Frederic Clemson Howe.

Privilege and democracy in America online

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is a financial life. It is carried on by banking and
credit transactions. Those transactions have fallen
under the dominion of a group of men, who could be
enumerated on the fingers of one hand. Through
the direct and indirect control of the banks and
trust companies of America, all business, all com-
merce, all transportation, all of the necessities of
life, have become subject to their dominion. The
daily, weekly, and monthly press must seek their
loans from this syndicate. Competing industry
must go to it for the right to live. The politics of
city, state, and nation are already largely fashioned
by its will. Some conception of the extent of its
ramifications in the field of industry may be seen


from the fact that prior to the mergers above re-
ferred to 'Hhe directors of the National City Bank,
the head of the Standard Oil group, and of the Na-
tional Bank of Commerce, the head of the Morgan
group, hold over a thousand directorships in trans-
portation, industrial, and other commercial corpora-
tions."* By means of the financial resources in
their hands the railways and industries of the country
were brought under monopoly control in the closing
years of the last century. Dr. Wm. A. Scott, pro-
fessor of political economy at the University of
Wisconsin, describes the extent to which this has
already gone. He says:

"The Morgan, Vanderbilt, Pennsylvania, Gould-
Rockefeller, Harriman - Kuhn - Loeb, and Moore
groups, and their more recent successors, represent
the achievements of high finance in this field, and
great achievements they have been, involving the
bringing together under the management of less than
seven groups of financiers nearly 2,000 railroad cor-
porations, representing more than 200,000 miles
of track and a capitalization of about thirteen billions
of dollars. (Moody's The Truth about the Trusts.)

''In the industrial field the achievements of high
finance have been scarcely less remarkable. By
January 1, 1904, seven great industrial trusts had been
developed, controlling 1,528 plants with a capitaliza-
tion of more than two and a half billion dollars, and
298 lesser industrial trusts, controlling more than
3,000 plants, capitalized at over four billion dollars.
By January 1, 1908, the groat trusts controlled over

' A Decade oj High Finance, p. 7, by W. A. Scott, Ph.D.


1,600 plants capitalized at nearly three billions of
dollars, and the lesser ones over 5,000 plants cap-
italized at over eight billions of dollars. To these
should be added the so-called franchise trusts, con-
trolling about 2,500 plants capitalized at over seven
and a half billions of dollars." *

Control of the banking resources and through
them of the stock market has been the means by
which the control of industries has been brought
about. Through this control the cost of living and
the material well-being of the people are influenced.

^'The Standard Oil and Morgan federations have
well-nigh attained such control. Through the di-
rectorate of groups of railroad and industrial cor-
porations they are able almost at will to increase or
decrease the earning power now of this enterprise
now of that. . . . Through reorganization schemes
they can water the stock of a concern until even
huge earnings yield only insignificant dividends.
Being themselves possessed of great wealth and
holding large blocks of securities, they can place so
much pressure on either the supply or demand side
of the market as to force prices in the direction de-
sired. Through their control of great banks and
trust companies they may increase or diminish the
amount of funds available for investment and specu-
lation." 2

Upon the savings of the people, gathered together
like the rivulets which gradually grow into a mighty
stream, has been erected a financial feudalism which
is gradually absorbing to itself the industrial wealth

> A Decade of High Finance, p. 7, by W. A. Scott, Ph.D.
^ Idem, p. 21.


of America. In the transactions of the directors of
these financial institutions there is no breach of trust.
No wrong thing has been done in the use of the coun-
try's credit. But the result has been the complete
subjection of the American people to a power,
whose ruthlessness or generosity is only a matter of
the wish of those who control the system. Through
the control of these funds, railroads, mines, indus-
tries, and franchise corporations have been taken over.
Syndicates are formed among the banking interests.
They make loans to themselves of other people's
money. Competing properties are purchased. When
ownership is secured the properties are consolidated.
Securities are then watered. These in turn are sold
to the people whose money has been used to effect
the monopoly. No new wealth has come into being
in the process. Nothing has been added to the prop-
erties. Only the tribute of those who toil has been

