men who favored it were "a gang of throttlers and ravenous wolves." They were "blatant demagogues, who made great pretence of advancing the city's interest, but whose real aim is to enrich themselves at public expense." The bonds, which had been issued in due form by special authority of the Legislature, ratified by a vote of more than three-fifths of the citizens, and declared to be valid by the United States Court, were described as "chromos," "worthless rags," "bad medicine," "disfigured securities," "like rotten eggs, highly odorous goods," "but few persons at most can be found ignorant enough to buy them.

The Mayor, City Auditor, Board of Natural Gas Trustees, united with a citizens' committee of the Board of Trade in a plan to promote the sale of the bonds direct to the people of Toledo through a financial institution of the highest standing. This action the paper described as "a scheme for gulling simples," "a blind pool," "an unpatented financial deadfall"; compared it with "gambling, pool-playing, and lottery selling." These grave charges were widely circulated throughout the country. Bankers and capitalists in other cities who received them had no means of knowing that they were not what they pretended to be—the honest if uncouth utterances of an independent press chastising the follies of its own constituency. Newspapers which supported the city's project were assailed as ruthlessly as the community and citizens. The Blade was constantly referred to as "The Bladder." Another journal was given a nickname too vulgar to be printed here. One of the most prominent journals of Ohio was punished by the following paragraph, which is a fair sample of the literary style of monopoly: "That aged, acidulous addlepate, the monkey-eyed, monkey-browed monogram of sarcasm, and spider-shanked, pigeon-witted public scold, Majah Bilgewater Bickham, and his backbiting, black-mailing, patent-medicine directory, the Journal."

An old journalist and honorable citizen who wrote over his initials, "C. W., a series of able and dignified letters in the Blade, which had a great influence in the formation of public opinion in favor of the pipe line, was assailed with "brutal falsifier," "hoary old reprobate," "senile old liar." Caricatures were published depicting the buyers of the bonds as simple greens." When the County Court of Lucas County, following the United States Court, sustained the bonds on their merits, and did so on every point in question, because, as the judge stated, "the equities of the case are with the defendants," the organ falsely stated that judgment for the city was given "because the merits of the case are involved in a higher court." When a capitalist of New York, who had been an investor in the bonds of Toledo and a taxpayer there for twenty-five years—one of the streets of the city was named for him—bought $10,000 of the city pipe-line bonds, the paper attacked him by name in an article headed "Bunco Game," charging him with being a party to a bunco game in connection with "public till-tappers" for "roping Toledo citizens into buying doubtful securities." When the Sinking Fund Commissioners of Toledo very properly invested some of the city's money in the gas bonds, they were held up by name as "public till-tappers," "menials" of a "hungry horde" of "boodle politicians," accomplices of "plunderers of the public treasury," unable to withstand "the brutal threats and snaky entreaties of the corrupt gas ring." For one of the associate editors the position of Deputy State Inspector of Oil was obtained—an appointment which cost the Governor who made it many votes in the next election, and did much to defeat him. Such an appointment might give a versatile employee the chance to do double duty: as editor to brand as bad good men who could not be bought, and as inspector to brand as good bad oil for sale.[6]

One of the means taken to defeat the pipe line was the publication of very discouraging accounts of the "failure" at Indianapolis, where the citizens had refused to give a natural-gas company belonging to the oil trust the franchise it demanded, and, forming an anti-monopoly trust, had undertaken to supply themselves. Some "influence" prevented the Common Council of Toledo from sending a committee to Indianapolis to investigate. A public-spirited citizen, prominent and successful in business, came forward, and at his own expense secured a full and accurate account of the experience of Indianapolis for the city. This proved that the people were getting their fuel gas at less than one-half what Toledo was paying. The contest against giving the Indianapolis franchise to a corporation of the trust had been a sharp one. Its success was due to the middle classes and the working-men, who stood together for freedom, incorruptible by all the powerful influences employed. "We will burn soft coal all our lives," one of their leaders told the Toledo committee," rather than put ourselves in the power of such men."

