HC 105.H65 Speeches and papers on the silver, posta 3 1924 013 858 786 The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013858786 With the compliments of N. P. HILL, Denver, Colorado. SPEECHES AND PAPERS Silver, PostalTelegraph, AND OTHER ECONOMIC QUESTIONS. Nathaniel P. Hill. published by The Gazette Printing Company, colorado sprinos, colo. 1890. PUBLISHEE'S PEEFACE. Among the more important questions now agitating the public mind, and receiving the consideration of Congress, are those relating to the Postal Telegraph and the Silver Coinage. During the service in the Senate of the Hon. N. P. Hill, he was regarded as an authority on both of these subjects. His speech on the Postal Telegraph was the first comprehensive presentation of this subject in the Senate, and since then it has been a national question. As Chairman of the Senate Committee on Post Offices and Post Roads, he carefully investigated the facts relating to the Postal Telegraph, and made a report containing the most valuable data on this subject now available. But his advocacy of the silver question has generally been con- sidered his most important work in the Senate. While his first speech was delivered a little more than four years after the passage of the act of 1878 remonetizing silver and when barely one hundred millions of dollars had been coined, yet his arguments are as pertinent and strong to-day, when our coinage is approaching four hundred millions, as they were then. His speeches were marked by originality of thought, great freshness in the selection and use of statistics, and a breadth and fair- ness of argument which were refreshing at the time. Of course the statistics have not been brought down to the present time, but express the condition of affairs at the time the speeches were delivered. But it is a significant fact that the inferences drawn at the time these speeches were delivered are abundantly vindicated to-day, with the larger range of facts and experience at our command. The discussion of these subjects during the last few months has caused great inquiry for these speeches among those who wish to study these subjects more carefully. To meet this demand we have published this volume, which includes all of his speeches delivered in the Senate, together with some contributions to Reviews, and also his addresses delivered since he left the Senate which bear on similar questions. CONTENTS. PAGE. Silver Coinage.— Speech delivered in the Senate of the United States, June 20, 1882, 1 Gold and Silver as Standards o£ Value.— Prom the North Ameki- CAN Review of October, 1883, 25 Should Silver be Demonetized ?— From the North American Review of November, 1885, 36 Silver Coin and Silver Certificates. — Speech delivered in the Sen- ate of the United States, December 15, 1884, 44 Silver Coinage. — Speech in Reply to Senators Morrill and Bayard, delivered in the Senate of the United States, February 26, 1885, 75 Silver Coinage.— Address before the Commercial Club of Provi- dence, Rhode Island, January 9, 1886, 96 A Rejoinder. — Reply to the criticisms of the Providence Jour- nal, February 9, 1886, 124 Payment of the National Debt. — Speech delivered in the Senate of the United States, February 10, 1883, 132 Payment of the National Debt.— From the North American Review of September, 1886, 153 Tariff on Wool. — Speech delivered in the Senate of the United States, February 3, 1883, 164 Postal Telegraph. — Report submitted to the Senate of the United States, May 27, 1884, 167 Postal Telegraph. — Speech delivered in the Senate of the United States, January 14, 1884, 198 9 The Backbone Land Grant. — Speech delivered in the Senate of the United States, May 7, 1884, 236 The Question of the Hour. — Address delivered at Leadville, Colo., before the Y. M. C. A., on Thursday evening, April 12, 1888, 265 SILVER COINAGE. Speech delivered in the Senate of the United States, June 20, 1882, the Senate having under consideration the bill to enable national bank- ing associations to extend their corporate existence. Me. President: I desire to submit some remarks on the general subject of the coinage of silver, in answer to what was said yesterday by the Senator from Ohio, [Me. Shee- MAN. ] In doing so it will be necessary to briefly review the monetary position of silver for the past few years. There can be no doubt that the great majority of the sup- porters of silver remonetization in the United States, in 1876- '77-78, were in favor of its unlimited coinage on the same footing as gold. This is shown by the facts that the House of Representatives parsed bills by overwhelming majorities in 1876 and 1877, providing for the unlimited coinage, and agreed with great reluctance, in 1878, to the limitation upon that coinage which is embodied in the act of February 28 of that year. In 1880 the same body passed a bill removing that limitation, by a majority which was not large, but which included nearly if not quite all the members who did not favor a single gold standard. The limitation, which origin- ated in this Chamber, was opposed by a large portion of the supporters of silver money, and it is doubtful if it would have been agreed to except under the coercion of a supposed necessity of obtaining a two-thirds vote to carry the measure over the veto of the President. At the same time it is well known that independently of the importance of so framing the silver bill as to procure its passage over a veto, which had been preannounced and was inevitable, there were many persons in this Chamber and elsewhere who, while they desired to take a step in the direc- tion of the double standard, and were profoundly impressed with the mischiefs and hazards of attempting to base the I SILTEB COINAGE. vast and increasing business of the commercial world upon the monetary use of gold alone, still doubted the expediency, under the existing circumstances, of restoring the double standard with the unlimited coinage of both metals. These persons saw that a coinage of silver about equal to the production of our own mines would help to keep up the gold price of silver, and thereby sustain a meritorious home industry of great importance to the development of our West- ern States and Territories. They saw that it would tend to check so much of the movement in other parts of the world to demonetize silver as arose from an apprehension that it was menaced with a grave degree of depreciation. They saw that by adding to our metallic money it would aid in reviving our depressed trade and industries, and would facilitate the resumption of specie payments. These persons believed, furthermore, that it would be many years before the proposed rate of coinage could result in any disparity of market value between gold and silver coins, even if the old ratio of market value between gold and silver bullion was not restored. On the 17th of February, 1878, when the silver-coinage bill was pending in this Chamber, the following was proposed as an amendment of that part of the bill which provides for the monthly purchase for coinage of not less than $2,000,000 nor more than $4,000,000 worth of silver bullion : One hundred millions of such dollars should be coined during three years from this date, and if the average monthly price of such silver bullion during the last twelve months thereof shall be less than ninety-seven one-hundredths of a gold dollar, the Secretary of the Treasury may suspend such coinage until further action by Congress. This proposed amendment did not require but merely authorized a suspension of silver coinage if there should still remain, after a coinage of one hundred millions, a dif- ference as great as 3 per cent, between the value of gold and silver bullion. But, although put in that mild form, the amendment was lost by a decisive ' vote, ( yeas 25, nays 40, ) which is a clear proof that in the opinion of the Senate at that time there was no occasion to arrest the coinage of sil- ver at the point of one hundred millions, whatever might be SILVEE COINAGE. 6 the market relation of value between gold and silver bullion when that point should be reached. It is now proposed not merely to authorize a suspension of the silver coinage, but absolutely to suspend it when the amount coined has as yet reached only about one hundred and sixteen millions. I do not believe, Mr. President, that there has been any change in this country since 1878 in favor of further restricting the coinage of silver. In fact I believe the country is in favor of a more liberal policy in respect to the coinage of this metal. That there are benefits derived from continuing the coin- age of silver is plain and incontrovertible. Nobody will deny that it assists to sustain the price of silver, and that it is only this sustained price of silver which gives activity to the min- ing of that metal and to all the industries dependent upon or connected with it — such as the furnishing of supplies and machinery and the construction of railroads through our vast argentiferous territories. Nobody will deny that the rapid development of the population and commerce of the country. East as well as West, requires all the sound money we are likely to obtain from any source. It is not the silver-producing States alone that have been benefited by this industry. As an illustration of this, Colo- rado is now sustaining a population of about 250,000 people. To a very large extent this population is supported by silver mining, the product of which last year was about $23,000,000. The statistics of the railroads show that there were trans- ported to Colorado from the States lying east of her, last year, 308,343 tons of merchandise. The estimated value of this merchandise is over $20,000,000. In other words, as one of the results of this industry, $20,000,000 have been sent to the States which produce no silver in payment for the prod- uct of their soil and labor. But there is a higher and more important principle in- volved in the question of the benefits derived from the coin- age of silver. It is that of retaining silver as one of the money metals of the world ; it is that of protecting the debtor 4 SILVER COINAGE. class of our people. It is this class which produces the wealth of the nation. A vast proportion of the industries of the world is carried on with borrowed capital. Any contraction in the volume of money injures the borrowing classes — a contraction sufficient to put all the business of the world on a gold basis means their ruin. What injury has resulted or is likely to result from con- tinuing the coinage? There is no depreciation relatively to gold or greenbacks of the silver dollars, or of the Treasury certificates representing such dollars. Our gold and silver dollars maintain an absolute parity of value in the market. There is no premium on the gold dollar, and there is no dis- count on the silver dollar. They circulate side by side, and are as equal in purchasing power as they are in the power to pay debts. No evil consequence of any kind has so far re- sulted or is even alleged to have resulted from the coinage of silver dollars. There are two conspicuous facts which establish, beyond the possibility of dispute, the present market parity of our full- tender silver and gold coins and of the Treasury certificates which represent them. The first is the character of the money paid for tariff duties at the New York custom-house, where the great bulk of that part of the public revenue is collected. In round numbers the average weekly amount of these pay- ments is about two and one-half millions of dollars, and they are made in about the proportion of four-fifths gold to one- fifth silver, nearly the whole of the silver being paid in the form of certificates. The persons who make the payments have the right to offer either gold, silver, or greenbacks. If there were a dis- count so small as even one-sixteenth of one per cent, upon either of these three descriptions of money, the entire receipts of the New York custom-house would consist of the particular money which was obtainable at a discount. Nothing is more certain than that men will not pay in a dearer money when a cheaper one will answer the same purpose, and especially will they not do it when the dearer money is more cumbersome to SILVER COINAGE. 5 handle. The men who now carry about five tons of gold weekly to the New York custom-honse in bags, or who have it carried there by porters and on drays, would certainly carry silver certificates by preference, if such certificates were procurable at the same cost. If they were procurable at a less cost, not a single ounce of gold would reach the New York custom- house. The second fact which establishes the market parity of gold and silver coins is found in the history of what occurred under the order of the Secretary of the Treasury, dated Sep- tember 18, 1880, permitting the owners of gold coin to deposit it at the New York assistant treasurer's oflBce, and receive sil- ver certificates therefor: Treasury Department, Secretary's Office, Washington, D. C, September 18, 1880. Until further notice, the United States assistant treasurer at New York will pay out at his counter standard silver dollars or silver certifi- cates in sums of $10, or any multiples thereof, in exchange for like amounts of gold coin or gold bullion deposited with him. Upon the receipt by the Treasury of the United States, in this city of an original certificate of deposit issued by the United States assistant treasurer of New York, stating that there has been deposited with him gold coin or gold bullion in the sum of $10, or any multiple thereof, pay- ment of a like amount in standard silver dollars or silver certificates at the counter of any United States assistant treasurer designated by the depositor will be ordered. John Sherman, Secretary. Under this order the voluntary exchanges of gold for sil- ver certificates at the office of the New York assistant United States treasurer were so numerous and so completely drained that office of certificates that on the 1st day of November, 1881, a succeeding Secretary of the Treasury conceived it to be his duty to issue the following new order, suspending until further notice the right of individuals to make such exchanges : Treasury Department, Secretary's Office, Washington, D. C, November 1, 1881. Until further notice, the exchange of silver certificates for gold coin deposited at the ofiice of the United States assistant treasurer at New York will be suspended, and Department's Circular No. 75, of September 18, 1880, is hereby modified accordingly. H. F. French, Acting Secretary. 6 SILTEB COINAGE. It thus turned out that so many persons in New York — merchants, bankers, and others — were eager to obtain silver certificates and to pay gold for them, dollar for dollar, that the Treasury officials felt obliged to decline to grant them that accommodation. Notwithstanding the constant parade by certain financial journals of a fluctuating difference in market value between the bullion of which a silver dollar is made and the bullion of which a gold dollar is made, it is not seriously claimed by any one that any difference has yet shown itself between the market value of those coins. But the important problem, and the one which most con- cerns us now, is the effect which the continued coinage of sil- ver will have upon the relative value of gold and silver money. How much silver coin can we add to our circulation without disturbing the parity of value which now exists between these two kinds of money? A late Secretary of the Treasury, now the honorable Sen- ator from Ohio, believed that the danger was imminent, that a difference in their market value would show itself if the coinage of silver dollars was allowed to exceed fifty millions. In his annual report of December, 1878, he said: It would seem to be the best policy, for the present, to limit the aggregate issue of our silver dollar, based on the ratio of 16 to 1, to such sums as can clearly be maintained at par with gold. The Secretary respectfully recommends that he be authorized to discontinue the coin- age of the silver dollar when the amount outstanding shall exceed 150,000,000. The Congress to which this recommendation was made, and the succeeding Congress, both declined to fix the limit of fifty millions, or any other limit, upon the coinage of silver dollars, but it has turned out that even with a coinage of one hundred and sixteen millions, no disparity of value between gold and silver dollars has shown itself. How the Secretary of the Treasury arrived at the conclusion that silver dollars might, and probably would, depreciate if coined in excess of fifty millions has never been explained by him, and is not known. His opinions have certainly not been justified by the SILVER COINAGE. 7 event. I do not believe that silver dollars, if coined to the extent of ten times fifty millions, would depreciate in the market relatively to gold dollars, even on the supposition that the relative value of gold and silver bullion remains -what it is now. It will, however, be sufficient to justify opposition to the plan of suspending the coinage of silver dollars, if it can be shown satisfactorily that no risk of their depreciation is involved in continuing their coinage at the present annual rate of about twenty-seven and one-half millions for ten years longer, at the end of which time their total coinage would amount to about three hundred and eighty millions. The Director of the Mint estimates that on the 1st day of November, 1881, there was in this country 1563,000,000 of gold, including coin and "bullion at the mints and assay offices available for and awaiting coinage," to which is to be added, say, 105,000,000 silver dollars, making a total of $668,- 000,000 of full-tender metallic money. There is in every country maintaining specie payments a certain minimum be- low which the full-tender metallic money cannot be reduced. I do not affirm that in the United States this minimum may not be a sum somewhat below $668,000,000. It is impossible to form an exact judgment upon questions like that. But grouping all the facts of the case, first, that our metallic money is now actually $668,000,000 ; second, that our popula- tion, wealth, and exchanges are rapidly increasing ; third, that the metals are now as much excluded from the circulation as it is possible to exclude them by paper issues, inasmuch as $1 and $2 money notes are already in use ; and, fourth, that other specie-paying countries use an amount of metallic money at least as large, allowing for differences in population and other circumstances, as $668,000,000 is for this country, the conclusion seems inevitable that the possible minimum of metallic money in the United States is not below that amount. Whatever it may be, gold must form a part of it until the quantity of coined silver equals or exceeds the possible mini- mum. This principle has been very clearly set forth and strongly sustained by George M. Weston, an able financial a SILVER COINAGE. writer, in an article in the Economist, dated July 24, 1880. He says : The conclusion upon the whole case may be summed up by saying that so long as the United States cpntinues to be a specie-paying and bimetallic country gold dollars will not command a premium in ex- change for silver dollars, whatever the quantity of the latter may be, unless the silver coinage has passed the minimum limit of the total metallic money required to maintain the equilibrium of prices in this country with the general range of such prices in the foreign countries with which we maintain relations of trade. The question of how much silver money can be main- tained at a parity with gold money is governed by this principle. There cannot be a sensible discount upon silver coin without such a premium upon gold coins as will expel them from circulation. Such an expulsion is impossible until the silver coinage exceeds the amount below which our total metallic circulation cannot be reduced. I have said before, that at the present rate of coinage in ten years from this time we should have $380,000,000 of silver coin. No one can maintain that $380,000,000 is above the possible minimum of metallic money required by this country. If not, it cannot be maintained that 380,000,000 of silver dollars will depreciate relatively to gold dollars. And it is not to be forgotten here that the real question presented in this case is not the possible minimum of metallic money at this time, but the possible minimum ten years hence, until which time the silver coinage at its present rate will not have reached $380,000,000. In 1892 our wealth will be double what it is now, and our population, instead of being 52,000,- 000, as it is to-day, will be 67,000,000, or almost equal to the present aggregate population of France and of the United Kingdom of Great Britain and Ireland, which have now an aggregate full-tender metallic circulation of more than four times $380,000,000. What has been the experience of other specie-paying countries which use both the metals and keep them at parity by limiting the coinage of one of them? Four countries, SILYEE COINAGE. 9 France, Belgium, Holland, and Switzerland, since 1874 have maintained specie payments and a bimetallic circulation. On the 6th of October last (I take the estimates of the Director of the Mint, in round figures, not giving the fractions of millions) France had $874,000,000 of gold and $545,000,000 of silver legal-tender coin. Over 38 per cent, of her entire metallic money is silver ; of her silver money 30 per cent, was held as reserves in the bank, and 70 per cent, was in active circulation. At the same time Holland had $29,000,000 of gold and $56,000,000 of silver. About 66 per cent, of her metallic money was silver, and 40 per cent, of the silver was in active circulation. If of the $668,000,000, which is our total metallic money, 38 per cent, consisted of silver, as in France, we should have $254,000,000. If two-thirds of it consisted of silver, as in Holland, we should have $440,000,000. The mint ratio of silver to gold is, in Holland, 15.604 to 1, and in France it is 15^ to 1, while it is 16 to 1 in this country; so that the bullion value (measured in gold) of Dutch silver coins is about 2^ per cent, and of French silver coins about 3 per cent, less than the bullion value (measured in gold) of American silver coins. Furthermore, the use in the United States of silver certifi- cates (which are not known in Holland or France) favors a larger proportionate circulation of silver here than in either of those countries. In both France and Holland the parity of value in the market of the two classes of coins is perfectly preserved. The Paris correspondence of the London Econ- omist, of November 10, 1881, says : " There is no premium on gold." A dispatch from Mr. Birney to Mr. Evarts, dated " The Hague, March 17, 1880," says : " The money in circula- tion is chiefly silver. Silver, gold, paper-money, and bank notes are at par." This parity of value between gold and silver coins in Hol- land and France continues to the present time, and it does not appear that anybody in either of those countries suggests 10 SILVEE COINAGE. the possibility of its being disturbed. The same parity exists in Belgium and Switzerland, in both of which countries the proportion of silver may be presumed to be as large as it is in France, as both belong to the Latin Union. The French example shows that silver coins constituting 38 per cent, of a metallic currency will preserve their parity with gold coins, while the Dutch example shows that they may constitute two-thirds of a currency and still maintain the same parity. We have had now nearly four years' experience of the effects of the coinage of silver under the act of February, 1878, and it is certainly true that they have in no particular verified the evil prophecies of its enemies, and that the bene- fits expected from it have been, in an important measure, realized, although the administration of the act has been all the time in unfriendly hands. In his annual report of 1879, the Secretary of the United States Treasury, after quoting his own recommendation of the previous year, that the silver-dollar coinage be arrested at the limit of $50,000,000, proceeded to say : I again respectfully call the attention of Congress to the importance of further limiting the coinage of the silver dollar. Owing to its limited coinage it has been kept at par, but its free coinage would soon reduce its current value to its bullion value, and thus establish a single silver standard. The inevitable result would be to exclude gold coin from circulation. It is impossible to ascertain what amount of silver coin, based upon the ratio of sixteen of silver to one of gold, can be main- tained at par with gold, but it is manifest that this can only be done by the Government holding in its vaults the great body of the silver coin. The Secretary cannot too strongly urge the importance of adjusting the coinage ratio of the two metals by treaties with commercial nations, and, until this can be done, of limiting the coinage of the silver dollar to such a sum as, in the opinion of Congress, would enable the Depart- ment to readily maintain the standard dollar of gold and silver at par with each other. Having failed to persuade Congress in 1878 that $50,000,- 000 was the maximum limit of safety in coining silver dollars, we find the Secretary asking Congress in 1879 to form its own opinion as to what the maximum limit of safety was. The SILVER COINAGE. 11 urgency as to coming to a decision upon that point was not so apparent to the legislative body as to the Secretary, and the last Congress declined to act at all in the matter. In no wise discouraged by the repeated refusals of Con- gress to adopt his views, the Secretary, in his report of December, 1880, when the silver-dollar coinage had reached $75,000,000, advised that it be peremptorily arrested at that point, or that the weight of the dollar (said by many to be already oppressively burdensome) should be increased to 450 grains, and that at such weight only so many be coined as in the opinion of Treasury officials might be called for by the wants of the public. His language was : The Secretary respecttally but earnestly recommends that the fur- ther compulsory coinage of silver "be suspended, or, as an alternative, that the number of grains of silver in the dollar be increased so as to make it equal in market value to the gold dollar, and that its coinage be left as other coinage to the Secretary of the Treasury or the Director of the Mint, to depend upon the demand for it by the public for con- venient circulation. It is confidently believed that a silver dollar containing 450 grains, based upon a ratio of 1 of gold to about 17.5 of silver, could be safely coined, as demanded for use and exportation. These persistent recommendations of the head of the Treasury Department, .in 1878, 1879, and 1880, that the further minting of silver dollars be arrested, were all based upon the view, reiterated in various forms of language, that the continuation of such coinage would "soon" reduce the value of the coined silver dollar to its bullion value, of which the "inevitable result would be to exclude gold coin from circulation," and thus to "establish a single silver standard." In 1878 he feared these results, if the silver coinage should go beyond $50,000,000, and he invoked the attention of Con- gress to the imminency of the danger. In 1880, when the coinage had reached $75,000,000, he advised that the danger was close upon us, and that no time should be lost in adopt- ing remedial measures. I do not call in question either the intelligence or the patriotism of the distinguished gentleman who was at the 12 SILVER COINAGE. head of the Treasury in 1878, 1879, and 1880 ; but he will certainly have the candor to admit that, now that the silver coinage has reached one hundred and sixteen millions, there is no indication of any kind or in any quarter of an impend- ing depreciation of the silver dollars. On the contrary, numerous citizens are asking, as a favor, that they may be permitted to deposit gold in exchange for them, or for the certificates representing them. I confess my inability to understand by what process of reasoning the Senator from Ohio could have arrived at a con- clusion in 1878 that we could not coin more than fifty million silver dollars, and at a conclusion in 1880 that we could not coin more than seventy-five millions without an imminent risk of "establishing a single silver standard" and of "ex- cluding gold coin from circulation." Silver dollars, at any ratio of valuation relatively to gold, cannot become the sole coined money of this country ; or, to express the same thing in other words, they cannot " exclude gold coin from circula- tion," so long as specie payments are maintained, until they are struck at the mints in such numbers as to exceed the smallest figure to which the whole metallic circulation of the United States can fall. That smallest figure is to-day, under the existing plan of keeping one hundred and forty millions of coin as a reserve for the redemption of the greenbacks, certainly not less than five hundred millions, which is eighteen years' coinage at the present rate. The people of the United States can never be made to believe that the parity of our gold and silver coins is threat- ened with any such immediate danger as is apprehended by the Senator from Ohio, when our silver dollars constitute only about one-sixth of our coined money. They know that silver constitutes nearly 40 per cent, of the coined money of France, and two-thirds of the coined money of Holland, with- out disturbing the parity of value between the two classes of coin in those countries. Mr. Sherman, in his annual Treasury report of December, 1880, after observing that his unwearied and persistent efforts SILVER COINAGE. 13 to get silver into use had failed to produce any important re- sult, proceeded to assign the reasons for this failure, being the two following : First. It is too bulky for large transactions, and its use is confined mainly to payments for manual labor and for market purposes, or for change. The amount issued for these purposes is already in excess of the probable demand. Second. It is known to contain a quantity of silver of less value than the gold in gold coin. This fact vrould not impair the circulation of such limited amount as experience shows to be convenient for use, but it does prevent its being held or hoarded as reserves or exported, and pushes it into active circulation until it returns to the Treasury as the least valuable and desirable money in use. The first reason ignores the fact that the act of 1878 pro- vides for the circulation of silver in the certificate form, in which it is neither heavier nor bulkier than greenbacks or national bank-notes. It is in that form that silver does now principally circulate, and it is in that form so entirely accept- able that the Treasury Department has felt obliged to notify the public that it is unable any longer to accommodate those who wish to exchange gold for silver certificates. As to the non-exportability of the silver dollars, if that could in any proper point of view be an objection to them, the same objection lies against the French silver five-franc piece and the Dutch silver florin, both of which are current and acceptable in the countries issuing them. Of the persons who handle money, it is only a very few to whom its exportability is of any consequence. As to those to whom it may be of some consequence, it is sufficient in re- spect to any currency that it is easily convertible into export- able money. The real and only obstruction which has existed in respect to the circulation of silver dollars, and especially in the cer- tificate form, and which as to the former still exists," although in a dimished degree, is, I think, perfectly well understood by the country. It was, at any rate, perfectly well under- stood by the editorial managers of the New York Tribune when, in their issue of July 8, 1881, after referring to the 14 SILVER COINAGE. inquiry made by the British ministry, whether the Bank of England would keep a certain proportion of silver among its bullion reserves, they proceeded to say : The bank was necessarily consulted, because its acceptance or rejec- tion of a particular kind of money would practically determine the status of that kind of money in the London market. We have a parallel case in New York. If the associated banks of this city would undertake to receive silver coin at par in deposits, no tradesman or wholesale dealer would hesitate to accept any amount of such coin that would probably be offered. Silver dollars will circulate in the United States with as universal acceptance as less valuable silver coin circulates in Holland, France, and other European countries when time enough has elapsed for the subsidence of the heat and pas- sion which attended the passage of the act of 1878, and when the bankers of the Northeast see that the determination of the country to persevere in the policy of that act is fixed and ir- reversible. Smooth water does not at once succeed to the waves which have been raised by a great storm. The con- troversy which preceded the act of 1878 involved something more than mere difPerences of speculative opinion. It in- volved the apparently conflicting interests of the debtor and creditor sections of the Union. It involved the relative val- uation of property and money. Even more than that, it in- volved, in respect to a vast amount of mortgaged property, the question whether mortgagors had or had not any interest in it. A controversy like that, on another subject, which led to the civil war must leave behind it exasperations which will slowly disappear. They are, however, lessening every year, and I abide in the belief that the day is not far distant when opinion will be as united that the restoration of silver was for the real interest of all classes and all sections as it is al- ready that the abolition of slavery was beneficial to all parts of the Union, including that part which resisted to the last extremity. It was stoutly contended that the act of 1878 would be seized upon as an opportunity for Europe to complete the SILVER COINAGE. , 15 establishment of an exclusively gold standard, and to use this country as "a dumping ground for its discarded silver." It has had no such effect. Not a step has been taken in any part of Europe toward silver demonetization since the pas- sage of the act of 1878. On the contrary, in several countries in Europe in which strong and active parties in favor of sil- ver demonetization had existed before the passage of that act, they seem to have been paralyzed by it, while the opponents of an exclusively gold standard have increased in courage and power. The act has had, in short, precisely the effect which its friends claimed it would have. By tending to uphold the value of silver, and by allaying in a good measure that appre- hension of its impending heavy depreciation which was the most effective point made against it abroad as well as here, it has thus far checked what seemed at one time a general movement throughout the world toward silver demonetiza- tion. It has stayed the tide if it has not turned it, although the moral effect upon the world of the act of 1878 has been greatly weakened by the persistent efforts for its repeal and by mistaken anticipation abroad that its repeal was probable. In France, although the further coinage of silver is for the time being suspended, the agitation for the demonetiza- tion of the $500,000,000 of silver coins now in existence, in- stead of being persistently pressed as it was before the act of 1878, is absolutely abandoned. In Holland a monetary commission recommended a gold standard in 1873. The ministry steadily pressed it, and in December, 1876, actually carried a bill for it through one branch of the Legislature. There has been no agitation to that end since the action taken in this country. In Spain a royal proclamation in 1876 announced a pur- pose to establish a gold standard. If that purpose has not been abandoned no step has been taken to carry it out, and the Spanish mint is still coining silver. In Austria, the gold party, although at no time strong enough to succeed in its policy, has been active since Ger- many decreed a gold standard in 1871. That, since the 16 SILVEB COINAGE. American action of 1878, the Austrian gold party has lost ground, and has been less able to influence the policy of the government, is shown by the two facts, first, that silver flor- ins are now being substituted for one florin-national notes, and second, that the Imperial Bank has, during and since 1878, increased the silver in its reserves, to an extent not compatible with any idea of going to a gold standard. Of all the States of the Latin Union, Switzerland was the most inclined to the gold standard. In 1878 it gave a formal notice of its desire to terminate the treaty upon which the Latin Union rests. But within the last year its national as- sembly adopted, by a large majority, a resolution declaring their preference for the double standard. Our resumption of silver coinage in 1878 has everywhere in Europe arrested any progress to a gold standard, and strengthened the hands of the supporters of silver. It has had the same effect in India, where, although the change of the currency from silver to gold is an admitted impossibility, the policy of suspending the further coinage of silver has had many advocates. This policy would undoubtedly have been carried out if the fall in the gold price of silver in 1878 had not been lessened by the action taken in this country. The silver sent to the Bast is absorbed principally by In- dia, and it so happened that the India demand fell off nearly three-fourths, comparing the year preceding the passage of the act of 1878 with the year following it. The India department of finance and commerce states the silver imports and exports of India, taking its trade with all countries for the last four years, (the Indian fiscal year, like the British, ending March 31, ) as follows : Fiscal year. Imports. Exports. Net imports. 1877-'78 $78,832,660 27,968,495 48,025,010 26,580,780 $5,500,985 8,115,025 8,676,295 7,117,910 $73,331,675 19,853,475 39,348,715 19,462,870 1878-'79 1879-'80 1880-'81 SILVEE COINAGE. 17 Comparing the year ending March 31, 1878, with the year ending March 31, 1879, the India silver absorption fell sud- denly from $73,831,675 to $19,853,470, or by the great sum of $53,478,205. This is about double the annual amount ab- sorbed in our silver dollars, under an unfriendly exercise of a discretion which is left to Secretaries of the Treasury. The new demand of the American Mint in 1878, it is true, did not raise the gold price of silver, or even prevent some degree of fall in its price, but that was because the new de- mand was for $27,000,000, while, the India demand was dimin- ished twice that amount. The probability is that if the new demand of the American Mint had not been created by our legislation, the falling off in the India demand would have caused a fall at least as low as the panic quotation of 46d. per ounce in the London market in 1876. Without the new de- mand of the American Mint it is probable that the proposal to suspend the silver coinage in India would have been adopted. The Eastern demand for silver, reduced by disastrous fam- ines in both India and China, has not revived. From Great Britain, which principally supplies that demand, the excess of silver export to India and China over imports was $19,436,925 during the first eleven months of 1881, as compared with $26,005,180 during the corresponding months of 1880. Our small coinage of silver has kept the London quota- tions since May, 1879, at an average of 52d per ounce, and with remarkable steadiness, notwithstanding the fact that the Eastern demand during that time has been abnormally small. The conclusion is irresistible that our coinage, even if not increased, must raise the price as soon as the Eastern demand revives. We have thus every encouragement to persevere steadily and firmly in the policy which we adopted in 1878, after the fullest deliberation. The discretion given to the Treasury Department by the act of 1878 to purchase for the mints from two to four million dollars' worth of silver bullion in each month was not intended to be a merely arbitrary discretion. It ought to have been and 18 SILVER COINAGE. ought now to be exercised upon legitimate considerations, among which the hostility of a Secretary of the Treasury to any silver coinage at all is not one. Without undertaking to state all the considerations which ought to govern him and which are legitimate, it seems to me that the amount of our domestic silver production and the magnitude of the Asiatic demand are certainly two. The policy of this country, as set- tled by the act of 1878, is to coin silver, and on that account, and from a proper regard to the large domestic industry of mining silver, as well as from the importance of preserving bimetallism, it is for the interest of this country to sustain the value of that metal. To that end, the whole of our silver production which is available for coinage should be kept out of the markets of the world when the Asiatic consimiption is at a low ebb. A policy like this would have tended to restore the old relation of market value between gold and silver, and in my opinion would have restored it by this time. London is the great silver receiving and distributing point for the world. For the year 1881 Great Britain imported sil- ver to the amount of $34,509,810, and exported it to the amount of 135,019,910. The export demand for silver, to say nothing of the wants of British home consumption, is thus shown to have been greater than the supply, even when the principal demand, which is from Asia, was exceedingly small. Mani- festly it needed only a little more demand or a little less supply to have caused an important rise in the price. In view of this condition of things how extraordinary is the fact that of the total British silver import of $34,509,810 during the year 1881 there was a net import, or excess of import over export, of $12,991,465 from the United States, a country pro- foundly interested in sustaining the price of silver. The whole of the $12,991,465 of silver exported by us to England during the year 1881, and with the effect of depress- ing the London price of that metal, might and ought to have been absorbed in coining dollars at our mints under the law of 1878. To have administered the law in that way would SILVEK COINAGE. 19 have been to carry out its spirit and object ; and it will not lessen the piiblic wonder at the manner in which it has been administered to learn that Great Britain imported more silver from the United States during the year referred to than from any other quarter. Those who advise us to suspend the coinage of silver until England and Germany join us in coining it know very well that this means the indefinite suspension of silver coinage. Upon the sound principle that intelligent men intend what is the necessary effect of their own acts, the persons who give this advice must be held to intend and desire such a deprecia- tion of silver as will not only prevent its restoration as money in European countries, but put an end to its free coinage in India. If we wait for England and Germany we shall wait long enough for the purposes of these advisers. What they really mean by such advice was inadvertently exposed in an editorial notice in the New York Times of December 1, 1881 : If the adoption of the double standard shall be dependent on a com- pact between the leading commercial nations, including Germany and Great Britain, for the free and unlimited coinage of gold and silver at a fixed ratio, we shall be tolerably secure against it. It is said sometimes that if the United States shall go to a gold standard by arresting the coinage of silver it will bring on such a contraction of money, fall in prices, and depression in trade and industries that Europe will be forced to restore bimetallism, while this country, from its greater natural re- sources, can better bear the strain and can afford to wait until commercial distress causes a change of policy on the other side of the Atlantic. But are we sure, or is there really any reason to believe, that any degree of enhancement of the value of money, of fall in prices, and of that commercial and indus- trial distress which is inseparable from a fall in prices, would- have any other effect than to induce the interests which are now actually dominant kx both England and Germany to cling to the gold policy with a more relentless perseverance? Did we find that the industrial distress in Europe from 1873 to 1879, unparalleled as it was in degree and duration, served in 20 SILVER COINAGE. any manner to persuade those interests to relax that contrac- tion of money which was not only the real but the avowed object of their gold policy? How was it in the United States in 1878, when the bank- ruptcies were multiplied on every side; when an enormous proportion of the property of the country was being foreclosed and auctioned off at sheriffs' sales ; and when the violence of starving and desperate tramps was restrained only by displays of the military force of the nation? Did the interests in this country to be benefited by a gold standard then relax in the slightest degree the tenacity and aggressive vigor with which they insisted upon it? Are the bankers of London and Frank- fort so sensitive to tender and humane impulses, and so accustomed to prefer the good of others to their own, that they will forthwith abandon a policy, however much it may enrich themselves, as soon as they are satisfied by a trial of it that it is injurious to the community around them? The European partisans of gold desire nothing so much as the abandonment of silver coinage at the American Mint. Their most persistent and thoroughly reliable exponent, the London Economist, says in its issue of December 10, 1881, in reference to the last annual report from our Treasury Depart- ment : He would have Congress repeal the Bland law, which compels the Treasury to coin silver to the value of .6400,000 each month. The folly of coining silver which no one wants has now become so apparent that probably Congress will not hesitate to repeal an act which ought never to have been passed. And after noticing that a desire to " coerce " England into adopting bimetallism is assigned as one of the reasons for Mr. Folger's recommendations that the coinage of silver be stopped, the Economist observes : If these recommendations are in themselves sound, as we believe them to be, it does not matter materially what motives are prompting them, and we can quite afford to look with composure upon the legisla- tion proposed. The monometallists of England and Germany manifestly have no apprehension of being driven into silver coinage by SILVEK COINAGE. 21 our abandonment of it. The fall in prices and the increased value of money, which would result from the closure of our mints to silver, are precisely what they desire. And after the trial they have had of their own power during the unprece- dented commercial and industrial distress which followed the German silver demonetization, they have no occasion to dis- trust their ability to compel submission among their own people to any degree of financial misery which may come from the practical adhesion of the United States to the policy of discarding silver as money. We are sometimes told that while the non-coinage of silver here might injure our miners by depressing its price, it would injure England still more by deranging the Indian exchange. But the truth plainly is, that the British Govern- ment can make the rate of exchange between England and India just what it pleases by suspending or limiting the silver coinage at the Indian mints, and can thus leave us to bear the loss of the break-down in the price of silver without even the poor consolation of having inflicted an injury upon the trade between Great Britain and its Asiatic dependency. The suspension of the Indian silver coinage is certain to fol- low our suspension of it. The vice-regal government of India, at the end of 1878, asked authority to suspend it in con- sequence of the low price of silver {50d. per ounce) in the London market, and the British cabinet held the request for a long time under advisement. It was not until May, 1879, that the cabinet refused to grant it. Their refusal was an- nounced on the day after Bismarck ordered the suspension of silver sales in Germany. Nothing can be surer than that if we now strike down the market for silver by closing our mints, the British cabinet will promptly meet the emergency by permitting the local government of India to do what it asked permission to do in 1878. I cannot see what is to limit the resulting fall in silver to even the panic quotation of 1876. Confidence in its value will receive a shock from which a recovery will be difficult if not impossible ; and while we are vainly dreaming that we 22 SILVER COINAGE. are piirsuing a policy which will force England into the monetary use of silver, we shall in fact have taken a step which will force other European nations into its abandon- ment. There is nothing in the current relative production and consumption of the two precious metals, either in this country or in the world at large, to induce us to change at this time the policy of the law of 1878. The reports of the directors of our mints, and of Wells, Fargo & Co., agree that there has been no substantial change in the relative production of gold and silver in the United States during the past half-dozen years, and that the absolute production of both has fallen off since the sudden decline of the yield of the Com.stoct lode. As to the silver production of this country in the future, no- body can safely make predictions. From my own intimate knowledge of one important field of that production, and from information obtained from those who are best acquainted with other fields, I see no prospect of any large increase in the near future. It is true that new silver mines are constantly discovered, but it is also true that old silver mines are becoming exhausted. It requires a vast application of capital and labor to maintain the production of silver in this country at its present annual amount, which approximates $40,000,000. In the production of the world, according to estimates based upon the investigations of Soetbeer, the leader of the German gold monometallists, the proportion of gold to silver was the same, comparing the five years ending with 1880 with the five years ending with 1875. No change has occur- red since the passage of the law of 1878, except the falling off in the Asiatic demand for silver. We can see that there has been for that falling off a special and temporary cause in the extraordinary famines which have afflicted both India and China. In the last-named empire whole provinces have been depopulated by that scourge, and according to some re- ports 20,000,000 of the human race have been swept away. Under these circumstances it is reasonable to hope that the SILVER COINAGE. 23 cycle of Tinpropitious seasons and deficient harvests in Asia lias passed, and that in the better times of the future its de- mand for silver, which has never wholly ceased within his- torical times, will again increase. As I have already pointed out, small as the Eastern demand has been for the last four years, and especially during the year 1881, it would have been sufiicient to have caused a serious scarcity in the Lon- don market if the mints of this country had increased the monthly coinage of that metal to $3,000,000. I think I have shown that at the present rate of coinage there is no possibility of the depreciation of the silver dollar for years to come. There are good grounds for expecting a restoration of the old ratio of relative valuation if we do not ourselves break down the price of silver by arresting its coinage. There is no reason assigned for suspending the coinage of the silver dollar except the mere possibility that it may de- preciate in the future. To guard against that remote and improbable danger we are asked to strike a heavy blow against a great industry and all the ramified interests de- pendent upon it, and to so depress the price of silver as to strengthen the hands of the gold monometallists of Europe, whose principal avowed grounds of attack upon silver are its actual depreciation and the danger of its further deprecia- tion. There is nothing in the conditions of business in the United States which invites us to this step. Unless all signs are deceptive, the policy which public opinion enjoins upon the present Congress in respect to the currency is the policy of " a masterly inactivity." It is certain, as a matter of fact, that financial and industrial prosperity and the coinage of silver commenced and have progressed together. It is no time for tampering with the currency, and there is a decided public opinion against trying experiments, when all the busi- ness interests of the country are enjoying an unprecedented prosperity. There is no indication that' the monetary circulation of 24 SILVER COINAGE. the United States is too large, or that constant additions to it will not be required as we advance in wealth, population, and exchanges. The sure test of an excess of currency is such a rise of prices relatively to the prices of the world as results in an adverse balance of foreign trade and a drain of specie to go abroad. We are not experiencing any such rise of rela- tive prices. In conclusion, I submit to the Senate that all the circum- stances of the times enjoin upon us the duty of a conserva- tive and cautious policy. We are in a good situation to wait the course of events ; a hasty step may involve us in irretriev- able disasters. Time will clear up points now doubtful. The country is in no humor for currency agitation, and the existing situation calls for none. GOLD AISTD SILVER AS STANDARDS OF VALUE. From the North American Review, of October, 1883. In the contest, which has been waged for a number of years, between the advocates of monometallism and bimet- allism, it has become apparent that the majority of the people of this country desire that silver, as well as gold, should be coined, at least to the limited extent provided for by the act of 1878. They desire it, not for the purpose of inflating the currency, nor for the purpose of benefiting certain sections of the country in which silver mining constitutes an important and profitable industry, as has been so often derisively charged by the monometallists, but for the broader and more equitable purpose of preserving uniformity in the value of metallic money, and more especially to prevent such a contraction of the total volume of money as would fatally depress prices, pervert the equity of contracts, ruin debtors and tax-payers, aggrandize moneyed capital, and impoverish the masses of the people. Justice to all classes of people — to the poor and the rich, to the laborer and the capitalist, to the debtor and the cred- itor — requires that we should so legislate as to preserve for money, as nearly as possible, a uniform value, or, in other words, a steady purchasing power. The money which the borrower should pay the lender, at the maturity of the debt, should be of the same value as that which was received when the debt was made. Since the passage of the act of 1878, by the coinage of sil- ver, the United States have added about 1150,000,000 to the metallic money of the country. That it has not thereby created an inflation of the currency, and that none is threat- 26 GOLD AND SILVEB AS STANDARDS OF VALUE. ened, but that the volume of money is too small rather than too large, is shown by a tendency to falling prices. The address of Mr. Goschen, April 8, 1883, before the Lon- don Institute of Bankers, upon the increase of the purchasing power of gold, or, in other words, upon the fall in the gold price of commodities, within ten years, has excited lively dis- cussion in Europe and in this country. The criticisms upon his address have been varied and numerous ; but none of his critics have denied his proposition that prices have fallen, or that Mr. Goschen is right in assigning, as one of the conspic- uous causes of the fall, the increased demand for gold arising from the deraonetization of silver by several countries. They have not, so far as I have observed, gone beyond the attempt to show that Mr. Goschen has somewhat overstated the new demand for gold, and that the other causes for a fall in prices are more numerous than he supposed them to be. The London Times, which, upon the whole, does not regard the fall of prices as a thing to be deprecated, or as affording an occasion for Pleasures to relieve the constriction of gold, says in its issue of May 7, 1883 : " Prices at the present day are, on the whole, lower than they were ten years ago. They are as low, or nearly as low, as they were in the old days before the great gold discoveries had been made. It is certain, as Mr. Goschen says, that prices of commodities are affected by changes in the volume of the circulating medium in which they are expressed. . . . Germany, Italy, and the United States have, during the past ten years, been absorbing in their currency more gold than the available supply. They have taken between them not less than £200,000,000, and a large part of this has necessarily been obtained at the expense of the general stock. The result has been that, as the stock of gold has diminished, the price of gold has gone up ; or, in other words, that the prices of commodities have fallen. It is impos- sible that 60 large a drain of gold can have failed to affect prices. Mr. Goschen must be admitted to have made out his case thus far. He has laid his finger on a cause, and it is demonstrably a vera causa, capable of the effect he assigns to it. But an examination of his figures will show that other causes have been concurrently at work." It is difficult to compute the exact rise and fall of the gen- eral range of the prices of commodities, and persons desirous GOLD AND SILVEE AS STANDABDS OF VALUE. 27 of ascertaining the truth may differ somewhat in the results at which they arrive. The method lately adopted by esteemed English authorities, as affording the closest approximation to accuracy, is that of comparing the prices in different years of all the articles imported into and exported from Great Brit- ain, in respect to which the Custom-house statements admit of tracing the relation between quantity and money valuation. This is true of about three-fourths of the whole mass of im- ports and exports. Considering the immense magnitude of British foreign commerce, and that it embraces almost every- thing that is bought and sold by mankind, either for con- sumption or as raw materials for manufactures, it would seem that the prices of commodities could not be more reliably ascertained. Robert Giffen, Secretary of the British Board of Trade, in a paper read March 21, 1882, before the London Statistical Society, said in respect to the fall of prices in Great Britain during six years ending with 1879 : " The range of difference in the aggregate values of the exports of the United King- dom, owing to the difference of price alone, amounted to thirty per cent, between 1873 and 1879." The determination of the German Government to adopt a single gold standard was announced by decrees in December, 1871, but during 1872 nothing was done beyond coining about $100,000,000. It was in 1873 that the demonetization of sil- ver, the melting of silver coins, and the sale of bullion, by the German Government, actually began. The six following years were marked by a continuous and extraordinary fall in prices and depression of industry throughout the whole com- mercial world. There may have been other and contributory causes for this fall and depression ; but it cannot be success- fully controverted, and I believe it has never been denied by financial writers upon the subject, that among the principal causes was the silver demonetization of Germany, followed by a similar policy in Denmark, Sweden, Norway, and the United States. Since 1877 the London Economist has made semi-annual 28 GOLD AND SILVER AS STANDAEDS OP VALUE. and annual comparisons of the prices of imported and ex- ported articles. In its issue of January 27, 1883, it exhibits the prices for each of the five calendar years ending with 1882. The starting point of its comparison is $1,422,200,000 of imports and $714,550,000 of exports in 1877. It then pro- ceeds to show the changes in the aggregate money valuation of the same articles in each of the next five years, as com- pared with the immediately preceding year, which resulted from changes in price, and excluding the effect of changes in quantity. From the figures of the Economist it appears that there was in 1880 an increase of $105,450,000 ; but in each of the other four years a decrease as follows : Tears. Decrease of Prices 1878 $138,250,000 1879 113,300,000 Years Decrease of Prices. 1881 $48,800,000 1882 30,650,000 The comparisons of the Economist which cover articles dealt in by the British foreign trade, of the enormous value of $2,137,750,000 in 1877, are the best attainable evidence of the fluctuation of prices throughout the commercial world. The year 1877 was itself the fourth year of a period of falling prices which commenced in 1873, the date of the German de- monetization of silver. When the agitation for a single metallic standard was commenced by Chevalier and others in 1855-6, immediately after the great out-turn of gold by California and Australia, the sole ground upon which it was based was the danger, if the world continued to use both the metals as money, of a depreciation of the money standard and of a hurtful inflation of prices ; but now, in the presence of a large and continuing fall in prices, it has become apparent that the use of both the metals will be required, and may not even be adequate to prevent a monetary constriction, which will lower the value of all forms of property. The New York Public, although it ably and persistently advocates the discarding of the use of silver money, is forced to admit that gold is growing dearer and the gold price of GOLD AND 8ILVEK AS STANDARDS OF VALUE. 29 merchandise lower. I quote from its issue of March 23, 1883: " The year 1882 was one of remarkably general and important de- cline in prices, both in this country, in Great Britain, and on the Con- tinent. Generally speaking, the purchasing power ol gold was decid- edly increased during the year 1882 throughout the western world." The rise of prices, commencing in this country in 1879 and a little later in Europe, proved to be only a temporary reaction, such as will occur in any general course of the mar- kets, whether up or down. It was assisted undoubtedly by the resumption of silver coinage in this country, under the act of 1878, notwithstanding the hostile, halting, and partial administration of that law. The writer of the article in the London Times, already quoted from, endeavors to allay the fears of mankind, as to a further rise in gold, by making the following observations : " Mr. Goschen's calculations do not help us to forecast the purchasing power of gold. The drain of gold has been temporary. The supply goes on, and apart from the exceptional demand of the last ten years, it is in excess of the world's wants. How, then, will the case stand when the world at large has recouped itself for its late losses? The tendency of things seems to point to a lower value of gold, unless, indeed, some other nations are to be found to do what Germany, Italy, and the United States have been doing, and to absorb, or more than absorb, the whole future yield. If nothing of that kind happens, we may look for a return to higher money prices. It is more certain that the supply of gold will continue than that the demand will rise in proportion. Again, a rise in the value of gold serves as a stimulus to the production of gold. " It is quite impossible to mistake the animus of the organ of British opinion when it makes so many gratuitous assump- tions and overlooks so many obvious facts. There is no ground for the affirmation that the out-turn of the gold mines during the last decade would have been in " excess of the world's wants, " or, in other words, would have done anything more than keep prices steady, if silver had not been demone- tized in Germany and the United States. It is true that " a rise in the value of gold serves as a stimulus " to mining for it ; but it is also true that the pro- duction cannot be enlarged at will, as can be the production 30 GOLD AND SILVEE AS STANDARDS OP VALUE. of wheat or cotton, but is limited by such fortuitous circum- stances as the discovery of mines ; and, in point of fact, its actual production has been declining during the last ten years, while its value has been rising. That the fall in prices, during the last ten years, may be accounted for in part by the demonetization of silver does not admit of a doubt, but there are other conspicuous causes for the fall which have been generally overlooked by writers upon this subject. I refer to the large increase in the con- sumption of gold in the arts and manufactures and to the decrease in the production of the mines. Soetbeer, who has been the principal writer and statistician of the supporters of the gold monometallic policy of Germany, printed two exhaustive essays in 1881, the first upon the world's production of gold during the fifty years ending with 1880, and the second upon the consumption of that metal in the arts during the same time in Europe, America, and Australia, and exclusive of Asia and Africa. No living statistician enjoys a higher reputation for industry and care, and of course he cannot be suspected of a desire to underrate the annual supply of gold for monetary purposes, which is the excess of its production above its consumption in the arts. He gives the following table: Decade ending with |3 ; 1 Gold consumvtion in the arts in Eu- rope, America, and Australia, exclusive of old materials used.. 1840. . $134,915,830 364,206,280 1,341,182,290 1,252,789,850 1,131,830,830 1119,629,100 132,922,000 1850 1860 186,090,800 1870. ... 382,150,750 1880 556,092,070 During the decade ending with 1880 the average annual consumption of gold was $55,609,207, but inasmuch as there has been a constant and large increase of consumption, in GOLD AND SILVER AS STANDARDS OF VALUE. 31 recent years, the actual consumption must liave been much greater at the end than at the beginning of the decade. We may fairly estimate that $55,609,207 was the consumption of the middle year of the decade, and that the. increase during the eight years that have since elapsed has been $13,915,304. This is, of course, assuming that the annual increase of $1,739,413, which is shown by comparing the decade ending with 1880 with the decade ending with 1870, has continued through the past eight years. There are many facts going to show that the increase for the past eight years has been more rapid. If the figures of Soetbeer are correct, and they are gen- erally admitted by statisticians on this subject to closely approximate correctness, the annual consumption of gold in the arts in Europe, America, and Australia is at the rate of $69,524,511. In reaching these figures Soetbeer has made an allowance of from ten to twenty-five per cent, in the different countries, for gold obtained from old articles of ornamenta- tion, which have been rem.anufaotured. In no country has the effort ta ascertain the consumption of the precious metals in the arts, by government authority, been more thorough than in the United States. It was undertaken here for the first time by Mr. Burchard, Director of the United States Mint, and has been executed with creditable industry, care, and skill. In addition to obtaining from the assay offices the delivery of gold to jewelers, he has received replies to thousands of letters addressed to persons engaged in all the arts in which the precious metals are used. His conclusion, as given in the last annual report, is that the gross consumption of gold in the United States during the fiscal year ending June 30, 1882, exceeded $12,000,000. He says the statistics do not justify a larger deduction than ten per cent, for old jewelry and plate, in arriving at the net con- sumption of gold in the arts in that year, which therefore exceeded $10,800,000 of new gold. This is $1,827,765 more than the average annual net consumption of this country dur- 32 GOLD AND SILYEB AS STANDARDS OF VALUE. ing the decade ending witli 1880, as given in Soetbeer's tables. The Director of our Mint, in his annual report for Novem- ber, 1881, says : ," From a review of the information published in this and preceding reports and other authorities, I estimate that, including the annual consumption in the United States of $11,000,000 of gold and $6,000,000 of silver, the annual consumption of the world in ornamentation, manufactures, and the arts is at least $75,000,000 of gold and $35,000,000 of silver." To the consumption of gold in the arts in Europe, America, and Australia is to be added the steady importation of that metal by British India, where it is not used as money, but is worked into ornaments by the native artisans. It is so com- mon to speak of that country as an absorbent of silver, that we have overlooked the fact that it is also a large absorbent of gold. The official figures of its foreign trade show that, during the thirty years ending with 1880, the average annual excess of Indian imports of gold over exports was $16,018,- 330. The importation of gold by India continues unabated, and may be expected to increase with the rapidly advancing wealth of that country. But taking it at the average rate for thirty years, we have the following results : Annual gold consumption in Europe, Australia, and Amer- ica $69,524,511 In India 16,018,330 Total $85,542,841 The average annual gold production of the world, during the decade ending with 1880, was, according to Soetbeer's table, $113,183,083; but, as it was at a declining rate, it was less in 1880. Soetbeer estimated it for that year at $101,000,- 000, and Sir Hector Hay at $95,000,000. The estimates of Mr. Burchard, Director of the United States Mint, are higher, being, for three calendar years, as follows : 1879 $108,778,807 1880 106,436,786 1881 107,773,157 GOLD AND SILVER AS STANDARDS OF VALUE. 33 Wells, Fargo & Company estimate the production of the United States in 1882 at $2,768,682 less than Mr. Burchard. The New York Mining Eecord insists that the world's pro- duction of gold in 1882 did not exceed $90,000,000, the differ- ence between the Eecord and other authorities being most- marked in respect to the yield of the Russian mines. "With- out claiming exact correctness, the total gold yield of the world may be approximately stated at $100,000,000. Of this total production of gold, the arts and manufactures swallow up fully five-sixths, and this consumption, being almost wholly for objects of luxury and display, must increase in about the ratio in which wealth increases. The consumption of gold for other than monetary pur- poses in Europe, America, and Australia has more than quadrupled in thirty years, and has quite trebled in twenty years. It is more than five times what it was half a century ago. The great mass of gold which has flowed from the mines has been absorbed in the same opulence and luxury of the times which have swallowed up the flood of gems, great in volume beyond any former precedent, from the diamond fields of South Africa, and increasing prices will be quite as likely to whet the appetite for both as to check it. Five- sixths of the current production of gold is absorbed in the arts and manufactures in the western world and in British India. A part of the remaining sixth is lost in the wear of coins and by fires, shipwrecks, and forgotten hoards. What is left to increase the stock of gold money in proportion to the increase of population, exchanges, and wealth of the world? It is possible that the production of gold may in- crease. It is also possible that it may decrease, as it actually has been decreasing for many years ; but there is no uncer- tainty about the consumption of gold, which is sure to grow pari passu with the growing- opulence and luxury of the world. It has trebled within the past twenty years, and if it only doubles within the next twenty years it will exceed the production, even at the extreme rate which it attained when the California and Australia out-turn was at its highest point. 34 GOLD AND SILVEE AS STANDARDS OF VALUE. All the conditions have changed since the commencement of the agitation for a single metallic standard. There was then a greater production of gold and a very much less con- sumption for other than monetary purposes, ahd it is not strange that many persons honestly believed that the steadi- ness of prices could be best secured by confining the func- tions of money to gold alone. But it is difficult to under- stand how it can now be believed, under the complete change of circumstances, that a perseverance in that policy can have any other result than a prostration in the prices of every species of property and in the wages of labor, and the serious injury of all indebted persons, classes, and nations. Although the disasters which are sure to follow from this policy will fall most heavily upon the debtor classes, and creditors and money capitalists may derive a temporary advantage, they cannot in the end escape a participation in the evil results. In a general wreck all must suffer, although in different de- grees. The conditions, it must be admitted, are modified where creditors and debtors do not live in the same country. The London Economist, of April 21, 1883, closes its comments upon Mr. Goschen's address by saying : " There is some consolation to us in the fact to which he directs special attention : that any increase in the purchasing power of gold is a benefit to creditors. Nearly every nation on the face of the earth is indebted to us, and the result of an appreciation of gold is, that we ob- tain a larger quantity of their commodities in settlement of our claims." This view of the Economist is one of the explanations of the support given to gold monometallism by classes which are powerful and perhaps dominant in some other countries of western Europe besides Great Britain. It shows how idle the suggestion is, that we can force the English and similarly situated nations into bimetallism by again demonetizing sil- ver ourselves, and thereby precipitating a still further decline in prices. Such a decline is precisely the object which, as international creditors, they desire. We know by an experi- ence too fresh to be forgotten, that wHen the depression of GOLD AND aiLVEE AS STANDAEDS OF VALUE. 35 1878-9 -was at its worst, the adherence of the governing classes in England a^d Germany to a gold standard only be- came more determined and aggressive. It is not by co-operating with them, but by resisting and defeating their schemei of dislodging silver from its immemo- rial place as one of tjie money metals of the world that we shall compel them to abandon it. The present and pros- pective position of th^ United States is so strong, and silver is now the favorite currency of so large a part of mankind, that gold cannot be made the exclusive money of the world without our consent. In 1900, we shall have more population and more wealth than Qreat Britain and Germany combined. We have only to remain firm in our present position. Euro- peans are too dependent on foreign trade, and have too much fear of the United States, as a commercial rival, to persevere in a gold policy which would tend to isolate them if we re- fused to join them in it. We cannot bring upon them the coercive power of low prices without submitting ourselves to the same prices and to all the ruinous consequences which they entail. The succesf? of that species of coercion is, to say the least, too doubtful to justify the enormous sacrifices on our own part which a trial of it must involve. N. P. Hill. SHOULD SILVER BE DEMONETIZED ? From the North American Review, of November, 1885. Of the questions involved in the "battle of the standards," the one which overshadows all others is that of the volume of money. It is the controlling factor in determining prices and wages, and thereby the burden of taxes and the relations of debtors and creditors. The question of how large the volume of money shall be arouses the passions of men, because it affects the most important human interests. It determines the sides which men, classes, sections, and nations respectively take, regarding the use of gold alone, or both gold and silver, as the metallic standard of the commercial world. In his report upon the Mint, 1791, Alexander Hamilton summed up the whole matter by saying, that "to annul the use of either of the metals as money is to abridge the quan- tity of the circulating medium." To effect that abridgment was the avowed object of the persons who, under the lead of Chevalier, originated, thirty years ago, the plan of employing one and the same metal in all commercial countries. They at first proposed that this metal should be silver, and they actually persuaded some European countries to demonetize gold. They soon, however, changed their tactics, and proposed the- demonetization of silver as a more practical method of accomplishing the object of " abridging the quantity of the circulating medium." The motives of the men who have kept up the war upon silver down to the present time are the same as they were then, although not so openly avowed. Those who marshal, victual, and pay the forces by which this war is waged, for- mulate the battle-cries and direct the maneuvers, are the men SHOULD SILVER BE DEMONETIZED. 