Herein is the machinery by which the wealth of
America has been cornered. It was by such meth-
ods as these that the great combinations of the last
few years have been carried through. By this proc-
ess the anthracite coal monopoly came into being.
Thus the Steel Trust, with its billion and a half of
securities, was fastened upon the American people.
By these means the beef, the sugar, the tobacco, the
copper, and many other trusts were created. Ac-
cording to the census enumeration of 1900 the wealth


of America was $94,300,000,000. At the same time
there were over 440 industrial franchise and transpor-
tation monopolies with a total capital of $20,379,162,-
000, or more than one-fifth of the total census wealth
of America. Most of these combinations had come
into existence in the preceding half-dozen years.

Only surviving exceptions give reality to the
banking business as described in the books, just as
surviving examples of independent coal, iron-ore,
sugar, and meat producers give reality to the com-
petitive principles of economic science. To such an
extent is the credit of America being used for spec-
ulative purposes, for the upbuilding of monopoly
interests through pools, corners, and syndicates, that
the producing industry of the nation is being starved.
Money needed for local industry is being used in Wall
Street for purposes of speculation. When call loans
command in the East from ten to thirty per cent.,
banks will not make time loans to their local cus-
tomers at six per cent. For money flows to the point
of highest return almost as readily as water flows to
its lowest level.

This is the lamp of Aladdin by which the resources
of America have been cornered. The stock exchange
is the tool of these money interests. Prices are made
at will. So is the news which the speculative world
reads with avidity. Day by day the presses are kept
busy printing certificates of servitude upon the peo-
ple. They cost no more than the greenbacks issued


by the government during the Civil War. But they
are far more costly. The Treasury notes were issued
for labor. And labor could and did retire them.
But the inflated securities of monopoly are mort-
gages in perpetuity upon the labor of mankind.

Even without these tools monopoly would have
appeared. It would have been a slower process.
The laws of the land make monopoly inevitable.
For monopoly is not due to illegal combinations in
restraint of trade. Nor is it due to the skill, talent,
or great ability of the master-minds of industry.
Monopoly is created by law. It is born of law-made
privilege. It is not the law-breaker who is at fault,
it is the law-maker. The menacing monopolies which
have come into being are almost without excep-
tion traceable to four sources. The chief of these is
the monopoly of the land. To this are traceable the
coal and the iron, the oil and the copper, the gas and
the timber monopolies. It is the monopoly of the
iron ore and coking coal that has given the Steel
Trust the control of the markets of America. The
same is true of the copper and the anthracite and bi-
tuminous coal monopolies. It is true of the oil and
the gas. It is not the wells, the refineries, or the
furnaces, it is the control of the raw materials that
lies at the root of these monster combinations.

The second great source of monopoly is the private
ownership of the highways of the nation. The rail-
ways arc natural monopolies, and the coal, oil, iron,


and steel combinations are affiliated with them. In
many instances the ownership is identical. The oil
monopoly was born of this intimacy, while the beef,
the packing, the warehousing, and scores of minor
monopolies have had their inception and continue
their control of the market by the ownership of
private car lines, by ingenious preferential rates, by
privileges of countless kinds which are only possible
through the joint control of the railways and the in-
dustry itself.

The third great privilege is that of taxation. The
tariff is the mother of many trusts. It shields many
others which are identified with the railways and the
land. In this class are the sugar and the tobacco,
the leather and the woollen, the harvester and the
cotton, the iron, steel, copper, lumber, paper, and
many other combinations.

The fourth source of monopoly is the direct action
of the government itself in the creation of exclusive ;
grants, of which the franchises of our cities are the /
chief. The rights of way which they occupy are
exclusive. There is no possibility of competition.
The laws have been drafted by the privileged classes.
Once granted, franchises cannot be amended or re-
pealed. Upon these franchises billions of securities
have been issued, upon which excessive rates and
charges are fixed.

Nine-tenths of the monopolies of to-day are the
children of our own creation. They have arisen


through no violation of the law. They have been
invited by the law itself.