In Indiana the Legislature meets only once in two years, and when this issue arose had adjourned, and would not meet again for a year. The people, not being able to get authority for a municipal gas pipe line, went to work by voluntary cooperation. Every voting precinct in the city was organized and canvassed for the capital needed. The shares were $25 each, and they were bought up so rapidly that the entire amount—$550,000—was subscribed in sixteen days by 4700 persons, without a cent of cost to the city. When subscriptions to the amount of $550,000 had been raised, $600,000 more was borrowed on certificates of indebtedness.

Gas lands were bought and 200 miles of pipe lines laid, all at a cost of about $l,200,000. The income in one year, during a part of which the system was still under construction, was $349,347. In the first year of complete operations the Indianapolis people's trust paid off $90,000 of the principal. The income for the year ending October 31, 1892, was $483,258.21, and the bonded debt has been paid. The stock, since January 1, 1893, has been paying dividends at the rate of 8 per cent. a year.

A prominent citizen of Indianapolis, one of the State judges, told the Toledo papers, in an interview: "The private companies had their gas laid to the city and along the streets several months in advance of the Citizens' Trust, but it did them little good. Everybody said: 'I will wait for the Consumers' Trust.' 'Yes, but we will furnish you gas just as cheap,' said the Indianapolis company; 'why not take it of us?' To this the citizens replied: 'To take gas of you means cheap gas to-day, but high gas to-morrow.' And wait for the gas they all did." The charge to manufacturers was 2 cents a thousand feet, as against 8 cents, at that time charged at Toledo. There were 12,000 private consumers. Cooking-stoves in Indianapolis were about $12 a year, against $19.50 in Toledo. One of the representatives of the private company declared at a public meeting at Indianapolis that its charges were made such as to give a full return of all the invested capital in three years, as that was the probable life of the supply. A year after the inauguration of the Indianapolis movement a committee of the citizens at Dayton, who had risen against the extortionate prices charged them, investigated the condition of affairs at Indianapolis. They reported that Indianapolis had paid $200,000 on its bonded debt, and was getting ready to pay as much more. The Consumers' Trust supplied between 10,000 and 11,000 consumers, and spent $1,000,000 less than the Dayton private company spent to supply 3000 fewer consumers. The annual charge at Dayton was $54.80; at Indianapolis only $26.80—less than half.

When facts like these were brought out, to the demolition of the fictions circulated in Toledo, the answer was characteristic. The "organ" could not deny the statements, but it fell upon the citizen through whose generosity the information had been got for the people, and assailed his private character in articles which, one of the daily papers declared, editorially, "would almost, if not quite, justify him in shooting their author on sight."

This newspaper charged the city natural-gas trustees with being "rotten to the core," and with every variation of phrase possible to its exuberant rhetoric sounded the changes upon their official career as a "big steal," "fostered by deception, falsehood, and skull-duggery." It sought to intimidate the Legislature and the courts when they failed to enact or construe laws against the people. It said: "Law-makers, judges, and others may feel the force of this element when the proper time comes and political preferment is sought."

It was money in pocket that facts like those of the experience of Indianapolis, Detroit, and other places should not be made known. Even ideas must not be allowed to reach the public mind. Professor Henry a. Adams, the well-known political economist, lectured in Toledo during this contest, in a University Extension Course, on "Public Commissions Considered as the Conservative Solution of the Monopoly Problem." The "organ" gave a synopsis of the lecturer's views, which is printed herewith in parallel columns, with a synopsis of what Mr. Adams really said, as revised by himself: WHAT THE ORGAN OF MONOPOLY REPORTED The lecturer made reference to Toledo as an unfavorable place to discuss the matter of municipal control of quasi-public business and competition of municipalities with private corporations. But he deprecated anything in that line. He did not mention particular instances, but broadly condemned the policy pursued by this city in matters of this kind, and his remarks had a visible effect on his audience. He considered municipal control of business enterprises the worst form of monopoly, as they began by having the unfair advantage of the lawmaking power, and the tendency to corruption was greater than when individual enterprises were asking privileges. The audience was much pleased with the lecturer. WHAT THE LECTURER REALLY SAID. Professor Adams thought the solution of the monopoly problem must be found either in public control or in public ownership. He advocated public control, and held that the State and Federal railroad commissions should have a fair trial, that their hands should be strengthened by further and adequate legislation. He entertained the hope that this control and regulation would ultimately protect the interests of the public in a satisfactory manner. He was willing to admit, however, if this effort to secure the needed public control by the aid of commissions and legislation should fail, then public ownership was the only remaining solution. He held that in local monopolies it may still be wise to try the experiment of public control by aid of commissions. He said, however, that if anything should be owned and controlled by and for the people it would be street-railroads, gas and water works. He admonished his audience not to be misled by the argument that municipal ownership would be dangerous because of undue political influence, for the local monopolies under private ownership were already in politics, and in a most dangerous manner. He observed facetiously that he hesitated to discuss the question of municipal control or ownership before a Toledo audience.

