SPEECH OF ELIHU ROOT AT DURLAND'S RIDING ACADEMY NEW YORK, OCTOBER 31, 1908 WASHINGTON : SUDWAKTH PIUWTINQ COMPANY 1906 SPEECH OF ELIHU ROOT AT DURLAND'S RIDING ACADEMY NEW YORK, OCTOBER 31, 1908 WASHINCITON : SUDWAKTIl I'RINTINC COMPANY 191 1.S Fellow Citizens: I wish to state some reasons which lead me to believe that Mr. Bryan's election to the Presidency would be followed by general and long continued business disaster; that the recov- ery, now in progress, from the panic of last year, would stop ; that production would be curtailed, many workmen thrown out of employment, wages lowered, the market for farm pro- ducts and manufactures reduced, and the income upon invest- ments of private individuals, of savings banks and insurance companies, of charitable and educational institutions, in a great measure cut off.; and that a long period of stagnation and distress would ensue, such as we experienced between 1893 and the election of Mr. McKinley, in 1896. Whatever may be the development of our industrial system in the future, no considerable productive enterprise goes on under the present system without the use of capital as well as labor. Sometimes in this combination capital gets more than its fair share of the profit and sometimes the capital is lost altogether, and then there is no profit and there are no more wages coming from the enterprise that has failed. Just as productive enter- prise stops when there is a strike because labor is not satis- fied with its wages, so productive enterprise stops when the owner of capital ceases to believe that he will get back his in- vestment with a profit. I believe that thoughtful men, gener- ally, realize that the effect of labor unions in securing fair and steady wages and just conditions for labor is beneficial to ' the whole community, the employer as well as the employed. It is equally clear that stability, certainty, and a natural, even development in law, administration and social conditions, are important for the Avelfare of the whole community, employed as well as employers, because these are necessary to enable investors to forecast the future and form a reasonable judg- ment as to whether if they put their money into productive enterprises they will make a profit or will lose what they put in. Threats of violent changes which make it impossible to form a judgment as to the future course of business, still more, threats of changes which present the probability of loss, check investment, and, therefore, check production immediately. The essential feature of all business depressions is loss of confidence in the future. Without confidence in the future the manufacturer is bound to reduce his purchases of raw materials and his output. Without confidence in the future the merchant is bound to reduce his stock to the lowest possible point. With- out confidence in the future, railroad and industrial securities cannot be sold, new construction, extensions and renewals nec- essary to keep pace with active business development cannot be made. All these mean men out of employment and wages reduced, and men out of employment and wages reduced mean a decrease of the purchasing power of the country, so that the products of the farm and the factory will not find ;i market, and their failure to find a market would necessarily lead to still further contraction and the continuance of the process until some great event like the resumi)tioii of specie [(ayiuents of 1879, or the election of ]\IcKinley in ISOG. happens to I'estore confidence. I cannot doubt that the election of jNIr. l>ryan would destroy the confidence necessary to the continuance of indus- trial and connnercial enterprises; and T think thai his election . would justly destroy confidence. Any change of government from the administration of a party whose principles and practical workings are well known and whose action it is practically easy to forecast, to a new set of men who belong to another party and whose course in office is a matter of conjecture, in itself tends to create doubt and hesitancy, and the possibility of such change always keeps many l)usiness enterprises in suspension before every Presiden- tial election. Tlie possibility of Mr. Bryan's election, however, involves much more than this ordinary doubt. We know that he is a politician of great skill, who. while real- ly a Populist in fact, as he was formerly by political affiliation, has secured control of the machinery of the Democratic party. He advocates a great variety of measures, which are grotes- quely inconsistent with the principles of Thomas Jefferson, which would result in the complete abandonment of the doc- trine that "That government governs best which governs least,"' and which would bring about an all powerful cen- tralized government in Washington completely destructive of State sovereignty. Yet the disciples of Jefferson follow him meekly and appear happy to eat out of his hand. He has taken the leadership of those elements of the Democratic party which wrecked the second administration of ]\lr. Cleveland, and many of Mr. Cleveland's friends and followers, made of less stern material than that man of strong convictions and high cour- age have attorned to the new leader. It appears probable, therefore, that if the Democratic party is put in power with ]\Ir. Bryan as President he will be able to try in actual adminis- tration and legislation the views which he has expressed. In the Democratic party there seems to be no opinion except Mr. Bryan's, and where he leads the party is sure to follow; what he wishes to have done the party