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THE ANNALS
AMERICAN ACADEMY
POLITICAL AND SOCIAL SCIENCE
ISSUED BI-MONTHLY
VOL. XXIV
JULY 1904— DECEMBER 1904
Editor: EMORY R. JOHNSON
associate editors: SAMUEL McCUNE LINDSAY, JAMES T. YOUNG
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PHILADELPHIA
American Academy of Political and Social Science
1904
Copyright, 1904, by the American Academy of Political and Social Science
All rights reserved
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CONTENTS
PRINCIPAL PAPERS
PAGE
Anderson, L. A. Insurance Investments 431
Beck, James M. The Federal Power over Trusts 87
Betts, Walter C. The True Basis of Fire Insurance 463
Byall, J. Bruce. The American System of Improving and
Administering Commercial Facilities 489
Claghorn, Kate Holladay. Immigration in its Relation to
Pauperism 185
Clark, E. E. Arbitration of Industrial Disputes 285
Cleveland, F. A. The Financial Report of National Banks
as a Means of Public Control 43
Cortelyou, George Bruce. Some Agencies for the Extension
of Our Domestic and Foreign Trade 1
FousE, L. G. State Regulation of Insurance 67
Garner, James Wilpord. The Northern Securities Case 123
Hall, PrESCOTT F. Selection of Immigration 167
HuEbnEr, Solomon. Relation of the Government in Germany
to the Promotion of Commerce 525
Kjlburn, Frederick D. Control and Supervision of Trust
Companies 27
Landis, Abb. Life Insurance by Fraternal Orders 475
Lewis, Charlton T. The Scope and Limits of Congressional
Legislation against the Trusts 111
Macarthur, W. Political Action and Trade Unionism 316
Norton, Eliot. The Diffusion of Immigration 159
Oviatt, F. C. Fire Insurance, Expenses, Profits, Problems .... 446
Parsons, Frank. Australasian Methods of Dealing with Immi-
gration 207
Patten, Simon N. The Present Problems in the Economic
Interpretation of History 540
RidgEly, William Barret. Government Control of Banks
and Trust Companies 15
Rubinow, I. M. Compulsory State Insurance of Workingmen . . 331
(iii)
iv Contents
PAGE
Sammis I Walter. The Relation of Trust Companies to
Industrial Combinations, as Illustrated by the United
States Shipbuilding Company , 239
Sargent, Frank P. Problems of Immigration • 151
Smith, I. Russell. The British System of Improving and
Administering Ports and Terminal Facilities 507
TrENOR, John I. D. Proposals Affecting Immigration 221
Walling, William English. The New Unionism— The Prob-
lem of the Unskilled Worker 296
VudELSON, Sophie. Woman's Place in Industry and Labor
( )r£anizations 343
COMMUNICATIONS
Adlbr, Herbert M. Police System of London 556
Conway, Thomas, Jr. Street Railways in Philadelphia since 1900 354
Parsons, Frank. Public Ownership and Low Rates 361
BOOK DEPARTMENT
Conducted by Frederick A. Cleveland and James W. Garner
REVIEWS
Andrews, E. B. The United States in Our Own Times.— /. W. Garner 378
Bolen, G.L. Getting a Living: The Problem of Wealth and Poverty — H.
A. Millis 379
Ferrero, Guglielmo. Militarism. — W. R. Shepherd 380
deForest, R. W. and Lawrence Veiller, Ed. by. Tenement House
Problems— W. H. Allen 381
Freind, Ernst. The Police Power. Public Power and Constitutional
Rights.— J. W. Garner 570
Hamilton, Angus. Korea. — /. R. Smith 572
Hanotaux, Gabriel. Contemporary France. J.W.Thompson 382
Contents
PAGE
Hoar, G. F. Autobiography of Seventy Years. — /. W. Garner 384
Howard, G. E. A History of Matrimonial Institutions. 3 Vols. — Carl
Kelsey 572
Lavisse, E. Histoire f de France, Vol. v, Part 1 ; Vol. v, 2, par H. Lemon-
nier. — D C. Munro 385
Lomas, S. C, Ed. by. Letters and Speeches of Oliver Cromwell, with Eluci-
dations by Thomas Carlyle. — W. E. Lingelbach 574
Montague, G. H. Trusts of To-day. — E. R. Johnson 387
Moody, John. The Truth About the Trusts.— E. R. Johnson 387
RowE, L. S. The United States and Porto Rico.—/. H. Hollander 575
Seager, H. R. Introduction to Economics. — R. C. McCrea 390
Skrine, F. H. The Expansion of Russia.— C. A. Beard 391
Warne, F. J. The Slav Invasion and the Mine Workers: A Study in Immi-
gration.— E. S. Meade 576
Washington, B. T. Working with the Hands.— Carl Kelsey 579
notes
Austin, O. P. Steps in the Expansion of our Territory 364
Bain, Alexander. Dissertations on Leading Philosophical Topics 560
Beard, C. A. The Office of the Justice of the Peace in England: Its Origin
and Development 560
BuELL, A. C. William Penn 560
BylES, J. B. Sophisms of Free Trade and Popular Political Economy
Examined 364
Cambon, Jules. France and the United States: Essays and Addresses 561
Conigliani, C. A. Saggi di Economia politica e di Scienza delle Finanze. . . 561
de Coubertin, Pierre. La Chronique de France 561
Crandall, S. B. Treaties: Their Making and Enforcement 562
Crooker, J. H. Religious Freedom in American Education 364
Davitt, Michael. Within the Pale 562
Duguid, Charles. The Stock Exchange 365
Egner, Hermann and Karl Schuemacher. Brennende Agrar-, Zoll-, und
Handelsfragen 365
Ellwood, C. A. Public Relief and Private Charity in England 365
Elson, H. W. History of the United States of America 562
Engel, August. Die Westfaelische Gemeinde Eversberg 367
Ensor, R. C. K. Modern Socialism 563
Evans-Gordon, W. The Alien Immigrant 563
Fleming, W. L., Ed. by. West Virginia University Documents Relating to
Reconstruction 564
Flower, B. O. How England Averted a Revolution by Force 366
Ford, G. S. Hanover and Prussia 366
Foulke, W. D. Slav or Saxon 564
vi Contents
PAGE
FriBdrich, Arthur. Schlesien's Industrie unter dem Einflusse der Capri-
vi'schen HandeUpolitik, 1889-1900 • • • • 367
Hadley, A. T. The Relations between Freedom and Responsibility in the
Evolution of Democratic Government 368
Halsey and Dale. Metric Fallacy 564
Hammond, B. E. Outlines of Comparative Politics • 368
Hammond, J. L. LeB. Charles James Fox: A Political Study 368
H.itult*><>k on the Prevention of Tuberculosis 565
Haskins, C. W. Business Education and Accountancy 369
Haywood, M. DbL. Governor William Tryon and his Administration in
the Province of North Carolina, 1765-1771 565
Hitchcock, Ripley. The Louisiana Purchase and the Exploration, Early
History of the West 370
Joergbns, Max. Finanzelle Trustgesellschaften 367
Johnson, W. F. A Century of Expansion 565
Joly, Henri. L'Enfance Coupable 566
Jonas, Stephan. Handelspolitische Interessen der deutschen Ostseestaedte
1 v>0-1900 367
Ladoff, Isador. American Pauperism and the Abolition of Poverty 566
dbLannoy, Fl. Les Origines Diplomatiques de l'Independance Beige 370
Lansing, Robert and Jones, G. M. The Government and the Civil Institu-
tions in New York State 566
Lefevre, Andre. Germains et Slaves 370
Lewis, R. E. The Educational Conquest in the Far East 371
Luckey, G. W. A. The Professional Training of Secondary Teachers in
the United States 372
Murphy, E. G. The Present South 567
Myers, P. V. N. The Middle Ages 372
Palmer, F. H. E. Austro-Hungarian Life in Town and Country 373
Pblloutier, Fernand. Histoire des Bourses du Travail 373
Raper, C. L. North Carolina: A Study in English Colonial Government. . . 374
Richard, Gaston. Manuel de Morale et Notions de Sociologie 567
Riley, F. L., Ed. by. Publications of the Mississippi Historical Society.
Vol. vii 374
Scherger, G. L. Evolution of Modern Liberty 374
von Schierbrand, Wolf. America, Asia and the Pacific 568
Schouler, James. Eighty Years of Union 375
de Seilhac, Leon. Syndicats ouvriers, Federations, Bourses du Travail. . . 375
Shaler, N. S. The Citizen 568
Shambaugh, B. F., Ed. by. The Messages and Proclamations of the Gover-
nors of Iowa 5g9
Smith, J. H. Arnold's March from Cambridge to Quebec 375
Smith, W. R. South Carolina as a Royal Province 376
Strong, Josiah, Ed. by. Social Progress 569
Talbot, Edith A. Samuel Chapman Armstrong, A Biographical Study 569
Contents vii
PAGE
Thomas, D. Y. History of Military Government in Newly Acquired Terri-
tory of the United States 569
Thwaites, R. G., Ed. by. Hennepin's A New Discovery in America 377
VandervELDE, E. Die Entwickelung zum Socialismus 570
Vogelstein, Theodor. Die Industrie der Rheinprovinz, 1888-1900 367
Webb, Sidney and Beatrice. The History of Liquor Licensing in England,
Principally from 1700 to 1830 378
NOTES
I. MUNICIPAL GOVERNMENT
Conducted by L. S. Rowe
Boston. — Percentage of Voters 406
Buffalo. — Police Administration 583
California. — Home Rule Charters 400
Chicago. — Police Administration 581
Cincinnati 584
Cleveland 582
Colorado Springs. — The Liquor Question 408
District of Columbia. — Report of the Commissioners 409
Denver. — Home Rule for Cities 395
Duluth. — "Home Rule" Charters in Minnesota 398
Duluth. — Police Administration 591
Grand Rapids 590
Kansas City, Mo 588
Milwaukee 587
Missouri. — Home Rule for Cities 396
Pennsylvania Report of the Executive Committee of the Civil Service Reform
Association 410
Paris. — Prostitution 411
Pittsburgh. — Police Administration 585
San Francisco. — Charter 402
Civil Service 403
Bond Issue 405
Seattle. — Police Administration 591
Washington, D. C 587
Washington. — Home Rule for Cities 397
Wisconsin and Milwaukee. — The Liquor Question 407
II. PHILANTHROPY, CHARITIES AND SOCIAL PROBLEMS
Conducted by Mrs. Emily E. Williamson
Board of Education of the City of New York, Committee on Lectures and
Libraries of the 602
British Inter-Department Committee of Physical Deterioration, Report of . . . 593
viii Contents
PAGE
Free Coffee and Sandwich Distribution in a New York Mission, Observations
602
on
Jewish Chautauqua Association 421
National Conference of Charities and Correction, 31st Annual Session of the . . 414
New York Fiscal Supervisor of State Charities 414
Oregon State Conference of Charities and Corrections, Report of the 413
Poor Relief in Indiana 412
Social Service, Training for 412
Women's Organizations 419
III. NOTES ON COLONIES AND DEPENDENCIES
Conducted by James T. Young
Filipino Students in the United States 425
Friar Lands, Disposition of 428
Hawaiian Finances 424
Philippine Forests and Forest Reserves 430
Philippine "Official Gazette" 429
Trade in the Philippines 427
How Yellow Fever may be Introduced into the Philippines 426
THE ANNALS
AMERICAN ACADEMY
POLITICAL AND SOCIAL SCIENCE
ISSUED BI-MONTHLY
VOL. XXIV, No. i
JULY 1904
The Government in its Relation to Industry
SPECIAL ANNUAL MEETING NUMBER
PHILADELPHIA
American Academy of Political and Social Science
1904
Copyright, 1904, by the American Academy of Political and Social Science
All rights reserved.
CONTENTS
PART I
THE ANNUAL ADDRESS
PAGE
SOME AGENCIES FOR THE EXTENSION OF OUR DOMESTIC
AND FOREIGN TRADE i
Hon. George Bruce Cortelyou, Secretary of Commerce and Labor,
Washington, D. C.
PART II
THE GOVERNMENT REGULATION OF BANKS AND
TRUST COMPANIES
GOVERNMENT CONTROL OF BANKS AND TRUST COMPANIES. . 15
Hon. William Barret Ridgely, Comptroller of the Currency,
Washington, D. C.
CONTROL AND SUPERVISION OF TRUST COMPANIES 27
Hon. Frederick D. Kilburn, State Superintendent of Banks,
Albany, N. Y.
THE FINANCIAL REPORTS OF NATIONAL BANKS AS A MEANS
OF PUBLIC CONTROL 43
Professor F. A. Cleveland, New York University
STATE REGULATION OF INSURANCE 67
L. G. Fouse, Esq., President of the Fidelity Mutual Life Insurance
Company, Philadelphia
THE RELATION OF TRUST COMPANIES TO INDUSTRIAL COM-
BINATIONS, AS ILLUSTRATED BY THE UNITED STATES
SHIPBUILDING COMPANY 239
L. Walter Sammis, Esq., Associate Editor, New York Sun
iii
|V Contents
PART III
THE SCOPE AND LIMITS OF FEDERAL ANTI-
TRUST LEGISLATION
PAGE
THE FEDERAL POWER OVER TRUSTS 87
Hon. James M. Beck, late Assistant Attorney-General of the
United States
THE SCOPE AND LIMITS OF CONGRESSIONAL LEGISLATION
AGAINST THE TRUSTS 1 1 1
Charlton T. Lewis, LL.D.
THE NORTHERN SECURITIES CASE 123
James Wilford Gamer, Ph.D., University of Pennsylvania
PART IV
THE IMMIGRATION PROBLEM
PROBLEMS OF IMMIGRATION ,5I
Hon. Frank P. Sargent, United States Commissioner of Immigra-
tion, Washington, D. C.
THE DIFFUSION OF IMMIGRATION i59
Eliot Norton, Esq., New York City
SELECTION OF IMMIGRATION l6?
Prescott F. Hall, Secretary Immigration Restriction League,
Boston, Mass.
Contents
IMMIGRATION IN ITS RELATION TO PAUPERISM 185
Kate Holladay Claghorn, Tenement House Department, New
York City
AUSTRALASIAN METHODS OF DEALING WITH IMMIGRATION. . 207
Professor Frank Parsons, Boston, Mass.
PROPOSALS AFFECTING IMMIGRATION .'. 221
John J. D. Trenor, Chairman of the Committee on Immigration,
Appointed by the National Board of Trade for 1904, New York
PART V
PROCEEDINGS OF ANNUAL MEETING 271
I. The Annual Address
Some Agencies for the Extension of our
Domestic and Foreign Trade
By Honorable George Bruce Cortelyou, Secretary of Commerce
and Labor, Washington, D. C.
(vii)
SOME AGENCIES FOR THE EXTENSION OF OUR DOMESTIC
AND FOREIGN TRADE
By Honorable George Bruce Cortelyou
Secretary of Commerce and Labor, Washington, D. C.
Mr. Chairman, Ladies, and Gentlemen :
I am particularly fortunate in having the privilege of meeting
you this evening, for, in addition to the pleasure of seeing so many
old friends, it is an interesting and gratifying experience for a speaker
to address a gathering peculiarly concerned with the subject he has
to discuss.
Your organization has had a rapid and healthful growth since
its foundation in 1889. I am glad it is international in its scope and
that its influence for good has been so marked. As announced when
it was organized, the desire was to establish an association which,
"renouncing all attempts at propaganda and demanding no con-
fession of faith, should yet aim to keep its members in close touch
with the practical social questions of the time. " You are living up to
this standard; you are doing something worth while in the life of the
nation, and that should be a source of pride and congratulation to
any association.
I greatly appreciate your kindness and consideration in arranging
for me to meet not only the members of this Academy, but the mem-
bers of the Manufacturers' Club, honored so long and so justly among
the great organizations of its kind, and I am glad also to meet the
representatives of the University of Pennsylvania, the foundation
of which "was laid in colonial days, nearly fifty years before Penn-
sylvania became a State."
Philadelphia has many claims upon those of us who are trying
to contribute to a better understanding of commercial and industrial
conditions. As the metropolis of a manufacturing Commonwealth,
as the seat of one of the great universities of the country and other
institutions of learning having a deservedly high standing in their
respective classes, as the home of influential organizations such as
yours, and as the abiding place of many who represent the best ten-
. (1)
The Annals of the American Academy
dcncies of our citizenship, it is peculiarly a city in which it is oppor-
tune- to dwell at some length upon problems before the country and
the steps believed to be necessary for their solution.
I have been in Philadelphia many times. I have had occasion,
in connection with various Presidential trips, to note the tact and
courtesv and hospitality with which your citizens arrange for such
gatherings as this and for the services or exercises incident to your
public meetings. You will pardon me for the personal allusion if I
sav that in a number of instances when visiting other places under
such auspices I felt it necessary to take charge of the committees;
whenever I came here your committees took charge of me I con-
clude, therefore, that to-night I am in your hands, and that while
von mav differ with some of my statements and conclusions, you will
bear with me patiently, and will receive in the generous spirit so
characteristic of your people such suggestions as may seem warranted
regarding the topic upon which I shall speak.
Many of you recall the visit of President McKinley to attend the
opening of the Philadelphia Commercial Museum. He believed in
such agencies for the promotion of our commerce. Some day the newr
Department of Commerce and Labor may find it advisable to have
closer relations with these museums, and I should be glad to see
some practical steps taken to that end. Doctor Wilson, the able
head of the Museum, and those associated with its development,
deserve the thanks of this community and the recognition I am sure
they will receive from the business men of the country for what they
have contributed to the fund of our information upon commercial
topics.
There has never been a time in the history of this country when
so much interest was taken in commercial and industrial conditions
as at present. With the expansion of our territory has come the ex-
pansion of our trade. We believe that the necessary expansion of
territory has been attended by no sacrifice of the principles upon which
the Government was founded and with no menace to our future wel-
fare. The same must be made true of the expansion of our trade.
The founders of the Republic builded wisely, and however great may
be tin development on commercial and industrial lines, there should
be no deviation from the great fundamental principles, adherence
to which has been the safeguard of our institutions. Some time ago,
Extension of our Domestic and Foreign Trade 3
upon an occasion similar to this, I referred to what is termed the
"commercialism" of the age in which we live. Let me recall what
I then said :
"In these prosperous times we hear much of the term 'commer-
cialism. ' It is frequently referred to as though in itself it represented
a misguided national spirit or a tendency of our people to lower their
standards. There is, undoubtedly, a commercialism that would
dwarf the national life; that would place business success above
business honor ; that would contemplate the profits of trade without
the ethics of trade; and that, if followed to a large extent, would
make the American name a shame and a reproach among the nations.
But there is another commercialism that is founded upon the tradi-
tions of the fathers ; that seeks to secure the markets of the world by
the American traits of thrift and fair dealing ; that weaves into every
fabric, as a prime essential, a moral fibre; that combines the fine
qualities which have made the names of our really great merchant
princes and leaders in the business world synonyms of honor and in-
tegrity. That is the commercialism with which you and I wish to
ally ourselves, for the nation that is devoid of that spirit to-day sits
supinely while her competitors pass on to the goal of commercial
and industrial supremacy. Let us dedicate ourselves, not to the
warped and sordid and altogether false commercialism that would
gain success at all hazards, but rather to the true commercialism that
is worthy of our best American ideals.
"It is so easy to start a word or a phrase on its rounds, that is
later to be taken up, written about, and preached about ; and it seems
to me this is as good a time as any to place ourselves on record on
the right side of this proposition and have the eminent gentlemen who
are such ready critics and prolific controversialists understand that
there can be a commercial spirit in a great nation so fine and so true
that it becomes a support for the best tendencies and best possibili-
ties of the national character; and that we do not intend that this
spirit shall be misrepresented by any sweeping generalization or by
a failure to recognize the fact that among the greatest of the forces
that have made this Republic what it is to-day are the men of com-
merce and industry."
My remarks this evening contemplate this true commercial
spirit as an essential basis for a consideration of agencies for the ex-
The Annals oj the American Academy
4
tension of our domestic and foreign trade. Upon that foundation,
what are some of these agencies? .
First there must be the initiative and energy of the individual
merchant; and cooperating with the individual merchant must be
his employee, for the initiative and the energy of the one must ^be
supplemented by the faithful service and devotion of the other.
('Anting this we find ourselves at the very outset confronted with
the great question of the relations of what are called capital and
labor Elsewhere I have discussed this question at some length. I
shall not delay vou with any remarks upon it further than to say that
the relations maintained between the employers and employees in our
business life have an intimate bearing upon the whole subject of the
extension of our influence on commercial lines. Labor and capital
must work together, must reason together, must be tolerant and open-
minded if they are to achieve the goal of their mutual desires. Men
naturally differ among themselves in their opinions on this subject,
but very often their differences are found to show but slight diver-
gence from a common ground. The man who seeks to accentuate
these differences for political or personal advantage will ultimately
receive the condemnation his mischievous teachings deserve. The
demagogue is always with us. For some months in the immediate
future we may expect to hear much from him. Whether in the ranks
of capital or labor, whether in one political party or another, he is an
impediment to progress and a menace to free institutions. In spite
of him and in the interest of good government, the problems that are
essentially nonpartisan must be sacredly kept so. Not that we
should minimize the dangers along our pathway, not that we should
abridge the freedom of speech or of the press in the discussion of
wrongs that must be righted or of evils that must be eradicated, but
running through the whole discussion must be a spirit of fair play
and common decency. It is not necessary that one should be a
pessimist to recognize the evil tendencies and forbidding influences
that menace the national welfare. We are not naturally a nation of
pessimists. The founders of the nation breathed the very spirit of
optimism, and, while recognizing that this Government, like all human
devices, had its imperfections, and that dangers and difficulties were
inseparable from the working out of its destiny, the great leaders
of American thought and action from the days of Washington to the
Extension of our Domestic and Foreign Trade 5
present moment have carried aloft the banner of a national hopeful-
ness and have been sustained and strengthened by a firmly rooted
belief in the integrity and greatness and glory of this mighty Republic.