37 who live upon fixed incomes ; bankers, as a class, those who hold credits secured upon the property of others, and those who own the enormous and almost fabulous public debts, not less of all kinds than forty thousand millions of dollars. It is in the interest of these classes of men to have as few dol- lars as possible, that each dollar may have an augmented command over the necessaries, comforts, and luxuries of life, and they know that there is no more direct road to an ap- preciated money than to strike down the monetary use of one of the metals. It could be easily shown — if the brief space at my com- mand would admit — that there has been a continuous fall, since 1873, in the prices of all the principal commodities which enter into human consumption, excepting only the year 1880. The reaction which occurred in that year was more than balanced by the fall in the year 1884, which was larger than in any of the preceding years. The statistics of the value of the imports and exports of Great Britain, amounting to about $3,000,000,000 per annum, furnish data upon which safe esti- mates of the general range of prices can be made. From these data, it clearly appears that the purchasing power of money has steadily increased, and that it is now fully 25 per cent, greater than it was in 1860. Unless the settled judgment of mankind, that the price of commodities, labor, land, and all kinds of property depends upon the volume of money is a delusion, it must be obvious that the demonetization of silver and restrictions upon its coinage in important countries must have been one of the powerfully contributing causes of the fall of prices and de- pression of industries. Striking statements of the proportions and consequences of the fall of prices could be indefinitely multiplied ; I must restrict myself to two or three. In the British House of Commons, May 8, 1883, the condi- tion of India being under consideration, Mr. Cross said : " Debt is not so easy to pay as it formerly was. A pound of debt was discharged by the remittance of a sovereign's worth of produce ; 38 SHOULD SILVEB BE DEMONETIZED. but, unfortunately for the debtor nations of the world, a good deal more produce had to be remitted to discharge a pound of debt than when most of the debts of the world were contracted. This told heavily against India." Mr. Cross then read the following statement of the quan- tities of certain articles of Indian produce required to pay a pound sterling of debt in England, at the prices of 1883, as compared with the quantities which would have been required at the average prices of the preceding twenty-five years : ArticUs Of Indian produce. 111 Pounds. 44 224 185 288 20 4i Pounds 34 Wheat 168 Jute . . 123 193 Tea 13 3i Mr. Cross was justified in saying, as he did after reading this statement, that "the strain on gold might well make debtors tremble." In the letter of February 11, 1885, addressed to Mr. Cleve- land by ninety-five members of the last United States House of Representatives, it is said : " It can be shown that it will take more labor or more of the produce of labor to pay what remains of our national debt now than it would have taken to pay it all at the close of the war. Eighteen million bales of cotton were the equivalent in value of the entire interest-bearing debt in 1865, but it will take 35,000,000 bales at the price of cotton now to pay the remainder of the debt. Twenty-five million tons of bar-iron would have paid the whole debt in 1865. It will now take 35,000,000 tons to pay what remains after all that has been paid." The New York Tribune, of January 8, 1885, says : "About the 13th of December (1884), the market for products touched the lowest level of prices ever reached in this country since records of prices began. The range of prices is now below that of Oc- tober, 1878, then the lowest reached for many years. When the depre- ciation of paper currency vanished (October, 1878), it was found that SHOULD SILVEE BE DEMONETIZED. 39 prices were more than 15 per cent, below the specie level of 1860, the last preceding year in which prices had been made in gold." Silver dollars, if they were current in the market at only their bullion value, instead of their face value, would still have a purchasing power greater than any kind of dollars had in 1860. In view of the disasters to debtors, taxpayers, industries, and all kinds of property, excepting only money, which the war upon silver has already caiised, and the greater disasters which it threatens, and in view of the fact that an immense majority of the people of this country are debtors, taxpayers, or laboring men, how amazing does it seem that the adminis- tration of the national finances is now, and for many years has been, in the hands of men who are subservient to the in- terests of the few money-lenders, and antagonistic to the in- terests of the great mass of the people who are engaged in productive industry, and who are compelled to borrow money. So long as men are selfish, and these conditions exist, we may expect that every discrimination which human ingenuity can devise will be invoked to depreciate the value of silver, and to make the silver dollar unpopular with the people. It is true that a silver dollar measured by a gold standard does not contain a dollar's worth of bullion at the present market price. This may be an evil, but so long as there is no disturb- ance in the parity of the coins of the two metals, and no pos- sibility of such a disturbance for many years to come, it is an evil of trifling consequence compared with that which will result from the discontinuance of silver coinage. Complaint is made that silver is less convenient as to its portability than gold, but both metals, except subsidiary coin, are now chiefly used, and might be wholly used, not corpor- ally, but by representative paper. The storage of silver requires larger vaults than the stor- age of gold, but if all the advantages in respect to conven- ience which are claimed for gold are conceded, they wholly fail to justify the disuse of silver, if gold alone is inadequate 40 SHOULD SILVER BE DEMONETIZED. in amount to sustain prices at the level at which the vast debts of the world haA^e been contracted. We may apply in this case the language of Dr. Benjamin Franklin, in a reply which he made in England, in 1764, to the complaints of the British Board of Trade, that the American Colonies were supplementing coin with paper : "However fit a particular thing may be for a particular purpose, whenever that thing is not to be had, or not to be had in sufficient quantity, it becomes necessary to use something else, the fittest that can be got in lieu of it." The North American Review for June contained articles favoring a cessation of our present coinage, by Professor Sumner, President Walker, and Professor Laughlin. A reply to the arguments and statements of these three able writers, which rest to a degree on widely different grounds, would fill many pages of the Review. A brief allusion to them must suffice for the present. Professor Laughlin has been at the trouble of preparing a wood-cut, with the value of gold between 1870 and 1884 exhibited by a straight line as the standard of comparison, and with the value of silver relatively to gold during the same period exhibited by another line, which is of course very crooked and erratic ; but he must know that if he had represented the value of silver by a straight line, and made that the standard for comparison, and had represented the relative value of gold by another line, the latter would have been equally crooked and erratic. But what is more impor- tant, and what the Professor may have failed to remember, is that if the general range of the prices of commodities be represented by a straight line, the correspondence with it of a line representing the value of silver would be much closer than of a line representing the value of gold. Professor Sumner says that a fear that American money is to be depreciated by the continued coinage of silver is the reason "why so few are now willing to become creditors, and why industry and commerce are stagnant." With due deference to the opinions of so able a theorist as Professor iSumner, the least that can be said is that this SHOULD SILVER , BE DEMONETIZED. 41 statement shows a misconception of the situation as a matter of fact, and that it is erroneous as a matter of philosophy. Of the persons possessing moneyed capital, instead of there being only a few who wish to become creditors, or, in other words, wish to loan it, they nearly all want to loan it. It is for this reason that rates of interest at central points are now merely nominal. This unprofitable situation of loanable capital is as con- spicuous in Great Britain, where no silver coinage is either in progress or impending, as it is in New York or Boston. The cause of the almost universal desire in Europe and the United States to lend money, rather than to invest it in productive enterprises, or in purchases of any kind of prop- erty, is the common apprehension that money will appreciate in value, and that the position of a creditor with any tolerable security is more desirable than that of the holder of property. This is the true reason "why industry and commerce are stagnant," while interest-bearing deposits with bankers, trust companies, and savings-banks are multiplying. Nobody wishes to produce commodities, or to buy and hold them, while they are falling in price. A glut of loanable capital and low rates of interest are the inevitable and final accompaniments of a shrinking vol- ume of money, and the consequent decline in market values, rendering investments in property unprofitable and hazard- ous. The British historian, Allison, said that the contraction of currency which attended the resumption of specie payments by the Bank of England, in 1821, caused as much loss to money capitalists by lowering the rate of interest as to pro- ducers by lowering the price of commodities. Professor Walker favors the abrogation of the Silver- Coinage law of 1878 upon the sole ground that a bimetallic arrangement with European nations is the indispensable con- dition to the safe use of silver in this country. This is in plain contradiction of the experience of man- kind. From time immemorial both gold and silver have been 42 SHOULD SILVER BE DEMONETIZED. iTsed as money without bimetallic treaties. The relative value of gold and silver, disturbed for a time by the disproportion- ate yield of silver following the discovery of America, finally settled in 1650 to between 15 and 16 to 1, and so remained for 225 years, although the first case of an international arrangement, the Latin Union treaty, did not occur until 1865. That treaty was between four countries, all of which were already on the double standard, and all of which had the same ratio, viz. : 15^ to 1. It was made to secure a com- mon use of the metallic money of the four countries, and had no reference to the general question of the metallic standards. The world has had a long experience, independently of international treaties, of that steadiness of the relative value of the two metals which results from the magnitude of their mass, representing the accumulation of ages, which is so vastly in excess of their annual production. No cause of equal magnitude, tending to disturb the rela- tive value of the metals, as the transition of Germany from the single standard of silver to the single standard of gold, will probably recur for centuries. After that transition had spent its force we have the following record of the average gold price per ounce of the British standard silver during each of the past six years, in the London market, as given by the London Economist, February 21, 1885: Av. price in Years. pence, 1879 5114 1880 52 M 1881 5111-16 Ai\ price in Years. pence. 1882 51?^ 1883 50 9-16 1884 50 11-16 These fluctuations, in the opinion of Professor "Walker, are so intolerable, that in order to avoid them we must give up silver, unless there is a general coinage of it in Europe ; and in the same article he admits that the abandonment of silver will result in "the enhancement of the burden of all debts and fixed charges, acting as a steady drag upon produc- tion," and that "suffocation, strangulation, are words hardly SHOULD SILVEE BE DEMONETjCZED. 43 too strong to express the agony of the industrial body when embraced in the fatal coils of a contracting money." To such evils, by no means too vividly portrayed, may this country never be brought to submit, by false alarms, as to the danger of a single silver standard. That our present rate of coinage will ever result in such a standard is a remote and improbable contingency — even if it should occur, it would be a less misfortune than that of suf- fering our currency, by discarding silver, to be appreciated to any height to which selfish bankers and money capitalists in this country and in Europe may be able and disposed to carry gold. It is of infinite importance to maintain the steadiness of the value of our own currency, and of our own prices. In comparison with this it is of little importance what the rela- tion of value may be between our currency and that of foreign countries. N. P. HiLL. SILVER COIN AND SILVER CERTIFICATES. A speech delivered in the Senate of the United States, December 15, 1884, on the consideration by the Senate of the following resolution, submitted by Mr. Hill, December i, 1884 : Resolved^ That in the existing depressed condition of the industrial interests of the country, and in presence of the great fall which has taken place, and is still in progress, in the wages of labor and in the prices of the products of farms, workshops, mills, and mines, the recommendations of the President and of the Secretary of the Treasury that the coinage of silver dollars and the issue of silver certificates shall be immediately and unconditionally prohibited are calculated to create alarm, and thereby aggravate the difficulties of the situation ; and that, to the end that the public mind may be quieted by the assurance that if the total volume of the currency is not to be enlarged in correspondence with the increasing population and exchanges of the country, it shall at least not be reduced by suspending the coinage of silver dollars, the Senate declares its opinion to be that no valid reason exists at the present time for imposing any new and additional restrictions upon either the coinage of silver dollars or the issue of silver certificates. Me. President : The recommendations in respect to silver contained in the recent annual message of the President and recent annual report of the Secretary of the Treasury are such as to require some expression of opinion of this body. They are inopportune to an alarming degree when falling prices prove that money is deficient, rather than too abun- dant. They are singularly ill-timed in view of the monetary conference of the Latin Union to be held on the 15th of next month, which must be influenced unfavorably to silver if this country shall indicate a disposition to abandon its support and shall actually depreciate it by ceasing to coin it. Fur- thermore, these recommendations are extraordinary and ex- treme in their character in this, that they advise the summary prohibition not merely of the further coinage of silver dol- lars, but of the further issue of certificates for the 187,000,000 of those already coined. As the certificates are daily paid into the Treasury for taxes they will disappear altogether from the circulation if there are no new issues or reissues, and with the inevitable result of making the Treasury the SILVER COIN AND SILTEB CERTIFICATES. 45 owner of one hundred and forty-seven millions of the one hundred and eighty-seven million silver dollars now coined. In this statement I assume that the channels of circulation will absorb only about forty millions of silver in the metallic form. The consequence must be that there will be no gold in the ownership of the Treasury. It is impossible that the Secretary does not foresee this result, and no motive for his recommendation can be suggested except the belief that the accumulation of silver in the Treasury to the exclusion of gold would lay a foundation for a future demand that the sil- ver dollars already coined shall be demonetized, melted down, and withdrawn from use as money. It is plain that the real scope of the policy of the President and the Secretary of the Treasury is not merely to prevent a further issue of the silver-dollar money, but to insure the destruction of the amount now in existence, by depriving it of the facility of circulation which it acquires from the use of certificates and by forcing into the ownership of the Treasury the whole of it except the forty millions or thereabouts which will circu- late in the metallic form. In respect to the report of the Secretary of the Treasury it is keeping well within the bounds of a proper reserve in language to say that his several times repeated affirmations that the United States has outstanding "gold obligations" amount to an open defiance to the law-making power, to which he and all executive officers owe obedience. There never was a gold obligation authorized by law in this country, and no obligation was ever issued by it ex- pressed to be jjayable in gold. I am quite aware that during the discussions of 1876 and 1877 it was claimed that certain bonds expressed to be payable in coin were by the bond- holders understood and expected to be paid in gold ; but the law-making power in the act of February 28, 1878, directing the resumption of the coinage of the silver dollar, settled all doubts by declaring that such coin should be a "tender for all debts and dues, public and private," and in addition to that the great bulk of the bonds of the United States now in ex- 46 SILVER COIN AND SILVER CERTIFICATES. istence, that is, 1906,297,103 out of a total of $1,182,147,100, have been issued and bear date since the law of February, 1878. On this subject I prefer to give my views by quoting the language of an eminent citizen of New York who has filled the offices of Attorney-General of the United States and Minister to England, Hon. Edwards Pierrepont. In a letter to the New York Times, of April 18, 1884, Mr. Pierrepont says: There is not an outstanding bond, coupon, or greenback issued by the United States which may not be lawfully paid in silver. Not one of them on its face or back, or in. the statute authorizing the issue, or in declaration or resolution of Congress, has any proviso that they shall be paid in gold. And the act of February 28, 1878, directing the coinage of silver dollars, declares that such dollars "shall be a legal tender at their nominal value for all debts and dues, public and private, except where otherwise expressly stipulated in the contract." It is asserted in both the President's message and the Sec- retary's report that one of the consequences of the payment by the Government of all its debts in silver would be the im- pairment of the national credit, although no explanation is given how a refusal to pay gold can injure the character of a country which has never promised to pay gold, and which has a law on its statute-books admonishing everybody who deals with it that the standard silver dollar is, and shall be, a tender for everything which it owes, unless it is "otherwise expressly stipulated in the contract." To-day and always since the resumption of the silver dol- lar coinage the Government has paid more or less silver dol- lars or silver certificates to its creditors of every description, including the holders of its bonds, and all the while its credit has been growing stronger instead of weaker. It is only in its clearing-house transactions with certain banks, notably the banks of the city of New York, that it pays nothing but gold or greenbacks as a matter of special favoritism. This is not in conformity with the spirit of the act of Congress passed in July, 1882, forbidding national banks being mem- bers of any clearing-house having a rxde excluding silver and SILVER COIN AND SILVEB CEETIFICATES. 47 silver certificates from use in paying clearing-house balances. The New York clearing-house had adopted such a rule in 1878, but abrogated it when the act of 1882 was passed. The abrogation was merely nominal, as there was substituted for it a tacit understanding that neither the United States assist- ant treasurer nor any other member should offer silver or silver certificates in payment of balances. Upon that under- standing the United States assistant treasurer has acted to this day with the knowledge of the late and the present Secre- tary of the Treasury. This is a practical nullification of a law of Congress and is the sole cause of there being any sil- ver dollars held and owned by the Treasury. If the law of 1882 had been carried out, or if Congress can by new legisla- tion compel the present Administration to carry it out, or if the incoming Administration shall voluntarily carry it out, every silver dollar now coined, or which can be coined for years to come under the act of 1878, will go into active circu- lation, in the certificate form, and thereby uphold prices and revive languishing industries. • The practice at the New York clearing-house is described in the following extract from the late report of the Treasurer of the United States : As a consequence of the inability ot the Treasury under the exist- ing practice to use either the silver dollars or the silver certificates in its settlements v^ith the New York clearing-house, where by far the greater part of its disbursements is made, the available gold ran down from $155,429,600 on January 1, 1884, to §116,479,979 on August 12, 1884, while the silver dollars and bullion on hand, not represented by silver certificates outstanding, increased during the same period from $27,266,- 037 to $48,603,958. As a temporary expedient to stop this drain of gold from the Treas- ury the assistant treasurer at New York was directed to use in pay- ments to the clearing-house United States notes to the extent of one-half of the payments. But the amount of these notes in the Treasury, which at the time of the commencement of this mode of payment had accumulated beyond its needs, has now become so much reduced that they are no longer available for such payments to any considerable extent. All debts due from the Government, which, when owned by the New York clearing-house banks and presented for ad- 48 SILVER COIN AND SILVEB CEETIFICATES. justment at the clearing-house, are paid by the assistant treasurer in gold or greenbacks, and never in any part in silver or silver certificates, are precisely the same kind of debts which, if presented at the Treasury at "Washington, or at any place where there is no clearing-house, are paid more or less, and sometimes wholly, in silver or silver certificates. A draft for the salary of a justice of the Supreme Court, or a coupon of a Government bond, if presented at the Treasury in Washington, is paid wholly or partly in silver or silver cer- tificates ; but if the same draft or coupon is transferred to a New York bank it is paid wholly in gold or greenbacks. In other words, it is not the character of the debt which deter- mines under this practice in what medium it shall be paid, but it is the character of the party to whom the debt is trans- ferred and by whom it is owned and presented. This prac- tice is based upon the strange theory that the bankers of New York are entitled to the special prerogative of refusing any kind of lawful money to which they happen to have a dislike, and that to pay them in silver will ruin the public credit, while at the same time that credit receives no injury if the same silver is paid to other people upon identically the same claims against the Government. There is not in either the President's message or in the report of the Secretary of the Treasury a single valid reason given for the discontinuance of the silver coinage or the issue of silver certificates. It is true that $40,000,000 out of the $187,000,000 already coined are now held and owned by the Treasury, but it is equally true that $138,000,000 in gold are held and owned in the Treasury, or three and one-half times as much as of silver dollars. No reason is given or can be given why the Treasury ownership of silver is more injurious to the public interests than its ownership of gold. It being the opinion of the Treasury ofiicials that a certain amount of coin must be kept to protect the redemption of the green- backs, it is plain that to give up the present ownership of forty millions of silver dollars would compel the locking up of forty millions more of gold. That there are now any sil- SILVER COIN AND SILVER CERTIFICATES. 49 ver dollars in the Treasury is caused solely, and, as I believe, intentionally, by the refusal of the Administration to execute the act of 1882, according to its plain intent, by paying out silver and silver certificates at the New York clearing-house. Both the President and Secretary predict that the con- tinued coinage of silver dollars under the act of 1878 will at no distant day drive out all the gold which is now in circula- tion, but they do not affect to give any reasons for such an apprehension, and I shall endeavor to show before I close my remarks that there is no foundation for it whatever. This great question of preserving the ancient and consti- tutional standard of money in this country, gold and ■ silver, upon which depends the value of every species of property and the relative position of debtors and creditors of every class, is to be settled by the logic of facts and figures, and not by unsupported assertions and predictions, no matter from how high a source they may come. I hope to convince the Senatfe that the measures proposed by the President and Secretary are so alarming and danger- ous in their character that this body should adopt such de- claratory resolutions upon the subject as will put the public mind at rest by assuring the country that there is no danger that these measures will receive the sanction of Congress. If a further depreciation of the value of silver bullion, which would result from the stoppage of the coinage of silver dollars, affected only the interests of persons engaged in min- ing for silver, or in extracting it from the ores, it would be a question of local consequence and of no national importance ; but it is inevitable that any action on the part of the United States which would produce a further disparity between the price of gold and silver bullion would be a blow at the very foundation of bimetallism. It is not only good policy on the part of the United States to retain the use of both gold and silver as money metals, but it is one of the highest duties which rests upon our Gov- ernment to so legislate as eventually to bring about and pre- 50 SILVER COIN AND 8ILVEE CEKTIFICATES. serve a parity in the bullion value of tlie coins of the two metals. The consumption of gold in the arts and for the purposes of luxury and display will divert more and more of that metal, and is at this time diverting its entire annual produc- tion from monetary use. This is a fact which receives in the discussion of the policy of coining silver much less consider- ation than it is entitled to. Furthermore, the rapidity with which the consumption of gold for other purposes than money has been enlarged in modern times is not generally known. No full and detailed exhibition of it was made till 1881, when Soetbeer published exhaustive presentations of the world's production of gold and of its consumption in the arts, outside of Africa and Asia, during the fifty years ending 1880. No European statistician enjoys a higher reputation, and as he was the most conspicuous leader of German silver demonetization he will not be suspected of a purpose to rep- resent the situation as more unfavorable than it really is, to the theory that gold alone can suffice for the monetary wants of mankind. The statistics which he collected show that the average annual gold production of the world was $134,000,000 for the decade ending with 1860, and $113,000,000 for the decade ending with 1880. It fell to $101,000,000 in the year 1880. Mr. Burchard, the Director of the Mint, gives as the gold production of the world for the calendar years — 1881 $103,023,078 1882 98,699,588 1883 94,027,901 Soetbeer has furnished extensive tables showing the con- sumption of gold in the arts. He shows that outside of Asia and Africa the consumption rose from $18,000,000 as the an- nual average of the decade ending with 1860 to $55,000,000 as the annual average for the decade ending with 1880. In the last annual report of the Director of the Mint he estimates the consumption of gold in the arts in four coun- SILVEE COIN AND SILVEE CEETIFICATES. 51 tries, namely, United States, Great Britain, France, and Brit- ish India, at $53,000,000. It is safely deducible from the figures given by Soetbeer and the Director of the Mint that the annual gold consump- tion of the world, inclusive of British India, does not fall short of the production for the past year, namely, $94,000,000; The consumption of gold in the arts and for luxurious display, according to the figures of Soetbeer, is three times what it was twenty years ago, more than four times what it was thirty years ago, and nearly five times what it was forty years ago. If the figures of the consumption in 1823, made by Chabral and adopted by Humboldt, are correct, it is to- day between eleven and twelve times greater than it was siKty years ago. Senator Hunter, of Virginia, said correctly in his report on the coinage in 1852, that "the demand for gold and silver in the arts will be very nearly in proportion to the wealth of society." Who will undertake to set bounds to the future increase of this demand, when it is recollected that opulence, as a consequence of inventions and discoveries which give to man a constantly enlarging command over the forces of nature, is increasing by strides without example in the history of the human race? Inasmuch as it is not within the limits of reasonable an- ticipation that the future yield of the mines can keep pace with the increase of the consumption, it is inevitable that the future demand for the arts will make a disastrous draft upon the gold now in monetary use. An increase of the production of gold is of course possi- ble, but there are no present indications of it, and thfere is no certainty that it will ever occur. Its decrease is equally pos- sible and more probable. It has decreased largely, taking the whole period together, since 1856, and during no part of that period has it increased. Its consumption in the arts has fully overtaken the production, and there is nothing in the past history of the metal to induce us to hope that the future production can possibly keep up with such an increase of the consumption as is now plainly inevitable. There is, in short. 52 SILVER COIN AND SILVER CEETIFICATES. as clear a certainty as is ever attainable in conducting human afPairs by a forecast of the future that while increasing popu- lation and exchanges will be constantly requiring more metal- lic money, mankind are doomed to have constantly less of it if silver is stricken down from its immemorial position as one of the moneys of the world. In addition to the certainty that the money of the world will be subjected to the drain of an increased consumption of gold, there is an imminent danger, if the policy of depreci- ating and thereby discrediting silver is persisted in, that it will be subjected to another drain of vast and unknown di- mensions from the diversion of Asiatic hoardings from silver to gold. The London Times, of May 7, 1883, in the course of an article upon the rise, which it admits to have taken place, in the value of gold, says : The adoption of a gold standard for India, or, still more, the choice of gold instead of silver for hoarding purposes in the East, would so change all the conditions of the problem as to upset all calculations. It must be true from the nature of the case that the fur- ther divergence between the values of gold and silver bullion will tend to diminish the confidence of the people of Asiatic countries in silver, or, what is the same thing, to inspire them with a greater confidence in gold as the repository of wealth laid up for the future. The Times is right in speaking of the possible change of Eastern hoardings from silver to gold as of more consequence as affecting the relations of the two metals than the introduction of gold coinage into India. This view illustrates the enormous risk of any such ex- periment on our part, hopeful in no aspect, as the closing of our mints to silver, upon the theory that we can bear the consequences better and longer than England and Germany, and thereby force them into a bimetallic treaty. England has the power, and will certainly exercise it, to close the In- dia mints against silver when we close ours; but, aside from that calamity, the closing of our mints to silver would result in such a depression of the price of that metal that Eastern SILVEE COIN AND SILVER CERTIFICATES. 53 nations would lose confidence in it and devote their hoardings to the other metal. With silver discredited and gold drained away to Asia to disappear forever among its hundreds of millions of people, as silver has disappeared for more than two thousand years, Europe will have nothing before it but an era of paper money, and America, by destroying the East- ern market for silver, will have thrown away in a mad experi- ment the everlasting resource of wealth which it possessed in the silver mines found everywhere in the great mountain range which stretches unbroken from Patagonia to Alaska. All the conditions have changed since the beginning of the agitation for a single metallic standard. There was then a greater production of gold and a much less consumption in the arts. To now contract the volume of money by one-half (which is the ultimate object of most of the persons who urge the stoppage of our silver coinage, and which would probably be the ultimate effect) by the method of demonetizing one of the metals which has heretofore constituted its mass, is wholly indefensible. It must be some great object which induces those who originated such a policy to persist in it after the course of events has so clearly demonstrated the injury and injustice which it must inflict upon the world. Certain classes, having the whole world as tributaries, by a system of national debts which has in itself reached fabu- lous proportions, and which is re-enforced by a vast amount of other public as well as corporate and individual indebted- ness, seek to increase the tribute in the form of interest which they are enjoying by the noiseless and insidious process of increasing the value of the money in which it is paid. ' Gold monometallism, which increases the value of credits and in a corresponding degree the burden of debts, is natu- rally a favorite policy in England, for the double reason that the creditor classes, by whom it is dominated, are enriched by that policy, as against the debtor industrial and tax-paying classes at home, and that the English people, as a whole are. 54 SILVER COIN AND SILVER CERTIFICATES. enriched by it as against the rest of the world, which is in- volved in an enormous indebtedness to them. The London Economist, of April 21, 1883, closed its com- ments upon an address in which Mr. Goschen had pointed out the recent rise in gold and fall in general prices, by say- ing: There is some consolation to us in the fact to which he directs special attention, that any increase in the purchasing power of gold is a benefit to creditors. Nearly every nation on the face of the globe is in- debted to us, and the result of an appreciation of gold is that we obtain a larger quantity of their commodities in settlement of our claims. H. H. Gibbs, an ex-governor of the Bank of England, says in an article in the British National Review for July, 1883, that the following ideas, being precisely those of the Econo- mist, are constantly pressed upon the English public : England is a creditor nation. The scarcity of gold has made that metal more valuable, and she must needs be the gainer by this, and must continue to be still more the gainer if gold becomes scarcer still. Is it to be expected that she should throw away this advantage? The same reasons which make gold monometallism a favorite policy in England make it a favorite policy in every country and in every section of all countries in which the creditor classes are dominant. Quite as naturally it is not a favorite policy in countries and sections of countries which are heavily loaded with public, corporate, and private debts. It was not a fortuitous circumstance that when the silver coinage law was passed in the Senate over the President's veto by a vote of 46 to 19, 13 of the 19 votes were given by Senators from New England, New York, and New Jersey. These States have sixteen Senators, and the three not voting were paired so as to neutralize the vote of six Senators who were friendly to the law, so that the entire Senatorial repre- sentation of the eight Northeastern States, without regard to party lines (five of the sixteen being Democrats and eleven Eepublicans) supported the veto in one solid and unbroken column, either by voting or pairing. We must be prepared to expect that the ramified pecun- iary interests engaged in this scheme, stimulated as they are SILVEB COIN AND SILYEB OEKTIFICATES. 55 to the intensest efforts by the vastness of the profits which success in it will bring to them, controlling the policy of gov- ernments in some important countries, and having numerous allies and adherents in every country in Europe and in this country, will maintain the struggle to the last moment. It is in the great power of the gold propagandists and in their persistency, arising from the vast interests at stake, that the difficulties of the question of the monetary standard lie. No careful student of the subject can fail to arrive at the conclusion that the abandonment of the use of silver as a money metal must lead to one of the following results: either the world must suffer an enormous contraction of the volume of money and a corresponding fall in prices, or it must resort to the use of irredeemable paper money. It is a most extraordinary delusion to suppose that by closing our mints to silver, and by thus bringing on a great fall in the price of this metal, we can compel the countries of Europe to enter into a bim.etallic treaty and resume its coinage. Such an expectation is based upon two proposi- tions: First, that the financial distress which our stoppage of the coinage of silver and the consequent fall in prices of all commodities will bring upon Europe will compel its ruling classes to return to bimetallism. Second, that it will so dis- arrange the Indian exchanges as to force England into bi- metallism. I may be pardoned in answering the first proposition by repeating a few words that I have before uttered on this floor: It is said sometimes that it the United States shall go to a gold standard by arresting the coinage of silver it will bring on such a con- traction of money, fall in prices, and depression in trade and industries that Europe will be forced to restore bimetallism ; while this country, from its greater natural resources, can better bear the strain and can afford to wait until commercial distress causes a change of policy on the other side of the Atlantic. But are we sure, or is there really any reason to believe, that any degree of enhancement of the value of money, or fall in prices, and of that commercial and industrial distress which is inseparable from a fall in prices, would have any other effect 56 SILTEE COIN AND SILTEB CEETIFICATES. than to induce the interests which are now actually dominant in both England and Germany to cling to the gold policy with a more relent- less perseverance ? Did we find that the industrial distress in Europe from 1873 to 1879, unparalleled as it was in degree and duration, served in any manner to persuade those interests to relax that contraction of money which was not only the real but the avowed object of their gold policy ? How was it in the United States in 1878, when bankruptcies were multiplied on every side ; when an enormous proportion of the property of the country was being foreclosed and auctioned off at sheriff's sale ; and when the violence of starving and desperate tramps was restrained only by displays of the military force of the nation ? Did the interests in this country to be benefited by a gold standard then relax in the slightest degree the tenacity and aggressive vigor with which they in- sisted upon it ? Are the bankers of London and Frankfort so sensitive to tender and humane impulses, and so accustomed to prefer the good of others to their own, that they will forthwith abandon a policy, how- ever much it may enrich themselves, as soon as they are satisfied by a trial of it that it is injurious to the community around them ? The monometallists of England and Germany manifestly have no apprehension of being driven into silver coinage by our abandonment of it. The fall in prices and the increased value of money which would result from the closure of our mints to silver are precisely what they desire. And after the trial they have had of their own power during the unprecedented commercial and industrial distress which followed the German silver demonetization they have no occasion to distrust their ability to compel submission among their own people to any de- gree of financial misery which may come from the practical adhesion of the United States to the policy of discarding silver as money. As to the effect that such a step on our part would have upon the Indian exchanges it can not be denied that we should depress the value of silver bullion by throwing our whole product upon the world's market ; but we can not de- press the value of the Indian rupee. England can prevent that by closing the Indian mints. The London Economist, of June 24, 1882, says on this point : We admit that if the government, while other countries were slaughtering their silver wholesale, were to permit the unlimited coin- age of the rupees the depreciation would take place, but what is to prevent the coinage of rupees under such exceptional circumstances SILVER COIN AND 8ILTEE CEETIFICATES. 57 being stopped ? This would tend further to depreciate, silver but to steady the rupee. A well-informed Euroj^ean observer (Professor Lexis) says, in a paper translated from the Gernlan and printed in the New York Banker's Magazine, of December 1, 1882 : In my opinion the expectation would prove itself unfounded that England might be put at a disadvantage and forced into the bimetallic league by the cessation of American coinage. This measure would probably have the result of stopping the coinage in India. The practicability of keeping a steady ratio of exchange between the English gold sovereign and the Indian silver rupee by limiting the coinage of the latter is shown by the fact that the silver florins of the Dutch East Indies, esti- mated at 220,000,000, which is equal to $88,000,000, are by the same method of limiting their coinage, as prescribed by a Dutch law passed in 1877, kept at a parity with the florins of gold and silver circulating in Holland. The policy pursued by the United States in coining silver under the act of 1878 has checked, if it has not completely arrested, what seemed at one time a general movement throughout the world toward silver demonetization, notwith- standing the fact that the moral effect upon the world of the act of 1878 had been greatly weakened by the persistent efforts for its repeal, and by mistaken anticipations abroad that its repeal was probable. The coinage of silver by the United States has sustained its price at a nearly uniform rate, notwithstanding the great and unprecedented falling off, owing to causes believed to be temporary, of the demand for silver in China. Further, if the Secretary of the Treasury had exercised the discretion given to him by the act of 1878, upon legitimate considerations, and with a proper regard to the large domestic industry of silver mining, and to the im- portance of preserving bimetallism, as well as to the moment- ous interests involved in maintaining prices and saving the debtor classes from ruin, and had coined $3,000,000 instead of $2,000,000 per month, the whole of our silver production which is available for coinage would have been kept out of 58 SILVER COIN AND SILVER CEHTIFICATES. the markets of the world, and the old relation of market value between gold and silver bullion would, in all proba- bility, have been restored. But in spite of all adverse cir- cumstances it is undeniable that since we reversed our action of 1873, by passing the law of 1878 to resume the silver- dollar coinage, no single step in the direction of the demone- tization of silver has been taken in any part of Europe. Our- silver legislation of 1878 would undoubtedly have produced by this time much greater effects abroad, and in all probability would have already resulted in an extensive international accord upon the coinage ratio of the two metals if the confidence of Europe in the steadiness of our policy had not been weakened by circumstances which are too well known and which have been most unfortunate in their conse- quences. From all the information within my reach I be- lieve that the question of the monetary standards would have been satisfactorily settled before this- time if doubts of the finality of the decision reached in 1878 by the American Congress, by extraordinary majorities and after the most thorough discussion, had not been inspired abroad by the persistent clamors of the newspapers of our Atlantic cities, which are the only ones read and quoted in Europe, and by the reiterated recommendations for the stoppage of the silver coinage which have been made by both Presidents and Secre- taries of the Treasury. In all European countries in which parliaments exist the opinions of cabinets not only follow but foreshadow legisla- tion, because cabinets resign when they can not command legislative majorities. It is natural, therefore, that Europeans should attach to the recommendations of our executive offi- cials a degree of importance as affecting and indicating legislation which they do not possess under our system of government. However it may have been brought about, it is certain that an expectation has thus far prevailed in Europe that our silver coinage will be abandoned and that the influence of this country in favor of silver has been thereby for the time being SILVER COIN AND SILVER CEBTIFICATES. 59 nullified. After the lapse of some period, longer or shorter, the policy of this country, if it is persevered in, will come to be regarded abroad as one of the fixed facts of the situation, and it will then have the influence upon the actions of other countries which it ought to have. I have briefly referred to some of the advantages which have accrued from the coinage of silver under the act of 1878. Now let us examine some of the objections which have been urged by the opponents of silver coinage to the continuance of this policy. Much has been said about the accumulation of silver in the Treasury, which is denounced as an idle and costly waste in the loss of interest and otherwise. At the close of last month the total amount of silver dollars and silver bullion in the United States Treasury was $149,745,075. There were outstanding silver certificates to the amount of $104,988,531, so that the Government ownership of silver dollars and of silver bullion amounted to only $44,536,392. At the same time the Treasury held in gold coin and bull- ion the sum of $231,389,361, and the gold certificates out- standing were $93,374,290, making the actual Government ownership of gold coin and bullion $138,015,071. Thus after nearly seven years' experience under the silver-coinage act of 1878 it appears that of the total coinage of 187,180,829 silver dollars 147,424,285 were in active circu- lation in either the metallic or certificate form. The predic- tion that they would be a dead weight which must be carried by the Treasury and would exclude gold from it has been completely falsified. Of the metallic full-tender money be- longing to the Treasury more than three-fourths is gold. So long as the country believes it to be wise policy to hold a metallic reserve for the redemption of the greenback there must be coin of some kind accumulated and held unused in the Treasury, and how can it be said to be more idle or costly to pile up silver for that purpose than it is to pile up gold? The more silver dollars are owned by the Treasury, 60 SILVER COIN AND SILVEE CERTIFICATES. the more gold dollars can be spared from it and set free to sustain the trade and business of the country. The objection that the Treasury has not vault room for the accumulation of silver dollars, if we continue to coin them and to receive them on deposit, is too frivolous for considera- tion. The bank of France held on November 13, 1884, 1,028,- 288,051 francs in silver money, equal to $200,000,000, which is largely in excess of the amount in all the Treasury vaults and mints of the United States, including standard dollars, fractional coin, and bullion. In receiving silver on deposit and issuing certificates for it, the Treasury realizes from the loss and destruction of cer- tifica;tes a direct profit which exceeds many times over the cost of providing storage room. But the cost of the storage room for either of the metals, even if there were no direct compensation for it, is a wholly unimportant consideration in comparison with the vital and overshadowing interests in- volved in maintaining a proper volume of the monetary cur- rency, which determines the price of property, the wages of labor, the burdens of the tax-payer, the relations of creditor and debtor, and the prosperity or depression of industries. It is trifling with a question transcending nearly all others in its importance to complain of an expenditure of $200,000 on vaults for the custody of silver by a Government which has spent eight millions on a post-office in New York and four millions on a post-office in Boston ( a large part of it in archi- tectural and artistic displays), which is spending millions annually upon public buildings in every part of the country and for all sorts of purposes and with very little attention to economy in their construction, and which never lacks either money or disposition to use it, in constructing in "Washing- ton monuments, museums, and hot-houses for the supply of bouquets to members of Congress and other officials. Another objection to silver coinage, and a much more im- portant one, is based upon the apprehension that its continu- ance will cause a depreciation of the silver dollar, relatively to the gold dollar, a necessary result of which would be the SILVER COIN AND SILVER CERTIFICATES. 61 expulsion of gold from circulation and its exportation from the country. In a speech which I had the honor to deliver in this Chamber about two and a half years ago I presented some- what at length the most important facts bearing upon this subject. I do not desire to traverse the same ground again, but a very brief reference to the views then presented may not be out of place at this time. We had then coined 105,000,000 of full legal-tender silver dollars. There was no disparity of value between our silver and gold coins, and I think it was clearly shown that no dis- parity could occur until we should coin enough silver dollars to supply the total metallic money required by the country; that there can not be a discount on silver coins without such a premium on gold coins as will expel them from circulation ; and that such an expulsion is impossible until the silver" coined exceeds the amount below which our metallic circula- tion can not be reduced. In other words, that so long as specie payments are maintained, silver dollars can not be- come the sole coined money of this country, until they are struck at the mints in such numbers as to exceed the smallest figure to which the whole metallic currency of the country can fall. The total metallic full-tender money of this country on the 1st day of last October, as stated by the Director of the Mint, was— gold, $610,535,028, and silver, $187,315,233; total, $797,850,261, including both gold and silver bullion in the mints for coinage. There is no reason for believing that this amount is more than our fair distributive share of the metal- lic money of the world, or that it is more than enough to maintain the equilibrium of prices in this country with the general range of prices in foreign countries. At the present rate of silver coinage, we will not reach this amount in twenty years. Our coined silver, under the act of 1878, has now reached $187,180,829, and notwithstanding it has been confidently as- serted that the coinage of silver could not be pushed at the 62 SILVER COIN AND SILVEE CERTIFICATES. furthest beyond $100,000,000 without depreciation, there is not a symptom of lessening value or acceptability. When the issue of gold certificates was resumed in Octo- ber, 1882, it was predicted by the New York press that they would soon expel the silver certificates from use. This was also the unhesitating conviction of the late Mr. Folger, the Secretary of the Treasury, who said, in his annual report of December, 1882 : The amount of silver certificates outstanding November 1, 1881, was about $66,000,000, and the amount outstanding November 1, 1882, was about $65,500,000. Inasmuch as by recent legislation the Secretary is required to issue gold certificates, it is to be looked for that the place of the silver certificates will be, to a great extent, supplied by gold cer- tificates, as the latter are furnished in convenient denominations, and it is just to suppose that a certificate payable in a coin worth but 88 per cent, of its nominal value will be displaced by one worth fully its nomi- nal value. But the fact is that since this prediction of the Secretary of the Treasury was made there have been constantly calls upon the Treasury for silver certificates in exchange for gold, dollar for dollar and cent for cent, and instead of the dis- placement of the silver certificates in circulation by the gold certificates, they have increased from $65,000,000 in Novem- ber, 1882, to $74,000,000 in August, 1883, to $88,000,000 on the 5th of December, 1883, to $96,000,000 on the 29th of De- cember, 1883, and to $105,000,000 at the end of last month. Heretofore in discussing this question I have considered it sufficient to show that with a coinage of silver dollars limited to 28,000,000 per annum they could not depreciate relatively to gold dollars for many years to come. I will now submit to the Senate reasons for believing that, at the same rate of coinage, they will never depreciate. The distinguishing financial circumstance in the case of the United States is the enormous excess of the growth of its population, wealth, and exchanges over the growth of other countries, and of Europe in particular. It may be stated, as areasonable expectation, that at the end of this century, now only sixteen years distant, our population will equal the com- SILTEB COIN AND SILVEE CERTIFICATES. 63 bined numbers of the German Empire and of the United Kingdom of Great Britain and Ireland. Our fractional share of the aggregate metallic money of the commercial world must, therefore, steadily and largely increase. This much is certain. The absolute amount of our money must also largely in- crease if there is an expansion of the metallic and paper money of the commercial world corresponding with the gen- eral increase of population and trade such as will maintain existing prices. In modem times the increase of wealth is more rapid than that of population. The least measure of the increase of money necessary to save prices from falling, which is pro- posed by any financial authority, is an increase proportioned to that of population, which would be for this country three per cent, per annum. If we compute the total volume of our money, gold, silver, and paper, at fifteen hundred millions, and most authorities make it more while none make it less, it requires now forty-five millions a year and will require more as the total volume becomes greater. The actual expansion of the currency since the resumption of specie payments in 1879 has been at a rate considerably larger than this, and the evidence is conclusive from the condition of our foreign trade, of which the balance is favorable, that our prices are not too high relatively to prices abroad, or, in other words, that our money is not in excess of our proper distributive share. If the United States was an absolutely stationary country, it would be true that an annual coinage of 28,000,000 silver dollars would finally drive out some other kinds of money, but $28,000,000 is much less than the annual increase of our total money during the past five years. It is clearly less than the increase necessary to keep up our prices. It is less than the increase which we shall probably be able to obtain, and it is also less than the increase which it ought to be our policy to obtain. There is therefore no reason to suppose that an annual coinage of 28,000,000 silver dollars will ever of itself. 64 SILVER COIN AND SILVER CERTIFICATES. and without an increase of our paper money, expel any of our gold money or even prevent some degree of its enlargement. It is often said tliat in dealing with European nations we must liquidate in gold the balances of trade when they are against us, because silver has no rights of coinage, and is therefore not a money metal in Europe ; and that, on the other hand, when the balances of trade are in our favor we will be paid in silver. Paying Europe in gold but being paid by Europe in silver would sooner or later transfer our gold to the other side of the Atlantic. But in truth Europeans can no more pay us in silver than we can pay them in that metal. They could pay us in our silver dollars if they possessed any, but they have none, and they can not get any except at the price of gold dollars. Their own silver coins can not be dis- posed of in this country at a better rate than 80 per cent, of their value at home. As to silver bullion it is as commer- cially impossible that it should be sent here from Europe as that coals should be sent to Newcastle. We are the chief silver-mining nation in the world, and our total home demand for silver in the arts and at the mints (with our annual coinage of $28,000,000) is less by about ten millions annually than the home production. The excess, whatever it is, must be sold abroad, and must always be, as it is now, put at a price which will force its sale in foreign mar- kets. During the three fiscal years ending June 30, 1884, the excess of our exports of silver over imports was $29,584,783, or at the rate of about $10,000,000 annually. The flow of silver from the United States to the London market will con- tinue constant until all the facts of the situation are changed. It is as idle to apprehend an import of silver coin or bullion from Europe as to apprehend an import from the same quar- ter of timber, wheat, petroleum, naval stores, or cotton. No silver from Europe will ever be "dumped" upon this country until commodities move from dearer to cheaper markets. The necessary effect of the whole situation is what we know as a fact of observation, that the money balances due to us from Europe are received always in gold, and in nothing SILTEB COIN AND SILYEK CEBTIFICATES. 65 else. The other kinds of money which we use, namely, silver dollars, greenbacks, and national-bank notes, would be ac- cepted by us with equal readiness, but foreigners possess neither, and can not obtain either at less than their face value in gold. Our position is precisely like that of France, in which silver francs are, at home, of the same value as gold francs, but are worth only four-fifths as much anywhere out- side of the Latin Union. When the state of the exchanges requires the transmission of money from Paris to London, or to New York, it is only gold which can be sent, because it is only gold which will be accepted. But it is equally true that when London and New York send money to Paris it can only be gold, because they have no French silver francs. France is not drained of its gold, because the balance of its foreign trade is, at least, as often favorable as it is un- favorable. Nor does a temporary outflow of gold depreciate silver in France or impair the confidence of the French in silver. That was shown three years ago when the outflow of gold was on a very large scale. They know that the outflow must go to the length of exhausting, substantially, all their gold before a disparity between their gold and silver coins will arise, and of such an outflow they neither have nor need to have any apprehension. The experience of the Dutch has been precisely the same. The official figures of the movement of precious metals in our foreign trade since the silver-coinage law of 1878 went into operation show conclusively that there is no foundation for the theory that the coinage of silver must necessarily ex- pel our gold. Taking first the case of silver, it appears that there was a continuous net export (that is, an excess of exports over im- ports), including coin and bullion, during the six fiscal years ending June 30, 1884, as follows : , Year ending June 30~ Export of silver. Import of Net export of silver. silver. 1879 1880 1881 1882 1883 1884 $20,409,827 13,503,894 16,841,715 16,829,599 20,219,445 26,051,426 $14,671,052 12,295,914 10,544,238 8,095,336 10,755,242 14,594,945 $5,738,775 1,227,980 6,297,477 8,734,263 9,464,203 11,456,481 66 SILVER COIN AND SILVER CERTIFICATES. Taking next the case of gold (coin and bullion together) there was a continuous net import during the five fiscal years ending June 30, 1883, as follows : 1879 $1,037,334 1880 77,119,371 1881 97,466,127 1882 1,789,174 1883 6,133,261 The fiscal year ending June 30, 1884, was the first one since the passage of the silver-coinage law of 1878 to show a net export of gold. The export was $41,081,757; import, $22,831,317; net export, $18,250,440. This is not a large export for a country with an annual production of about $30,- 000,000, and even with the proper allowance for the consump- tion of that metal in the arts, it does not imply any decrease of our gold money. So far during the current fiscal year there has been a net import of gold. During the four months ending October 31 last, this net import amounted to $8,344,169, and was large during Novem- ber, for which exact figures are not obtainable. From figures furnished to me a year ago by the Mint Bu- reau, supplemented by the official figures to this date, it ap- pears that between March 1, 1878, and November 30, 1884, there was a net import of $177,793,530 of gold ; that between the same dates our gold mines yielded about $236,000,000, and that the consumption of gold in the arts in this country was about $63,000,000. The following table shows the increase of gold in this country from March 1, 1878, to November 30, 1884: Net import $177,793,530 Production of our mines 236,000,000 Total $413,793,530 Deduct for consumption in the arts 63,000,000 Net increase $350,793,530 The editors of a leading paper in the city of New York recently declared their opinion to be that "there is positively no limit to human stupidity and credulity in matters relating SILVEE COIN AND SILTEK CERTIFICATES. 67 to finance." It can only be upon some such views of the illimitable gullibility of mankind that it can have been so persistently maintained that an annual coinage of 28,000,000 silver dollars must necessarily soon expel all our gold, in face of the fact that it has absolutely increased $351,000,000 since the coinage of silver was resumed. An objection to our present silver coinage, which is per- haps urged more than any other, is the deficiency in respect to the weight of the silver dollar. Many persons who claim to be bimetallists, and to favor the continuance of the coin- age of both metals, assert that they are opposed to making any more dollars of 412^ grains. They demand that the coin- age ratio of gold and silver should be made to conform to the market ratio of the two metals, which is now nearly 19 to 1. When the present silver-dollar law was passed various at- tempts were made to change it so as to conform more nearly to the actual market ratio at that time, but all such attempts, after full consideration, were voted down in Congress. Our legislators at that time saw clearly that to make our ratio 17 or 18 or 19 to 1 would increase the difference, already some- what embarrassing, between our ratio and that of the Euro- pean countries ( which was 15^ to 1 in all of them except Holland, in which it was 15| to 1 ) , and would render it impos- sible for them to resume the free coinage of both meials, because a ratio here above 16 to 1 would drive all our silver to their mints. Our legislators saw that no international ar- rangement would be possible in respect to the coinage of gold and silver except upon the same ratio, or very nearly the same, and that to establish and to adhere to a ratio above 16 to 1 would put an end to any hope of a monetary accord with Europe. This reason for not raising our ratio above 16 to 1 is as cogent to-day as it was in 1878. The full-tender silver money in Europe ( including French Algeria ) is stated in the October report of our Mint Bureau for 1883 at $880,017,000, having now a bullion value of only 80^ per cent, in gold. If we should add silver enough to our 68 SILVER COIN AND SILVER CERTIFICATES. dollar to make the bullion in it worth a gold dollar, the na- tions of Europe could not bring up their silver coin to the point required in order to conform to our new ratio except by incurring a loss of $172,000,000. Nobody believes that they would entertain for a moment the idea of submitting to a sac- rifice so enormous. It is not possible, under present circumstances, however important and desirable it may be, to have any steady eq'uality between the bullion values of the gold and silver dollars. So long as the mints of the commercial world, including our own, are either closed entirely to silver, or coin it only in quantities limited as they are at present a part of the produc- tion will be thrown on the markets, to be sold as a com- modity, for use in the arts, and for export to Asia, and like everything else sold as a commodity the price of it will con- stantly fluctuate. Nothing can be more absurd than the idea of governing our mint ratio by such a market price as that, up to-day and down to-morrow. If we should add 15 cents now to our silver dollars we may find next year that they are at such a premium as will carry them all to foreign countries, or to the melting-pot, and the year afterward that we must add another 5 or 10 cents to bring their bullion value up to their coin value. It is possible to preserve a steady relation of value between the gold and silver coins of a country so long as the coins of the metal, cheaper for the time being, do not wholly expel from use the coins of the other metal. But we have no right to expect, and we shall never see, a steady relation of value between gold and silver sold as commodities, until some coun- try, or combination of countries, having an importance rela- tively to the commercial world equal to that possessed by France in 1803, shall coin both the metals without limit. That would steady the relation now, as France steadied it for seventy-one years prior to 1874 There is no occasion for abandoning the expectation that a combination may be formed by the United States with European countries, or at any rate with American countries, of which several besides our own SILVEE COIN AND SILVEK CERTIFICATES. 69 are rapidly rising into importance. It is only necessary that we should convince mankind by a firm perseverance in our present coinage of silver that we are inflexibly resolved that it shall remain one of the moneys of the commercial world. The equalization of the mint and market relative valua- tions of the two metals is not a thing to be undertaken in a hurry. It is prudent to delay it until it can be seen whether existing divergencies are permanent or only merely tempo- rary, and also until it can be seen pretty clearly what the new market relative valuation is to be. Our predecessors in this Government have always acted upon that view. In 1821, in consequence of the resumption of specie payments in gold by the Banlv of England, the silver price of that metal was every- where enhanced, and in this country the premium on gold rose to from 6 to 8 per cent. The premium continued, al- though it gradually declined about one-half ; but it was not till 1834, or after a lapse of thirteen years, that our mint ratio of the metals was changed by reducing the amount of gold in the gold dollar. The men of that day knew that the change in the market ratio of the two metals was caused by the English resumption in gold, and they waited to see what the ultimate effect of that resumption was to be. When after- ward, as a consequence of the unprecedented gold yield in California and Australia, such a premium arose upon our silver coins as to cause their disappearance by melting and export, the measure adopted by Congress in 1853, upon the report made in 1852 by Senator Hunter, of Virginia, was lim- ited to the reduction of the weight of our small silver coins, and to making such coins subsidiary and a tender for only $5. Adopting the views of Mr. Hunter in that respect, Congress thought it best to defer to a future day, when the new market ratio of the metals should be more definitely settled, the ad- justment of a new mint ratio between gold and the silver dollar having a full tender capacity. In fact, no further Con- gressional action took place, although the premium on the silver dollar continued for twenty years afterward and amounted to 3 per cent, in February, 1873, when an act was 70 SILVER COIN AND SILVEE CEETIFICATES. passed which, as was discovered three years later, stopped the minting of the silver dollar altogether. There was no time for twenty years prior to 1874 when to have produced an equality of bullion value it would not have been necessary to have added to the weight of the gold dollar or to have reduced the weight of the silver dollar. If our predecessors thought it proper, before acting upon the question of changing our mint ratio between the metals, to wait so many years in order to see the permanent effects of the gold resumption in England and of the Californian and Australian mining discoveries, we may well be slow and cautious now, when the market relation of the metals has been so violently disturbed by silver demonetizations and closures of mints to silver in Europe, and when debates, as yet uncertain in their outcome, are still in progress in so many European countries as to their future policy in respect to silver. No man can to-day fairly say of any proposed mint ratio that it can be relied upon to be in correspondence with the market ratios for six months to come. Until we can cer- tainly better our condition by changing our mint ratio, we had better let it alone. "We know that it values silver 3 per cent, lower than it is valued in $880,017,000 of European full tender silver coins. We know that if we raise our mint ratio above 16 to 1 it is a step which must be retraced if we ever come to a monetary treaty with France and other European silver-using countries. It will cost us $31,000,000 to raise the weight of our silver dollars in the proportion of 83^ to 100, besides the consider- ~ able expense of recoining it, which is a large sum to venture upon a not very promising experiment. Of all those in the Senate and House who say that they have no objection to what they call an honest silver dollar, I have not observed that any one of them offers a bill specifically prescribing how much more silver shall be put into the dol- lar. General denunciations of the present dollar are easy, but it is more difficult to define the exact change which they will take the responsibility of recommending. SILVER COIN AND SILVER CEETIPICATES. 71 It would certainly be inopportune to increase at this time the weight of the silver dollar and, raise our minting ratio be- tween the metals above 16 to 1, which would render a bime- tallic treaty with European powers impossible, at the same moment when the opponents of silver are concentrating their forces in support of a measure to suspend its coinage, of which the alleged purpose is to drive Europe into bimetallism by the coercion of a distress in which we must necessarily become full participants. It is an affront to the intelligence of mankind to hold up bimetallism as an object to be sought by any measure however dangerous, and certain to be calam- itous in its immediate effect, and at the same time to create, by putting more silver into the dollar, a new and insurmount- able obstacle in the way of any monetary concert with other countries. In view of the dangers, foreseen and unforeseen, which must attend a change in the money which has been employed by mankind as far back as history goes, the follow- ing words with which a debate on the monetary standard, in the French Senate in January, 1876, was closed by Dumas, are as appropriate as they are impressive : Those who approach these questions for the first time decide them at once ; those who study them with care hesitate ; those who are obUged practically to decide doubt and stop overwhelmed with the weight of the enormous responsibility. The quantities of the precious metals which are now sufficient may become insufficient. Nobody can guarantee that the present vast pro- duction of gold will continue. The placers are found on the surface of the earth, and may be exhausted by the very facility of working them. In presence of the unknown which dominates the future, we should practice a prudent reserve. Within a year or two the opponents of the silver dollar instead of demanding absolutely, and in so many words, that its coinage shall be stopped, make the more plausible demand that it shall be coined only to the extent necessary to meet the call for it at the Treasury. Several bills, to this effect, were introduced into the last Congress, in both the Senate and House, and the measure was recommended in the annual report of 1882, of the Secretary of the Treasury. Nothing 72 SILVER COIN AND SILVER CERTIFICATES. can be more ingenious than the phraseology in which this proposition is clothed, but it will not bear the test of a close examination. The demand in this country for the coinage of silver was not based upon such a preference for silver over gold, and especially not upon such a preference for silver over paper kept equal to coin by convertibility, as would induce anybody having a warrant upon the United States Treasury to demand its payment in silver. It is notorious that the people of this country almost universally prefer to handle convertible paper rather than either of the metals. As between the two metals silver is the least convenient, by reason of its greater weight and bulk for the same value. It would only be in rare and exceptional cases that anybody would ' demand silver in pref- erence to gold at the United States Treasury or anywhere else. It was not a preference for silver over gold which in- duced the support of the silver-coinage law of 1878. It was the inadequacy of gold, in point of quantity, which led the country to demand that it should be supplemented by another metal, admitted to be less convenient, but the incon- veniences of which could be mainly avoided by the use of cer- tificates. What the country wanted was not silver money as a matter of preference, but more metallic money than could be obtained from the gold mines alone. It was the necessity of silver coinage, as a means of averting a contraction of money disastrous to mankind, and the general desire of the. country, based upon that and other public considerations, that there should be such a coinage, which constituted to- gether that demand for silver dollars which induced Congress, in 1878, to order them to be struck at the mints, .and which has induced subsequent Congresses to continue the same pol- icy. That is the only kind of demand, for any species of money, which can legitimately be taken into account by legis- lators, in either creating currencies or in regulating their vol- ume. But according to the new rule proposed to be applied to silver dollars, the amount coined is to be regulated by the calls for them by a particular class of persons who may have SILVER COIN AND SILVEE CERTIFICATES. 