Almost without exception they are identified with
the land, or are buttressed by some legislative act,
which gives them a monopoly of the market or of the
service which they render. The law itself offers a
sheltering arm to monopoly from the competition
which lies at the life of other business. And the wa-
tered securities which spread like a mortgage upon
the people of America represent no labor on the part
of those who issued them. No new wealth has come
into existence through this addition of billions of se-
curities to these corporations. Monopoly does not
make the grass to grow, or the wheels of industry to
turn. Far from stimulating production, monopoly
causes production to die. For monopoly means
scarcity. It reduces the output of field and factory,
and erects a barrier about the nation by means of a
tariff wall for the purpose of limiting the supply of

Yet, while no wealth has come into being by this
process, those who labor are the poorer by reason of
it. It cannot be otherwise. The dividends of priv-
ilege can only mean cold, hunger, and want for the
millions, just as they mean idle luxury for the few.
This is the meaning of monopoly; this is part of the
cost of the private ownership of the highways and
the resources of the earth.


Along with the enclosure of the land there has
gone an increase in tenancy as well as in the size of
farm holdings. The free home-owner is diminishing
in comparison with the tenant, while the small farm
is being overshadowed by the large estate. These
movements are already well under way. They
characterize the East as well as the West. The
rapidity of the change is startling. We are fast be-
coming a nation of tenants, and from now on the
movement will in all probability continue at an
accelerated pace.

Conclusive proof of the increase in tenancy ap-
pears from the reports of the United States Census.
It is evident in agricultural as it is in urban homes.
In the year 1880 the number of farms operated by
owners was 74.5 per cent, of the total. This was in
the midst of the flood tide of Western migration,
when the country was recovering from the de-
pression of the previous decade. The homestead
law was calling to the West the dispossessed of
all the world. Here was land in abundance, which
the nation and the states desired only to see appro-



By 1890 the number of farms operated by owners
had diminished to 71.6 per cent, of the total. Dur-
ing the decade from 1890 to 1900, a decade coinci-
dent with another period of industrial depression and
recovery, the decline in farm ownership amounted to
a rush. By the close of the century the percentage
of farm ownership had fallen to 64.7 per cent, of the

In the twenty years from 1880 to 1900 cash ten-
ants increased from 8 per cent, to 13.1 per cent,
of the total, while share tenants increased from
17.5 per cent, to 22.2 per cent. The increase in
the cash tenants was even more marked than the
increase in the number of tenants with an interest
in the soil.^

An increase in tenancy may be expected in any
growing country. The increase in population makes
it inevitable. But that tenancy in America should
have increased with such rapidity is startling. And
the census enumerators have given the most favor-
able construction possible to the returns. They
have included as '^owners" all those who were "part
owners" as well as those who were '^ owners and ten-
ants" and ''managers. " They have helped the pros-

* The distribution of farm ownership during these years, accord-
ing to the census of 1900 (Vol. V, Twelfth Census), is as follows :

Year Owners Cash Tenants Share Tenants

1880 74.5 per cent. 8 percent. 17.5 per cent.

1890 71.6 per cent. 10 percent. 18.4 per cent.

1900 64.7 per cent. 13.1 percent. 22.2 per cent.


perity theory as much as statistical license would
permit. For this reason the census showing of farm
ownership is much more favorable than the real con-
ditions warrant. For in 1900 only 54.9 per cent,
of all the farms were operated by full owners, while
45.1 per cent, were in the hands of tenants, or ten-
ants with some sort of interest or ownership in the

Startling as is the extent of tenancy, the ratio
with which it has increased during the past twenty
years is far more startling. From 1880 to 1900 the
number of farms of all forms of tenure increased
from 4,008,907 to 5,739,657, or an increase in farms
under cultivation of 1,730,750. The farms operated
by owners increased 729,065, or 24.4 per cent.; the
farms operated by cash tenants increased from
322,357 to 752,920, a gain of 430,563, or 133.6 per
cent.; while the farms operated by share tenants
increased from 702,244 to 1,273,366, a gain of
571,122, or 81.3 per cent. The percentage of in-
crease in cash tenancy was five and one-half times
the percentage of increase of ownership, while the
percentage of increase in share tenancy was nearly
three and one-half times as much as the percentage
of increase in ownership.

