railroads a thing that he has never aspired to do in years gone by.

THE RAILROAD RATE QUESTION Before this subject is abandoned, the matter of rates must be touched upon, however lightly. There is much misunderstanding on this point, and there must continue to be much misunderstanding about it, so long as railroads continue to be private corporations. The figures regularly published by the railroads showing their average rates per ton per mile have little or no meaning, so far as the question of fairness in rates is concerned. Suppose, for instance, that half of the total earnings of a railroad come from the carrying of manufactured steel, and only one-tenth comes from other manufactures. If the railroad should lower the rate for the steel makers by 10 per cent. and increase the rate for the other manufacturers 50 per cent., the average rate per ton per mile would be about stationary. Yet the road would probably be squeezing the very life out of every manufacturer except the maker of steel.

Therefore, I shall merely point out that the average rate on the Union Pacific is now about 9.20 mills per ton per mile against about 10.45 in 1900; while on the Southern Pacific the rate is about 9.76 mills against about 10.25 mills. During the same period, nearly all the neighboring railroads have shown reductions in their average rates compiled in this way, but each of them has shown the greatest growth in tonnage that pays very small rates, while the principal growth on the Harriman lines has been in freight that pays high rates. For instance, while the Northern Pacific has been securing more and more lumber for freight, the Harriman lines have shown their greatest growth in merchandise, high-grade ores, fruit, and other products that naturally must pay high rates per ton. It is ridiculous to try to draw conclusions from data so incomplete. It is discouraging to note that the Interstate Commerce Commission is trying to do this very thing at the present writing. It may be noted, however, that in January, 1904, all the trans-continental railroads raised their throughfreight rates on some commodities about 10%.

One must deal in general terms with this rate matter. I met a cattle dealer from Wyoming, who told me that his business had been ruined by the Union Pacific, and who hates Mr. Harriman cordially. He said that the

rates went up to a point where he was forced out of the business. It looked like a black indictment of the railroad. On investigation, however, the case was disposed of in this way by one of the men who ought to know:

"Yes, I know Mr. B. In the three years up to 1905 he paid us about $14,000, directly and indirectly, for freight transportation. We paid him, on nineteen settlements, $20,000, or thereabouts, in damages. He is a good sample of the cattle shipper. If they knew less about damage suits and more about cattle, we could afford to do their business; but I don't think you will find a railroad either in the Southwest or the Northwest that is pining for the business of carrying cattle, even at the present rates. I never want to see any cattle on our railroad as long as I live!"

There are two sides to most questions. In general, the tariffs of the Union Pacific are not much, if any, lower than they were when Mr. Harriman took command. The benefits that have accrued in the way of economy have mostly gone to the stockholders, of whom Mr. Harriman is, perhaps, the largest. It would be much easier to demonstrate that Mr. Hill is an altruistic railroad manager than that Mr. Harriman has any claims in that direction.

Let us sum up the railroad accomplishments of the Harriman régime, and set them over against the Harriman activities in finance, speculation, and politics. In this way, perhaps, one may get fair measure of the man and of his service, or otherwise, to the people of the United States. It may be said, in passing, that it is to the railroad doings of his reign that his apologists turn when they would defend him against charges of corporate misdoing, high and unprincipled finance, political manipulation, and Wall Street graft.

In the ten years of his power he has rebuilt the Union Pacific Railroad practically from end to end. In fact, he has made two Union Pacifics to grow where only one grew before. He has made travel safer, swifter, and more comfortable from the Rivers to the Pacific Ocean. By his methods he has contributed largely to the growth of the whole South PacificCoast in wealth and in commercial life. He has not ruined cities, nor deliberately juggled with the great industries of the regions which he serves. When the land called aloud for new transportation facilities, he has listened

to the call and has spent many millions of dollars to answer it. This is true both of the Union Pacific and of the Southern Pacific. Even in small matters like station houses, small sidings, railroad crossings, the policy has been more than liberal. It has been lavish.

Moreover, he has turned his back upon the "graft" of his predecessors. When the Southern Pacific and the Union Pacific bought supplies, cars, rails, or anything else in the other days, the purchases went through the hands of various other interests. There was a profit to be gained in every instance on these purchases, great and small. The Harriman method has eliminated this. He has a "purchasing agent," right under his own commanding eye. I am writing of the actual administration of the roads, and not of the purchase of securities. A recent statement to the effect that the Manchuria and the Mongolia, the great steamers of the Pacific Mail, are owned by Mr. Harriman personally, opens some question; but the statement is certainly technical, meaning that Mr. Harriman owns them merely as trustee. They were built from money advanced by the Union Pacific Railroad, and accounted for in its report. The purchase of the San Pedro was done in the same way, Mr. Harriman being the owner of this stock, as trustee for the Union Pacific.