Among the problems confronting our people to-day, none is
more worthy of serious attention than that relating to commercial
and industrial conditions. I believe that we are making progress.
I believe that there is to come better feeling between employer and
employee. I believe that the organizations and individuals repre-
senting the men and women of wealth, and the men and women
whose toil makes the accumulation of wealth possible, are exercising
an ever-increasing influence for better feeling; and your association
and others of kindred purposes, chambers of commerce, boards of
trade, and commercial organizations generally — great unofficial
agencies for the extension of American commerce — are doing much
vital work in that direction.
To repeat: first, individual initiative, energy, and loyalty upon
the part of the citizen whether employer or employee ; then, in cooper-
ation with them, the agencies of government, and, at this time, most
appropriately, the new executive establishment which has been
created to have some jurisdiction over commercial and industrial
affairs.
Turning to the Federal agencies, we find that nearly every branch
of the Government does important work for commerce and industry.
The Department of State in negotiating treaties promotes the devel-
opment of commerce, while the work of the consular service, the re-
sults of which are now given to the public daily, by the Department
of Commerce and Labor, is almost exclusively devoted to commercial
interests. The Army of the United States, for which many millions
are annually appropriated, although intended primarily as an in-
strument of war, is, in fact, an important agency for the upbuilding
of commerce, since it is under the jurisdiction of the War Depart-
ment that the vast appropriations for the improvement of rivers and
harbors are expended. The Navy is also an important factor, not
only by way of protection to our merchant marine, but also in its work
of exploration, in the laying out of cable routes, and in many other
ways. The Post-Office Department, with its expenditure of over
one hundred million dollars per annum, is an invaluable agency for
commercial development. The Department of the Interior is an-
The Annals of the American Academy
,,ther through the aid which it gives our citizens to establish homes
.m(l m become producers of agricultural and mineral wealth; and par-
ticularlv in the encouragement which, through the administration
„f the patent laws, it gives to the inventive genius of the country.
The- Department of Agriculture, for which nearly forty million dol-
lars have been appropriated during the past decade, is engaged in
promoting and fostering our principal source of wealth, agriculture,
whose products form such a large part of the materials entering into
our commerce, both internal and external. Of our total exports,
which now exceed those of any other country of the world, agricul-
ture supplies nearly, or quite, two-thirds. The Department of Jus-
tice, in enforcing the various laws against the restraint of trade, and
the Treasurv Department, in administering the finances of the coun-
try, are also potent factors in our commercial progress and develop-
ment ; and in conjunction with these Departments the Department of
Commerce and Labor will contribute its share to the maintenance of
our commercial and industrial preeminence.
It is especially with reference to the work of the new Depart-
ment that you naturally expect me to speak in detail.
Congress has declared it to be the province and duty of the De-
partment of Commerce and Labor to "foster, promote, and develop
the foreign and domestic commerce, the mining, manufacturing,
shipping, and fishery industries, the labor interests, and the trans-
portation facilities of the United States."
One of the most important methods of aiding commerce is to
give to those engaged in it such definite information regarding exist-
ing conditions as will enable them intelligently to determine the
classes of articles which can be most profitably produced, the sec-
tions to which they should be distributed, and the agencies through
which they can best be placed before prospective customers. In all
of this work the new Department is actively engaged.
The Census Bureau, which in the year 1900 gathered the statis-
tics of population, manufactures, and agriculture, is now engaged
in collecting and compiling information on other subjects having
important relation to our industries, and is also preparing to take, a
year hence, another census of our manufactures, thus giving a quin-
quennial instead of decennial statement, which in the past has been
our sole information on the subject of manufactures. In addition,
Extension of our Domestic and Foreign Trade 7
its statistics on cotton production are now presented at frequent in-
tervals, and in conjunction with special investigations ordered by
Congress, it is giving to the country a fuller knowledge of the great
factors of our commerce than ever before.
The Bureau of Statistics of the Department publishes, for the
benefit of our commercial interests, such information as it is able to
collect with the cooperation of the various governmental offices and
commercial organizations. It also gathers and publishes from month
to month statements of the concentration of the principal articles
at certain internal points and their transportation therefrom to
various parts of the country and to the seaboard for exportation.
This work, a comparatively new one, is carried on by the Bureau
largely through the cooperation of commercial bodies, the press, and
the large organizations engaged in transportation. In like manner
information is collected and distributed regarding exports and im-
ports. Material for use in manufacture is forming a steadily growing
share in our imports, while the home market for articles in a form
ready for consumption is more fully supplied year by year by our
own producers and manufacturers. Manufacturers' materials in
i860 formed 26 per cent, of our total imports; in 1880, 37 per cent.;
in 1900, 46 per cent., and in 1903, 48 per cent., while the imports
of articles manufactured in a state ready for consumption have de-
creased in about the same proportion.
Monthly statements of the total exports of the various articles
oi production and of the countries to which exported are presented
by the Bureau of Statistics and distributed to individuals and to com-
mercial and industrial organizations. In addition, statements are
issued at the close of each fiscal year showing the distribution by
countries of every article exported and the quantity and value sent
to each country during each year of the previous decade . Semiweekly
statements of commercial conditions are prepared and distributed to
the press and to commercial organizations, thus giving the widest
possible publicity to the latest available information regarding
commercial conditions.
Still another important undertaking of the Department is the
publication and distribution of commercial information collected by
the consular service of the United States — a service composed of
more than 300 men scattered throughout the world— who report
8 The Annals of the American Academy
reeularlv upon the opportunities for Ameriean commerce in their
respective districts. These reports are forwarded by the consuls
through the State Department to the Department of Commerce and
I abor for publication and distribution. In addition to the informa-
tion thus obtained, the Department of Commerce and Labor from
time to time calls upon the consuls for special information for which
inquiry has been received from merchants and manufacturers. The
consular reports are issued daily in printed form, and distributed to
the press, to commercial bodies, and to a limited number of individ-
uals. It is through this service that the American commercial public
is kept in close and constant touch with trade conditions and oppor-
tunities throughout the world.
Another valuable agency is the Bureau of Labor of the Depart-
ment . Its investigations are not confined to conditions in the United
States, but are extended to other countries and to the relations which
labor conditions there bear to production and commerce and labor
in the United States. The information thus obtained is published
periodically and widely distributed.
Other branches of the Department's work in the interest of com-
merce and industry include the Light-House Establishment with its
thousands of employees engaged in maintaining aids and safeguards
to commerce on the coasts and inland waterways ; the Coast and Geo-
detic Survey with its corps of skilled men engaged in surveys of our
coast ; the Steamboat-Inspection Service, which contributes largely
to the safety of persons and capital engaged in commerce by water,
both along the coast and upon the interior waterways of the country ;
the Bureau of Navigation, which has to do with matters relating to
the shipping interests of the United States ; the Bureau of Fisheries,
which in promoting the development of our fresh and salt water
fisheries contributes largely to the food supplies entering into the
commerce of the country; the Bureau of Immigration, which pro-
tects the country against violations of the laws governing immigra-
tion; and the Bureau of Standards, which is intrusted with the care
and use of the national standards of measure, with the development
of methods of measurement, and with the dissemination of knowl-
edge concerning these subjects as applied in the arts, sciences and
industries.
Of the new Bureaus created by the act establishing the Depart-
Extension of our Domestic and Foreign Trade 9
ment of Commerce and Labor, the Bureau of Corporations is engaged
in the necessary foundation work for its duties under the law, and
will eventually become a valuable agency for the extension of our
domestic and foreign commerce. The Bureau of Manufactures is
not yet organized, owing to lack of appropriations. Funds avail-
able in present legislation will make possible an early beginning of the
work of this Bureau.
Provision was made in the estimates for this year for an appro-
priation to be expended under the immediate direction of the Secre-
tary for special investigations of trade conditions at home and abroad,
with the object of promoting the domestic and foreign commerce of
the United States, and for other purposes. Important instruments
in the promotion of trade are the agents dispatched from time to
time by foreign governments to study commercial opportunities in
other countries. Military and naval experts are sent abroad by our
Government to report on conditions that are of interest to their re-
spective Departments. In the daily competition of international
trade there is even greater need of intelligent outposts abroad.
Special agents are also required in the Department itself to inspect
the branches of its services in different localities and to secure uniform,
businesslike and economical methods. The need of such agents in
other Departments has been met by appropriations, and there is of
course a similar need in this new Department.
No appropriation has yet been made for this service, but I am
convinced that when its importance is made more apparent to Con-
gress favorable action will be taken.
In addition to the measures that have been taken for the reor-
ganization and improvement of existing branches of the statistical
service, it is proposed to establish an office for the collection and dis-
tribution of foreign-tariff information, this being one of the directions
in which the Department's work can apparently be extended with
great advantage. A small initial appropriation has been received
for this purpose.
Nations are inclined to regulate their commercial intercourse by
means of a double system of tariffs, permitting preferences through
commercial treaties. The current agitation in Great Britain for a
departure from traditional policy in order to increase commerce be-
1' >
The Annals of the American Academy
tween the- members of the British Empire may have marked effects
upon American trade and incidentally upon American labor.
The industrial and economic facts which accompany such move-
mctits must be closely, intelligently and unremittingly watched. A
:ru competent employees, acting directly under the head of the De-
partment, will suffice for this purpose. From the small expenditure
proposed excellent results may be obtained. There is at present no
Government office in the United States engaged systematically in
the work of collecting information regarding foreign tariffs, and
making that information available to our exporters. This Depart-
ment has received frequent inquiries for such information, and has
been impressed with the importance of providing a medium to
supply it.
Y< >u have been kept advised from time to time of what the new
1 kpartment is doing on these lines. Too much must not be expected
in the initial months of its existence. It will cooperate with you and
you must cooperate with it. There must be mutual understanding
and mutual support. It will not attempt the impossible. Its sphere
lies in what will be well-defined limits. It is a branch of the Federal
Government, and as such must adhere strictly to the lines marked
out for its jurisdiction and not inject itself into fields of private en-
deavor where it does not belong. It can do a great work for the com-
merce and industry of this country, but the results it will achieve
will be measured by the foresight and the intelligence and the con-
servatism with which it carries on its work as one of the great agencies
in the extension of our domestic and foreign trade.
The promise held out for the new Department presupposes proper
equipment. As it demonstrates its usefulness, I am confident
Congress will increase its appropriations to a point adequate to its
needs. Like all new institutions it is bound to have its early struggles
for recognition. Congress and the Chief Executive have given it
work to do. Whether well or ill equipped, it will do this work in the
best manner possible. It seeks nothing it should not have. It will
ask for support only on its merits, but as it demonstrates its useful-
ness in the scheme of our Government, it will have whatever recog-
nition and commendation it may be entitled to receive.
The new Department has to deal in a large way with great
business enterprises. It has approached these problems with con-
Extension of our Domestic and Foreign Trade 1 1
servatism and impartiality. It has some jurisdiction over the in-
terests represented by the toilers of the country, and it will do its
share in securing a recognition of labor's rights and the encourage-
ment of better feeling and fairer dealing. It is made the statistical
Department of the Government, and it will make its statistics non-
partisan, impartial, and as accurate as they can be made. It has to
do with marine interests. It will advance those interests in every
proper manner, and I am sure it is not heresy to state in this presence
that it will lend the weight of its influence to the building up of the
American merchant marine. It has supervision over the difficult
problems of immigration and Chinese exclusion. There are incon-
sistencies in the laws relating to them. There are grave hardships
constantly coming up in the execution of these laws. Not infre-
quently they present obstacles to the development of our commerce.
But they are founded on the good old doctrine of self-preservation,
and must be fairly enforced until more satisfactory legislation can be
devised. These and the other problems to the solution of which the
Department must give its best energies are among the most important
confronting our people to-day. If the Department can do its legiti-
mate share in their solution, if its personnel can be raised to a high
standard, if its expenditures can be kept at the lowest figure con-
sistent with good administration, if, in a word, it can be conducted
as a business establishment for the advancement of business interests
and for the encouragement of good feeling and better understanding
between all interests having to do with our trade and industrial rela-
tions— the employer and the employee, the accumulator of wealth,
and the toiler in the counting room or the shop or the factory who
contributes to it — if it can be a potent force for enlightenment and
progress in these busy years of the nation's development, all who have
an interest in its success will feel that their confidence has not been
misplaced and that they have contributed to the establishment and
advancement of a factor in our national life.
In some remarks made to officials of the Department on the ist of
July, 1903, I said: "The new Department moves forward, and as it
takes its place by the side of the other great executive establishments
it will catch the step and the swing of their onward movement in the
nation's progress and prosperity."
I am sure you will welcome the statement, which it is almost
I 2
The Annals of the American Academy
unnecessary to make, that in all the work of the new Department, in
its desire for nonpartisan and impartial and conservative action, in
its contribution to the solution of the problems with which it has to
deal, it lias had no more sturdy friend, no more vigorous advocate,
no more faithful supporter, than the strong and able and fearless man
who is today President of the United States.
This country has taken its place in the front rank of the world's
producers. It now excels any other country in the production of
wheat, corn, iron and steel, coal and copper, and possesses more
manufacturing establishments and a larger number of intelligent,
well-paid workmen than can anywhere else be found. Our loco-
motives, railway cars, carriages, agricultural implements, boots and
shoes, clocks, scientific instruments, telephone and telegraph instru-
ments, and a multitude of other products which go to every quarter
of the globe are a tribute to American skill and enterprise.
What I have referred to this evening are, in the main, the forces
to which we may look for still further progress and development in our
commercial and industrial relations, but back of them all there must
be triumphant Americanism, forceful and far-seeing, ever aggressive
and ever mindful of the principles upon which our national progress
depends. On the integrity, and energy, and public spirit of American
citizenship we may confidently rely for the future glory and pros-
perity of our country.
Such organizations as yours are among the most influential
factors in our commercial and industrial development. I congratulate
you upon what you have done; I bid you Godspeed in the good work
vou are vet to do.
II. The Government Regulation of
Banks and Trust Companies
■3)
Government Control of Banks and Trust
Companies
By Honorable William Barret Ridgely, Comptroller of the
Currency, Washington, D. C.
(15)
GOVERNMENT CONTROL OF BANKS AND TRUST COM
PANIES
By Honorable William Barret Ridgely
Comptroller of the Currency, Washington, D. C.
The passage of the National Bank Act, or National Currency
Act as it was first called, may be considered the beginning of the fed-
eral control of banks. This has now been exercised for more than
forty years with most satisfactory results, both to the government,
the banks and the people who have done business with them. It
has resulted in an excellent system of banks, honestly, ably and well
managed. The figures in regard to the number of failures and loss
to depositors which are given elsewhere in the article show an un-
equalled record of soundness and safety, and, contrasted with the
previous records of State banks and even with the better and stronger
State banks and trust companies which have existed alongside of
the national banks, make a strong argument in favor of national con-
trol of institutions of this character. The total loss in over forty
years is less than eight one-hundredths of one per cent, of the aver-
age amount on deposit. The volume of experience gained during
the forty years' control of the national banks is probably the greatest
accumulation of such experience which has ever been made, based,
as it is, upon the control of a greater number of banks, more widely
distributed, doing a larger volume and variety of business and cover-
ing a longer period than has ever been exercised in any other country.
As a matter of fact, other countries do not attempt such a complete
control or examination of banks as we do in the United States. The
nearest approach to our national system is in some of our State bank
departments. State banks, and especially the mutual savings banks
in several States, are quite closely controlled in their management
by specific statutes and are frequently and thoroughly examined.
But there is no other system of banks over which there has been for
any such period such a thorough control through restrictive statutes,
frequent examinations and reports, as has been exerted over the
national banks of the United States.
(17)
1 8
The Annals of the American Academy
Probably the main consideration in the passage of the currency
act establishing the system of national banks was to provide a mar-
ket for the national loans made necessary by the war.' The country,
however, was glad of a chance to exchange the system of State banks
under different laws in each commonwealth for a national system,
which would at least be uniform, and which, above all, would sub-
stitute- a system of national bank note currency for the many issues
of State bank notes. As is well known, it was then expected that this
bank note currency would replace all other forms of paper currency
in circulation. It was probably on this account that the official
who was to have charge of the relations of the federal government
and the banks, was called Comptroller of the Currency, instead of
the Comptroller or Superintendent of National Banks, which, as
events have shown, would be a more distinctive title. The issue of
legal tender, United States notes and other forms in circulation, and
later the addition of a large volume of silver certificates to our paper
circulation, have made such a change in the situation that, instead
of furnishing all the paper currency, the national bank notes have
formed but a comparatively small part of it.
It was mainly the granting of the privilege of note circulation
which first attracted banks to the national system and made any
national control of banks possible. The national banks were in-
tended and expected to be primarily banks of issue, and were in-
directly given a monopoly of this privilege by a prohibitive tax
levied on the issues of all other banks. Outside of their note issues,
the powers of the national banks were quite severely restricted.
They were expected to be banks of deposit and discount and to trans-
act, as far as possible, the local commercial business of their com-
munity. They were denied the power to have branches, to make
loans on real estate or to own real estate other than their necessary
banking houses, to loan more than ten per cent, of their capital to
any one person, firm or corporation, to own or deal in shares of stock,
to own or make loans on their own shares of stock as security. Each
bank was originally required to keep a minimum reserve against
deposits and notes issued, but this was later amended to require a
reserve on deposits only.
When the act was first passed, there was much question whether
the inducements offered the banks were sufficient to induce them to
Government Control of Banks and Trust Companies 19
submit to examination, restriction and control by the United States.
Many of the early banks were organized, or converted from State to
national as much or more from patriotic motives as from hopes of
increased profits. The fact is, the circulation has never been very
profitable ; never sufficiently so to induce the banks to approach the
maximum amount permissible. The highest percentage of possible
circulation was issued in 1882 and was 81.6 per cent. This gradually
declined to 27.54 Per cent, in 1892 and has since then steadily in-
creased to 54.75 per cent, in 1903. A strong inducement to the
banks in the larger cities to secure national charters is the system
of reserve and central reserve banks, which permits a national bank
in other cities to keep two-thirds of its cash reserve on deposit with
an approved reserve agent national bank in a reserve or central re-
serve city; and a bank in a reserve city to keep one-half its reserve
in the central reserve cities St. Louis, Chicago and New York. This
gives national banks in reserve cities an opportunity to secure large
deposits from country banks which the State banks cannot secure,
because deposits with State banks are not counted as reserve, and are
also subject to the ten per cent, limit on indebtedness by any one
firm or corporation. An additional inducement for banks to sub-
mit to federal control is the greater confidence in which the banks
under national supervision and control are held by the people. This
has steadily increased since the creation of the system as the result
of the examinations and published reports, and that this is justified
is shown by the comparative statement of the failures of national
and State banks. From the date of the organization of the national
system to January 22, 1904, there were organized 7083 national
banks. Of this number 404 became insolvent and 1499 have gone
into voluntary liquidation, leaving 5180 in operation. The per-
centage of failed banks to the total organizations is 5.7 per cent. ; the
percentage of liquidating banks is 21.2.; the percentage of active
banks is 73.1.
From an estimate based on 330 insolvent national banks whose
affairs have been finally closed, dividends amounting to 71.31 per
cent, have been paid on claims proved amounting to $101,724,840.
Including in this estimate, however, offsets allowed, loans paid, etc.,
the creditors received on an average 78.55 per cent, on their claims.
This would make a loss of 21.45 per cent, to the creditors. The total
2(
Tin
Annals of the American Academy
,oss to depositors in forty-one years on deposits, now amounting to
,lm(,s, three and one-half billion dollars, has been less than thirty
mllll((I1 d()iiars. The cost of liquidation, based on the total amount
collected from assets and from assessment on shareholders was
sS.570.S22, or 8.3 per cent. The causes of failure have been classified
Kxcessive loans 22.81 /0
Fraudulent management and defalcation 36-34%
Injudicious banking 25.06%
General stringency and panic 15-79%
Comparing the result of failures and liquidations among the
nat i< >nal banks with the figures in regard to the failures of State banks
from 1863 to 1896, as given in the report of the Comptroller of the
Currency for 1896, the last date to which complete figures are avail-
able, it will be seen that while only 6.5 per cent, of the number of
national banks in existence failed during this time, 17.6 per cent, of
the other banks in existence failed. And while the national banks
which had failed up to 1896 paid to their creditors 75 per cent, in
dividends, the State and other banks paid only about 45 per cent.
The cost of liquidation of State and other banks which failed is also
verv much higher than the cost of liquidation of national banks.