73 the right to receive payments at the Treasury. On this plan the silver coinage will be dependent as to the amount of it, and indeed as to whether there shall be any at all, not upon the general public interest of the country, or upon the law- making power, but upon the caprice and personal interests of individuals. If this is the proper method of regulating the coinage of silver, no reason can be imagined why it is not equally the proper method of regulating the coinage of gold and the issue of greenbacks. If no more silver should be coined, why should any more gold be coined than there is a demand for at the Treasury ? And if as much silver should be coined why should there not be as many greenbacks issued as there is a demand for at the same place ? If this new rule of issu- ing money was applied to gold and to greenbacks the coinage of gold would immediately cease altogether, while the issue of greenbacks would be enlarged. The holders of greenbacks have had them redeemed in gold since January 1, 1879, if they desired it, but have very rarely desired it. The total amount of gold demanded for their redemption has been ab- solutely insignificant. Since the same date very few persons, if any, having the right to be paid money at the Treasury have desired to be paid in gold in preference to being paid in any other money. The Senator from Ohio, when he was at the head of the Treasury, was obliged, for the purpose of economizing the use of bank notes and greenbacks, to issue an order requiring persons having the right to payments to accept a part in sil- ver and a part in gold. At no time during the past six years has there been any appreciable demand for gold at the Treas- ury. If the coinage of gold was subjected to the same rule that it is proposed to apply to the coinage of silver, the Sec- retary would not have the right to coin gold so long as he had enough already coined to meet demands upon him ; and there- fore, as there has been all the time a large amount of gold in the Treasury, the coinage of that metal must have ceased during the past six years, and there is no probability that there would be any coinage of it for years to come. But the 74 SILYEK COIN AND SILVEK CEETIFICATES. fact that no preference has been shown for gold the past six years does not prove that there are not considerations of the highest public importance which require the coinage of gold. The time is most inopportune for stopping the coinage of silver when our bank-note currency is undergoing a consid- erable contraction, and when it is by no means certain that Congress will be able to agree upon any measure which will avert its further and greater contraction. The situation in respect to our paper money is admitted on all sides to be a very grave one. The volume of the greenbacks is fixed abso- lutely by law, while the volume of bank notes tends to dimin- ish from the cancellation of the Government bonds upon which they rest. Their contraction has not been seriously felt be- cause their place has been supplied by silver. Why should the United States, the principal silver-pro- ducing country of the world, attempt this dangerous experi- ment of stopping its coinage, or of suspending for a time its purchase ? What is there in the condition of the business of this country which demands it? At the present rate of coin- age there is no possibility of depreciation of the silver dollar for years to come. The volume of money is not too large, as shown by a tendency to falling prices. There is no inflation of the currency, and it is contraction rather than inflation which is now threatened. By the addition of $187,000,000 of silver to the money of the country we have increased its volume and have thereby in some measure sustained the wages of labor and the prices of the product of the soil and of the factory. Of the many and dire disasters predicted as the result of this addition it is not pretended that a single one has yet been realized, and the dates for the fulfillment of the prophecies of evil are constantly postponed. In this state of things the country will, I hope, conclude that it is wise to let the silver-coinage law alone so long as it works well, and that it is unwise to throw away its important and admitted advantages, from a fear of prospect- ive, certainly far-distant, and perhaps wholly imaginary dan- gers, and for which, if they shall ever come, our successors may be trusted to find appropriate remedies. SILVER COINAGE. A EEPLY TO SENATOES MOEEILL AND BAYAED. Speech delivered in the Senate of the United States, February 26, 1885, the Senate, as in Committee of the Whole, having under consider- ation the bill (H. R. 4976) for the retirement and recoinage of the trade- dollar — Me. Peesident : In replying to Senators who have in this debate advocated the extraordinary amendment proposed by the Finance Committee to the pending bill, I must take up successively some of the points which they have made, and this will necessarily give to my remarks somewhat of a desul- tory character. The Senator from Vermont [Mr. Morrill] praises the Sec- retaries of the Treasury for "pushing and industrious zeal" in attempting, as he thinks unsuccessfully, to get silver into circulation. Among these displays of zeal does he count the acquiescence of successive Secretaries in the action of the New York clearing-house, the principal point of Government payments, in the rule adopted by it on the 12th of November, 1878, under which neither silver dollars nor silver certificates were to be received at all for clearing-house balances ? Does he regard this assent of the Treasury Department to the tabooing of silver as money, at the place where the bulk of the Government disbursements is made, as being compensated for by its show of favor to the silver dollars, in sending them to the few people who may happen to make special application for them ? In what light does he regard the action of the Treasury Department in 1882, and down to the present time, in tacitly agreeing, and in strictly acting upon its tacit agreement, not to offer silver in discharge of 76 SILVEE COINAGE. its balances at the New York clearing-house after the New York banks had been compelled by Congress to repeal the rule under which silver was made non-receivable ? Did this show a "pushing and industrious zeal" in circulating silver, or even a decent regard of the Treasury Department to the law-making power ? The violation by the banks of New York of the plain in- tent of the act of 1882 in respect to the settlement of clear- ing-house balances in silver certificates, and the palpable connivance of the present Secretary of the Treasury and of his immediate predecessor in this misconduct of those insti- tutions, have been many times pointed out in this Chamber. An occurrence which took place on the 9th of this month adds to their misdoings very aggravating features of evasion and hypocrisy. On the day referred to, and, as is believed, by a preconcert between the banks and the Treasury Depart- ment, the assistant treasurer at New York tendered to the banks in part settlement of the clearing-house balances a small sum in silver certificates, stated by the New York papers to be $120,000, and the banks accepted it. The local editor of the New York Tribune, a paper which has been distinguished for its zeal in supporting the refusal of the banks to receive silver certificates, gives in that paper of February 11 the following account of the motives of the banks in seemirig on the 9th to have relaxed in their exclu- sion of silver : It is understood that the Monday payment by the subtreasury was intended to accomplish two objects, to soothe any jealousy on the part of country banks and to enable the Secretary of the Treasury to answer satisfactorily the Congressional inquiry whether any national banks or clearing-house associations refused to accept silver or silver certificates. As the New York clearing-house has now accepted silver in payment of balances, both it and the subtreasury have complied with the Federal law. It is generally understood by bank officers that payment in silver will not be repeated except in cases of emergency. This acceptance of silver certificates on the 9th instant is thus admitted to have been partly a temporary sham to ena- ble the Secretary of the Treasury to answer troublesome SILVER COINAGE. 77 inquiries from Congress, and partly a soothing measure to keep banis in other cities from complaining that they are compelled to take silver certificates while the New York banks are paid in gold and Treasury notes. The country will understand,, as this writer admits that the New York bank ojEcers understand, that the New York clearing-house will not hereafter be asked to accept silver certificates "except in cases of emergency," and that things will run along in their old course after Congress adjourns, unless the new administration shall enforce the act of 1882 in good faith, which is evidently not expected by the banks. But is the Senator from Vermont quite sure that with all the ill-will to silver of successive Secretaries of the Treasury, apparently most malignant on the part of a free-trade doc- trinaire and ex-London and New York banker who now pre- sides over the Treasury by a mysterious dispensation of the power of President Arthur, there has been no success in get- ting silver into circulation? With all his painstaking atten- tion to figures, is it not remarkable that the Senator from Vermont has overlooked the fact that of the silver dollars so far coined no greater proportion is owned by the Treasury Department than it owns and holds of the existing gold money, and that as great a proportion of the silver is in cir- culation, outside of the Treasury, in either the metallic or certificate form, as there is of the gold money? At the close of business on the 31st of January, 1885, the Treasury held and owned of gold, after deducting the amount belonging to the holders of outstanding certificates, $125,187,- 578, while it held and owned of the silver dollars, deducting the amount belonging to the holders of outstanding certifi- cates, $36,783,343. If we adopt the estimate that there is now in the country $610,000,000 of gold money, and it is generally regarded as a correct estimate, one-fourth of it, within a min- ute fraction, was held and owned by the Treasury January 31, and only three-fourths of it was in circulation. But at the same date, of the $192,000,000 of silver coined, a little less than one-fiith was held and owned by the Treasury, and 78 SILVER COINAGE. slightly more than four-fifths was in circulation. And fur- thermore, of the silver dollars and silver certificates outside of the Treasury, nearly the whole was in circulation from hand to hand, because the banks as a rule make it a point to keep as little silver as possible among their reserves; whereas of the gold outside of the Treasury a large part is locked up in the vaults of the banks. Even if he has not exam.ined the figures, how can the Sen- ator from Vermont have failed to know, what is a matter of universal observation and knowledge, that the rarest thing to be seen in the circulation this side of the Pacific Coast is a piece of gold money? As a part of his objection to the silver dollar the Senator from Vermont takes occasion to say that " all of our people prefer a paper money currency, if it is only the equal of our standard coins." That is exactly what the framers of the silver law of 1878 knew and acted upon when they provided that the holders of silver dollars could, at their option, have them represented by silver certificates in "money-note form" of the denomina- tion of $10 and upward. Nothing can be more nearly equal to standard coin, and more perfectly combine the convenience of paper with the safety of coin, than a certificate of gold or silver deposited in the Treasury of the United States, and required to be kept umised until the owners call for it. During the last session of Congress I submitted a bill making such description of paper, backed by coin dollar for dollar, a legal tender. I have only been restrained from pressing it by the belief that the Senator from Vermont and those who act with him upon questions of currency would oppose it by all the resources of legislative delays. It is certain that President Arthur, both the Secretaries of the Treasury of his appointment, and numerous other official and unofficial persons, with whom the Senator from Vermont is in the habit of acting, have recominended, in ad- dition to stopping the further coinage of silver dollars, that the issue of certificates for such dollars already coined shall 8ILVEE COINAGE. 79 not be hereafter permitted. I have reason to believe that the Senator from Vermont will support these recommenda- tions when I notice that he stigmatizes the silver certificates as a "queer form of paper money," and says that it is a form of money which is "rapidly increasing and usurping the place of United States notes as well as of national-bank notes," and finally declares that "it is by far the dearest and most expensive paper currency ever invented." There is no mistaking the animus of a Senator who de- nounces as "queer" a currency of silver certificates when he has been since 1863 an assenting and supporting party, in either this or the other branch of Congress, to legislation providing for gold certificates, which are identical in character and principle with the silver certificates. There is no mistaking the animus when he asserts that silver certificates are "usurping the place" of United States notes and national-bank notes, when the plain truth known of all men is that they have not taken the place of either class of notes, but have been a useful and much-needed addition to both. Within a few weeks after the passage of the silver law of 1878 Congress fixed absolutely by law the volume of United States notes, and it has not been varied by one single dollar from that day to this from the usurpation of their place by silver certificates, or in any other way. The circulation of bank notes to-day is about the same in volume as it was when the silver law of 1878, with its pro- vision for silver certificates, was enacted. During the time which has passed since 1878 the volume of bank notes first increased and has since decreased, but neither the increase nor the decrease was caused by the existence of silver certifi- cates or of gold certificates. Their volume is now declining, but, as everybody knows, it is from the high premium which government bonds have attained and from the small profits to be made from purchasing such bonds at their present prices as the basis for bank-note circulation. Among the other amazing declarations made by the Sen- ator from Vermont is the following, which I read in the exact 80 SILVER COINAGE. language in which it appears in the Record: "Certainly no one has ever pretended that it [the silver law of 1878] could be successful without the co-operation of other nations, and it should not be charged to the friends of bimetallism (the supporters of the silver law of 1878 ) that they intended an insidious measure to separate the United States from the great commercial nations of the world by fastening upon us the silver standard of monometallism." It is true that the supporters of the silver law of 1878, who were the great body of the people and of the representa- tives in Congress of the States and the people, did not intend by the law of 1878 to fasten upon the country "the silver standard of monometallism." It is also true that that law has not produced any such result, but that, on the contrary, the volume of gold in the country has more than doubled since the law was passed, and that the prospect for an indefinite future is that it will continue to increase. But the support- ers of the silver law were and are determined that a gold "standard of monometallism" shall not be fastened upon the country, and as one of them I declare for myself that if we must have monometallism in any form, which I do not believe and to which I am opposed, I prefer silver monometallism to gold monometallism, because the latter will most completely sacrifice the interests of producers, laborers, and tax-payers to aggrandize the moneyed creditors and income classes. When the Senator from Vermont says that the supporters of the silver law of 1878 believed its success to be dependent upon the co-operation of the "great commercial nations" — by which he means England and Germany — or that the law must be abandoned, unless we could make a bimetallic treaty with some of the nations of Europe, which is constantly be- coming a less important part of the world, he must have to- tally forgotten the discussions which preceded and attended the passage of that law. In the report of the United States monetary commission, appointed by Congress in 1876, the concluding language of SILVER COINAGE. 81 the majority who recommended the remonetization of silver was: The commission believe that tlie facts that Germany and the Scandinavian States have adopted the single gold standard, and that some other nations may possibly adopt it, instead of being reasons for perseverance in the attempt to establish it in the United States, are pre- cisely the facts vchioh make such an attempt entirely impracticable and ruinous. * * * The attainment of such a standard becomes difficult, precisely in proportion to the number and importance of the countries engaged in striving after it ; and it is precisely in the same proportion the ruinous effects of striving after it are aggravated. The provision for an international monetary conference with European powers was voted on as an amendment ( Feb- ruary 15, 1878, ) of the bill for silver coinage sent up by the House. The vote on the amendment was — yeas 40, nays 30. Of the Senators in favor of a gold standard, and who finally voted against the bill after the amendment was adopted, twenty-one voted in favor of the amendment, and only one [Mr. Edmunds] voted against it. Mr. Edmunds objected that the proposed conference was limited to an effort to regu- late a double standard, whereas he was opposed to a double standard and believed that the conference should be em- powered to agree upon a single standard. His language was : The commission is tied up ; the matter is decided in advance to the theory of a double standard of value, which the experience of this coun- try and every other has shown from the beginning to be only fraught with disaster to everybody who engages in it. Of the Senators in favor of silver coinage, and whose votes passed the bill at last over the President's veto, nine- teen voted for the amendment and twenty -nine voted in the negative. It thus appears that the amendment was carried by the unanimous votes, with one exception, of the Senators opposed to silver remonetization, combined with the vote of a minority of the Senators who were in favor of silver re- monetization. One view taken by the Senators who were in favor of silver coinage, and who voted against the amendment, was, as the record of the debate will show, that the amendment might be construed as an admission that the success of silver 82 SILVER COINAGE. coinage in the United States depended upon European co-operation, which they utterly denied and repudiated. Another view was that it was unwise to fetter by treaty stipulation the free exercise at all times of the constitutional power of Congress over the coinage of money. As respects the great body of Senators who were in favor of silver coinage and voted for the amendm^ent, there is no reason to doubt that their opinions were fairly expressed by Senator Ferry, of Michigan, who said : " My view is that it is desirable to secure the co-operation of foreign powers, but if they decline it we can stand alone." How extraordinary it will appear in the face of these authentic evidences of the opinions of the supporters of the silver coinage during the struggle which preceded the law of 1878 that it shall now be said that nobody ever maintained that we could coin silver in this country unless certain European nations, such as Eng- land and Germany, should also agree to coin it, or unless the larger part of the specie-paying European nations could enter into bimetallic arrangements with us ! Undoubtedly the supporters of silver money in the United States would have been willing in 1878 to admit that without some foreign co-operation silver could not be supported as one of the moneys of the world. But it was true then, as it is true to-day, that silver is the exclusive metallic money of the larger part of the human race; and it is impossible that the supporters of silver coinage in this country could have doubted in 1878, or that they now doubt, the entire feasibility of sustaining silver, with the assured aid of Asia and of the great and advancing countries south of us in North and South America, and in the presence of the further fact that there is in Europe, which cannot be exchanged for gold, more than eight hundred million dollars in full-tender silver coins. The Senator from Yermont affirms that the law of 1878 has been "of no benefit to our silver mines," and that it "has not sustained the price of silver," by which he means the value of silver in exchange for gold, or, in other words, the gold price of silver. But if there is any undisputed truth in SILVER COINAGE. 83 political economy it is tliat the prices of everything depend upon the play against each other of the two forces of demand and supply, and it would be a waste of words to combat the proposition which the Senator advances that a new demand at our mints for silver to an extent of more than one-fourth of the world's total product has not helped to sustain its price and has not benefited the miners. To prevent a fall of 10 per cent, when it might otherwise have been 20 per cent, is a benefit to producers equal in importance to that which would arise from raising it 10 per cent. British India, the principal silver market in the world, absorbed during the fiscal year ending March 31, 1878, the extraordinary amount of $73,331,- 675 of silver, while it absorbed during its fiscal year ending March 31, 1879, only $19,853,475. It was the unusually great India demand during the year immediately preceding the American silver law of February 28, 1878, which brought up the price of silver from the point of depression which it had reached in 1876, and which was lower than it had reached before, or has reached since, to the comparatively high point at which it stood when our silver law was passed. The price fell in 1878, after February 28, because the Indian demand fell off by a greater sum than the amount of the coinage at our mints, and the price would have fallen very much more if our coinage of silver had not prevented it. If the Senator really expects to carry his plan of closing our mints to silver by making either Congress or the country believe that a monthly demand of our mints for ' $2,000,000 worth of silver bullion does not sustain the price of silver, and does not benefit those who mine it, he has undertaken an enterprise in which, with all his ability and all his perseverance, he will certainly fail. The Senator admits that silver certificates, and of course silver dollars, which can at any time at the option of the holder be converted into silver certificates, are at a parity with gold, but he says that is only because the Treasury re- ceives them "on the par of gold in the payment of duties." Without doubt the receivability of silver for all Government 84 SILVER COINAGE. debts and taxes, including custom-house duties, assists tlie currency of silver, and so does also the function of being a legal tender for private debts assist it ; but it is no more true of silver than it is of other descriptions of money that their currency and acceptability as mediums of exchange depend upon the functions of legal tender and tax-paying power with which the law endows them. But without following the Senator into the mazes of a theoretical discussion of the causes of the actual parity of value in the markets between silver and gold coined money, it is sufficient that he admits that the parity exists, and that he also admits that men of business are constantly exchang- ing gold for silver certificates, at the United States Treasury offices, on equal terms, dollar for dollar, on account of the superior convenience in the use of such certificates. But while admitting that silver dollars are to-day, and have been during the seven years since the coinage was re- sumed, of equal value with gold dollars, he not only insists that this equality can not long exist, but he undertakes to fix the date beyond which it cannot be expected to be main- tained. Disclaiming the intention of being an alarmist he declares that the depreciation of silver, the expulsion of gold, and the bringing the country to a silver standard may not happen " in the present year, possibly not in the next," thus indicating that it is only barely " possible," but by no _ means probable, that the calamity can be averted beyond the end of 1886, but he abstains, and it seems to me very pru- dently abstains, from stating the reasons which have led his mind to that conclusion. At the present rate of coinage we will have coined at the end of 1886 246,000,000 silver dollars. Is it conceivable that that number of silver dollars will depreciate when they are receivable on the par of gold for the taxes of every descrip- tion of a government with an annual revenue of 1300,000,000, and when they are a tender for all the private debts of 57,- 000,000 of people who have no equals on the face of the globe in the activity, number, and magnitude of their indus- SILTEK COINAGE. 85 tries, exchanges, and credit transactions? And especially can we conceive of this result when we know that France, with only two-thirds of our population and one-eighteenth of our territorial area, does to-day sustain, at a perfect parity with gold, $537,000,000 of full-tender silver coins, containing 3 per cent, less of silver, as compared with its gold coins, than is contained in the silver coinage of our mints? The Senator says that'" the Latin nations have kept silver on a par with gold by a limitation of its coinage, or by ceas- ing to coin it in excess." But neither France nor any other of the Latin nations has found by experience that its silver coinage was "in excess," and no one of them has melted down or withdrawn in any way any part of its silver coins. It is true that they have stopped their silver coinage at cer- tain limits (and that this limit in the case of France was fixed at the amount of $537,000,000) from mixed motives, of per- haps excessive caution, and of antagonism to Germany, whose operation of exchanging silver for gold the French people preferred rather to obstruct than to facilitate. But can it be gravely argued that because France has, from whatever mo- tives, suspended its silver coinage at a certain limit, we ought either now or eighteen months hence, to suspend our coinage, when we are not within twenty years of reaching that limit at our present rate of coinage, taking into account relative dif- ferences of area and population and the rapid growth of this country in all the elements of numbers, trade and wealth which occasion a demand for money? What evidence is there that there is an "occasional sur- plus" of silver in France which "has to be gathered up and held as is done by the Bank of France"? What French or other authority does the Senator cite in support of the state- ment that the Bank of France was ever obliged to gather up and hold a single dollar of silver because silver dollars were in excess, or ever took in a dollar of- silver except in the course of its business and for the purpose of protecting its own safety, solvency and solidity as a coin paying institution? There is no such evidence and there is no such fact. 86 SILVEE COINAGE. While there is no public man in France wlio suggests the "withdrawal of either the whole or any part of its coined silver money, the Bank of France has been from the beginning and is to-day the sturdiest and most pronounced opponent of any such impossible and suicidal policy. Instead of regarding the silver of France as a burden, which the Bank of France must carry, its managers regard it as the best bulwark of the safety of the institution over which they preside and of the finances and prosperity of their country. I do not charge the Senator from Vennont, who has served so long, so usefully and so honorably in the highest councils of his country, with any set purpose of exciting alarms, false in themselves and dangerous to public confidence. Never- theless his declaration that "silver certificates may ultimately prove less valuable than United States notes," must have the effect with those who believe that the declaration has any good foundation to induce them to receive such certificates with reluctance and to impair their acceptability and usefulness as a currency. But it is too plain that a certificate promising to pay silver dollars, and also promising to keep always on hand, and un- used, the full amount of silver dollars promised, can never be less valuable than a note which is redeemable in silver at the option of the same Government, but for which the silver in which it is redeemable is not kept on hand. The act of 1875 directing the resumption of specie payments January 1, 1879, ordered the greenbacks to be then and thereafterward paid in coin. There is not the slightest ground for pretending that at any time or in any act the Government ever made any promise, express or implied, to pay them in gold ; and any Secretary of the Treasury who should dare to pay them in gold, if that method of payment was more onerous to the country, ought to be impeached and punished for it. The notes of the United States are a perfectly safe cur- rency, but they cannot become a more valuable currency than silver certificates until our laws relating to currency and finances are fundamentally changed. SILTEE COINAGE. 87 The Senator from Vermont says that "the vital spark in business industries is the solid and unchanging character of the money in circulation." Without doubt frequent changes in our monetary system are attended with many mischiefs, and they can rarely be nec- essary; but the remark which I have quoted seems hardly a suitable one to come from a Senator who is the reporter and leading manager of a proposition to unsettle all that was de- liberately done in 1878. That proposition is to strike down the only coin we have ever had under the Constitution of the United States which has never been changed in its essential feature. The amount of pure silver which it contains, originally fixed by Alexander Hamilton at 371J grains in 1792, is the same now as it was then. The gold eagle has been twice changed in the amount of pure metal which it contains, but the silver dollar has never changed in that particular, and has therefore come to be nat- urally regarded and spoken of as the "standard silver dol- lar." If we have any old and time-honored landmark in mone- tary and financial affairs it is the silver dollar. It is as old within three years as the beginning of George Washington's first Presidential term, and yet we have a propo- sition to destroy it from a Senator who tells us that nothing is more essential to business industries than the "unchanging character of the money in circulation." If the efforts of the Senator from Vermont to introduce changes can be defeated, as I feel assured they will be, it can be said of this Congress that it left the currency laws as it found them, and that if it had done no good in that particu- lar it had done no harm. The Senator from Delaware [Mr. Bayard] has favored this body with a speech upon the pending bill. Eather more than half of it was devoted to a demonstration that this Gov- ernment is not under the slightest obligation to redeem the trade-dollar at more than its bullion value, but closes with a 88 SILTEB COINAGE. declaration that he was ready to vote to pay for them at their nominal value, at a cost or loss to the Government of some- thing like $1,500,000, for the purpose of giving the country a moral lesson of some kind or other. I have never heard be- fore that Congress had any right to appropriate the money of the tax-payers, except to provide for carrying on the Govern- ment and paying its debts. No warrant is found in the Con- stitution for appropriating money for the purpose of giving moral lessons to anybody. The Senator from Delaware will doubtless explain to the Senate, and to his constituents, in his own way and at the proper time, on what political or ethi- cal basis he will vote $1,500,000 to individuals who, he says, have no just claim to it. A part of the speech of the Senator from Delaware is in support of the proposition to stop the coinage of silver dol- lars, to the resumption of which in 1878 he was one of the strongest opponents, and which he has never ceased to de- nounce from that day to this. He reiterates statements which have been shown over and over again to be completely er- roneous, and principles of political economy which are not supported by a single good authority, and which are incom- prehensible as a matter of reasoning. He says that the standard silver dollar, as compared with the trade-dollar, is "confessedly less in actual value," when all market quotations and the knowledge of everybody proves it to be about 15 per cent, higher. The trade-dollar is worth a good deal less than a gold dollar, but I do not believe that the Senator from Delaware ever purchased a standard dollar at less than its face value in gold, or that he can name any market in the United States where it can now be purchased for less. If there is anybody who has confessed that the sil- ver dollar is of less "actual value" than the gold dollar the Senator from Delaware does not name him. I am certain thatno supporter of the double standard has ever "confessed" that the actual market and exchangeable value of the silver dollar is inferior to that of the gold dollar, or believes that it is likely to become so for an indefinitely long period to come. SILVER COINAGE. 89 If confessions of that kind have been made it must have been by the clearing-house bankers of New York, or similar classes of persons. The Senator from Delaware quotes, adopts, and indorses the statement of Mr. McCuUoch, the Secretary of the Treas- ury, that the Government is under certain gold obligations. That statement is wholly gratuitous and without a shadow of foundation. From the Secretary of the Treasury, who is an executive official, and bound to obey the laws enacted by Congress, it was an unwarrantable statement, inasmuch as Congress de- clared seven years ago that the silver dollar should discharge all public debts except where it was otherwise stipulated in the contract, and neither Mr. McCuUoch or anybody else has or can show any existing bond, contract, note, or other obli- gation in which the Government has stipulated to pay gold. The Senator from Delaware also quotes, adopts, and indorses the prediction of Mr. McCuUoch that unless the coin- age of silver is soon stopped it will cause the total disappear- ance of gold by export or hoarding, or both, and a "severe contraction," which the Senator himself enlarges and empha- sizes by predicting "a most severe contraction, convulsing all business." And to fortify these ominous predictions, the Senator de- clares that they are confirmed by his correspondence from the money centers, doubtless meaning by that such sources of intelligence as Chestnut street in Philadelphia, State street in Boston, and last, but not least, "Wall street in New York. The following is an account in the Senator's own language of the statement of these letter-writers : They all say to me that there is a great apprehension that the evils depicted by Mr. McCuUoch of the contractions to follow our embark- ation upon the monometallic basis of silver will convulse business, and the other evil, that the prices of what is needed by the laboring classes necessarily will be increased by the measurement in the less valuable metal. Elsewhere in his speech the Senator adopts as his own and amplifies the theory that while the expulsion of gold will con- 90 SILVEE COINAGE. tract currency and convulse business, it will at the same time raise prices by causing them to be stated and estimated in a less valuable kind of dollar. To quote his exact language : What will measure prices when gold is gone ? In what will be the estimate of the cost of living for those for whom I am sure our hearts are anxious ? Sir, the measure of prices will be in silver, and silver be- ing of lesser value, those prices must be nominally increased to make up for the deficiency of real value. The scale will be higher. It is not unnatural that the Senator from Delaware and his correspondents from the "money centers" whose "hearts are anxious'' for the laboring classes should have had their fears concentrated upon the one point that a silver standard would increase the prices of the necessaries of life. It is nevertheless plain that if prices rise as a consequence of the depreciation of money, the prices of everything, luxuries as well as necessaries, will be raised, and that wages, the price of labor, will also be raised. The mere statement of these propositions of Mr. McCul- loch, of the Senator from Delaware, and of his correspond- ents from the "money centers" shows how untenable they are. The coinage of silver can not possibly tend to contract the volume of money. On the contrary, to the extent of it the tendency must be to expand the volume of money in the world and to make our share of it absolutely greater. The coinage of silver will be followed by the expulsion of gold under only one or the other of the two following conditions : First. — That our silver coinage shall so expand our prices relatively to prices abroad as to cause an unfavorable balance of trade. We know that the balance has been since 1878, and still is, heavily in our favor. Second. — That the banking and moneyed interests hostile to silver coinage shall by deliberately concerted action create a panicky fear of an impending depreciation of silver and a belief that the hoarding of gold would result in a profit from the premium upon it within some near period, and thereby cause the locking up of large quantities of gold. SILTEK COINAGE. 91 In respect to a withdrawal of gold from circulation by hoarding, it is not impossible that it might be brought about to some extent if the banking classes should combine as a unit and instigate others who are under their influence to co- operate with them. But bankers as a body have too much prudence and know too well how large a share they must themselves bear of any calamnity falling upon the business interests of the country to be concerned in getting up a panic in respect to an approaching premium on gold. The hoarding of $610,000,000 of gold for the purpose of profiting by an expected premium upon it would cost the banks and individuals engaged in it $30,500,000 annually in interest, if we count it at 5 per cent. At the same time there would be no certainty that such a hoarding would of itself cause a premium on gold. Silver, greenbacks, and national- bank notes perform all the offices and answer all the purposes of money for domestic uses. Until there arose some demand for gold for foreign purchases and payments nobody would have any inducement to pay a premium on it. The present state of our trade enables us to pay gold abroad at less cost, by the method of using bills of exchange, than by shipping gold ; and the time when gold will be in demand for foreign shipment is indefinitely remote. The loss of interest in hoarding it is a certainty. The gain is prospective, doubtful, and really improbable. Bank- ers, who are not apt to be governed by their passions, will be slow to embark in such an enterprise considered in the aspect of a plan for making money. In all events, if the gold now in circulation is expelled, irf whatever way it may be done, the money remaining in circu- lation, which will then consist of silver and of paper repre- senting silver, must increase largely in value and purchasing power, because the total volume of the circulation will have been largely reduced. It is not enhanced prices of commo- dities which we shall then see, but prices lowered, and to such a degree that gold would flow here from all parts of the world. 92 SILVER COINAGE. It was not my intention to address the Senate at length at this time on the questions involved in this bill and in the amendments proposed by the committee. I presented my views upon the general subject somewhat fully at an earlier day in the session. In closing, I desire to call the attention of the Senate to the unadvisedness of attempting to dispose of such an import- ant measure, affecting as it does the volume of the currency, and to the impossibility of doing so even if it is advisable, in the closing days of the session. The pending bill was reported to the Senate on the 27th of January, when there remained only thirty-one working days of the life of this Congress, and with no warning or rea- son to expect that the Senate would be called upon during the brief remainder of tj^is session to discuss any such measure as that of suspending either absolutely or contin- gently the coinage of the standard silver dollar. On the 27th of January, when the committee agreed to report the pending bill with amendments relating to entirely different subjects, it did not have before it, by any reference made by the Senate, the question of the continuance or discontinuance of the silver-dollar coinage. At the beginning of the last session that question was be- fore the committee by reference of a bill submitted by the senior Senator from Vermont [Mr. Morrill] covering various things connected with the mints and the coinage, and con- taining among its provisions one for the suspension of tha silver-dollar coinage. In the course of the last session the committee acted upon and reported that bill after having stricken from it that part which suspended the coinage of silver dollars, and by no subsequent vote of the Senate, within my knowledge, has that subject been referred to the commit- tee. I feel justified, therefore, in saying that their report on the 27th of January of a silver-dollar suspension law was without warning; that it was gratuitous and unauthorized, and, as it seems to me, violates good parliamentary practice by attempting to foist upon a bill referred to it a measure SILVEB COINAGE. 93 not germane and relating to a totally different subject- matter. The trade-dollar was wholly deprived of the monetary function in 1876, and has since then formed no part of the money of the country. The bill sent up by the House pro- poses the purchase and withdrawal of the trade-dollar on certain terms, and has no provision in it relating to the cur- rency to which such a proposition as arresting the further issue of legal-tender silver dollars can by any possibility be germane. The bill, with the amendment proposed, was for the first time called up for consideration with only twenty- three working days of the session remaining, with the calen- dars of both branches of Congress loaded with important measures, and with some of the most important of the regu- lar appropriation bills for the support of the Government as yet scarcely touched. It must be quite obvious that under such circumstance very little time can be given to the consideration of the bill and proposed amendment in the Senate, and still less time to the consideration in the House of the amendment if it should be adopted here and sent to the other branch of Congress for its concurrence. The repeal or, what is the same thing, the suspension for an indefinite peripd of the silver-coinage law of 1878 is a measure of as much importance as the original passage of that law. It involves the same points of discussion; and unless the deliberations which preceded that enactment were protracted beyond all reason, the time now proposed in which to consider the repeal is totally inadequate. The law of 1878 was debated by two successive Congresses, and it was considered inexpedient to take final action until a monetary commission had been appointed to hear such testi- mony and suggestions as might be offered from any part of this country or from foreign countries, and until that com- mission in addition to reporting such testimony and sugges- tions had submitted their own opinion in an exhaustive and able review of the whole subject. How thorough and elaborate the debates in Congress were may be judged from the fact that during the session when the 94 SILVER COINAGE. law was passed there were forty-one set speeches made "in the Senate upon the law as a whole, in addition to the discussion of the various amendments proposed to it. It was not then considered that too much time was given to the subject, be- • cause everybody saw that it involved all the questions of a sufficiency of the money volume, of the prices of land, labor, and commodities, of the pressure of public debts, of the in- terest of tax-payers, and of the preservation of justice and equity in the relations between classes and geographical sec- tions. All these questions are involved, and in an equal de- gree, in the repeal of the law of 1878, which is now proposed to be accomplished by a side blow in the form of an amend- ment of a bill on another subject. With no disposition to impute motives to committees or members of this body, it is true and it is proper to be said that if not so intended the late day at which this measure has been sprung upon the Senate is calculated to favor a plan which may have been formed in certain quarters to secure snap judgment in this body and in the other House against the coinage of silver by the aid of machinery which exists in such quarters for sounding and resounding false intelligence and false alarms through subsidized, unscrupulous, and widely circulated daily newspapers. Abundant motives for such planning and plotting are found in the enormous gain which would result to banks and bankers and creditor and income classes generally from that appreciation of the value of the money certain to be caused by confining coinage to the single metal, gold, the total current production of which from the mines is now swallowed up by consum.ption in the arts. The pending bill as it came from the House, and when it was confined to the trade-dollar, was very objectionable and could not have failed to have provoked lengthy debates in the Senate. I refer to the proposition to give a price gratuitously enhanced 15 or 20 per cent, for approximately eight millions of trade-dollars, the present holders of which obtained them as a rule, although doubtless with some exceptions, at not more than their bullion value. SILVER COINAGE. 95 i President Arthur and Mr. Folger, the late Secretary of the Treasury, both recommended that no more should be offered for the trade-dollar than a slight premium above its bullion value, barely sufficient to induce the holders to bring them to the mints. Objectionable as the bill was as it came from the House, the amendment proposed by the Finance Committee in respect to the trade-dollar makes it very much worse. The House bill gave a 15 or 20 per cent, gratuity to the holders of the trade-dollars, but not at the expense of the Treasury or the tax-payers. By making the standard dollars coined out of the trade-dollars an addition to the present coinage of stand- ard dollars, it gave the gratuity to the holders of trade- dollars out of the profit upon the additional number of standard dollars. But the amendment of the Finance Committee throws the burden of the gratuity, which will be approximately one and a half millions of dollars, upon the Treasury and the taxpayers. A proposition so offensive as that, and presented in this sudden way, after the bill itself, to which we are asked to attach it, had been held back in the Finance Committee for nearly a year, ought to be more thor- oughly scrutinized than there is time for during the closing days, of the Forty-eighth Congress. If there is any justice in treating the trade-dollar as part of the money of the country, and not merely as so much stamped bullion, let the question be considered on its merits and by itself. It is in any view we may take of it a matter of but slight importance, except to a comparatively few persons who hold these dollars. The amendments proposed by the committee involve the monetary system and the monetary policy of this Government, and their hasty consideration may lead to disastrous results. SILVER COINAGE. AN ADDEESS BEFORE THE COMMEBCIAL CLUB OF PEOTIDENCE, EHODE ISLAND, JANUABY 9, 1886. Mr. President and Gentlemen of the Commercial Club: The subject upon which you have done me the honor of inviting me to address you naturally divides itself into two parts : The first is the general question of maintaining both gold and silver as the measure of values in the commercial world. The second is the special question of what is practic- able and expedient to be done by this country to uphold sil- ver as a co-ordinate money with gold, if we decide that our interests require us to uphold it. Upon the first branch of the subject it is not believed that there is much difference of opinion in the Northeastern States, and there is substantially none in the other sections of the United States. It is true that the enormous produc- tion of gold which followed immediately upon the discovery of the Californian and Australian mines created here, as well as in Europe, a belief that the monetary standard was threat- ened with a serious depreciation which could be avoided in no other way than by demonetizing one of the metals. But the yield of those mines soon reached its maximum, and be- gan to decline ; and the additional stimulus which it gave to business and enterprises so expanded the commercial ex- changes of the world that the effect of the new gold in raising prices was not great, and was beneficial rather than alarming. Under the experience of the disastrous consequences of the demonetizing of silver, twelve and fifteen years ago, by Ger- many and the Scandinavian States, it is now a matter of gen- SILVER COINAGE. 97 eral regret that the experiment of tampering with the old measure of values was ever entered upon. There can hardly be a controversy about the two principal facts connected with this question. The first is that the pro- duction of gold, instead of expanding in proportion with the numbers and exchanges of mankind, has been steadily de- clining for nearly thirty years, while its consumption in the arts has been so increased by the advancing wealth and popu- lation of the world, that it absorbs every dollar of the annual yield of the mines, leaving absolutely none for monetary use. The second is that since 1873, when Germany commenced the melting down and sale of its silver coin, there has been a per- sistent decline of prices in all of the countries in which money is kept at the gold standard, with only one temporary reac- tion in 1879 and 1880, and that the general range of prices is now lower than it has been for a century. I. — Taking the figures of Soetbeer, who is the best Euro- pean authority on the statistics of gold and its consumption in the arts, the annual average yield of the mines was $134,- 000,000 during the decade ending with 1860 ; it fell to $125,- 000,000 during the decade ending with 1870 ; to $113,000,000 during the decade ending with 1880, and in the year 1880 was only $101,000,000. Since that year it has still continued to decline, and he estimates that in the year 1884 it was only $93,000,000. Being a supporter of the single standard of gold, he cannot be suspected of a disposition to underrate the production of that metal; and his figures correspond sub- stantially with those of the best French and English authori- ties. In the annual report, just published, of our own Mint Bureau, the estimate of the gold prodiiction for the year 1884 is $95,292,569. In respect to the consumption of gold in the arts and for ornamentation, Soetbeer estimates that in Europe, America, and Australia alone, exclusive of old jewelry and of other old materials reworked, the annual average was $12,000,000 dur- ing the decade ending with 1840 ; $13,300,000 during the dec- ade ending with 1850 ; $18,600,000 during the decade ending 98 SILVEK COINAGE. with 1860 ; $38,200,000 during the decade ending with 1870, and $55,600,000 during the decade ending with 1880. The use of gold for purposes of luxury, splendor, and dis- play depends upon the wealth rather than upon the popula- tion of the world ; and in modern times, with the constant increase of human control over the forces of nature, opulence is advancing in all civilized countries much more rapidly than population. We know how enormous the development of wealth has been within fifty years, and especially since the great impe- tus given to industries and commerce by the mining discov- eries in California and Australia ; and the figures of Soetbeer show, just as we would expect them to show, a corresponding increase in the use of gold in the arts. The consumption of gold during the decade ending with 1870 was more than double what it was during the decade ending with 1860. During the decade ending with 1880, it was checked by the six mem- orable years of depression which followed the German silver demonetization of 1873, but was nevertheless some 45 per cent, greater than it was during the decade ending with 1870. There is no good reason to doubt that the increase during the current decade which will end with 1890 will be at least 45 per cent, over the decade ending with 1880. On that basis, the annual average gold consumption during the cur- rent decade will be $81,000,000. As the annual average of the decade must be supposed to be the amount of the middle year of the decade, the annual consumption at the present time is therefore probably $81,- 000,000. The mistake is often made of supposing that Soetbeer's estimates of the consumption of gold in the arts include what is sent to Asia. He gives the countries in detail, and his estimates are confined to Europe, America and Australia. The gold consumption of British India, which is very large and which is nearly all supplied by importation, is not embraced in his estimates, but is to be added to them. During the thirty Indian fiscal years ending March 31, 1880, or the period since the opening of the Californian and .SILVEE COINAGE. 99 Australian mines, the net annual import of gold for that country averaged $16,000,000, and during the last five fiscal years ending March 31, 1885, it has been larger. The annual average of those five years was $23,565,000, or, allowing for the depreciation, relatively to gold, of the rupee currency in which the official accounts of India are kept, it was $20,000,- 000. With an annual consumption in the arts, by Europe, America, and Australia, of $81,000,000, and an annual absorp- tion by India of $20,000,000, the total yield of all the gold mines in the world is swallowed up. Not one single dollar is left for monetary use to repair the waste and loss of coins, and to expand the volume of money in correspondence with the enlarging commerce and exchanges of the world. These are facts which we cannot get away from ; and what is the prospect before us? The gold mines may hereafter produce more, but it is more probable that they will produce less. There is nothing more certain than that the consump- tion of gold will increase with the rapidly growing wealth and luxury of the world. This consumption, already beginning to act as a drain upon the gold coinages, will soon deplete them at a rate which no probable increase of production of gold can make up. That the general public is not aware of the rapidity of the increase in the consumption of gold, or of the magnitude which the figures have already reached, is owing to the sys- tematic suppression of facts by the press of the great com- mercial cities. The situation with regard to the consumption of gold has been stated with substantial accuracy in some of the recent reports of the Mint Bureau, and cannot be unknown to the persons who furnish the financial articles for the newspapers of the Atlantic cities. In the report of 1881 of that bureau it is stated that "The annual consumption of the world in ornamentation, manufac- tures and the arts is at least $75,000,000 of gold." In the report of 1884 of that same bureau, it is stated that the con- 100 SILVER COINAGE. sumptiou in only four countries, namely, Great Britain, France, the United States, and India, amounts to $53,000,000. There is no mistaking facts like these, as showing the total inadequacy of gold to sustain prices and the business of the world ; and it is not fair that such facts should be kept from the general knowledge of the people, while it is claimed that no coin should be struck excepting from that metal, and that silver has no more fitness for use as money than pig iron or pig lead. II. — Upon the second prominent fact relating to the me- tallic standard — that the general range of prices has fallen disastrously since German silver demonetization in 1873, and that it is now lower than it was before the Californian and Australian discoveries — it is not necessary to give proofs in detail to an audience of intelligent merchants, manufacturers, and bankers who ate always obliged, for the safety of their own affairs, to watch the course of the market with a vigilant eye. The following brief but sufficient summary of the situa- tion was given on the 8th of last January in the New York Tribune : About the 13th of December, 1884, the market for products touched the lowest level of prices they have reached in this country since rec- ords of prices began. The range of prices is now below that of October, 1878, then the lowest reached for many years. When the depreciation of paper vanished, October, 1878, it was found that prices were more than 15 per cent, below the specie level of 1860, the last preceding year in which prices had been made in gold. The New York Tribune is accepted as good authority in finance by those who agree with it in demanding the stoppage of silver coinage in this country. As will appear from what I have read, from its issue of the 8th of last January, the range of prices one year ago was "below that of October, 1878," which, it says, " was fifteen per cent, below the specie level of 1860, and in fact the lowest reached for many years." But if you look at the same paper of the 19th of October, 1885, you will find an editorial array of figures proving that prices continued to fall until well into last summer ; and that although from the extremest point of depreciation then SILVER COINAGE. 101 reached there has been a reaction, which constitutes the im- provement in business of which we hear so much, the general range of the market was still distinctly lower in the middle of October, 1885, than it was in the middle of October, 1884. It makes a list which it says " might be indefinitely ex- tended," of thirty representative products, of which the prices of twenty-seven had all fallen in that time ; the average rate of the fall being 14 8-10 per cent., while only three had risen in price. Of the three articles, wheat and potatoes had risen, because of deficient crops ; and Ohio wool, No. 1, had only risen from thirty-five to thirty-five and one-half cents, although the rise from last summer was from thirty cents. Cotton sheetings and print-cloths had both fallen since Octo- ber, 1884, although both had risen since last summer. The Tribune adds : The wages paid in manufacturing establishments generally, not- withstanding the recent advance in a few instances, appear to be, upon whole, fully ten per cent, lower than they were a year ago. Thus, although the Tribune declares that the markets, at the end of 1884, had " touched the lowest level of prices ever reached in this country since records of prices began," the facts exhibited in its article of October 19th last leave no room for doubt they are now even more depressed than they were then. The substantial correspondence, in the course of prices, in all commercially connected countries, is so well known that it will be sufiicient to make a brief reference to the fall in prices in Great Britain, which has a wider range and greater volume of foreign trade than any other country, and the markets of which are the most reliable indicator of the mar- kets of the world. In a paper read in March, 1882, before the London Statistical Society by Mr. Giffen, then Secretary of the British Board of Trade, he said : The range of difference in the aggregate value of the exports of the United Kingdom, owing to the difference of prices alone, amounted to thirty per cent, between 1873 and 1879. After the six years of continuously falling prices which followed the German silver demonetization of 1873, there was 102 SILVER COINAGE. a temporary reaction, not lasting in Great Britain more than a year ; and as early as 1883, the relapse had carried markets down to the point reached in 1879. Indeed, on the 7th of May, 1883, the London Times said : Prices at the present day are as low or nearly as low as they were in the old days before the great gold discoveries had been made. But prices still continued to go down, and, according to the table of prices which the London Economist has been in the habit of making up for many years; the average range at the end of 1884 was even lower than during the period just before the great gold discoveries. A table of prices of forty leading articles of British commerce, prepared by Prof. Jevons, shows that from 1809, when the production of the Spanish- American mines was suddenly reduced by the Revo- lutionary troubles, to 1849, coin prices fell in the proportion of 157 to 64, or by at least three-fifths. No point so low had ever been reached since England had become the chief manu- facturing and commercial nation of the world; but at the end of 1884 it was still lower. During 1885, according to all authorities, British prices as a whole have rather receded than advanced, and the utmost hope which prevails there is, that the worst has been passed; that the bottom has been reached; and that the next change, when a change shall occur, will be for the better. As late as the 7th of last November the London Economist said: As regards the commercial outlook, no change can be reported. In the United States there can be no doubt that some improvement has been established, but, so far, it has not been reflected here. That gold prices have fallen, or, what is the same thing, that the value or purchasing power of gold has risen within recent years, cannot be successfully controverted by anybody ; nor is it really denied by anybody that the greater use of gold as money, arising from the disuse of silver to the extent of the demonetization of the latter metal, has been a principal cause of the enhancement of the value of gold and of the re- duction of prices and wages. The most uncompromising SILVER COINAGE. 103 gold monometallist, in considering this subject, goes no fur- ther than to say that there are other causes acting in the same direction. Thus the London Times, of May 7th, 1883, said, in reply to Mr. Goschen : Germany, Italy, and the United States have, during the last ten years, been absorbing in their currency more gold than the available supply. They have taken, between them, not less than 200,000,000 of pounds sterling. The result has been that, as the stock of gold has diminished, the price of gold has gone up, or, in other words, that the prices of commodities have fallen. It is impossible that so large a drain of gold can have failed to aflfect prices. Mr. Goschen must be admitted to have made out his case thus far. He has laid his finger upon a cause, and it is demonstrably a vera causa, capable of the effect which he has assigned to it ; but an examination of his figures will show that other causes have been concurrently at work. Several contributory causes have undoubtedly been in operation, chief among which has been the decline in the production of gold, and its increased consumption in the arts, and the extraordinary increase of the commerce and the manufactures of the world during the present generation. But, instead of being a justification for the demonetization of silver, it is an aggravation of the folly or criminality of the policy that it should be persisted in when gold for sev- eral years has been tending to a higher value, independently of the striking down of the monetary use of the other precious metal. The fall in prices which is now in progress differs wholly from those temporary oscillations in trade, arising from fluct- uations in the value of paper money or in the conditions of commercial credit, with which the experience of the past has made us so familiar. It is not a mere ebbing of the tide which is soon to flow again ; it is something more than one of those periodical transitions in the temper of trade from buoyancy to depression, to become in due time buoyant again, which arises from the variableness of the humor of mankind. It arises from an attempt to narrow the money of the world to a single metal, and that one so trenched upon by its em- ployment in the arts that the stock in monetary use is al- ready stationary and must soon absolutely diminish. A 104 SILVER COINAGE. change in the measure of prices as permanent as would neces- sarily result, should such a policy be successful, must be felt disastrously for an indefinite period. The effect would not be limited to a brief transition from one scale of prices to another, to be soon followed by a transition in the opposite direction — as those who prophesy smooth things vainly en- deavor to persuade us. Sir Archibald Allison, in his "Eng- land in 1815 and 1845," has given a graphic picture of the course of trade and industry in England, which, with only two or three short reactions, was continuously downward dur- ing the thirty years of shrinking money, both paper and metallic, which followed the close of the Napoleonic wars. It was of that period that Mr. Walter Bagehot said in his "Economic Studies," about ten years ago : For the thirty years succeeding the peace of 1815 England was al- ways uncomfortable. Trade was bad, employment scarce, and all our industries depressed, fluctuating, and out of heart. The dreary course of prices, continuously drooping, because money was continuously shrinking, under the com- bined influence of the diminished yield of the Spanish- American mines, and of the withdrawal of the irredeemable paper issued in England and other European countries dur- ing the struggle which ended at Waterloo, was relieved, at last, by the flood of gold from California and Australia. Nothing less potent could then have reanimated the financial and commercial world, and nothing short of a second miracle like that will check the ruin which is now inevitable if the monetary function is confined to a single metal. It may be true that the debts of failing merchants and manufacturers are speedily written off or sponged out by bankruptcy laws, and that the destruction of individual debtors, however lasting the effect may be upon them and their families, is soon forgotten by the general public, be- cause the victims sink out of sight in the obscurity of pov- erty. But the entanglements of mgrtgages upon real estate, which constitute a very large part of the possessions of peo- ple of moderate means, will still remain, and so will those SILVER COINAGE. 105 other fixed charges upon the property and labor of the world which exist in the public debts which have been piled up mountain high in modern times. In all stich cases of per- manent debts and fixed charges the oppressive effect of a continuous contraction of money will be felt forever. How vast is the aggregate of the losses which are thus entailed upon the world is illustrated by the clear demonstration sub- mitted recently to the Glasgow Chamber of Commerce by an old and distinguished member of Parliament, Mr. Smith, of Liverpool — that the real burden of the British debt has been increased from the fall in prices, since 1873, by the enormous sum of 250,000,000 pounds sterling. With an enlightened public sentiment upon this question there can be no serious disagreement as to the importance and necessity of employing both gold and silver as the meas- ure of values in the commercial world. It is when we come to the second branch of this general subject, and begin to discus's what is practicable for the United States to do in order. to sustain the monetary use of both the metals, and what is the best policy for us to pursue to effect that object, that considerable divergence of opinion manifests itself. We are met at the very threshold of this part of the dis- cussion by the doctrine that silver must be given up every- where in the commercial world, iinless certain countries in Europe, including especially England and Germany, shall become parties to an international agreement to use both gold and silver, and upon a common ratio. This doctrine seems to have been originally the invention of an Italian, M. Cemuschi, now a banker in Paris, who made a special visit to this country in 1877 for the purpose — in which he completely failed — of persuading Congress that it would be an act of what he called "audacity" on its part to authorize the resumption of silver coinage without first arranging the terms of an accord with the European Powers upon the monetary question. This doctrine is certainly not more than a dozen years old, and appears novel to an extraordinary degree when it is remembered that both gold and silver have 106 SILVEK COINAGE. been regarded and treated as moneys of the world from time immemorial, and have satisfactorily performed the office without a single example in history of the international reg- ulation of the subject. The Latin Union, formed in 1865, is not an example of such a regulation, as it is sometimes sup- posed to be. All the countries composing it were contiguous and acting upon the double standard, and at the common ratio of 15^ to 1, before they entered into the Union. The whole object of the Union was to facilitate the interchange- able use of their respective coins. The doctrine of Cernuschi is not only repugnant to the experience and practice of the world for thousands of years, but it is based upon an entire misconception of both the na- ture and the causes of the fact that the two precious metals, sometimes called the "noble metals," are the world's moneys. When Daniel Webster said, fifty years ago, that gold and silver were money in this country by the law of the land, and money abroad by the law of the world, he neither meant that there was any such impossible thing as legislation for the world, nor that there were international treaties upon the sub- ject, which, although not an impossible thing, had not been proposed nor even thought of. He meant merely that confi- dence in the value and steadiness of those metals had always existed, and was so universal that they were everywhere an accepted medium of exchange, and enjoyed what Edmund Burke called an "everlasting credit." They were thus the moneys of the world, from habits and ideas so fixed as to have the force of law. Their circulation as between nations has not been at any specific and unvarying coinage rate, but at their bullion value, in which there have always been consider- able fluctuations, relatively both to commodities and to each other. But these fluctuations have never been so sudden as to sensibly impair their utility as a medium of international exchange. While the high degree of their value rests upon their scarcity, the stability of their value rests upon the im- perishability which they possess on account of their extraor- dinary power of resisting chemical changes, thereby admitting SILVEE COINAGE. 107 of such an accumulation of the production of ages that varia- tions of the current yield of the mines can only very slowly .affect the stock of these metals. Thus, Humboldt, in a worlc called "Fluctuations in Gold and Silver," (1838,) says: In the modern world, the amount of the accumulated masses of gold and silver already in existence tends to render still more stable the rela- tive value of the metals. Experience has shown this. In England, for instance, in the ten years from 1817 to 1827, more than 1,291,000 marks of gold (i. e., ^180,959,000) were converted into money ; and yet this monopoly of gold only raised its proportion to silver from 1 to 14.97 to 1 to 15.6. Any increase in the production which our imagination could call into existence would be infinitely trifling compared with the accumulation of thousands of years now in circulation. The fluctuations of the metals relatively to each other have been less than their fluctuations relatively to commodi- ties. The greatest change in them, known in history, was that which followed the discovery of America, in 1492, with its vast mines, of which the proportion of the yield of silver has been on the whole far in excess of what it has been in the Old World. But while the effect of the discovery of America was to depreciate the aggregate value of gold and silver to about one-fourth of their previous value, the change in their relations to each other was comparatively slight. It was between 10 and 11 to 1 when America was discovered, but gradually widened until it settled, in 1650, to between 15 and 16 to 1, at which it remained for 225 years, or till the disturbance brought on by the German silver demonetization in 1873. In 1717, Sir Isaac Newton, then mtlfeter of the Brit- ish mint, fixed the relation at about 15 1-5 to 1, or, to speak more exactly, 15 and 14-68 to 1. Our own mint act of 1792 drawn by Alexander Hamilton, fixed it at 15 to 1. The French relation of 15^ to 1 was first adopted in 1785, and confirmed by the First Napoleon in the famous law of 1803. During most of the time the Spanish relation was 16 to 1; and this was adopted by us in 1834, and is still retained. The German silver demonetization of 1873 changed the entire money of a great country from one metal to another. No equal disturbance of the kind, and nothing approximating 108 SILVER COINAGE. it, has ever occurred before nor is likely to occur again for an indefinite period. But great as this disturbance was, the relations of the metals, although widened, soon became suffi- ciently steady for all the practical purposes of international exchange. During the six years from 1879 to 1884, inclusive, the extreme variation in the average annual price of silver per ounce in the London market was only from 52^ to 50 9-16 pence. The figures as given in the London Economist, Feb- ruary 21st, 1885, are as follows : Mean annual Years. pirice per ounce. 1879 •. 