Year by year, and decade by decade, the loss in
farm ownership has continued. It is not confined
to any one section or to any form of agriculture.
The relative number of owners has everywhere de-


creased, while the relative number of tenants has
everywhere increased.

When the acreage involved in various kinds of oc-
cupancy is considered, the extent in the decline of
ownership is even more discouraging. By the close
of the century exactly one-half of the acreage of
farming land had passed under tenant or qualified
owner occupancy. Of the 841,201,546 acres of land
under cultivation, 422,354,923 acres were in the
hands of '^owners." The other half was operated
by 'tenants," ''part owners," or ''owners and ten-
ants, " and "managers. " And even if we include as
"owned" all farms except those operated by cash
and share tenants, the area of the lands cultivated by
pure tenants amounted to 195,072,457 acres, repre-
senting a value of $4,750,888,795.'

This decline in the percentage of home-owners is
just beginning. The next generation will see an
even more rapid change in this direction. The
growth of population will, of itself, produce this re-
sult. For the area of America cannot be increased.
The exactions of the railways, of the meat-packers,
of the elevators, the warehousemen, and stock yards
will promote the tendency still more. A period of
hard times, involving an increase in mortgage in-
debtedness, will still further stimulate it, so that from
this time on a relative decrease of farm ownership
may be expected.

> Twelfth Census, Vol. V.


This growth of tenancy has been accompanied with
a steady increase in the size of farms. During the
fifty years from 1850 to 1900 the farm land under
cultivation increased from 293,560,614 to 841,201,-
546 acres. The census enumerators have claimed
that the statistics indicated a decrease in the size of
farms in recent years. But comparisons have been
made with the returns of the year 1850 before the
West was opened up to settlement. If we take the
census of 1880 for comparison, it appears that the
average size of farms has increased from 133.7 acres
in 1880, to 146.6 acres in 1900. And while some-
thing more than one-half of the total number of
farms are still under 100 acres in extent, it is the
total acreage held in large and small farms that
indicates the tendency. Of the total area under
cultivation, 200,324,045 acres, or one-fourth of the
total, are in farms of 1,000 acres and over. In
twenty years' time the number of farms in this
class has increased from 28,578 to 47,276, while
the average size of these farms of over 1,000
acres is now 4,237 acres. In other words, twenty-
five per cent, of the farm acreage of America is
held by the insignificant fraction of .0006 of the
people. There can be but little comfort in a
division of the continent under which less than
50,000 persons own 200,000,000 acres, an area far
greater than that of either France or Germany,
and almost exactly equal to the combined acreage


of Germany and the United Kingdom, with their
population of 100,000,000 souls/

Upon this imperial domain, a hierarchy of owners
and laborers, of landlords and of tenants, has arisen
not unlike the feudal order. Had an intelligent fore-
sight guided the distribution of the public land, from
ten to twenty million people might have been homed
on this area with farms of fifty acres each. Twice
that number could have produced a more comfort-
able living than many city workers now enjoy.
Towns and cities would have arisen and industries
would have been called into existence employing
millions of other workers. There would have been
social and political freedom, for freedom is always
stimulated by home ownership.

It has been suggested that this increase in tenancy
may be a good rather than a bad thing. Tenancy,
it is claimed, may mean that the wage-earner is being
called back from the city to the country; that the
blacks of the South are taking up small patches of
ground formerly worked on the plantation system,
and that farmers who have acquired a competence
are leaving the country for the cities, the better to

• In addition to these great estates the Census of 1900 shows that
103,289,564 acres are held in farms whose average size is 210.8
acres; 129,686,228 acres are held in farms whose average size is
343.1 acres, and 67,878,349 acres held in farms whose average size
is 661.9 acres. Taking the country as a whole 501,186,000 acres are
in farms whose average size exceeded 200 acres. Only 340,000,000
acres of the 841,201,546 acres under cultivation were in farms of less
size than the homesteads allotted by the government.