The present law authorizes the Comptroller to order an examina-
t ion of a bank at any time he may see fit. For several years after the
establishment of the system but one examination was made each
year. After a short time the banks in the reserve cities were ex-
amined twice in each year. During the administration of Mr. Eckels
after the panic of 1893, this system was extended until each bank is
now examined regularly twice each year. The reports made by the
examiners have grown from a short statement of liabilities and re-
sources until they now cover all vital points of interest in regard to
the condition and solvency of the bank examined. These reports
when received in Washington, are gone over very carefully by a corps
of trained men, and letters are written to the banks, calling attention
to and criticising the various items in the reports and asking for an
explanation or additional information in regard to them. This is prob-
ably the most important work of the Bureau, especially in cases where
a bank is in a critical condition. Probably the greatest utility which
is done bv the Currency Bureau is to be seen in those cases where it is
Government Control of Banks and Trust Companies 2 1
discovered, through the reports, that a bank has made such losses as
to involve an impairment of capital or possible insolvency. In more
cases than are generally known the Comptroller of the Currency, with
the aid of the bank examiner, is able to save a bank which, without
intervention and assistance, would have failed. Of course it is
essential to success in this matter that secrecy be observed, and it
rarely becomes known to anyone outside of the bank and the Comp-
troller's office what has been the condition of a bank or what steps
are necessary to save it. It is the experience of the office that,
where the officers of the bank are honest, truthful and make complete
statements of their difficulties, in most cases additional security
can be obtained for doubtful paper, or such a contribution made by
the directors or other stockholders that the impairment of capital
or insolvency can be entirely removed, and there are many banks in
the United States to-day which have been saved in this way and are
now not only thoroughly solvent, but highly prosperous institutions.
This system of examinations, of course, is far from perfect. The ex-
aminer cannot, in the time at his disposal, make such an inspection
as will always result in the detection of fraud and violations of law.
If the officers of a bank, or any of them, are dishonest, being in the
bank every day, they have every advantage over an examiner, and
are very frequently able to deceive him. No system of examination
can supply ability or ensure honesty in bank management. This
must be supplied by the officers and directors, and upon them the
responsibility must rest. In any well managed bank the work of
the examiner ought to be supplemented and aided by continued and
thorough examinations by the directors themselves, or someone ap-
pointed by them independently of the men who regularly have charge
of the funds and accounts. In addition to the two examinations in
each year, each national bank is compelled by law to make to the
Comptroller at least five sworn reports of its condition. These were
first made on fixed dates, but it was found that as these dates were
known the banks would always prepare to make their statement ; and
the present method is for the Comptroller to call for a statement of
condition as of some previous date, and these are always made with-
out any notice to the bank on dates which are not fixed by the Comp-
troller until the moment#the call is made. A summary of the state-
ment of condition of all banks of the country, divided by States,
The Annals of the American Academy
which is published within two or three weeks after the issuance of a
call. Rives very prompt and valuable information as to the condition
„,- the banks in all parts of the United States.
It is worthy of notice that, while the national banking system
lias been steadily growing until there are now about 5200 banks,
with the great ^sources already referred to, the tendency to increase,
both in number of banks, capital and deposits is greater among the
banks other than national than among the national banks. The
following is a table from the report of the Comptroller of the Currency
for the year 1903:
HANKS.
Number
CAPITAL.
DEPOSITS.
Amount.
Per cent.
Amount.
Per cent.
1882.
2,239
5,063
$477,200,000
234,900,000
67.01
32.99
$1,131,700,000
1,718,700,000
39-7
State etc
60.3
Total
7.302
71 2,100,000
100 .00
2,850,400,000
TOO . 00
1892.
National
3,759
5,579
684,678,203
386,394,845
63-9
36.1
i,767,5i9,745
2,911,594,571
37-8
62. 2
Total
9,338
1,071,073,048
100 .00
4,679,114,316
100.00
1902.
4,535
7,889
3,732
701,990,554
499,621,208
138,548,654
52.4
J 47.6
3,222,841,898
| ( 6,005,847,214
I 478,592,792
\
33- 2
State, etc
66.8
ReportinK for tax only
Total
16,156
1,340,160,416
100.00
9,707,281,904
1903.
4,939
8,745
4,546
743,506,048
578,418,944
152,403,520
50.43
} 49-57
3,348,095,992
r 6,352,700,055
l 502,522,431
}
32.81
67.19
Total . . .
18,230
1,474,328,512
TOO. OO
10,203,318,478
The national banks, which had 67 per cent, of the capital in 1882,
had 63.9 per cent, in 1892, 52.4 per cent, in 1902 and 50.43 per cent,
in 1903. The national bank deposits, which wrere 39.7 per cent, of
the whole in 1882, were 37.8 per cent, in 1892, 32.2 per cent, in 1902
and 32.8 in 1903. Some of this apparent decrease may be possibly
due to more complete returns from the banks other than national
which are now obtained, but there is no doubt of the fact that the
tendency is for the banks other than national to increase more rapidly.
This is true in spite of the fact that the law of March 14, 1900, author-
izing the organization of national banks with a capital as low as
Government Control of Banks and Trust Companies 23
$25,000, has resulted in the conversion of a large number of State
banks in the country towns into national banks, and the organiza-
tion of a great many national banks to succeed private ones. Prob-
ably the principal reason for this tendency is the great increase in
the number of trust companies which have been organized during
the last ten years. These companies, organized under State laws
originally designed to provide for companies doing a strictly trust
business are taking advantage of the liberal character of those laws,
and a very large portion of the new organizations are merely com-
mercial banks, having trust company privileges perhaps, but in reality
doing comparatively little strictly trust company business. The
laws of the different States, particularly in regard to the cash reserves
to be held, and loaning money on real estate security, are so liberal
that organizations of this character have a great advantage over the
national banks in the inducements which they can offer their cus-
tomers. It is naturally to be supposed that any one contemplating
the organization of a new bank, other things being equal, will be in-
clined to do so under the laws which allow the greatest freedom
from governmental interference, restriction and control. The ques-
tion as to what shall be done in the way of control of these new trust
companies is very important. It would be a great mistake for the
different States to allow the national banking system to be broken
down or seriously weakened by new organizations which are able to
do so because they are less carefully examined and controlled than
the national banks. The national system has furnished most ex-
cellent banks for the regular commercial banking business. It is
not likely to be an improvement to have this replaced by any system
of State banks. Much less is this likely to be the case if the induce-
ment to go into the State systems is greater freedom from control,
weaker reserves and less careful management. The modern trust
company has been called the highest example of modern commercial
organization, and of many of the largest and best companies .this is
doubtless true. The regular trust company business is a very im-
portant part of any financial system, and calls for the highest degree
of character, honor and ability.
I quote from a recent writer on this subject, and agree with all
that he has said in regard to the trust companies:
"Trust companies are formed for the execution of the most
24
The Annals of the American Academy
sacred duties that can be imposed by man. The care of the property
and welfare of the helpless and the dependent, the widow and the
orphan the feeble and ignorant ones, who are such an easy prey for
the unscrupulous, is part of their mission; to carry out the wishes
of the dead, who put faith in the company and entrusted their dear-
est interests to it for years in the belief that it always would be true
and honest ; to meet the expectations of the living, who entrust
their property to it in full confidence that it always will be faithful
and capable; this demands a conscientiousness and thoroughness,
which must always serve as a high ideal and inspiring stimulus to
right-minded men. "
When, however, the trust companies cease to do this character
of business or attempt to add to it not only ordinary commercial
banking, but in many cases underwriting and promotion of all sorts
« »f new enterprises, the case becomes entirely different. It can hardly
be said to be a reasonable or proper regulation of the banking and
trust company business to allow the organization, under the same
law, of concerns which not only have the power to act as trustees in
all of the important capacities which the writer has enumerated, but
which also have the power, if the management is so inclined, to do a
general commercial banking business with little or no cash reserve,
and even to underwTite an issue of bonds and securities several times
in value the combined capital, surplus and deposits of the so-called
trust company, as happened in a recent notable case. In another
instance trust companies organized under the laws of certain Eastern
States engaged in the organization of national and other banks in
t he Western States and attempted to pay up the capital with cer-
tificates of deposit in the so-called trust company. It is true most
of the older trust companies have been splendidly managed in every
respect, their officers and directors are men of the highest character
who can safely be trusted with any business, whether it is in the nature
of a trust, commercial banking, promotion, or underwriting. It is
not such concerns as this which need control and regulation. Their
business will be well and properly done in any event, and probably
will come well within the terms of any law intended to control this
class of business. Such concerns as this have nothing to fear from
regulation, nor should they oppose the attempts to place reasonable
safeguards upon the business for the protection, not only of their
Government Control of Banks and Trust Companies 25
depositors and creditors, but of the entire country. If there is any
reason why a national bank should maintain reserves against com-
mercial deposits, the same reason will apply to commercial accounts
in any other bank, whether called a trust company or not. A trust
company with a large business in its trust department, if it also has
a banking or savings department, owes it to its customers and to the
public to see that the banking department is not so conducted as to
endanger its trusts in the slightest degree. The very existence of
those trust obligations should make its banking department ultra-
conservative and careful, as so many of them are. The trust com-
pany, whose chief business is in its banking and savings department
and is carefully and conservatively managed, is more interested
than anyone else to prevent reckless and incompetent, or dishonest,
men from securing similar charters which will permit them to run
competing banks, without proper reserves or other safeguards pre-
scribed by experience. Frederick D. Kilburn, Superintendent of
the New York State Banking Department, says in regard to reserves
in Trust Companies for March, 1904:
"After mature consideration of the subject and a study of the
existing conditions, I am of the opinion that the whole matter should
be regulated by statute. Before this is attempted, however, the
banks and the trust companies should agree upon the provisions of
any proposed legislation in this direction. All feelings of spite and
selfishness, if any exist, should be forgotten. The interests of any
particular institution, except as it may be in harmony with the in-
terests of all, should not be considered. The law should be general
in terms, and, if any class of deposits are exempted from its opera-
tion, sound reasons should be given for the exemption.
' ' I am well aware that many trust company officials, and some
bank officials, will not agree with my view. Some think, and per-
haps not without reason, that they are able safely and conservatively
to conduct the affairs of their institutions without interference of
this or any other kind ; but others will sometime take their places,
and then perhaps a less experienced and less conservative manage-
ment will be in control. The whole matter should be adjusted with
exclusive regard for the needs of the situation, and with the sole pur-
pose of conserving the interests of all concerned. In the meantime,
it should be remembered that trust companies and banks alike are
The Annals of the American Academy
in the main founded upon
the same general principles and are de-
jx.nck.nt to the- same degree upon public confidence for success.
In his annual report for 1904, Mr. Kilburn also says:
••The right of domestic trust companies to hold stocks m pri-
vate corporations might wisely be definitely defined, their right to
engage in underwriting schemes unqualifiedly denied, and the obliga-
tion imposed upon them to carry a legal reserve. As a part of this
latter proposition, I am confident that itwould be advisable to require
also that these institutions and the State banks in New York make
weekly reports similar in scope to those submitted by the Clearing
House banks and the non-member banks to the Clearing House
Association. "
Whatever regulation or control there is to be of the trust com-
panies must come, for the present at least, from the State govern-
ments. Federal control of the national banks has been so satisfactory
and successful that there is some desire expressed for federal control
of other banks and trust companies. There has not been, however,
so far as I know, any practical suggestion made by which these
institutions can be forced or persuaded to submit to Federal con-
trol, especially if it is to be more severe than that now exercised
by the States. Federal control, therefore, does not seem to me to
be a present practical question.
Do not misunderstand this as in any degree an attack on the
trust companies or as unjust criticism of them by a partisan of na-
tional banks. The trust companies can have no better friend than
I am. I believe in them thoroughly; I recognize the great value
of their past services and their possibilities for good in the develop-
ment of our country in the future. There is abundant field and
scope for both the national banks and trust companies, but they
should work in harmony, aiding and supplementing each other.
I speak in the interests of both, and in advocating more careful
control and conservative management, I do so in the interest of
the many splendid banks of both kinds whose able, honest, conserva-
tive management, with or without restrictive laws, is entitled to
the protection which only such laws can give them against not only
the competition but the danger to their institutions and the whole
country which may come from institutions whose management is
in less honest and less able hands.
Control and Supervision of Trust Companies
By Honorable Frederick D. Kilburn, State Superintendent of
Banks of New York
(27)
CONTROL AND SUPERVISION OF TRUST COMPANIES
By Honorable Frederick D. Kilburn
State Superintendent of Banks of New York
In discussing the general question of the control and super-
vision of the trust companies in the country by the respective States
in which they are located, I take it for granted that there can be no
serious division of opinion. It is the general impression and desire
among thinking men, who have given the subject consideration, that
adequate and thorough control of institutions of this kind by the
State is essential alike to their own legitimate success, and to the
safety of the public. And especially is this true in view of the great
development of our country's resources, the vast extension of its
influence, the undreamed of expansion of its domain and the
wonderful growth and combination of business enterprises all over
the country which the last ten years of our history have witnessed.
Not until recent years has there been a State supervision of these
institutions in any comprehensive sense, or by general laws reg-
ulating their formation and control.
Trust companies are private corporations created by the State.
They are privileged to take charge of private estates, and to act as
executor, administrator and guardian — relations which imply the
most sacred trusts. Their powers and privileges in other directions
are varied and extraordinary, and altogether their character and
purposes are of such a nature that there should be the closest and
most efficient State control and supervision over them that can be
devised, to the end that, so far as human foresight can prevent,
there shall be no betrayal of the interests committed to their care,
nor failure by them to meet promptly and faithfully their engage-
ments. But this judgment is not intended to imply that an admin-
istrative bureau should undertake a regular examination of each
specific trust, nor do I believe that experience has shown this to be
necessary. If it be made certain that the affairs of a corporation
of this class are being managed in general with prudence and wise
judgment, that its investments are of a character carrying the
(29)
The Annals of the American Academy
guaranty of a reasonable income return and of safety— in a word,
if general examinations show a company solvent, strong and prosper-
ous, and conducted in accordance with the law— the question of
the proper discharge of each specific trust can be left without risk
t<> the company and to the determination of the Courts at the final
accounting, when, if any default or wrong be shown, the company
being responsible and abundantly able to pay, correction or repara-
tion may easily be enforced.
All trust companies organized in the State of New York prior
to 1887 were formed under special charters granted by the Legisla-
ture. The first such charter granted was to the Farmers' Fire In-
surance and Loan Company, now the Farmers' Loan and Trust Com-
pany of New York City, one of the largest and most conservative
companies in my State. It was chartered in 1822, and was given
the power to make loans upon the security of bonds and mortgages,
or upon conveyance of improved farms, houses, manufactories,
or other buildings, or on any other real estate, or on the security
of corporate stocks. It was also empowered to carry on the business
of fire and life insurance. It was prohibited, however, from taking
deposits, or from discounting promissory notes, bonds, due bills,
drafts or bills of exchange; nor was it allowed any banking privi-
leges or business whatever. The same year the charter was amended
to eonfer upon the company the power to act as trustee.
Other charters were granted from time to time, all containing
special privileges to a greater or less extent, such as insurance, title
guarantee and mortgage features.
Many of the savings banks' charters, which until recent years
were also the creatures of special legislation, carried trust company
powers. Some trust companies were required to report to the Comp-
troller of the State, and others to the Supreme Court. The powers
and privileges granted to one differed perhaps radically from those
granted to another. Some of the charters were extremely liberal
in their provisions, and included powers which would be regarded
as inconsistent with the proper functions and purposes of these in-
stitutions as they have developed and as they exist to-day. There
was no supervision, except of a superficial and perfunctory character.
There was no comprehensive system of reports, and the whole mat-
ter was in a chaotic condition. Notwithstanding all this, and though.
Control and Supervision of Trust Companies 3 i
there have been instances of voluntary liquidation and of merger
and consolidation, there have been but two failures of trust companies
in the history of the State where the depositors and general cred-
itors were not paid in full. One of these failures was that of the
National Trust Company, which occurred in 1877, and the other
The American Loan and Trust Company, occurring in 1891.
In 1887 a general act was passed in the State of New York
regulating the formation of trust companies and defining their powers
and privileges. This act provided that any number of natural per-
sons (not less than thirteen), three-fourths of whom should be resi-
dents of the State, might associate themselves together for the pur-
pose of organizing a trust company; that in no material respect
should such company's name be similar to the name of any other
trust company organized and doing business in the State; that the
certificate should state the place where the business was to be trans-
acted, the amount of the capital stock and the number of shares into
which the same should be divided, and the name, residence and post
office address of each member of the company ; the term of the com-
pany's existence, which should not exceed fifty years ; and the decla-
ration that each member of the association would accept the respon-
sibilities and faithfully discharge the duties of a trustee if elected
to act as such. It provided that the certificate should be executed
in duplicate, one of which should be filed in the office of the Clerk
of the county wherein the trust company was to be located, and the
other in the office of the Superintendent of Banks. It also provided
for the publication for four weeks of a notice of intention to organize.
It defined the powers and duties of trustees. It provided that the
capital stock must be at least five hundred thousand dollars, except
that trust companies with a capital of not less than two hundred
thousand dollars might be organized in cities the population of which
did not exceed one hundred thousand inhabitants.
It also provided that the capital of the company should be in-
vested in bonds and mortgages on unincumbered real estate in the
State of New York, worth at least double the amount loaned
thereon, or in stocks of the State of New York, or of the United
States, or in the stocks or bonds of incorporated cities or counties
of the State of New York duly authorized to be issued. It provided
further that all trust companies organized under the act should be
V
The Annals oj the American Academy
corporations possessed of the powers and functions of corporations
generally, and as such should have power:
Tu make contracts;
To sue and be sued, complain and defend, in any court as fully as natural
i\, act as fiscal or transfer agent of any state, municipality, body politic or
corporation; and in such capacity to receive and disburse money, and transfer,
register and countersign certificates of stock, bonds or other evidence of indebt-
edness;
To receive deposits of trust moneys, securities and other personal property
from any person or corporation, and to loan money on real or personal securities;
To lease, purchase, hold and convey any and all real estate necessary in
the transaction of its business, or which the purposes of the corporation may re-
quire, or which it may acquire in the satisfaction, or in partial satisfaction, of
debts due the corporation under sales, judgments or mortgages;
To act as trustee under any mortgage or bond issued by any municipality,
body politic or corporation, or accept and execute any municipal or corporate
trust not inconsistent with the laws of the State;
To accept trusts from and execute trusts for married women, in respect to
their separate property, and to be their agent in the management of such property,
and to transact any business in relation thereto;
To act under the order or appointment of any court of record as guardian,
receiver or trustee of the estate of any minor the annual income of which is not
less than one hundred dollars, and as depositary of any moneys paid into court;
To manage estates, collect rents, etc.;
To take, accept and execute any and all such trusts and powers of whatever
nature or description as may be conferred upon or intrusted or committed to it
by any person or persons, or any body politic, corporation or other authority;
To purchase, invest in and sell stocks, bills of exchange, bonds and mort-
gages, and other securities, not including, however, the power to issue bills to
circulate as money;
To be appointed and to accept the appointment as executor or trustee under
the last will and testament, or as administrator with or without the will annexed,
of the estate of any deceased person, and to be appointed and to act as the com-
mittee of the estates of lunatics, idiots, persons of unsound mind and habitual
drunkards.
The act also provided that no loan should be made by any trust
company, directly or indirectly, to any trustee or officer thereof.
It was also made the duty of the Superintendent of Banks to
ascertain from the best sources of information at his command
whether the general fitness for the discharge of the duties appertain-
ing to such a trust of the persons named in the certificate was such
as to command the confidence of the community in which such trust
Control and Supervision of Trust Companies 33
company was proposed to be located, and whether the public con-
venience and advantage would be promoted by such establishment.
It was left entirely to the discretion of the Superintendent, based
upon the result of these inquiries, to authorize, or not to authorize,
the formation of the company. These are the principal features of
the law of 1887.
In 1892 a general and comprehensive revision of the Banking
Laws was made and embodied in one act, now known as the "Bank-
ing Law," which relates to all corporations under the supervision
of the Banking Department, including State Banks of Discount,
Trust Companies, Savings Banks, Building and Loan Associations
and Safe Deposit Companies.
There have been some amendments to the general law of 1887,
but, with one or two exceptions, these amendments have been of
minor importance, and the law to-day is substantially that passed in
1887, the principal features of which have been summarized.
One of the amendments in the revision of 1892 provided that
every trust company incorporated by special law should possess the
powers of trust companies incorporated under the general law, and
be subject to such provisions of the general law as are not inconsis-
tent with the special laws relating to such specially chartered com-
panies :
Another provided that companies might be organized with a
capital of $150,000 in cities containing more than twenty-five thou-
sand and less than one hundred thousand inhabitants, and with a
capital of $100,000 in a city or town containing not more than twenty-
five thousand inhabitants; and
Another allows a director or officer to borrow a sum not exceed-
ing ten per cent, of the capital stock upon the approval of the Board
of Directors.
The law also provides that the capital of every trust company
shall be invested in bonds and mortgages on unincumbered real
property in this State to an amount not exceeding sixty per centum
of the value thereof, or in the stocks or bonds of the United States,
or of the State of New York, or of any county or incorporated city
of the State of New York duly authorized by law to be issued.
It compels the Superintendent to examine, or cause to be ex-
amined, every trust company in the State at least once in each year,
>4
The Annals of the American Academy
and empowers him to make an examination also, whenever, in his
judgment, it may be necessary or expedient to do so.
It requires each company to report to the Banking Department
its condition on the morning of the first days of January and July,
which report must be in such form, and contain such particulars as
the Superintendent may designate or require.