In the matter of rates, Mr. Harriman has not departed from the ways of his predecessors. He seems to believe in charging "what the traffic will bear." This phrase, which is really the basis of the rates made by nearly every railroad, has a double meaning. First, it means that the roads will make rates which will create new traffic and new markets, even though such rates give the railroad little or no direct profit from the business. Second, it means that the railroad will charge just as much as the business can pay, and stay alive. Mr. Harriman's roads have done both, probably the latter quite as often as the former. On this point, I quote from Professor Parsons's new book, "The Railways, the Trusts, and the People":

"I was told in California that the Southern Pacific has made a practice for many years of fixing rates on the basis

freight rates at the level that will just leave his head above water. For example, potatoes were 25 cents a bushel in Oregon and would bring $2.50 in Los Angeles; so the railroad made the freight rate $2.10 a bushel, leaving the shipper just enough margin to keep him moving."

On the other hand, the two Harriman roads make rates on California fruit which enables it to meet the fruit from Florida in the New York markets on equal terms. If one struck a balance between the two methods, it is very probable that the balance would be on the side of the railroad. The fact that the Harriman country is uniformly prosperous and hardly more discontented than other regions served by other railroads, would seem to argue strongly in favor of the Harriman fairness.

SOME QUESTIONS YET UNASKED This review of the Harriman railroad history practically closes up the record. I have omitted the discussion of two or three legal questions that now loom large in the financial and political world, because none of them has been fought through the courts, and discussion of them at this time would be hardly profitable. Two or three of them hinge upon the Sherman law, which is supposed to prevent the merger of parallel and competing roads. The chief of these questions is whether the purchase of a half interest in the San Pedro, Los Angeles & Salt Lake Railroad is a defiance of the law. The road is a competitor of the Central Pacific and the Southern Pacific from Salt Lake to all points on the South Pacific Coast. The Union Pacific did not buy it directly. It lent money to Mr. Harriman, who bought it and holds it as trustee for the Union Pacific. The courts must decide whether this is an evasion of the law, which would seem to prevent the Union Pacific from owning it personally.

Another legal question concerns the reorganization of the Chicago & Alton, in 18991900. It appears that the old Alton, while it was in the hands of the reorganization committee headed by Mr. Harriman, James Stillman, Mortimer Schiff, and George J. Gould, paid a dividend of 30 per cent., or about $6,500,000. The question is, who got that money? The other question is, whether or not the people who got it were entitled to

investigate the richness of ores, and the value of beans, prunes, potatoes, etc., find out how much the shipper can pay without driving him out of business, and fix the

company which leased the old Alton on April 3, 1900, was entitled to any dividend that it paid on May 7, 1900, but it appears that it

was not so. I quote from the Financial Chronicle of May 12, 1900:

"The syndicate which acquired the stock of the Chicago & Alton Railroad has been paid a cash dividend of 30 per cent., being the accumulated surplus earnings of the company which had not been distributed. The payment amounted to about $6,500,000."

It would appear that the stock upon which this dividend was paid was actually sold to the new company in April, but that the syndicate reserved the right to receive the dividends. Also, this syndicate bought, at 65, a block of $32,000,000 bonds, which were sold to the public at prices ranging from 85 to 96. It would seem that the dividends and the bonds alone yielded an immediate profit of about $14,000,000. There were other profits, in the new stocks and bonds. Altogether, this lucky syndicate seems to have gathered in a nice. little profit of over $18,000,000 cash. Of course, profits are not, per se, criminal, and judgment must be reserved upon this matter until it has gone through the courts. It will probably never reach those courts unless some stockholders of the new Alton should take it

there.

THE HARRIMAN ALLIES AND FOES

We have seen Mr. Harriman from the beginning of his life to the end of his fiftyninth year. For nearly forty-five years, he has been a Wall Street man. At the outset of his Wall Street life, we saw him a trader on the floor of the Exchange, merely turning over stocks and bonds from day to day, taking the little profits where they appeared. Then, at forty, we find him for the first time in the service of a great railroad, the Illinois Central. At forty-five, he dares a conflict with J. P. Morgan & Co. over the Erie Railroad. At fifty, he becomes the head of the Union Pacific, and begins his activities at once as one of the leading financiers of the United States and one of the great railroad executives.

His position has never been more interesting than it is at the present moment. He stands like a Great Captain in the centre of two concentric circles made up of the greatest financiers in the United States, if not in the world. He is surrounded by the captured banners of his foes, and confident in an almost unbroken record of conquest. He is rich and powerful with the spoils of past conflicts.