51M 1880 521^ 1881 51 11-16 1882 51 10-16 1883 50 9-16 1884 50 11-16 Never, in the history of the metals as the moneys of the world, have they both been used as such in every country, and never, until Cernuschi made his appearance as a finan- cial discoverer, was the doctrine heard of, that it was neces- sary to the use of the metals as world's money that they should both be used as money in every country. It has been proved by experience that the monetary use of gold alone in some countries, of silver alone in other coun- tries, and both together in still other countries, coupled with their extensive employment in all countries in the arts and in ornamentation, is sufficient to make them an available medium for exchange, purchase, and payment everywhere, and thus moneys of the world. It was half a century after England, the nation with which we trade the most, adopted gold as its sole money, before anybody conceived that the United States must cease to coin silver, or that a difference between the British me- tallic standard and our own was any impediment to trade between the two countries. It is only as bullion at its market value, and not as legal tender, that either gold or silver coins serve as a medium of exchange outside of the country which issues them, and silver SILVER COINAGE. 109 bullion possesses everywhere a market value, which is not aflfected during the brief periods which cover commercial operations by such a degree of fluctuation as impairs its use as a world's money. The importance of the metals in the payment of national debts and in international purchases, as compared with their importance in home transactions, and in preserving the steadiness of home prices, is enormously overrated. Foreign trade is in the long run an exchange of products ; the bal- ances are small, first on one side, then on the other ; and in modern times and between commercial countries they are more frequently adjusted by the transfer of such securities as have an international circulation than they are by the move- ment of the metals. It is among the possibilities, although hardly among the probabilities, that international arrangements may be made, which would give to the metals used as bullion and as the world's money a higher degree of stability in their relative values than they now possess. Every attainable improve- ment of that kind is desirable ; and there is no danger that a progressive country like the United States will be behind other countries in any proper efforts to reach it. But it is trifling with the intelligence of the people of this country to affirm that the international use of the metals, which is as old as human history, has all at once become impossible, without treaty arrangements of which no example exists, and the idea of which has not been conceived longer than ten or a dozen years. This country, since its first settlement, has been under the regime of a double standard — as England itself was while we were in the colonial condition, and for forty years after that condition was terminated. The fathers of our independ- ent republic were all agreed in maintaining the same policy ; and although they adopted a different unit of money from that of England, it was not a new coin, but one which Mr. Jefferson said, in a memorial to Congress in 1784, had been long in use, and was even more familiar in the trade of the 110 SILVER COINAGE. country than was the British pound. This new unit which Congress adopted in 1785, under the advice of Mr. JeflPerson, concurred in by Washington, was the silver dollar, which had been received abundantly in our commerce with Span- ish America;. In drafting the mint act of 1792, Alexander Hamilton carried out the resolution of Congress in 1785, that the dollar should be of the value of the Spanish dollar. He did this by causing several hundreds of them to be taken in- difPerently from the actual circulation and to be melted down ; and finding that they contained on the average 371^ grains of pure silver, he fixed that as the amount to be contained in the new dollar to be struck at the mint. The amount of pure silver in our dollar has not changed from that day to this. It is thus true that it is not only the old dollar of 1792, but is identical in bullion value with the dollar which had been in actual use in this country anterior to 1792, and is the most ancient monetary landmark which we have. The market value of the bullion in oxir silver dollar and in the fractional coins was at an exact parity with the bullion value of our gold money until 1821, when there arose a pre- mium upon the latter ranging from 3 to 8 per cent. This continued till 1834, when it was corrected by the act of that year, which reduced the amount of gold in the gold coins. Under the extraordinary abundance of gold yielded by the Califor- nian and Australian mines, a premium arose upon silver coins, amounting to 3 per cent, in 1873, when the act prohib- iting the further coinage of silver dollars was passed by Con- gress without the knowledge of the country, and with the attention of very few members of the body which enacted it. For twenty years previous to 1873 there was no time when silver did not command a premium over gold. Manufactur- ers who consumed silver in large quantities had agents in all parts of the country engaged in gathering silver coins to be melted, and saved in this way about 3 per cent, as compared with the price of bar silver. Some of the persons who are now present will remember, as I do, the piles of silver dol- lars, aggregating hundreds of tons, which could be seen at SILVER COINAGE. Ill the -works of Gorham & Co., in this city, and which were con- verted into all kinds of silverware. The two main arguments which are now urged in favor of arresting the coinage of silver are, first, that to continue it any longer will expel our gold, and make this country a "dumping ground" for the silver of Europe, and thus depre- ciate the silver dollar to its bullion gold value and bring the United States to a single silver standard ; and second, that the best method of forcing Europe into a bimetallic interna- tional arrangement, is to stop coining ourselves. In considering the dangers which are said to be impend- ing unless the present Congress shall promptly arrest silver coinage, we naturally inquire : What has been our actual ex- perience under the silver act of 1878? When such inquiry is fairly answered, it will be seen that during each and every year of the seven fiscal years ending with June 30, 1885, there has been a net export of silver — that is, an export in excess of the import — instead of any "dumping" of that metal upon us from any quarter, and that the total net export of the seven years was $60,172,185. It also appears that during six of the seven fiscal years ending June 30, 1885, there was a net import of gold amounting in the aggregate to $201,759,071; that there was a net export in only the single year ending June 30, 1884, and that amounted to only $18,250,440, or rather less than the addition made to our gold from domestic mines after supplying the consumption in the arts. Taking the seven years together and deducting the export in one of them, there was an aggregate net gold import of $183,508,624. So far during the current fiscal year we have imported more gold than we have exported. From figures obtained at the Mint Bureau, it appears that the total yield of our gold mines from the passage of the sil- ver coinage law, February 28, 1878, to the present time, is about $196,000,000 in excess of the consumption of gold in the arts, which makes an aggregate increase of our gold money, from domestic production and importation combined, of $379,- 508,624. We have now more than six hundred millions of gold 112 SILTEB COINAGE. money, of which nearly two-thirds has been acquired since the resumption of the coinage of silver dollars. The prediction that such resumption would cause the dumping upon us of foreign silver and the expulsion of our gold has been falsi- fied by experience, and it never in fact had any good reason to rest upon. As to the dumping upon us of foreign silver, it is as im- possible as the dumping upon us of foreign wheat, and for the same reason, namely, that we produce more than we con- sume. Our use of silver in coining dollars under the act of 1878, and in the arts, is less than the production of our mines. The excess of their yield beyond the demands of manufactur- ers and of our mints must necessarily be exported, and must fall to a price at which it can be exported. An importation of silver from Europe is impossible, because that continent has no stock excepting its coinages, in which silver is rated about 3 per cent, higher than it is in our dollars, and more than 20 per cent, higher than it will command to-day in our markets. Our gold can only be expelled by such an increase of either our paper or our silver circulation as will raise the total volume of our money above the proper proportion to the vol- ume of money in other commercial countries, so as to inflate our prices relatively to prices abroad, and thus cause an ad- verse balance of trade. But our paper circulation is slowly diminishing from the shrinkage of the National Bank notes ; and the annual addition of 28,000,000 silver dollars is less than the amount which is required to keep the monetary vol- ume of this rapidly growing country in a fair proportion to the volume elsewhere. During the fiscal year ending the 30th of last June, the foreign merchandise trade of this country was $164,662,426 in our favor, which is conclusive proof that our prices are not too high relatively to prices abroad, notwithstanding the increase of $379,508,623 in our gold money, and of our an- nual coinage of 28,000,000 silver dollars since February, 1878. Those who predict that the volume of our money will become SILVEE COINAGE. 113 excessive from the present rate of our silver coinage, so as to expel gold, which is now the only part of it that can be ex- ported, overlook the steady and very large increase in the money-absorbing power of a country like this. It may be likened to a reservoir which, if its capacity were fixed, would soon overflow, if a stream of water were always running into it and none was running out, but which would never overflow if its capacity was constantly enlarging in a proportion equal to or greater than the inflow. If fears can possibly remain of the depreciation of our silver dollar to its bullion value, or of the expulsion of gold during the present generation from the continued annual coinage of 28,000,000 silver dollars, I hope those who enter- tain them will be quieted by remembering that France, with a population of only two-thirds of ours, and with only one- eighteenth of our territory, sustains a full tender silver circu- lation of $535,000,000, 3 per cent, less valuable than ours, at an exact parity with gold, and has, during the recent years of divergence between the values of gold and silver bullion, lost none of its gold money. As to the question whether the stoppage or continuance of our silver coinage would be most likely to induce Europe to make a greater use of silver money, we know two things with certainty : one is that the progress of silver demonetiza- tion in Europe, when it was under full headway, was brought to a dead halt by the passage of our silver coinage law ; the other is, that a fall in the gold value of silver, which will inevitably result from now closing our mints against it, has an obvious effect to impair confidence in it, and to render its rehabilitation more difficult. On the 23d of last September, when the London quotation of silver had reached the extreme low point of 47 5-16 pence per ounce, the New York Times said, with exultant hope : If silver should drop a penny an ounce before Congress meets, as it easily may, there would be a majority in that body in favor of stopping the coinage. The fall in silver from the closure of our mints would be immediately followed by the closure of the Indian mint. 114 SILVER COINAGE. which would still further aggravate the fall, and so intensify the distrust of the metal as to make its restoration impossi- ble. A great British interest, composed of Englishmen and English banks, holding credits in India, is always at work in favor of stopping the coinage of the Indian rupees so as to bring them back to the old relation of ten to a pound ster- ling. They will be aroused to a greater activity if we pursue a policy which will still further depress silver. An organ of that interest, the London Times, on the 30th of last Sep- tember said : The Bland act has recently exhibited most unmistakable signs of being in a moribund condition; and when that goes the only question that will remain will be, how long can the Indian mints be kept open? It is said that stopping our silver coinage will so disturb the exchanges between Calcutta and London as to force Eng- land into a bimetallic arrangement. The truth is, that the British Cabinet can make the rate of exchange between Cal- cutta and London just what it pleases by arresting or restrict- ing the coinage of the rupee ; just as the Dutch, by limiting the coinage of silver florins in Java, keep them identical in value with silver and gold florins in Holland. English journals of all shades treat with the ridicule it deserves the idea that we can compel British coinage of silver by disturbing the Indian exchanges by the method of closing our mints. It is also said that we can coerce England and Germany by stopping our silver coinage and throwing a still greater monetary demand upon gold, thus producing a further de- pression of prices, and bringing on an intensity of commer- cial and industrial distress which the United States, as a new and prosperous country, can bear better and longer than the old and hard-pressed populations of Europe. The folly of what is thus suggested consists in this : that while the inten- sity of the distress which we can produce at home and abroad by repealing our silver law is not exaggerated, it will not reach the banking and moneyed and creditor classes by whom the policy of England and Germany is controlled. It is pre- cisely in that distress which is caused by falling prices and SILVER COINAGE. 115 » appreciated money, that the holders of the fabulous aggrega- tions of moneyed capital in London find their gains. The influence of this class of capitalists now absolutely controls the British Government, and is likely to do so for an indefi- nite period ; and a similar influence is only a little less pow- erful in Germany. There is already a severe depression in all European industries. It exists to such an extent that England is forced to the appointment of a commission to inquire into its causes ; but the arts of the London press, which is manipulated by London bankers, bondholders, and mortgagees, will be sure to divert the inquiry away from the true cause. To them it is a matter of comparative indiffer- ence that mills are closed at Oldham ; that the cotton manu- facturers of Lancashire seem to be on the brink of ruin ; that the ship-yards on the Clyde are deserted, and that iron mines and works are closing one after another. So long as they are themselves collecting dividends and securing their income in a constantly appreciating money, the disasters of others will move them as little as the prostration of great industries in Fall Kiver and Providence will move the moneyed interests of New York, which are struggling to fasten a single gold standard upon this country. It is not by the method of bringing on a distress by stop- ping the coining of silver, in which we must all be partici- pants, in the vain hope of softening the hearts of financial Pharaohs abroad or at home, that we shall best sustain the ancient measure of values in the world. The road in which we niust march to effect that object, and which lies straight before us, is to coin it ourselves, and thereby to sustain its value, and to direct our attention to the silver-using countries which offer the most profitable opening for our foreign trade, rather than to Western Europe. It is in that way, as Gov- ernor Boutwell said in a recent address in Boston, that our best hope lies of coercing the gold standard countries on the other side of the Atlantic to restore silver, in order to pre- vent our obtaining an advantage over them in the competi- tion for South American and Asiatic commerce. 116 SILVEB COINAGE. ( The control which the United States has over this ques- tion is clearly shown by the fact, which is acknowledged by all authorities in Europe, that the fall during 1885 in the gold price of silver, was caused almost entirely by the agita- tion for the repeal of our silver coinage law, which was re- vived by the unmasking, in February last, of the purpose of Mr. Cleveland and his advisers, to make that a leading object of his policy. It was certainly not caused by either any in- crease in the production of silver, which our Mint Bureau estimates to have been 11,000,000 less in 1884 than in 1883, or in any falling off in the Indian demand, which is the chief factor in fixing its value. The net import of silver by India, that is, the excess of imports over exports, during the last Indian fiscal year, ending March 31, 1885, was $35,598,877, whereas, during the preceding year it was only $32,174,445, and during the five previous years the annual average was only $27,500,000. During the first four months of the cur- rent fiscal year, that is to say, during April, May, June, and July, the net import was $23,244,085, or at the enonnous rate of $69,732,255 for the whole year. In short, no other cause can be assigned for this year's fall in silver than the attack made upon it by the Cleveland Administration. That this was the real cause is shown by all the evidence in the case. At the beginning of 1885 the London price of silver per ounce was 50 pence, and it fell to the panic price of 47^ pence on the 17th of September, upon the publication, in the London Times of that day, of the following dispatch from Philadelphia, under date of September 16 : A Cabinet council was held yesterday to consider the silver question. Both the President and Secretary of the Treasury will recommend Con- gress to stop the coinage of silver dollars. The London Economist of September 12, commenting upon the cause of the fall in silver, said : In the main, it is only the old cause — apprehension as to the future of silver — which has been in operation for years, but which has recently been revived and intensified by the agitation in the United States against the continuous coinage of silver. SILVER COINAGE. 117 The London and China Telegraph of the 26th of Septem- ber said : At a Cabinet council held in Washington on the 15th inst., it was resolved to recommend Congress to stop coining silver under the Bland bill, and the semi-panic on Thursday, September 17, was a not unnatural consequence. The London Banker's Magazine for the beginning of Oc- tober says : The agitation of the repeal of the Bland act is a main cause of the depreciation. The amount of silver coinage in the States is 5,000,000 pounds sterling annually ; and were Congress to sanction an abrogation of the law that enforces the absorption of that amount by the Treasury, a complete glut would doubtless be seen on the market. The Manchester Guardian of October 16 said : The recent heavy fall in the silver market and the Eastern ex- changes has been caused mainly by an apprehension of the repeal of the American silver coinage act of 1878. As the recent fall in the value of silver was caused by the expectation in Europe that our coinage would' be stopped, Congress can restore its value by manifesting its determina- tion to continue it. That body will be encouraged to- this course by the fact that all circumstances favor the belief that the future Asiatic demand for silver, and the Indian demand in particular, will be larger than ever before. The develop- ment of the resources of China by railroads and textile ma- chinery, and by all the other aids to industries known to the Western world, is believed to be near at hand, while the rapid advance in population, commerce, industries, and wealth of India, which has been for centuries the greatest consumer of silver, is an assured fact. The total foreign merchandise trade of India, in and out, for the fiscal year 1842-43, was only X20,550,000, but it ex- panded to £135,570,000 in the year 1882-3, a gain in forty years of nearly seven-fold. The steadiness of the progress made by that country is shown by the table : Imports. Exports. 1842-3 . . ■• £7,600,000 £13,550,000 1852-^3 10,070,000 20,460,000 1862-3 22,630,000 47,860,000 1872-3 31,870,000 55,250,000 1882-3 52,090,000 83,480,000 118 SILVEE COINAGE. Within forty years the Indian export of raw cotton in- creased from £2,390,000 to £16,050,000, and the export of grain of all kinds from £630,000 to £14,880,000. The export of wheat has grown up wholly within a few years, and it is estimated will reach 50,000,000 bushels during the current fiscal year. In the Indian foreign merchandise trade there is uniformly a large balance of exports, which enables India to import the gold which it requires for ornamental purposes, and the greater quantity of silver which it requires for both ornamental and monetary purposes, in addition to paying the interest on it^ foreign debts. The industrial and commercial India of to-day is the creation of the past few years. Bail- roads and machinery have made a new country of it. Its wealth has enormously increased, and with that increase has come an enlarged use of the precious metals in ornaments. In all aspects, and even if the Indian coinage of silver should be arrested, the extraordinary prosperity of India is a most important element in forecasting the future demand for that metal and its future value. All the facts of the situation point to the conclusion that it is within the power of this country, by its own action, and without seeking the support of international treaties, to main- tain silver in its old place as one of the metallic moneys of the world. To say that, is not to set up the claim that we can, by our own policy, force a new money upon mankind ; it is merely affirming what is true and what is recognized on all sides in Europe, that in view of the actual relative strength of the opposing forces in the battle of the standards, the power of this country is great enough to turn the scale in favor of silver, which is to-day the only money known to a majority of the human race. The exclusive gold standard exists only in England, including its English-speaking colonies ; in Ger- many, and even there the demonetization of silver has not been fully carried out ; in the small Scandinavian States, and in Portugal, which is really a British dependency. These several countries contain, all together, only about one-twelfth part of the population of the globe. Instead of Europe be- SILVER COINAGE. 119 ing a unit in favor of the single standard of gold, silver is still a full legal tender among the great majority of its in- habitants, either as the exclusive metallic money, as it is in Austro-Hungary, and Russia, or in conjunction with gold, as it is in the Latin Union, Holland, Spain, and some minor States in Eastern Europe. To-day there is more than four times as much full tender silver circulating in Europe as there is in the United States. The European countries which use it can neither bear the loss of replacing it with gold, nor can they find anywhere the gold with which to replace it, if their ability to pay for it .were ever so great. The Latin Union has just been extended for another term of five years. In this divided and neutralized condition of Europe, and upon the determination of this country to assume the coinage of silver which was formulated into law in 1878, it cannot be doubtful that the battle of the standards would have been definitely ended, had not the natural and legitimate effect of that law been counteracted. The executive branch of the Government has been all the while in the hands of persistent and uncompromising enemies of silver. Of the seven annual Presidential messages since February, 1878, only two have been silent on the subject, the other five insisting on the ab- solute stoppage of the coinage of silver ; while every annual report of the Secretary of the Treasury has without excep- tion been of the same complexion. In all ways the succes- sive Executives have been playing at cross-purposes with Congress ; and having the advantage of controlling our diplomatic representation abroad, regular and irregular, they have succeeded in creating in foreign countries such a distrust in the permanency of our silver policy of 1878, and more recently such a confident belief that it is sure to be abandoned, that the influence of the United States on the world has been more on the side of gold monometallism than on the side of bimetallism. The recent instance of the accrediting of Manton Marble, of New York, city, a gold mono- metallist of the worst type, to run about Europe as the mouth- piece of American policy upon the question of the standards. 120 SILVER COINAGE. is, to be sure, a greater misrepresentation of the country than anything which we have before witnessed. But the differ- ence is only in degree. In contrast with the incalculable evils which everybody except a few gold standard doctrinaires admit to be involved in the final suppression of silver as a monetary metal, how petty and trivial are the objections which are most frequently and noisily made to the coinage of silver dollars. They are said to be unavailable in the payment of debts due in foreign gold-standard countries ; but that is true only in the same sense and to the same extent th'at greenbacks and national- bank notes are so. A merchant holding silver dollars and owing debts in England, which for any reason he prefers to pay by shipping money rather than merchandise, must ex- change his silver dollars for gold, which is precisely what he must do if he holds greenbacks or national-bank notes ; and the exchange is made as easily in the one case as in the other. Silver dollars are said to be heavy, but they are no heavier than they always were, and the weight of silver as well as gold has become a matter of indifference, because they can be used in the form of Government certificates or other rep- resentative paper. The expense of providing vaults for the storage of silver is complained of, when everybody knows that there is no difficulty in providing sufficient storage for the most bulky articles, like pig-iron and jute, in bonded warehouses in New York, and that the Government has pro- vided storage in Kentucky and elsewhere, for as much as eighty million gallons of whisky held as security for the taxes thereon. It will be strange, indeed, if this country can be per- suaded, by suggestions so inconsequential, to be an assisting party to the exclusion of silver from monetary use in the commercial world ; and without our assistance that exclusion can not be accomplished. It is impossible to estimate the disasters which will follow it. Even President Francis A. Walker, an able advocate of the suspension of the coinage, has recently been compelled to admit, and I shall quote his SILVER COINAGE. 121 own language, "that among its consequences will be the enhancement of the burden of all debts and fixed charges, act- ing as a steady drag upon production," and that "suffocation, strangulation, are words hardly too strong to express the agony of the industrial body when embraced in the fatal coils of a contracting money." , All the existing financial conditions invite us to a conserv- ative policy. Our money is not inflated. On the other hand, we are suffering from low prices, which result in part, at least, from a contracted currency. It is less than thirteen years since silver was at a pre- mium in gold. Who can say that within less than that time it may not be at a premium again ? A slight increase in the demand for Asia, or a slight falling off in the production, both of which are not improbable contingencies, would be sufii- cient to upset all calculations. There is no agency so potent in solving difficult questions in finance as time. A very short time may be sufficient to indicate clearly the course which this country should pursue. No one claims that any evil has thus far resulted from the coinage of silver. Even President Cleveland said in his late annual message, " there is certainly not .silver enough now in circulation to cause uneasiness, and the whole amount coined might after a time be absorbed by the people without apprehension." There are wiser men in finance than Mr. Cleveland, who believe that we could continue the coinage of silver at the present rate for twenty years without any just cause for apprehension. In fact, we would have to coin it for twenty years at the present rate before we would have an amount of silver coin, in proportion to our population, as large as France has, and there has never been the slightest shade of disparity between the silver money and the gold money of France, and no one has any apprehension that there ever will be any. It is not existing troubles which are complained of, for it cannot be denied that thus far the silver coinage law has worked well. 122 SILVER COINAGE. It is disasters to overtake us in the future of which we are warned. The alarmists on this subject, the same men who are now urging a suspension of the coinage, have never ceased to warn us of our danger during the eight years which have elapsed since we commenced to coin silver. ;rhey at first fixed the limit of safety at $50,000,000, and informed the country that we could not go above that amount without creating a premium on gold. When we had coined $75,000,000 we were declared to be on the brink of ruin, and if we went a step farther we would drive the gold out of the country. After this limit was well passed and no harm came to us, the danger signal was taised at $100,000,000. Well, we have coined over 210,000,000 silver dollars, and still there is no premium on gold and no discount on silver, and so far at least the prophets of evil have all proved to be false prophets. Among the persons who advocate a change in our mone- tary standard or in the laws relating to our coinage, there is a great diversity of opinion. Senator Sherman, than whom there is no better informed person on the subject, admitted in a speech which he made in the last Congress, that it would be dangerous to contract the money of the country by sus- pending silver coinage, and that the interests of the country demanded the continuous use of both gold and silver. The only change which he favored was an increase in the weight of the dollar. Senator Aldrich, who represents the State of Rhode Island so ably in the Senate, thinks that the only safe plan is to stop the coinage of silver altogether until we can secure some international arrangement with certain Euro- pean countries. Senator McPherson thinks it is unwise to coin silver at all, and he introduced a bill in the last Congress providing for the issue of certificates which should be based upon silver bullion at its market value, and which should cir- culate as money, the bullion to be held by the Government in the form of bars. Even among the advocates of a change in the weight of the dollar there is no accord. They all know that if we in- crease the weight of the dollar so that its bullion value shall SILVER COINAGE. 123 be equal to its face value, and silver should advance in price, our silver money will go into the melting pot and disappear from circulation, as it did from 1853 to 1873 ; and if, on the other hand, silver should farther decline, we would still be coining a debased dollar. The opponents of the present coinage law agree only upon one thing — that an evil exists ; but when it comes to provid- ing a remedy by those to whom this duty belongs, their con- fusion is like that of the builders of the Tower of Babel. A KEJOINPER. BEPLY TO THE CKITICISMS OF THE PROVIDENCE JOXJENAL, FEBRUARY 9, 1886. To the Editor of the Providence Journal : As you kindly gave so large a space in your paper to the address which I delivered on the 9th ult. before the Commer- cial Club of your city, I have neither the right nor the dis- position to complain of the criticisms you have made upon it. Observation has taught me that those who undertake a controversy with editors in their own columns almost invari- ably get the worst of it ; yet, with your leave, I will note cer- tain points in which your criticisms appear to me to be either not well founded or to be open to fair answers : First — My statement that a depression of prices followed, and was in part caused by, the German silver demonetization of 1871-3, is not answered by saying, what is undoubtedly true, that prices fell, not only in Germany or in England, which has long been monometallic, but in other countries, like the States of the Latin Union, in which silver is money as well as gold. A fall in prices in Germany, resulting from a demonetization of silver, could by no possibility be con- fined to that country alone. Prices in all countries tend to an equilibrium, and what Germany did in going from a silver , to a gold standard was to draw gold from the whole world outside of itself, and the necessary consequence was the fall of gold prices everywhere. Second — In your paper of January 12th you ask : "Who is it that claims that no coins should be struck except from gold? Who is it that says that silver is no more appropriate for coinage than iron or lead?" It may have escaped your A EEJOINDEB. 125 attention, but it is true that the assertion has been frequently- made that the holders of pig iron or pig lead were as well entitled as the holders of silver to have their property stored in the Treasury, and to obtain certificates invested with the monetary function therefor. During my brief visit in Provi- dence I was several times asked why certificates based on wheat or some other commodity would not be as good money as certificates based on silver. The persons who ask such questions overlook the pre- eminent fitness for being money which both gold and silver possess, owing to the magnitude of the existing stocks of these metals as compared with their annual production, which gives them so great a stability of value relating to commodities and to each other. Cernuschi, who may be said to be the author of the false and wild theory that silver ought not to be coined anywhere until there can be an international adjustment of its value relatively to gold, is constantly affirm- ing that without such an international adjustment there can be no greater stability in the relative values of gold and sil- ver than there is between the relative values of sugar and coffee or iron and lead. Third — In the several editorial articles which have ap- peared in the Journal, in the address of Mr. Edward Atkin- son before the Board of Trade, and in the letter of Warwick, the burden of the refrain is the 80-cent dollar, the dishonest dollar. If an unanswerable argument is presented, showing that the interests of the country absolutely require a gradual and moderate increase in the volume of money, on account of the increase in the exchanges, wealth, and population of the country, and that the coinage of silver is the safest and best method of securing it, the reply is made, and it is the only reply that* can be made, that the silver dollar is a dishonest dollar. Is it a dishonest dollar? It is an undeniable fact that it is at the pft-esent time in all the markets of this coun- try exactly equal in value to a dollar in gold or greenbacks. Warwick says that there is no way in which a merchant can exchange silver for gold. But neither Warwick nor anybody 126 A EEJOINDEK. else will claim that silver dollars can be purchased in the United States at a discount, or that gold dollars can be sold at a premium. That there may be no misunderstanding on this question, I will make Warwick a definite offer. I will pay him at the Fourth National Bank in New York for 100,- 000 silver dollars $99,000 in gold. I will require one week's notice, on account of my distance from New York. If the silver dollar is worth only eighty cents, as claimed by War- wick, he will make a profit of $19,000 ; if, as I claim, it is worth exactly as much as the gold dollar, I will make $1,000 profit. Warwick is a man of large wealth, and will have no difficulty in buying the silver dollars at a discount if they are to be had. He will not accept my offer, because he knows he cannot buy 100,000 silver dollars for less than $100,000 in gold, greenbacks or National-bank notes. Admitting that the gold dollar is an honest dollar, how can it be said that another dollar, which can be changed at any time for the gold dollar, is a dishonest dollar. I am aware that you will answer that silver dollars are a legal tender by law, and everybody is forced to take them ; but there is no law which compels anyone to give gold for them, and so long as they are exchangeable for gold on equal terms it makes but little difference to the holder why they are so. The statement, so often repeated, is simply false. If it were said that at some future time the silver dollar would not be at par with the gold dollar, and therefore would become a dishonest dollar, I could only say in reply that the proposi- tion was one on which there might be two opinions and it was a fair subject for discussion. In the several speeches which I had the honor of deliver- ing in the United States Senate, beginning in 1882, I main- tained the doctrine (I do not mean to be understood that it originated with me) that inasmuch as a premium on gold would expel it from circulation, no such consequence could result until there was a sufficiency of money of other kinds than gold to maintain our prices at an equilibrium with prices in the commercial world, and that the period was in- A REJOINDER. 127 definitely remote when the coinage of silver dollars, at the present rate, would produce in this rapidly growing country such a sufficiency. This doctrine has never been contro- verted, so far as I am aware. The principles on which it rests are identical with those upon which rests that other doctrine familiar and well-established among economists, that when a legal tender — irredeemable paper — is introduced into a coun- try previously using coin money, no premium can arise upon the coin until the issue of irredeemable paper becomes suffi- cient in quantity to take the place of coin and to maintain the previously existing range of prices. Since the delivery of my recent address in Providence the Boston Herald, a paper well-known in your city as one of the ablest and most persistent organs of those who oppose silver coinage, has had the fairness to admit not only that this doc- trine is a sound one, but that it is a "fundamental principle of finance." This admission was made in its issue of Janu- ary ID, upon the occasion of the publication in the Herald of a letter from Washington reporting the prediction of Mr. Dingley, of the House of Eepresentatives, that the payment in silver of the Government bonds would immediately force gold to a premium of 5 per cent, or more. Upon this latter the Herald made the following comment : Be the chances of legislation what they may, Mr. Dingley is entirely mistaken in his prediction of a gold premium. There is no possibility of a premium on gold until the total volume of the unexportable cur- rency exceeds the amount of money required for the transaction of the internal business of the country at gold values. This is a fundamental principle of finance. That the continued coinage of silver at the present rate might at some future time result in a divergence in the values of the coins of the two metals is possible, but I am sure that no unprejudiced student of finance can fail to see that such an event cannot occur for twenty years to come, and unless the country is forced to the policy of using an irredeemable paper money ; with our rapidly-growing population and wealth, and with the disappearance of the National-bank notes, which must follow the payment of the Government 128 A EEJOINDEE. bonds, it is more likely to be forty years. Long before there can be any possibility of danger of a premium on gold the policy which this country should pursue in regard to silver will be plainly indicated. Fourth — Tour assertion seems extraordinary that the op- ponents of the silver-coinage law of 1878 would be willing to allow the coinage to be continued if the dollar was so in- creased in weight as to equalize the bullion values of the gold and silver dollars, and that they have never been, and are not now, opposed to the striking at our mints of what is called an "honest" silver dollar. I believe that there was no time during my six years of service in the Senate, when a dozen votes could have been obtained in both branches of Congress in favor of a bill to increase the weight of the silver dollar. I do not remember that during that time any bill for that purpose was ever in- troduced. If such a bill was introduced it attracted no atten- tion. No such bill was reported from any committee of either the Senate or House, or was supported and brought to a vote in either. The contention which occurred in these bodies was on the proposition to summarily stop the coinage of silver alto- gether, or, what is the same thing, to indefinitely suspend it, and with no provision for any substitute for it. It was a bill of that kind which the Senate Finance Committee reported last winter and pertinaciously pressed till the very close of the session. It was an amendment of that kind to an appro- priation bill in the House which received the unanimous support in that body, on the 26th of last February, of all the opponents of the existing coinage law. To this it may be added that, from first to last, the leading newspaper organs in New York city of the opponents to that law have ridiculed and denounced the idea of a heavier dollar. I do not deny that that idea has had some able advocates, such as Hon. John Sherman and Hon. Edwards Pierrepont, but it is certainly true that they have never been able to rally any considerable number of adherents, and I am quite sure that Mr. Sherman A REJOINDER. 129 has never made any effort to secure any definite legislation for a new dollar. It is an unavoidable incident of the situa- tion that the leadership of the movement against silver is now in the hands of the Cleveland Administration. The question is not what isolated individuals, having no control over the cause of the controversy, may believe or may say, but what the President and his Secretary of the Treasury advise, and what the supporters of the Administration's policy on the silver question are now doing and proposing to do. Following the lines of his letter, written just before his inauguration. President Cleveland, in his first annual mes- sage, urges at great length, not the coinage of a heavier dol- lar, but the indefinite suspension of the present coinage, which he declares to have already gone "beyond the amount needed for a sufficient circulating medium." Nowhere in his message does he recommend what is called an honest silver dollar in the sense of one having a bullion value equal to that of the gold dollar. His Secretary of the Treasury goes still farther, and devotes a page and a half of his report to the special denunciation of the idea of putting more silver in the dollar. He says that the "objection" that it will be a "direct hinderance to the international bimetallic union" is "fatal to the proposal to put more silver in the dollar." He adds : "Another decisive criticism upon the proposal is that it implies the necessity of further purchases and coinage of silver, which necessity does not exist." And he adds further : "The coinage of silver, not being free to all comers, but be- ing exclusively a coinage of Treasury purchases of silver, there is no reason for making a heavier dollar, whether the purchases are to be continued or to be stopped." The character of the bills introduced in Congress during the .past few weeks by Senator McPherson and other oppo- nents of the existing law for coinage, indicate conclusively that the question of repealing or suspending that law will be, during the present Congress, as it was during the three preceding Congresses, the only one which will be pressed. How, then, Mr. Editor, can you say, as you did in your issue of the 13th, "Did he (Mr. Hill) suppose that the Com- 130 A REJOINDEE. mercial Club, even after dinner, would not make the discrim- ination between no silver coinage and a dishonest silver coinage?" And then follow it up with the implication that the factor of stopping the coinage was non-existent, etc. If you will indulge me, I will add a word of a personal nature to my already too long letter. In the replies that have been made to my address, in your editorial columns, in the address of Mr. Edward Atkinson before the Providence Board of Trade, in the letter of War- wick, which was printed in the Journal, in an abusive edito- rial in the New York Evening Post and in other newspapers, it has either been stated in direct terms or plainly implied, that my advocacy of silver coinage is based upon selfish motives. Such statements or implications are neither manly nor true. I believe I have myself dealt with this question without personalities. I might inquire what motive Mr. Atkinson has for his hatred of the men who believe that the welfare of the country demands the continuous coinage of silver dollars, but when it becomes necessary to defend the policy of making silver money by that method I will retire from the field. I have often stated that it is for the interest of certain classes of capitalists to make money dear and scarce, and that they are guided by those selfish interests in opposing the coinage of silver or anything else that has a tendency to maintain the volume of money, but I have never found it necessary to attribute selfish motives to any antago- nist in the discussion of these questions. Even if I had been inclined to do so, I should have feared that my reader or hearer would ha^^e reached the conclusion that I could not answer the arguments of my opponent, and, therefore, got mad and said that he was paid to talk in that way. The fact is, I have no interest in silver mines. I have never made a dollar in mining for silver. I am the manager of a company whose business it is to buy gold, silver and copper ores, and extract the metals and refine them. We re- ceive every day quotations of the market price of silver from New York and London. The prices we pay for ore are based A EEJOINDEE. 131 on the market rate for the metals, and we sell them at the market rate. Success in our business is dependent only in a slight degree upon the prices of the metals in which we deal. I am not in debt to any one, and therefore would derive no pecuniary gain from an increase in the volume of money. On the contrary, the property of which I am possessed is of such a character that I would gain much more by the en- hanced value of money, if we were to stop coining silver, than I would lose by any fall which could occur in the price of silver bullion. I am not accustomed to this mode of defense. On two occasions in the Senate, when I had stated at length my rea- sons for believing that silver coinage should be continued, the reply was mainly an attempt, or an apparent attempt, to "show the Senator from Colorado how he could get a higher price for his silver," the object being, of course, to break the force of his argument, by assuming that its author was a "bonanza" silver miner. I have studied the currency question with some care, and think that the conclusions at which I have arrived are founded on facts and sound principles. Whether they are right or wrong, they rest on a broader basis than my own selfish interests. Very truly yours, N. P. Hill. Denver, Col., February 3, 1886. PAYMENT OF THE NATIONAL DEBT. A speech delivered in the Senate of the United States February 10, 1883, the Senate having under consideration the bill (H. R. 5538) to reduce internal-revenue taxation. Me. Peesident : In the discussion of the public finances it is often asserted that even if all our modes of collecting taxes are the wisest that could be devised, and if the aggregate amount of taxes collected is not found to be burdensome, our revenues ought nevertheless to be reduced, that we are col- lecting more money than is required or can be used for any legitimate purpose, so that the excess constitutes an irresist- ible temptation to extravagance and corruption, that our accumulations of unemployed cash in the Treasury and pay- ments made in respect of the national debt are beyond any former precedent, and finally, that there is a substantially unanimous concurrence of public opinion that the revenues must in some way be reduced even if it becomes necessary to repeal some taxes of which nobody complains, and others which are positively beneficial to the country in either their moral or economical effects. In a speech made by the Senator from Vermont [ Mr. Mor- rill] on the 10th of January, in opening the debate on the tariff bill, he said : " This bill has been made to secure with greater certainty a reduction of a too abundant revenue." The chairman of the Committee on Appropriations [Mr. Allison J in a speech made on this floor on the 20th of Janu- ary, used the following language : We all say, and we all affect to believe, that in addition to the pas- sage of the appropriation bills it is necessary to relieve the people to some extent from the great burdens that rest upon them in way of taxa- tion, and relieve the overflowing Treasury from the §150,000,000 of sur- plus in it. I believe it can be shown that all statements of this char- acter are destitute of any foundation in fact. Our revenues PAYMENT OF THE NATIONAL DEBT. 133 are not extraordinary in amount. There is no unnecessary accumulation of money in the Treasury. "We are not paying off the national debt at a rate that is unprecedented or inju- rious to the interests of the nation. Going back to the period immediately following the close of the war we find that the revenues of the Government were then much larger than they are now. I admit this would not be a fair comparison, inasmuch as the close of the war left a mass of demand liabilities, the immediate payment of which was necessary in order to carry through a successful funding of the remainder. But in 1869 order had been completely restored in our finances and the public credit did not require any unusual measure for its support. During the four years beginning with July 1, 1869, which cover substantially the first term of General Grant's Administration, the public reve- nues were as follows : Year ending June 30 — ^ 1 ill ill 1870 $194,538,374 296,270,408 216,370,286 188,089..522 $184,899,756 143,098,153 130,642,177 113,729,314 $395,959,833 1871 1872 375,431,104 364,694,229 1873 322,199,673 During the four years which will end on the 30th of June, 1883, taking those of the current year at the figures estimated by the Secretary of the Treasury, the revenues were as follows : Year ending June 30 - 1880 1881 1882 1883 $186,522,084 198,159,676 220,410,730 234,999,990 $124,009,373 135,264,385 146,497,595 144,851,929 s-a 8> $333,526,500 360,782,292 403,525,250 415,000,000 134 PAYMENT OP THE NATIONAL DEBT. During the four years ending June 30, 1873, the annual average was $364,310,759. During the four years ending June 30, 1883, they averaged annually $378,208,510. The increase is unimportant, notwithstanding the great increase of popu- lation and still greater increase of wealth during the inter- vening decade. During the two years ending June 80, 1869, the average annual revenue was $366,811,355. During the two years ending June 30, 1867, although for reasons already given I do not claim that they afford a proper basis for comparison, the annual average was $491,398,122. It is true that during the six years of panic, falling prices, and prostration of business, between June 30, 1873, and June 30, 1879, the revenue fell to an annual average of $280,799,- 666, the total receipts for this period having been $1,684,797,- 999. That the revenues have since enlarged is not the result of the imposition of new or of the increase of old taxes. On the contrary, the changes in taxation, though not considera- ble, have since been in the direction of a reduction. The revenues are now larger than they were during those six years, partly because there is more population to collect them from, but mainly from the increased prosperity of the country ; and it is not a matter of complaint but of congratu- lation that the revenues have expanded from such causes. The taxation, while more fruitful, is less felt. Upon this brief review of the public revenues since the close of the civil war there is clearly no ground for saying that they are now so unprecedented in amount as to justify a demand for their reduction, without regard to whether the tax-payers are contented or discontented, or whether there are or are not any appropriate public objects to which the money can be applied. The persons who declaim against a revenue of a million of dollars daily as in itself such a monstrous abuse as to call for an instant correction, no matter by what remedy, forget that the revenue has been at about the same average since 1865, and has not been below it except during the extraordi- nary depression in business which followed the financial crisis PAYMENT OF THE NATIONAL DEBT. 135 of 1873. They fail also to take into account the fact that since 1865 the population of the country has increased by over one-half while its wealth has trebled and perhaps quad- rupled. Nor is it true that the annual average payments in respect of the debt, since the revival in the prosperity of the country in the summer of 1879, have exceeded in any appreciable degree the annual average of such payments during the entire period since the close of the civil war. They are almost identical in amount with the annual average of such payments during the four years ending June 30, 1873. Noth- ing has changed except that as the interest charge has become less, more of the accruing surplus has been left to be applied to the principal of the debt. No more of the money of the tax-payers is now collected and paid over to the public cred- itors, and those creditors are not now receiving more. Less of what they receive is called interest and more of it is called principal ; but that change of nominal designation does not affect the actual fact as to the amount of revenues raised to be applied to debts, while it does most substantially improve the prospect that the country may be finally relieved of debt altogether. During the four years ending June 30, 1883, the payments on account of the interest of the debt and the reduction of the net principal, that is to say, of the total debt less the cash in the Treasury, have been as follows, the figures for the present year being in part estimated by the Secretary of the Treasury : Year ending June 30— 1 •a 3 .1 1880 $95,757,575 82,508,741 71,077,206 59,500,000 $85,034,961 101,573,484 151,674,351 120,000,000 1881 1882 1883 136 PAYMENT OF THE NATIONAL DEBT. During these four years payments on account of the interest amount to $308,843,522, and reductions of the prin- cipal amount to $458,282,795. The total payment in respect of the debt was $767,126,298, which is an annual average of $191,781,574. During the seventeen years, from June 30, 1865, to June 30, 1882, the payments in respect of the debt were, principal, $1,041,000,000; interest, $2,047,000,000. This is a total of $3,088,000,000, or an annual average of one hundred and eighty-one and two-thirds millions of dollars. During the four years ending June 30, 1873, the amounts paid annually for interest on the debt, and the annual reduc- tion of the net principal of the debt, are as follows : Year ending June 30- 1870. 1871. 1872. 1873. $129,235,498 125,576,565 117,357,839 104,750,688 $102,643,881 94,327,765 100,544,491 44,667,630 During the last named four years the payments on account of interest were $476,920,590, and on account of principal $342,183,767, making the total payments in respect of the debt $819,104,357, or an annual average of $204,776,089. I am not now discussing the question whether an annual average payment of $191,781,574 in respect of the debt dur- ing the last four years is excessive. But that it is not unpre- cedented is proved by the facts that it was $204,776,089 during the first term of General Grant's administration, and that it was more than $181,000,000 during the seventeen years from June, 1865, to June, 1882. There have not been and are not now any accumulations of cash in the Treasury beyond the amounts which the Sec- PAYMENT OF THE NATIONAL DEBT. 137 retaries of the Treasury in the lawful exercise of official authority decide to be needed as a fund to assure the redemp- tion of the greenbacks and to maintain a working balance for the public expenditures. At this -particular time the cash balance is at an unusually low ebb. The Treasury statement on the 1st of January, 1883, gives it at $149,037,773, but as in that statement $28,721,530 of bonds and interest actually paid but not yet entered as paid in the Treasury accounts are reckoned as cash, the actual cash balance on that day was only $120,316,243, which is $18,356.16 short of the reserve of 40 per cent, for the redemption of the greenbacks, to say nothing of the working balance needed for the current expenditures. There has not been and can not be any accumulation in the Treasury arising from the lack of a proper legal and legitimate object to which it might be applied. Of the pub- lic debt, payable by its terms at the pleasure and on the short call of the Secretary of the Treasury, on the 1st of January, 1883, there remained, according to the official statement of that date, $289,563,950 of 3 per cents and $99,321,200 of the 3^ per cents, aggregating $388,885,150. It is true that this aggregate includes $30,000,000 in calls maturing January 15 and February 10, and the payment of some portion of which had actually been made on the 1st of January, and that it also included about $5,600,000 paid under the offer of the Treasury to pay $10,000,000 with interest reckoned to Feb- ruary 28. But deducting from the aggregate of $388,885,150, as given in the statement of January 1, the $5,600,000 and the whole of the called $30,000,000, whether now paid or unpaid, there is still left a debt payable at pleasure of $353,285,150. It is a remarkable position to take on this condition of facts that our revenue is yielding a surplus for which there is no legitimate use and which must therefore stimulate extrava- gance and corruption. No individual having interest-paying debts payable at his pleasure would ever think of describing himself as embarrassed with a surplus which he did not know 138 PAYMENT OF THE NATIONAL DEBT. how to dispose of. A complaint of that kind made by a gov- ernment under the same circumstances is equally absurd. It is a well-known historical fact that a leading object in reorganizing the Government of this country by the adoption of the present Constitution of the United States was to give it sufficient taxing power to restore its finances by paying the debt incurred in the long struggle for independence. This object occupied the first place in the minds of the framers of the Constitution, and they gave it the first place in their enu- meration of the purposes for which taxes are collected. Their own language in their grants of power to Congress was "to lay and collect taxes, duties, im.posts, and excises, to pay the debts, provide for the common defense and general wel- fare of the United States ; but all duties, imposts, and excises shall be uniform throughout the United States." General Washington, who had been constant in his rec- ommendations to Congress to provide for reducing and finally paying the public debt, did not fail to urge the same duty in his farewell address, in which he insisted upon "vigorous ex- ertions in time of peace to discharge the debts which un- avoidable wars may have occasioned," and admonished the country "to bear in mind that toward the payment of debts there must be revenue ; that to have revenue there must be taxes." So far in our history we have adhered to the ideas upon this subject held by General Washington and by all the great and patriotic men associated with him in founding this Republic. The European system of perpetual debts has not yet gained a foothold in this country ; and it is to-day as re- pugnant to the genuine sentiment of the masses of the Amer- ican people as it ever was. So long as there is any portion of our interest-bearing debt unpaid which we have the right to pay off, I will not favor the plan of reducing the revenue unless some better reason exists for it than has yet been assigned. The money now taken from the people by taxes does not in any impor- tant degree exceed the average amount so taken from them PAYMENT OP THE NATIONAL DEBT. 139 during the last seventeen years, although the present wealth of the country is double what it has been in an average of these years. There is no fair ground for saying that the ex- isting taxation in any way cripples the industries or impedes the general prosperity of the country, or is the subject of popular complaint. There may be cases where the original imposition of a particular tax or the original rate of a par- ticular tax may have been unwise, or where from a subsequent change of circumstances a repeal or alteration of the tax would now promote the public interests. I am ready to co- operate in any modification of our revenue laws which can be shown to be called for upon either of those grounds. But a willingness to correct any demonstrated defect in the tax laws is a very different thing from a predetermined purpose to cut down the revenues at all events for the pur- pose and with the effect of perpetuating the debt, as is shown in the attack upon the whisky, beer, and tobacco taxes. These imposts do not fall upon necessaries but upon luxuries and indulgences ; or, as many would say, upon vices. At the present time, and in any future condition of things which I can conceive to be possible, they ought to be kept at the point at which they will yield the largest revenue which can be obtained from them ; and whenever they are changed it should be for ihe purpose of increasing the revenue from them and not diminishing it. The debt of this country must be a very large one for many years. The 4 per cents not redeemable until July 1, 1907, including refunding certificates, amount to 1739,349,350. They are not purchasable to-day even in small quantities at a less premium than one-fifth of their par value. That is very much more than public opinion would sustain the Sec- retary of the Treasury in paying for them. Furthermore, if the Treasury should make a large movement in the way of attempting to purchase them the premium would be run up to a much higher figure. In short, $739,349,350 of our interest-bearing debt, which is more than half of it, is wholly beyond our reach and must be left to be dealt with by an- 140 PAYMENT OF THE NATIONAL DEBT. otlier generation. Two hundred and fifty million dollars more of it (4J per cents) is not redeemable until September 1, 1891, and is thus at present also beyond our reach ; al- though it is probable that as we approach the period of its redeemability the premium may so decline that anticipated purchases of some portion of it may be made at a price which the country would be satisfied to pay. But substantially the only question in respect to the public debt which the circum- stances permit to be discussed at the present time relates to the $353,285,150 of bonds payable at our pleasure which have not yet been called. Upon the assumption that if there is no change in our present revenue laws the debt of $353,285,150 will be paid off within three or four years, the suggestion is made that it would be more expedient to spread its payment in about equal installments over the seven or eight years between the pres- ent time and the time when the payment of the $250,000,000 may be anticipated. Whether the existing revenues will discharge the debt of $353,285,150 within three or four years depends upon a great many doubtful contingencies. In estimating, as the present Secretary of the Treasury does, that the surplus revenue (in- cluding that applied to the sinking fund) for the year ending June 30, 1884, will amount to $119,792,062, he puts down the customs receipts at $235,000,000, which is the amount for the current year, and he puts down the amount needed for pen- sions at $101,575,000. But the pensions, according to the estimates of some re- spectable authorities, will be more than that ; and as to the customs receipts, we know by a long experience to what great fluctuations they are subject from the vicissitudes of com- mercial affairs. During the six years of depression from 1873 to 1879 they fell to an average of $144,450,126. The magni- tude of the imports of any country must vary with the mag- nitude of exports ; and in respect to this country its exports depend largely upon foreign prices and demand for agricul- tural staples, which may be less for five years to come than PAYMENT OP THE NATIONAL DEBT. 141 they have been for the five years past. While customs rev- enues may fall off, it is equally true that numerous occasions for public expenditures not now expected may arise. The best time to pay debts is always the present time, when the surplus exists wherewith to pay them, when the country is prosperous, and when taxes are little felt. The future is full of uncertainties of every kind. The best wisdom for this case is the homely wisdom of "making hay while the sun shines." The Secretary of the Treasury estimates that the surplus of revenues for the next fiscal year ending June 30, 1884, available for paying the principal of the debt will be $74,- 719,837. The chairman of the Committee on Finance esti- mates the reductions of the revenues if this bill passes at $79,839,324, and remarks that this is quite as far as prudence will allow us to go. He admitted that other losses of revenue were likely to occur, as for example $8,000,000 by a reduction of letter postage, and that expenditures may be increased by pensions and other bills. If the estimates of the Secretary of the Treasury and of the Senator from Vermont are correct, the reduction of the debt except so far as is provided for by the sinking fund is brought to a close by the passage of this measure. If on the other hand the revenues are reduced from any cause below the estimates of the Senator from Vermont, and the expenditures are further increased, we will fall short of the requirements of the sinking fund. Is not this going farther than prudence will allow us to go? The policy of diminishing the annual rate of the payment of the debt of $353,285,150 which is subject to call, and of spreading the payment over a greater number of years, would be much less objectionable and dangerous if all interests in this country were in harmony in desiring the same general object of finally extinguishing the whole national debt. Un- fortunately, it is too plain that no such harmony of interests 142 PAYMENT OF THE NATIONAL DEBT. exists and that we now liave in this country a party — new in American history and not yet large in numbers, but power- ful in moneyed influence — which is opposed not merely to the payment but to the reduction of the public debt, and which will not fail to improve the first opportunity to enlarge it. If we assent to an arrangement of the taxes upon a basis expected to pay off the demand debt of $353,285,150 within eight years, we can have no guarantee of the permanency of the arrangement. The party hostile to the payment of the debt will have gained a present reduction of the revenues, and will have no motive to restrain them from seeking a further reduction at any moment when a depression in business or any other favoring circumstances shall occur. The two questions of the public debt and of the revenues are inextricably involved with each other. If all interests were agreed that the debt ought to be paid we should hear of no such doctrine as that of reducing the revenue while there is an indebtedness of over $350,000,000 subject to call. There is no conceivable reason why a surplus of national revenue should arouse the resistance of anybody except those to whom the payment of the debt is an obnoxious and odious thing. It is that class of persons which has really been at the bottom of all the concerted clamor of the press of the Northeastern cities, ostensibly in favor of relieving the bur- dens of the tax-payers, but having no other object than that of permanently establishing the European funding system in this country. The newspapers of New York and Boston are substan- tially a unit in demanding reductions of revenue, which would extinguish the whole surplus, even on the very san- guine estimates of the Secretary of the Treasury. This can mean nothing else than that the purpose of the men from whom these newspapers receive their inspiration is to main- tain the national debt in at least its present magnitude as one of the filled institutions of the country. This debt-perpetuating policy is adverse to the highest interests of the whole country, and even to the interests of PAYMENT OF THE NATIONAL DEBT. 143 the majority of the people of the Northeastern States them- selves. But it is my special duty to the State which I have the honor in part to represent to point out the peculiar in- jury and injustice which this policy inflicts upon those sec- tions of the country which, whether from their newness or from whatever other cause, are deficient in cash capital and obliged to be borrowers of it in developing their natural resources. No Senator can deprecate more than I do the introduc- tion of sectional antagonism's as an element in the con- sideration of political and financial questions. But a fair and frank presentation of the special interests of the several territorial divisions of this country, has no tendency to create or increase geographical alienations. Those special interests will exist even if we ignore them. The interests of the coun- try as a whole are, in fact, made up of the interests of its different parts ; and it is by an open and full discussion of them that we shall be most likely to find a basis of justice and sound policy upon which they can be permanently rec- onciled. Nothing can be more obvious than that to whatever ex- tent owners of loanable capital can persuade governments to borrow and pay them interest for it, the am.ount of such capital left to be competed for by private business is reduced, and that they must pay a correspondingly higher price for its use. Nothing can be more certain than that to whatever ex- tent government debts are paid off, the money received by the public creditors must be invested in other securities. This is the reason why the rate of interest in this country, although the renewed activity of business since the summer of 1879 tended directly to raise it, has nevertheless largely declined since that time. The same renewed activity of business increased the reve- nues so as to create a surplus which has caused the payment of more than $400,000,000 of the public debt in the four years ending June 30, 1883; and it is this new supply of the loan markets which has forced down the interest rates quite 144 PAYMENT OP THE NATIONAL DEBT. one-third on acceptable securities. I could give any number of proofs that the rate of interest was expected to rise after 1879 with the reviving prosperity of the country, but I must content myself with reading the following extracts from a letter addressed by the Secretary of the Treasury, Mr. Sher- man, December 27, 1879, to the Senate Finance Committee : The present time I believe to be the most advantageous for such re- funding (at i per cent.) probably much more favorable for the operation than any future time. * * * j think the present an exceedingly favorable time for the refunding. * * * With the revival of in- dustry and the great activity in manufacturing, signs of which are already to be seen in all parts of the country, and the constant and in- creasing demand for money arising therefrom, it seems to me to be not at all certain that we shall be able to borrow freely at even i per cent, per annum ; and of the correctness of these views I received the most positive assurances during my recent visit to New York. This view of the Treasury Department in December, 1879, in which the financiers of New York concurred, that the re- vival of business then just commenced would tend to raise the rate of interest in the negotiation of securities, was in itself clearly sound, and the rate would undoubtedly have risen if that tendency had not been more than counteracted by the relief afforded to the loan markets by the immense sums paid out in the redemption of Government bonds. It is to that redemption and to nothing else that we are in- debted not merely for the difference between the present rate of interest and that prevailing at the end of 1879, but for the much greater difference between the present rate and that which would have prevailed if there had been no pay- ments made on the public debt in the mean time. But making the comparison between the present time and the end of 1879, which was the beginning of the recent period of large redemption of Government bonds, the rate of interest has fallen fully one-third upon municipal securities, and more than one-third upon mortgages, in our Western cities and on farm mortgages throughout the West. Eailroad bonds command a much better price, although bearing lower rates of interest, than three years ago, and what is of almost PAYMENT OP THE NATIONAL DEBT. 145 equal importance, the demand for them and the capacity of the loan markets to absorb them has at the same time won- derfully expanded. The new railroad construction which had averaged annually only 2,703 miles during the six years end- ing with 1879 was raised to 7,124 miles in 1880, to 9,351 miles in 1881, and to 11,000 miles in 1882. Notwithstanding the vast issues of railroad bonds which this increased construction has involved, there has been no constriction in the markets in which they are sold, but on the contrary, an increase in the facility with which they are ne- gotiated. In short, the course of the market for acceptable securities of all descriptions has followed the course of the market for Government bonds, the possible sale of which at a 4 per cent, rate was considered by the Secretary of the Treas- ury in 1879 to be by no means an assured certainty, whereas to-day a 3 per cent. Government bond, although embarrassed by subjection to being called at any time, commands a pre- mium of 3 and 4 per cent. The market for other descriptions of securities has improved even more than the market for Government bonds. Mr. George S. Boutwell, in an article published in the February number of the North American Review, while favoring the stoppage 'of the payment of the national debt with, as I believe, the erroneous idea that there is no other way to save the National banks, states in the following strong language the injury to result from a discontinuance of the policy of paying the debt : The returns indicate that the country has built 9,000 miles — (It is really over 11,000 miles) — of railway in the year 1882. If these roads were built at a cost of $20,- 000 per mile the consumption of capital was at the rate of half a mill- ion dollars a day. From what source has this capital been drawn? Very largely from the Treasury of the United States. The Government has been drawing from distant and unobserved sources ten to twelve mill- ions per month in excess of its needs. The payees have been compelled to receive this money, and receiving it they have applied it to such un- dertakings as promised the best results. When the redemption of bonds ceases, the supply of free capital will diminish proportionately, new enterprises will not be undertaken. 