It is also provided that, if it should appear to the Superintendent
of Hanks that any trust company has violated its charter or any law
of the State, or is conducting its business in an unsafe or unauthor-
ized manner, he shall, by an order under his hand and official seal,
addressed to the company, direct the discontinuance of such illegal
or unsafe practices; and, if it shall appear to the Superintendent that
it is unsafe or inexpedient for the company to continue business,*he
shall communicate the fact to the Attorney-General, who shall
thereupon institute such proceedings against the company as are
authorized in the case of insolvent corporations, or such other pro-
ceedings as the nature of the case may require.
There are in New York State to-day seventy-nine trust com-
panies, twenty-five of which were organized under special charters,
and the others under the general law, but in practice all exercise
substantially the same powers and are engaged in the same classes
of business, and are now controlled by substantially the same laws.
A few statistics concerning them may be of interest, and per-
haps important in considering what should be done, if anything, in
the way of enlarging or extending State supervision and control.
There were eighty-one trust companies in the State on the first day
of January, 1904, forty-eight of which were located in the city of
New York :
The combined capital on the first day of January, 1904,
was $63,750,000
Their surplus and undivided profits on book values 141, 504, 56 1
and on market values 143,087,880
Amount due depositors, including the amounts due
other trust companies, savings banks and banks 807, 1 82, 140
Their combined resources amounted to 1,039,735,828
They had —
Bonds and mortgages 59,534,679
Bond and stock investments 225,386,955
Loaned on collateral 510,928,626
Bills purchased 56^714,963
Control and Supervision of Trust Companies 35
Real estate 14,376,379
Cash on deposit 125,392,247
Cash in vaults 26,894,136
and overdrafts amounting to but 4X»I23
Their net earnings for the year 1903 were $17,383,608, or $8,333,-
756 in excess of dividend distributions.
The New York law, though excellent in character and compre-
hensive in scope, is not perfect. In a report to the Legislature in
January, 1904, the writer recommended that trust companies
located in the city of New York be compelled to keep legal reserves
of fifteen per cent., one-third in cash and the balance on deposit.
For the balance of the State ten per cent, was suggested, one-half
of which should be in cash. This proportion seems sufficient when
we take into consideration the fact that a trust company is obliged
to invest its capital in the manner heretofore pointed out.
The Clearing House has attempted to regulate this question by
an amendment to its constitution, prohibiting Clearing House priv-
ileges to trust companies unless they keep a reserve in accordance
with the Clearing House requirements. The Clearing House, how-
ever, is powerless to compel the observance of its rule. The trust
companies simply withdraw from the privileges of this institution
if they do not wish to observe its regulations. In any event, but
few of them ever availed themselves of these privileges.
It is, of course, proper, and in accordance with the well established
policy of the law, that trust companies should be the custodians of
trust funds and moneys not daily employed in the business of the
country ; and I am not aware that any state prohibits a trust com-
pany from receiving on deposit the moneys employed in the daily
and active business of merchants, manufacturers and other business
men. It is doubtful, however, if this was the original intention of
the framers of the laws, either special or general, under which trust
companies are organized.
I may seem to have given too much attention to the banking
features of my subject at the expense of the trust features.
It is exceedingly difficult sometimes to distinguish between
deposits which are genuinely trust deposits and those of a purely
banking character. One great and conservative trust company in
the city of New York reports all of its deposits as trust deposits,
;6
The Annals of the American Academy
and vet the only difference between these and ordinary deposits
is that they are represented by certificates containing the provision
that they will be paid upon five days' notice. But commercial
deposits form so large and important a feature in the transactions
of all the companies that control and supervision in this direction
necessarily covers, if not the details, at least the general character
of transactions, and determines whether a company deserves con-
fidence, or needs to be curbed and corrected in its operations.
( )n January ist, 1904, the trust companies in the State of New
York reported trust deposits to the amount of $215,929,174, all but
about $7,000,000 of which are in trust companies in Greater New
York.
The trust companies of the State had at the same time general
deposits amounting to $591,252,966, included in which are $35,-
000,000 belonging to other trust companies, $35,000,000 belonging
to savings banks, and $20,000,000 due banks, bankers and brokers.
If, therefore, trust companies are allowed to take on deposit
active business accounts, they should be compelled to keep a safety
fund in the way of a reserve against deposits of this kind, as
Hanks of Deposit and Discount are obliged to do.
In the report mentioned it was also recommended that trust
companies be prohibited from engaging in underwriting schemes:
"Trust Companies should be prohibited by law from engaging in under-
writing schemes. In my opinion it is sufficient for them to be allowed to invest
in the securities of private corporations only after these securities have had in-
ception and their value tested upon the market. Those who underwrite enter
into their engagements, of course, upon the expectation of being able to market
the securities for which they subscribe at a greater price than that which they
promise to pay. This is not investment; it is speculation, in which trust com-
panies ought not to be allowed to use the money of their depositors.
' ' The experiences in New York within a year or two, where bonds thus put
out have had very great depreciation, regardless of the strength of their support,
have occasioned many regrets and sore memories. I hold, therefore, that it is
not enough that the door be closed effectually against excessive purchases of
stocks of private corporations, but that it should be shut also against a too close
and dangerously large identification in any manner of the fortunes of a trust com-
pany with experimental and hazardous schemes for the financing and develop-
ment of properties, which, even if eventually successful, may have before them
long years of uncertainty and difficulties. The public's deposits deserve to be
guarded against such reckless employment, and the statute should be so changed
Control and Supervision of Trust Companies 37
as at least to impose a limit beyond which operations along such lines can not be
lawfully carried."
Since the report was written no grounds have arisen for a change
in the views there expressed. In fact, further reflection but confirms
the opinion that Trust Companies should be absolutely prohibited
by law, not only from investing on their own account in the untried
and "undigested" securities which, especially of late, have been so
prevalent in the markets, but also from so identifying themselves
with highly speculative ventures as to create the impression with the
public that the trust companies are sponsors or guarantors for such
enterprises. The good name of a financial institution should be a
real and substantial asset, and good faith should be always a charac-
teristic of its management, so that its indorsement, even if implied
only, may be accepted with absolute confidence and trust. A trust
company cannot afford, nor should it be permitted under the law,
to lend its credit or give its moral support to enterprises which,
through reckless violation of sound principles, may involve scandals
and disaster.
I fear there is a popular impression that it is an ordinary and
frequent occurrence for trust companies to engage in enterprises of
this kind, and in a general way to enter the field of speculation.
This, so far at least as New York State is concerned, I can positively
refute. Two or three unfortunate instances of the kind, to which great
publicity has been given, have created the impression that trust com-
panies, especially in the city of New York, are in a general way en-
gaged in promoting schemes and in underwriting the securities of
corporations and combinations unworthy of public confidence.
Many people rush to the conclusion that, because one company
has committed flagrant violations of the law and engaged in schemes
of the kind to which I have referred, therefore all must be to a greater
or less extent involved in the same unwarranted and unlawful prac-
tices. This was well illustrated in the story of the failure of the
United States Shipbuilding Company, and of the connection of the
Trust Company of the Republic with the financing of that corpora-
tion's affairs. This was a case where liabilities were incurred which
not only jeopardized the solvency of the trust company, but flag-
grantly transgressed the law. Upon the first intimation that the
trust company had made unusual commitments a special inquiry
^g The Annals of the American Academy
was instituted bv the Banking Department, and I confess that I
was amazed at the extent to which the president of this company,
either with the passive acquiescence of the directors, or without
their knowledge, had committed his company. Through the power
given me by the law I was enabled to save all depositors from loss,
and the company from dissolution, by using its entire surplus and
one half of its capital stock of one million dollars. The publicity
of this affair did more to discredit the trust companies in the city of
New York, and especially some of the newer organizations, than any-
thing that has happened for years. It has, at the same time, fur-
nished a salutary lesson and warning.
But let me emphasize that I must not be understood as assert-
ing that there is no opportunity for improvement in the general ad-
ministration of these companies' affairs, though I do wish to dispel
the impression that they are as a class engaged in dangerous and
speculative enterprises, or are being conducted in a reckless and un-
safe manner. Their stability and soundness have been too well
tested during the long years of their operation in New York State
to require other refutation of this general insinuation, and instances
of unlawful procedure or reckless investment by them are too infre-
quent to warrant any general distrust of their stability. If the laws
under which they are organized are imperfect or inadequate, they
can be amended. If the powders of the Superintendent are insuf-
ficient, they can be increased. If the Superintendent is incompetent
or neglectful of duty, he can be replaced.
There is no general law in the Stace of Massachusetts for the
organization of trust companies. There is, however, a bill now be-
fore the Legislature of that State for that purpose, drawn largely
upon the plan of the New York law. A bill has also been intro-
duced compelling trust companies to keep reserves, and regulating
the amount. There is a general law of the State (Chapter 116 of
the revised law) which provides that domestic trust companies in-
corporated subsequent to the 28th day of May, 1888, shall be subject
to its provisions, and that any such corporations chartered prior to
that date which have adopted, or which shall adopt, according to law,
the provisions of that chapter, or any section thereof, or the corres-
ponding provisions of earlier laws, shall be subject to the provisions
so adopted.
Control and Supervision oj Trust Companies 39
Michigan has a very comprehensive general law for the organ-
ization and control of trust companies. Organization under it,
however, is unrestricted.
Maine has no general law for organization or control. All trust
companies in that State are organized by special legislation. Be-
fore 1893 these special charters contained various provisions such as
might suggest themselves to the parties seeking them. Since that
time, however, they have been modelled after a general form regu-
lating their powers, and providing for State control and supervision
to a limited extent.
In Illinois trust companies are quite generally organized under
the banking act, which confers upon State banks the power to accept
and execute trusts. Before assuming the exercise of such powers,
however, they must deposit certain securities with the State Auditor.
Connecticut has no general law whereby any bank, savings
bank, or trust company can organize or do business. Each derives
its powers from special legislation. It has, however, a general law
governing State Banks and Trust Companies, but the power of super-
vision is inadequate.
Pennsylvania does not seem to have any general law for the
organization of trust companies. They are organized under the
General Corporation Act of 1874, and their powers are defined in
various supplements to that act, passed in 1885, 1889 an^ 1895. It,
however, has a general law very much like that of New York pro-
viding for supervision and denning the powers of the Commissioner
of Banking.
New Jersey has a general act under which trust companies may
be organized, and denning their powers. This act is also very similar
in many features to the New York law.
New Hampshire and Vermont have no general laws upon the
subject so far as uniform method of organization is concerned. In
Vermont many of the trust companies have the words "savings
bank" in their titles, although they have no savings bank powers.
Ohio and Minnesota both have general laws for the organization
of trust companies, and defining their powers and privileges and pro-
viding for their supervision.
The banking law of Wisconsin makes no provision whatever for
the organization, supervision or control of trust companies. So I
The Annals of the American Academy
assume that the institutions of this kind in that State, if any exist,
are the creatures of special legislation.
It will be seen that each State is a law unto itself in the matter,
and that the variety of powers, privileges and purposes of trust com-
panies in the country is only limited by the conditions and necessities
existing in different localities and the conceptions of human ingen-
uity. The Federal government has not the power to regulate or
control in matters of this kind. This power must be left to the re-
spective States, where I believe it can safely remain, though it is to be
recognized that the question ought to have the best and most care-
ful consideration that financiers and publicists can give to it. The
one tendency most to be feared regarding it is the too great readiness
of some legislatures to grant to trust companies charters containing
almost unlimited powers. The possession of power carries the
temptation to use it, and if a corporation has the legal right to ex-
ploit a railroad or a mine in China or Timbuctoo, or to finance
speculative schemes wherever it may choose, it is almost certain that
some restless, not to say reckless, mind will be found in its directorate
who will not be content while such power stands unemployed. The
way of safety is, therefore, for legislatures to deny applications for
trust company charters that permit any extraordinary latitude of
operations out of which disaster might result. The ideal system
would undoubtedly be a conformation ultimately of all charters of
institutions of this class to some one general plan based upon con-
servatism and safety. This is probably not as yet practicable —
perhaps not even advisable at present; for, while in my opinion it
would be well if substantially uniform laws, liberal enough to include
all desirable features and privileges, and yet sufficiently restrictive
to prevent unsafe practices, could be enacted by all the States, diverse
conditions existing in the different States might make it necessary
to add to, or take from, general privileges, or it may be require more
or less restrictive features in some localities which would not be
salutary in others.
Experience is a great teacher, and the defects in our laws re-
lating to trust companies, the mistake of granting of savings bank,
banking, insurance, title guarantee, safe deposit and trust company
privileges all in one charter, the granting of too generous privileges,
or the enactment of excessive restrictions, will, in my opinion, all
Control and Supervision of Trust Companies 41
be righted and regulated eventually, as experience and considera-
tions of public safety, backed by an enlightened public sentiment,
shall demand. Much has already been accomplished; evolution in
this field having been going on for years, and still continuing. Es-
pecially is this true of the great financial centers of the East. I do
not believe that there was ever a time when the general condition of
the trust companies of New York was better than at the present. It
must be remembered that they have more than doubled in number
during the last six years, as they have also doubled in deposits and
general resources. The marked depreciation in values and depression
in business which have taken place in the last two years have been a
great strain upon all financial institutions, and when we remember
that not a trust company in the State of New York has become in-
solvent through it all, or failed to pay all debts upon demand, there
would seem to be slight cause for apprehension regarding their safety,
or room for criticism of their management.
I speak of my own State freely because I am familiar with con-
ditions there, and can speak from knowledge. There is no reason
why results should be different in other States where conditions and
laws are substantially the same. I do not hesitate to state that
the practices of some companies have met with just condemnation.
Occasionally I have had reason to deplore and criticise the general
condition and the policy of some companies under my supervision,
but anything of a nature serious enough to imply failure or disaster,
or to produce an unsafe or unsound condition, is exceedingly rare.
Unsafe or even unlawful practices cannot be eliminated wholly in
trust companies or other financial institutions so long as human
nature remains fallible.
Aside from the conservative management which these institu-
tions enjoy, I believe that the laws of the State of New York have
done more to conserve their welfare than any other thing. Your
president (and I hope I am not violating any confidence) in a
letter to me used the expression "unregulated developments in
matter of trust companies." In some States organization is un-
restricted in the sense that no officer has the power to prohibit,
provided the procedure is in accord with the statute, but in New York
and in some of the other States a trust company can not be organized
without the consent of the Superintendent of Banks, based, as has
42 The Annuls of Ike American Academy
been suggested, upon the fitness of the proposed incorporators and
the advantage and convenience of the public; and, while many trust
companies have been organized in the State of New York in the last
six or eight years, more applications have been refused than have
been granted.
Since the business of the country became less active, and busi-
ness incorporations and combinations less frequent, the desire for
trust companv organization has proportionately abated. I am un-
qualifiedly in favor of State control, adequate and close control,
not only of trust companies, but of all institutions of a financial
nature which invite the public confidence and deal with the people's
monev. This control should be sufficiently comprehensive to regu-
late the organization, provide ample supervision, and restrict in-
vestment, in a way that will conserve, in so far as human ingenuity
can provide, the interests of the public. Investment by such in-
stitutions, in untried securities, promotion of questionable enter-
prises, speculative underwriting of stocks or bonds, and all other
acts of a nature involving dangerous investment or promotion of in-
dividual interests, should not only be prohibited, but made a penal
offense if indulged in contrary to law. It would be well if the name
'Trust Company" could have a uniform meaning throughout the
land, always implying strict compliance with wise laws, adequate
State supervision and control and conservative and safe management.
The Financial Reports of National Banks as
a Means of Public Control
By F. A. Cleveland, Ph.D., New York University
143)
THE FINANCIAL REPORTS OF NATIONAL BANKS AS A
MEANS OF PUBLIC CONTROL
By F. A. Cleveland, Ph.D.,
New York University
The inquiry suggested by the title would seem to be one of pos-
sibility rather than precedent or present practice. Assuming this
point of view, discussion will first proceed from a consideration
of the law under which powers of control may be exercised. Broadlv
speaking, there are three legal questions raised: (i) What are the
powers of control given by the National Bank Act? (2) Under the
Act, what are the purposes for which control is to be exercised? and
(3) In the exercise of powers granted by the Act, what devices or
means may be employed by the Comptroller to reach these ends?
The Powers of Control given by the National Bank Act.
The first of these questions may be answered by direct appeal
to the language of the Act. Section 87 of the National Banking
law (Section 52 11 R. S.) contains this specific mandatory declara-
tion: "Every Association (i. e., National Bank) shall make to the
Comptroller of the Currency not less than five reports during the year,
according to the form which may be prescribed by him." This
general provision is supplemented by grants of specific power to
the Comptroller, which enable him to call for other reports as often
as he may desire, and to obtain such information as he "in his own
judgment" thinks necessary "to a full and complete knowledge"
of financial condition; a bank failing or refusing to comply with
such request is liable to a penalty of $100 per day (Sec. 5213 R. S.).
It would appear, therefore, that the Comptroller is not lacking in
authority to obtain any and all information which may be necessary
to administrative supervision. A further reading of the National
Bank Act quite as concisely forces the conclusion that the Comp-
troller has all the power necessary to a complete control over National
Banks and their operations, as to all subjects which are properly
(45)
The Annals of the American Academy
within the range of official discretion; this power extends even to
the taking possession of the bank itself and winding up its affairs
for failure to comply with his demands.
The Purposes for which Control is to be Exercised.
This brings us to consider the second question raised, viz.: the
subjects of official discretion, or the purposes for which official control
is to be exercised under the Act. It has been repeatedly affirmed
that the prime purpose of the National Bank Act was to create a
better market for Government bonds at a time when the National
credit needed support. In the midst of civil strife when the financial
resources of the nation were strained almost to the point of bank-
ruptcy it was conceived that a very large part of the capital employed
in commercial banking enterprise in the United States might be
utilized to support the Government. The plan proposed was an old
one—one jn which the banks, being induced to use their capital to
purchase Government bonds, would be permitted to use bank notes
with which to carry on their business. By this device it was thought
that the financial strength of the banks might be brought to the
support of the Government — i. e., that the State banks might be
induced to bring over their capital into a new National system where
it might be utilized in the manner indicated.
To make such a scheme acceptable, however, two conditions
must be met : The first result of such a plan of support to the bond
market would be a large increase in the money circulation of the
country ; the bank-note would not be received unless it were made as
sound (i. e., as valuable) as the money then in current use — the green-
back. But this was not the only condition that the Government must
reckon with. In the experience of the past, business had suffered
quite as much from unsound bank credit in the form of customers'
accounts (or deposits) as it had from an unsound currency. National
reaction against "wild-cat" banking had but recently forced the
several State systems over to a basis of capitalization and official
inspection to protect the people against wholesale fraud and bank-
ruptcy. If these State institutions were to be brought into a National
banking system — if the Government was to utilize their capital
resources to fund its own . necessities — the new National system
National Banks as a Means of Public Control 47
must carry with it all the provisions for safety and for the protection
of the public against the speculative devices of the unscrupulous
that three decades of legislative reaction had evolved.
Wild-cat banking was banking on "commercial assets" without
adequate capitalization. From 1837 to the time of the Civil War
the whole trend in banking ideals and in banking legislation was
toward the strengthening of banking equipment. It had been
lound from bitter experience that a bank which was not properly
capitalized, and which therefore did not have capital resources
sufficient to support its credit transactions, was as dangerous to
those coming into business contact with it as was a mine or a factory
whose construction was faulty and whose machinery was over-
crowded. To the public, the poorly -equipped bank was much more
dangerous than the mine or the factory by reason of the fact that, in
case of collapse, a much larger number of people were constantly
within the danger line.
After two years of agitation and amendment and compromise
an acceptable law was enacted. This Act carried with it two pro-
tective features: (1) the note was to be secured by a collateral
deposit of bonds purchased, and (2) those holding the credit accounts
of the bank were to be protected by provisions which required what
was thought to be adequate capitalization before business might be
begun, and by the exercise of official supervision to prevent "impair-
ment of capital" during the period that business should continue.
It was for the purpose of enforcing these two provisions of safety
and security that the Bureau of the Currency was created and a
Comptroller was appointed.
Means by which Control may be Exercised, and the Ends of the Act
Reached.
The functions of the Comptroller have a direct relation to the
conditions above described. The first or, as it was then viewed,
the prime purpose for which public control was to be exercised was
to guarantee the soundness of the new National currency. This is
clearly expressed in the first clause of the Bank Act which recites :
"There shall be in the Department of the Treasury a Bureau charged
with the execution of all the laws passed by Congress relating to the
g The Annals of the American Academy
issue and regulation of a National currency secured by United States
bonds; the chief officer of which Bureau shall be called the Comp-
t rolkr of the Currency * * * ." The second purpose of the appoint-
ment of a Comptroller is set out in various subsequent portions of
the Bank Act designed to insure adequate capitalization. These later
provisions of two classes, viz.: (i) Those designed to require ade-
quate cap'talization as a condition precedent to commencing busi-
ness, and (2) those intended at all times to secure customers against
loss on account of "impairment of capital."