is sure to undertake, if it comes into power. The suggestion has been made that a Republican Senate might stand as a bar to carrying out ^Ir. Bryan's ideas al- though he should be elected President. lu my judgment that is a delusion. Careful observation of the Senate leaves little doubt that if the people of the country were to give their approval to Mr. Bryan by electing him President and by sup- porting him with a Democratic House, a sufficient number of Senators elected as Republicans would yield to the pressure of the Bryan policies backed by the force of that popular en- dorsement, to give effect to almost any measure which he might propose. Mr. Bryan has publicly declared that he expects this, and I think his expectation would be justified. The substantial question before us, therefore, is what would be the effect upon the productive enterprise of the country to know that Mr. Bryan's views were; to be made effective by the entire force of the National Government. Let us seek an ans- wer to that question by recalling the views which he has ex- pressed. I need not spend time over ]\Ir. Bryan's devotion to the free coinage of silver. He has omitted that fiom his platform this year, because it no longer affords a popular issue in the face of the logic of events which has disproved every prophecy upon which he staked his reputation for political wisdom in his campaign of 1896. But he has not abjured it. In his speech at Albany in 1896, he said : ' ' The Democratic party has begun a war of extermi- nation against the gold standard. We ask no quarter; we give no quarter. We shall prosecute our warfare until there is not an American citizen who dares to ad- vocate the gold standard." At Knoxvillc. ^|HHHMHP<>ii the oth of October, ^ he said : "If there is anyone who believes that the gold stand- ard is a good thing, or that it must be maintained. I warn him not to east his vote for me because I promise him that it will not be maintained in this country longer than I am able to get rid of it." The business men of the country will not forget that under our laws it would still be possible if Mr. Bryan were President and a time of stringency were to come, to completely destroy the single gold standard by executive action and to bring on a trial of his favorite theory through the enact- ment of a law for the free coinage of silver. He has declared himself in favor of the initiative and refer- endum, and he has never abjured that, although he has omit- ted it from his platform because he has seen that the Ameri- can people shrank from destroying the system of representa- tive government under which they have grown so great and un- der which a larger measure of liberty and justice has been at- tained than under any other form of government the world has know. He has repeatedly and formally declared himself in favor of the Government ownership of railroads and he stands by that declaration. In his speech at the great reception given in New York upon his return from Europe in August, 1906. Mr. Bryan declared: ''I have reached the conclusion that there will be no permanent relief on the railroad question from the dis- crimination between individuals and between places and from extortion in rates until the railroads are the prop- erty of the Government and are operated by the Gov- ernment in the interest of the people." He has repeated that declaration many times and in many places. He refrains from pressing it now because it would not help to elect him, but he holds to it. He does not believe in the regulation of railroad rates or in the laws to prevent discrimination in rates. He believes those laws to be futile and sure to fail of effect. He would like to see the National Government become the owner of all the great railroads of the countrj^, and an executive offi- cer, under his direction as president, controlling their opera- tions with the enormous horde of Federal officers necessary for their administration, and with the tremendous power over every State that such a control would give to him, skilled politician as he is. He proposes in his latest platform a bank deposit guar- antee scheme under which all the National banks of the country shall guarantee the payment of the deposits of all the other National banks. We have in this country a system of perfectly safe and sound savings banks in which over eight million and a half of depositors have deposits amounting to about three billions and a half of dollars. These depositors are for the most part wage earners, clerks, thrifty persons of small means not en- gaged in business. For the use of such persons in parts of the countr}' where savings banks are not accessible the Re- publican party proposes to establish postal savings banks through which the Government will take charge of their sav- ings and keep them securely. Mr. Bryan's scheme does not touch this class of people or provide for the safety of this kind of deposit. It relates to the business banks, through which the business people of the country transact their busi- ness. A bank deposit is in effect a loan of money by the de- positor to the bank to be repaid at such time and in such amounts as the depositor indicates by drawing checks against the bank. We now have a free banking system under which any group of men who can raise $25,000 can start a bank and invite deposits ; that is, can ask people to lend them their money to be repaid in the Avay I have described. As matters 9 stand now, ordinarily no man undertaking to start a bank will get any deposits, that is to say, will get business people to lend him