146 PAYMENT OF THE NATIONAL DEBT. and many old ones will be brought to a disastrous conclusion. * * * The construction of railways has furnished support during the last year to a million or a million and a half of persons, either by direct or indi- rect employment. The sudden suspension of the business will diminish the means of subsistence of a body of our inhabitants equal to one-third or one-half of the" population of New England. The loss of labor in so vast a body of people is a loss of means to buy the products of the labor of others, and the evil extends until every branch of business is in- volved in a common catastrophe. This effect of the payments on the national debt to make capital cheaper and more accessible is in every way advan- tageous to all the States of the great West and Southwest. It is not surprising and ought not to be offensive that we look at this subject from our own point of view. With a vast extent of undeveloped area, we need more railroads ; and it is a matter of rejoicing with us that they are so rapidly furnished by the capital of the Northeastern States which is dislodged by the payment of the Government bonds. We owe large sums for State debts, still more for municipal and county debts, and an even greater sum for mortgage and other individual debts ; and we rejoice that the interest upon all of them is reduced in the same way. We believe also that the special advantage to tis of the present debt-paying policy of the Government is in itself a rightful advantage, inasmuch as the present policy merely restores the situation as between those who need capital and those who have it to spare to a natural and normal condition. We ask nothing beyond this, that the price of the use of capi- tal shall be left to be adjusted as other prices are adjusted, by demand and supply, and that it shall not be artificially raised by continuing public debts which the Government has a right to pay, and which it has abundant and easy means of paying. The interest paid upon our national debt during the sev- enteen years ending on the 30th of June, 1882, was $2,041,- 000,000. That is a great sum to extract from the productive interests and labor of this country. It is something which we can see and measure and can state in exact figures. But PAYMENT OF THE NATIONAL DEBT. 147 there is another and vastly larger burden which this debt imposed during the same seventeen years which escapes cas- ual observation and the precise dimensions of which can never be determined, and that is the tax imposed, upon production by the enhancement, in consequence of the existence of the national debt, of the rate of interest upon the much greater mass of private debts. The best and greatest relief which we can give to the country is not the reduction of the revenue, but the reduction of the national debt. The contribution which is directly and indirectly levied by the debt is the heaviest one which is exacted from the nation, and it is paid, not for the maintenance of any branch of the public service, but for the individual benefit and enrichment of special classes of persons. While the lowering of the general rate of interest upon loans, which is the necessary result of setting free for other uses the funds looked up in the public debt, is specially ad- vantageous to the western section of the country, owing to its comparative lack of capital, it is for the advantage of the vast majority of the interests and persons even in the North- eastern States. During the two and one-half centuries of their occupation by European races, they have accumulated great wealth by their industry, thrift, enterprise, admirable system of education, good laws, and enlightened administra- tions. But with all their brilliant and well-deserved success, they have not achieved the impossible thing of making every- body capitalists. From various causes, they have their full share of persons whose enterprises exceed their means, and who are borrowers rather than lenders, and therefore interested to have loanable capital abundant and cheap. Nor have the Northeastern States escaped better than other States the burden of county and municipal debts, which make all tax-payers debtors and amount practically to mortgages upon everybody's prop- erty, and with a priority of lien to all other mortgages. These debts have compelled several municipalities in the North- eastern States to compromise with their creditors. In nu- 148 PAYMENT OP THE NATIONAL DEBT. merous cases tliey are so heavy that the relief of the lower rate of interest, which has been a consequence of the policy of paying the national debt, is felt most sensibly by the tax- payers. A firm of Boston brokers, in their monthly circular issued at the end of December, 1882, say: The demand has been greater this month for town and city bonds than at any time during the year, and they are selling on a 3}^ to 4 per cent, basis. The improved price of those bonds is not due to their scarcity. There were as many of them at the end of 1882 as at the beginning of it, and there are as many of them now as there were three or four years ago. It is the dislodgment since October, 1879, of more than $400,000,000 from Govern- ment bonds, and the necessity the receivers of that sum of money have been under to seek other investments for it, and their natural tendency to look for other bonds as near as pos- sible to Government securities in stability of value, which have caused the rise in municipal bonds. The cause of the rise is not more obvious than are its eflPects in relieving the burdens of the tax-payers of the Northeastern States as fast as municipal bonds mature, so that they can be refunded on more favorable terms. I am quite aware that there are some persons who desire a reduction of the revenues as a means of arresting the pay- ment of the public debt because they believe, not that a national debt is in itself a national blessing, but- that it is at this time, and under the actual conditions, necessary to pre- serve it as the basis of the National-bank currency. I agree fully with those persons in regarding that currency as im- measurably superior to any bank-note eircvilation which ever existed in this country, and in recognizing the difficulties which will be encountered and the care, skill, and watchful- ness which will be required in devising any acceptable security for bank issues when the Government bonds, now used for this purpose, shall have all disappeared by payment. But I can not agree with them in believing that there is any such difficulty in substituting some other safe and ade- PAYMENT OF THE NATIONAL DEBT. 149 quate security as to overbalance the many and urgent reasons for adhering to the traditional policy of Artierica in respect to the extinguishment of public debts. Indeed nothing will so surely overwhelm the national banking system with popu- lar odium as the belief that its existence is so indissolubly bound up with that of a national debt that the two must fall together. To foreigners a belief of that kind seems very extraordi- nary. Thus the London Economist, December 2, 1882, says, in reference to the currency of this country: It is not at all necessary in order to retain the paper currency to discontinue the redemption of the debt. Other and possibly better basis for circulation can be found, for no one will dream of arguing that a country which has no debt can have no paper currency. The New York banker, George 8. Coe, who presided over the last two annual conventions of the American Bankers' Association, as high an authority as we have in this country on all questions relating to our present system of banking, in his last address to the association, delivered August 16, 1882, used the following expressive language : Debt expresses poverty. A currency of a country should be based directly upon the property of the country, not upon its debts. A safer, more natural, and healthier system of circulating notes can be provided by a few simple and practicable legal restraints through the securities that commerce creates for its greater transactions than through any form of public debt. It is a strange and palpably absurd proposition in political economy, that a popular government must be kept poor and in debt in order that the people may be provided with the means to be- come rich. Mr. Coe has sketched a plan of security for National-bank issues which he regards as even preferable to the bonds of the Government. It is not the proper occasion to discuss the ■merits of his plan. It does, however, certainly command con- siderable favor among persons practically concerned in bank- ing. The framers of the present National banking law availed themselves with wisdom and judgment of the fact of the actual existence of a large amount of Government bonds, which had been issued, not as a basis for a currency, but to meet the necessities of a war. But the resources of human 150 PAYMENT OP THE NATIONAL DEBT. intelligence were not exhausted by that law, and it is a most extraordinary assumption that it will not be possible to intro- duce such changes into it as will adapt it to new circum- stances. For the present and for a considerable time to come, it will not be necessary to provide any other security than the Government debt for National-bank issues, even if the whole of that part of it which is subject to call is actually called and redeemed. There would still remain 1739,349,350 irre- deemable for nearly twenty-five years, and $250,000,000 irre- deemable for nearly nine years. In addition, there are $64,623,512 of bonds issued to the Pacific roads irredeemable before various dates from 1895 to 1899, which are accepted under the present law as a basis for currency, and $16,000,000 of District of Columbia bonds, guaranteed by the United States and not redeemable until 1924, which ought to be ac- cepted, and the law could easily be so modified as to cause them to be accepted. We thus have bonds having a long period to run, aggregating $1,069,972,862, which would be the basis for bank issues of an equal amount, if accepted at 10 per cent, below their market price, but not for more than par value. The present net amount of National-bank notes is only $323,000,000, deducting from the total amount outstanding the notes of failed, liquidating, or reducing banks, for the redemption of which lawful money has been deposited and is held in the Treasury. With long Government bonds outstanding to the amount of $1,069,972,862, the danger can not be great for a consid- erable time of any sensible contraction of a bank-note cir- culation of $323,000,000, and this danger may be much diminished, and perhaps wholly averted, by certain measures. One of them is the plan of the senior Senator from Nevada [Mr. Jones], which is substantially the same as the plan proposed by the Comptroller of the Currency, of converting the fours of 1907 into threes, with the consent of the holders ; the Government paying in cash the difference in value. That PAYMENT OF THE NATIONAL DEBT. 151 would remove the objection of the banks to buying the 1907 bonds, which is the high premium on them, and could be made acceptable to the country by shortening the time of the substituted threes. Another measure, which is always within our power and which ought to be adopted if it shall appear to be necessary to prevent any sudden or great reduction of the bank-note circulation, is to remit the tax thereon. The remission of it under such circumstances and for such a pur- pose would be for the general interest of the country and not for the special benefit of the banks. The assumption that there is any popular demand for a reduction of the revenues m.erely to lessen the amount of money in the Treasury to be disposed of and with the effect and scarcely concealed purpose of perpetuating the national debt seems to be groundless. It is not credible that the peo- ple of any part of the country have all at once abandoned the debt-paying policy established by the founders of the Gov- ernment and faithfully adhered to during the trials of a cen- tury. They can not fail to see that no circumstance of the present situation gives us more prestige abroad or more de- cisively causes the inflow into the United States of both popu- lation and capital from the other side of the Atlantic than the vigorous payment of the great indebtedness incurred dur- ing our civil war in contrast with the hopeless and helpless financial involvement of the European nations. It may possibly be true that the holders of the national debt, who are principally concentrated in a particular section of the country, may be reconciled to its perpetuation from being the receivers of nearly all the large annual income which it yields, and by the increased rate of interest which its existence enables them to obtain upon all their other loans of capital. But it is inconceivable that a national debt can be regarded as a thing to be cherished as a national blessing in other sections of the country which pay their full share of its direct exactions, and more than their share of its indirect exactions, without any participation in its benefits. With these views I can not vote for any repeal or for the lowering of any taxation upon the assumption that the reve- 152 PAYMENT OF THE NATIONAL DEBT. nues ought to be reduced, or that the aggregate of the exist- ing revenue is either unprecedented or impoverishing, or complained of by the people, or that there is not a legitimate use for any surplus, however large, so long as there is any Government debt within call. I can not vote to change the taxes on either whisky, tobacco, or beer, except to improve and facilitate their collection or to make the revenue from them greater. But I am ready to vote to repeal or modify any "tax which can be shown to cripple any industry or to be oppres- sive or to be unfair as between different classes of persons, different interests, or different geographical sections, pro- vided always that the great policy of the vigorous payment of all debts within the reach of payment be substantially maintained. PAYMENT OF THE NATIONAL DEBT. From the North American Review, September, 1886. It has become apparent that great interests are at work to prevent the payment of the national debt, and to perma- nently fasten upon lis the British funding-system, of which, while it was yet in its small beginning, .Lord Bolingbroke said, in 1748, that it is a "method" by which "one part of the nation is pawned to the other, with hardly any hope left of ever being redeemed." Of all the possible disasters which may happen to the country, the reversal of its traditional debt-paying policy will be one of the greatest. Nothing would more profoundly change for the worse all the prin- ciples and workings of the Government. The reasons for persevering in the extinguishment of the financial obligations of the civil war are innumerable, but within the limits of this article I can only notice briefly a few of them. 1. That debt-paying is our traditional policy will be more vividly realized from a recital of some particulars of our his- tory in that respect. Our Government went into operation, under the present constitution, in 1789. In the enumeration, in that instrument, of the purposes for which Congress is empowered to levy taxes, the payment of the public debt comes first, and the history of that tim.e shows that the resto- ration of the finances was a chief object of the new constitu- tion. Quoting its language, the taxing power was conferred "to pay the debts and provide for the common defense and general welfare." The conduct of the generation which framed the constitution, and first administered it, is a lumi- nous commentary upon its true meaning and intent. Within forty-four years after 1789, not only was the revolutionary 154 PAYMENT OF THE NATIONAL DEBT. debt of $80,000,000, whicli was greater than that of the civil war, with proper allowances for differences of population and wealth, paid off, but also the debt of the war of 1812 and 1815 with England, and the obligation for $20,000,000 incurred in the purchase of Louisiana and Florida. It might have been said, posterity should be left to pay for the lands acquired by these purchases and falling to them as a vast inheritance, being fully one-half of the present territorial area of the re- public ; but not so did the fathers reason. It was their pride and glory to remove all encumbrances from the patrimony of their children. "Not ungenerously throwing upon posterity the burden which we ourselves ought to bear," is the grand and noble sentiment of Washington, in that part of his fare- well address in which he urged the earliest possible extinc- tion of the debt. In his second annual message, Mr. Jefferson advised "the payment of our public debt, and the emancipation of our pos- terity from that moral canker." General Jackson, who had, in his first inaugural, declared that a national debt was "incompatible with real independ- ence," assigned, in his fifth annual message, as a reason for rejoicing over its extinction, — "the satisfaction of bequeath- ing to the public servants who follow us, the rare blessing of a revenue unencumbered with any burden." In his message vetoing the United States Bank bill, he said : " Pay the na- tional debt. Let no surplus be allowed in the Treasury. Practice the closest economy in the expenditures of the Gov- ernment." Of the seven Presidents during the forty-four years which witnessed the complete discharge of the great debts of our two wars with England, and of our territorial purchases from Prance and Spain, five had borne conspicuous parts in civil or military life during the revolutionary war. The last two, J. Q. Adams and General Jackson, both born in 1767, were too young to participate in the struggle ; but they were close to the generation which carried it through, and thor- oughly imbued with its hostility to perpetual debts and fund- PAYMENT OF THE NATIONAL DEBT. 155 mongering. All these seven Presidents, in their official addresses and in their private correspondence, insisted, from first to last, in season and out of season, that a public debt was among the greatest of public mischiefs, and that no efforts and sacrifices to get rid of it could be too great. President Washington, in six of eight of his annual addresses to Congress, and in his farewell address to the country, gave to debt-paying the most conspicuous place in his recommendations. The elder Adams urged the payment of the revolutionary debt, and especially warned the country against imitating the funding-system of Europe. Jefferson, in seven of his eight annual messages, classed the early and complete discharge of the debt as among the first of public duties. Both Madison and Monroe were equally strenuous and persistent on this point. The younger Adams insisted, in his inaugural, upon the duty, "to discharge, with all possible promptitude, the national debt." In his second annual mes- sage he urged "steady and inflexible perseverance" in that work, and in his third message he spoke "of the deep solici- tude of our citizens of all classes" for its speedy completion. General Jackson, who, as a candidate for the presidency, had declared, in his letter of April 26th, 1824, to Dr. Coleman, that a national debt was "a curse to a republic, inasmuch as it is calculated to raise round the administration a moneyed aristocracy, dangerous to the liberties of the country," re- mained steadfast in that opinion after his . election to the chief magistracy, and insisted that the tax on tea and coffee should not be given up until the payment of the debt was fully assured. During the darkest days of our civil war, the debt-paying traditions of the republic were never lost sight of. A sink- ing fund was provided for all debts created, and Secretary Chase of the Treasury kept all the new and great obligations incurred within the reach of an early option of redemption, following in that the policy of Albert Gallatin, when he was at the head of the Treasury during the war of 1812 and 1815. 156 PAYMENT OF THE NATIONAL DEBT. The debates in Congress, after the civil war was over, upon the funding act of July I4th, 1870, show that, even if there was then in some quarters a secret wish or hope that the debt might be perpetual, nobody ventured to avow any other policy than that of its steady reduction and final payment. It surely will not be an easy thing to persuade the country to reverse precedents which have been unbroken for nearly a century, and to begin now, for the first time, in the midst of peace and abounding wealth, to enter upon the policy of debt- perpetuation. 2. The payment of the debt is the most effective method of preparing for war in time of peace. It is also the most direct means of avoiding war, since nothing can more plainly tend to dissuade foreign nations from making aggressions upon us than to see that our finances are unencumbered and available for defense. If we were to-day involved in hostili- ties with a foreign country, we should be obliged, first of all, for the essential purpose of protecting our credit, to provide $48,750,000 annually, which is the official estimate of the interest on the debt during the current fiscal year. If free from debt, we should, with the same revenue, have $48,750,- 000 more in hand to expend every year in military and naval operations. Furthermore, as the enormous money-cost of modern wars always creates a necessity for loans, we" could borrow more abundantly, and at easier rates, than if our credit was partly exhausted by obligations already outstand- ing. It was, "as a very important source of strength and security," that General Washington, in his farewell address, advised the country to "cherish public credit," and, as the best m.eans to that end, to make "vigorous exertions in times of peace to discharge the debt which unavoidable wars have occasioned." He knew practically, as well as theoretically, that "money is the sinews of war," and with that sound sense which never failed him, he saw that nothing would more surely put us in a position to command the sinews of war than to be free from the drain of interest and impair- ment to credit resulting from pre-existing debts. PAYMENT OF THE NATIONAL DEBT. 157 The genius, traditions, and situations of the United States are all opposed to offensive wars, and no preparation for them need be made. Indeed, it would be injurious to make prep- arations for such wars, because nations which are always armed for a fight are like individuals in a similar case, always tempted to engage in one. For defensive wars, scarcely any other preparation is necessary than . that of making oar finances impregnable, by making haste in times of peace to relieve them of all encumbrances. With that preparation we shall, in all human probabilities, escape war for an indefinite period. Our last war with any of the Euro- pean powers was finished seventy years ago, and the danger of a new one decreases as their estimate of our strength in- creases. Nothing has so impressed them with our resources as the vigor and steadiness with which this country has thus far addressed itself to the work of making continuous pay- ments on the principal of the debt of the civil war. The London Economist, of March 10th, 1883, said : The grandeur of the American Republic, considered in its external policy, has moreover been greatly increased by its debt-paying policy; for it has been felt that a people which could raise four or five hundred millions sterling at 3 per cent, was, on that account alone, a great peo- ple ; one which, on cause shown, could create fleets and armies almost out of the ground. In 4;he light of this extract -from the Economist, we can better understand what it said on the 4th of October last in respect to the feeling of the French toward England. "A notion that England is bad to fight ( a feeling akin to that of our people about the United States) is very widely diffused." Clearly, this country has no army or navy in existence of which foreign nations need be very much afraid. What they respect is our power to raise, equip, and maintain armies and navies, and they know that this power becomes greater in proportion to our progress in freeing ourselves from financial clogs and encumbrances. The London Spectator, of April 14:th, 1883, said : The grand reason for paying debt is that we want to strengthen the credit of the State, as the cheapest and best of all insurances. If any 158 PAYMENT OF THE NATIONAL DEBT. one doubts that, let him look at the position of the United States. That grand republic has no fleet, and on the water could hardly fight Spain ; but she has reduced her debt by strenuous paying, and every one knows that if she wanted a fleet to blow Spain out of the water, or to contest the seas with us, she could buy and complete one in twelve months. Her payment of her debt is an insurance, not only against de- feat, but against attack. As freeing ourselves from the shackles of debt is the most effective preparation fot war, and thereby the best preven- tion of war, so it is preferable, in many other respects, to the method of maintaining great armies and navies, which are not only extremely costly but in many ways demoralizing, and certain to run into great abuses. In navies, since the incoming of iron-clads, of iron and steel war-ships, propelled by steam, and of rapidly succeed- ing inventions in armaments, there has been a most deplor- able record in this and other countries of untold millions sunk in experimental constructions, all recommended as in- fallible instrumentalities of war, but all either proving use- less upon trial or soon superseded by something better. The British navy accomplished very little in the war of 1854 and 1855 against Russia, and the French navy absolutely nothing against Germany in the war of 1870 and 1871. Iron-clads, more than anything else, bankrupted Turkey, and now threaten Italy with financial ruin. There is not one of the great European powers the efficiency of whose naval establishments is not profoundly distrusted by their own experts. In contrast with the frightful expense of these doubt- ful methods of preparing for war, the payment of the prin- cipal of debts costs nothing. Unlike the payment of interest, it is not an expenditure, but for every dollar paid there is a corresponding reduction of the mortgage on the property and labor of those who pay. Instead of being expenditures, pay- ments of principal stop expenditure by stopping interest, and it is to such payments that the French maxim, "Whoever pays, enriches himself," exactly applies. 3. The locking up of loaning-capital in public debt dimin- ishes by so much the supply of such capital for other pur- PAYMENT OF THE NATIONAL DEBT. 159 poses, and thereby enhances the rate demanded and obtained upon all loans and investments of money. It affects, in the same way, the rents of houses and other structures, which in the large cities constitute an important item in the cost of living. Men will not erect buildings for renting unless the ex- pected rental bears a certain relation to the interest on money. The payment of $600,000,000 of the principal of the national debt, during the six years ending November 1st, 1884, produced a decisive fall in the rates of loans to States, counties, munici- palities, and railroads, and to individuals in good credit on good secumty. While this has been a great advantage to en- terprise, it hag been distasteful to lenders. This is the lead- ing cause of the disposition to perpetuate the national debt, which is distinctly visible among powerful classes in the Northeastern States, which are the great possessors of loan- able capital, and the great suppliers of it to the South and West. It has been the leading cause, during this century, of the perpetuation of the British debt, which would have been paid off in 1843 if Pitt's sinking-fund had been adhered to. A writer in this country has collected the evidence from the British parliamentary debates, that in 1802, 1807, and 1813, the three first occasions when Pitt's sinking fund was broken into, the special reason assigned was that the effort of paying off debts injured capitalists by reducing the rate of interest on all loans. If that writer had continued his in- vestigation to later dates, he would have found that the war upon the sinking fund was persevered in, and upon the same ground, until its enemies were finally able to get rid of it, after the close of the Liverpool Administration, in 1827, which had held firmly to the debt-paying ideas of Pitt. In 1826, with a debt of 840,000,000 sterling, the British sinking fund was only about 5,000,000 sterling, or about six- tenths of one per cent., but the moneyed classes could not bear even that small payment, and on the 17th of February in that year, in the House of Lords, the Earl of Louxderdale declaimed against the tendency of it to reduce the rate of interest, say- ing, among other things : 160 PAYMENT OF THE NATIONAL DEBT. The public had now to contend with an excessive capital equal to 5,000,000 sterling, thrown in annvially to such employment in other in- terests. Must not this extraordinary supply of capital diminish the value? This it was that reduced the interest on fixed securities. They must see how the case stood with those who had disposable capital. Mortgages at 5 per cent, were, in hundreds of instances, redeemed in money at lower interest. Professor Sidgwick is recognized in England as one of the ablest of living British economical writers. What is of equal consequence, he is very little chargeable with the besetting sin of men of his class, which is that of catering to such spe- cial interests as are most powerful. In his "Principles of Political Economy," published in 1883, he makes the follow- ing frank admission of the effect of national borrowings to so change the distribution of the annual aggregate productions of a country as to aggrandize capital and depress labor : There is another less obvious disturbance of pre-existing distribu- tions which borrowing, whether for profitable outlay or to ward off cal- amities, tends to bring, namely, by raising the rate of interest, and thereby raising the share of the aggregate produce that falls to capital. The gain to capitalists from the rise of interest inevitably involves a corresponding loss to labor. ■4. In addition to giving to moneyed capitalists, by rais- ing the rate of interest, an increased share as against labor in the productive enterprises in which a part of their capital is engaged, public debts quarter them on the taxes, as to that part of it which is invested in such debts. A debt-roll, so far as the interest payments are concerned, is nothing but a pension-roll, the inscriptions on which are obtained, not by meritorious service in the field or in civil life, but by pur- chase, and in the case of great war loans, almost always at very cheap rates. So long as the principal is not paid, the debt, in its full proportions, is immortal, and the tax-payers remain forever the tributaries of the holders of the debt — be they who they may, Jew or Gentile, aliens, citizens living at home, or citizens expatriating themselves to spend their pensions in enjoying the luxuries or vices of foreign cities. Such a roll, if it is a long one, must always contain the names of many of the most detestable or contemptible of mankind, PAYMENT OP THE NATIONAL DEBT. 161 to be tributary to whom adds a deeper tinge to the degrada- tion of being tributary to anybody. It was a metaphor of the English courtiers, referred to by Lord Bacon as being old in his times, to liken taxes to the water which is drawn up from the earth to descend again from the clouds in fructi- fying rains. An enemy of Charles the First said, in the Long Parliament, that it descended then "in hailstones and mil- dews." The theory of a good government is to be always econom- ically administered, and to confine itself to the essential ob- jects of public services. If that theory could be perfectly carried out in practice, taxes would not be a burden, but only a payment of fair equivalent for indispensable needs. The efforts of a wise people should always be to bring the practice of their government nearer and nearer to the point of theoretical perfection in the disposition of the proceeds of taxation. But it reverses the whole theory of a just taxation to permit the existence, for one day longer than is absolutely necessary, of an army of tax-devourers in the form of receivers of interest on public debts. Under that baleful system, taxes no longer "fall back to earth again in fertilizing showers" upon those who contribute them, but are diverted into rivu- lets and streams for the fattening of the fields of special classes; and this diversion is carried in modern times to an extent which leaves the fields of the non-favored classes so parched and barren that they yield little more than enough to keep soul and body together. In England, for forty years after the battle of "Waterloo, one-half of the taxes was paid over, under the name of inter- est, to the national debt-holders ; and even now, seventy years after that memorable ending of the Napoleonic wars, one- third of the taxes goes the same wa,y, the interest not having been lessened, but other expenditures having been increased. Since the surrender of General Lee, the United States have paid $2,200,000,000 as interest-money, and it had been paid in gold at an appreciating value. If we pay no more of the principal of the debt until the 4 per cent, bonds mature in 162 PAYMENT OF THE NATIONAL DEBT. 1907, we shall by that time pay $1,045,000,000 more as inter- est money. It is only the interest upon the 4|s which we can reduce ; if that is lowered to 3 per cent, in 1891, the earliest day at which it can be done, the saving will be $60,000,000 from 1891 to 1907; but allowing for that saving which may be expected to be made, we shall still have $985,000,000 to pay as interest-money between the present time and 1907, if we abandon the policy of making payments on the principal of the debt. And it must be noted that these $985,000,000 will be paid, not by posterity, but by this generation, and that it is this generation, and not posterity, which will enjoy the advantage of whatever saving of interest, between now and 1907, should be effected by adhering to the policy of re- ducing the principal of the debt. 5. The steady reduction — looking always to the early ex- tinction of the debt — will remove causes of heart-burnings and jealousies between different classes and sections, and tend strongly to consolidate and animate the patriotism of the masses of the people. The non-taxability of our Government bonds, for National, State, county, or municipal purposes, is an odious feature, and, right or wrong, it can never be made otherwise. It may have been necessary and wise to make them non-taxable, al- though I do not believe it was. The British debt was never non-taxable, and to-day is paying a heavy income tax. It is, however, idle to discuss the question, as it is now the clear contract-right of the holder of our bonds to enjoy exemption from taxation, and there is nothing to be done but to do what we have agreed to do ; but it is in a high degree expedient that the spectacle of a class of persons, enjoying the safest and most desirable form of property, while contributing noth- ing to the public charges, should be gotten rid- of in any honest and lawful way as soon as possible. Another source of discontent is the substantially exclusive holding of these bonds in a small section of the Northeastern part of the Union. Nobody is to blame for their concentra- tion in* that particular section. It has resulted from the fact PAYMENT OF THE NATIONAL DEBT. 163 that it is there that the loanable capital of the country is chiefly found, which is due to its having had a considerable density of population many years in advance of the other parts of the Union, and to the admirable industry, economy, ingenuity, enterprise, and thrift of the people who have oc- cupied it ; nevertheless, the West and South believe, and it is true, that the actual distribution of the holdings of the national debt make them tributary to the Northeast. They will not be, and ought not to be, content to have a large part of the loanable capital of the Northeast receive its income permanently from the proceeds of general taxation. It may be true that in territorially small countries, like England and France, with a general similarity of condition over their whole areas as respects accumulation of realized wealth, a national debt, held at home and kept within reasonable limits, may give stability to the existing forms of government, and to the dynasties actually in power, although it cannot fail to weaken such countries in their external relations. But in a country of vast extent, like the United States, made up of parts ex- ceedingly dissimilar in financial situation, a few of them lenders of capital while the majority of them are borrowers, a national debt is a source of discontent and a constant temp- tation to disintegration. N. P. Hill. TAKIFF ON WOOL. A speech delivered in the United States Senate, February 3, 1883, the Senate having under consideration the Tariff Revision bill. Me. Pbesident : I desire to offer several amendments, but before doing so I wish to occupy a few moments of the time of the Senate in some general remarks on the subject of the duty on wool. The present duty on wool was fixed by the law of 1867. Before that time, as is well known, the business of wool growing was not remunerative. Under the protection given by that act American producers have been able to compete with those of foreign countries, and the growth of the business has been enormous. It is now estimated that there are over 400,000 persons who own flocks of sheep. In the year 1850 the production of wool in this country amounted to 52,576,959 pounds ; in 1860 it was 60,264,913 pounds ; in 1870 it was 100,102,387 pounds ; in 1880 it was 235,648,884 pounds. The year 1860 gave an increase over the year 1850 in the wool product of the country of 7,747,954 pounds, or 14J per cent. The year 1870 gave an increase over 1860 of 39,837,474 pounds, equal to 66 per cent. The year 1880 gave an increase over 1870 of 135,546,447 pounds, equal to 135 per cent. There are but few branches of business in this country which show such rapidity of growth. What reasons can be given for imperilling an industry of this kind at the present time? There is no rule proposed by the advocates of the protec- tion policy in this country which does not require that the duties on the ordinary grades of wool should be maintained at least as high as they are under the present law. There is no feature of monopoly in the production of wool as respects either classes of persons or territorial divisions. TAKIFF ON WOOL. 165 It is produced in every one of our States and Territories, from Maine to Texas, and from the Atlantic to the Pacific, and by 400,000 owners of flocks, great and small. It is adapted to all our climates, latitudes, and soils. The natural capacity of the United States to produce it is not exceeded in any part of the world, and if its price is lower anywhere else than it is here, it is because the wages of labor are less elsewhere, and those who uphold the doc- trine of protection have always maintained that import duties should be kept high enough to offset the difference between wages at home and abroad. The production of wool, as the figures which I have read show, has increased with amazing rapidity under the protec- tion given by the present law, and is nearly equal to the present demand of our woolen mills. There is no reason to doubt that it will expand as the demand of these mills ex- pands, and that the price will be kept down as low as it ought to be by the conlpetition of home wool-growers. The present duty is far below that imposed upon many other articles, and is in no sense excessive. The total value of the wool product of the country for the year 1880 was about $105,000,000. The reduction of price, if the bill passes as reported by the committee, will be about three cents per pound, which, on 235,000,000 pounds, will amount to over $7,000,000. The loss of this amount annually to the wool-growers of this country will at once cripple this indus- try, and probably render it unprofitable. It will impair the value of nearly $300,000,000 worth of property and in the end will transfer the business of supplying our factories to Australia and South America. Mr. President, the State which I in part represent asks for protection on but very few articles. Its most important production is gold and silver. It is a large consumer, not only of manufactured articles, but also of the products of the soil from other States. There are but few States in the Union whose interests naturally lie more in the direction of free trade. Yet its representatives on this floor, in the interests 166 TARIFF ON WOOL. of American labor, have voted steadily for the protection of the manufacturers and producers of the country, whether they be of New England, of New York, or Pennsylvania, of the South, or of the Great West. In view of the fact that it is believed by those best in- formed on the subject that a reduction of duty on wool from the present rate will result in the serious injury if not the destruction of this industry, I trust the Senate will vote against the proposed reduction. I now offer the amendments of which I spoke. They are amendments intended to be proposed by my former colleague, Mr. Chilcott, and which are lying on the tables of Senators. POSTAL TELEGRAPH.* A REPORT SUBMITTED TO THE UNITED STATES SENATE, MAY 27, 1884, BY ME. HILL PROM COMMITTEE ON POST-OFFICES AND POST-ROADS. The Committee on Post-offlces and Post-roads, to which were referred Senate bills No. 17, "to provide for the establishment of a postal telegraph system," No. 227, "to establish a system of postal tele- graph in the United States," and No. 1016, "to provide for the transmission of correspondence by telegraph ; " and which was also instructed by. the Senate to inquire " whether the cost of telegraphic correspondence between the several States and Territories of the United States, or with foreign countries, has been injuriously affected by large stock dividends made by the Western Union Tele- graph Company, by consolidation between different telegraphic companies, by working contracts with cable companies, by leasing of connecting or competing lines, or by other means," has con- sidered the same, and submits the following report, together with an accompanying bill ( S. 2022 ) : The committee has heard fully such statements as the representatives of the Western Union, Baltimore and Ohio, Bankers' and Merchants', and Postal Telegraph Companies have desired to make. It has also examined witnesses not connected with those companies, and has received several written communications. These statements and written com- munications are herewith submitted. In respect to the instructions given by the Senate to the committee to inquire whether the cost of telegraphic corre- spondence has been raised by the stock dividends of the Western Union Company, and by its various consolidations with and leases of other telegraph property, the committee believes that it can best comply with them by giving a sum- mary history of the increase of the debts, rental, and stock * Note. — This report is inserted because it was prepared very largely by Mr. Hill as chairman of the Senate (Committee on Post-offices and Post-roads. 168 POSTAL TELEGRAPH. capital of the Western Union Company, and such information as is obtainable as to the actual value of the tangible property which it holds, either by direct ownership or by lease. At the present time its stock capital is $80,000,000, its bonded and other debt is $6,224,176, .bearing an annual in- terest of $466,911, and the annual rentals which it has as- sumed obligations to pay for leased lines in this country are $528,000, which obligations to pay rent, capitalized on the basis of an annual interest of 6 per cent., are equal to a debt of $8,800,000. Its total share, debt, and rental capital is, therefore, $95,024,176, and as the dividends upon the stock part of it are at the rate of 7 per cent, per annum, the net profit required to be derived from its business, in order to pay the annual charges upon this capital, is $6,594,911. It is also under obligations to pay annual rentals of $700,- 000 for Atlantic cables, and of $301,000 for Cuban cables and for the Gold and Stock Company, being a total of $1,001,- 000, which, if capitalized at 6 per cent, interest, is equal to a debt of $16,683,000. But if this leased property as a whole yields an income equal to the rentals paid for it, it will not be necessary for the Western Union Company to impose a tax upon the internal telegraphic business of the country in order to make good a deficiency. How much income it yields does not clearly appear. In respect to the stock capital of the Western Union Company, amounting to $80,000,000, nearly the whole of it has arisen from stock dividends and from purchases made of the lines of other companies, which were paid for by issues of stock. In 1863 its stock capital was only $3,000,000, and even of that amount, small as it seems in comparison with the present stock capital of $80,000,000, it is quite certain that at least five-sixths consisted of what is known in stock manipulations as water. The original line of the Western Union was from New York to Louisville, via Buffalo, Cleve- land, and Cincinnati, and was constructed at a cost of about $150,000. It early acquired, by purchase at very low rates, the property of embarrassed Western telegraph companies POSTAL TELEGKAPH. 169 owning lines from Buffalo to Milwaukee, and from Cleveland to Cincinnati, and built a line from Pittsburgh to Philadel- phia, but even then its actual cash investment is affirmed by those who have carefully investigated the subject not to have exceeded $300,000. In 1863 the stock property of $3,000,000 was doubled by a stock dividend, and during 1863 and 1864 $5,000,000 was added to represent extensions and purchases of new lines paid for in stock. The capital being thus swollen to $11,- 000,000 was in 1864 doubled by a stock dividend and thereby made $22,000,000. Eighteen hundred and sixty-six was a year memorable for new consolidations, the stock capital then being increased to $41,000,000 by the issue of $19,000,000 of new stock. Since 1866 the stock capital has been carried up to its pres- ent amount of $80,000,000, partly by the issue of stock for the purchase of new lines, but mainly by the three following stock dividends : In 1879, $5,960,600; in 1881, $15,526,590, and $4,320,000; total, $25,807,190. It is not necessary to comment upon stock dividends, the nature and effect of which are well understood. In respect to the issues of stock for purchases of other lines, the prices paid have no relation either to the cost or to the earning capacity of the property. The purchases were influenced, in some cases, by the desire to get rid of competition, and in others, by the fact that the persons controlling the manage- ment of the Western Union had large interests in the prop- erty purchased. In purchases prompted by the latter motive the higher the prices which were paid, the gireater were the gains of individuals in the control of the Western Union. In the case of a purchase made before 1870 of a line 1,100 miles long, from Brownville, Nebraska, to Salt Lake City, which was built for $147,000, and had been nearly three times paid for by a bonus from the Government of $40,000 annually for ten years, but which the building company, styling itself the Pacific Telegraph Company, had stocked at $1,000,000, the Western Union paid $2,000,000 of its own stock under 170 POSTAL TELEGRAPH. the circmnstances detailed in tlie following extract from a sworn statement made March 26, 1870, by Charles M. Steb- bins, a well-known telegraph builder : This $1,000,000 of Paoiflo Telegraph stock (prominent men of the Western Union Telegraph Company being the sole owners ) was after- wards taken into the Western Union Telegraph Company by issuing therefor $2,000,000 of Western Union Telegraph Company's stock. After this the Western Union Telegraph Company's stock was trebled, by which manipulation an original expenditure of $147,000 ( and a part of that not honestly spent ) came to represent $6,000,000 of Western Union Telegraph stock. In 1881 the Western Union paid $15,000,000 of its stock for the stock and bonds of the American Union Telegraph Company, and $4,080,000 of its stock for all of the stock which it did not already own of the Atlantic and Pacific Telegraph Company. From a comparison of the annual reports of the Western Union it appears that the addition to its property was greater in 1881, when these purchases were made, than in 1882, when no purchases were made, by only 3,975 miles of pole, 46,171 miles of wire, and 329 offices. This excess of addition to the equipment in 1881 seems to be a tolerably correct measure of the tangible property which the Western Union acquired by issuing $19,080,000 of stock in 1881, and if it is, the actual cost value of the property must have been about $3,281,970, on the estimated cost of constructing tele- graph lines pbr mile of wire at $70. The purchases of new lines made in 1881 did not cause any accessions to the busi- ness of the Western Union, inasmuch as the subsequent in- crease in the number of messages was no greater than the normal growth without the addition of new lines. It is evident, without pursuing this branch of the subject further, that the price which the Western Union paid in its stock for competing lines was vastly in excess of either the cost or earning capacity of the property acquired. It was claimed before the committee, by the President of the Western Union, that it had from time to time ex- pended, out of its current earnings, considerable money on construction account ; that is to say, in additions to its lines POSTAL TELEGEAPH. 171 and equipments over and above their maintenance. This may be true to some extent, but cannot be true to the extent of justifying the enormous stock dividends which the com- pany has made, nor was the appropriation of current income to construction account sufficient to prevent the payment of munificent cash dividends to the shareholders, who received in that way from 1867 to 1883 (both inclusive) 134,000,000 in addition to stock dividends of $25,817,198. As the prices paid by the Western Union in its own stock do not furnish even an approximate idea of the actual cost of the lines which it has purchased from other companies, and as the representatives of the Western Union, which alone possesses the information, have given no definite or detailed account of the amounts of money it has itself ex- pended in the construction of lines, the committee has en- deavored to ascertain what it would now cost to reproduce lines equal in every respect to those which the Western Union has acquired in all ways. The present cost of similar lines is a near approximation to the cost of the existing lines. There has been a fall in the price of wire as compared with the average price during the period when the existing lines were constructed, but this is partially offset by the rise in the price of poles. The President of the Western Union stated to the com- mittee that the books of the company show that the miles of wire owned by it are 348,819, and that the miles controlled and leased are 82,909, making a total of 431,728. As part of the miles owned, he counted the lines purchased of com- panies, including the cases of companies the separate organi- zation of which is kept up for various reasons, but all the shares of which, except a minute portion, are held by the Western Union. Deducting the wires leased to newspapers, railroads, and individuals, the rentals of which do not appear in the receipts for telegrams, and deducting also the lines which are really mere duplicates and practically useless, which formed a part of the property obtained by the Western Union in its multiplied acquisitions of other companies, the 172 POSTAL TELEGRAPH. committee believes it to be a large estimate to assume that the number of m^iles of wire actually used in, and necessary to, its business of transmitting telegrams is 350,000. The committee believes also that the average cost at this time pet mile of wire, including poles, construction, and the instru- ments for telegraphing, would not exceed $70, which would make a total cost of $24,500,000 for the whole 350,000 miles. But if we assume that every mile of wire owned by the West- ern Union is essential to its business of transmitting tele- grams, viz., 431,728 miles, the value of the property at $70 per mile would be $30,220,960. At present there are in this country, on an average, about three miles of wire to one mile of pole line, but as telegraphic business increases the propor- tion of wires will be larger. Colin Fox, late an employe of the Western Union, testi- fied before the committee that between 1868 and 1876 he built from 500 to 800 miles of pole line in Michigan, on poles 25 feet long and 5 inches at the top end, and adapted to con- veying two or three wires, but generally carrying only one, at a cost never exceeding $75 per mile. For an additional wire (No. 9) the increased cost would have been $30 per mile. The lines were well built and are still in use. He also testified that one set of instruments in an office would cost $25, and that the distance between offices ranged between six and ten miles. The poles he used were obtained in a lumbering country, and at cheap rates. E. E. Chapman, who was superintendent of the construc- tion of part of the lines of the Mutual Union, including all their lines west of Cleveland, testified that he built himself a portion of the lines between Cleveland and Chicago, and be- tween Chicago and Kansas City. On the line between Cleve- land and Chicago the poles were strictly first-class, 30 feet long and 6 inches at the top end, and of a capacity to carry six- teen wires, No. 6 and No. 8, althoiigh originally constructed with only four wires. With the four wires the cost of mate- rials and construction was from $325 to $350 per mile. If eight wires had been strung the cost would have been less POSTAL TELEGEAPH. 173 than $60 per mile of wire. Since that time wire has fallen and poles have risen in price. Mr. Chapman testified that this line was constructed some distance from the route of any railway, and that there was no better constructed line in the United States. He also built the line from Springfield, 111., to Kansas City with 25 feet poles, 5 inches at the top end, with two wires, although provided with cross-arms for two more, at a cost of $225 per mile. With four wires strung the cost would have been $71 per mile of wire. John C. Van Duzer, formerly a superintendent and con- structor of United States military lines, testified that he has built, since the civil war, 4,000 miles in Texas, the Indian Territory, New Mexico, Montana, and Dakota. He built 1,200 miles in Texas in 1874 and 1875 under the direction of the Chief Signal Ofiicer, all with a single (No. 9) wire. The cost of all materials, poles, wires, and insulators, was $50 per mile. The labor was performed by the troops, but would have cost, if hired, $25 per mile. An additional wire would have cost $30 per mile more ; the use of a No. 8 wire would have in- creased the cost $4 per mile of wire. The poles, chiefly red cedar, 25 feet long and 5 inches at the top, were, with the exception of one cargo shipped from Norfolk, obtained in Texas, but were hauled long distances, in some cases 100 miles, at great expense. He also testified that white cedar poles of the same dimensions, which would carry four wires, can be purchased for 40 cents in Wisconsin and Michigan, delivered by water at either Detroit or Chicago at 70 cents, and delivered at railroad stations in Illinois and Iowa at $1.25 in car-load lots. The exact excess of the capitalization of the Western Union, beyond the actual cost of its lines, and beyond what it would now cost to reproduce similar lines, cannot be determined. That it is enormous is entirely plain and un- disputed. In reference to the inquiry whether this excess of capitali- zation, arising from stock dividends and from purchases of other lines at inflated prices, paid in stock, has " injuriously 174 POSTAL TELEGRAPH. affected the cost" of the transmission of telegrams, the com- mittee deem it sufficient to say that its own conclusions cor- respond with the opinion of the country, that its effect in that direction cannot be a matter of doubt, and that it has been very great, even if we admit, as is claimed by the Western Union, that the average rate on the aggregate business has been reduced. The swollen capitalization of the Western Union has cre- ated at one and the same time a cover, an inducement, and in some senses a necessity for excessive charges for telegrams. To the extent that the public have been made to believe that the nominal capital was a real one, it has tended to cause an acquiescence in excessive charges, while the exposure of the actual nature of the nominal capital does not diminish the pressure of the motives which impel the managers of the company to keep up charges which are essential to the maintenance of the present dividends upon the immense mass of its watered stock. For the purposes of relieving the country of the burden of charges for telegrams which are too high, of making those charges more equal as between different localities and differ- ent classes of telegrams, and of guarding against the mis- chiefs and dangers of leaving the control of the telegraphic business of the country in the hands of a private company, which enjoys a practical monopoly, the committee has re- ported the accompanying bill (Senate, 2022). The constitutional right of this Government to establish a postal telegraph, under its power to establish post-offices and post-roads, seems too clear to require argument. It has always been recognized, and the first telegraphic line in this country was constructed and operated and owned by the United States, and many military lines are now in operation. In all European countries the business of telegraphing is managed by the public authorities. The war power and the power to regulate commerce between the States are some- times invoked, and may be fairly invoked, as also justifying this Government in establishing a postal telegraph, but the POSTAL TELEGRAPH. 175 power to establish post-offices and post-roads is of itself abundantly sufficient for the purpose. A practical construc- tion long ago extended it to modes of communication not known when the Constitution was formed, such as steam- boats and railroads, and there can be no difficulty in extend- ing it to other modes since discovered, such as the telegraph and the telephone. To the objection to a postal telegraph that it will operate injuriously upon the business and profits of private tele- graphs, there are obvious and sufficient answers. All persons engaged in any business, not protected by the monopoly of a patent, know and act upon the knowledge that they are ex- posed to the competition of other persons and of the public authorities. The postal money-order system interferes with the business of bankers, The parcel post interferes with the business of the express companies. Postal savings banks, existing in many countries and often proposed in this coun- try, would interfere with the business of private savings banks. It has been known for many years that a postal tele- graph had numerous advocates, and that its establishment, in some form, was among probable events, and all persons concerned ought to have governed themselves accordingly, and doubtless have done so. In making these observations the committee does not intend to deny that it is the duty of the Government, in exercising its powers, to look at all the effects of every measure which is proposed, including its effects upon private citizens who are engaged in any lawful industry or undertaking. But in this case, as the committee expects to be able to show, no damage is threatened to any private persons or companies, beyond a curtailment of ex- traordinary and abnormal profits, and the curtailment is not greater in degree than is required to relieve the people from unreasonable exactions imposed by the companies themselves. The bill reported by the committee provides in its first ten sections for inviting proposals from telegraph companies now in existence, or which may hereafter be formed, to do the work of transmitting such telegraphic dispatches as the 176 POSTAL TELEGRAPH. Government may deliver to them, at prices whicli are not to exceed the rates specified in the bill. Such post-ofiices as shall be designated from time to time as postal-telegraph offices, are to receive dispatches from the public and hand them over to the contracting companies for transmission to the postal-telegraph offices in the places of their des- tination, from which they are to be delivered to the persons to whom they are addressed. For the services of receiving and delivering the messages the Government is to be allowed three cents for each message, which is to be col- lected by deducting it from the rate allowed to the contract- ing companies. On this plan, as thus briefly sketched, the Government will deal with telegrams precisely as it now deals with letters ; that is to say, it will confine itself to re- ceiving and delivering them. In both cases the transmission is performed for the Government by contractors, letters being carried by railroads, steamboats, coaches, wagons, etc., and telegrams being carried over wires. In neither case does the Government have anything to do with the plant required to do the actual work of transmission, which is left to be pro- vided by the contractors. The maximum rates limited by the bill are, for day tele- grams of not exceeding twenty words, exclusive of the date, twenty cents for distances within 1,000 miles, with an addi- tional charge of five cents for every additional 250 miles, or fraction thereof ; but for no distance is the rate to exceed fifty cents. For night telegrams the maximum rate for not exceeding twenty words, exclusive of date, is to be fifteen cents for all distances below 2,000 miles, and for greater dis- tances twenty-five cents. In respect to both day and night telegrams an addition of one-fifth the rate is to be made for every five words, or fraction thereof, in excess of twenty words. The prescribed rates are to cover immediate and special delivery within a mile of the telegraph office, or within the letter-carrier delivery, and immediate transmission by mail when destined for any place where there is no postal telegraph office. If acceptable contracts can be entered into. POSTAL TELEGRAPH. 177 the contractors are to transmit all messages sent by Govern- ment officials upon public business at rates to be fixed by the Postmaster-General, as under existing laws. The Gov- ernment is not in any case to assume any monopoly of the telegraph business, but is to leave it open to everybody, in- cluding the companies which may contract to transmit mes- sages delivered to them by the Government. The plan covered by those sections involves no outlay of money, present or future, not reimbursed to the Government. The only new ofiice which it creates, is that of an Assistant Postmaster-General. The messenger boys who will deliver telegrams, and a small number of additional clerks are the only new employes whom it will call for, and that branch of the business involves only a small expenditure and no polit- ical patronage. The income received by the Government for receiving and delivering telegrams will certainly pay, and probably over-pay, the foregoing charges, and also the cost of providing a room in each postal-telegraph office, as re- quired by section 7, for the use of the einployes, instruments and batteries of the companies contracting to transmit tele- grams. The receiving of telegrams by the postal- telegraph offices, will subject the Government to but little expense not now incurred. The delivery of telegrams will cost one cent for each telegram, according to the evidence submitted to the committee. As the charge collected by the Governiment for receiving and delivering will be three cents for each telegram, there will be a profit of two cents on each. This would be $811,623 annually, if the Government handles 40,581,177 tele- grams annually, as the Western Union did in 1883. Eight hundred and eleven thousand six hundred and twenty-three dollars per annum will more than cover the rent of the rooms which the Government is to furnish under the seventh sec- tion of the bill, and we may expect that the Government will soon handle twice 40,581,177 telegrams annually, on the basis of the experience in Europe of the effect of lowered rates to multiply the number of telegrams sent. The plan provides for the widest practicable diffusion of 178 POSTAL TELEGRAPH. the proposed new system. All post-offices in places in wliicli telegraph offices exist when the bill becomes a law are made postal-telegraph office's, and authority is also given to the Postmaster-General to designate other post-offices as postal- telegraph offices from time to time, as the wants of the public may seem to him to require. Furthermore, the new tele- graphic service is really extended to post-offices which are not postal-telegraph offices, by the provisions that messages may be sent over the wires to the postal-telegraph office nearest to their destination, and thence forwarded by mail to the per- son addressed. The companies to whom contracts for the sending of messages may be awarded are forthwith to open for use such lines as they may have in operation, and must, within four years, construct or acquire such additional lines as will connect all the post-offices which are made by the bill postal-telegraph offices, and with the further requirement that at least one-fourth of the needed additional lines shall be annually constructed or acquired. The plan is enlarged so as to include telegraphic money-orders for sums not ex- ceeding $100, that being, in the opinion of the committee, as large a limit as it was prudent to fix, until we can have some actual experience of the working of the system. The contracts for the transmission of telegrams are to be made after advertising for bids, with the provision that the Postmaster-General "shall contract with the company or companies whose proposition shall be deemed by him the most favorable for the performance of the telegraph service " contemplated by the bill. The term of the contract is five years, with a right on the part of the contractors to one re- newal for another term of five years, provided they have faithfully performed all their • duties during the first term, and subject to the further condition that a uniform rate, without regard to distance for sending telegrams at or below the lowest rate specified in the bill, shall be adopted. All contracts are to be at any and all times terminable at the option of Congress, and in addition there is expressly re- served to Congress the general power of altering, amending. POSTAL TELEGKAPH. 179 or repealing the proposed law or any part of it. In short, the fullest freedom of action is reserved to the Government in the future, so that it may withdraw from the system at any time, if it proves to be onerous or injurious in any particular not now foreseen. The committee was unanimous in reporting the first ten sections of the bill ; some of its members believing that those sections go as far as it is now prudent to go in the direction of connecting the Government with the telegraph business, and others believing that those sections constitute an impor- tant improvement on the existing system, although they would have preferred that there should now be begun and pressed to a full completion, as soon as practicable, the plan of a complete Government ownership and working of tele- graph lines. The concluding thirteen sections, which embody all the principles of the bill (S. 17) introduced by Senator Ed- munds, did not receive the unanimous support of the com- mittee. The members of it who were in the minority as respects that part of the bill will doubtless state the views by which they were controlled. It will be improper to an- ticipate the statements they may think fit to make, but there is no impropriety in saying that their principal objection to the concluding part of the bill was understood, in a general way, to be that it was inexpedient to enlarge the present operations and patronage of the Government by throwing upon it the ownership and management of telegraph lines, and on that account they were not prepared to sanction pro- visions for doing that, even contingently upon the event that no satisfactory bids should be received from contractors for the transmission of telegrams within the rates limited by the bill. It is provided in these sections that if no responsible con- tractors shall offer to carry messages over their wires within the rate limited in the bill, the Government may accept any offer for sale of existing lines suitable for the purposes in- tended, and at prices deemed to be fair and reasonable by 180 POSTAL TELEGRAPH. the Postmaster-General, it being further required that any proposal of that kind shall first be submitted to and ap- proved by Congress. The Postmaster-General is required to invite proposals for the sale of telegraph lines, at the time when he invites proposals for contracts to transmit telegrams, so that if no satisfactory proposals of the latter kind may be received, it may be possible that he will receive proposals for the sale of lines in season to be acted upon during the lifetime of the present Congress. But if no purchase of lines is consummated by the approval of Congress before the 4th of March next, and if before the same date no contract is en- tered into for the transmission of telegrams, the bill provides that a board consisting of the Secretary of State, the Secre- tary of War, and the Postmaster-General shall locate four trunk lines of telegraph connecting Washington with the Northeastern, Northwestern, Western, Southwestern and Southern parts of the country, such lines and branches thereof to be, from time to time, extended as Congress may hereafter appropriate money therefor. The actual construc- tion is to be under the direction of the Secretary of War, and through the Corps of Engineers, subject to the same general provisions of law which are applicable to other pub- lic works under the charge of the same Secretary. The lines, when constructed, are to be used for sending telegrams, at the rates provided in the first sections of the bill, but those rates are subject to revision by a board consisting of the Secretary of State, Secretary of the Treasury, and Postmas- ter-General. If it shall happen that over the routes upon which this bill authorizes the construction of lines there are already existing lines of a suitable character, the Secretary of War, with the approval of the President, may purchase them, if he can do so at prices not exceeding what it would cost the United States in cash to construct similar lines, and at such reduction below such prices as ought to be made on account of the decay or deterioration of the lines purchased. The appropriation for the current fiscal year ending June 30, 1885, to carry out the bill is two million dollars. The POSTAL TELEGRAPH. 181 clerks, electricians, and operators to be employed in working tlie lines contingently proposed to be acquired or constructed by tlie Government are to be subjected to examination by the Board of Civil Service Commissioners, and of the persons passing a satisfactory examination the Postmaster-General is to employ such number as the public service may from time to time require, and at rates of compensation to be fixed by a board consisting of the Secretary of State, Secretary of War, and Postmaster-General. And to avoid delays in the construction of the lines contingently proposed to be con- structed, the Secretary of War is authorized to offer, with the approval of the President, fair prices for the right-of-way and other real estate which may be needed for the establish- ment of the lines and for such machinery, appliances, devices, and materials (not including telegraph lines), whether pa- tented or not, as may be needed for the convenient and suc- cessful operation of such lines. If the prices offered are not accepted, the Secretary of War may still take the property, leaving to the owners the right to establish in the Court of Claims, subject to appeals to the Supreme Court, what the true value of the property taken is, and the bill makes an ap- propriation in advance of so much money as may be required to satisfy the final judgments which such owners may obtain against the United States. In the details of the bill the committee have been gov. erned by the opinion that it was necessary, expedient, and entirely safe to leave a considerable range of discretion to executive ofiicers, but no discretion is given to ofiicers below the grade of cabinet ministers, who must act under the watchful observation of the country and under a constant sense of the responsibility which attaches to the high places which they fill. The committee admits fully that it would be inequitable and contrary to an enlightened public policy to coerce the owners of private lines to sell them to the Government, or to make contracts for the transmission of telegrams over their lines, at inadequate prices, by the menace that the Govern- 182 POSTAL TELEGEAPH. ment would otherwise build lines of its own. But it also be- lieves that it is within the limit of the most scrupulous consideration of private rights and interests, as well as de- manded by business prudence in taking care of the public interests, to accompany the offer of such fair and even liberal terms as this bill makes to private telegraph companies, with an effective declaration that if such terms are not accepted the Government will provide lines of its own. To do so is not making use of the ample pecuniary meaijs of the Gov- ernment to oppress individuals, but to protect the tax-payers, whose contributions make up the public revenue, against ex- orbitant exactions. That the terms offered to the company with which the Government may contract for the transmission of messages are liberal will be shown by a careful examination of the cost of sending messages, even taking as a basis the figures fur- nished by the Western Union Company. Making no allowance for profit on the capital employed, the cost per telegram on the business of the Western Union, during the year ending June 30, 1883, was 23.325 cents, as given in an itemized statement of the president of that com- pany. To say nothing of the criticisms which might be made on some of the items of that statement, it is shown in a letter addressed to the committee by Mr. Gardner G. Hubbard, that the same business could be done under the bill reported by the committee at a cost of 18.912 cents, or in round numbers 19 cents per telegram. This saving is effected in various items, such as in printing ; in the charge for the cost of maintaining consolidated companies ; in rents, inasmuch as in most places the post-offices will have room enough for the telegraph office ; and in the less number of clerks and cash- iers required in the handling, book-keeping, and numbering of messages under the postal system, when all messages are to be prepaid by stamps, and almost the only accounts to be kept will be those of the number of messages sent and of the money received for stamps. Estimating the average cost per telegram at 19 cents, which includes the three cents allowed to the Government POSTAL TELEGRAPH. 