From the control of the markets to the control of the minds of a people—this is the line of march.

So direct, persistent, and bold were the charges of corruptions rung day after day by this journal against all the officials concerned in the city gas enterprise that some people began to believe there must be truth in them. But when the community at last turned upon its maligners, and the grand jury brought indictments against the active manager of the paper and his chief assistant for criminal libel upon the city's natural-gas trustees, the whole structure of their falsehood went down at a breath. They had no defence whatever. They made no attempt to justify their libels or even explain them. Their only defence was a series of motions to get the indicted editor cleared as not being responsible for what had appeared in the paper. Counsel labored over the contention that the accused was none of the things which the language of the law holds for libel. He was neither the "proprietor," "publisher," "editor," "printer," "author," nor a person "who uttered, gave, sold, or lent" a copy of the newspaper, but only the "manager." The employees gave testimony which would have been ludicrous but for the contempt it showed for court and community. The journalist who was the "managing editor" of the paper under the indicted chief editor was asked:

"Who was the head of the paper when you entered upon your duties as managing editor?" "I do not know." "Who hired you as managing editor?" "I really can't say that I was hired at all." "Who employed you to come to Toledo?" The witness had been an employee in Pennsylvania of the editor on trial, and had followed the latter to Toledo to take the place of managing editor. "Nobody employed me."

The son of the indicted editor had also followed his father to Toledo, and was employed on his paper. Asked for what purpose he came, he said: "I had no purpose in coming."

The gentleman who had charge of the counting-room was asked who fixed his salary. "I regulate my own."

The advertising manager declared: "I have no knowledge who is my superior."

The accused had to let the case go to the jury without a spark of proof of the accusations which had filled the paper every day for months. He had no evidence to offer either that the charges were true, or that he believed them to be true. He stood self-confessed as having for years printed daily gross libels on citizens, officials, and community, as part of the tactics of a few outside men to prevent a free city from doing with its own means in its own affairs that which an overwhelming public opinion, and the legislative, executive, and judicial authorities, and its present antagonists themselves, had all sustained its right to do. The agent of this wrong was found guilty, and sentenced to imprisonment in the county jail, with heavy costs and fine; like the unhappy agents at Buffalo—"made cheap" for others.[7] But sentence was suspended pending hearing of the motion for a new trial. This did not come up for a year. The court could find no error in the proceedings of the trial court, and could not sustain any of the objections made. But it found a point which even the lawyers had not hit on, and strained this far enough to grant the new trial. Then the convicted editor went before another judge—not the one who had tried him—pleaded guilty, and was fined, and so saved from jail.

One of the last scenes in this Waterloo was the abandonment of the newspaper with which the corruption and intimidation of public opinion had been attempted. Failure was confessed by the sale of the paper, and it was bought by a journalist who had been especially prominent in the defence of the city, and against whom on that account a bitter warfare had been waged by the daily which now passed into his possession. The Sunday Journal of Toledo, in commenting on the surrender, declared that the course of the organ had been one of the strongest factors of the success of the people. "In every possible way it slandered and outraged the city, where of necessity it looked for support. There could be but one result. Scores who had opposed the pipe line became its most ardent advocates purely in the general defence."

[1] State, ex rel., vs. City of Toledo, 48th Ohio State Reports,p. 112. [2] Federal Court Reporter, vol. xxxix., pp. 651-54. [3] Report of the Northwestern Ohio Natural Gas Company, January 7, 1889. [4] Toledo and Its Natural Gas Bonds, pp. 36-37. [5] City of Toledo and Its Natural Gas Bonds, p. 3. [6] See ch. xxix. [7] See ch. xx.