Around him lies his host, ready for defense or conquest. It is a host of veterans, men

well tried in years of Wall Street battle. Mr. Jacob H. Schiff brings to war a splendid following of foreign banking wealth and the prestige of a long and honorable career as a banker and financier. Messrs. William Rockefeller, Henry H. Rogers, and James Stillman marshal to his aid the forces of the so-called "Standard Oil Interest," closely affiliated in every way with Mr. Harriman. Mr. H. C. Frick brings to the conflict a tremendous personal wealth, and a wisdom in counsel unsurpassed in this country. It is a solid host, homogeneous, compact, organized. In railroad matters, it is absolutely one with Harriman, whose will rules it like an autocrat. There has never been, in the former history of the world, so splendid a fighting financial organization.

Around it lies the outer circle of opponents and enemies. There is no leader in this host. A common impulse of self-protection has brought it together, but it is a host of many heads, many counsels, much jealousy, much distrust. It cannot move to attack; it can merely maintain a loose blockade, so loose, indeed, that it has not been effectual to prevent the Harriman raids of conflict, save in one or two instances.

The units that make up this army are commanded by men of mighty power. Mr. J. P. Morgan is one of them. In his day, he has met Mr. Harriman four times in the disputes of Wall Street, and in three instances the Harriman end was gained. Were he the Morgan of yesterday, he would be qualified to bind together into one fighting organization all the units of this host, but to-day he is on the eve of retirement. He is nearly seventy years of age, and is tired of leadership. Beside him stands another veteran, James J. Hill, seasoned and unafraid, the one of all the host who would not hesitate to alone withstand the whole force of Harriman, or even to invade him. Beyond lie the forces of the First National Bank and the Rock Island, bold enough, yet cautious, realizing that they stand practically alone. Mr. George J. Gould commands a force of seasoned veterans, trained in the long wars of Jay Gould, but weakened in later years by defections, treachery, and the resulting lack of confidence. Behind this great circle of the magnates lie other captains: Edwin Hawley, burning with eagerness for any raid or venture; James R.Keene, passionate for revenge for his terrific drubbing in 1993;

Stuyvesant Fish, another soldier of vengeance; Thomas F. Ryan, quiet and non-committal, but rankling from the lash of Harriman's threatening tongue; James Speyer, hating in the cold, steady manner of his race and kind.

United, this group of men and powers could come near destroying the power of the Harriman army. Divided, it has watched that power grow until it nearly overtops them all together. When Hill, Morgan, and the First National Bank were drawn together by a common danger in 1901, they saved the Northern Pacific from Mr. Harriman. Indeed, Mr. Hill says that they also saved the Great Northern. When the First National, the Rock Island Crowd, and Edwin Hawley came together in 1904, they cut out from under the Harriman guns the Chicago & Alton, and made it easy for Hermann Sielcken to capture the Kansas City Southern. The coöperation of Mr. Gould and Mr. Hawley is striking at the very heart of the Harriman system by the building of the Western Pacific. If Mr. Hill should drive the Burlington through to Salt Lake and join this interest in the Western Pacific, the end of the Harriman dominion. on the South Pacific Coast would be clearly in sight.

Because Mr. Hawley and Mr. Speyer were divided in 1901, Mr. Harriman controls the Southern Pacific. Again, if Mr. Morgan and Mr. Hawley had had a little better understanding, the Southern Pacific would have gone into the hands of Mr. Morgan in 1901, and would probably have been the Southwestern division of the Hill System by now. The margin of chance was so narrow in this instance that a single word from Morgan would have changed the railroad history of the West.

And they are still divided. Between Mr. Gould and the Rock Island there is jealousy and strife, though both recognize the common enemy. Rumors are constant that Mr. Hill will some day be a third in their rivalry over the railroad field between Kansas City and the Gulf. There is little or no coöperation, in fact, between any two of the interests that compose the group of "Harriman rivals."

Therefore, the position of Harriman at the present time is very strong, so far as his relations with his neighbors are concerned. The enmity of the Government of the United States is quite another matter, and it is not the intention of these articles to attempt to find a conclusion to these legal matters before

the courts have considered them, and before the evidence on both sides is on record. Even in this matter, the position of Harriman is undoubtedly strong; but it does not look, on the face of it, any stronger than was the position of Mr. Hill in 1902; yet Mr. Hill was beaten by the Government.

THE CRITICISMS AGAINST MR. HARRIMAN

Since these articles began, there has been a tremendous outburst of criticism all over the country against Mr. Harriman. It has been based largely upon the financial activities, rather than upon the railroad methods of the man. There seems to have arisen an idea in the minds of the people that the railroad manager should not be in touch with the tickers of Wall Street. Mr. Harriman is in touch with these tickers. He is also condemned on the ground that his methods have given to the Union Pacific undue power, and this criticism is valid and sensible.

touch with these tickers.