183 for receiving and delivering, and the average rate under the bill reported by the committee at 25 cents, the profit on 40,- 581,177messages (the number sent in 1883) will be $2,434,870, which is an ample return upon the capital invested. But the number of the telegrams transmitted by the Western Union has doubled during the last six years, and the experience of the effect both in Europe and in this country of a reduction of rates, justifies the prediction that under the stimulus of the lower rates prescribed by the bill, the business will double certainly during the next three years, and not improbably during the next two years. That would double the profit and make it $4,869,750, even if the cost per telegram remained the same, whereas it is certain that it will diminish as the number of telegrams becomes larger. Precisely how much it will diminish cannot be accurately stated, but the commit- tee believes that a diminution of two cents per telegram may be safely assumed. This would increase the profits on 81,- 162,354 telegrams $1,623,246, and make the total profits $6,- 492,996. In addition to this, the company which should take the contract would still have the profits to be derived from wires leased, from all the private business which it might secure at higher rates under special guaranty from private market reports, and from numerous other sources. In proposing in the bill, as the committee has done, that the contract for the transmission of telegrams may be re- newed for five years, on the basis of a uniform rate of 20 cents for day telegrams and 15 cents for night telegrams, and that the Government charge for receiving and delivering tele- grams should then be reduced from three cents to two cents, the committee was influenced by the belief that the cost to the Government of receiving and delivering telegrams would be diminished one-third by the expansion of their number. A diminution so large is not to be expected on all the items of the cost of transmitting telegrams, but there is hardly one of the items in which thbre will not be some diminution. From a full consideration of the case, and after weighing all 184 POSTAL TELEGRAPH. the testimony, tlie majority of the committee were therefore of the opinion that it is not an arbitrary and wrongful menace, but a well justified precaution, for the Government to declare that if it cannot have the messages of the people of this country transmitted at fair and liberal rates it will build or acquire lines of its own. And the committee was unani- mously of the opinion that it was proper and expedient to accompany the offer of an option to any contracting company to renew its contract for an additional term of five years, with the condition that there should then be a uniform rate of 20 cents for day telegrams and 15 cents for night telegrams as being no greater reduction than would be just, in view of the expected increase in the number of telegrams and consequent decrease in the cost per telegram. The committee was confirmed in its view as to the rates which should be fixed, by the fact that a responsible company came before it and offered to make a contract at rates fully as favorable to the public as those contained in the bill. This offer will be found among the papers accompanying this report. While a majority of the committee believe that the pub- lic interest would be promoted by the adoption in substance of the entire bill, the committee is unanimously of the opin- ion that very important advantages may be secured by the adoption of the first ten sections, if it appears that the last thirteen sections do not commend themselves to the judg- ment of the Senate. Among the important advantages obtained by the pro- posed plan of contracting for the transmission of telegrams, the four following are conspicuous : First — It largely reduces the average charges now paid by the public for telegraphic services. Under the bill reported by the Committee, the average will not exceed 25 cents per telegram, after making allowance for the large proportional increase of messages which will be sent over long distances as a consequence of the large re- duction which the bill makes in that class of messages. POSTAL TELEGRAPH. 185 • The report of the Western Union for the year ending June 30, 1883, shows 40,581,177 messages, and receipts $19,- 454,902, which would show an average charge of about 48 cents per telegram. But there are included in the above $19,454,902 of receipts some branches of income not derived from telegrams transmitted over lines in this country, such as revenue from Atlantic and Cuban cables, rental of lines leased to private parties, and receipts from the Gold and Stock Telegraph Company. In a letter addressed to Mr. Gardner G. Hubbard, on the 19th of September last, the President of the Western Union says that these independent sources of revenue yield "an aggregate of $4,012,000 that is not derived from the transmission of messages over Western Union lines in the United States and Canada." If this is correct, it would reduce the amount received from telegrams from $19,454,902 to $15,442,902, which would be 38 cents per telegram. In his testimony before the committee the Presi- dent of the Western Union states that the receipts exclu- sively from telegrams during the last fiscal year were $16,200,000, which would make the average charge per telegram 40 cents. Mr. Hubbard, as the result of his own calculations, makes it 38.9 cents. Taking all the evidence together, it must be very near the fact to say that the reduc- tion made by the bill in the average charge per telegram will be from 39 cents to 25 cents immediately, and to 20 cents at the end of five years. To the reduction of the average charge per telegram from 39 to 25 cents is to be added the other quite as important consideration, that under the bill the average amount of ser- vice performed, per telegram, will be much greater than it is at present. The great reductions of rates which the bill makes are on telegrams sent over long distances and on those sent to places where the telegraphic business is small, and as a consequence the proportion of both those classes of tele- grams will be vastly increased. If, with its present rates, the Western Union was transmitting the same proportion of tele- grams for long distances and to out-of-the-way localities as 186 POSTAL TELEGKAPH. will be transmitted should the service be performed under the terms of this bill, its average rate per telegram, instead of being 39 cents, would be much higher, and not improbably twice 39 cents. Taking the two things together, the dimin- ished average charge per telegram and the increased service per telegram, the gain secured to the public by the bill takes on great proportions. Second — The plan inaugurated by the first ten sections of the bill secures, during the first five years, an absolute uniformity of the charge for day telegrams within all dis- tances not exceeding 1,000 miles, and for night telegrams within all distances not exceeding 2,000 miles. The varia- tions from this uniformity, in respect to greater distances, are not large, and they are also much less than the variations in the charges now imposed by the telegraph companies. If contracts are made with those companies, they will be, at their option, renewable for an additional five years, but only upon the condition that the charges shall be absolutely the same for any number of miles, so that telegrams will then be, in that particular, upon the same footing as letters. Public considerations have induced the Government in fixing the rates of letter postage to overlook distance and also comparative sparseness or density of population, and the greater or less number of postal communications between different places, notwithstanding that each one of these cir- cumstances affects the actual cost of sending letters, and that the two last-named circumstances affect it very sensibly. It is certainly true that the postal intercourse in the densely populated parts is somewhat overtaxed in order to admit of some degree of undertaxing of the same intercourse with and between the sparsely populated parts of the country. Every- body knows "that this is so, and everybody is satisfied that it should be so. A plan of so arranging letter postage as to favor the rural districts, to favor the less wealthy regions, and especially to favor the newer parts of our growing coun- try, is heartily supported by those whom it does not favor, because all believe that it is for the common advantage. POSTAL TELEGRAPH. 187 Among the circumstances which reconcile the old States on the Atlantic to the migrations of their sons and daughters is the knowledge that however far they may go within the na- tional jurisdiction, if even to the far-distant Pacific ocean, family and social intercourse with them by letter can be maintained at the same cost as if they had migrated no far- ther than to the next township. The benefit is common and equal to those who go and to those who remain ; and now that the country has had an experience of it, nobody will make or support a proposition to return to the old plan of graduating letter postage according to distance. The principle of making letter postage iiniform, without regard to distance, was only adopted within recent years — 1863 ; but from the foundation of the Government it has been uniform in the particular of disregarding the difference of expense of sending and delivering letters between places having a large and those having a small postal business. That difference is much greater than the difference of ex- pense between the carriage of letters over long and over short distances. If the postal business, as respects letters, had been left to private companies, they would always have charged higher rates to places which received few letters, for the reason that the cost, both for carriage and delivery, in- creases in proportion as the number diminishes. We know that to-day the telegraph companies graduate their charges, in most cases, upon that principle, and considered as private companies, doing their business solely with a view to profit, they are justified in doing so. Their charges for telegrams are, relatively, very high to and from places in which busi- ness of that kind is small, while on the other hand there are cases in which some companies actually charge less for tele- grams between great cities than the lowest rate limited in this bill. The following table exhibits the telegraph rates from Washington to the residence of each of the members of the Senate and the House Committees on Post-offices and Post- roads under the Western Union and the proposed postal- telegraph systems : 188 POSTAL TELEGRAPH. APRIL, ISSL PLACE OF RESIDENCE. Senate Committee. Washington to — Denver, Colo Fairfield. Iowa Paris, Tex Jackson, Tenn Eikton,Md Detroit, Mich Oshkosh, "Wis Petersburg, Va Dover, Dfel Av. for residences of Senate Committee House Corrvmittee, Winona, Miss Fort Smith, Ark Henderson, Tex Indianapolis, Ind Sparta, Ga Booneviile, Mo Winchester, 111 Lexington, Tenn Philadelphia, Pa Akron, Ohio WatertOwn, N. Y Blue Earth City, Minn Manchester, Ky Gallipolis, Ohio Lafayette, Ind Utah Av.for residences of House Committee WESTERN UNION. Day. to- 5 $1 00 75 1 00 1 00 25 50 75 25 25 64 $0 75 75 1 00 50 60 75 60 50 15 50 35 1 00 50 50 50 1 00 62 Night. 2.8 I I 75 .50 75 75 20 35 50 25 20 I .50 50 66 35 40 50 40 35 15 35 ■if, 66 35 85 35 42 POSTAL-TELEOBAPH AB PKOPOSED IN THE BII/L. Day. "^ 8 •^ ft o 8 a -i II! 140 25 80 20 20 20 20 20 20 I 20 25 30 20 20 25 20 20 20 20 20 20 20 20 20 50 Nigbt. a 2.S as, a OB g-tsS 8SS If? SO 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 25 All the public reasons which justify and require and have secured the adoption of a uniform rate of letter postage, without regard either to distances or to the varying amount of postal business between different places, apply with full and undiminished force to telegrams. We may be sure that the country will regard it as a great merit in the pending bill that it secures, at the end of five years, uniform charges for POSTAL TELEGRAPH. 189 telegrams, wherever sent, and, in the meantime, keeps the variations from uniformity within narrow limits. The evidence submitted to the committee shows the effect of the high and unequal telegraphic charges in this country in reducing the proportion of family and social telegrams to a mere nominal figure in comparison with the proportion of such telegrams in Europe, where the rates are lower and more uniform. Of the proportion of telegraphic messages sent by the Western Union relating to family and social mat- ters, the president of that company stated to the committee (January 31) that "he did not think it was more than 5 or 6 per cent, of the whole," and he added that "about 80 per cent, of our business is strictly commercial, and does not care so much about rates as it does about quick work." He also stated in his testimony that not more than 500,- 000 persons, or less than one per cent, of the people of the United States, ever use the telegraph. About 12 per cent. of the messages sent by that company consist of press dis- patches. In contrast with this condition of the business of the Western Union, the classification of the telegrams sent in Belgium in 1880 shows that the private dispatches upon family and social matters amounted to 55.10 per cent, of the whole, and in Switzerland to 61 per cent. In 1881 the pro- portions were substantially the same. With low and uniform rates, we shall hear no more of the use of the telegraph being enjoyed by only one per cent, of our population. The proportion of family and social tele- grams, instead of being 5 or 6 per cent, of the whole, as it is now, will exceed the 55 per cent, shown in Belgium, and the 61 per cent, in Switzerland, inasmuch as neither there, nor in any country in the world, is the number relatively so great as it is in this country of persons who have something to spend beyond obtaining the bare necessities of life. And moreover there is no country in which families are separated by such long distances. By what gauge or standard shall we undertake to measure the benefit of cheap telegraphy in keeping alive and warm the relations of blood and friend- 190 POSTAL TELEGEAPH. Bhip, and in relieving the anxieties of families, by bringing witliin the reach of the many that prompt intelligence as to the health and movements of their far-removed members which is now the luxury of the few? Third — The plan provided in this bill secures from the commencement of its operation a uniformity of charges, irre- spective of distance and also irrespective of the amount of business in different places, for telegrams to newspapers and to commercial news associations ; that is to say, for all tele- grams which convey the current news, for publication by the press, and intelligence to the public of the daily and hourly changes in the foreign and domestic markets. This uni- formity does not now exist, and never will exist, under the exclusive control by private companies of the business of telegraphing. It is a weighty recommendation of this bill that it secures it. The procurement of the intelligence which the newspapers ought to give and do give to the country will thus be made as cheap in one place as in another, saving only the' unavoidable inequality which arises from the fact that the number of newspapers which may combine to purchase the intelligence is greater in some places than in others. So, too, telegraphic advices to commercial news associations of the course of the markets, so important to be known by all classes, by producers, by manufacturers, merchants, bankers, and indeed everybody who is obliged to sell or to buy any- thing, will be subject to the same charges in all places, near and remote and great or small, provided only that they are large enough to maintain such an association. In these ways telegraphic communication of intelligence of a public nature and for the general information of the people will be made equally facile and of equal cost in every part of this broad country from ocean to ocean. That it will be made so will be one of the beneficial results of making telegraphy a matter of public administration, looking to public objects and con- trolled by public considerations, instead of leaving it exclu- sively in the hands of private companies which are necessarily governed solely by their own interests. POSTAL TELEGBAPH. 191 Fourth — The bill, while it may not wholly remove, does, to an important degree, lessen the danger that the purveying and preparation of the intelligence sent to newspapers and to commercial news associations will be subjected to a concealed censorship, whereby it may be colored and distorted so as to subserve political purposes, to mislead public opinion as to the merits or demerits of men and measures, to pervert legis- lation, and to favor schemes of private gain. Under the present telegraphic system the possibility of such a species of censorship, which is one of the most alarm- ing dangers which menace the country, arises in two distinct ways, each of which requires a separate consideration. The first is the power which the telegraph companies themselves have of manipulating news for sinister purposes, and the second is the same power possessed by the Associated Press and other similar associations, not themselves owning tele- graph lines, but making special compacts for the transmis- sion of telegrams over lines owned and managed by others. It will appear that the power of the telegraph company in this respect will be entirely taken away by the pending bill, and that the power of the Associated Press and similar asso- ciations will be greatly reduced. The President of the Western Union furnished to the committee copies of two contracts of that company, one an old contract dated January 11, 1867, with the Western Asso- ciated Press, and the other a later contract dated December 22, 1882, with both the New York Associated Press and the Western Associated Press. It is the general effect, summa- rily stated, of these contracts to divide the furnishing of news into two divisions. The one set apart to the Press Association is described as follows : The business of collecting and selling to newspapers, for publica- tion, commercial news and other reports of a general character. The other, set apart for the Western Union, is described as follows : The business of reporting, supplying, and selling financial and com- mercial news, market and other reports, and quotations of a miscellane- ous character, to individuals, clubs, boards of trade, exchanges, and 192 POSTAL TELEGEAPH. other organizations, for their own use and the use of their members, but not for newspaper pubHcation. These contracts entitle the Western Union to buy news collected by press associations, but to be used, not for publi- cation, but only for such sales of news as the Western Union has the right under the arrangement to make. And, on the other hand, the contracts entitle the Associated Press to buy news collected by the Western Union, to be used, not for resale, but only for publication in the newspapers. The subsisting contract, which is that of December 22, 1882, is for ten years, unless it is sooner terminated by either party by giving six months' notice. The situation gives to the Western Union a practical monoijoly control of commercial and financial news. It col- lects daily and hourly the market and commercial news to be distributed in every town in this country, and with the j)Ower of changing the complexion of it, whether it exercises that power or not. It admits no partnership in the business of furnishing commercial and financial news to individuals or associations of individuals. It is true that the press asso- ciations may supply that class of news to the press, but they receive a good deal of it from the Western Union, and of course only after such censorship as that company may see fit to exercise over it. The relations between the Western Union and the Asso- ciated Press restrain them from interfering with each other's interests and purposes, and make them practically, as against the general public, a single corporation. This is particularly the case so far as it relates to the market news. Having nothing to fear from the competition of the Associated Press in selling financial and commercial news, the Western Union can put down individual competition in innumerable ways. As an illustration take the following case from the testimony of Gardner G. Hubbard : A few years ago a man in Cincinnati had a little news bureau. His correspondent in New York collected the news of the market every morning, forwarded it through the Western Union oflEioe, and it was POSTAL TELEGEAPH. 193 sent over the through line. The Western Union afterward monopolized that business, as they monopolize everything they can put their hands on. Asked him to sell out. He said, " No, I am making a very good thing of this business, and I prefer to keep it." The Western Union stopped sending his messages on the through line, and transmitted them on a way line. There was no priority for their messages. Oh, no ; they only sent them on the through line. Those that went by the way line were longer in getting through, and when received the customers of the Western Union had received the prices and acted on them. No priority, only the man was ruined. He was obliged to give up his busi- ness to the Western Union, and they now monopolize it. For the purpose of giving fabulous fortunes to its inside managers and their friends, the Western Union need not send untrue market quotations. It has only to give the true quotations a single hour, or less than that, in advance to those whom it means to favor, and the work is effectually accomplished. No such power should be allowed to exist in this country, even if no past abuses of it can be shown to have occurred, or even if it be believed that in fact it has not been abused. The temptation to abuse it is enormous, and will sooner or later prove to be irresistible. The bill will effectually take the power away from the Western Union, or any other pri- vate telegraph company, by the low rates and equality which it secures to everybody, and by the still lower rates which it secures to commercial news associations. Competition in furnishing commercial and financial news to all points and places is not to be expected under this bill, but it will be suf- ficient if it insures, as it is certain to do, competition in fur- nishing such news to the more important places, whereby the field for profitably tampering with public intelligence will be so narrowed that the temptation will no longer con- stitute a sensible danger. In respect to the Associated Press, William Henry Smith, the general manager, described the working of it in his testi- mony (March 7) before the committee. The Eastern news is collected by its local agents at vari- ous points and sent to a central officer in the city of New York, by whom, after being subjected to a process which is 194 POSTAL TELEGBAPH. described as "editing," it is sent out to the newspapers whicli belong to the association. This "editing" consists of select- ing such parts as the central officer thinks proper to send out, and in modifying the language, and in making the selec- tion he sends more matter to some sections and places than to others. All the Eastern news goes first to the central office in New York, except that portion of it which is sent directly from this city of Washington to the West and South, and to Baltimore and Philadelphia ; and there is a central officer here who determines absolutely what shall be sent and what shall not be sent. It may be assumed, and is doubtless true, that the persons selected to do this species of editing will be those best fitted to do it skillfully and judiciously, but it must also be assumed that they will be in almost all cases persons who can be influenced, and especially by those to whom they are indebted for their appointment and for continued retention in their places, to edit the news so as to give it a particular coloring and to serve particular purposes. Of the nature and danger of such a power, the following description was given in the testimony of Gardner G. Hub- bard : The man who rules the Associated Press has an instrument for shaping the opinions of the millions which, by the constancy, univer- sality, and rapidity of its action, defies competition. The events which take place in all business, political, and religious centers, together with the actions of public men and their imputed motives, are all presented simultaneously to the public, from ocean to ocean, through this instru- mentality. The agents who collect the news respond to the central authority at New York, and are subject to removal at its pleasure. Here is a power greater than any ever wielded by theFrench Directory because, in an era when public opinion is omnipotent, it can give, with- hold, or color the information which shapes that opinion. It may impart an irresistible power to the caprice of an individual, and the reputation of the ablest and purest public man may be fatally tainted in every town and village on the continent by a midnight dispatch. It is incompatible with public safety that such an exclusive power to speak to the whole public in the same moment, upon every subject, and thus to create public opinion, should be under the absolute control of a corporation. The general manager, William Henry Smith, seemed to claim that the fact that no opposition news association was POSTAL TELEGEAPH. 195 formed for twenty-five years to compete with the Associated Press is proof that its management had been unobjection- able. On the contrary, it may appear to others to be one of the proofs that the Associated Press is so strongly in- trenched in the intimacy of its relations with the Western Union that competition with it has been made well nigh im- possible. It may be said that if under the operation of this bill sev- eral associations shall be formed to collect and distribute news they will necessarily have their news concentrated at central points before it is distributed, and that the same dan- ger of a censorship at such central points will exist as now exists in the case of the Associated Press. But the temptation to exercise a censorship will be taken away, because there will be little or no advantage to anybody in manipulating the news sent out by one association when other and independent associations are at the same time sending out the news un- manipulated. It is only the fact of a monopolized news distri- bution which makes a news censorship possible. This bill is for the press a proclamation of emancipation, and it will not be really a free press until it, or something like it, is enacted into a law. To-day no new paper can be placed on the list of recipients of Associated Press dispatches without the con- sent of all the papers in the same town already on the list, and all papers receiving the news by contract with the asso- ciation are liable to be stricken from the list at the pleasure of the central management. The telegraphic news is the breath of life of the daily press, and to receive such news practically at the will of one company is an intolerable con- dition, degrading to the newspapers and alarming to the country. This bill will put an end to it by the impartial and low rates which it fixes for telegraphing, and by the compe- tition in the furnishing of news which it renders possible and encourages. And to whatever extent it may be shown by ex- perience not to reach and remedy the whole of the present evils. Congress will always have the power to supply what is proved to be lacking by amendatory legislation. 196 POSTAL TELEGBAPH. Summarizing what has thus far been said, it has been shown that the bill secures the advantages of cheapening very largely the charges for telegraphing ; of making those charges and the charges for the transmission of public intelli- gence for the press and for commercial news associations uniform ; and of removing or greatly diminishing the danger that the selection of the public intelligence to be telegraphed will be controlled by large and centralized corporations, by whose managers it may be colored for political, personal, and selfish objects. The advantages thus enumerated are each of them of the first importance, and they constitute together a weighty aggregation of reasons for the enactment into law of at least the first ten sections of the bill. While no reason of a public nature for opposing the adoption of these ten sections suggested itself to any member of the Post-office Committee, they are and will be resisted by telegraph com- panies which are now profiting by higher rates for telegraphic business than the bill provides. Such companies must either offer to become contractors under the lower rates of the bill or take the risk that other companies, now existing or here- after to be formed, will become such contractors. If the thirteen concluding sections of the bill shall recommend themselves to the approval of Congress, and if no company will contract to convey messages of the public delivered to it by the Government at the rates limited in this bill, the exist- ing companies will be subjected to the competition of lines constructed or acquired by the Government. It is not to be expected that any company which is now reaping a monopoly harvest from the present situation of things will favor the pending bill, or will fail to exert itself to defeat it. Men easily persuade themselves that they have an equitable right to the perpetual enjoyment of the advan- tages which they possess, and that every deprivation or im- pairment of such advantages is an act of injustice. It is the duty of legislators to weigh in a just balance the interests of the public and the interests of private companies and in- dividuals. POSTAL TELBGBAPH. 197 The Committee on Post-offices and Post-roads has en- deavored to discharge that duty with care and fairness, and it has arrived unanimously at the conclusion that the time has come for reducing the present rates of telegraphing and making them uniform, and that to the extent of the plan con- tained in the first ten sections of the bill this may be done without injustice to existing companies, and especially with- out injustice to the principal existing company, which is known to have enjoyed, over a long period of time, an income enormously disproportioned to any investment of capital which it has made. POSTAL TELEGRAPH. Speech delivered in the Senate of the United States, January 14, 1884, the Senate having under consideration the bill ( S. 227) to establish a system of postal telegraphs in the United States. Me. Peesident : In the history of goveminents it has sometimes happened that functions first exercised by rulers for the sole purpose of extending and maintaining their power have become converted into instruments for the benefit and service of the people. To subdue and keep in subjec- tion the provinces of the Roman Empire Europe was covered with military roads, which were afterward used as avenues of commerce and friendly intercourse between the descendants of the conquerors and conquered. Lines of couriers estab- lished to bear along these roads messages of emperors and military commanders were gradually superseded by systems of postal communication, in whose benefits the subject was permitted to share. In the course of time, as trade and intercourse developed, the share of the governed in the bene- fits of these systems became more and more important and that of the rulers comparatively more insignificant. For a time the privilege of carrying on the postal service was granted to the court favorites or farmed out for purposes of revenue. But these monopolies have long since been abol- ished, and civilized governments have everywhere themselves undertaken the service. In performing it they mainly act as agents of society, for the promotion of its happiness and prosperity, and not for their own aggrandizement. Even the direct raising of revenue is no longer a prime object, but only an incident of the service. The limits of political boundaries which confine the other functions of government have been by mutual consent broken over by the postal sys- tem, and it is now operating as a mighty force to bind to- gether in amity the nations of the world. Upon governments POSTAL TELEGRAPH. 199 considered as mere instruments for tlie preservation of the peace tlie effect of cheap and frequent postal communication has been to bring the people into closer relations, thus diminishing the chances of foreign and domestic troubles, and at the same time to make more easy the maintenance of their ordinary powers by stimulating and giving greater play to the productive forces from which the revenues to support these powers must be provided. But who shall say what the effect has been upon the peo- ple themselves in their social and commercial relations? In anticipating the result of the introduction of the penny post in England Mr. O'Connell declared in Parliament that it would be impossible to exaggerate its benefits, and even if it would not pay the expenses of the post-oflBce, he held that the Government ought to make the sacrifice for the purpose of facilitating communication. Viscount Sandon insisted that the post-office was not a proper source of revenue, but ought to be used for the purpose of stimulating other sources of revenue. Mr. Goulburn admitted that it would ultimately increase the wealth and prosperity of the country. Sir Robert Peel said that great social and commercial advantages would arise from the change independent of financial consid- erations, and Mr. Wallace described it as one of the greatest boons that could be conferred on the human race. Lord Ashburton, speaking of a high-rate postage, said : I think it is one of the worst taxes. We have, unfortunately, many taxes which have an injurious tendency, but I think few, if any, have so injurious a tendency as the tax upon the communication of letters. And again : It is, in fact, taxing the conversation of people who live at a distance from each other. You might as well tax words spoken upon the Royal Exchange as the communications of various persons living in Manchester, Liverpool, and London. You cannot do it without checking the disposition to commu- nicate very essentially. In describing the results of the reform, after its accom- plishment, the following picture was drawn by Senator Sum- ner in debate in this body: 200 POSTAL TELEGEAPH. The smallest part of the result was in the revenue, except so far as this was advanced by the increased activity of the country, represented by the added millions of correspondence. Commerce and business were quickened infinitely, while the ties of social life were brightened and the heart was rejoiced. Here the testimony is complete. Tradesmen wrote to Bowland Hill, their benefactor, saying how their business had in- creased. Charles Knight, the eminent publisher, who did so much for the literature of the people, wrote that every branch of bookselling was stimulated, while the country seller was brought into daily communica- tion with the London houses. The publisher of the polyglot Bible, in twenty-four languages, requiring a peculiar revision, declared that it could not have been printed but for penny postage. The Secretary of the Parker Society, composed of church dignitaries and intelligent lay- men, which has done so much for ecclesiastical literature by reprinting the works of early English reformers, stated that without penny postage the society could not have come into existence. Secretaries of other societies, literary and benevolent, wrote how their machinery had been improved ; conductors of educational establishments testified that peo- ple were everywhere learning to write for the first time, in order to enjoy the benefits of untaxed correspondence, and that night classes of adults for this purpose were springing up in all large towns. A leading advocate for the repeal of the corn laws gave it as his opinion that this reform must have waited but for penny postage ; that through this ally it reached its triumph two years eaWier than it other- wise could have done. All this is easy to believe ; for penny postage lends itself to all knowledge and to every reform. Others wrote with rapture of its operations. The accomplished naturalist Professor Hens- low, of Oxford, rejoiced over " its importance to those who cultivate science," and pictured the satisfaction of the humble people about his country parsonage " at the facility they enjoy of now corresponding with relatives," together with what he calls the " vast domestic comfort which the penny postage added to homes like his own.'' Miss Martineau de- clared the social advantages that were assured in her neighborhood. Rowland Hill himself, showing how much it had done for the poor, said " the postman has now to make long rounds through humble districts where heretofore his knock was rarely heard." And from the outlying Shetland Islands a visitor reported : " The Zetlanders are delighted with cheap postage. The postmaster told me that the increase in the num- ber of letters was astonishing." But, perhaps, the heartfelt exultation was never better expressed than by the accomplished traveler, Mr. Laing, when, after describing the Prussian system of education, and giving the palm to penny postage as " a much wiser and more effective educational measure," destined to be " the great historical distinction of the reign of Victoria," he proceeds to say that " every mother in the kingdom who has children earning their bread at a distance lays her POSTAL TELEGEAPH. 201 head upon her pillow at night with a feeling of gratitude for this bleBS- ing." (Laing's Notes of a Traveler, chap, vi.) Such was the unbought tribute from all quarters — alike the cottage of the lowly and the home of the professor, the counting-house of the merchant, and the activities of benevolence, business in its various forms, and the commanding efforts of the political reformer, all, all, confessing their debt to penny postage. The increase of correspondence in Great Britain by the cheapening of postage was enormous. In 1840 (the first year) the number of letters more than doubled, and in 1856 the number of letters had grown to 778,393,803, and that of money orders to 6,178,982, as against 75,907,572 letters and 188,921 money orders in the last year of the old system. In 1882 the letters numbered 1,229,354,800 and the money orders 14,880,821. In addition to this, 10,902,318 registered letters, 135,329 postal cards, 140,789,100 newspapers, and 271,038,700 book packages and circulars were carried by the mail in the United Kingdom. The number of letters per capita is shown by the report of the British Postmaster-General to have increased from three in 1839 to seven in 1840, twenty-eight in 1872, and thirty-five in 1882. While the increase of revenue was the result least con- sidered when the reform was under consideration, yet the predictions of Mr. Cobden and of Eowland Hill in that regard were fully realized. The net receipts of the British post-office had reached $6,000,000 in 1856 and in 1882 over $15,000,000. Yet it was of a reform which has produced such beneficent results that a noble lord, then Postmaster-General, said in anticipation : Of all the wild and visionary schemes I have ever heard of it is the most extravagant. In the United States the benefits derived from successive reductions of the postal rate have been not less astonishing. Prior to 1845 the rates for single letters were graded by dis- tances as follows : Not exceeding 30 miles, 6 cents. Over 30 and not exceeding 80 miles, 10 cents. Over 80 and not exceeding 150 miles, 12^ cents. 202 POSTAL TELEGRAPH. Over 150 and not exceeding 400 miles, 18| cents. Over 400 miles, 25 cents. And for double, treble, or quadruple letters in proportion. Under these oppressive rates the limit of correspondence had apparently been reached, since the receipts of the De- partment remained about stationary for ten years prior to 1845, in which year, indeed, they were 13 per cent, less than in 1837. The first important reduction took place on the 1st of July, 1845, to 5 cents for distances under 300 miles, and 10 cents for longer distances. So great was the impetus given to correspondence that the immediate loss of revenue was more than recovered in three years, and the receipts, which in the year ending January 30, 1845, had stood at $4,289,841, amounted in the year ending June 30, 1848, to $4,555,211.10. In three years more, 1851, it reached $6,410,604.33. Then came the sweeping reduction of 1851, namely, to 3 cents for single letters under 3,000 miles. The I9SS of reve- nue which this induced was much greater than that following the reduction of 1845, but it was more than recouped in four years. The revenue in the year ending June 30, 1855, was $6,642,146.13, and in 1860 it had reached $8,518,067.40. These figures may be roughly assumed to have represented about 250,000,000 letters in 1860. ' No important reduction in the letter-postage has taken place since that time until the present fiscal year, and the in- crease has gone on more gradually, but still rapidly and surely. In the fiscal year ending June 30, 1882, the sale of ordinary stamps and stamped envelopes for letters and circu- lars had reached about 1,340,000,000, and for the fiscal year ending June 30, 1883, the number was about 1,432,000,000. But in 1873 a new feature was introduced into the postal system in the shape of one-cent postal cards. "With no ad- vantages over letters in point of speedy transportation, and with the double disadvantage of smaller size and, lack of secrecy against them, their sales have yet risen from 91,079,- 000 in 1874 to 379,516,750 in 1883, or an increase of more than fourfold in nine years. The whole of this vast increase POSTAL TELEGEAPH. 203 of correspondence may be mainly attributed to the cheapness of communication. It may well be said that the benefits to our people from a cheap and efficient postal service are incalculable. In confer- ring them our republican Government has merely carried out one of the purposes, and one of the most important purposes, for which it was created, and performed a service which could not properly, or indeed safely, be committed to any other agency. When our forefathers separated from the mother country there had long been in operation through the colonies a sys- tem — although an imperfect system — of postal communica- tion. Its direction was assumed by the Continental Congress in ordinances which declared its functions to be "the com- municating intelligence with regularity and dispatch from one part to another of these United States." And by the Articles of Confederation the power of "establishing and regulating post-offices from one State to another" was ex- pressly committed to Congress. Although post-roads were not mentioned in the Articles of Confederation the power to establish them was necessarily presumed, and by the act of October 18, 1782, an extended system of postal communication was put in operation. In the first draught of the Constitution there was a clause : Congress shall have power to establish post-offlces. But the words "and post-roads" were added by a vote of the majority of the State delegations, and the amendment was afterward unanimously concurred in. From the beginning the simple words of the Constitution "to establish post-offices and post-roads " have been given all the breadth of construction necessary to carry into effect the power which the clause granted. By its authority statutes have been passed under which thousands of officers and sworn agents have been appointed and paid by the Govern- ment to conduct and superintend the transportation of the mails. "Post-roads" were not thought to mean merely the high- ways on land existing at the time of the adoption of the Con- 204 POSTAL TELEGRAPH. stitution. On the contrary, in the first permanent act of Congress " to establish post-offices and post-roads within the United States," passed .February 20, 1792, provision was made for the postal service "in packet-boats or vessels passing by sea to and from the United States or from one point to an- other therein." The act of February 27, 1813, authorized the Postmaster-General "to contract for carrying the mails of the United States in any steamboat or boats which are or may be established to ply between one post-town and another post- town." Penalties for the non-delivery of the mails within a certain time by persons employed on such boats were pro- vided by the act of February 27, 1815, and by the act of March 23, 1823, it was enacted — That all waters on which steamboats regularly pass from port to port shall be considered and established as post-roads, subject to the provisions contained in the several acts regulating the post-ofHoe estab- lishment. The act of March 25, 1864, required all citizens of the United States owners of vessels plying between the United States and foreign ports to carry the mails, and by various acts the post-office clause of the Constitution has been drawn upon to authorize, in part at least, the charter by Congress of lines of steamers between the United States and foreign countries. [15 Statutes, 229. J Under that clause alone the Postmaster-General has been authorized to conclude conten- tions with foreign governments for the exchange of postal correspondence, and to make contracts with private persons for the carriage of the United States mails through foreign territory. The navigable waters of the United States, and canals and plank-roads within their limits, have been de- clared post-roads while the mails were carried thereon. And by a sweeping clause in the act of July 7, 1838, it has been enacted "that each and every railroad within the limits of the United States which now is or hereafter may be made and completed shall be a post-road." Railroads thus chartered as postal agents of the Govern- ment have been required to furnish special cars for the con- venient transportation of the mails and otherwise to provide POSTAL TELEGKAPH. 205 for their prompt transmission and delivery. On the other hand, they have incidentally received valuable franchises from the postal legislation of Congress. Their bridges across navigable streams have been declared post-roads, and the Su- preme Court has held that such declaration made them legal structures. In the foregoing instances, as in most others, the power to establish post-roads was used merely to designate existing routes over which the mails should be carried, but in the practice of the Government the power has by no means been confined to such designation. Under the administration of Jefferson authority was given the President, and exercised by him, to cause to be opened roads in Georgia, in the Indian country, and from Nashville, Tenn., to Natchez, Miss. [2 Stat- utes, 397. ] At the same session he was authorized to regulate the laying out and making a road from Cumberland, in the State of Maryland, to the State of Ohio. The road was con- structed and appropriations were made for its maintenance down to the year 1838. Many acts were also passed for the repair of old post-roads in the States and for surveying new roads. The practice was discontinued for two reasons : First, because the invention of railroads made its continuance unnecessary; and second, because the construction by the General Government of roads through the States which might and would be used more largely for other purposes than for postal communication seemed to be of doubtful policy. It was the fear that such schemes of internal improvement would interfere with the rights of the States that led to the several vetoes of Presidents Madison, Monroe, and Jackson. In his mes- sage of the 4th of May, 1822, vetoing a bill for the repair of the Cumberland road, Mr. Monroe did, indeed, argue that the words " to establish post-offices and post-roads " conveyed merely a power to designate existing places and existing roads between and over which the mail should be carried, but al- though the particular bill was not passed over his veto, yet, 206 POSTAL TELEGRAPH. " as before seen, His views did not prevail in subsequent Con- gresses. So far as the authority to construct roads is concerned it has not yet been directly passed upon by the courts, but the word "establish," as used with reference to post-offices, has within the past ten years been given the widest possible meaning by the Supreme Court of the United States. For many years it had been the practice for the Government to purchase sites in the States and to erect its own buildings at the more important post-offices. In the appropriation act of June 10, 1872, provision was made "to commence the erec- tion of a building at Cincinnati, Ohio, for the accommodation of the United States courts, custom-house, United States de- pository, post-office, internal-revenue and pension offices, and for the purchase at private sale or by condemnation of ground for a site therefor." Under this act, for the first time in the history of the Government, it was sought to secure the condemnation of the necessary land by proceedings in the United States courts. The proceedings were resisted, and the case was brought to the Supreme Court, which said in the course of its opinion : When the power to establish post-offices and to create courts within the States was conferred upon the Federal Government, included in it was authority to obtain sites for such offices and for court-houses, and to obtain them by such means as were known and appropriate. The right of eminent domain was one of these means well known when the Constitution was adopted and employed to obtain lands for public uses. Its existence, therefore, in the grantee of that power ought not to be questioned. ( Kohl vs. The United States, 91 U. S. R., 372.) If under the power "to establish post-offices" the Gov- ernment may acquire lands in the States by condemnation through its own agencies, it can not be doubted that it may by similar means acquire whatever may be necessary to en- able it "to establish post-roads," and that the courts will so decide if the occasion shall ever arise. It may be presumed that the power would never have been questioned if its exer- cise had not, as before shown, involved the establishment of POSTAL TELEGBAPH. 207 roads to be used for the carriage of freight and passengers. If, therefore, there had existed in the early days a method of communication adapted only to the wants of the postal service, surely no one would have doubted the authority of the Government to avail itself of that method under the post- office clause of the Constitution. A pneumatic tube under- ground, or a balloon route through the air, would have been held to be a post-road equally with the common highway or the railway on land, the navigable rivers and canals, or the trackless waters of the ocean. About the time that Congress declared that railroads were post-roads, and while the people of Great Britain were still rejoicing over the establishment of the penny post, an inven- tion was perfected whose sole use and object was to carry out the functions of the post-office as described in the ordinances of the Continental Congress, namely, " the communicating of intelligence with regularity and dispatch from one part to an- other." The inventor brought it to the attention of Congress, and an act was passed March 3, 1843, appropriating $30,000 to test the practicability of establishing a system of electro- magnetic telegraphs by the United States. A line was built from Washington to Baltimore, and placed in charge of the Postmaster-General. For three years it was maintained by the Government, and its revenues were directed "to be placed in the Treasury of the United States for the benefit of the Post-office Department in the same manner as other revenues from postages." But the people were slow to recognize its advantages, and its workings were so imperfect that it was thought to be unavailable for long distances. Under the au- thority of the act of June 19, 1846, the line was sold to pri- vate parties, and the invention passed from the hands in which it had been properly placed, and under which alone the public could ever hope to realize its full benefit. It may be doubted whether the statute-books contain a piece of more ill-advised legislation than this act of 1846, an act which has already cost the people a hundred million dol- lars in the excessive cost of telegrams, which has produced 208 POSTAL TELEGRAPH. most serious evils in the past, and which, unless its conse- quences can now be checked, may be fraught with yet more serious evils in the future. The act was not passed without earnest protest. In 1845 the Ways and Means Committee of the House of Kepresen- tati^^es made a report [No. 187, second session Twenty-eighth Congress], in which, after asserting with emphasis the con- stitutional right and duty of the Government to adopt for the benefit of the people this' new system of postal communica- tion, the committee said : Should the arrangements into which he (the inventor) may find it necessary to enter with private individuals or associations stipulate ex- clusive rights in their favor, it is manifest how greatly Government and people would lie at their mercy. Having in their hands the monopoly of such a medium of intelligence on the important lines, they could make such use of their advantages over the Government and the com- munity as would at length enable them to exact their own terms as the price of the surrender of their exclusive right ; for the truth cannot be too often repeated, or too deeply impressed, in relation to this sub- ject, that the people will never submit long to the mischiefs and dis- credit of the public post being outstripped by any private monopoly or establishment whatever. The loss of revenue will co-operate with the complaints and sufferings of the people to do what were better done at once, namely, to establish the telegraph in connection with and as a branch of the post-oflBce. And again : The committee might easily add to the views and arguments which they have now presented others of a highly commanding character, especially those which relate to the extreme value of which the magnetic telegraph would be in the emergencies of war, and its singular adapted- ness to render our system of Government easily and certainly main- tainable over the immense space, from the Atlantic to the Pacific, which our territory covers. Doubt has been entertained by many patriotic minds how far the rapid, full, and thorough intercommunication of thought and intelligence so necessary to a people living under a com- mon representative republic could be expected to take place throughout such immense bounds. That doubt can no longer exist. It has been resolved and put an end to forever by the triumphant success of the electro-magnetic telegraph of Professor Morse, as already tested by the Government. These views were concurred in by the Postmaster-General of that day, Mr. Johnson, who described the telegraph as an POSTAL TELEGRAPH. 209 agent vastly superior to any other ever devised by the genius of man for the diffusion of intelligence, and said : The use of an instrument so powerful for good or evil cannot with safety to the people be left in the hands of private individuals uncon- trolled by law. The States of the continent of Europe were the first to ap- preciate the advantages of governmental control of the tele- graph. They received the inventor as a public benefactor, covered him with honors, and from the beginning they as- sumed the erection and management of the telegraph lines. It may be said that in taking control of the telegraphs the monarchial governments of the Old World were actuated as much by the desire to use them for the maintenance of authority as by the advantages which they offered for the service of the people. To a certain extent this is doubtless true, but it is none the less true that the people have reaped the most solid benefits, and that the tendency has been rather to liberalize government than to maintain arbitrary power. From the various administrative departments to which it was at different times confided the management of the telegraphs in the most important States has been transferred to the post- oflS.ce and amalgamated with that establishment, and by suc- cessive reduction of rates the system has been brought within the reach of the poorest classes, and at the same time, through the increase of correspondence thus produced, it has, in the majority of cases, been made self-sustaining. Moreover, the greatest progress and the best management have alike been shown in those countries where the forms of government are most liberal, as in Switzerland and Belgium. The areas of these countries is so small (the former covering only about 16,000 square miles and the latter only about 11,- 330 square miles) that the telegraph has the least possible advantage over mail communication. A few hours will carry a letter from one end of either country to the other, but the management of the telegraphs has been such that their small margin of usefulness has been availed of to the utmost. Under the tariff of one franc, or less than twenty cents for 210 POSTAL TELEGRAPH. twenty words, the number of internal messages in Belgium grew from 80,216 in 1860 to 332,721 in 1865. On tlie 1st of December of that year the rate was reduced one-half, and in 1866 the number of messages increased to 692,936, or more than 100 per cent. In 1882 the number was 2,225,094, in ad- dition to 579,931 international messages sent and 620,923 in- ternational messages received, and 3,095,177 messages in the service of telegraph, post-oiBce, railroad, navy, and other Government departments. In Switzerland, under * a like tariff of one franc for twenty words, the number of internal messages had in 1867 reached 397,333. The rate was reduced to half a franc on the 1st of January, 1868. In the very first year of the reduction the number of messages increased to 798,186, or more than 100 per cent. ; and since that time it has grown to 1,837,385 in 1881, in addition to 879,727 inter- national messages sent and received. These figures alone would seem to be sufficient to show the popular character of European systems as illustrated in these two countries ; but that character further appears from the classifications made by Belgian and Swiss administrations of the nature of the telegrams in 1872 and prior years, from which it appears that more than half the telegrams in those countries were on social affairs. In 1872 the proportion of social messages in Belgium was over 55 per cent., and in Switzerland 61 per cent, of the total number. In striking contrast' with this is the statement which has been made on good authority, that of the 40,000,000 messages which passed over the wires in this country last year less than 12 per cent, were on social matters. In the other countries on the continent the progress of the telegraph has varied with the character of the people and their institutions, the rates charged, and the advantages offered by telegraphing over postal communication. In France, under the tariff of 1858 of 2 francs fixed and 10 centimes per myriameter (about six miles) for twenty words, 1 franc in the same department, and 1^ francs between adjacent departments, the number of messages in 1861 was POSTAL TELEGEAPH. 211 only 734,352. January 1, 1862, the rates were reduced to 2 francs per twenty words, without regard to distance, and 1 franc in the same department. The number of messages rose to 1,291,774 in 1862. In 1868 the rates were reduced to 1 franc throughout France and one-half franc within a depart- ment, and the number of messages increased from 2,916,734 in that year to 4,085,408 in 1869. Since the establishment of the republic the progress has been most rapid. In 1878 the service was amalgamated with that of the post-office, and in 1880 the tariff was reduced to 5 centimes, or less than one-half cent per word, with a minimum tariff of 50 centimes. The result of this reduction appears in the increase of internal messages from 13,998,736 in 1879 to 21,210,510 in 1882. In the last-named year the French sent and received also 3,379,620 international messages. For 1 franc messages may now be sent from the north of France to Algiers, a distance of 2,000 miles. In Germany the tariff was for a long time based upon distance. Uiider this rate the number of internal messages in 1872 was 6,783,533 and the receipts from internal messages were $1,304,373, showing an average receipt per message (which of course exceeds the average tariff for the minimum number of words) of about 20 cents. In 1875 the service was amalgamated with the post-office so completely that no dis- tinction is now made in the statistics as to the salaries paid employes who perform the postal and telegraphic services. In 1878 Bavaria and Wurtemburg, which formerly main- tained separate telegraphic administrations, were brought into the imperial system. The present tariff in Gennany is IJ cents per word, with a fixed rate of 5 cents per message additional. For local messages the tariff is one-half cent per word. The number of internal messages in 1882 was 12,303,516. While the progress of telegraphic correspondence in Ger- many is thus seen to have been less rapid, so far as the reduction in rates and increase of messages are concerned, the management of the system in other respects leaves little to be desired; and further reduction may be expected to 212 POSTAL TELEGRAPH. place the system on the same popular basis as in the other countries. In 1876 an extensive system of under-ground lines was commenced, which now extends to 221 cities and aggregates 3,400 miles of line, carrying 23,318 miles of con- ducting wires. In Great Britain the telegraph was at first controlled by private parties. As early as 1854, however, it was proposed by Mr. Thomas Allen, a well-known electrician, to annex the system to the general post-office. In 1856 Mr. Baines, an officer of the post-office department, submitted a plan for that purpose to the lords of the treasury. In 1861 Mr. Kicardo, formerly a member of Parliament, forwarded to the chancel- lor of the exchequer a memorandum "in support of the ex- pediency of the telegraphic communication of the kingdom being placed in the hands of Her Majesty's Government," which was referred to the post-office officials, but did not receive immediate attention. The question, however, soon grew to be one of popular interest, and in 1865 the Edinburgh Chamber of Commerce appointed a committee to consider it, which reported in favor of the proposition. This was fol- lowed by a petition from the Association of Chambers of Commerce of the United Kingdom to both houses of Parlia- ment. The post-office department, through Mr. Scudamore, one of its officials, then commenced a thorough investigation of the subject. In this investigation it was ascertained that many important districts were unprovided with telegraphic facilities, and that the rates, although apparently yielding only a fair profit to the companies, were unreasonably high. Competition had been tried by a company made up of stock- holders directly interested in cheap telegraphy which had established a uniform rate of one shilling, but it was unable to maintain this rate, although the old companies still pros- pered on the tariff between points not affected by the compe- tition. In July, 1865, the rates had been increased to one shilling and sixpence between 100 and 200 miles, and two shillings beyond 200 miles. In Mr. Scudamore's report the success of the postal tele- graph of Belgium and Switzerland was adverted to, as well as POSTAL TELEGRAPH. 213 that of the system of the colony of Victoria, where the tele- graph had for some time been under the control of the post- office. It was shown that the proportion of telegrams to letters in the United Kingdom had ranged from 1 to 439 in 1855 to 1 to 121 in 1866, while in Switzerland the proportion had been 1 to 84 in 1860 and 1 to 69 in 1866. In Belgium, after the reduction in telegraph tolls from one franc to one-half franc, the proportion rose from 1 to 73 in 1865 to 1 to 37 in 1866. If this proportion had obtained in the United Kingdom there would in 1866 have been trans- mitted 19,700,000 instead of 6,000,000, the actual number. From the foregoing premises and from the greater intel- ligence and social and commercial activity of the British people, as well as the greater advantages which the longer distances give to the telegraph over the mail, Mr. Scudamore argued that the establishment of a postal telegraph in Great Britain was desirable and that it would become even a greater success than on the continent. In conformity with his opin- ions, a bill was prepared by the post-office department and submitted to the lords of the treasury February 14, 1868. In transmitting the bill the Earl of Montrose, the Postmaster- General, said: It is merely a permissive bill, and does not contemplate the acquisi- tion of any monopoly by the Postmaster-General. * * * It is not proposed in the inclosed bill to confer on the Postmaster-General any rights which the existing companies have not been authorized to exer- cise, or to give him any greater power over the holders of private prop- erty than the existing companies have already obtained from Parliament. In short, if the bill should become a law it would merely place the Postmaster-General in the position of a newly-organized telegraph com- pany, and will leave him to negotiate with existing companies for the transfer of their property on such terms as shall be satisfactory to him and them. Upon its introduction into Parliament the bill was at once attacked by the representatives of the telegraph companies. Their arguments need not here be adverted to. They have been so often urged from the same quarters in this country that they are already familiar to the Senate and to the American people. After an exhaustive hearing by a Parlia- 214 POSTAL TELEGKAPH. mentary committee they were decided not to be well founded, and in July, 1868, an act was passed "to enable Her Majesty's Postmaster-General to acquire, work, and maintain electric telegraphs." Its main features were as follows : The Post- master-General was authorized, two-thirds of the stockholders consenting, to purchase the whole or any part of the under- takings of the telegraph companies at a price equal to twenty times their net profit during the year ending June 30, 1868. In addition to this price, special arrangements were provided for the compensation of the competing United Kingdom Company in consideration of its efforts to establish a shilling rate before alluded to, and for the assumption of the lines owned by the railway and canal companies, or operated by them, under contracts with the railways. The rate for messages was fixed throughout the kingdom at one shilling for twenty words, excluding the address and signature. This rate covered delivery within one mile of the office of address or within its postal delivery. If delivered beyond these limits the post-office might be used or special messengers employed at a cost of sixpence per double mile. No agreement entered into under authority of this act was to bind the government until it had lain for one month on the table of both houses of Parliament without disapproval. It is not easy to say whether the fixing of these favorable terms of purchase was due to deception practiced by the com- panies as to their actual profits or to concessions made by the friends of the bill in order to avert the opposition ^f the com- panies, but it is certain that before its passage that opposi- tion was withdrawn, and for the best of reasons. Referring to the matter, Mr. Gladstone said (Hansard, volume 193, page 1586 ) : That at all events, at that time (before they knew of the proposed terms) the companies treated the proposed purchase as a disadvantage. The price of the Electric Telegraph Company's shares was then £153 ; on the 23d of June, just after the reference in committee, the shares had risen to £165. The rise might be taken to represent the normal, fair, and legitimate improvement in the value of the property, connected with the approximate realization of the plans of the Government. But what POSTAL TELEGEAPH. 215 were they to say when, instead of a rise of £12 between the 2d of Janu- ary and the 23d of June, they found a rise of £41 between the 23d of June and the 21st of July? And would the reasoning of the honorable and learned gentleman account for that? He had set up an ingenious theory that there was something so delightfully scientific in the posses- sion of telegraph property that it attracted to itself, quite irrespective of vulgar calculation, what was known as a pretuim affectionis, but he was afraid that the change which had occurred during the last few weeks must be attributed to considerations of a different character. The Electric Telegraph Company's shares were £153 on the 2d of Janu- ary, £165 on the 23d of June, and £206 on the 1st of July, and the Magnetic Company's shares were £115 on the 2d of January, £125 on the 23d of June, and £150 on the 21st of July. In the former case the increase was one-fourth, and in the latter it was one-fifth between June and July. Under the agreements made with the telegraph companies, by the authority of the indefinite provisions of the act of 1868, the compensation to be paid the companies grew from £d,- 000,000, the estimate of Mr. Scudamore, to over £7,000,000. When the money bill came to be discussed by the new Par- liament, Mr. Crawford, a member of the commons, who had opposed the original bill, said (Hansard, volume 198, page 759): He confessed the terms now proposed to be given to the companies were, in his opinion, exorbitant and preposterous beyond all reason. Still he thought the house was bound by its bargain. The Parliament undertook last year to pay these companies twenty years' purchase, and if it could be shown that the profits amounted to the sum set down the house could not help itself without breaking faith with the companies. He thought the bargain a very bad one, but he was afraid it must be carried out. It was this sentiment that led Parliament to change the original intention and to confer a monopoly of the telegraphs on the post-office department. Thus one mistake necessarily led to another, and the British postal telegraph was from the first handicapped by an enormous interest charge, and to some extent by the odium which always attaches to a legal monopoly. But notwithstanding the exorbitant price paid for the telegraph, the investment has not proved an unprofitable one. 216 POSTAL TELEGEAPH. Since the date of the transfer of the telegraph to the State, January 29, 1870, the length of line has been increased from 5,651 miles to 27,096 miles, and that of wire from 48,999 miles to 132,431 miles. The number of offices has grown from 2,488 to 5,747, and the number of messages from about 6,000,000 to nearly 33,- 000,000. Much of this increase was very sudden, the number of messages in 1872 having jumped to about 17,000,000. The popular appreciation of the benefit derived from the transfer of the telegraph to the State was so marked that for a short time the lines, notwithstanding their great extension, were clogged with business. This difficulty was soon obviated, however, and the steady progress of the system has enabled the Government to pay all the expenses out of the receipts and to fall but little short of paying the interest on the entire investment. For the whole of Europe it appears that the total number of internal messages sent in 1882 ( excluding Portugal; Spain, Turkey, and Bulgaria), namely, 90,053,781, were sent at a total cost of $24,278,164, or an average cost per message of less than 27 cents. When it is considered that these figures represent more than the average tariif for the minimum number of words, and that the statistics include such unprogressive countries as Russia, Servia, Eoumania, and Greece, where rates are exceptionally high, it will be seen that the average rate, taking Europe as a whole, is extremely low. The interest which European governments take in their telegraphic systems is shown by the fact that they have been accustomed for many years to hold conferences, at which all matters relating to telegraphy are discussed. They have also organized an international bureau, with headquarters at Berne, presided over by a Director-General, Mr. L. Curchod, a gentleman selected for his abilities for that important office, to whom advocates of a governmental telegraph in the United States are much indebted for statistical and other informa- tion. POSTAL TELEGBAPH. 217 In the United States, after the relinquishment by the General Government of the control of the line from Wash- ington to Baltimore, the construction of a telegraph was commenced by individuals and corporations organized under State laws. The most enterprising of these was the Western Union Company, organized at Eochester, N. Y., which first built a line from New York to Louisville, via Buffalo, Cleve- land, and Cincinnati, at a cost of about $150,000, The com- pany then turned its attention to the purchase of lines of strug- gling Western companies, acquiring the Erie and Michigan from Buffalo to Milwaukee, and the Wade line from Cleveland to Cincinnati, and leasing the Louisville, St. Louis and Pitts- burgh, and the Cincinnati and Louisville lines. It also built from Pittsburgh to Philadelphia. The lines were cheaply built and still more cheaply purchased, so that the expendi- ture, as is stated by those in a position to know, was up to this time about $300,000. This expenditure was more than recouped by the cash dividends, and the company's stock was quadrupled, making it about $2,000,000. From that time for- ward it is believed that the investments were paid out of the earnings, after deducting handsome dividends. These in- vestments were sometimes in cash, but more generally in the shape of new issues of stock, and the policy of absorption of old and the construction of new lines was continued. Down to 1860 the intervention of the General Government had been confined to the passage of a few acts granting aid and protection to parties proposing to extend the telegraph to the Pacific coast and to the Atlantic Cable Company. In June of that year Congress offered a bonus of $40,000 a year for ten years, in addition to rights on the public lands, to parties who would undertake the construction of a line from the Missouri to the Pacific. This offer was accepted by cer- tain directors of the Western Union Company and the line constructed from Brownsville, Neb., a distance of 1,100 miles, to Salt Lake City, where it connected with the line to San Francisco. Four hundred and seventy-five miles of the east- em end of this line, from Brownsville to Sedgwick, were 218 POSTAL TELEGBAPH. erected by Charles M. Stebbins, a well-known telegraph, builder and operator, at that time, I believe, a citizen of my State, at a cost of $67 per mile, including the hauling of the poles and all the materials long distances in wagons. The western end, according to Mr. Stebbins' statement, was built liiuch more expensively, at a large profit to the contractors, but the whole cost only $147,000, or about $134 per mile. On this expenditure $1,000,000 of stock was issued in the name of the Pacific Telegraph Company. In speaking of this line Mr. Stebbins, in a sworn statement, dated March 26, 1870, said : This one million dollars of Pacific Telegraph stock ( prominent men of the Western Union Telegraph Company being the sole owners) was afterward taken into the Western Union Telegraph Company by issuing therefor $2,000,000 of Western Union Telegraph Company stock. After this the Western Union Telegraph Company's stock was trebled, by which manipulation an original expenditure of §147,000 ( and a part of that not honestly spent) came to represent $6,000,000 of Western Union Telegraph stock. The property thus represented by $6,000,000 of stock had itself been three times paid for by the Government bonus of $40,000 per annum for ten years. , At the beginning of the civil war the telegraphic terri- tory of the country was divided mainly between the Ameri- can Company, running through the eastern slope from Nova Scotia to New Orleans ; the Southwestern, extending from New Orleans through Mississippi, Tennessee, and Kentucky to Louisville ; and the Western Union Company, extending through the Middle and "Western States. The California State Telegraph Company operated the lines on the Pacific slope, connected with the Western "Union by the line above alluded to ; the Illinois and Mississippi Company operated lines west of Chicago ; the Northwestern Company those through Wisconsin and Minnesota, which maintained an independent organization until their recent absorption. These lines all worked in connection as one system, although under different managements. POSTAL TELEGEAPH. 