their money, unless he is known and has a good reputation in the community. Business people will not en- trust their money to unknown or unfavorably known adven- turers. As a result our banking is as a rule honest and con- servative and the losses by depositors are exceedingly small. If, however, Mr. Bryan's scheme were to be adopted any set of scoundrels who could raise $25,000 could start a bank and could borrow money on the credit of the entire banking capi- tal of the United States ; for the depositors would know that it made no difference to them whether the men who asked for their deposits were incompetent or reckless speculators, or dishonest rogues, because if their deposits were lost in specu- lation or stolen, nevertheless the other banks of the country would pay them. Furthermore, the business of banking is conducted under widely different conditions in different parts of the country. Bank money can be loaned at twelve per cent in Oklahoma; in New York, Boston and Philadel- phia four per cent is a good rate. Some bankers are content to get only four per cent with the good security that can al- ways be had with a low rate of interest, whi'e other bankers prefer to take the chance of a very high rate of interest to- gether with the risks that always accompany high rates of interest. Under Mr. Bryan's scheme the conservative, cau- tious, safe banker who is content with four per cent would have to bear the risks incurred by the twelve per cent banker, while the latter would take the twelve per cent profit, if all went well. Under Mr. Bryan's scheme the sound, conserva- tive bankers of the country would have no control whatever over the risks which would thus be imposed upon them. The burden of these risks would not be imposed upon the stock- holders of banks alone, but upon the great body of the de- 10 positors and borrowers from banks — tlie men who are en- gaged in conducting the legitimate business of the country ; for under the competition of our free banking system, the- margin of banking profit is ordinarily very narrow, and any burden imposed upon the banks comes ultimately out of the depositors in reduced interest paid to them for their deposits, and out of the business men w^ho borrow money from the banks in the increased rate charged against them for loans. Such a scheme as this is worse than would be a law to com- pel every merchant to endorse the notes of every other mer- chant for when notes are endorsed the amounts are known and the persons for whom they are endorsed are known. This scheme would require all the sound banks of the country and all the legitimate business transacted through them to endorse, out of sight and unseen, all the future obligations that may be contracted by an indefinite number of unknown persons. Mr. Bryan in his Lincoln speech of October 12th attacked Governor Hughes for vetoing the two-cent fare bill in the State of New York, and held up that veto as a reason why the Republican party should not be continued in power. He knew, as the whole country knows, that at the same time when Governor Hughes vetoed that bill he procured the passage by the Legislature of New York of a bill providing for a Public Service Commission charged with the dut}' of inquiring into the reasonableness of railroad rates what rates would enable the railroad companies to pay their ex- penses, maintain their roads and rolling stocks and still make a reasonable profit; and to regulate rates in accordance with the facts a.scertained ; and he knew tliat the ground of the veto of the two-cent fare bill was th;it the bill was passed by llic Legislature of New York witlioiit any iiuiuiry what- ever into such facts, but as a purely arbitrary act of power fixing the rate without any reference to the question whether 11 it would amount to confiscation of railroad property or not. Mr. Bryan's disapproval of Governor Hughes' course, there- fore, was an approval of a practice under which the people who travel upon the railroads of the United States shall fix their own fares by legislative enactment in accordance with what they wish to pay. without ascertaining or caring wheth- er the fare so paid will furnish a reasonable return to the railroad to enable it to pay its labor, buy its materials and return any profit whatever to the capital invested. ]\Ir. Bryan proposes in his latest platform that all articles entering into competition with trust controlled products shall be placed upon the free list. Examine this for a moment. The great evil of trusts lies in their driving out of business their smaller competitors, and af- ter these are driven out, putting up prices. The driving out of business is practically always done by unfair and oppressive means. Indeed, it can be done in no other way except in cases where the trust controls the whole raw material of manufac- ture, for wherever the raw material of manufacture can be ob- tained and competition has a fair chance, the moment prices are put up competition increases and the trust control de- creases. The Republican plan of dealing with trusts is to go after all the big concerns which are driving out competition by unfair practices, to compel them to stop and to punish them if they do not stop, so as to give the smaller competitors a fair chance. The whole railroad rebate system, for Avhich so many punishments have been inflicted within the last few years, is an illustration of one of the unfair methods by which big con- cerns have been driving smaller concerns out of business. The essential idea of this method of dealing with trusts is to give the little