That the "National Currency" which was to be issued through
the agencv of the banks might be kept as sound as the standard
money (t. e.} that all forms of money issues might have a common
valuation) provision was made that the bonds purchased by the
banks might be hypothecated with the Treasurer as collateral security
for final payment and redemption of notes outstanding. According
to the provisions of the Act the Government was made a trustee
for the benefit of noteholders. For each $900 of notes turned over
to the bank by the Government for issue, the Treasurer was to hold
a non-interest bearing account with the bank secured by a $1,000
bond. The obligation of the bank to the Government was for the
repayment of $900 in bank notes, or legal tender money at its own
option. The Government as trustee was the legal owner of the
bond. The beneficiaries were (1) the noteholders to the amount of
notes held, and (2) the bank for the amount of the current income
on the bond and for its equity of redemption. This made the bank
the immediate agency of redemption of the new currency, and the
Treasurer, as trustee, the agent of ultimate redemption. Such a plan
of National currency having been adopted, when a bank issued a
note the customer took it, not on the credit of the bank, but as a
beneficiary in the trust security held by the Government. The note-
holder never inquired as to the credit of the bank through which
the note was issued, but relied entirely on his claim against the
security held in trust by the Treasurer. Since both bonds and
greenbacks were Government credit the National currency secured
by Government bonds was taken by the public to be as good as a
greenback. Later when both greenbacks and bonds were redeemed
in gold, this National currency came to be considered as good as
gold. As a means of control (to secure the soundness of the circula-
National Banks as a Means oj Public Control 49
tion or National currency so issued), therefore, the function of the
newly created Bureau was to see that the trust account of the bank
with the Treasurer was kept amply secured, and that the bonds held
as collateral security were sufficient for this purpose. But all the
data were at hand for determining this fact, and, the bonds them-
selves being in custody, the services of the Comptroller in his capacity
ar^ guardian of the currency became merely nominal and perfunctory.
Moreover, for this service no report was necessary.
The Chief Functions of the Comptroller.
Not so, however, wHh the second function of control exercised
by the Bureau — the protection of those who hold open accounts (or
deposits) of the bank. The importance of this character of official
guardianship has correspondingly increased — but not in its bearing
on original capitalization. As at the beginning, the method of
ascertaining whether the bank had the requisite capital resources
to commence banking operations, has remained one of inspection
and not one of financial report. The Comptroller must know that
at least 50 per cent, of the amount of the authorized capital stock is
actually in hand in money, and that the balance of the stock subscrip-
tion is good, so that it may be realized in 10 per cent, monthly install-
ments.
The most difficult duty which the Comptroller has to perform,
and the one of increasing importance to the financial world, is that
which pertains to the security of the public against the r< impairment
of apital resources" during the period that the bank continues in
operation. Knowledge as to the feature of the work must come
largely from the reports made by the banks themselves, as the
number of examiners is grossly inadequate to report more than a
check on some of the main items of account. It is from this duty
that the subject assigned takes its chief bearing.
Protection of the Public Against Impairment oj Capital Resources.
To state more specifically some of the questions that the Comp-
troller must have in mind in asking for reports with respect to capital-
ization, Section No. 5202 R. S. provides that "no Association at any
The Annals of the American Academy
tune shall be indebted, or in any way liable, to an amount exceeding
the amount of its capital stock (capital resources) at such time actu-
ally paid in, and remaining undiminished by loss or otherwise, except
on' accounts of the nature following: (i) Notes of circulation; (2)
Moneys deposited with or collected by the Association; (3) Bills of
exchange or drafts drawn against money actually on deposit to the
credit of the Association, or due thereto; (4) Liabilities to the stock-
holders of the Association for dividends and reserve profits." Sec-
tion 5203 R. S. specifies that "no Association shall either directly
or indirectly, pledge or hypothecate any of its notes of circulation
for the purpose of procuring money to be paid in on its capital stock,
or to be used in its banking operations or otherwise; nor shall any
Association use its circulation notes or any part thereof in any
manner or form to create or increase its capital stock (capital re-
sources).'' Section No. 5204 recites that "no Association or any
member thereof, shall, during the period it shall continue its banking
operation, withdraw or permit to be withdrawn, either in the form
of dividends or otherwise, any portion of its capital (capital re-
sources)." Again, in Section No. 5205 R. S. the law requires that
"every Association which shall have failed to pay up its capital
stock, as required by law, and every Association whose capital stock
(capital resources) shall have become impaired by loss or otherwise,
shall, within three months after receiving notice thereof from the
Comptroller of the Currency, pay the deficiency in capital stock
(capital resources) by assessment upon the stockholders pro rata
for the amount of capital stock (capital liability) held by each."
All of these, and other assignments of duty with respect to the
protection of customers against impairment of capital, make neces-
sary an official inquiry into the relation of capital resources to capital
liabilities. They require a specific inquiry as to the capital resources
at hand. For the purpose of determining whether or not the capital
equipment of the bank has become impaired through "loss" on
account of banking operations or "otherwise" a keenly analytical
report is necessary. To properly execute this lunction of control
it is necessary to distinguish the capital resources and liabilities,
from the other assets and obligations of business.
National Banks as a Means of Public Control 51
The Present Value of the Report to the Comptroller as a Means of
Control.
In taking up the "form" of report made by the banks to the
Comptroller, attention will be confined to the inquiry as to whether
or not it is well designed to give the information necessary to the
exercise of sound official discretion. Is the form of report such
as to enable one to determine whether the capital resources have
become impaired? An examination of financial statements, as at
present made, will disclose the fact that no attempt is made to
distinguish "capital" resources and liabilities from the assets and
obligations current to the business.
For the purpose of determining financial condition of a going
concern, it has become an established principle of analysis that
capital resources are all those properties and assets which are in-
tended for permanent or continuous use in the business. Two
principles of administration are well settled: (1) To prosecute an
enterprise successfully, it is necessary to provide the management
with equipment adapted to its purposes; and (2) whatever property,
equipment, and stock, is permanently or constantly needed, should
be provided out of capital investment. This is the purpose for which
capital is needed. Proper equipment is necessary to success. As
a matter both of financial advantage and of financial safety, this
equipment should be provided out of capital. To attempt to pro-
vide permanent equipment out of temporary loans, or floating debt,
is to hold the enterprise in constant jeopardy. This is as true of a
bank as it is of a railroad or of a mine, and this is the underlying
thought of the Law.
The current assets of an enterprise are those which are acquired,
not for equipment use in the business, but those which are acquired
in its current transactions — i. e., in the course of current operation
for profit. It is to fund the current needs — to meet the current ex-
penses— to provide funds to carry these current assets and trans-
actions— that current liabilities or floating debt is incurred. If the
principles of financial analysis commonly employed in accounting
are applied to the assets and liabilities of national banks, conclusions
may be reached as to whether or not the capital resources have been
impaired as well as whether or, not the permanent equipment is
c2 The Annals of the American Academy
adequate to support its operations with safety to those who may
be in business contact with the institutions under examination.
What are the Capital Resources of National Banks?
The reports, as at present made to the Comptroller, are not
based on such a system of analysis, and, therefore, any attempt
at rearrangement to this end must be in a measure unreliable. But
taking the various items of resource exhibited as a basis for present
discussion, a fair approximation may be reached: (i) "Banking
houses and fixtures" are unquestionably capital resources. (2)
"Real estate," in contemplation of law and from every point of
business reasoning, should be charged against capital. (3) The
bank invests its capital in bonds to secure circulation, and receives
on the collaterals deposited notes which may be used in the business —
the "margin" of capital invested in these collaterals should be con-
sidered a capital charge ; the same is true of the "margins " invested
in the collaterals deposited to secure Government deposits. (4)
The "money reserve" is essentially a capital reserve; it is the prin-
cipal equipment necessary to support the current credit accounts
(deposits) outstanding — the floating debt of the business. There
can be no doubt that the "cash" held by a bank should be a direct
charge against capitalization, and is made so by legal enactment —
the only question with reference to this class of items pertains to
the interpretation to be given as to what properly constitutes
"money reserves." (5) The accounts which it is necessary for a
bank to maintain to provide for an "exchange" are likewise an asset
permanently needed and in continuous use ; they should, therefore,
be counted as a part of the necessary banking equipment. (6)
Finally the "unencumbered securities" and "other direct invest-
ments of capital " owned and held by a bank as a means of strengthen-
ing its money reserve should be regarded as capital resource. These
must be so considered for the reason that the direct application of
capital to the purchase of "securities," or for that matter even the
purchase of commercial paper, is not banking. There can be one
purpose only for making such purchases, viz. : to keep the capital
which is needed to support credit transactions invested in income-
producing assets when not needed in the form of "cash." "Securi-
National Banks as a Means of Public Control 53
ties" must be considered either as banking equipment, or as an
investment which is a charge on capitalization. The same is true of
all other direct investments of capital. A bank which engages in buy-
ing and selling "securities," in "underwriting flotation" or in other
business not in the nature of banking, needs to have a larger capital
than an institution which does not so engage itself. Whether the
capital investment be in banking equipment, or in other assets and
business ventures, the amount of funds thus engaged by the banks
should be set up as capital resources, or charges against the capital
provided for doing business, the protection of which is the chief end
of control.
These several classes of assets being in the nature of capital
resources, the relations, pertaining to which the duty of the Comp-
troller obtains, are to be found: (1) in a comparison of the capital
resources on hand, with the amount of capital provided for use of
the institution under examination; and (2) in an examination of
current assets to ascertain whether there have been any losses suf-
fered in the prosecution of the business, since all "bad loans," etc.,
must be charged against capital. The accounts exhibiting capital
put into business are found on the liability side of the balance sheet.
The capital provided for use is represented in three controlling
accounts, viz. : "Capital Stock," "Surplus" and "Undivided Profits."
Of these the first two items are permanently reserved for use in the
business, and the third must remain in it so long as there is any
question as to the impairment of capital resources. Before any
comparison may be made for the purpose of determining what char-
acter of investments has been made of capital put into the business,
the statement of assets reported by the banks must be assumed to be
based on a proper valuation, or a critical examination must be had.
For this purpose the Comptroller may supplement the report made by
the bank itself, with the report of his examiners in whose field the
bank lies, or may detail a special examiner if the case seems to
warrant such an assignment. In any case, however, a distinction
must be made between the current accounts and the capital accounts.
Classification of Balance Sheet to Show Financial Condition.
Intelligent judgment as to the character of equipment provided
54
The Annals of the American Academy
by u hank by capital investment requires a classification of resources.
The exercise of official discretion with reference to the integrity of
capital resources which proceeds from the examination of financial
reports, makes a classified balance sheet a necessity. To the end of
establishing a basis for the further discussion of "the financial report
as a means of control," and at the same time of showing some of the
difficulties which stand in the way of the exercise of effective control
under the present form of report, an analysis of the consolidated
statement of all the National Banks of the State of Iowa for Sep-
tember 9, 1903, is here exhibited. The classification submitted
is not offered as a model in the arrangement of items. Neither is
the assignment of inadequacy of the present form intended to reflect
on Comptrollers past or present. The form now used is in effect
that which has been employed by officers of banks for a century; it
has been used by comptrolling officers of government since public
examination first began. Suggestion that a change might be made
to advantage is not therefore to be considered as offered in the spirit
of reflection on official conduct, more than a proposed amendment
of law would imply legislative incapacity. Not engaging any spirit
of personal criticism and holding in mind my own inability to do more
than suggest that a classified balance sheet is essential to further
consideration of the topic assigned, the following statement of
capital accounts is modestly offered as a tentative and provisional
arrangement :
CAPITAL ACCOUNTS.
Capital in the Business.
I. Capital Stock $14,881,550
II. Surplus 3,533,641
III. Undivided Profits 2 085 923
TotaJ Capital in the Business -. $20,501,114
Capital Investments and Equipment.
I. Banking-house, etc .$2,193,300
1 1 . Real Estate 347 77 r
III. Margins:
1. Amount invested in Collaterals:
(1) U. S. Bonds for Circulation, $8,742,010
(2) U. S. Bonds for Deposit . . 2,391 100
National Banks as a Means of Public Control 55
(3) Other Sec' ties for Deposit
(4) Premium on Bonds (?).... 313,006
(5) 5 per cent. Fund in Treas'y 424,880
Total Investment. $11, 870,996
Less Cash Received:
(1) Circulation $8,690,245
(2) U. S. Deposits 2,324,773
Total Avails 11,015,018
Capital Invested in Margins 855,978
IV. Cash Reserves :
1. Cash Items (?) $475,136
2. Bills of Other Banks 481,461
3. Frac. Currency 36,515
4. Specie. . . •. 2,988,269
5. L. T. Notes 1,498,104
6. U. S. Certificate of Deposit
7. Due from U. S. Treasury 8,512
5,487,997
V. Balances kept with Banks for Exchanges (?) 2,100,000
VI. Unencumbered Securities:
1 . Securities Owned :
(1) U. S. Bonds on Hand .... $18,400
(2) Stocks, etc 3,147,380
Total $3,165,780
Less Incumbrances:
(1) Bonds Borrowed $53,210
(2) Bills Payable (?) 624,500
(3) Other Liabilities (?) 79,816
Total 757,526
Amount Invested in Unencumbered Securities. . . . 2,408,254
VII. Other Direct Investments of Capital:
1. Loans to Reserve Agents 7,107,810
Total Capital Investments and Equipment $20,501,1 14
Attempting to state the amount of capital put into the business,
and to account for its investment, in the above exhibit it is assumed
that the valuation of assets represented in the reports of the Comp-
56
The Annals of the American Academy
trailer is conservatively made, and that there are no "bad loans"
to be written off. But even with this assumption, and for this
purpose, the form of report made by the banks to the Comptroller
renders many of the items doubtful: (i) In the statement of "pre-
mium on bonds " as one element in the computation of the amount of
capita] locked up in "margin" there is no way of distinguishing this
from premium on "bonds on hand;" (2) In the "cash items" it
is of frequent occurrence for banks to include expense vouchers
which are to be held till the end of the month; in so far as these
were included the statement of the amount of "cash reserve" is
too large; (3) the amount stated as "balance kept with banks for
exchange" must be roughly approximated as no specific inquiry
is made in the present form submitted by the Comptroller to deter-
mine this fact— the amount of clearing-house exchanges held is
$141,000; assuming that the amount of exchanges outstanding
against the banks under consideration averages $175,000, and further,
that it requires on an average three days for them to be presented
and paid, the average balance needed to be kept for the redemption
of exchanges would be $525,000. Assuming again that four times
this average amount would place the banks of Iowa in a position
at all times to meet exchanges, it would be necessary to carry only
$2,100,000 on account with other banks for exchange purposes —
this amount is arbitrarily set up; (4) under the head of "in-
cumbrances" on "securities owrned" it is assumed that the "bills
payable," and "other liabilities," stand as incumbrances on stocks,
bonds, etc. This is true to the extent only that these liabilities are
based on stocks and bonds hypothecated as collaterals, and in so
far as this is not true the account would be varied by an exact
return such as might be obtained from the bank; (5) the amount
exhibited as "loans to reserve agents" is stated on the assumption
that the purpose of such investment is to have a quickly convertible
asset by means of which cash may be obtained when the money re-
serve runs low— a bank making a statement to the Comptroller
under a form calling for this specific item of capital reserve might
set up some other form of asset as a "direct capital investment."
In each and all of the items above mentioned there are elements of
doubt— elements which require questions to be raised; but each
National Banks as a Means of Public Control 57
of them might be made certain by a different form of inquiry sub
mitted to the banks by the Comptroller.
The Uses which may be made of such an Analysis.
But assuming for the purposes of present discussion that the
above analysis of capital investment were true to the facts, let
us see what use might be made of such form of report. In the first
place we may seek to eliminate those investments which are not in
the nature of banking equipment. The building in which the bank is
housed is not essentially banking equipment. The banking business
is a credit business; primarily, it consists of the exchange of bank
credit for commercial credit at a profit. Investment in a building
does not strengthen the concern in its current credit relations.
Many of the largest banking institutions do not own a building.
The prime purpose of capitalization being to provide equipment
with which to supply funds to the community in the form of demand
credit, any use of capital to purchase a building must be considered
as an extraneous investment not available for the support of the
credit of a going concern. "Real estate" belongs to the same
class of investments. This has been so often said that it has become
axiomatic in commercial banking circles. The "margin" invested
in the securities hypothecated with the Government is also not
available to the business as a going concern. All of the above classes
of assets are important as assets for final liquidation, but to a going
concern they are purely voluntary and ornamental and bear much
the same relation to the business of banking that the gilded dome
on the Congressional Library does to the value of its literary stores
within. Whether in contemplation of law this amounts to an im-
pairment of capital or not, the fact remains that $3,397,053 of
capital invested in this way has weakened the banks of Iowa
as going concerns, and to that extent.
Another class of considerations attaches to the remaining classes
of capital investments — those resources used to support the banking
transactions themselves. Assuming that the banks had made
return of redemption equipment as above exhibited, the Comptroller
as an agent of the Government should know whether this equipment
is adapted to the use for which it is intended. The unencumbered
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securities, for example, being intended for an invested reserve to
strengthen the cash reserve held to support demand accounts (de-
posits outstanding), the question pertinent to this use is: "Are these
securities immediately convertible by sale or hypothecation without
loss of principal?" If, again, any of these are held as the result of
underwriting, this fact would suggest that a portion of the bank's
capital was being employed in business other than banking and
there would be an impairment in use if not in valuation. By some
such classification facility would be given to many other official
inquiries directed toward the protection of the people against im-
pairment of the capital resources needed by a going banking concern.
A Point of Control not Adequately Covered by the National Bank Act.
While the National Bank Act is very specific as to the powers
of control directed against the "impairment of capital" there is
another element of banking strength or weakness quite as important
that has been neglected, viz. : the protection of the customer against
overburdening the equipment used. Judgment as to safety must
rest not alone as to the absolute strength of material used in construc-
tion and equipment, but this having been determined it must then
be compared with the weight or strain to be supported. To be
more concrete, every facility is given to such inquiry as the Comp-
troller may make to protect the capital put into the business against
deterioration, but almost no provision is made for inquiry as to
whether the credit burden imposed by the bank officers on this
equipment in the prosecution of the business is greater than it can
safely bear. There is no provision made for correlation of capital
equipment with the credit liabilities incurred in the course of the
banking business. These obligations must be met on demand, and
safety requires that they should be met by capitalization. This
is the essential difference between what has been known as wild-cat
banking and sound banking as contemplated in the National Bank
Act. Banking activities are represented in its current assets acquired
and the current liabilities incurred in banking operation. To con-
cretely exhibit this class of financial results, reference will again be
made to the summary for the State of Iowa above used in the state-
ment of capital accounts:
National Banks as a Means of Public Control 59
ACCOUNTS REPRESENTING BANKING OPERATIONS.
Current Liabilities — Incurred in Hanking Operations.
I. Due to Banks and Bankers:
(1) Due to National Banks $2,362,481
(2) Due to State Banks 4,257,426
(3) Due to Trust Companies, etc 3,258,966
(4) Due to Reserve Agents 18,377
$0,897,250
II. Commercial Credit Accounts:
(1) Individual Deposits $58,606,777
(2) Deposits of U. S. Disbursing Officers 42,586
58,640,363
III. Miscellaneous:
(1) Dividends Unpaid 12,467
Total Current Liabilities $68,550,080
Current Assets — Acquired in the Course of Banking Operations.
I. Due from Banks and Bankers:
(1) Due from National Banks $2,608,877
(2) Due from State Banks 1,058,720
(3) Balance due from Reserve Agents 1,483,018
(4) Clearing House Exchanges 141,352
$5,382,876
II. Commercial Assets :
(1) Loans and Discount $62,150,426
(2) Overdrafts 1,121,025
Total $63,280,451
Less Notes rediscounted 105,267
Net Commercial Assets 63,175,184
III. Miscellaneous:
(1) Revenue Stamps 1 ,020
Total Current Assets $68,559,080
From the two summaries exhibited (the one of "capital ac-
counts" and the other of "banking transactions") it appears that
by means of a capital investment of $20,501,114 a banking business
of $68,559,080 was carried on. With these results in mind let us
determine, in so far as we may from the data in hand, what strain
6q The Annals of the American Academy
was brought on capital equipment. In the first place, on what
part of the equipment does the banking strain come? As before
observed it is at once apparent that no part of the credit strain
falls on the first three classes of equipment enumerated, viz.: (i)
'Hanking house and fixtures." (2) "Real estate," and (3) "Mar-
gins." From the point of view of the demands of commercial
banking these are purely a gratuitous use of capital. Ownership
of a house and furnishings is unnecessary — this paraphernalia may
be leased and the rent charged to current expenses, and when a
building is owned it is in the nature of a real estate investment;
"real estate" owned is an incumbrance on banking capital and
not banking equipment; the "margins" invested in bonds used as
collaterals for notes and deposits are incidental to the system de-
vised by the Government to strengthen its own credit and as such
are not banking equipment — they are a further incumbrance on
banking capital.
The equipment necessary to banking transactions is the "cash
reserves," or "such invested capital reserves as may be readily
converted into cash" and which may be used to meet demands on
outstanding credit accounts without curtailing commercial ac-
commodation. As a means of carrying on a business which consists
in the exchange of bank "credit accounts" for "income-producing
assets in the nature of commercial credit," the bank must establish
and maintain a reputation for meeting its credit accounts on demand.
The only way that this may be done with safety to its customers
is by having capital resources in the form of "cash" when demands
are made. The real test of banking strength, therefore, is to be
found (1) in the "cash" on hand; (2) in "exchange balances;" and
(3) in "unincumbered securities" and "other capital investments"
readily convertible into cash. Again assuming the valuation of these
capital assets to be conservative, the strength of banking equipment
of the State of Iowa by this method of analysis, at the time stated,
was $17,104,061.