219 In 1863, as is stated by eminent authority (Mr. Gardner G. Hubbard), the capital stock of the Western Union Com- pany was $3,000,000, representing the $2,000,000 to which it had been quadrupled and accretions from various sources. In that year a stock dividend of $3,000,000 was added. In 1863 and 1864 $5,000,000 more was issued to represent exten- sions and new lines, and in the latter year the stock was doubled by an issue of $11,000,000 as a dividend. In 1863 and 1864 the Russian extension was organized with a capital of $10,000,000. The success of the Atlantic cable of 1865 made this line utterly useless, and it was saddled on the Western Union Company by an issue of $3,300,000 in bonds of the latter. During and after the war an active opposition arose from the United States Telegraph Company competing in the territory of the Western Union over some 14,000 miles of wire. In 1866 commenced a grand scheme of consolidation. The 14,000 miles of the United States Company's wires, which were very poorly built and which offered ieyf additional facili- ties to the public, were stocked into the Western Union at $6,345,800. The Illinois and Mississippi and the South-' western Companies' lines were absorbed. Bonds to the amount of $1,652,000 were issued for the California telegraph lines; and for each share of the American Company's stock, which amounted to $4,000,000, three shares were issued, mak- ing an addition of $12,000,000. When this consolidation was accomplished the Western Union Company stood without an important rival in the tele- graph business of the country, with a capital stock of $41,- 000,000 and a total nominal investment of $47,877,350, of which $22,475,000 represented nothing but pure water, and $9,645,000 property almost worthless. The remaining $15,- 757,350 was an exaggeration of probably 100 per cent, of the cost of the plant which it represented. The year 1866, as has been seen, marks an important epoch in the history of the telegraph in this country. 220 POSTAL TELEGEAPH. Since that time, and by processes similar to those above described, the stock of the Western Union Company has been increased from $41,000,000 to 180,000,000, at which figure it now stands. Of this increase $15,526,590 represents a stock dividend declared two years ago, and the greater part of the remainder the purchase of lines of the various competing companies which have started up from time to time. The Bankers and Brokers', the Insulated, the Franklin, the Pacific and Atlantic, the Southern and Atlantic, the Atlantic and Pacific, the American Union, and the Mutual Union have successively gone to swell the enormous aggregation of con- solidated capital on which the people who send telegrams are obliged to pay dividends. Other competing lines are now starting, but they will be short-lived, no matter how able their promoters may be to ' carry them on. Where combination is possible competition is impossible, and in the nature of things capitalists will not carry their schemes beyond the point at which they become unprofitable. If a complete system of competing lines were to be established to-morrow, the result would be to more than double the expense by the increased cost of operating and to more than divide the profits by the necessary reduction of rates. But long before such point can be reached in the or- dinary course of things competitors would find it to their interest to consolidate, and the amount of stock to be issued to the competing company as its share in the iuture profits would only be measured by its ability to hold out. That is the history of the past, and will be the history of the future so long as the telegraph remains solely in private hands. To show how this has operated in the past I insert a table taken from the report of the House Committee on the Post-office and Post-roads of the last session, to which I have added the figures for the last year, furnished by the Journal Telegraphique of Berne and the report of the Western Union Company. These figures show that the net profits of that company have almost steadily increased, notwithstanding the large competition since 1866. In spite of it, they grew from $2,624,919 in 1867 to $3,229,157 in 1875 and $7,660,349 in 1883. POSTAL TELEGRAPH. 221 Eh 03 S 1^ o 03 CQ s & 12; CO w tH o 1 o Cfi |i< K n "! S !« PQ w a b p oo^mcDcocoi-iooaicoi;-oi:-L--0"3 OSOrHlOrHIMffqQt-OSl— (NOt-a5O03 e3iN(N en 00 CO tH CO ff^ in o iH lO lr-00 '" '* ■' ocDiom CO(N-*ItH CO CD CD CO co(Nino, oToToTo w to " t- CO rH -* (NinCOCDC-CJlNCOOt-rH-^CDCBOt-t-r 03^-*[-CD-*CDa5COa50CQOOlOQ(N'H OO^C3THCD-^-^COiHI>TH050CO^CPiHCO^-THOO t-0D05Oi-l(NC010l:-C-00aJO.HCQ(Nt~(N iHtHi-liHiHrHiHrHiHCqiMCqcOCOTfH oocogjc 00t-00O3C_„„ ,.-^ . coiMiHOrHOOt-inooiocni: CDt-ODCSOrHriCO-^iracDC-OOOlOiHCMCO CDCOCDCDt^l:^l~-t-I:'t^C^t^t-I:^a00000Q0 OOOOCOQOQOOOOOQOOOX 0000000000000000 iHrHiHTHr-(THi-irHi-liHi-trHi-tiHi-(i-llHrH 222 POSTAL TELEGBAPH. The market price of the stock which in September, 1860, stood at 58, has since greatly fluctuated, going at one time as low as 30J, but the above table shows that the profits have never been less than 5 per cent, and are now about 9 per cent, on the greatly inflated capital. To no organization in this country is more applicable the oft-quoted remark of Hon. Josiah Quincy, that — By high charges the corporation has taken the money of the people, expended it in extensions, and then claimed the right to charge the people forever with dividends on the stock for which they have paid. The feudal barons of the Rhine, the transportation managers during . the Dark Ages, compelled all that passed to pay tribute, but they lacked the master stroke of financiering in neglecting to compel the people to pay interest forever on the very sums of which they have been plundered. Even before the consolidation of 1866 the evils attending private management of the telegraph had not escaped the at- tention of Congress. In February of that year Mr. Brown, of Missouri, made an elaborate speech in this body, and a resolution was adopted calling on the Postmaster-General for information as to the feasibility of a postal telegraph on the principal mail-routes. To this resolution the Postmaster- General returned an unfavorable reply, based mainly on the information furnished him by the telegraph companies inter- ested in opposition to such a scheme. At the same session of Congress a proposition was pending for the incorporation of a new telegraph company, to be called the National, whose projectors proposed, in return for certain concessions, to sub- mit their business to limited control by the Government, and to allow the latter to purchase their lines at any time at an appraised value. It was not deemed wise to grant the char- ter asked for, but instead of it a general act was passed July 24, 1866, by which any telegraph company then or thereafter organized, and which should accept its provisions, was granted the right-of-way over all post-roads, navigable waters, and public lands, with certain other privileges on the latter. Bach company accepting the act was to agree to give Gov- ernment messages priority, to transmit them at rates to be POSTAL TELEGRAPH. 223 fixed by the Postmaster-General, and to sell its " telegraph lines, property, and effects" at an appraised value to the Government at any time after five years from the passage of the act. Over fifty companies, organized from time to time, includ- ing all of any importance, accepted the franchises conferred by the act and became bound by its provisions ; and they and their stockholders for seventeen years have had fair notice of the intention of the Government at some time to assert its right to perform the telegraphic business as a part of its public functions. Notwithstanding this supposed check on its management, frequent complaint has been made of the manner in which that business has been conducted since the passage of the act. The nature of these complaints may be gathered from various memorials and from reports of committees and execu- tive officers. They have become too familiar to need lengthy repetition by me at this time. They relate not merely, nor indeed mainly, to the high and unequal charges for tele- grams. These charges, although still unjustifiably high in most parts of the country, have been largely reduced in the past few years, partly, it is admitted, in consequence of continued agitation in Congress and partly as a measure of business sagacity, to which the people have responded by in- creasing the business of the company from six to forty mill- ion messages and its profits from two to nearly eight millions of dollars per annum. The most alarming aspect of these complaints has been that in which they exhibit the power and influence which this corporation has gradually acquired over the commerce, the press, and the legislation of the country. It has been claimed that through its commercial news organization the management may at some time affect the prices of commodi- ties in home or foreign markets ; and should this manage- ment fall under the control of one man, as it is not impossible, he might, sitting in his office at New York, like a spider in its web, manipulate the wires that lead all over the land to 224 POSTAL TELEGEAPH. entrap unwary speculators to their ruin and his own enor- mous profit. Through its relations with the press associations the tele- graph company can discriminate between friendly and un- friendly newspapers, and compel the latter to dependence upon its will. It is said that the establishment of opposition newspapers has been prevented, and that those already established have been crushed or their hostility averted by the mere raising of tariffs for press dispatches. Evidence has been given that at one time the contracts with the news- papers provided against such hostility, and to enforce their provisions the following circular was issued : LPriyate circular. Not for publication.] Cincinnati Commerciai, Office, April 15, 1867. To the Members of the Western Associated Press: Your attention is invited to the clause in our contract with the tele- graph company which forbids us to encourage or support any opposition or competing telegraph company. That clause was to the telegraph company a valuable consideration for the favorable terms upon which they contracted with us. Mubat Halsted, Executive CoTnviiftee W, A, Press. As to the attempted control of governmental action by the Western Union Company, it was boldly acknowledged by the president himself in his annual report for 1873 in the follow- ing language : The franks issued to Government officials constitute nearly one-third of the total complimentary business. The wires of the Western Union Company extend into thirty-seven States and nine Territories within the limits of the United States, and into four of the British provinces. In all of these our property is more or less subject to the action of the National, State, and municipal authorities, and the judicious use of com- plimentary franks among them has been the means of saving to the company many times the money value of the free service performed. I do not need to assume the responsibility of charging the present existence of all the abuses which are possible, or even of those referred to, in the management of the telegraph. It will be sufficient for us to say, in the words of the late Postmaster-General Howe : POSTAL TELEGBAPH. 225 Knowing that it can be so abused, it seems to be the dictate of pru- dence not to wait until it is so abused. It is an agency much too dread- ful to be intrusted to private hands. For evils like those that have been briefly indicated it is conceded by all who have investigated this subject impar- tially, even by those who, like the late Postmaster-General, came to the investigation reluctantly and with a strong indis- position to interfere with private interests, that the remedy must come in some form of action by the National Govern- ment. Competition might afford relief, but it is certain that competition will not do so, because competition is at the ex- pense of capital. This I believe to be the overwhelming sentiment of the country, accentuated by the occurrences of last summer, and it remains for us to decide sooner or later upon the form of relief best adapted to the nature of the case. Four leading plans to this end have been proposed to Con- gress, differing widely in their provisions. I will endeavor to describe them briefly without regard to the order of time in which they were submitted. While I would not antagonize any one of them that would meet with the approval of the Senate, certain objections to each, which have occurred to me in investigating the subject, have induced me to suggest a fifth and still a different plan. First, it has been proposed to charter a new company to build or purchase telegraph lines, with which the Govern- ment should contract for the transmission of telegrams at specified rates, the Government to attend to their receipt from and delivery to the public ; the wires of the company being admitted to the post-ofiices in most cases, and its opera- tors in many places acting as postmasters or postal clerks. This plan has met with some favor in the House, and was strongly indorsed by Senator Kamsey, of Minnesota, chair- man of the Post-office Committee. It is considered by the present Executive and the Postmaster-General the least ob- jectionable of all the schemes yet proposed ; but, with great deference to these authorities, it seems to me open to serious criticism. 226 POSTAL TELEGRAPH, The establishment of a postal telegraph can only be justi- fied on the ground that it is a public business, under the post- office clause of the Constitution ; the power to regulate commerce between the States, even if applicable, not being broad enough to authorize an effective intervention. From the interference of the Government, so far as it extends, no one should be allowed to derive a direct private profit ; least of all should Congress, by chartering a particular company, favor one private interest to the exclusion of another. The administrative objections to the scheme are well stated by one of our ablest Postmasters-General, Mr. Creswell, who gave the subject of postal telegraph exhaustive attention in his annual report of 1872. It is not [said he] in analogy with the workings of the mail service in any important particular. In the latter the Department transmits the mails under the charge of its own officers, and controls all the ma- chinery necessary for that purpose ; in the former, it is proposed to make the Department a mere agent to receive and deliver telegraph messages for the benefit and profit of a private corporation. After describing the duties of the company and the post- office under the proposed dual management, Mr. Creswell adds : The Grovernment, inasmuch as it would deal directly with the par- ties sending and receiving messages, would be alone looked to for redress in case of default, and yet it would have no adequate power to compel the company to execute its contract. This would lead to endless confu- sion and irreconcilable conflicts between the Government and the com- pany, and would certainly result in great inconvenience and pecuniary disaster to the people. The bill of General Butler, reported in 1875 from the House Judiciary Committee, proposed to declare all telegraph lines to be post-roads, and to require the Postmaster-Gejieral to contract for the transmission of messages in the same way that he contracts with railroads for the transportation of the mails. While this plan is not open to the charge of favorit- ism, it is difficult to see how it could escape the administra- tive difficulties before suggested. A third plan contemplates the construction of lines by the Government without making any provision for the use of existing facilities. In 1868 Mr. Elihu B. Washburne, and in POSTAL TELEGRAPH. 227 the last Congress Mr. Anderson, introduced bills looking to such construction over certain specified routes only between the larger cities. It may well be doubted whether such par- tial systems would give sufficient relief or whether their operation would be such as to encourage Congress to after- ward authorize the necessary extension. In the telegraph as in railroad business the traffic on the trunE lines is not more necessary, important, or profitable than the local traffic, or that on the branch lines, which act as feeders. Moreover, it would be a serious inconvenience to the patrons of the tele- graph to divide their messages, sending those to the larger cities by the postal lines and those to smaller points by the lines of the company. The latter could doubtless afford, without much loss, to reduce its rates to competing points to a level with those of the Government, and through its supe- rior connections it could retain the bulk of the telegraphic business. The loss which such a system would entail on the Government would be a constant argument in favor of its abandonment instead of its extension by further legislation. If the present is a favorable time for Congress to deter- mine whether it shall perform what I regard as its constitu- tional duty, to establish telegraph post-roads, then the establishment should be made co-extensive with the needs of the people, and the governmental system should not be outstripped in extent by that of private parties. If the principle is once decided upon, the same Congress which decides it should authorize it to be carried out in its entirety, and not have a system half established, and perhaps a financial failure, exposed to attacks from those influences which would surround our legislation when it was proposed to extend it hereafter. Furthermore, as an objection to a proposition of this character, I submit that if the existing lines could be ac- quired for anything near what it would cost the Government to build, sound policy requires that they should be pur- chased. I concede that on the principles analogous to those laid down by the Supreme Court in the case of the Charles 228 POSTAL TELEGRAPH. River Bridge Company the Government is under no obliga- tion to purchase existing lines ; but that company was given the option of selling its property at a fair valuation, and it would seem to be expedient to give the lelegraph companies the same option before proceeding to construct lines in com- petition with them. This would do only in case they re- fused to sell. The fourth plan to which I have alluded was that pro- posed by Mr. C. C. Washburn in the House of Representatives in 1870 and afterward indorsed by Postmaster-General Ores- well, to wit, the enforcement of the existing contract with the companies who accepted the provisions of the act of 1866 by the purchase of their "telegraph lines, property, and effects'' at an appraised value. This plan was the subject of two bills in the last House. One, introduced by Mr. Springer, would authorize the appointment of the appraisers provided for in the act of 1866, and direct them "to ascertain the actual cash value of all the plant, property, and effects of the companies interested, including the value and character of all leases, choses in action, contracts, and franchises, and the receipts of the company from all sources ; the operating expenses and the rates charged for transmitting messages, royalty paid to inventors, and all other facts which such appraisers may deem necessary for a thorough knowledge of the subject." This information was to be reported to Con- gress at its next session for its action or non-action, as the case might be. The other bill, that of Mr. Ford, is the same as the bill reported by Mr. C. C. Washburn from the Select Committee on Postal Telegraphy in the Forty-first Congress. It would authorize the appointment of appraisers under the act of 1866, and give the Postmaster-General power to contract with the companies for the purchase of their lines, etc., at the ap- praised value, but subject to the approval of Congress. A basis of appraisal is, however, laid down for the appraisers, as follows : First, what would be the actual cost to the Gov- ernment of erecting new lines of equal value of those ap- POSTAL TELEGRAPH. 229 praised ; second, the value of said lines as a means of earning dividends, regarding a stock which will earn regularly 10 per centum on all proper expenditures equivalent to par ; and the average of the above modes of appraisement shall be the true basis of value. While this mode of appraisal might not have been too liberal at the date of Mr. Washburn's report, when the mar- ket value of Western Union property, at the selling price of the stock, was about $16,000,000, it would not answer for the present, when that value is over $60,000,000. Moreover, it is contended, first, that the act of 1866 did not give either party the right to fix the basis of appraisal ; and, second, that the companies were not bound to submit to an appraisal until the Government had first provided absolutely for the purchase of their lines at the value to be determined by the ap- praisers. I have little doubt of the meaning of the act of 1866. It was intended, in the first place, to give the companies five years' notice in which to prepare for the entry of the Gov- ernment into the telegraph business ; and, in the second place (in return for that notice and for the very valuable franchises conferred upon the companies which should voluntarily ac- cept its provisions ), to provide a means whereby the Govern- ment might acquire the facilities necessary for the conduct of such business without the trouble of building or manufac- turing them. Under the act "the telegraph lines, property, and effects " of the companies were to be bought under ap- praisal, i. e., such property and effects as are necessary and convenient for the proper working of telegraph lines, with- out regard to the value of the stock or the price of good-will or monopoly. The forbearance of the Government in not exercising for five years its undoubted right to undertake the telegraphic business and the privileges granted to the com- panies constituted a valuable consideration for the stipula- tion on their part to sell their "telegraph lines, property, and effects." The contract was one of perfect mutuality and jus- tice to the different companies, as well to the Western Union, 230 POSTAL TELEGRAPH. whose property was paying large dividends, as to tlie opposi- tion lines, which, were losing money ; and if the Government before making it was perfectly at liberty to undertake the business without regard to the existence of the companies, then surely our forbearance and concession to the latter, which have aided the Western Union since 1866 to amass a profit of $65,000,000, were not intended to place us in a worse position than before the passage of the act. But these views are stoutly disputed by the Western Union Company, which has many times in the course of the discus- sion of this question claimed that the appraisal of its lines must be based on "their capacity to earn money;" or, in other words, the profits which its practical monopoly, built up largely since the act of 1866 was passed, has enabled that company to reap. On this point the act itself is silent. I do not see how its provisions could be brought before the courts for construc- tion until after the appraisers had acted, and perhaps com- mitted us to the views of the companies and to an expenditure which would perpetuate, by taxation on the whole people, divi- dends which are now paid by the senders of telegrams. The a<" ' of 1866, if we should now attempt to enforce its provisions, would involve us in serious difficulties and leave us in no better position than that in which Great Britain was placed in the absence of a prior statute on the subject. If we go to an appraisement we are bound irretrievably to abide the award of five appraisers, of whom two are to be named by the Government, two by the companies, and the fifth to be agreed upon by the other four. We know in ad- vance that the two appraisers selected by the companies will insist upon the most exorbitant award which the companies, in their greed, can possibly demand, and that they will have at least an equal chance to secure the fifth appraiser in their interest. In fact, they can refuse their assent to any fifth appraiser who does not suit them, and thus either defeat the Government by preventing any appraisement at all or obtain such fifth appraiser as they feel confident of their power to POSTAL TELEGEAPH. 231 maBipulate. The Government almost invariably goes to the wall in appraisements of this kind, and especially where the other side has an unlimited command of money. Appraisers appointed by the Government, who neither will have nor ought to have any other purpose than to do impartial justice between the parties, will be no match for the appraisers ap- pointed by the companies, whose object is sure to be not im- partial justice between the parties but the highest obtainable award in favor of their employers and clients. In making these observations I am not assuming that the managers of telegraphic companies are either worse or better than other men. The Government is rich and able to pay round prices for all it buys. Upon the average and common views of morality which prevail, nobody loses character nor suffers much from conscientious scruples by driving a sharp bargain with the Government about anything. The cases are exceptional in which men do not obtain and retain all they can get from it. But we are not bound to put the provisions of the act of 1866 in operation in order to acquire a system of postal telegraphs: No such agreement is to be implied, either from the concessions made by the act or from the forbearance of nearly eighteen years to take advantage of our rights under it. "We are still at liberty to compete with the telegraph company as we do with the banks and express companies in our money-order and parcel-post business ; and unless the telegraph owners shall agree to sell at a fair price, or to come' under appraisal on a reasonable basis, I am in favor of such a competition. The bill which I have had the honor to intro- duce provides for this contingency, by allowing the purchase of the existing lines, if they are offered, at a certain percent- age (which I have left blank) over the cost of new construc- tion. In its other details, the discussion of which at length I shall postpone until the committee shall have had an oppor- tunity to consider it, I have endeavored to meet the objections which have seemed to me to apply to the other plans hereto- fore presented, and to incorporate in it the most approved 232 POSTAL TELEGRAPH. features of European systems, leaving matters of administra- tion largely to the Postmaster-General, subject to Congres- sional disapproval. The bill fixes a popular uniform, rate of one cent per word for all distances, with reductions for the press, and pro- vides for the transmission of telegrams by mail between postal-telegraph offices and all post-offices where telegraph offices are not established under its provisions. Postal- telegraph offices are to be opened at all places where tele- graph offices now exist by July 1, 1887. The telegraphic service of the country ought not to be performed upon the methods of private business operations, the governing principle of which is necessarily that of ob- taining the greatest profit and charging the highest rate which the business will bear. The people are entitled to telegraphic communications upon the methods of an enlight- ened public service, not looking at all to pecuniary gains, and not even insisting as a necessary condition that the cost shall at all times be directly reimbursed in money, but having re- gard to the indirect benefits of stimulating trade, diifusing intelligence, and strengthening social and family ties. The postal service by the telegraph ought, in short, to be gov- erned by the same policy which we have so long and with such manifest and admitted advantage applied to the postal service in transmitting letters and newspapers. Upon considerations of public policy, and because we be- lieved it to be for the common advantage of the people, we have long since, without regard to the relative cost of trans- mitting letters over long and short distances, adopted a uni- form rate of postage for the entire country. The reasons are stronger in the case of the telegraph than of the mail for the adoption of a uniform rate. The telegraph has already so largely taken the place of the mail, and will in the future, under the benignant and fostering administration of the Government, supersede the mail to such a degree that the people of the remote and thinly settled districts are entitled to be placed upon the POSTAL TELEGRAPH. 233 same footing in respect to this mode of communication as tlie people of our densely populated cities. No time can be more auspicious than the present to en- counter the expenditures of the new policy, including the cost of the lines and other plant of a Government telegraph. Our revenues are so abundant that in order to reduce them, and for the mere sake of reducing them, propositions are made to repeal the taxes on articles such as whisky and to- bacco, taxes which oppress nobody, and on articles which are admitted on all hands to be the most fitting objects of taxa- tion. Under a condition of things which gives rise to sug- gestions, which receive no inconsiderable support, to throw away money by the repeal of such taxes for the sake of throwing it away, it will not be denied that now is the ac- cepted time to meet the first cost of a Government telegraph service, if it is ever to be undertaken. I am aware that the passage of such a bill would increase by several thousands the number of Government officers and employes, and that this is an objection which has been raised by opponents of a Government-telegraph system ; but the same objection would prevent the extension of the postal service, which is growing with enormous rapidity and benefit to the country. If the telegraph is properly, as I claim it is, only a branch of the postal system which the Constitution authorizes Congress to provide, we should not be alarmed at the number of employes which it requires. To quote once more from the late Postmaster-General Howe : I know of no law but necessity limiting the employment of oflBcials. That government is not wise which employs a single officer not needed ; it is unwise if it refuse to employ thousands when they are needed. Again, he says that — The increase has doubtless been exaggerated. At a very large per- centage of the offices the telegraph operator would not supplement the postmaster, but would supplant him, and that would result in giving to the administration of not a few offices men who have learned to do one thing in place of those who have never learned to do anything. To this extent at least the adoption of a postal telegraph would reduce political patronage and be a movement in the 234 POSTAL TELEGEAPH. direction of civil service reform, and I am assured it would also to some extent reform the personnel of the telegraph. By amalgamating the two establishments better salaries could be paid without an increase of the present expenditure. The best educated operators would then be content to serve at the smaller offices instead of crowding into the cities, striking for higher wages, and seeking other occupations where their efforts to better themselves in their own have failed. The foregoing considerations negative the idea that the telegraph would be used as a political machine by the party in power. The system would require the service of the whole body of telegraphers in the country. Its officers and em- ployes would necessarily be appointed for their technical skill, without regard to their political affiliations. The ward striker and the' more genteel campaign organizer would thus both be excluded from its service. A system in the hands of men of all parties, appointed for their efficiency, could not be used largely for the benefit of any party. In my judg- ment, founded upon some experience, there is much more political interference by the present telegraph employes than there would be under a postal system regulated by law. But if this were not so, it seems that the public would suffer less from the active efforts of a few more place-holders to elect this or that man to office than it is likely to suffer from the control of its communications by monopolists seeking their own profit and aggrandizement. It is doubtless of great importance who shall direct, make, and execute our laws, but it is of much greater importance that the system of telegraphic intercourse should not be left to grow under private control into one of those strong yet subtle forces which are constantly operating in this country to transfer the production of the many to the pockets of the few and to reduce the reward of labor, and make the rich richer and the poor poorer. Whatever abuses there may be in the post-office, no one would propose to surrender our postal communication wholly to a corporate monopoly; yet if we fail to assume the tele- POSTAL TELEGRAPH. 235 graph, we may sooner or later find that we have substantially- done so. The use of the telegraph is now restricted by its cost to extraordinary communications, and by its nature to messages which do not need to be in the handwriting of the sender. Under these conditions the proportion of telegrams to letters is about one to thirty. But who shall say how soon some great discovery no more wonderful than the telephone may enable fac-simile messages to be sent instantaneously and cheaply over the wires instead of by the slow and costly process by which they are now transmitted in Europe. If that result shall be accomplished (and it is being earnestly sought by inventors), the post-office will be stripped of its most important business. Every letter which does not re- quire absolute secrecy or which can be written in cipher will be taken from the mails and sent by electricity. Drafts will be drawn and balances settled daily by telegraph, and the monopoly which shall have grown up in the control of this business will overshadow not only the Post-office Department but the Government itself. I move that the bill be referred to the Committee on Post-offices and Post-roads. The motion was agreed to. THE BACKBONE LAND GRANT. POEFEITUKE OF LANDS GRANTED TO THE NEW ORLEANS, BATON ROUGE AND VICKSBURG RAILROAD COMPANY. Speech delivered in the United States Senate, May 7, 1884, the Senate, as in Committee of the Whole, having under consideration the bill (S. 2031) to declare a forfeiture of lands granted to the New Orleans, Baton Rouge and Vicksburg Railroad Company, and for other pur- poses — Mb. President : On the 10th of December the Senate passed a resolution, proposed by me, directing the Secretary of the Interior to furnish to the Senate copies of all papers then on file in the Interior Department relating to the trans- fer of the land grant of the New Orleans, Baton Kouge and Vicksburg Railroad Company. The copies called for were transmitted to the Senate on the 7th of January, and have been printed and constitute Executive Document No. 31 of this session. After a careful perusal of these papers I deemed it to be my duty to introduce a bill, which I offered on the 10th of April, declaring a forfeiture of the land grant conditionally made in 1871 to the New Orleans, Baton Kouge and Vicks- burg Railroad Company. Before moving the reference of this bill to the Committee on Public Lands I will, with the leave of the Senate, state my reasons for believing that it ought to be passed. The question involved in this case is the validity of the claim of the New Orleans Pacific Railway to the lands condi- tionally granted to the New Orleans, Baton Rouge and Vicks- burg Railroad Company by the twenty-second section of the act of Congress of March 3, 1871, creating the Texas Pacific Railway Company. THE BACKBONE LAND GRANT. 237 The full text of the twenty-second section is as follows: That the New Orleans, Baton Eouge and Viokeburg Railroad Com- pany, chartered by the State of Louisiana, shall have the right to con- nect, by the most eligible route to be selected by said company, with the said Texas Pacific Railroad at its eastern terminus, and shall have the right-of-way through the public land to the same extent granted hereby to the said Texas Pacific Railroad Company ; and in aid of its construction from New Orleans to Baton Rouge, thence by way of Alexandria, in said State, to connect with said Texas Pacific Railroad Company at its eastern terminus, there is hereby granted to said com- pany, its successors and assigns, the same number of alternate sections of public lands per mile in the State of Louisiana as are by this act granted in the State of California to said Texas Pacific Railroad Com- pany ; and said lands shall be withdrawn from market, selected, and patents issued therefor and opened for settlement and pre-emption upon the same terms and in the same manner and time as is provided for and required from said Texas Pacific Railroad Company within said State of California : Provided, That said company shall complete the whole of said road within five years from the passage of this act. It may be proper to state that the bill creating the Texas Pacific Eailway originated in the House of Representatives, in which it was passed without the twenty-second and twenty- third sections, which were added by the Senate. The bill as the House passed it was limited to a road from a point at or near Marshall, in Texas, to San Diego, Cal. The twenty- second section made provision for a connection between Marshall and New Orleans, by the New Orleans, Baton Eouge and Vicksburg Railroad Company, an existing com- pany under the laws of Louisiana, and the twenty-third sec- tion for a connection with San Francisco by the Southern Pacific Railroad Company, an existing company under the laws of California. The Louisiana law creating the New Orleans, Baton Rouge and Yicksburg Railroad Company was passed Decem- ber 30, 1869, and authorized it to build "from any point on the line of the New Orleans, Jackson and Great Northern Railroad within the parish of Livingston, running from thence to any point on the boundary line dividing the States of Louisiana and Mississippi," thus establishing its entire main line on the east side of the Mississippi river ; but it 238 THE BACKBONE LAND GEANT. was also authorized "to construct and operate a branch rail- road from its main line to the City of Baton Rouge," and was further invested with a general and sweeping power "to con- struct, maintain, and use such branch railroads and tracks as it may find necessary and expedient to own and use. As originally chartered, therefore, the main line of the New Orleans, Baton Rouge and Vicksburg was to be wholly on the east side of the Mississippi river, looking to a connection with Vicksburg, in the State of Mississippi, as its title im- ports, and having no reference to the scheme of a Texas Pa- cific Railway. An additional act, passed by Louisiana December 11, 1872, refers to the grants of lands made by the act of Congress of March 3, 1871, to the New Orleans, Baton Rouge and Vicks- burg Railroad Company, and for the purpose of giving to that company the power to enlarge its originally designated line so as to avail itself of those grants, made New Orleans its point of beginning, instead of "the line of the New Orleans, Jackson and Great Northern Railroad within the parish of Livingston," and also authorized it to extend the line "to the city of Shreveport, or perfect railroad commu- nications with the Texas Pacific Railroad, or any other rail- road in northwestern Louisiana, near the Louisiana State line." But it is to be specially noted that the Louisiana act of December 11, 1872, contained the following proviso : Provided, hoivever, That the said company shall construct the line of its road between the city of New Orleans and the city of Baton Rouge, on the east side of the Mississippi river. Without waiting for the Louisiana act of December 11, 1872, but apparently feeling justified by the sweeping power to build branches given by the act of December 30, 1869, the New Orleans, Baton Rouge and Vicksburg Railroad Com- pany, on the 11th of November, 1871, filed in the General Land Office a map showing the general route of a road pro- jected from Baton Rouge to Shreveport by the way of Alex- andria, and on the 13th of February, 1873, filed in the same office another map showing the general route of a projected THE BACKBONE LAND GRANT. 239 road between New Orleans and Baton Bouge, being wholly on the east side of the Mississippi river, to which side of the river it was strictly confined between those two points by its original charter of December 30, 1869, and by the supple- mentary Louisiana act of December 11, 1872. In both the cases of the filing of these maps showing projected lines there was a withdrawal from sale of the public lands within certain limits on each side of the projected lines, and it is not pretended that the New Orleans, Baton Rouge and Yicks- burg Bailroad Company has to this day filed any other maps showing a definite location on any part of its proposed gen- eral route, or that it has ever built one foot of railroad any- where, either within or without the designated limits of its general route. B. H. Green, the chief engineer of the New Orleans, Baton Kouge and Vicksburg Bailroad Company until January, 1870, in a letter submitted in 1880 to a House committee describes as follows exactly how much, or it might be more correct to say how little, that company ever did in the way of construct- ing a road : Some ten months after my first connection with this company Messrs. Bates & Co. sold out to Messrs. Willis Gaylord and associates. During said period of ten months some surveys were made, but exclusively on the east side of the Mississippi river, covering a distance of less than 100 miles, and a little light grading leading out of Baton Rouge was partially and imperfectly performed to the extent of considerably less than a mile. A few thousand cross-ties were also contracted for and de- livered. Subsequently, under Messrs. Willis Gaylord and associates, there has been no survey of any part of the line east or west of the Mississippi river, or any work of any description done within my knowl- edge. The New Orleans Pacific Railway was first organized in June, 1875, under a general railroad law of Louisiana, but on the 19th of February, 1876, received a special railroad char- ter, adopting in the main, but with some small alterations, the provisions of the first organization. The special charter was further modified on the 5th of February, 1878, by the Legislature of Louisiana. Its authorized line, and the line which it now actually owns, either by purchase or construe- 240 THE BACKBONE LAND GEANT. tion, between New Orleans and Baton Rouge, is wholly on the west side of the Mississippi river. Between Baton Rouge and Shreveport, by the way of Alexandria, its authorized and actually constructed line is necessarily pretty near the general route between the same points laid down on the map filed in the General Land Office by the New Orleans, Baton Rouge and Vicksburg Railroad, but nowhere coincides with it, and it is not pretended that the New Orleans Pacific Railway in building between Baton Rouge and Shreveport was in any measure influenced or controlled by the surveys and designa- tions of a general route by the New Orleans, Baton Rouge and Vicksburg Railroad. The chartered line of the New Orleans Pacific Railway Company began on the right or west bank of the Mississippi river, "at a point at New Orleans or between New Orleans and the parish of Ibervillej" and was actually commenced at a point at New Orleans on the west side of the Mississippi river and extended, both as chartered and actually constructed (including a purchased road sixty-eight miles in length), 325 miles to Shreveport, and the company has neither built nor is it by its charter authorized to build beyond Shreveport to Marshall, which is the eastern terminus of the Texas Pacific Railway. From the actual starting point of the road at New Orleans to Baton Rouge Junction the distance is ninety miles and the main line is at that junction connected by a branch of eight miles with West Baton Rouge. From the evidence printed in House Report No. 678 of the present session of Congress it appears that the New Orleans Pacific Railway Company appeared before the Pacific Railroad House Committees of the Forty-fifth, Forty-sixth, and Forty-seventh Congresses asserting and offering proofs to show that the New Orleans, Baton Rouge and Yicksburg Company was a bankrupt and defunct concern, with no assets but a repealed charter and a lapsed land grant, and asking that the lands covered by that lapsed grant should be by Con- gress given anew to the New Orleans Pacific Railway. It also appears that the House committees of the Forty-fifth and THE BACKBONE LAND GRANT. 241 Forty-sixth Congresses reported in favor of the action thus asked for, thereby deciding that the New Orleans, Baton Rouge and Vicksburg Company had no rights in the subject- matter. These reports were never reached for action on them by the House. The House committee of the Forty-seventh Congress made no report, and probably for the reason that it was the common belief at that time that no more grants of lands for railroads were likely to be made. Before the com- mittee of the Forty-seventh Congress E. B. Wheelock, Presi- dent of the New Orleans Pacific Railway, appeared and filed a brief in March, 1880, in which he reiterated the assertion that the New Orleans, Baton Rouge and Vicksburg Company, popularly known as the Backbone Company, had no rights whatever, and that he would not negotiate with it at all. In this brief he states that on the 23d of December, 1878, he sent the following telegram to Mr. Elam, of the Louisiana delega- tion in the House : No arrangement looking to any recognition of the pretended claims of the Backbone Company will be entertained by my company. Also that on the 13th of January, 1879, he sent the fol- lowing telegram to Messrs. Ellis and Elam, of the Louisiana House delegation : My telegram to Elam, December 23, is final. We now have ability to complete our road without Government assistance, and if our friends cannot secure land grant we must get along without it. Having failed to obtain any grant of lands from Congress and not then having conceived the idea of buying rights from the defunct New Orleans, Baton Rouge and Vicksburg Com- pany, which had no rights to sell, the New Orleans Pacific Rail- way did, on the 31st of July, 1880, enter into a contract for the complete construction of its line with the American Railway Improvement Company, the financial responsibility of which was ample (Jay Gould being the principal stockholder and G. M. Dodge president) and which did forthwith enter upon the work of building the road, and carried it steadily and rapidly forward to the end. The American Railway Improve- ment Company in making this contract was not influenced by any land grant, thfe New Orleans Pacific Company having at 242 THE BACKBONE LAND GRANT. that time definitely abandoned the hope of getting one from Congress, and not having down to that time conceived the idea of getting a title to one by negotiations with the New Orleans, Baton Eouge and Vicksburg Company. It appears further from the afiidavit of the chief engineer of the New Orleans Pacific Company, now on a map in the General Land Office, that the "actual location" of the road from Shreveport to White Castle, which is seventy-five miles from New Orleans, and is the northern end of the piece of road purchased by the New Orleans Pacific Bailway, was com- pleted by December, 1880. (See page 81, Executive Docu- ment No. 31). The exact date of the final completion of the road does not officially appear, but is understood to have been wholly or chiefly complete in 1881. The dates of the filing in the General Land Office of two maps showing the line of actual construction were October 27, 1881, and November 17, 1882. (See page 82, Executive Document No. 31). In the annual report for 1881 of the late Secretary of the Interior, Mr. Kirkwood, dated several days before the (so called) meeting of the stockholders -of the New Orleans, Baton Rouge and Vicksburg Railroad in December of that year, conveying their land grant to the New Orleans Pacific Railway, he says : One hundred and thirty miles of the New Orleans Pacific Railway have recently been examined but not accepted, and one hundred and twenty-three miles are now ready for examination. The first shadow of a claim to lands from the United States which is set up by the New Orleans Pacific Railway, if it can be said to be the shadow of a claim, is an indenture dated January 5, 1881, in which the New Orleans, Baton Rouge and Vicksburg Railroad Company figures as the party of the first part, while the New Orleans Pacific Railway figures as the party of the second part. (See pages 21 et seq. of Execu- tive Document No. 31. ) In this indenture the party of the first part, "in consideration of $1 and of other good and val- uable considerations, releases and quitclaims unto the said party of the second part all the right, title, and interest of the said party of the first part in or to a certain grant of pub- THE BACKBONE LAND GRANT. 243 lie lands granted to the said party of tlie first part by an act of the Congress of the United States approved March 3, 1871." The only evidence that the New Orleans, Baton Eouge and Vicksbnrg Railroad Company had anything to do with this indenture is its corporate seal aflB.xed thereto and the signa- tures of W. H. Barmim and "W. M. Barnum (father and son), styling themselves as being respectively the president and secretary of the company, of which indenture and accom- panying paper the following is the full text : This indenture, made the 5th of January, 1881, between the New Orleans, Baton Rouge and Vioksburg Railroad Company, a corporation created and existing under and by virtue of a special act of the Legisla- ture of the State of Louisiana, approved December 30, 1869, party of the first part, and the New Orleans Pacific Railway Company, a corporation created and existing under and by virtue of the laws of the State of Louisiana, party of the second part, witnesseth : That the said party of the first part, for and in consideration of the sum of $1, lawful money of the United States of America, to it in hand paid by the said party of the second part, at or before the ensealing and delivery of these presents, the receipt whereof is thereby acknowledged, and of other good and valuable consideration has remised, released, and quitclaimed, and by these presents does remise, release, and quitclaim unto the said party of the second part and to its successors and assigns •forever. All the right, title, and interest of the said party of the first part, its successors or assigns of, in, or to a certain grant of public lands granted to the said party of the first part by an act of the Congress of the United States approved March 3, 1871, and entitled " An act to incor- porate the Texas Pacific Railroad Company and to aid in the construc- tion of its road, and for other purposes," together with all and singular the tenements, hereditaments, and appurtenances thereunto belonging, or in any wise appertaining, and the reversion and reversions, remainder and remainders, rents, issues, and profits thereof. To have and to hold all and singular the above mentioned and de- scribed premises, together with the appurtenances, unto the said party of the second part, its successors and assigns forever. In witness whereof the said party of the first part hath caused its corporate seal to be hereunto afiixed and these presents to be signed by its president and secretary the day and year first above written. W. H. Barnum, President. Wm. M. Barnum, Secretary. Sealed and delivered in the presence of — Charles L. Beaman, Charles Edgar Mills. 244 THE BACKBONE LAND GRANT. The conclusion seems to have been adopted at the Interior Department that the deed of the Barnums, upon proof of its acceptance by the New Orleans Pacific Railway, was of itself sufficient to convey to that company the land grant of the New Orleans, Baton Eouge and Yicksburg Eailroad and to effect the transfer of a location of that grant from the route of one road to' the route of the other. This is shown by the fact that the President, doubtless on the recommendation of the Interior Department, appointed a commissioner to exam- ine one hundred and thirty miles of the constructed line of the New Orleans Pacific Hallway early enough in 1881 to make a report (page 28 of Executive Document No. 31) on the 26th day of October in that year. Down to that time there had not been exhibited to the Interior Department, nor has there since been exhibited to that Department down to January 7, 1884, which is the date of the letter from it, send- ing to the Senate the papers constituting Executive Docu- ment No. 31, any evidence that the organization of the New Orleans, Baton Rouge and Vicksburg Railroad had been regularly kept up, nor that it had any legally constituted board of directors, nor was any inquiry made whether the board of directors, if there was one properly constituted, had the right and power to convey any title the company might have to a land grant, or whether, if the board of directors had such right and power, they could delegate it to the presi- dent and secretary, to be exercised at their absolute discre- tion and without the subsequent ratification of the board of directors itself. Ordinary business prudence in the conduct of private affairs would have clearly dictated an investigation on all these points in a transaction involving millions of dol- lars' worth of property. The Louisiana act of December 30, 1869, chartering the New Orleans, Baton Rouge and Vicksburg Railroad, defining in the fifth section the powers of the directors says that they "may make such rules, regulations, and by-laws for the gov- ernment of its officers and the management of its business as they may deem expedient, and may, in the name and on THE BACKBONE LAND GKANT. 245 behalf of said company, make sucL. contracts, enter into such, agreements, and do and perform such acts as they, or a ma- jority of them, may deem proper, convenient, or necessary for the accomplishment of the object for which said company was created." The directors have no other power than what is given in so much of the fifth section as I have just read, and they could never have adjudged that the sale of their title (if any) to their conditional land grant for $1 and other considera- tions not disclosed, and known only to the Bamums, father and son, could tend in any possible manner to "the accom- plishment of the objects for which said company is created," which were the construction, maintenance, and operating of a railroad. Without doubt the charter might, if the Legislature of Louisiana thought it proper, have clothed the directors with the power, if an abandonment of the enterprise had been compelled by insolvency or other misfortunes, to dispose of the wreck for the benefit of whom it might concern. But the charter as it was actually framed and granted gave them no such power, nor any power except to perform acts "proper, convenient, or necessary for the accomplishment of the ob- jects for which said company is created." And even if they possessed any such power as that of disposing of the wreck for the most it would bring, it would not have been a power which they could have delegated to the president and secre- tary to be exercised at their mere discretion without any dis- closures of the considerations received by them, and the whole of which the president and secretary might retain except such portions of it as they might find it necessary to use to buy off the opposition of such of the stockholders and creditors as were vigilant enough to discover what was going on and to interpose troublesome protests against it. The papers sent to the Senate by the Secretary of the Interior do indeed disclose an account of what is described as a meeting of stockholders in New Orleans on the 9th of December, 1881, at which by a unanimous vote it was voted to 246 THE BACKBONE LAND GEANT. "ratify and confirm" the action of the directors in authorizing (December 29, 1880), the Barnums to sell out the land grant and the deed of indenture of the Barnums (January 5, 1881), actually conveying it to the New Orleans Pacific Bailway Com- pany ( pages 36 et seq. of Executive Document No. 31 ). Among these papers is a list of the stockholders as of November 28, 1881. There has never been any investigation of the regu- larity of these proceedings in any particular, either as to the call of the meeting, the accuracy of the list of the stockhold- ers, or anything else ; and I note in this connection that on page 57 of Executive Document No. 31, there is the sworn statement, dated June 13, 1882, of Thomas C. Bates, of Eoch- ester, N. Y., that he was the owner of 1,000 shares of the stock, although his name does not appear at all in the list of stock- holders referred to. Mr. Bates was the first president of the company and was a large creditor of it at the time of the transfer by the Barnums of whatever title it had to a land grant. From the papers transmitted to us in relation to this meeting of stockholders, it does not appear that there was one single stockholder present ; certainly no stockholder took part in it. The entire number of shares voting for directors was 42,755, all of them by B. F. Wheelock, by virtue of proxies which he is said to have held, his own name not ap- pearing on the list of stockholders, and he being the presi- dent of the New Orleans Pacific Bailway. The number of shares voting for the resolution to ratify and confirm the deed of the Barnums to the New Orleans Pacific Bailway Company was also exactly 42,755 and may be presumed to have been thrown by the same Mr. Wheelock. If, however, it can be shown hereafter, as it has certainly not yet been shown, that the stockholders' meeting which acted with such suspicious unanimity on the 9th of Decem- ber, 1881, was regularly called, and that a majority of the stockholders were present either personally or by proxy, the utmost effect which can be claimed for the resolution which it adopted is that it operated as a transfer on that day to the THE BACKBONE LAND GKANT. 247 New Orleans Pacific Railway of any right the New Orleans, Baton Rouge and Vicksburg Railroad Company might have in a land grant. It could have no retroactive effect to vali- date the deed of the Barnums on the 5th of the preceding January, and it is not until the 9th of December, 1881, that the New Orleans Pacific Railway can possibly claim to have received the transfer to itself of such right (if any) to a land grant as the New Orleans, Baton Rouge and Vicksburg Railroad Company might possess. In point of legal right it is of no consequence whether the New Orleans Pacific Rail- way received the transfer in January or December, 1881, but as bearing upon the equitable right, which the New Orleans Pacific Railway Company now sets up, it is of a good deal of consequence. Notwithstanding the fact that on the 31st of July, 1880, the New Orleans Pacific Railway Company entered into a contract for the complete construction of its work with the responsible Railway Improvement Association, which did actually complete it, it is now said that the construction was undertaken only upon the faith of and as a consequence of the transfer of the land grant of the New Orleans, Baton Rouge and Vicksburg Railroad. In that point of view it is important that the transfer, if there was anything to be trans- ferred, was obtained not in January, 1881, but in December, 1881, eleven months afterward and when the Railway Improve- ment Association is shown to have been well along in the work of construction. The New Orleans Pacific Railway Company knew perfectly well that whatever rights the New Orleans, Baton Rouge and Vicksburg Railroad might have, the deed of the Barnums of January, 1881, was incompetent to transfer them ; and the president of the New Orleans Pacific Railway, Mr. Wheelock, was active in obtaining proxies for himself for the stockholders' meeting of the New Orleans, Baton Rouge and Vicksburg Railroad on the 9th of December, 1881, which consisted of himself alone, so far as appears, and the results of which he "took pleasure" in communicating on the next day to one of the Barnums. (See pages 36 and 40 of Execu- tive Document 31). 248 THE BACKBONE LAND GEANT. A careful perusal of the papers sent to the Senate by the Secretary of the Interior, and which make up Executive Document 31, has satisfied me that the New Orleans, Baton Eouge and Vicksburg Eailroad did not possess either in Jan- uary or December, 1881, any land grant which it could con- vey to anybody. It never built or acquired a foot of rail- road, had no property or assets of any kind, and was loaded down with debts of all sorts, including judgments and bonds. Its first president, Mr. Bates, in his sworn statement of June, 1882, already referred to, says : I am thoroughly familiar with the financial history of the road from its organization to the present time. The said road, aside from its land grant, since 1871 has been, and now is, utterly and hopelessly insolvent. Judgments have been entered against it in New York and Louisiana to a great many thousands of dollars. The interest on its bonds has not been paid since 1871. Its current debts and obligations have not been discharged since that date. The only property the said railroad com- pany has is its Congressional land grant. Its land grant not being realizable until its road should be built, the five years limited for the completion of its road having expired in 1876, it having totally failed to enlist cap- ital in its construction, and its originators, promoters and manipulators having divided among themselves personally, in unknown proportions, whatever was obtained on the large issue of bonds with which it signalized the commencement of its existence, it was to all practical intents and purposes a de- funct corporation in 1880. Furthermore, I do not yet see any room to doubt that it was then legally defunct, as a con- sequence of the repeal of its charter by the Legislature of Louisiana in 1877. There is nothing shown to the contrary, except (page 15 of Executive Document No. 31) a decision of the circuit court of the United States, fifth judicial circuit and district of Louisiana, rendered June 13, 1877, there being present only the district judge, Hon. E. C. Billings. No rea- sons for the decision are given, and the case seems to have been submitted without serious argument. The judgment was obtained by collusion, and was the judgment which both the parties equally desired. The plaintiff was a creditor of THE BACKBONE LAND GBANT. 249 the company, seeking to uphold its legal existence as the last hope of obtaining something on the debt due him. The de- fendant was the company itself, also desirous of upholding its own existence as the last possible hope of obtaining something out of its land grant. The 'defendant filed June 11, 1877, exceptions, raising the point that the repeal of its charter was unconstitutional, and on the same day the amicable counsel for both parties agreed that the exceptions should be "sub- mitted to the court on briefs to be furnished in twenty-four hours." Two days afterward, namely, on the 13th day of Jiine, 1877, the court entered the judgment which the plaintiff and defendant were both seeking, that the repeal of the charter was unconstitutional. That decision does not in any event bind any but the parties to it, and we cannot know until we get some explanations what reasons there may be which can justify it. It is impossible to understand how it can be unconstitu- tional for the Legislature of Louisiana to repeal this charter when the general law of that State, as embodied in its code (article 447), is as follows : A corporation legally established may be dissolved by an act of the Legislature if they deem it necessary or convenient to the public inter- est : Provided, That when the act of incorporation imports a contract on the faith of which individuals have advanced money or engaged their property it cannot be repealed without providing for reimburse- ment of the advances made or making full indemnity to such individu- als. The charter of the New Orleans, Baton Kouge and Vicks- burg Company did not of itself import any contract on the part of the State which is the kind of contract intended on the faith of which anybody could or did advance money or property. The company itself, after it was chartered, entered into many contracts, such as issuing bonds, etc., and if it had any property to give value to such contracts the repeal of its charter did not take away any liens on such property. This company, however, had no property of any kind, and the re- peal of its charter could not make the plight of its creditors any worse than it was already. 250 THE BACKBONE LAND GEANT. Briefly, the condition of things was that the New Orleans, Baton Bouge and Vicksburg Eailroad was practically defunct, and to all appearance legally defunct, as a consequence of the repeal of its charter, and that the New Orleans Pa,cific Rail- way had ascertained during the' session of Congress of 1879- '80 that the policy of granting lands to railroads was out of favor in Washington, and that it was not practicable to obtain a Congressional transfer to itself of the lapsed land grant of the New Orleans, Baton Rouge and Vicksburg Railroad. The ingenious men in both roads seem then to have devised the scheme of procuring to the New Orleans Pacific Railway a transfer of the land grant of the New Orleans, Baton Rouge and Vicksburg Railroad Company, which had nothing except a repealed charter and millions of outstanding debts, and which had never built a rod of road or earned either a legal or equitable title to an acre of land. The New Orleans Pacific Railway was then actually engaged in building a railroad from New Orleans to Shreveport ; over a route which was ninety miles of its length on a different side of the Mississippi river from that of the chartered route of the New Orleans, Baton Rouge and Vicksburg Railroad, and was determined to build it with or without a land grant. It has, in fact, been since built, and without any aid from any land grant, inasmuch as the scheme of converting to its own use the lapsed grant of another road chartered to build over a materially different route has not yet been finally consummated. It is said, fur- thermore, that the construction of the railroad has, independ- ently of any land grant, been exceedingly profitable to the builders. A. M. Gibson, in a letter to the Secretary of the Interior, September 25, 1883 (page 85 of Executive Document No. 31 ), says, in respect to the disposition of this prize of a lapsed land grant, if it can be resuscitated : The lands, if patents are issued therefor, are to be mortgaged for $4,000,000. These bonds are, I understand, already printed. They are, as part of the assets of the New Orleans Pacific Company, to go to the American Railway Improvement Company, by virtue of a contract of the latter with the former, a few persons who have already made 500 per cent, profit in building. The stockholders of the New Orleans Pacific THE BACKBONE LAND 6EANT. 251 Railroad Company will not be benefited by this swindle which you are asked to make possible ; no one will be benefited save the few persons who hold American Railway Improvement Company stock and the old land-grant bonds of the New Orleans, Baton Rouge and Vicksburg Rail- road Company. It appears from recorded deeds that on the 20th of June, 1881, the New Orleans Pacific Company conveyed its entire road equipment, rolling-stock, and rights and property of every kind to the Texas Pacific Eailway, but specially except- ing its rights under the (so called) transfer of the land grant of the New Orleans, Baton Eouge and Vicksburg Company. Precisely how the proceeds of that grant are to be divided, if patents for it can be obtained, is not known and never will be until there is a judicial inquisition or until the dividing parties get into some quarrel among themselves and divulge the secrets. But there are some things about it which we can under- stand, and among them the following : That the Texas Pacific Railway will get no part of the land grant, as that was ex- cepted out of the deed made to it by the New Orleans Pacific Railway; that whatever share of the grant was set apart to pay for the transfer of the New Orleans, Baton Eouge and Vicksburg Eailroad Company will go to the Barnums (father and son) with such undisclosed partners as they may have, except such part of the spoils as the Barnums have been obliged to use as sops to quiet remonstrating and protesting stockholders and creditors of the New Orleans, Baton Eouge and Vicksburg Eailroad Company; that it is at least doubtful whether the New Orleans Pacific Company stockholders will get any part of the grant, as we have the positive statement of A. M. Gibson, which I have already read, that the entire interest of that company in the grant has been made over to the American Eailway Improvement Company, of which Jay Gould is the principal shareholder. I do not propose to attempt to enter upon an argumenta- tive discussion of the legal questions which are involved, leaving that to the more competent hands of the lawyers of the Senate. I only intend to state summarily the conclu- 252 THE BACKBONE LAND GEANT. sions to whicli a careful perusal of the papers have led my own mind. The decision of the United States Supreme Court in Schu- lenberg vs. Harriman (21 Wallace), which is the authority chiefly relied upon to support the present extraordinary claim of the New Orleans Pacific Railway Company, does undoubt- edly lay down the doctrine that when lands are actually granted in prcesenti, but subject to the performance by the grantee of some condition at a future time, such condition is only a condition subsequent, the non-performance of which does not of itself forfeit the grant, but only makes the grant forfeitable by some judicial proceeding, or in the case of a public grant by a repeal of the grant. I have no occasion to controvert that doctrine, but the question is open in every case whether, taking all the provisions of a granting act together, the grant is in prcesenti or a grant upon a condition precedent. Delivering the opinion of the cotirt in this very case of Schulenberg vs. Harriman, Mr. Justice Field says : The language used imports a present grant and admits of no other meaning. The third section declares " that the said lands hereby granted to the State of Wisconsin shall be subject to the disposal of the Legis- lature thereof ; " and the fourth section provides in what manner sales shall be made, and enacts that if the road be not completed within ten years " no further sales shall be made and the lands unsold shall revert to the United States." The power of disposal and the provision for the lands reverting both imply, what the first section in terms declares, that a grant is made. The case of Rice vs. Railroad Company (1 Black) does not conflict with these views. The words of present grant in the first section of the act then under consideration were restrained by a provision in a subse- quent section declaring that the titles should not vest in the Territory of Minnesota until the road or portions of it were built. As will be noticed, the court do not adjudge the grant to Wisconsin to have been a grant in prcBsenfi merely from the words declaring a grant, but from the additional circum- stances that there were other clauses in the granting act. giving to Wisconsin the present disposal of the land and providing that if a certain road should not be built within a certain time the land should revert to the United States. THE BACKBONE LAND GRANT. 253 And as will also be noticed the court say that their decision in Schulenberg vs. Harriman is not inconsistent with nor intended to overrule their decision in the previous case of Rice vs. Railroad Company (1 Black), where words apparently declaring a present grant were restrained from operating in prcBsenti, by other clauses in the same act. It is at any rate open to very grave doubt whether words of present grant to a road, restrained, as in this case, by a proviso that the road must be built within five years, and when the road obtains neither title by patent nor possession, except as the road is actually built, do operate as a grant in prcesenfi so as to convert what would otherwise be a condition- precedent into a condition-subsequent. There is certainly nothing in the Schulenberg vs. Harriman case which controls the present case. N. C McFarland, Commissioner of the General Land Office, in a letter (December 24, 1881), addressed to the Sec- retary of the Interior (page 46 of Executive Document 31), says of the grant to the New Orleans, Baton Rouge and Vicks- burg road : This does not seem to be a grant in prcesenti. * * * It is a mat- ter of the gravest doubt whether the Department should go forward and issue patents to the company for the land without further action by Congress. It may be unnecessary to say that it will always be a ques- tion of policy, discretion, and equity whether Congress will waive or not waive even a condition precedent. It has the power to do so in any case and may well be induced to do so in respect to a railroad land grant not appearing to have been originally excessive, and in respect to which the grantee company has acted in good faith and with due diligence, has actually executed within the time limited a part of the work imposed upon it as a condition precedent, and has been disa- bled from completing the whole of it by unforeseen and insurmountable obstacles. It is a fatal objection to the pretensions of the New Orleans Pacific Railway to a conveyance of lands under the 254 THE BACKBONE LAND GEANT. twenty-second section of the Tesas Pacific Railway, act of March 3, 1871, that it is built over a route differing mate- rially from the route of the road to which a conditional grant of land was made by that section. If it even be conceded that the New Orleans, Baton Rouge and Vicksburg Railroad Company, to which the conditional grant of March 3, 1871, was made, might have effectually conveyed its right to build a road over its own chartered route and the accompanying land grant to another company, it can not transfer its land grant to another company whose chartered route is substan- tially different, and which actually builds over a substantially different route. This would be to transfer of its own authority the bounty of Congress not merely to another beneficiary, but to a substantially different object. The conditional grant of March 3, 1871, was to a company whose chartered line was from New Orleans to Baton Rouge on the east side of the Mississippi river, and is not transferable to a company whose line starts at a point at New Orleans on the west side of the Mississippi river and does not leave the west side in any part of its course. The reasoning by which it is attempted to justify such a transfer is destitute of any strength, and can hardly be said to be plausible. It is said, and is probably true, that the essential object of Congress in the twenty-second section of the act of March 3, 1871, was to promote a connection be- tween New Orleans and the eastern terminus of the Texas Pacific Railway, and would have been in 1871 and might be now as well satisfied with a connection over the route of the New Orleans Pacific Railway as over the route of the New Orleans, Baton Rouge and Yicksburg Railroad. The conclusion is a not improbable one, that if Congress had been applied to in 1871, or soon after, and before the policy of land grants to railroads had lost the popularity it once enjoyed in the country, the assent of Congress could have been obtained to a transfer of the land grant of the New Orleans, Baton Rouge and Vicksburg Railroad to the New Orleans Pacific Railway. THE BACKBONE LAND GRANT. 