concern a fair chance against the big concern. Mr. Bryan 's plan is that as soon as it is discovered that some manufacturing concern has got what he calls control of some 12 article, the article shall be put on the free list, taking off all protection whatever and ruining both the trust and all its competitors at the same time ; for, as a general rule, American manufacture cannot pay American wages and compete in our markets with European manufacture, paying Euro- pean w^ages, without some protection. The necessary effect of such a proceeding would be to close the American manufactories, throw the American work- men out of employment and compel our people to make all their purchases of the particular articles concerned in Europe. This would not merely be ruinous to the competing American manufacturer as well as to the trust, but would be most disastrous in its effect upon mercantile trade. The pro- ducts of manufacture are distributed by our mercantile houses ; the wholesaler buys from the mill ; the retailer buys from the wholesaler and all over the country there are large stocks of goods kept at the points where they are available for the con- sumer. Under Mr. Bryan these merchants would be obliged continually to face the danger that the value of their stocks of goods might be suddenly greatly decreased by a decision of some officer somewhere that the articles which they have on their shelves are to be classed as trust controlled articles, and are to be put on the free list, and a flood of free foreign com- petition brought in to undersell them. Mr. Bryan's platfoi-m declares that as to all articles in which American manufacturers compete with foreign manu- factures the tariff must be reduced to a revenue basis ; that is to say, that no duty shall be imposed with a view of protecting American maiuifacture. Little attention is being paid to tliis subject in this campaign, but that is wliat "Sir. I^ryan proposes to do and will do if elected, and in electing him the American people would commit themselves to the abandonment of the policy of protection. 13 I shall not argue the question of protection and free trade here, but I suppose that the most earnest believers in the ulti- mate advantage of free trade would not dispute that the im- mediate effect of withdrawing- protection would be to close a great multitude of American manufactories, turn the work- men employed in them into the street and render the capital in- vested in them valueless. It is with that immediate effect upon the business of the country that I am dealing now. and that would be the effect of Mr. Bryan's election. Mr. Bryan's platform proposes that any manufacturing or trading corporation engaged in interstate commerce — and all the large ones are engaged in interstate commerce — shall be required to take out a Federal license before it shall be permit- ted to control as much as twenty-five per cent of the products in which it deals, and that these licenses shall require all the concerns which hold them to sell to all purchasers in all parts of the country on the same terms after making due allowance for cost of transportation. All the leading concerns making or dealing in any of the tens of thousands of particular kinds of articles made and sold in this country are to be subject to this .limitation. I will not dwell upon how the facts are to be determined for the purpose of enforcing such a provision. That must neces- sarily be by some Executive otficer in Washington, for mani- festly it would be impossible that the courts should perform such an enormous task relating to all the great business of the country. I will not dwell upon the tremendous centralization of power in Washington which would be involved in this ; but I point to the fact that such a proposal would destroy the right of private contract on the part of the great pro- ducers and merchants of the country, and would impose upon all business the same limitations which are properly im- posed upon common carriers in the performance of their public 14 dut.y of transportation, for Avhieh they have received franchises from the public. Under such a provision no great manufacturer or merchant could make prices to his customers to suit the conditions and requirements of his trade. No matter how important it might be for him to reduce his stock, no matter how great might be the necessity of making sales to raise money for the eontinijanee of his business, no matter how important it might be for him to keep his work- men employed he could not shave prices for the purpose of securing an advantageous contract below the prices at which he had sold to somebody else in some other State. Manifestly to enforce this, it would be necessary that mer- chants and manufacturers should file schedules of their prices and then be subject to prosecution if they sold at any different prices. There is no manufacturer or merchant who will not recognize the impossibility of conducting the business of the country under any such system. I have now given eight specific instances in which Mr. Bryan has become known to us as the advocate of measures which the plain, common sense of the business men of the country recog- nizes as measures inconsistent with the success of enterprise and the safety of investment. These specific measures are the free coinage of silver, initiative and referendum, the Government ownership of railroads, the enforced guarantee of bank depos- its, the arbitrary fixing of railroad rates Avithout inquiry into facts, the putting of trust controlled articles on the free list to the ruin of