educate their children, or to pass the declining years
of their life in comfort.*

That the negro should be his own hand rather than
another's; that the farmer should go to the city to
educate his children; that the wage-earner should
leave the shop for the fuller opportunity of the coun-
tryside — that all these changes may make for eco-
nomic improvement and well-being of these classes
is true. But that tenancy on the part of the farm
hand, the wage-earner, or the negro is a good thing
for any one but for him who partakes of another
man's labor, it is difficult to believe. For that is
what tenancy means. It always means that some
one must labor in order that another may be idle.
And the more industrious the tenant, the greater
the productivity of his labor, the greater the de-
mand for land by those out of work, the higher will

' This is suggested by the Director of the Census. Commenting on
the increase in tenancy which the last census indicated, he said:
"A change of the same essential character took place between 1880
and 1890 in each of the five geographic divisions. The relative
number of owners everywhere decreased and that of cash and share
tenants increased, the share tenants in a less degree than the cash
tenants. The change in this character which took place in the dec-
ade 1880 to 1890 attracted great attention. It was taken for
granted almost universally that the number of tenants was increase
ing at the expense of the number of the owners, and that the move-
ment expressed by the increase of tenancy was an ill omen for
the republic. That there is another way of viewing the changes
here recorded, and that in some respects the popular conclusion over-
looks some very important social facts, is evidenced by tlie point
brought out in the discussion of the facts of Tables LXV and LXVI
that the farms operated by owners have increased faster since 1850
than the agricultural population. Such an increase can only be pos-


be the rent which must be paid. This is inevitable.
It is the testimony of all experience. Tenancy al-
ways means labor for privilege, economic subordi-
nation for freedom. It can mean nothing else.

Thus far we have been discussing farm tenancy
only. The growth of tenancy is even more marked
in urban communities than in the country. In the
larger cities the home-owner is rapidly disappearing.
Taking the country as a whole, and including urban
as well as agricultural homes, only 4,739,914 of the
16,006,437 homes, or 29 per cent, of the total, are
owned by their occupiers free from encumbrance,
while considerably less than half hold title-deeds at
all.^ In the Eastern cities tenancy is all but uni-
versal. In New York city the hired homes amount
to 87.9 per cent, of the total. In the boroughs
of Manhattan and the Bronx the percentage of
tenants rises to 94.1 per cent. In the cities of Bos-

sible provided the increase in the number of tenants has been by the
elevation of former wage employees to the position of farm tenants.
Such an increase in the number of tenants has been by recruits from
the ranks of wage employees, and not from farm owners or their
children. The class of owners has increased faster than the portion
of the families of former owners who have remained on the farms.
The same is true of the tenant class. . . . This marked decrease
clearly indicates that the gain in the number of farm tenants has
been due to recruits drawn from the ranks of wage laborers and not
from the ranks of farm owners. " — Twelfth Census of the United
States, Vol. V, p. Ixxvii.

•Distribution of homes in the United States in 1900:
Homes owned. ^TZnA ^^^^^ -'^^^^

4,739,914 2,180,229 8,240,747

—Twelfth Census, Vol. II, p. 662.


ton, Brooklyn, Fall River, Jersey City, and Memphis
more than four-fifths of the population live in rented
homes. In the city of Buffalo the percentage of
homes owned by the occupiers free from mortgage
fell from 21.1 per cent, in 1880 to 15.8 per cent, in
1900. In Milwaukee a similar loss is shown, while in
St. Paul, one of the new cities of the West, the loss in
mortgage-free homes was 25 per cent, in the decade.
Speaking generally, there was a larger proportion of
homes encumbered in 1900 than in 1890. In Man-
hattan Borough out of 383,726 homes only 15,361
were owned by their occupants; while of these only
6,305 are owned by the occupants free from mortgage
or other encumbrance. Taking the tenure of thirty-
eight leading cities of the United States, we find the
distribution to be as follows:



347,005 306,505 2,259,304


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Online LibraryFrederic Clemson HowePrivilege and democracy in America → online text (page 5 of 19)