But a comparison of strength of equipment with the credit
strain upon it must be arrived at by bringing the two results to-
gether. The total demand obligations for the payment of money
were in round numbers $68,559,080. That is, the equipment of
cash and immediately convertible capital resources (irrespective. of
National Banks as a Means of Public Control 61
the commercial assets) being $17,500,000, and the total amount of
demand credit to be supported $68,500,000 the inverted pyramid
would be $68,5oo,ooo\ 17,500,000. But in getting at the amount of
the strain that will fall on the capital resources this gross amount
must be reduced. Eliminating by set-off the current institutional
assets and liabilities the relation of credit outstanding to capital as-
sess employed m a strictly banking business would be $63,200,000
\ 17,500,000. In other words, $17,500,000 invested in banking
equipment have enabled the banks of Iowa to purchase about
$63,200,000 of interest-bearing commercial assets, by means of
about $63,200,000 of their own credit accounts supported by this
equipment. The corporations have a gross income about four times
as large, through banking operation, as they would have by direct
investment of their capital in commercial paper ; and they have
furnished to the community credit funds which do the work of
money equal to about four times the amount of money that would
have been in circulation by direct investment.
The purpose of control is to make such a business safe and the
differential of safety must be drawn from experience, leaving an ade-
quate margin of protection to the public against contraction of the
circulating medium as well as protecting customers against immediate
loss from non-payment. The need for a better correlation of capital
resources with banking operations carried on, may appear the more
vividly by comparison of the several classes of banks reported :
62
The Annals of the American Academy
Comparative Results of Analysis of Different Classes of National
Banks, September 9, 1903— Stated in Millions of Dollars.
Classes of Items
All National
Banks of the
United States
O 0}
PQP4
Banks of
St. Louis
Banks of
Chicago
■Ss
CO
V
«M O
03 «a r
C C w
d 5 <U
PQOD4
Capital Resources
Banking House, etc
$107
21
58
$ 25
4
13
$ 1. a
.1
1 .0
$ 1.3
. 2
.6
$ 20
3
15
$ 23
3
17
Cash Reserves
Exchange Accounts (?)
$606
40
478
$147
16
116
$18.4
4-5
3-3
2.4
$42.7
$177
$248
Other Direct Capital Invest-
Total Capitalization* . .
$1,310
$321
$30.9
$44-8
$215 ! $291
Current Assets
Cash
$ 321
893
'$'i2;i
89.6
$.5-5
11. 9
70.0
181. s
$ 32
79
144
632
$ 27
95
Due from Banks
Commercial Assets
$ 930
3,462
233
902
Total Current Assets and
$4-392
$1,214
$101.7
$268.9
$887
$1,257
Current Liabilities
$1,226
3,166
$460
754
$54.9
46.8
$143.3
125.6
$436
45i
$634
Commercial Credit Accounts
623
♦Capital Stock, Surplus and Undivided Profit.
In so far as may be determined from the bank returns made on
the form now used, the foregoing summary shows the disposition
of capital invested in the banking business in the various classes
of banks represented. From this it would appear that, while in a
single agricultural State like Iowa the banks, as a whole, by their
own capitalization have provided the equipment used to support
their outstanding credit, taking all of the banks of the United States,
they have provided no capital for direct investment in "loans to
reserve agents," and aside from the "cash reserves" have provided
scarcely enough for adequate "exchange accounts." The banks in
reserve cities are in about the same relative condition as those of
the country at large. The banks of the central reserve cities, how-
ever, have not sufficient capital to provide themselves with the cur-
rent "cash reserves" used in the business, and which are required of
them by statute. At the date of making the report the amount of
"cash" provided through capitalization bv this class of banks
National Hanks as a Means of Public Control
63
was only 24.2 per cent, of the net banking liabilities; the balance
of the amount of "cash" on hand to support outstanding accounts,
and to meet the 25 per cent, legal requirement had been borrowed.
Judgment of Bankers as to whether Present Capitalization is Adequate.
If, on the other hand, we take the judgment of bankers as to
what equipment is necessary to the safe conduct of their business,
another result will be obtained. For this purpose it may be assumed
that a banker will keep no more "cash" on hand than safety to his
business requires; if he does he is violating good business judgment.
The same may be. said of "exchange accounts" and of investments
made in low income-producing assets from which "cash" may be
realized by quick turns to support credit accounts. Assuming
further that the principle is a sound one, that such assets as are
permanently employed, or are continuously needed in the business,
should be procured by direct investment of capital {i. e., that a
business concern, especially a bank, should not obtain its equipment
on a "floating debt"), then the inadequacy of capital measured by
the standards set by bankers themselves increases as we proceed
from periphery of the National Banking system towards this center.
To exhibit this in tabular form, the result of failure of the law to
require such control as will prevent the overtaxing of capital re-
sources, and such as will insure that our commercial banks do busi-
ness on their own capital, would appear something as follows :
Comparative Statement of Equipment Actually Used by the Several
Classes of Banks — Stated in Millions of Dollars.
Classes of Capital Items
Iowa
Country
Banks
United
States
Reserve
Cities
Central
Reserve
Cities
New
York
Charges Against Capital
Banking House, Real Estate, and
Margins
$ 5-4
$ ior
$ 186
$ 42
$ 43
$ 38
Redemption Equipment Used
Cash Reserves
...
2 . 1
2.4
7-i
183
120
260
153
605
187
470
267
147
46
116
114
275
21
94
208
Exchange Account
Securities
Loans to Reserve Agents
Total
$20.5
$817
$1,715
$465
$433
$339
Capitalization
$20.5
$698
17%
$1,310
405
31%
$321
144
44%
$291
142
49%
$215
124
S8%
Floating Debt
Percentage of Floating Debt
64 The Annals of the American Academy
In the above, question is raised as to several classes of items.
Without specific inquiry in the form of report required as to
the amount which a bank carries for "exchange accounts," this must
be approximated. The approximation here given, however, is a
deduction from "Loans to Reserve Agents" (another account which
is carried as an invested reserve for the purpose of supporting the
cash reserve) and, therefore, one which should be capitalized. As
to the "securities held," in so far as they are not held as reserve
equipment, they are not a banking resource and like "real estate"
are in the nature of an encumbrance on banking capital. Such assets
must be either for support to bank credit or for direct investment.
In either case the bank should not buy bonds on credit. Taking
the charges against capital as they stand and the redemption equip-
ment actually used, we find that for the United States, in the judg-
ment of bankers themselves as reflected in practice, the banks should
have provided $405,000,000 more of capital to support their business.
That is, to properly support $4,392,000,000 of credit used in the
course of bank operations to purchase $4,392,000,000 of income
producing assets, the equipment which was actually used should
have been provided by the proprietors of the business. Such a
provision would require an increase of 31 per cent, in total bank
capitalization. But further inquiry would show that all but 9 per
cent, of this gross amount would be required of the reserve cities,
and that a very large portion %of the increase is needed in the city
of New York.
Inadequacy of the Reserve Requirements.
Again I wish to affirm the position before taken— that this is
not proposed as a true method of analysis to get at the relation of
intensity of credit strain to equipment used. Attention is directed
to the fact only that such an element should be taken into account
in reports, the purpose of which is to furnish the data for official
control. Further, it is suggested that no provision is made in the
present form of report for ascertaining these data; and only one
provision of law is made to protect the public against any over-
taxing of capital equipment. This one provision referred to is
the clause which imposes a minimum limit in money reserve to be
National Banks as a Means of Public Control 65
kept. Drawing on experience and on the expression of banking
opinion in legal form in State practice before adoption of the National
Bank Act, the minimum money reserve to be kept by country
banks was set at 15 per cent, of credit accounts outstanding, and
for reserve city banks, 25 per cent. This clause was modified,
however, under pressure from the banks, so that in estimating the
amount of cash on hand three-fifths of the 15 per cent, money reserve
of country banks might consist of loans to reserve city banks, and
one-half of the money reserve required of reserve city banks might
consist of loans to central reserve city banks.
This limitation imposed does, in fact, operate to prevent some
of the least provident bankers from bringing their houses down
on the heads of customers, and precipitating a panic in the business
community. Nevertheless, the provision is entirely inadequate to
prevent an overtaxing of equipment. To illustrate one of the
methods used for complying with the law and at the same time for
carrying a load that keeps the institution on the verge of credit
collapse: From the published reports it appears that a number of
banks have individual deposits outstanding amounting to from ten
to twelve times their capitalization. Some of these banks continu-
ously carry a cash fund larger than their capital stock, surplus
and undivided profits. Where did they obtain this money? Un-
doubtedly they borrowed it. In several instances, only about one-
third of the equipment constantly used by these banks is provided
by means of capitalization; the balance is obtained on demand loans.
Imagine another enterprise being financed in this manner !
The Present Condition not the Fault of the Banker but of the
Bank Act.
I am not finding fault with a bank for doing business in this
way. If a banker finds that he may obtain capital from others
with which to do business and that, when a sudden demand comes
for payment, he can force his commercial customers to find the
means necessary to replace the temporary foundations withdrawn,
if by such methods the banker may be able to keep his own house
from falling on the heads of managers and stockholders, he may be
exonerated qn the principle that he has availed himself of a business
66 The Annals of the American Academy
advantage which has brought a large return in profits. But the
purpose of control is not to protect the bank. From the point of
view of the purpose of public control we ask the question. "What is
the result of this character of banking to the commercial commu-
nityv' As a national system this is simply another form of wild-cat
banking and it is in this very practice that we find much of the
trouble that heretofore has been ascribed to inelasticity of the cur-
rency. The prime fault is in a law which permits bank capitaliza-
tion inadequate to maintain the volume of bank credit offered to
the community with which to do business and of which customers
have availed themselves. This being suddenly withdrawn to pro-
tect the bank from its own weakness, the community is left in a
crippled condition to shift for itself.
One of the purposes of control should be to secure a better
co-ordination between the volume of credit accounts sold and capital
equipment provided as a means of support; to this end the National
Banking Act needs revision. But having been revised so as to give
the Comptroller power to exercise supervision to prevent the over-
straining as well as the "impairment" of capital equipment, the
present power to compel reports is sufficient to make this supervision
effective. One of the two principal purposes of the Bank Act is to
guard the integrity of our financial system and to protect the public
against loss on account of inadequate capitalization. To effect the
full measure of good intended by the Act, to vouchsafe a system
of control which will secure "sound banking" as well as "sound
currency," there should be added to the present powers which are
intended to protect against an impairment of capital, inquisitory
powers directed against an overloading of equipment. As a means
of executing this authority, classified schedules should be devised
which will furnish the information necessary to intelligent official
discretion, and classified financial statements of results should be
published, that the public may the more intelligently deal wTith the
banks.
State Regulation of Insurance
By L. G. Fouse, Esq., President of the Fidelity Mutual Life
Insurance Company
(67)
STATE REGULATION OF INSURANCE
By L. G. Fouse
President of the Fidelity Mutual Life Insurance Company of Philadelphia
Origin. — The right of the State to regulate corporations created
by it is concededly an attribute of State sovereignty. Corporations
to whom sacred and important trusts are committed may be properly
required, therefore, to make a full exhibit of their condition to a
duly constituted authority of the State which is responsible for their
existence.
Experience has shown that in the absence of any State regu-
lation, franchises granted by the State have been shamefully abused,
and that because of the lack of authentic information it is practically
impossible for private judgment, even the best, to be exercised
intelligently. "Get rich quick" concerns have been incorporated
and men of prominence have appeared as officials, thus combining the
legal sanction of the State with the reputations of individuals, which
have had the effect of inspiring in some degree public confidence in
alluring, but impossible, schemes.
It was because of this condition affecting moneyed corporations,
that steps were taken by some of the States as far back as the year
1828, to require them to make report to State officials. While
State regulation of banks has been found necessary, and has placed
the banking business on comparatively safe grounds, it is even more
necessary in the matter of insurance, because an insurance contract —
and this is especially true of life insurance — may run for a long
time, and generally does not mature until the death of the party who
made it. It is right, therefore, that the State by its laws and their
enforcement should protect both the maker and the beneficiaries
under contracts of insurance. And it is just as important to protect
the insurer by law against imposition, collusion and fraud, as it is
to protect the insured or assured.
Aside from the fact that under an insurance contract the
happening of the contingency insured against may occur far in the
future, is the possibility of an insurance company's continuing to pay
(69)
-0 The Annals of the American Academy
its current claims with remarkable promptness, although it may be
hopelessly insolvent. The solvency of an insurance company can
only be determined by comparing available assets with the present
worth of its future obligations, together with the accrued liabilities.
The determination of the present worth of its obligations is a techni-
cal matter which few individuals can accomplish for themselves.
It requires skill and expert knowledge, which under State regulation
are provided by the State.
The abuse of the franchise privilege before State regulation
of insurance existed was so marked that a special commission in
New York State, on application of the companies themselves, was
appointed, and in December, 1856, reported its conclusion as
follows :
"The only sure method, without serious embarrassment to the
companies, we can discover to prevent the organization of fraudulent
institutions, and at the same time give the public an opportunity to
know at all times the condition of the companies, is to have a system,
sanctioned by law, requiring a rigid supervision on the part of the
State, which can be accomplished by annual investigation and public
registry of their securities," and, "they should be properly guarded
and protected in their legitimate business."
The origin of State supervision may, therefore, be attributed
to franchise abuse and the ruinous practices which obtained thereto-
fore, Massachusetts being the first to establish an Insurance Depart-
ment in 1855, New York following in 1859.
History. — Regulation of insurance by the State as it now exists is
of comparatively recent origin. The most rigid regulation recorded
in history is that by the German Empire. There is practically no
freedom of action on the part of the company management, and
little or no provision is made for changed conditions. That which
properly belongs to by-laws for the government of the company
has been incorporated into the statute.
The other extreme, of liberality, will be found in Great Britain,
which country may be said to be the mother of insurance. The
keynote of regulation in Great Britain is publicity. Companies
are required to file regular, carefully prepared schedules, by which
any person of ordinary knowledge[may arrive at an intelligent con-
clusion as to the financial standing of the companies. Great
State Regulation of Insurance 71
Britain, however, has always exercised a paternal interest in in-
surance.
By reason of complaints which had been made to the Govern-
ment, a Parliamentary Committee was appointed as early as 1720,
which was the first Parliamentary Committee on Insurance, but many
such committees were subsequently appointed. A report of the
Parliamentary Committee which sat in 1844 seems to have been the
basis of the weeding-out process which followed. They classified
the so-called "bubble companies" under three heads: —
First. Those which, being faulty in their nature, inasmuch
as they are founded on unsound calculations, cannot succeed by any
possibility.
Second. Those which, let their objects be good or bad, are .so
ill-constituted as to render it probable that the miscarriages or failures
incident to mismanagement will attend them; and
Third. Those which are faulty, or fraudulent in their object,
being started for no other purpose than to create shares for the
purpose of jobbing in them, or to create, under pretense of carrying
on a legitimate business, the opportunity and means of raising funds,
to be shared by the adventurers who start the company.
A registry law was passed, to become operative September,
1844, which was the substantial beginning of insurance legislation,
and which in Britain seems to have attained its perfection by the
Act of 1870, and amendments thereto.
Britain has upwards of twenty insurance institutes, and several
actuarial societies, the oldest of which, the British Institute, was
founded in the year 1848. Since the weeding out of unreliable
companies between the years 1844 and 1850, the method of regulation
in Britain, which is, as already stated, mainly by publicity, has
produced very satisfactory results. This is in a great measure due
to the development of the scientific aspect of the business. All
the world is in a great degree dependent on Britain for scientific
treatises on the subject of insurance.
It is only in recent years that organized attention has been
given in America to the scientific aspect of the insurance business.
The Actuarial Society of America was founded in 1889.
State regulation in the United States occupies a mean between.
72
The Annals of the American Academy
the hard and fast lines of the German Empire and the liberality
and latitude vouchedsafe by Great Britain.
As already stated, Massachusetts created an Insurance De-
partment in 1855, and New York in 1859, but Massachusetts did not
value policy liabilities by any standard until 1861, and New York
did not until 1S68. Other States followed, Pennsylvania in 1873,
until now all the principal States have not only undertaken to regu-
late the business by legislation, but have created Departments
charged with the execution of the laws in relation to insurance.
Every State has enacted laws to regulate the business.
Such laws specify what is necessary to secure a charter in the
home State, or a license from another State by way of payment of
fees, deposit, execution and filing of papers, and what must be done
periodically in order to continue business. The requirements of one
State frequently conflict with the requirements of another State.
With the view of endeavoring to reconcile such conflicts, and to
secure a greater degree of uniformity and harmony in State regula-
tion of insurance, the Insurance Commissioners have assembled in
annual convention since 1871 for the interchange of views and
opinions.
Abuse of Power of Regulation. — Aside from the taxation abuse
to which State regulation has given rise, and which will be discussed
separately, there are, notwithstanding the many good points, abuses
and objections in evidence.
Insurance, in order to get the benefit of the law of average,
must of necessity be extended over a wide field. Practice, as well
as the natural conditions, has made it an interstate business.
The Legislatures of the several States meet either annually or
biennially, and at every session bills are introduced, either will-
fully or ignorantly, which, if enacted into a law, would seriously
embarrass if not entirely destroy the business which has become an
essential part of our progress and civilization. This necessitates
vigilance, not only on the part of the State officials to whom the
supervision has been entrusted, but on the part of the companies,
and involves them in no inconsiderable expense.
Notwithstanding such vigilance, laws are frequently enacted
in one State which are directly opposed to the laws of another State,
and yet the companies already licensed and with business established
State Regulation of Insurance 73
in the several States are expected to comply with the conflicting
laws, and penalties are imposed if they do not comply. While
there has been a marked improvement in this respect through the
operation and work of the National Convention of Insurance Com-
missioners, under the theory and practice of exclusive State super-
vision it never can be as it should be for the best interests of the
people.
The State office of Supervisor of Insurance, whether elective
or appointive, is not always filled by one whose experience, training
and knowledge fit him for the position, but is liable to be filled by
one as a reward for political service, without reference to any special
fitness for the discharge of the duties required of him. It is true
that the office in the principal States, as a rule, has been filled by
men of eminent fitness. Nevertheless, there are many instances,
if the facts were generally and publicly known, that would seriously
reflect upon the entire system of State supervision.
A little knowledge is admittedly dangerous. A number of
the supervisors, by not restraining themselves in office until they
have mastered the intricacies of the business, have taken positions
which they could not maintain, and which were exceedingly annoying
as well as expensive to the companies. There have been supervisors
who constituted themselves judges of the law and the facts, and un-
undertook to rule arbitrarily without taking into account equities and
results.
As a rule, the officers of States to whom supervision is entrusted
are amenable to the courts, and, therefore, any radical departure
from sound doctrine and good practice may be checked or corrected
by appeal to the courts. A few States, however, notably Massa-
chusetts, leave everything relating to insurance to the opinion and
discretion of the Commissioner. Fortunately, the office has been
filled by men who have, with a few exceptions, taken no undue
advantage of the power conferred on them by law. In view of the
magnitude of the interests involved and the uncertainty as to the
capability and fitness of the supervisor, no State should enact laws
making the opinion and discretion of the supervisor or commissioner
final and conclusive. Just as the . individual under civic liberty
has the right to be adjudged innocent or guilty by a judicial tribunal
74
The Annals of the American Academy
so an insurance company should not be deprived of an appeal to
such a tribunal in the case of a controversy with a State supervisor.
The law of comity obtains between most of the States, so that
the certificate of the supervisor of the home State is accepted,
under the provisions of the laws of reciprocity usually incorporated
in the statutes of the different States, by the Supervisors in other
States. There are, however, a number of States that have no local
companies, and reciprocity means little or nothing to the super-
visors of such States. Hence, it is not unusual for them to attempt
to make independent investigations and valuations at the expense
of companies.
Some vears ago, junketing trips at the expense of the com-
panies were made by the representatives of some of the State In-
surance Departments. The examinations made were farcical, the
examiners being incompetent, not skilled or trained, and the motive
was self-aggrandizement, instead of benefit to the policy-holders.
However, the exposures of two or three such instances have had a
salutary effect, and there is less of it now than heretofore. Never-
theless, the opportunity for the abuse still exists.
Notwithstanding the efforts made since 187 1 to get the States
to adopt a uniform blank upon which to make returns, there are
still a number of States that have not fallen in line, which multi-
plies labor and increases the expense of the companies. Under
the laws of most of the States, the supervisor is given discretion in
submitting questions to the companies. When forty-eight super-
visors exercise such discretion, it can be readily understood how dif-
ficult it is to limit the questions submitted in the blanks to those
approved by the National Convention of Insurance Commissioners,
which is a voluntary body and has no legal existence. It is nothing
unusual, especially for inexperienced supervisors, to introduce some
new question, troublesome and expensive to the companies, but of
no practical value whatever.
Some of the States have discriminated against insurance com-
panies by imposing a penalty on companies in case they do not
succeed in defending a claim believed by the management to be
unjust. Such penalty in the State of Texas amounts to 12 per cent,
of the claim "together with all reasonable attorneys' fees." In
a number of the States, companies are denied the right of trans-
State Regulation of Insurance 75
ferring cases to the United vStates Courts. In others, there are
restrictions and conditions which practically amount to a denial of
the right to appeal to the highest courts.