It must be admitted, however, that most of the sweeping indictments brought against Harriman in the press are rather flimsy in their nature. They presuppose that Wall Street is merely a sort of gambling hell on a large scale. As a matter of sober fact, neither the rebuilding of the Pacifics nor the resuscitation of the broken Santa Fé, Northern Pacific, Erie, Reading, or any other big railroad could have been brought about without the help of Wall Street, its men and its machinery. Harriman himself could never have done what he has done for the West had he not been in command of Wall Street forces. It is not the use of this machinery of commerce that is worthy of blame. It is the abuse of it. Mr. Harriman has undoubtedly abused it many times, in using it for his own personal ends by throwing the resources of his great corporations into the battle for personal wealth and power.

In former articles, I have freely criticised these lapses into the discredited methods of what has come to be called "high finance." I have also criticised the political activities of Mr. Harriman. Both these matters were discussed at some length and in detail with Harriman people, before I published them and since. Even the most faithful Harriman apologists admit that the Northern Pacific purchase was a colossal gamble, and justify it by pointing out that it has redounded to the credit of Harriman, and the aggrandizement of every stockholder of the Union Pacific.

They defend the large dividends declared last autumn in the same way, but fail entirely to account for or excuse the methods followed in the stock market at that time. Nor do they convincingly deny that almost every single thing of importance done under the Harriman régime has had a distinct Wall Street tinge, and has been made the basis for heavy private speculation in stocks.

As to the political end of the Harriman machine, the defense is a time-worn one. Mr. Harriman did not put the Union Pacific into politics in Nebraska, nor the Southern Pacific into politics in California. Many years before Harriman ever thought of the Union Pacific, its lobbyists exercised their power in the politics of almost every state through which its lines operated. In the celebrated "Huntington Letters," brought to light many years ago, the dominancy of the Southern Pacific over the political being of California was written clear enough for all men to see. Mr. Harriman bought these heritages of corruption and dishonesty when he bought the roads. He has continued them because, he would probably say, he had to. It remains for the state of Washington to discover whether or not he is creating new corruption, new lobbies, where his predecessors had none. Certainly, the passage of the bill whereby the Alton bonds that were bought by the Harriman syndicate at 65 were made available for New York savings banks marked a new era in political finance.

Of late, it has been the habit to hurl diatribes at Mr. Harriman. During the next year, if all goes well, this will be changed. The general public is entitled to know that the Coal Roads, the Erie, the Standard Oil Company, the Pennsylvania, and many other corporations possess certain skilful gentlemen who are called "press agents," whose duties consist in bombarding the daily press and the magazines with so-called "news" about these corporations, and so molding public opinion to their own ends. Mr. Harriman has always frowned down upon this thing. He has gone much further, refusing to be interviewed or in any way to assist the legitimate gatherers of news for the public. It is interesting, therefore, to note that not only have the bars been let down in the Harriman home and offices, but also that henceforth the public is to have the opportunity of getting its Harriman news in the same way that it gets the Pennsylvania

and the Erie news-namely, through a press agent. So much for public opinion.

To

In these articles, I have tried to point out without fear and without bias the salient facts with regard to Mr. Harriman, personally, financially, and politically. On the one hand, he must be adjudged a clean man, with none of those detestable vices that so often go hand in hand with great wealth in this metropolis. He lives cleanly, temperately, moderately, as a man should. He is neither blatant nor extravagant, but rather simple and unaffected and extremely democratic in his tastes. his parents, to his younger brother, while he lived, and to his children he has been true and properly affectionate. As a servant of the public, he has done his duty in the upbuilding of the West, working through the two great railroads that bear his name. To his stockholders, speaking largely, he has been lavish; and this is stated with the full belief that he himself profited in every instance largely in the very largess he created for his stockholders. I cannot see how that fact can detract from the measure of his service to his stockholders. As a financier, without defending in the least the methods that he used to bring the results about, the results of his administration have not been proven detrimental to the people of the United States. In addition, he has done some service to the scientific world, through the Harriman Alaska Expedition, and to philanthropy.

Beyond that, in praise, it is not possible to go. Across the reverse of the picture lies the foul traif of Wall Street, at its worst—its tricks, its subterfuges, its unprincipled chicanery, its unholy lust for gain. Weighing pro and con the reorganization of the Alton, the reaching out for salaries, commissions, collateral profits of all sorts and sizes, the petty exercise of prerogatives in his dealings with men in his employ, the subtle scheming to hold the funds of the Equitable Life, the shifts to evade the law with respect to the holding of control over various roads, the cold-blooded assumption of his heritage of political corruption and dishonor, the abuse of trusteeship to help personal speculation in Wall Street markets, the tactless, mannerless attitude toward all and sundry who come in contact with him-weighing these things against the real executive greatness of the man, one cannot but wonder and be astounded that he has gone so far and fared so well.