265 But the question is not what Congress may with proba- bility be supposed to have been ready to do at some former time, but what it actually did do in respect to granting lands on the 3d of March, 1871, in the matter of promoting a con- nection between New Orleans and the Texas Pacific Railroad, and that was to grant lands to a company whose chartered route between New Orleans and Baton Rouge was strictly fixed to the east side of the Mississippi river. Congress has not acted in the premises since 1871, and it may be added that since March, 1876, when the limit of time for the con- struction of the New Orleans, Baton Rouge and Vicksburg Railroad expired, it has never been found possible to per- suade Congress to donate lands to the New Orleans Pacific Railway, either by a new and original grant or by what would have been the same thing, a transfer to it of the lapsed rights of the New Orleans, Baton Rouge and Vicks- burg road. It is also a fatal objection to the pretensions of the New Orleans Pacific Railway that it has not yet completed its line and so far as is known does not propose to complete its line to the eastern terminus, of the Texas Pacific Railway, which was fixed by the act of March 3, 1871, at a point at or near Marshall, in the State of Texas, and which was fixed by the Texas Pacific Company itself, in the exercise of the discre- tion left to it by the act of March 3, 1871, at Marshall. The New Orleans Pacific Railway extends from New Orleans, not to Marshall, in Texas, but to Shreveport, in Louisiana, which is distant rather more than forty miles from Marshall. In the opinion of the Attorney-General of the United States (page 53 of Executive Document 31) it is attempted to meet this point by showing that by the additional act of Congress of May 2, 1872, in respect to the Texas Pacific Rail- way, it is "authorized and required to construct, maintain, control, and operate a road between Marshall, Texas, and Shreveport, Louisiana, or control and operate any existing road between said points." He overlooked, or his attention 256 THE BACKBONE LAND GRANT. was not called to, the following express proviso in the same act. Provided, That nothing herein shall be construed as changing the terminus of said Texas and Pacific Railway from Marshall, as provided in the original act. It may be said "that a railroad from New Orleans to Shreveport makes a substantial connection with the Texas Pacific Railway, and that it would be technical to insist that the connection was by the act of March 3, 1871, required to be made at Marshall. But a granting act must be, at any rate by executive officers, construed strictly. The right of waiving conditions for sufficient equitable reasons rests with Congress alone, which has not yet waived the condition in this case that the connection must be made at Marshall. The New Orleans Pacific Railway Company is in no position to ask Congress to waive any condition, either substantial or merely legal, because the entire claim which it makes to lands rests upon the narrowest technicalities, strained and drawn out to the last possible degree of tenuity. It had already de- termined to construct a road from New Orleans to Shreve- port, had already definitely located the line, had already made a contract with a responsible syndicate to build it, and was far along in the actual work of construction before it con- ceived the idea of getting the transfer of a land grant over a different route, and not for the purpose of enabling its work to be carried on, but for the purpose of swelling the already swollen profits expected from it. The New Orleans Pacific Railway claimed in the first in- stance lands along their entire lines, including sixty-eight miles built by another company and which it acquired by purchase as late as February 10, 1881. These sixty-eight miles of purchased road formed a part of the one hundred and thirty miles of road examined and approved by Thomas Hassard, a commissioner appointed for that purpose by the President. ( See Hassard's report dated October 26, 1881. ) N. C. McFarland, Commissioner of the Land Office, in a letter addressed December 24, 1881, to the Secretary of the THE BACKBONE LAND GRANT. 257 Interior, said in respect to the sixty-eight miles of pur- chased road that they "were constructed years ago by another company without any grant of lands," and that as to those miles of road the New Orleans Pacific Eailway " clearly had no right" to claim any lands. The New Orleans Pacific Rail- way Company did not, however, give up that claim until ten months afterward, when on the 19th of October, 1882, and probably because it found that it was impossible to obtain an allowance for such a claim, it filed a disclaimer to any land grant in respect of the sixty-eight purchased miles. What was the reason for refusing an allowance of land in respect to those particular miles of road? Simply this, that they had been constructed without reference to a land grant, and that it would have been a fraud upon an act o:^ Congress granting lands for the purpose of procuring the construction of a railroad to appropriate such a grant to a line of road actually built without any expectation of such a grant and not at all upon the faith of or with the aid of such a grant. That precise objection applies, and with full and equal force, against allowing lands for any part of the mileage of the New Orleans Pacific Eailway, the whole of which was put under a construction contract with a responsible company six months before there is any evidence that the scheme of a transfer of the land grant of the New Orleans, Baton Eouge and Vicksburg Eailroad had been conceived of, and seven- teen months before such a transfer can be even claimed to have been made. This attempted transfer of a land grant by the New Orleans, Baton Eouge and Vicksburg Eailroad to the New Orleans Pacific Eailway is the first case, similar in kind, the legality of which has received an opinion in its favor from an Attorney-General of the United States. Such an attempted transfer from the Oregon Central Eailroad to the Willamette Valley Eailway Company was decided against by Attorney- General Akerman (13 Opinions, 382), and for reasons nearly all of which are applicable to the present case. Another transfer from the Hannibal and St. Joseph Eailroad Company 258 THE BACKBONE LAND GKANT. of a land grant in Kansas to the Atchison and Pike's Peak Railroad Company, which had been previously chartered by the Legislature of Kansas, was sustained by Attorney-Gen- eral Stanberry, but in that case the Hannibal and Saint Joseph Company had itself no chartered right to build a road in Kansas, and was by the Pacific road act of July 1, 1862, (section 13), authorized, in respect to a certain Kansas route, to "use any railroad charter which has been or may be granted by the Legislature of Kansas." That it has been commonly understood that transfers of this kind, in the absence of some such special power as is found in the grant of land in Kansas to the Hannibal and Saint Joseph Company, require legislative sanction, is shown by the legislation of Congress, which has been asked for and obtained in several cases. ( See section 2 of the act of March 3, 1865, volume 13, Statutes, chapter 88, and section 1 of the act of March 3, 1869, volume 15, chapter 127. ) An extraordinary effort has been made to produce the im- pression that some special and unusual power of transferring its rights and property was given to the New Orleans, Baton E.ouge and Vicksburg Company, by the fact that the grants of land are made to it, "its successors and assigns." These are formal words used in all public and private grants of land, except that in the case of grants and conveyances to individuals the phraseology is changed from "successors and assigns" to "heirs and assigns." I have not found a railroad land grant by Congress in which the words " successors and assigns " are not used. They are used in the act of March 3, 1871, granting lands to the Texas Pacific Railway. In the Pacific Railway act of July 1, 1862, it is provided in the fif- teenth section that : Wherever the word " company " is used in this act it shall be con- strued to embrace the words " their associates, successors, and assigns " the same as if the word had been properly added thereto. In the case already referred to (13 Opinions, 382) Attor- ney-General Akerman says : It is asked of what use is the word "successor" unless other parties may succeed to the Oregon Central Railroad Company in all the rights THE BACKBONE LAND GRANT. 259 conferred by the act. If this word were new in conveyances the argu- ment founded upon it would perhaps be irresistible ; but for centuries the word " successors " has been in common use in grants to aggregate corporations. " The successors of a corporation correspond to the heirs of a natu^^al person" (Burrill's Law Dictionary). Where a fee is in- tended to be conveyed to a corporation, sole or aggregate, the word "successors" corresponds as equivalent to heirs in regard to natural persons (Woodison's Lectures). The word is indeed unnecessary to con- vey a fee in a grant to an aggregate corporation, because the corpora- tion itself, being immortal, the word " succession " is superfluous ; never- theless, it has commonly been inserted in such grants having probably been at first accidentally adopted from grants to corporations sole, where it was necessary to convey a fee, and its meaning is well settled. I find nothing in the context of this Congressional grant to show that the word is used here in a new or peculiar sense. It may be asserted on eminent authority that the word "assigns," which is in fact almost if not absolutely always used in deeds of land, is unnecessary and confers no right which the grantee would not have if that word was omitted. The ownership of land does of itself include the right to as- sign it. In this case the use of an old and accustomed phraseology, "successors and assigns," did not of itself give the New Orleans, Baton Kouge and Vicksburg Railroad any additional rights. It can have conveyed nothing which it did not itself first own, and whatever it did own it could convey if the word assigns had been omitted in the conditional grant of land made to it by the Congress of 1871. The opinion of Attorney-General Brewster in favor of the validity of the land-grant transfer in the present case is not only not binding upon anybody, but it is not something be- hind which any executive official can take refuge so as to escape responsibility for his own acts. The present Secre- tary of the Interior, in a letter (May 24, 1883) to West Steever (page 10 of Executive Document No. 31), says : My predecessor submitted the question as to the right of the com- pany (New Orleans Pacific Railway) to receive the lands from the Gov- ernment to the Attorney-General, who decided the question in favor of the company. The Interior Department was compelled to accept this as the law governing the case, and then it became the duty of the De- partment to carry out the law. 260 THE BACKBONE LAND GRANT. No law or practice compels the Secretary of the Interior to accept the opinion of the Attorney-General. The heads of Departments have the right to ask the opinions of the Attor- ney-General but are not bound to accept them, and in fact have no right to accept them unless satisfied of the' correct- ness of the reasons upon which they are based. They are no more bound to accept them than clients are to accept the views of lawyers whose advice they seek and pay for. In the practice of the Government opinions are sometimes accepted by heads of Departments and sometimes not accepted. There is nothing judicial in the function of giving opin- ions which the Attorney-General possesses, and nothing judi- cial in the manner in which the function is exercised. He generally hears only one side, and always acts upon a case made up for him to act upon. In this case the claim of the New Orleans Pacific Company was supported by elaborate briefs and arguments from astute, experienced, and highly paid railroad lawyers, Dillon, Green, Swayne and Pierrepont, while the other side, which was that of the Government and the country, whose lands were the prize in controversy, was represented by nobody. The Attorney-General's mind might have been conducted to an opposite conclusion if he had got at the facts from versions of them given from both sides, and if he had heard counsel employed by the Government to look up and present all the precedents, cases, principles, and au- thorities adverse to the pretensions of the New Orleans Pacific Railway. The Attorney-General was in the same unfortunate pre- dicament in which committees of the Senate and House find themselves in hearing railroad and other cases, where great and wealthy corporations are interested on one side, and when the opposing interest is only that of the public. I have had some experience of that, and there are older Senators who have had a good deal more. The best legal talent, stimu- lated by munificent fees, and with ample time to hunt up all favoring precedents and authorities, appears on the side of the corporate interest, while the public interest is not repre- sented at all on the legal points. THE BACKBONE LAND GBANT. 261 The papers sent to the Senate by the Interior Department contain many protests against the deed of the Barnums, of January 5, 1881, from stockholders and creditors of the New Orleans, Baton Rouge and Vicksburg Eailroad Company, which were successively withdrawn as the protesting parties were arranged with and pacified. Some of these withdrawals were made with a suddenness which gives them an almost dramatic effect. Thus (page 33 of Executive Document 31) we find a letter dated November 18, 1881, from C. R. Bissell to the Interior Department, affirming the truth of the fol- lowing statement : That the Directors authorizing said transfer [the deed of the Bar- nums] had no authority to authorize the same, and had not been duly elected within a year before said transfer was authorized, and that the parties claiming to act as directors and authorizing said transfer were in fact " mere dummies," as admitted by the secretary of said company, and were acting in the sole interest of the president and secretary. On the same page there is another letter from him, dated on the next day, asking permission of the Interior Depart- ment to withdraw his letter of November 18, 1881, and another one of October 20, 1881, for the following assigned reasons : I desire to say I wish to recall both of these letters from your file, the New Orleans, Baton Rouge and Vicksburg Company having satis- factorily adjusted all matters with me as a stockholder, thus removing all objections I had, at the date of the letters referred to, to such trans- fer and issuing of patents. There is another class of protestors whom it will not be so easy to quiet, and that is the settlers on the lands in contro- versy, who prefer to deal with the Government rather than with a railroad company. To partially quiet them there have been promises that the New Orleans Pacific Railway Company will, on certain conditions and in certain cases, allow them to have the land in their occupation at $2 per acre. Hon. E. T. Lewis, member of the House from the Sixth Congressional District in Louisiana, in a letter (August 17, 1883) to the Secretary of the Interior, says (page 83, Execu- tive Document 31 ) : Many of my constituents are keenly interested in what is called the Back Bone land grant (to the New Orleans, Baton Rouge and Vicksburg 262 THE BACKBONE LAND GRANT. Bailroad). They are interested from the fact that hundreds of them have settled and built in good faith on these lands, believing the grant justly and legally forfeited, and that ultimately they would be able to obtain patents therefor from the Government. At a regular session, June 5, 1883, of the police jury of East Feliciana, in Louisiana, it was voted that the New Orleans, Baton Rouge and Vicksburg Railroad was " a fraudulent con- cern, which by some adroit impecimious adventurers and speculators organized fifteen years or more ago as a tributary to the Texas Pacific, and never had any vitality except the unlimited cheek of its projectors," and that it was "a col- lapsed and mythical concern" attempting to transfer its lapsed rights to another company which "has constructed a line of railroad on the western bank of the Mississippi." The meeting appealed to Congress to "nullify this most iniqui- tous transaction." This protest of East Feliciana was, on the 12th of June, 1883, read and adopted by the police jury of East Baton Rouge. On the 4th of August, 1883, the police jury of Franklinton protested against the transfer of any lands in that parish to the New Orleans, Baton Rouge and Vicksburg Railroad, or to any other railroad. With no disposition to reproach our predecessors in these halls, and making all allowances for their overestimates of the real cost of railroads, and their underestimates of the rapidity with which railroads have become directly remunerative, I must express the feeling which is now universal that the grants of land in aid of the construction of railroads have been enormously, I might even say frightfully, excessive. The methods in which these grants have been administered by executive officials have also carried liberality to the verge of downright looseness and waste. Reversing the triie rule that grants to private corporations should be construed strictly, and with a careful attention to the limitations and conditions, too many bf them seem to have strained every point in favor of the railroads, and to have struggled to find how large an interpretation granting acts wonld possibly admit of. It is THE BACKBONE LAND GEANT. 263 not in that spirit that the rights of pre-emptors and persons seeking to acquire title under the homestead provisions have been dealt with, but they have been required to bring them- selves within not only all the substantial conditions but all the most rigorous formalities prescribed in the laws under which they make their claims. I do not mean to say that the Interior Department is more rigid than official duty compels it to be in its dealings with individuals and in its requirements from pre-emptors and homestead settlers and others of strict and formal proof of the most complete and technical compliance with all the conditions of the acts of Congress before patents are issued. Nevertheless it is true that individual cases are hung up for months, until anything lacking which ingenuity can hold to be a necessary link in the chain of evidence is supplied ; but in the case of great railroad corporations, demanding millions and tens of millions of acres, everything seems to be pre- sumed in their favor ; no inquisition is made into the regu- larity of transactions in the most vital particulars, and where two constructions are possible the one giving the widest scope to grants seems to be invariably preferred. In this case the continued legal existence of the New Orleans, Baton Kouge and Vicksburg Railroad Company, notwithstanding the repeal of its charter years ago by the Legislatune of Louisiana, was assumed on the mere ground of a judgment obtained without argument and rendered without reasons in a subordinate United States court, and which, however obtained, was and is binding to nobody but the parties to it. So also the sufficiency of the deed of the Barnums, father and son, was assumed on no other basis than an authorizing vote of the directors of the New Orleans, Baton Rouge and Vicksburg Company, and without the least inquiry either as to whether the directors themselves had the power, which they manifestly had not, to make such a wholesale transfer of everything which the company possessed, or as to whether, if they had such a power, they could legally delegate it to anybody else. So also no investigation was made of the 264 THE BACKBONE LAND GEANT. questions whether the organization of the New Orleans, Baton Rouge and Vicksburg Company had been regularly kept up or whether the ratification meeting of the stockhold- ers in December, 1881, was duly called and contained the necessary quorum of bona fide stockholders. And from first to last no opportunity has been afforded by a reference to the Court of Claims or otherwise for a presentation of the legal points in favor of the rights of the United States or of the pre-emption and homestead rights of actual settlers as against the claiming railroad company, while the fullest hearing has been accorded to the elaborated arguments of the many eminent lawyers whom the company has the means and the sufficient inducement to employ. It is to be regretted that more of that care and caution which has been exercised in giving patents for quarter- sections of land had not been shown in giving patents to railroads for areas exceeding those of powerful European monarchies. It may be useless to regret the past, but it is clearly time to call a halt in loose grants and equally loose constructions of grants of the public domain to corporations which are private in their ownership, control and profit, however useful the enterprises in which they are engaged may be to the country. Mr. President, I now ask to have the bill referred to the Committee on Public Lands. THE QUESTION OF THE HOUR Address delivered at Leadville, Colorado, before the Y. M. C. A., on Thursday evening, April 12, 1888. There are many intelligent persons who believe, or pro- fess to believe, that the chief danger which menaces the se- curity of private property comes from the classes commonly described as socialists or communists. However possible it may be that there is some foundation for that view of the case in respect to a few countries in Europe, there is absolutely none in respect to this country. Where expression of opinion is so completely free, as it is in the United States, we may expect to hear opinions of all kinds. We have among us some theorists who advocate the abrogation of individual ownership of land, and still others who advocate a general per capita distribution, or at any rate, an equal per capita enjoyment of all the property of the world. Such idiosyncrasies are not original with this age, but have always commended themselves to a certain class of minds and have been much more common at former periods than at the present time. It is not improbable that much of the alarm which has been felt on this account has been fostered for the purpose of diverting attention from the real danger. In these days, and especially in this country, spoliations of property are in no appreciable degree threatened by so- cialists and communists. That danger menaces us from an entirely different quarter. It is not dreamers who wish all property to be held in common that we need fear, but those who seek to increase their share of the world's goods through crafty and unscrupulous manipulations of the legislative and sometimes of the executive and even the judicial departments 266 THE QUESTION OF THE HOUR. of the Government. Of tlie spoliations of tlais latter class, the greatest in amount and the most wide reaching, are made possible by the careless or corrupt granting of such excessive privileges to railroad, telegraph, water, gas and similar com- panies as to enable them to exact unequal and oppressive charges for the services which they render to the public, and by the careless or corrupt neglect to enforce against such companies the powers of regulation of which legislators can never divest themselves or their successors. This thing has gone so far that it is probably true, al- though exact accuracy in such matters is not attainable, that the whole amount of the national taxation in this country is exceeded by the sums annually taken from the people by monopolies of various kinds, the exactions of which can not be escaped until there is a radical reform in the spirit and methods of legislation. The proportions of the mischief are enormous. It is the chiefest and crying evil of the times, and it would be an affront to the intelligence of the country to suppose that the consideration of appropriate and efficient remedies will not soon become the foremost topic of political discussion. The monopolies which were in former times chiefly com- plained of in English history were the special grants, some- times by Parliament but commonly by the Crown, to particular persons or companies of the exclusive right to engage in certain branches of commerce or manufacture, whereby they were enabled to exact exorbitant prices from all who dealt with them. Such grants have been rarely made in England since the final expulsion of the Stuarts in 1688, although several of them have continued in existence to much later periods. A conspicuous monopoly, that of the trade of the Indies by the East India Company,' was not broken up until 1814. Patents and copyrights, for limited terms to inventors and authors, are known in the practice of European govern- ments and are especially authorized in the Constitution of the United States. They make a case sui generis, and are THE QUESTION OP THE HOUR. 267 regarded as a fair and expedient degree of encouraging the right of property which men are entitled to claim in their own discoveries and ideas, and in the results • of time and labor which they have expended in experiments, research and thought. Aside from that exceptional case, the monopo- lies of modern times, and especially in this country, very rarely arise from exclusive privileges granted avowedly and in so many words. They most commonly arise from the character and nature of certain services indispensably re- quired by the public, which, from the surrounding circum- stances, can only be performed by particular persons and companies. It is inevitable that a situation like this must practically give to such persons and companies all the advan- tages of an openly-declared monopoly, and practically compel the general community to submit to any charge which they may choose to exact, so long as the public authorities shall neglect, through carelessness or inattention, or shall refuse, under corrupting influences of any kind, to interfere for the protection of the rights and interests of the body of the peo- ple, by a compulsory reduction of charges to rates which are reasonable and just. That it is within the proper powers, and one of the im- perative duties of government to act in such cases, is one of the oldest doctrines of English common law. As a principle of jurisprudence it was adopted here from the beginning of the settlement of this country. It was recognized in our colonial legislation, as it has been since in the legislation of the States, and it has been uniformly siistained by the deci- sions of the State and National Courts, including some recent decisions of the highest judicial tribunal, the Supreme Court of the United States. It always was, and it is to-day the common law doctrine, that whoever is engaged in a business which is so far public that the people are in fact compelled to deal with him and to submit to his terms, is said to be en- gaged in a public employment, or as it is sometimes expressed, he is said to "exercise a sort of public office" and in order to prevent the extortion which might result from the abuse of 268 THE QUESTION OP THE HOUB. his position, the prices for his services may be regulated by law. In delivering the opinion of the Supreme Court of the United States, in Munn vs. Illinois, the late lamented Chief Justice Waite said : It has been customary in England from time immemorial and in this country from its first colonization to regulate ferries, common car- riers, haokmen, bakers, millers, wharfingers, inn-keepers, etc., and in so doing to fix a minimum of charge to be made for services rendered, accommodations furnished and articles sold. To this day statutes are to be found in many of the States upon some or all of these subjects, and we think it has never yet been successfully contended that such legisla- tion comes within any of the constitutional prohibitions against inter- ference with private property. Chief Justice Waite also notes that Congress in 1820 au- thorized the city of Washington to regulate the rates of wharfage at private wharfs and the charges for sweeping chimneys, and in 1848 authorized the same city to regulate the fares of hackney carriages, the hauling i-ates of wagoners, carmen and drajrmen, and this commissions of auctioneers. In all these cases there is a denial of the absolute right of persons to fix the price for their personal services or for the use of whatsoever they possess. The first impression in respect to such a denial might be that it is an infringement on the rights of private property. It is, however, an old and approved distinction, of the common law that to the extent that private property is used in such a way as to concern the whole public and so long as it is so used it becomes, in the words employed two centuries ago by the famous Lord Chief Justice Hale, "affected with a public interest," and ceases to be a matter of merely individual right. Among the examples by which he illustrates and defines this general doctrine, he said in respect to the ferries : A ferry for the common use of all the king's subjects passing that way doth, in consequence, tend to a common charge and it becomes a thing of public interest and use, and every man for his passage pays a toll, which is a common charge ; and every ferry ought to be under a public regulation, viz., that it gives attendance at due times, keeps a boat in good order and takes but a reasonable toll. And in respect to a wharf when it happened to be the only one in a port, he said : THE QUESTION OF THE HOUR. 269 In that case there cannot be taken arbitrary and excessive duties for cranage, wharfage, etc. Neither can they be enhanced to an immod- erate rate, but the duties must be reasonable and moderate, for now the wharf and crane and other conveniences are affected with a public interest. In the case of Munn vs. Illinois, already referred to, Chief Justice Waite stated the general legal doctrine as follows : When one devotes his property to a use in which the public has an interest, he in effect grants to the public an interest in that use and he must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use, but so long as he maintains the use he must submit to the control. From the multiplicity and novelty of the cases which arise from the changes which are constantly occurring in the methods by which business of highly-civilized communities is conducted there will be differences of opinion as to whether the special circumstances of a particular case do or do not affect private property or services with such a public interest as will properly subject them to public control. An example of that is the case of Munn vs. Illinois, already referred to, which involved the question whether the owners of the public warehouses in Chicago, advertised as ready to receive every- body's grain at fixed rates, could be treated as carrying on a business "affected with a public interest," and therefore liable to have their rates prescribed from time to time by the legislative authority. A. large majority of the Court decided that question in the affirmative, but from that opinion two of the justices dissented. It is not necessary that I should discuss controverted ques- tions of that kind, inasmuch as there is no dispute as to the rightful authority of the legislators to control all the cases which I propose on this occasion to consider. It is admitted on all sides that among the fit subjects of public regulation including the limitation of charges to be exacted, are common carriers of all kinds, including the car- riers of messages by telegraph, telephone, and other similar devices, ferries, bridges, turnpikes, railroads, and all public 270 THE QUESTION OF THE HOUK. communications which everybody must use, and the business of supplying towns and cities with water and gas. To this enumeration should be added as respects the arid regions which are so extensive between the Mississippi river and the Pacific ocean, the operations of irrigating companies. In nearly all of these numerous cases, in addition to the fact that public regulation is justified and required by the public interests which are involved, there is the further considera- tion that the parties concerned are under the necessity of obtaining legal authority to take property by compulsory condemnation, under either general or special laws. As the taking of private property at prices fixed by public authority and not by the owners is permissible under the National and all State constitutions only when the property is needed for a public use, it is not possible for railroad and similar com- panies, which ask legislative authority to obtain the property of individuals by process of condemnation, to deny that the business in which it is to be used is affected with a public interest. It is only upon the ground that the property is to be appropriated to public use that there is any constitutional warrant for subjecting it to be taken at a price fixed by public authority, and to which the owner is forced to submit, how- ever inadequate he may deem it to be. That the legislative authority may rightfully subject rail- road and similar companies to any regulation deemed neces- sary for the public interest, including the limitation of their charges within just and reasonable bounds, is a doctrine so well established that it cannot require any extended elucida- tion and defense. It will be sufiicient for the present occa- sion to have pointed out that it has been from time immemorial a part of the English common law which our ancestors brought to this country, and that it has always been recognized in American legislation and in the decisions of the American courts. In most of the cases, and especially within the last fifty years, in which companies for the construction and mainte- nance of railroads, ferries, bridges, telegraph lines, and water THE QUESTION OF THE HOUE. 271 and gas works have derived their corporate existence and their power to levy tolls and charges from legislative grants, in the form either of special charters or of general laws, an express reservation has been made of the legislative power to prescribe different tolls and charges, or to make new regula- tions of any kind, which may become in consequence of. a change of circumstances more conformable to justice and sound policy. No such express reservation, however, can be required. In the cases in which legislative power exists to regulate private property because it is employed in a business affected with a public interest, it must from the nature of things continue to exist so long as such property continues to be so employed. All legislative regulations for public purposes may be modified to meet new exigencies as they arise. The right of regulation is continuous, and is not ex- hausted by a single exercise of it. Legislative bodies exercise it only for the time being and cannot take it away from their successors. Or, at the very least, this may certainly be said, that an intention on the part of a legislative body to tie the hands of its successors so as to prevent such changes as new circumstances may make essential to the public interests, is never to be presumed ; is never to be deduced from doubtful language and by strained constructions ; and is never to be admitted except when the language used compels the admis- sion to be made. It is not the lack of legislative power or any doubt about the legislative power to check the abuses and excessive charges of railroads, telegraph, and similar companies in this country, which constitutes the difficulty of obtaining a redress of the wrongs and injuries inflicted upon the general com, munity by corporations which are practically monopolies, inasmuch as the facts of the situation substantially protect them against competition. The difficulty is of a different kind. It arises in part from carelessness and indifference of many legislators, in part from the downright corruption of some of them, and in part from the insidious and ramified influence which the monopolies are able to exert over public 272 THE QUESTION OF THE HOUK. opinion through subsidized newspapers, throiigh the mis- leading arguments and appeals of adroit and manifestly paid advocates, and through the arts and blandishments of lobby- ists in their employment, known and unknown, and of all gradations of degree from high to low. The corruptions which monopolies bring to bear upon legislators and upon politicians who can influence legislators varies from the mild form of the distribution of railroad and telegraph passes, which has now been so long practiced that it hardly ofPends the ordinary conscience, to the gross form of directly bargaining with legislators to pay them so much money for their votes and advocacy. Intermediate between these forms there are innumerable kinds of indirect pecu- niary influence. Legislators who, from some lingering pride, fear of ex- posure, or qualms of conscience, would not receive money paid into their hands and for their personal use, will accept contributions towards the expenses of their re-election ; as still others of them owe their original election to the pecu- niary aid of corporations to which they have promised fealty in advance. Corporations have naturally a fellow feeling and sympa- thy with each other which tends to produce a tacit but effect- ive combination among them to drive out of public life and to keep out any man who conspicuously opposes any one of them. Of that we have had a recent example, known of all men and deplored by all honest men, in the case of Judge Thurman, who committed the mortal offense of carrying through Congress by his ability, persistency and weight of character, a measure compelling the Pacific railroads to do at least something towards paying their debt to the Government. In so doing, while he increased his already great claims on the confidence of the country, he hopelessly consigned him- self to private life. The Standard Oil Company, one of the most successful and richest monopolies in America, has been the power made use of in Ohio to keep him permanently out of public life. It was drawn into the combination against THE QUESTION 'OF THE HOUB. 273 him by the sympathy that binds together those who are en- gaged in a common purpose of enriching themselves at the public expense, however diverse their methods of reaching that end may be. It was the Standard Oil Company, which, under the flimsy pretext of presenting another candidate for the Democratic nomination for the Presidency in 1880 and 1884, twice accomplished the 7'eal object of defeating the nomination of Judge Thurman ; and on both occasions it acted from its affiliations with those who have never forgiven his action in respect to the Pacific railroads. It was the same company and under the promptings of the same aiSliations which caused the exclusion of Judge Thurman from the present Cabinet. Every monopoly becomes, to a certain extent, an impor- tant agency for the support and defense of every other mo- nopoly. The railroad companies have fully recognized this principle in the policy which they have generally adopted of discriminating in favor of certain merchants and manufac- turers. Every trading point of any importance throughout the entire railroad system, has its railroad favorites who are enabled by cheaper freights to drive out of business all com- petitors. It is not claimed that the railroads receive more, or as much as they would, if all shippers were treated alike, but the favored corporations or individuals must necessarily become rich and influential, and they can always be relied upon to champion and sustain the action of railroads, right or wrong. So far as politicians are governed, as some of them are wholly, and all of them are to a certain degree, by consider- ing what line of conduct will most contribute to their own public advancement, it is inevitable that they should take into account that great corporations, wielding a vast patron- age from the magnitude of their incomes and expenditures, and controlling always numerous newspapers, which praise or disparage public men as they may dictate, cannot without some risk be converted into enemies and that their friendship is desirable, if it can be obtained without a too-open compli- 274 THE QUESTION OF THE HOUR. ance with their demands. The influence of monopolies in this way, exerts a subtle, corrupting power over legislators and politicians, and even over the aggregate action of polit- ical parties, which the public have no means of accurately measuring and of which even those who are subjected to it are not fully conscious. Without discussing further the various methods by which monopolies exert an influence over public opinion and over legislation, a good measure of the effectiveness of these methods is found in the magnitude of the exactions which they now levy upon the public, and which have so far been submitted to, not, perhaps, unresistingly, but without any approximation to that steadiness of resolution and effective- ness of resistance which the extent and audacity of the exac- tions ought to have aroused. It is the common belief, and the general judgment seems to be well within the mark, that taking railroads as a whole the $4,000,000,000, speaking in round numbers, of their out- standing bonds, cover more than all the real capital which has ever been put into them ; that the $4,000,000,000 of their shares are, as a whole, nothing but pure water ; and that all the dividends which have ever been paid upon these shares have been drawn from an excess of rates of charge for their services, beyond such as would have sufficed to pay fair and just income upon the acttial investment which has been made. The frequently-quoted saying of George Stephenson, the originator of steam railroads in Great Britain, that when "combination is possible competition is impossible," has had innumerable illustrations in this country. A few of the States have prohibited the consolidation of ownership between parallel and competing lines of railway. Such legislation has been frequently delayed until the mis- chief had already attained great proportions, and has been evaded in many ways. It can always be evaded by arrange- ments of one kind or another, which, without uniting roads in a common ownership, put their rates of fare and freights under a common control. The late Commodore Vanderbilt THE QUESTION OF THE HOUR. 275 commenced his career of railroad monopoly, by uniting the Harlem road, between New York and Albany, with the Hud- son River road, between the same points, thus rendering it possible to maintain a rate of fares and freights upon both roads which nearly double the market price of the Hudson Kiver shares and quadruple that of the Harlem shares, even after a large increase of the capital stock of both by the proc- ess of "watering." It would consume hours to give even a meagre outline of the railroad stock inflations in this country during the last twenty years. The present occasion admits of nothing more than a brief statement of a very few of them. The New York Financial Chronicle of May 16, 1869, printed tables showing in respect to twenty-eight railroads that during the twenty-two months ending May 1, 1869, their share capital had been swollen by watering from $287,000,000 to $400,000,000, and that in respect to nine of these roads their share capital during three years and ten months ending May 1, 1869, had been swollen by the same method from $84,000,000 to $208,000,000. In a little book entitled "Chap- ters on Erie," printed in 1871, being a collection of papers on railroad subjects from the pen of Charles Francis Adams, now President of the Union Pacific Railway, the following statements are made : First — That the stock of the Pittsburgh, Fort Wayne and Chicago road, then standing at the figures of S19,71i,000, less than 10 per cent, had been contributed in cash, and less than 20 per cent, in uncultivated lands, farms, and labor, and that more than 70 per cent, was therefore pure water and nothing else. Second — That the New York Central was organized in 1852 by a consolidation of eleven distinct companies owning local pieces of roads between Albany and Buffalo, with an aggregate share and bond capital of 123,235,600. In the consolidation the shares of the road selling cheapest in the market were rated at par, and premiums aggregating $8,894,.500 were allowed on the shares of the other ten roads, so that the share and bond capital of the consolidated road was carried up to $32,- 130,100. Between 1852 and 1868, when Commodore Vanderbilt came into the control, this had been on various pretexts carried up still higher to $40,000,000, of which three-fourths consisted of shares. Imme- diately upon assuming command of the Central, Vanderbilt, who was 276 THE QUESTION OP THE HOUB. not the man to do things by halves, declared a stock dividend of 80 per cent., thus creating about $24,000,000 of fictitious capital at a single blovjf. Third — That Vandorbilt's next step in 1870 vfas to consolidate the New York Central with the Hudson River road after a further watering of the Central 27 per cent, and of the Hudson River 85 per cent., thus making the grand aggregate of their stock §90,000,000, not including Harlem, which was held under a lease. Fourth — That as the result of the consolidation of 1870 with its attendant waterings, the New York Central and the Hudson River roads were capitalized, including shares and bonds, at $103,000,000, although their combined construction accounts (themselves doubtless more or less cooked) footed up only §50,000,000 in 1866 and $60,000,000 in 1870. Fifth — That of the capitalized valuation of 8122,000 per mile put on the Central and Hudson River roads when consolidated in 1870, at least S50,000 per mile was absolute water. On this condition of things in 1870, and it has since been made vrorse, the opinion of Mr. Adams, in his own words, was : It is probably safe to say that the Vanderbilt stock- watering be- tween Buffalo and New York annually cost the American people not less than 8^3,000,000 in excess of all remuneration whicl* can, under any claim of right, belong to the owners of the lines. Sixth — That in 1869 the Lake Shore & Michigan Southern Road be- tween Buffalo and Chicago was organized by various consolidations as a part of the Vanderbilt system with a share and bond capital of $57,000,- 000, increased down to 1871 to $62,000,000, of which at that date Mr. Adams says that "It is not denied that in the amount was included $20,000,000 of fictitious capital." The subsequent waterings have been still more enormous. As examples of first waterings the two following will suffice : The eighty-eight miles from Buffalo to Erie were covered by two roads whose aggregate share and bond capital was originally $2,800,000. These two roads were first joined together with a capitaliza- tion increased to 85,000,000, and then put into the final and grand con- solidation at a valuation of 812,000,000. The road of ninety -six miles from Erie to Cleveland, which, between 1802 and 1867, divided among its shareholders 120 per cent, in stock, 33 per cent, in bonds and 79 per cent, in cash, was put into the consolida- tion at $12,000,000, although it cost less than $5,000,000 to build it. Of the cost of the Central Pacific and of the off -shoot from it, known as the Southern Pacific, the public know ab- solutely nothing, as they were constructed and have been continuously managed and chiefly owned by a syndicate of THE QUESTION OF THE HOUE. 277 four men, wlio keep tlieir own counsels. Nobody alleges and nobody believes that the stock in the road represents any in- vestment whatever, and nobody doubts that the mortgages on the road, including that to the United States, produced more money than was put into its construction ; in addition to which the syndi^cate received cash subsidies from the State of California and from municipalities, and a princely land grant from the United States. The four men composing the syndicate are reported to be among the richest men in Amer- ica, and it is known that the whole of their vast wealth came from their connection with the Central Pacific road. In re- spect to the cost of the Union Pacific the country has got glimpses of the truth, mainly through some partial disclosures of the affairs of the Credit Mobilier, which built the road and divided all its stock, all the Government bonds loaned to it, all the money obtained by the mortgage which was allowed a priority to the claim of the United States, and the entire land grant with which the national munificence endowed it. Mr. Adams, who is now president of the road, said of the Credit Mobilier in 1871 : Who constituted the Credit Mobilier ? The members of it were in Congress. They were trustees for the bondholders ; they were direct- ors ; they were stockholders ; they were contractors. In Washington they voted the subsidies ; in New York they received them ; upon the plains they expended them, and in the Credit Mobilier they divided them. As stockholders they owned the road ; as mortgagees they had a lien upon it ; as directors they contracted for its construction, and as members of the Credit Mobilier they built it. What is the community to pay for it ? What the community has paid for the use of it during the first thirteen years of its existence, ending with 1883, will appear from the following aggregate results during that pe- riod of time, from Poor's Eailroad Manual : Gross earnings 8198,840,960 Net earnings 105,451,988 Annual interest paid 53^25,664 Net earnings above interests 51,088,938 Dividends on stock 26,850,663 Credited to income account 24,218,275 278 THE QUESTION OP THE HOUR. Twenty-six million eight hundred and fifty thousand six hundred and sixty-three dollars paid prior to 1883 as divi- dends on stock which represent no real investment whatever ; $24,218,275 carried to income account and the proceeds of land sold, together with the lands not yet sold. These are some of the elements from which may be calculated the profits of the controlling managers of the enterprise, and the burden of the contributions which it has levied upon the country. As to telegraph companies, it has been shown in respect to the Western Union that while its capital stock stands now at the enormous figure of $86,000,000, not more than one- sixteenth part of that sum was ever contributed by the share- holders of either the original company or of all the companies which it now controls by lease, or with which it has been in various ways consolidated. The total of such contributions was afiirmed in the sworn statement of one of the best experts upon such subjects in the country, Gardner G. Hubbard, after a thorough examination of the accounts, to have been "about $5,000,000, less probably than more," which was long ago reimbursed over and over again by dividends upon its inflated capital. Nevertheless it has not yet been found practicable to obtain legislation to prevent that company from levying a compulsory taxation upon the country which yields a fair rate of income upon a capital of $86,000,000 which is pure water, and the chance of perpetuating this taxation is con- sidered to be so good that this fictitious capital is actually salable at over $65,000,000. Annual net earnings of $6,000,- 000 or $7,000,000 upon an apparent capital of $86,000,000 do not seem to be anything more than highly remunerative, but annual net earnings of that amount upon real capital of not more than $5,000,000 are plainly outrageous. Nothing can show more forcibly the power of wealth to control legislation than the fact that the United States alone, of all the nations of the civilized world, has been unable to give its citizens an efficient telegraph service at cost. Inti- mately connected as it is with the postal service of the coun- THE QUESTION OF THE HOUE. 279 try; of vast importance as it is as a means of communication among the people and for the diffusion of intelligence, it is left in the hands, practically, of one man, whose guiding principle is greed and dishonesty, to say what 60,000,000 peo- ple shall pay for it. A good illustration of one of the meth- ods by which the people of this country have been so long deprived of the benefits of cheap telegraphy is found in a bill now pending in the Senate of the United States. Under this bill the telegraph service of the country would be placed under the supervision of the Inter-State Commerce Commis- sion. It was introduced by a railroad attorney, and will be supported by his brother attorneys, every one of whom knows that it will have no effect in reducing rates and will be un- productive of good in all respects. The people of this coun- try are entitled to and demand a Government telegraph. The supporters of this bill would make them believe that Congress is doing something for their relief, whereas the effect of such a law, if it has any effect at all, will be to perpetuate existing evils. The telegraphic communications of the country can never be relieved from the monstrous exactions by which the" peo- ple are now oppressed, and can never be conducted in a man- ner which will do justice to all classes and sections until they are made a part of the postal service. As a branch of the public administration, the aggregate charges for the work done would never exceed the actual cost, and the community would thus be relieved from the grievous burden and public scandal of being compelled to pay excessive rates in order to maintain dividends on the inflated and watered stocks of tele- graph companies, and notably of the Western Union. Fur- thermore, as a branch of the public administration, telegraph charges would be equalized or nearly so as between long and short distances, and as between cities and rural districts and the scattered settlements of the newer parts of the country. This equalization will be made upon the same principles of sound policy which are now applied to the postage of letters and newspapers. Telegraphing is to so large an extent an 280 THE QUESTION OF THE HOUE. inter-state business, that it is only the national authorities which can grapple with and overcome the existing difficulties and wrongs. The reform of it is one of the most urgent de- mands of the times. While it would be of special import- ance to the interior regions of the country, by equalizing rates, it would be fraught with beneficial results to all sec- tions, classes and persons. Great moneyed interests arp in opposition to it and will resist to the last extremity any interference with the fabulous gains which they are realizing from the existing system. They will spare no expenditure and no appliances of influ- ence to hold their present vantage ground of control and of power to tax the country substantially at discretion. To dis- lodge them from it will be no easy task, but it can be accom- plished if the people are resolute and persist in demanding a reform. The watering of railroad stocks and fictitious inflation of railroad issues are going on to-day on a scale in no degree lessened by the exposures which have been made of these detestable practices. Indeed, there are many things which look as if we have yet to create a healthy public opinion upon the subject, which shall be really effective to put an end to that complicity of men in public life with those practices which alone make them possible. The general facts in regard to the Manhattan company which leases and controls the Elevated railroads in New York city are well known. It is purely a paper company, never claiming to have a paid-up capital exceeding $100,000, which was absorbed in expenses of organization and principally in salaries. Without expending a single dollar in railroad con- struction the company issued $13,000,000 of shares of which two of the three Railroad Commissioners of the State of New York said, in 1883, that "this stock upon which it is claimed the public should pay dividends is pure water." The third Commissioner expressed himself in the follow- ing still more vigorous language : This fraudulent aggregation of stock is only a pyramid of water on a pedestal of transparent fraud. A healthy breeze of public sentiment THE QUESTION OP THE HOUE. 281 would dissipate it in the spray of a wat'er-fall, and an honest adminis- tration of law would send its architects to the State's prison. Unfortunately there has been no healthy breeze of public sentiment, and the architects of the frauds instead of being sent to the State's prison are quietly enjoying their ill-gotten gains, and what is of still more evil omen, a Governor of the State of New York, who assisted in making these gains by vetoing a bill reducing the fares on the elevated roads to 5 cents, was soon after carried into the Presidency by the aid of a large majority of the voters of New York city, notwith- standing his veto. Indeed, many careful observers believe that the support of the moneyed interests which he secured by that act more than counterbalanced the dissatisfaction which it created, and that his veto, instead of being an obsta- cle in the path to the high office he now holds, was really the determining cause of his nomination and election to it. It is most unfortunate that the action of the people can ever by any possibility be construed as teaching the lesson that pub- lic men have more to gain by supporting sharp practices and frauds of moneyed capital than by sustaining the just rights of the general community. In a contest recently carried on in the courts of New York city between quarreling factions in the syndicate which was trying to build the Southern Pennsylvania Railroad between Harrisburg and Pittsburgh, it was shown to have been the agreement of the syndicate to issue $20,000,000 of bonds and $20,000,000 of stock on a cash investment of $15,000,000. This is only the first watering, to be followed without doubt in due time by still more copious aqueous outpourings. The managers of the Southern Pennsylvania Eailroad have shown a praiseworthy degree of modesty and self-respect in comparison with the gentlemen who a short time ago cap- italized two miles of horse railroad in the lower part of Broadway, New York, which could not possibly have cost $50,000, at three and a half millions. The required equip- ment of cars and horses was doubtless large, and is alleged to have raised the total cost half a million.* Even if that 282 THE QUESTION OP THE HOUE. extreme claim is well founded the capitalization is seven times the real investment. It is likely to be doubled and trebled hereafter if the profits are as great as they promise to be. But if they amount to 100 per cent, annually on the actual investment, they cannot be reduced by legislation if the extraordinary principles of the veto by Mr. Cleveland of the 5-cent fare bill in respect to the elevated roads are finally sustained by public sentiment and by the courts. The feature of overcapitalization as a cover for profits, which would appear to be too unmistakably exorbitant if they were divided and declared upon the actual investment, is found in innumerable telephone, gas, water, and similar com- panies, which avail themselves of their positions as practical monopolies to levy extortionate rates for the services which they render to the public. In the street railroads of New York, including the elevated railroads, the watering of the stock is a distinguishing feature, and the exactions for which it furnishes a pretext and, to some extent, a mask, reach the figures of many million dollars annually. The tribute un- justly collected by these railroads is less noticed because it is taken in small sums and from a vast population, permanent and transient, but it is not on that account less profitable to those who receive it, or less burdensome to those who are compelled to pay it. If an accurate account could be made of all the contribu- tions annually levied upon the community in all parts of the United States through an excess of charges for services "affected with a public interest," which either the National or State Governments have a clear right to restrain, the aggregate would be found to surpass the highest estimate ever made of it. Abuses of this kind which transfer gigantic sums every year from the many to the few, and which have been per- mitted to flourish in this country upon so vast a scale, and with such an indolent acquiescence on the part of those who suffer from them, have never been practiced in Europe to anything like an equal extent. This fact of the easy submis- THE QUESTION OF THE HOUR. 283 sion of the intelligent and republican people of the United States to monopoly extortions, no approximation to which has ever been attempted in the monarchial countries of the transatlantic world, would seem at first sight to be a strange one. The probable explanation of it is, that the earnings of capital and labor, and the increase of wealth in this country are so vastly in excess of what they are in Europe that we are comparatively more indifferent to exactions which would be insupportable there, and to a degree which would actually make them impossible. The progress of our national pros- perity is so great that we are careless in respect to diversions from it for the unjust enrichment of individuals by side streams, large in themselves, but still not large enough to sensibly reduce the amplitude of its flow. The extent and resources of our new country, and the ingenuity, industry, and energy of our people create so vast a fund of annual production that considerable abstractions from it attract very little attention, and what is quite as important, the attention which has been drawn to them has thus far been merely occasional and spasmodic. It is far otherwise in Europe, where the total population is so great relatively to the total prodiiction by which it is sustained, that the annual surplus of production is barely sulScient to meet the public taxation required to sustain costly governments, great standing armies, and devouring national debts, so that little or no margin is left for the exactions of private monopolies. Even if inclined to permit the existence of such monopolies from a sympathy with the classes which profit by them, the rulers of Europe are compelled by the instinct of self-preservation to prevent their subjects from being so impoverished by individual and corporate extortions as to be disabled from contributing the public revenues essential to governmental necessities. In this country the growth of monopolies never made such rapid strides as at the present time. It is safely within the mark to say that within five years, more combinations have been made against the public interests than during the whole of our national existence. With no increase of progress in 284 THE QUESTION OF THE HOUR. that direction within a few years there will not be a single important article of daily consumption, a single necessary of life, that will not be controlled by a syndicate with unlimited power to advance prices to suit its own purposes. It requires no prophet or the son of a prophet to predict the results of such control. The rich will grow richer and the poor will grow poorer. The wealth of the country will be held by the few, and the mass of the people will have nothing but a con- tinuous struggle for existence. It will be a sad day for the Republic when workingmen must be satisfied with the bare necessities of life, without any of its comforts and decencies, with their children at labor instead of at school, with no aspirations for a better condition on account of the impossi- bility of ever reaching a better condition. How far organ- ized labor, while it yet has the intelligence to organize, will be the means of preventing or postponing such evils is yet an unsolved problem. The bitter warfare which the great monopolies of the country have waged against organized labor, is of itself proof that they dread its power. Not long since the manager of a great railroad company said that he would not talk with any man who represented a labor combi- nation. This same railroad company had for years been in combination with other railroad companies to keep up the rates of freight and travel, to keep down wages, and to per- petuate the system of unequal charges and oifensive discrim- ination. All that labor knows about the power of combination it learned from capital, and the results of some recent strikes show that it has yet much to learn. We have often been told that competition will regulate all these matters, but a long and thorough experience has proved that competition is a wholly inadequate protection against the excessive charges of railroad, telegraph, telephone and similar companies. The protection which it affords is never felt in the great mass of their business, but' is confined to competing points, and in many cases the advantages arising from it to the people at those few points, is less than the in- crease of the charges which they are forced to pay at non- THE QUESTION OF THE HOUR. 285 competing points. Competition between the great Atlantic cities and between some or all of those cities and Chicago has sometimes made telegraphing rates nearly or quite as low as they ought to be ; but by the way of indemnifying them- selves, the companies either raise their rates between other cities and places, or persist in maintaining them at the previ- ously-existing exorbitant figures. Among the great trunk lines of railroads having the same terminal points, competi- tion is from the nature of the case limited to these points, and not only does not reduce local rates, but tends to keep them up, and even to raise them. Furthermore, the compe- tition in these cases is never long lived. It is easy for the companies concerned to combine with each other, by leasing, consolidating, pooling, or other arrangements, and their per- manent policy must necessarily be to act in concert to get as much as possible out of the public. Their contracts with each other are always temporary, being always adjusted as soon as they can agree upon the terms of dividing what are common spoils of all of them. On a large view the final effect of competition in the form of constructing rival and parallel lines of telegraph and rail- road is generally to raise the rates rather than to reduce them. The competition is soon ended by the consolidation of the competing lines, by the purchasing or leasing of one or the other, or by some of the various methods by which such things are accomplished. The public is then obliged to pay on the same business the running expense and interest on capital of two lines instead of one. New lines of railroad and telegraph are often built for no other purpose than that of forcing old lines to buy them out or to take them through some other form of consolidation. Innumerable telegraph companies have been in this way swallowed up by the Western Union with the effect of compelling the public to pay the cost of uselessly-duplicated lines. The expe- rience in railroads has been the same, as in the conspicu- ous case of the Nickel Plate road, between Buffalo and Chi- cago, which was never pretended to have been built for any 286 THE QUESTION OF THE HOUE. other object tliaii that of forcing a sale of it at a profit to the Lake Shore road between the same points. In the case of the West Shore road, between New York city and Buffalo, the projectors may have hoped originally to run it as an in- dependent line, but at no time could they have failed to be influenced by the consideration that in all contingencies they had the power to sell it at some price to the New York Cen- tral. Lookers on have generally believed from the beginning that the pre-ordained destination of the property was into the arms of the Vanderbilts, who well know how to recoup the cost of it from the public. None of these cases of competi- tive new construction, which are almost always injurious to the public, would have occurred except for the extensive profits enjoyed by previously existing constructions, and in which new men naturally enough desired to share. They would have been effectually prevented if legislators had ex- ercised their rights and performed their duty by so regulat- ing the charges of existing constructions as to keep their profits within reasonable bounds. Discreet legislative regu- lation moderates profits by lessening the charges imposed upon the public. Competing constructions, on the other hand, while they reduce the profits and sometimes destroy them altogether, leave the burdens on the people undimin- ished and often increase them by dividing between two or more corporations business which could be more cheaply done by one. In some cases the difficulty of fully and properly regulat- ing by law the charges of individuals and companies for cer- tain services is so great that it is advisable to provide for the performance of such services by some branch or department of public authority. The most familiar example of that in this country is the quite-common practice of authorizing cities in their corporate capacity to erect and maintain works for the supply of the people with water, and to meet the cost by charges according to the amount consumed. There is but little doubt that in the future more and more of the service affected with a public interest will be made matters of public THE QUESTION OE THE HOUR. 287 administration. The tendency of things in recent years has been in that direction in the United States and to quite an equal degree in Europe. Turnpike roads constiructed by companies and maintained by tolls, -which they were author- ized to collect, were common in all parts of this country at the beginning of the present century. They are now much less known, it being generally recognized that the public communication by carriage roads should be maintained at the public charge. So, too, ordinary carriage bridges across rivers are more and more erected and kept up at the general expense, and the proportion of them held in private owner- ship and. supported by tolls is constantly becoming smaller. Certainly in one State — Massachusetts — the last toll-bridge ceased to exist some time ago. The contest which is now going on against monopolies in this country is sometimes described as a struggle of the laboring, industrial and non-property holding classes to free themselves from unjust exactions levied upon them by the wealthy. This is only a partial account of it and does not accurately describe either the classes which suffer from mo- nopolies or the classes which control and profit by them. The property as well as the labor of the country is burdened by monopolies. The owners of farms, of mines, and of facto- ries are obliged to pay to monopoly in enhanced rates of transportation and telegraphing, and in other ways a tax upon their capital, of which only a small part can be shifted off upon the laborers whom they employ. Much the greater part of the wealth of the nation consists of its real estate, including with land the various structures and improvements upon it. The valuation of the real estate of the United States exceeds that of all the personal property of every description. Nei- ther the real estate or that other large portion of the capital of the country which is invested in the machinery and appli- ances of productive enterprises is indebted to monopolies for any part of its income. On the contrary they are both of them burdened, victimized and robbed by monopolies. The wealth of the agricultural classes, of the capitalists, large and 288 THE QUESTION OF THE HOUR. small, who are engaged in the variciis branches of mining and manufacturing production, and of the holders of city and town property may be chargeable with a too selfish and exclu- sive attention to the conservation and enjoyment of their own rights, but cannot be fairly said to be specially aggressive upon the rights of others. Nobody, for example, has ever charged upon the richest family in New York city, the Astors, that the vast accumulation of their wealth, which has been going on for so many years, has been, in any way, filched from others by sharp practices. Nothing worse can be said of them than that the liberality of their public benefactions may not have been commensurate with the bountiful pro- portions of the share which has fallen to them of the general advancement of the wealth of the country since the begin- ning of this century. But while they have been innocent of encroachments upon others they have themselves, as the principal real estate owners of New York, been the chief suf- ferers by the retardation of the growth of that city which, great as it has been, would have been vastly greater if it had not been checked and hampered by the exaction of railroads, gas, and other monopolies. It is the Astors who have lost more than anybody else by the toll-gates which the Vander- bilts have maintained so long between New York and the West for the collection of dividends on the stock, which is nearly all water, of the New York Central road. It is the Astors who lost more than anybody else from the licensed exactions of an elevated road, between the lower and upper parts of New York city. Moneyed capital is the only form of projjerty which seems to have any natural tendency to become the ally and partner of monopolists. From the characteristics of that species of capital the owners of it can most easily escape the exactions, while they have peculiar opportunities to bargain for a share of the profits of monopoly. As a rule the contrivers of mo- nopolistic schemes are not those who were originally rich, but men with nimble wits who are more eager to organize wealth than scrupulous about the methods of its acquisition. THE QUESTION OP THE HOUB. 289 Moneyed capital is required to carry out their plans and it is to tlie owners of such capital that they go with offers of alli- ance and partnership and whose co-operation they must se- cure at the cost, if necessary, of conceding the "lion's share" of the expected spoils. From these and other causes, and especially because monopolies have long been considered the surest, shortest and easiest road to sudden and great fortunes, a very large part of the moneyed capital of the country is embarked in them, and the cases are exceptional in which the owners of such capital have not embarked some portion of it in them. While moneyed capital is only a small part of the total wealth of the country it possesses a formidable disproportion- ate power from the circumstances that its owners are concen- trated in a few localities, principally the large cities, that they have special facilities for acting in concert and combina- tion ; and that their influence is multiplied and intensified by the availability and mobility of what they possess. How ab- normally excessive the power of money capital is, as com- pared with that of other forms of capital, is shown by the considerable progress which has undoubtedly been made in the modern scheme of narrowing the money of the commer- cial world to one of the two precious metals. It is too plain that this would at one blow double the value of all money credits ; reduce by one-half the price of all tangible property, real and personal, and compel everybody who owes individual debts, or who, as a taxpayer, owes part of the public debt, to discharge himself at a cost of twice the property or twice the number of days' labor, which would previously have sufficed. The first impression in respect to a scheme like this, to sacri- fice such a large proportion of the labor and of the wealth of the world, in order to aggrandize the single and compara- tively small interest of money capital, would be that it could make no headway anywhere, and, least of all, in an intelligent and republican country. That the fact is otherwise, and that a scheme of such undisguised spoliation has long struggled and still hopefully struggles for success, is a striking proof of 290 THE QUESTION OF THE HOUR. the extraordinary power of money capital. It displays still greater power when it engages in the defence of monopolies in respect to which it is always possible to confuse the pub- lic judgment to some degree by sophistical appeals in favor of vested rights and of (so-called) innocent stockholders, and by figures artfully arrayed to prove that watered stock is a genuine investment, and that dividends have not adequately reimbursed actual outlay. The contest with the encroachments of monopoly which is now one of the most pressing duties of the country, is no holiday undertaking. It will not be finished in one year or in many years, and indeed it will never be fully ended. It is a law; of humanity that the body politic, like the physical body of men, is always exposed on every side to diseases, which must be ceaselessly guarded against by preventive measures or counteracted by appropriate remedies. Eternal vigilance is said to be the price of liberty, and it is the price also of all the blessings of men and nations. In this case we must begin at the foundation. As no stream can rise higher than its source, we have no right to expect in legislative bodies a greater average degree of virtue and public spirit than exists among -the people by whose suffrages they are created. The corruption of the American law-making power is largely due to the frequent spectacle of the long enjoyment of public favor by men who, while notoriously venal, are still able to retain popularity by the skillful manipulation of patronage, the purchased favor of newspapers and by all the arts known to politicians of deceiving and misleading the public mind. The character of American legislation will never attain a high standard until the people shall inflexibly discard those who betray the public interests, and shall also steadily up- hold honest legislators against the enmities and attacks which they may provoke by resisting the unjust and rapa- cious demands of monopolists.