In a word, abuse of State regulation of insurance is mainly due
to the impossibility of unifying and controlling the Legislatures
and supervisors of the forty-eight distinct sovereignties comprising
the Union.
Benefits and Advantage. — It is safe to say that the legitimate
insurance interests of this country would not be willing to give up
State regulation and supervision except for something manifestly
better. Supervision in the light of legislative regulation has been
upon the whole a success. The fault lies with legislative regulation
rather than with supervision. The tendency, however, in both
legislative regulation and supervision has been in the line of improve-
ment. Largely through the influence of supervision, the business of
insurance has been properly classified. While there are yet a few
companies acting under old charters, which combine businesses
that had better be separated, the general rule of separation of fire,
life, casualty, health, etc., obtains.
Safeguards have been adopted for the admission to the several
States of only such companies as can show their ability to fulfill
their contract obligations. Before a company can be admitted
to do business, it must file a certified copy of its charter, an official
certificate showing that it is legally authorized to do business in its
home State, that it has a surplus over and above all liabilities, and
the ability to fulfill its obligations, that it has securities on deposit
with the financial officer of its home State worth at least $100,000,
and in case of different lines of business, a larger deposit must be
made. It must file its annual statement showing income, disburse-
ments, list of investments, etc. ; furnish a certification of valuation
of its policy liabilities from the insurance official of its own State,
appoint an attorney upon whom legal process may be served, furnish
a list of its agents within the State to whom license must be granted
by the State before they are authorized to do business, and must
allow at the expense of the company an examination of its affairs
whenever deemed expedient by the insurance officer of the State.
It must also file official copies of all its policy forms and of documents
referred to therein or made a part thereof; and there are a number
76
The Annals of the American Academy
of other requirements which must be met. These are usually in the
line of good business and in the interest of the insuring public.
After a company is regularly admitted, it must comply with
the laws of the State, which usually protect the insured against
forfeiture, against unreasonable delay in the payment of claims,
and require a company to make annually a full exhibit of its affairs,
which by most of the States is published in the report of the Insurance
Department.
An effective system of supervision economically administered
lias become an absolute necessity to the business of insurance.
Taxation Abuse. — All the abuses of State regulation already
mentioned pale into insignificance before the abuse of taxation. Life
insurance does not create wealth, it merely distributes and sustains,
and is designed to reduce misfortune and pauperism and encourage
thrift and stimulate unselfishness and self-dependence. Law-
makers, however, because of large accumulations incident to the
feature of distribution, feel that these are easy to get at, and, there-
fore, should be made subject to taxation. The equities and justness
have evidently not received due and proper consideration. If they
had, it would be found that the tax is paid by the policy-holders
themselves, who have already paid taxes in some other form, and it
is, therefore, multiplying taxation upon them.
On December 17, 1897, I addressed the American Academy of
Political and Social Science, and presented the result of an inves-
tigation I had caused to be made in the Philadelphia and Mont-
gomery County almshouses. The census of 1243 paupers with
reference to life insurance was taken. Less than 10 per cent, had
ever contributed to life insurance, and then only under industrial
policies, which generally afford merely a burial fund, and only three
were found that had ever been beneficiaries of life insurance. The
investigation clearly showed that life insurance is practically un-
known to the pauper class, and yet fully 10 per cent, of the paupers
had been tradesmen.
The work of the insurance agent is to solicit and encourage
men during their productive years to make provision for their families
in the event of their death and for themselves in old age, thus waging
a constant warfare against pauperism and public dependency. For
doing this, which is for the good of the individual and the legislative
State Regulation oj Insurance 77
organism of society, called the State, the latter imposes a penalty
by a multiplication of taxes.
A contrary policy has been pursued in Great Britain ever since
it was found through an investigation by a Royal Commission, ap-
pointed in 1832, that the life insurance and friendly society move-
ments encouraged thrift, self-reliance, self-dependence, and reduced
the poor rate, as shown by section 821 of their report, more than
$10,000,000 annually. According to the terms of Section 54 of 16
and 17 Victoria, cap. 34, every policy-holder in a life and accident
company, who may be liable for income tax, is entitled to deduct
from his return of income to Government the premium or premiums
paid by him under any policy or policies of insurance on the life of
himself or his wife, to the extent of not more than one-sixth part of
his wmole income.
The policy pursued by the States in this country is, that while
money deposited in building and loan associations and in savings
banks, where it is always available to the depositor, shall be tax free,
money deposited with an insurance company, designed to protect
dependents in the event of the death of the insured, and not available
to the insured, thus preventing pauperism among such dependents,
must be taxed not only once but several times, indicated as follows :
1 st. Fees to the Insurance Department, including usually a
liberal license fee; 2d, license fees of agents; 3d, tax on gross pre-
miums of usually 2 per cent.; 4th, franchise tax or a tax on invest-
ments; 5th, augmented frequently by city, county or municipal
tax or license fees.*
In 1903 it cost the policy-holders in the United States holding
policies in level-premium companies $8,500,000 for taxes, or about
six per cent, over and above all direct taxation on the actual property
in their possession, of the whole amount paid for death claims and
matured endowments. In 1903 the Fidelity Mutual Life Insurance
Company paid its officers $39,664.14 to manage its business, and
paid to the States $69,685.21 in tax and fees for the right to do
business.
There is neither uniformity of rate nor method in imposing
tax by States. One State will tax reserves, another gross premiums,
etc., in addition to the license fees. The latest innovation was
made by the State of Nebraska taxing the cash surrender values of
;s
The Annals of the American Academy
policies, which, however, being a direct tax; will become known to
the insured, and probably will be soon repealed.
I admit that the State which gives existence to a corporation
has a right to expect a reasonable revenue from it, but submit that
it is not good public policy, and is contrary to the spirit of the State
'•which aims to secure the prevalence of justice by self-imposed
laws," to multiply the taxes upon one class of its citizens. It should
be remembered that "the great battles for freedom from the earliest
limes have been fought out on the questions of taxation." State
legislation, under the cover of taxation, has been trespassing step
by step upon the rights of a class of citizens who have agreed among
themselves to make provision for their dependents, until such rights,
if such trespassing continues, will be seriously jeopardized.
Insurance corporations should be taxed as all others, on the
actual property in their possession, and in addition to this a tax
might be imposed to cover the cost of supervision. The cost of
supervision, which should include examination of the companies (this
inspection should be made at the expense of the State and not of the
companies), would not exceed 10 per cent, of the amount now col-
lected for taxes and fees.
State Regulation of Insurance under National Supervision. —
While it would be impracticable and in a manner impossible to dis-
pense with State regulation, I am convinced that it would be to the
best interests of the insuring public and the business of insurance to
place State regulation under national supervision by Act of Congress.
Before the adoption of the Constitution, it* was attempted to
control trade under the Articles of Confederation by Legislatures of
thirteen distinct sovereignties. Gen. Washington said : " It behooves
us to establish just principles, and this cannot, any more than other
matters of national concern, be done by thirteen heads differently con-
structed and organized." Discrimination, confusion and discord
among different parts of the Confederacy were in evidence. One
of the reforms demanded was introduced and adopted by the Con-
stitutional Convention, and is found in Sec. 8 of Article I, namely:
"The Congress shall have the power to regulate commerce with
foreign nations, and among the several States, and with the Indian
tribes."
The creation of a national bureau of insurance under this sec-
State Regulation of Insurance 79
tion would be as simple, logical and conclusive as was the creation
of the Department of Commerce. This subject has been discussed
for the last thirty years. The opponents of national supervision,
and those not informed, refer to the case of Paul vs. the State of Vir-
ginia, decided by the Supreme Court of the United States in 1869.
The question before the court was as to whether Samuel B. Paul
violated the Virginia law in representing a company not licensed by
the State. Judge Field delivered the opinion of the Court and said :
'Issuing a policy of insurance is not a transaction of commerce.
These contracts are not articles of commerce in any proper meaning, of
the word."
A careful analysis of the case discloses the fact that the court's
statement touching the relation of a policy of insurance to commerce
is not entitled to any greater weight than that which ordinarily
attaches to what the courts call "obiter dictum," and is not, there-
fore, a precedent for the Supreme Court or for any other court.
As to whether or not insurance is commerce was not germane
to and had no bearing whatever upon the case. The decision would
have been precisely the same whether Congress has or has not the
power to regulate commerce among the States, and whether insur-
ance is or is not commerce. The States have the undoubted right,
in the absence of an act of Congress, to regulate the business and
prescribe the terms under which foreign corporations may transact
business within their borders.
If there had been a Congressional act in force in 1869 declaring
insurance to be commerce, then the question would have turned
on the constitutionality of such Congressional act, and Judge Field's
statement would not have been a mere dictum in effect, but a positive
expression of the law. ''Dicta are judicial opinions expressed by
the judges on points that do not necessarily arise in the case. Dicta
are regarded as of little authority on account of the manner in
which they are delivered, it frequently happening that they are given
without much reflection, at the bar, without previous examination."
In the case of Frants vs. Brown, 17 Serg. and Rawle, 292, Judge
Huston said: "I protest against any person considering such obiter
dicta as my deliberate opinion." Applying this reasoning to the
Paul case, and considering the little influence or weight attaching
to obiter dicta it is evident that that case is no authority on the
g() The Annals of the American Academy
question as to whether or not insurance is commerce, and the ques-
tion is yet an open one, without any judicial conclusion one way or
the other.
The next point for consideration is, should Congress declare
insurance to be commerce. If so, then it undoubtedly becomes a
subject for national supervision, but not until it has been so declared.
The Supreme Court in the case of Debs held that ' ' the Govern-
ment of the United States is one having jurisdiction over every foot
of soil within its territory, and acting directly upon each citizen."
In considering what was meant by commerce in Section 8 of Article
I of the Constitution of the United States, recourse must be had to
the generally accepted meaning of the word. Some give it the narrow
construction of trading in merchandise. The discord and friction
which obtained between the distinct sovereignties under the Articles
of Confederation, led such men as Alexander Hamilton, Thomas
Paine, Noah Webster, John Jay, James Madison, and Gen. Washing-
ton to advocate the framing of a National Constitution which in
certain matters should subordinate the States to the Nation.
Alexander Hamilton, in a letter September 3, 1780, to James
Duane, contended that "Congress should have complete sovereignty
in all that relates to war, peace, trade', finance, foreign affairs, armies,
etc." He also, in speaking of the interference and unneighborly
relations of States, urged that the "injurious impediments to the
intercourse between the different parts of the Confederacy" be con-
strained by National control. Sec. 8 of Article I of the Constitution
as adopted accomplishes this.
Commerce practically comprehends trade' and finance, and in-
cludes insurance. According to the American and English Encyclo-
paedia of Law, vol. 6, p. 217, the term "commerce" includes "all
commercial intercourse."
"The word ' commerce,' as used in the Constitution, includes all its ramifi-
cations, and every feature or form which it may assume." Ex. p Crandall. 1
Nev. 312. F
"Commerce among the States, within the exclusive regulating power of
Congress, consists of intercourse and traffic between their citizens " In re
Green, 52 Fed. 113.
" By the term commerce is meant not traffic only, but every species of com-
mercial intercourse." State vs. Delaware, etc., R. Co., 30 N. J. L. 478.
"Commerce signifies any reciprocal agreement between two persons, by
which one delivers to another a thing which the latter accepts, and for which
he pays a consideration." Crow vs. State, 14 Mo. 247
State Regulation oj Insurance 81
"Commerce is undoubtedly traffic, but it is something more; it is inter-
course." Gibbon vs. Ogden, 9 Wheat. (U.,S.) 189
"Commerce is defined to be an exchange of commodities, but this definition
does not convey the full meaning of the term. It includes intercourse and navi-
gation." Henderson vs. New York, 92 U S 259.
"Commerce is a term of the largest import. It comprehends intercourse
for the purposes of trade in any and all its forms." Welton vs. Missouri, 91
U. S. 2S0; Campbell vs. Chicago, etc., R. Co., 86 Iowa 5S9.
"The definition given as used in the Constitution of the United States
includes intercourse." Fuller vs. Chicago, etc., R. Co., 31 Iowa 207.
"Commerce signifies any reciprocal agreements between two persons."
Bouvier's Law Dictionary, 280.
All authorities seem to agree that commerce comprehends inter-
change and intercourse in pursuance of agreements between parties.
A contract of life insurance is unquestionably a reciprocal agreement
between two parties and is a thing of value. In England, the super-
vision of insurance is in the hands of the Board of Trade ; in France,,
it is looked after by the Minister of Commerce ; in Norway, permit
must be obtained from the Commercial Registrar; in Austria, it is
subject to the Tribunal of Commerce.
Is Insurance In Reality Commerce ? — Who would have the temer-
ity to assert seriously to-day, and under existing conditions, that
insurance is not commerce, that the most colossal and important
industry of modern life, involving more money and affecting more
people than all the railroads, banks, trust companies and savings
institutions combined, extending into every nook and corner of the
land, and the subject of sale, barter and pledge wherever business
activity exists, is not commerce, especially in contemplation of the
Constitution?
Indeed, it is confidently believed that Judge Field himself,
if he were alive to-day, in view of the enormous aggregations of capi-
tal, the gigantic combinations of all sorts, the revolutionary and pro-
gressive methods of business, the augmented necessities incident
thereto, the extended powers of the Federal Government under
judicial construction, and above all, in view of the prodigiousness of
insurance, its universal ramifications, its many uses, trade, com-
mercial and family, and the vast money interests involved, would be
one of the first to declare that it is, in the very highest sense, com-
merce, and conducted as it is to-day, is pre-eminently interstate
commerce and subject to Federal supervision and regulation under
appropriate Congressional legislation.
Furthermore, the question as to whether insurance is commerce
32 The Annals of the American Academy
or not, is not an abstract question of law. It is rather a question of
fact and to be determined as other questions of fact are determined.
And it is respectfully submitted that intelligent business men are,
to sav the least, quite as competent to determine the question as
judges and lawyers. If, therefore, Congress should declare that
insurance is commerce, the question would be thus determined by
the greatest and ablest legislative body in the world, whose impartial
determination of any question of fact deserves universal acceptation
as just and proper. The judges of the Supreme Court would un-
doubtedly accept Congressional determination of the fact as con-
elusive, even if thev should personally entertain a different view,
just as thev accept the verdicts of juries. But even in the absence
of a declaration to that effect by Congress, if the question should
be fairly and squarely presented to the Supreme Court either as a
question of law, or fact, or both, the Court would undoubtedly hold
that insurance is commerce, in view of the reasons heretofore indi-
cated.
The character of a Federal statute regulating interstate insur-
ance, the privileges and limitations under it, its requirements, the
powers and duties of the officials under it, and in fact, the whole
scope of such a statute, would require on the part of those who drafted
such a law the greatest care and experience.
Congress Inferentially Declares Insurance to be Commerce. —
Congress, in establishing the Bureau of Corporations of the Depart-
ment of Commerce and Labor, authorized such Bureau to gather,
compile, publish and supply useful information concerning "such
corporations doing business within the limits of the United States
as shall engage in interstate commerce, or in commerce between the
United States and any foreign country, including corporations
Engaged in insurance." This is the first legislative or judicial
expression under Federal authority to the effect that corporations
engaged in insurance come under the head of "commerce." The
natural sequence of the gathering and disseminating of information
by the Bureau of Corporations will be the establishment of national
supervision of insurance.
State regulation would, with the exception of the powers and
authority delegated by national supervision, be limited to the regu-
lation within its own borders of the corporations to which the State
State Regulation of Insurance 83
gives existence. State legislative regulation would virtually be at
an end, as it should be ; but State supervision could no doubt be sub-
ordinated to and be the representative of national supervision. If
a State maintains a bureau, then there is no reason why records, so
far as they relate to companies doing business in such State, should
not be furnished by the National to the State bureau for the information
of the citizens of such State. The relationship of State regulation
to national supervision will give rise to many important questions
which require careful consideration.
Until Congress exercises the power conferred upon it by the
Constitution to provide national supervision, the States will con-
tinue to exercise such right, because it is not forbidden, and because
supervision is a necessity.
II. The Scope and Limits of Federal
Anti-Trust Legislation
(85)
The Federal Power Over Trusts
By Honorable James M. Beck, Late Assistant Attorney-General
of the United States
(87)
THE FEDERAL POWER OVER TRUSTS
By Hon. James M. Beck
La e Assistant Attorney-General of the United States
The last decade of the Nineteenth Century witnessed an extra-
ordinary concentration of industries. For this economic phenom-
enon there were doubtless many and complex causes. The pro-
found and underlying cause was unquestionably the centripetal
influences of steam and electricity. These potent agencies, which
have almost annihilated time and distance, have made it possible
for the individual, and especially for collective groups of men, to
conduct business operations over a much larger area than was ever
heretofore possible. The natural result of such concentration
should be the elimination of unnecessary waste, both in the matter
of production and also in the nice adjustment of consumption
to production. To this extent concentration is as inevitable a
law in the business world as gravitation in the physical universe,
and its force is so potent and irresistible that, if it conflict with
either the statutory or constitutional law of organized government,
the latter will sooner or later inevitably and peacefully give way.
The trust problem is therefore not peculiar to the United States.
The concentrating tendency of steam and lightning first mani-
fested itself on a large scale in England, where scattered business
enterprises of individuals were rapidly consolidated into industrial
stock corporations, and later in Germany, where a similar move-
ment was made to revise its general economic methods. The United
States followed and did not lead an irresistible impulse in all civi-
lized countries.
But the economic phenomenon which gave rise to the so-called
trust problem had in our country some special causes. In part, it
was due to the instinct of imitation. A group of young men of
extraordinary business genius, perceiving the demoralization of
the oil industry by reason of cut -throat competition, created by a
gradual revolution the Standard Oil Trust. Its unprecedented
success, and the enrichment beyond the dream of avarice of its
(89)
9o The Annals of the American Academy
chief promoters, led men in other industries to attempt the formation?
of similar trusts, and when combinations of manufacturers were, so
far as Federal laws are concerned, apparently legalized by the
decision in the Sugar Trust suit, these amalgamations of business
enterprises proceeded with startling rapidity and ever accelerating-
speed, until there were formed between 1890 and 1900 over
four hundred large trusts, so-called, with a total nominal capital
in excess of twenty billions of dollars.
The imitators of the Standard Oil Trust, however, forgot that
it was far easier to create a monopoly in a product of limited
production like oil than in others of general and almost unlimited
production, and they further made the greater error of supposing
that mere combination would insure prosperity. The Standard
Oil Trust was at the beginning and remains to-day the most wonder-
ful business organization for the sale of commodities in the worldr
and this is not merely due to combination, but to the fact that
its managers are familiar with the work of the company and give
to its management the advantage of exceptional ability and un-
tiring industry. Their imitators, however, made the mistake of
assuming that there was some magic in the mere fact of com-
bination, and that when a practical monopoly was secured for
the time being in any given industry, little remained, except
to enjoy its fruits.
A third cause for the formation of trusts was the opportunity
which modern corporate facilities gave for the flotation of corporate
shares and consequent speculation therein. This facility to repre-
sent business values by pieces of paper gave a tempting oppor-
tunity to the promoter and the speculator, and combinations were
formed, not for the purpose of eliminating waste in the produc-
tion, transportation and sale of a commodity, but to float shares
of stock and sell them to the public at artificial prices. To this
cause must be attributed the greatest evils of the trusts. Over-
capitalization, secret profits to the promoters,, the declaration of
unearned dividends, the purchase at excessive prices of material
from insiders, and similar evils swiftly followed, and a very
saturnalia of business fraud ensued, which arrested the
industrial progress of the nation and produced a profound, although
temporary, depression. Not one, but a hundred John laws, sud-
The Federal Power Over Trusts 91
denly attempted to create wealth by the liberal use of the printing
press, and the South Sea Bubble became insignificant in compari-
son with the wild speculative orgie of the last few years, which
inflicted losses on the investing public of not less than three billions
of dollars.
It is not the purpose of this paper, however, to discuss the eco-
nomic phases of the trust problem, but to indicate the extent of
the Federal power over those vast amalgamations of capital. The
subject is one of overshadowing importance, for it will be generally
recognized that if the Federal government has not the power to
check the rapacity and abolish the abuses of the trusts, the
legal power is non-existent. The States are obviously im-
potent to solve the problem, for their authority ceases with their
respective borders. Steam and electricity have woven the American
people into a closeness of life, of which the framers of the Constitu-
tion never dreamed, and the necessity for Federal police regulations
as to a subject, which the force of events has brought largely within
the Federal sphere of power, has become increasingly apparent.
The Constitution itself has been modified by economic de-
velopments and its great latent powers disclosed. Let me remind
as one startled by the suggestion of an elastic Constitution that
Marshall, the great Chief Justice, clearly perceived that the
Constitution was little more than a working plan for an edifice
that was to endure forever, and, that while it must guide the master
builders, who in the future would erect the superstructure, it could
not express the various means by which the sublime design was
to be carried out. To quote his own language in the great case of
McCulloch vs. Maryland :
"This provision is made in a constitution intended to endure for ages to come,,
and consequently to be adapted to the various crises of human affairs. To
prescribe the means by which government should in all future times execute its
powers, would have been to change entirely the character of the instrument
and give it the properties of a legal code. It would have been an unwise at-
tempt to provide by immutable rules for exigencies, which, if foreseen at all,
must be seen dimly and can be best provided for as they occur."