American competitors, the Avithdrawal of the protective element in the American tariff, the requirement of Federal licenses. Most of these are violations of those universal laws which control the development and progress of the busi- ness of the world, here and everywhere — not laws voluntarily adopted, but laws imposed by human natni-e. essential elements 15 in the great processes of production a-nd trade and not subject to the control of any government whatsoever. Now, I ask you to consider the effect upon the business of the country of putting in control at Washington a num who has the will and the power to do all these things. What manufacturer will have the confidence to risk money in the purchase of raw material and of machinery, and payment of wages for manufacture if a majority of the people put into power a party which believes in withdrawing all protection from manufactured articles and in putting all such articles as some executive officer in AVashington is moved to declare under trust control upon the free list, so that at any moment the product of manufacture may be subjected to un- restricted foreign competition? AVhat merchant will have confidence to risk money in the purchase of stocks of goods from foreign or from Amer- ican producers if some executive officer in Washington is liable at any moment to destroy their value by the removal of the duty under which they were purchased and has power to prevent their owner from selling them ac- cording to the needs of his business to such customers as he can find and at such prices as he can get 1 Who is to put money into the extension and equipment of railroads necessarj^ for the conduct of the business of the country if we put into power in Washington a party whose all-powerful leader in the President's chair proposes to take the property over into the hands of the Government at the Government's own valuation and is in favor of limiting the rates to be charged for its use by perfectly arbitrary legisla- tion adopted without any regard whatever to the cost of transacting the business or to the rates necessary to produce a profit? Who is to have confidence to put his money into the bank- 16 ing business when it is to be subject not merely to the risks involved in the judgment and integrity of the men whom he selects to manage it, but to be made a guaranty for the credit of all the unknown men Avho may find it useful for their schemes of speculation or dishonesty to go through the forms of taking out a charter under the free banking system? What confidence would there be in any business under a Government with the will and the power to destroy the gold standard and inaugurate the free coinage of silver, and threatening the destruction of our old and well-considered methods of representative legislation by the adoption of the unknown and untried system of the initiative and referendum? Nor are these specific proposals in themselves the only causes for the destruction of confidence which would be found in the election of ]\Ir. Bryan. The character and qual- ity of the man indicated by them is such that no one can tell what new patent remedy he may seize upon at any time to meet the political exigencies of the moment, or do away with conditions which cause dissatisfaction among any part of his followers. Unacquainted with the difficulties of administra- tion and unfamiliar with the complicated forces that move the tremendous machinery of our vast industrial life the habit of his mind is to seek cheap and easy remedies to cure deep-seated tendencies which require patience, tlie consider- ate wisdom of men who know the subject with which they are dealing, firm and persistent administration and popular in- struction and education. His tendency is to believe his own advertisements and to kill his patient with (|uack remedies. The busiiu'ss woi'ld disti'usts ;i man of t li;it tcuqxn-anient and justly distrusts him, for he can do infinite harm. The news of his election would bring douht and distr-ust to the mind of every man having money 1o invest in American enterprises. It wouhl ]>r('vcn1 all new enterprise. It would reduce the 17 activity of all existing enterprises. Lack of confidence, con- traction, business depression, business failures, the stopping of interest and dividends, reduction in the expense of salaries and wages, more and still more workmen out of employment, reduced purchasing power of the people and a reduced market for farm, and factory products — all these in necessary suc- cession would be the inevitable result of endowing this danger- ous ai)ostle of half truths, with the tremendous power of the National Government to rule and to ruin. But the courts ! Woiild not the courts set a limit upon Mr. Bryan's interfer- ence with the conduct of business? Cannot the business men of the country rely upon the courts to protect them in their Constitutional rights ? To that I answer, first, that very little capital will be inves- ted upon the understanding that it will be lost unless the in- vestor defeats the National Government in litigation. Invest- ments already made may seek to protect themselves by litiga- tion, but investments not yet made will never be made at all on those terms. I answer in the second place, that the possibility, indeed, the probability of INIr. Bryan's control of the courts presents the most serious danger which would follow his election. He has already given us evidence by his public utterances that he would, if he could, re-constitute the courts in such a way that they should answer to the demands of what he deems to be pub- lic opinion. If elected President he will have an opportimity to re-constitute the Supreme Court of the United States, which stands as the great and indispensable bulwark of Constitu- tional right. When the next President is inaugurated four of the present Justices of the Supreme Court will have passed the age of retirement. One will be seventy-six, a second seventy- five, a third seventy-one and a fourth seventy years of age. 18 Before the next Presidential term is finished a fifth will lack a few days of being seventy-two and a sixth will be in his sev- entieth year. It is practically certain that the President elec- ted in November will have the appointment of a large propor- tion of the members of the Court to fill the vacancies which will occur, and it is highly probable that he will have the appoint- ment of a majority of the members of the Court. What pro-' tection would Constitutional rights have from the Court consti- tuted by Mr. Bryan ? I call as a witness upon this question Mr. Samuel Gompers. On the 12th of this month he published an open letter, ad- dressed to "Men of Labor, Lovers of Human Liberty," in which he said : "The facts are that the Judiciary, induced by cor- porations and trusts and protected by the Republican party is, step by step, destroying government by laws and substituting therefor a government b}^ Judges, who determine what, in their opinion, is wrong; what, in their opinion, is evidence ; who, in their opinion, is guilty, and what, in their opinion, the punishment shall be. It is sought to make of the judges irresponsible des- pots, and by controlling them, using this despotism in the interest of corporate power." The letter then described an unsuccessful appeal to the Re- pabliean party, and proceeded to say : "Labor's representatives then went to the Democratic party. That party made labor's contention its own. It pledged its candidates for every office to those reme- dies which labor had already submitted to Congress. The standard bearer of the Democratic party, Mr. AVil- liam J. Bryan, entered fully into the essence of this struggle and declared that tlie real issue in this cam- paign is: 'Shall the people rule?' "The Republican party and its candidate stands for 19 upholding and further extending into our country a despotic government vested in the judiciary. "The Democratic party and its candidate stands for government by law vested in the people." Mr. Gompers is Mr. Bryan's chief ally in this campaign. The circular was issued in Mr. Bryan's interest for the pur- pose of attracting to him the labor vote. Unless it is denied, and it has not been denied, this is to be taken as an authentic statement of ]\[r. Bryan 's attitude towards the courts. The particular occasion of these declarations was the re- fusal of Congress to pass a bill which withdrew from the courts the right to restrain by injunction any boycott, wheth- er secondary or otherwise, however arbitrary, destructive aud unjustifiable it might be, by means of a provision limit- ing injunctions to the protection of propertj^ rights, and en- acting that : "No right to carry on business of any particular kind, or at any particular place, or at all, shall be construed, held, considered or treated as prop- erty, or as constituting a property right." It is too plain for argument and is the law that the manu- facturer's right to use his machinery, the merchant's right to sell his goods, every man's right to use his property and carry on his business is a property right which constitutes the chief value of property, and that the legislation thus demanded, to withdraw this right of property from the pro- tection of the laws would be class legislation of the most dan- gerous and offensive character. To this, according to Mr. Grompers, Mr. Bryan and the Democratic party have assented. But the declarations of the circular go beyond the occa- sion which calls them forth, and set forth the true attitude of Mr. Brvan and his democracy toward the courts. In their • 20 view it is not the Constitution as interpreted by the courts ; it is not the rules of law and the existing statutes as inter- preted by the courts ; but it is the will of the people at the moment, expressed in some other way than through the courts, which is to govern ; and for the courts to render their decisions and issue and enforce their decrees in accordance with their opinion as to what the provisions of the Constitu- tion and the laws are, is despotism, unless that opinion agrees with the present wish of what Mr. Bryan and Mr. Gompers choose to call the people, as interpreted by them. This means the destruction of our judicial system. It means a subservient Venezuelan judiciary in place of an inde- pendent American judiciary. It means the sweeping away of all the protection that American Constitutions have thrown about the rights of property, the fruits of enterprise and the liberty of the individual. It means that if Mr. Bryan has the opportunity to reconstitute the Supreme Court he will make it the instrument of its own destruction and an accomplice in the surrender of that great judicial safeguard against the momentary influences of popular excitement, which has been the chief element in the security, the stability, and the progress of the American Republic. What confidence will the business men of America have in venturing their capital in the risks of production and trade with the shadow of this great calamity looming large on the horizon of the Nation's future under the control of Mr. Bryan and a Democratic Congress. LIBRARY OF CONGRESS 013 982 436 2