This truth was never more strikingly shown than in the last
twenty years, when the Republic, partly through expansion of
territory abroad and partly through the concentration of industrial
interests at home, has entered upon a new and most important phase
92
The Annals o) the American Academy
of economic and constitutional development. By some marvelous
intuition— or was it unconscious inspiration?— the Fathers "builded
better than they knew;" and instead of attempting to define the
powers of the Federal government they contented themselves with
their enumeration in simplest phrase, and then — as a novel
experiment in government — they created the august tribunal,
whose sublime and lofty mission was to develop and unfold
these latent powers. The nine Justices of the Supreme Court
are a quasi-constitutional convention and continuously in session.
Their deliberations fill one hundred and ninety-one volumes of
reports, and the noble superstructure of the Federal government
has steadily arisen by judicial interpretation upon the sure
foundation which the Fathers laid. As the conditions which
call for the exercise of constitutional powers change with the progress
of the centuries, necessarily the true powers of. the Constitution,
often latent and unsuspected, must from time to time be disclosed
and developed. The Constitution was and is a growth. As
Jefferson well said: "It was made for the living, not for the dead."
A striking illustration of this truth is the so-called commerce
clause of the Constitution. It was framed to meet almost primitive
conditions. The colonists were largely farmers, who sowed, reaped,
and transported their product in a manner little changed for a thou-
sand years. The world at that time knew nothing of the possibilities
of the railroad, the steamship, the telegraph, the cable, or the tele-
phone. There was practically no inter-vState trade except by sail-
ing vessels which ran inland on tidal rivers. Coaches and wragons
were the only methods of conveyance, and the transportation of
merchandise, beyond the baggage of travelers, was an impossibility.
Little could the Fathers have dreamed of an age when the United
States, from ocean to ocean, would be covered by a very network
of railroad, telegraph, and telephone lines, and when the States of
the Union would be indissolubly bound together by shining paths
of steel aggregating two hundred thousand miles in length. And
yet, the commerce clause has been found broad and elastic enough
to enable Congress to control and regulate the vast inter-State
traffic of the United States, and has been applied to subjects, of
which the Fathers did not even dream. If, therefore, we find our-
selves in the strange sequence of events treading unbeaten paths
The Federal Power Over Trusts 93
(and when did nation ever achieve greatness exeept along such
paths?), and facing conditions and problems undreamed of by the
Fathers, let it not be said that we are doing violence to their spirit
if we apply their principles of government to such new conditions.
The Constitution was great in what it expressly said, but it was
infinitely greater in that which it left to interpretation.
When the American people first found themselves confronted
with the assumed evils of railroad monopoly and industrial trusts,
they turned to the Federal government and invoked its power
over commerce for their suppression. A century had passed since
the adoption of the Constitution and this power had rarely, if
ever, been invoked, except to put a judicial veto on State
legislation. The Supreme Court had held that the failure of
Congress to legislate was the will of the nation that inter-State
commerce should be free, and it struck down every State
statute which in any manner impaired such freedom. When,
however, Congress believed that the then-existing industrial trusts
had been made possible by railway discrimination almost for the
first time they exercised by an affirmative act their power to regulate
commerce, and exactly one hundred years after the Federal Consti-
tution had been adopted, the Inter-State Commerce Commission
was created, whereby, for many purposes, the management of all
inter-State railways was placed under the supervision, and sub-
jected to the inquisitorial powers of a Federal commission. These
inquisitorial powers have recently received strong confirmation in
the decision, which requires the coal carriers to submit to the
Commission the most intimate and secret details of their manage-
ment and operation. While this act has failed to prevent wholly
the abuses of railway discrimination, yet it has gone far to lessen
them, and with the passage of the more recent Elkins Act, further
progress may be reasonably anticipated.
With the passage of this act to regulate inter-State railways,
Congress next proceeded to industrial combinations. The first
bill was introduced by Senator Sherman on August 14, 1888, and
a very flood-tide of proposed legislation succeeded. In the Fiftieth
Congress, twenty bills were introduced; in the Fifty-first, twenty-
three; in the Fifty-second, sixteen; in the Fifty-third, seventeen;
in the Fifty-fourth, eight; in the Fifty-fifth, eleven; the Fifty-
^4 The Annals of the American Academy
sixth, twenty-one; and in the first session of the Fifty-seventh,
twenty-two. Many of these bills excited prolonged discussion in both
houses of Congress, and with the debates comprise over a thousand
printed pages. The remedies suggested were many and various, and
resort was sought to be had to other clauses of the Constitution
besides the Commerce clause, such as the power over taxation,
that over patents and that over the mails. Thus it was proposed
by the abolition of customs duties to subject the trust, which had
secured a monopoly of domestic trade, to the competition of the
rest of the world. It was suggested that as an internal revenue
tax had been imposed to drive out the currency of State banks,
and the sale of oleomargarine had been largely destroyed by taxa-
tion and the constitutionality of such measures had been affirmed,
that this power to destroy by taxation should be invoked. It was
contended that as the government had exclusive power over the
United States mails and could determine what mail matter should
be thus transmitted, that the denial of the mails to monopolistic
trusts would operate to destroy them. Under the judiciary power
it was proposed to deny the trusts an appeal to the Federal courts
in the enforcement of their contracts, and under the fiscal powers
it was suggested that national banks and other government fiscal
agencies should not receive on deposit or accept as collateral or
otherwise deal in any stocks, bonds or securities of a trust. Any
patent or copyright owned by a trust should be forfeited. It was
even contended that the United States government should not
deposit government moneys with any bank which in any manner
deals with the stocks, bonds or securities of a trust. Under the
commerce clause it was proposed that no corporation should engage
in business outside of the State of its origin without a Federal license,
and provisions were made for publicity as to its management and
operation. Another provision was to forbid the inter-State trans-
portation of trust-made commodities.
Many of these suggestions went into the scrap heap of defeated
legislation, as indeed they deserved to do, and the sole result of
this discussion — perhaps the most prolonged and earnest, with the
-exception of the tariff question, since the slavery days — was the
so-called Sherman Anti-Trust Law, of July 2, 1S90. This act in
the most sweeping language, forbade every contract, combi-
The Federal Power Over Trusts 95
nation in the form of trust or otherwise, or conspiracy in
the restraint of trade or commerce among the several States
•or with foreign nations. As though this language were not
-sweeping enough, it provided that every person who shall monopolize,
or attempt to monopolize, any part of the trade or commerce among
the several States or with foreign nations should be guilty of a
•crime. It declared illegal every such contract or combination,
and invested the Circuit Courts with power to restrain violations
of the act. It is passing strange that an act, which was drawn by
eminent lawyers and statesmen after prolonged discussion, should
have been so loosely and unscientifically drawn. From its very
passage, courts have been obliged to guess at its meaning.
Consider, for example, the sweeping character of the language in
Section 2, which makes it unlawful for any person to monopolize
•any part of inter-State or foreign trade. The very word
" monopolize" belongs to the lax language of the political rostrum
and not to the precise phraseology of the law-making department.
After the passage of the Sherman Anti-Trust Law, it was be-
lieved by many, including prominent members of Congress who
had taken an active part in its passage, that it aimed solely at
industrial or manufacturing trusts as distinguished from transpor-
tation combinations. It was contended that, as to the latter,
Congress had fully legislated in the creation of the inter-State Com-
merce Commission. If such had been the real purpose of Congress,
it was defeated by the interpretation placed upon the act by
the Supreme Court; for in the Joint Traffic and Trans-Missouri
cases the act was held to apply to any combination in restraint of
trade between railroad carriers, wThile in the Sugar Trust case the
value of the Act, to the extent that it was aimed at manufacturing
monopolies, was materially impaired.
In the Sugar Trust suit, the then United States Attorney for
the Eastern District of Pennsylvania sought to invalidate a con-
tract which the American Sugar Refining Company had entered
into with certain stockholders of Philadelphia refineries to purchase
from them the stock of their companies. It was proved that
with this acquisition the Sugar Trust had obtained control of
refineries which controlled 98 per cent, of the sugar refined in this
country. The element of conspiracy was sought to be eliminated
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by proof of the fact that there was no understanding or concert
of action between the various stockholders of the several Phila-
delphia companies, who had acted independently and in ignorance
of each other's action, and that the contract of sale in each instance
left the sellers free to establish other refineries and continue the
business if they saw fit to do so, and contained no provision respect-
ing trade or commerce m sugar, and that no arrangement or provi-
sion on this subject was subsequently made.
The relief sought was the cancellation of the agreements and
the redelivery of the stock. It was admitted that the indirect but
probable effect was a practical monopoly (using that term in its
popular rather than its technical sense), of the inter-State sale of
sugar, but it was held that "the fact that an article is manufactured
for export to another State does not of itself make it an article of
inter-State commerce, and the intent of the manufacturer does not
determine the time when the article or product passes from the
control of the State and belongs to commerce." On the authority
of a previous case (Coe vs. Errol, 116 U. S., 517, 525), it was
further held that inter-State commerce does not commence until
"the final movement from the State of their origin to that of their
destination." The court did not mean to intimate that such a
combination might not have as its necessary purpose and effect a
restraint of inter-State commerce in the sale of the product, but
predicated its decision upon the statement that "there was nothing
in the proofs to indicate any intention to put a restraint upon trade
or commerce, and the fact as we have seen that trade or commerce
might be indirectly affected was not enough to entitle complainants
to a decree."
To at least one of the justices (Mr. Justice Harlan) this reason
seemed somewhat scholastic in its subtlety and he filed a vigorous
dissenting opinion to the effect that as the combination was ob-
viously formed to eliminate competition in the inter-State sale of
sugar, and as the acquisition of these refineries was one step in that
direction that the conspiracy under the Sherman Anti-Trust Law
had been established.
It is obvious from subsequent decisions of the court that the
country much misunderstood the effect of this case. It was re-
garded as putting manufacturing trusts not only beyond the pur-
The Federal Power Over Trusts <;7
view of the Act of 1890, but beyond even the reach of Federal power ;
and in the discussions which subsequently ensued in Congress it
was generally conceded that nothing further could be done against
manufacturing monopolies other than transportation companies
without an amendment to the Constitution, and various amend-
ments were consequently proposed.
The Supreme Court, however, in the subsequent case of the
United States vs. Addyston Pipe & Steel Company (175 U. S., 211),
showed that the Knight case had been somewhat misinterpreted. In
that case certain pipe and steel companies of different States entered
into a combination to control the sale of cast iron pipes. They
allotted certain territory in different States, in which each should
have the exclusive right to sell their product. The Supreme Court
held the combination illegal, and distinguished it from the Knight
case, as to which it said:
"The direct purpose of the combination in the Knight case was the control
of the manufacture of sugar. There was no combination or agreement in terms
regarding the future disposition of the manufactured article; nothing looked to a
transaction in the nature of inter-State commerce.' '
A still more significant opinion, however, has recently been
handed down by the Supreme Court, and for some reason has not
attracted the attention which its importance deserves. I refer
to the case of Montague vs. Lowry, decided on February 23rd, 1904.
In that case there was no allotment of inter-State territory.
It was a suit under Section 7 of the Sherman Anti -Trust Law, which
gives treble damages to any person who shall be injured in his busi-
ness or property by any violation of the act. The plaintiff, prior
to the commencement of the suit, had been engaged in selling
tiles in the city of San Francisco. A number of wholesale dealers
in tiles in California and certain manufacturers of tiles who were
residents of other States formed an unincorporated association to
control the sale of tiles in California. It was shown that there were
no manufacturers of tiles in that State, and that all tiles sold therein
were procured from manufacturers in other States, and
that, therefore, there existed an inter-State commerce between
California and other States in the transportation and sale of this
merchandise. The membership of the association was elective. It
was provided that no member should purchase any tiles from any
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manufacturer, who was not a member of the association, nor
should they sell to any non-member at less than list prices, and
manufacturers, who were members, were forbidden to sell to any
person not a member of the association, under penalty of forfeiting
their membership.
It will be observed that there was no allotment of territory
between dealers, and with the exception of the stipulation as to the
sale of tiles by non-resident manufacturers to California dealers
the transactions were intra-State. The court, however, held that
the agreement must be treated as a whole, and that it directly
restrained inter-State commerce between the eastern manufacturer
and the non-member, and was, therefore, invalid.
It is obvious that the prohibition of allotments of inter-State
territory and of discrimination between buyers of inter-State ship-
ments should effectually check two of the most common methods of
building up an industrial monopoly.
The more interesting question remains, however, as to whether
the Sherman Anti-Trust Law, with its sweeping and drastic pro-
visions, has exhausted the constitutional power of Congress to legis-
late against the trusts. Without expressing any opinion as to
whether there should be further legislation, which is a question of
legislative policy, I am clearly of opinion that the Federal govern-
ment has by no means exhausted its constitutional pdwer.
While the commerce clause of the Constitution must prove the
chief bulwark of the American people against industrial monopoly,
yet it is by no means their only defense. The power to tax, which
Marshall well described as the power to destroy, could be invoked
with great effect, especially against the abuses of overcapitalization.
Its destructive power has already been shown in the case of Veazie
Bank vs. Fenno (8 Wallace U. S.), where the Supreme Court upheld
a taxing statute, which was avowedly passed to drive out of circu-
lation the currency notes of State banks. The Court said:
"The first answer to this is that the judicial department cannot prescribe
to the legislative department of government limitations upon the exercise of its
acknowledged powers. The power to tax may be exercised oppressively upon
persons, but the responsibility of the Legislature is not to the courts, but to
the people by whom its members are elected. So if a particular tax bears
heavily upon a corporation or a class of corporations it cannot for that reason
only be pronounced contrary to the Constitution."
The Federal Power Over Trusts 99
The doctrine of this ease was, however, justified in subsequent
eases by reference to the power of Congress to furnish to the country
a uniform currency, and the power to destroy State currency, there-
fore, cannot be rested solely upon the power to tax. The power of
taxation is often used as ancillary to other powers of the government.
Prior to the Revolution no form of taxation was more common than
that which was used to regulate trade and not to raise revenue,
and the constitutionality of protective duties has since been justified,
not under the theory that the power to tax gives in itself the power
to protect an industry, but to the power to regulate foreign
and inter-State commerce.
Later in the Oleomargarine cases, in passing upon the consti-
tutionality of the internal revenue tax on oleomargarine (in re
Kollock, 165 U. S., p. 536), where it was urged that the purpose
of the Act was not for revenue, but to destroy the sale of oleomar-
garine, the Supreme Court said:
"The Act before us is on its face an Act for levying taxes, and although
it may operate in so doing to prevent deception in the sale of oleomargarine as
and for butter, its primary object must be assumed to be the raising of
revenue."
Later, Congress passed an Act whereby it sought, through
graded taxes, to prevent oleomargarine manufacturers from arti-
ficially coloring their product so as to make it look like butter.
The legislation was obviously passed in the interests of the farmers
and to discourage the sale of oleomargarine. The constitutionality
of this Act is now under consideration by the Supreme Court in
the case of Cliff vs. the United States, which was argued some months
ago. When that case is decided we will probably have an authori-
tative exposition of the extent to which Congress, under the guise
of taxation, can accomplish other ends. An Act which on its face
is designed for revenue cannot be declared unconstitutional because
of some presumed ulterior purpose, but it remains to be seen whether,
when such ulterior purpose is plainly manifested, and when such
purpose is not incident to any other express power, the court
will not hold such a taxing statute unconstitutional.
Until the Supreme Court rules to the contrary, it cannot be
said that graded excise taxes could not be used effectively to dis-
courage excessive capitalization, while the maintenance of many
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industrial monopolies could be further affected by the abolition
of protective tariff duties.
Another obvious weapon of defense is the exclusive power of
the Federal government over the mails. In ex parte Jackson, 86
I*. S., p. 727, the defendant was convicted of circulating lottery
matter through the mails in violation of the Federal statutes. It
was contended, in substance, by the defendant, that under the
power to establish "post offices and post roads" Congress had no
power to regulate the morals of the community by excluding mail
matter deemed to be immoral. The Supreme Court held, however,
that
" The power possessed by Congress embraces the regulation of the entire
postal system of the country. The right to designate what shall be carried
necessarily involves the right to determine what shall be excluded. ' '
The court further held that the Act in question was not designed
to interfere with the freedom of the press or with any other right
of the people, but to refuse its postal facilities for the distribution of
matter deemed injurious to the public morals, and this right of dis-
crimination was sustained.
In the later case of in re Rapier (143 U. S., no), an
attempt was made by eminent counsel to have the court recon-
sider the question and make a distinction between mail matter
which was mala in se and that which was only mala prohibita, but
the court declined to do so and reaffirmed the right of Congress to
discriminate between mail matter.
The freedom of the mails had been under discussion in 1836,
when President Jackson recommended to Congress the propriety
of a law to exclude from the mails such anti-slavery literature as
was incendiary in character. Mr. Calhoun, while condemning in
the strongest terms the publication sought to be excluded, insisted
that Congress had no such power of exclusion, because it would
abridge the liberty of the press. In Calhoun's view Webster acqui-
esced, while Senator Buchanan supported the bill on the ground
of the power of Congress to carry in the mails only such matter
as it saw fit. The bill was voted dow^n.
It is obvious that if the mails were denied to industrial trusts
their power to compete would be materially lessened. Business,
especially that of an inter-State character, is largely conducted
The Federal Power Over Trusts 101
through the mails. It is said that seven hundred millions of pieces
of mail matter are distributed each year in this country, as against
nine hundred millions for all of Europe. Unquestionably
communication could be established through the media of the tele-
graph and the express companies, but the facility of communica-
tion in large business corporations would be materially injured.
The question is, however, open, whether Congress would have
the same power to exclude mail matter, which it deems prejudicial
to the public interests for economic reasons, as that which it deems
prejudicial to the public morals. The cases previously referred to
go far to establish an absolute and unlimited power of the Federal
government to discriminate between mail matter. The Courts
have not as yet decided whether in the matter of constitutional
power there is any distinction between mail matter which is pre-
judicial to the common welfare on economic grounds and that on
moral grounds. This question will be considered hereafter, when
I refer to the doctrine of the Lottery Cases.
Assuming that the trusts, either inherently or in the manner
of their operation, are public evils requiring a remedy, the remedies
already suggested are, however, too indirect, arbitrary, and artificial
to secure adequate results. Enlightened public opinion would
hardly justify this attempt "by indirections to find directions out,"
if a more natural method presents itself under the Constitution.
Such method exists in the commerce clause, as to which the power
of the Federal government is supreme, exclusive and plenary.
It may be assumed that few, if any, of the great industrial
amalgamations confine their operations within the limits of any
one State. Practically all engage in inter-State commerce, and
many of them in foreign commerce, and the more direct method
of regulating them is to regulate their use of these channels of inter-
State and foreign trade. And here, as previously intimated, the force
of events has caused an enormous expansion of Federal power.
Burke once said that the greatest struggles in the English
constitutional history have revolved about the questions of taxa-
tion. This was once true of our own constitutional evolution as a
nation, but in the last half century the irrepressible conflict between
the Federal sovereignty and the autonomy of the States has had
the commerce clause of the Constitution as its chief battle ground.
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The reasonable elasticity of the Constitution— sometimes errone-
ously supposed to be rigid and inelastic— is nowhere more strik-
ingly shown than in the expansion of this power to meet the com-
plex problems, to which our concentrated and highly complex civili-
zation has given rise. This is not due to the conscious effort of
any department of the government, of any political party, or
of any individual. Mr. Dooley's famous epigram that the
Supreme Court follows the election returns was witty, but untrue;
but the Supreme Court does follow, as does the rest of the world,
the irresistible current of economic developments, with the result
to-dav that the commerce power has become the awakened and
not "the sleeping giant" of the Constitution.
What is commerce? Chief Justice Marshall defined it with
the illuminating word "intercourse." He clearly saw that inter-
communication between different nations or States, whether it
took the form of transportation of merchandise or the transit of
individuals or the transmission of intelligence, was the appointed
path to national independence and greatness. He therefore refused
to limit the word- "commerce" to the mere exchange of goods, and,
in effect, decided that the general power which each constituent
State possessed prior to 1787 over its external relations had
become vested in the United States, and that in such transfer
it was in no respect diminished, except by the express limitations
in the Federal compact, such as the prohibition of preferences
between different ports of various States and of export and clear-
ance duties. The delegated power was as exhaustive and plenary
as that which it was intended to supersede. Commerce, there-
fore, meant the intercourse or intercommunication of a State with
other States, or with the rest of the world.
It was accordingly held in Covington Bridge Company vs.
Kentucky, 154 U. S., 204, that the mere passage of a foot passen-
ger from one side of the Ohio River to the other was commerce
and the court added
" And the thousands of people who daily pass and repass over this bridge
may be as truly said to be engaged in commerce as if they were shipping cargoes
of merchandise from New York to Liverpool "
Indeed, the mere transmission of intelligence is commerce, and
the invisible messages which are transmitted along telegraph lines
The Federal Power Over Trusts 103
from State to State, or those which flash through the deep sea
cables, or those which by the genius of Marconi are transmitted
by the "sightless couriers of the air" — all, whether affecting the
sale of commodities or not, are equally commerce.
One of the most recent and important cases on this subject
is the Lottery cases (188 U. S., 321), where the carriage of a lottery
ticket from State to State was held to be inter-State commerce,
although the commodity itself was outlawed as purchasable mer-
chandise by the laws of the various States. The extent
of the power was argued at great length, and the vital and
momentous question was decided as to whether the right
to "regulate" — that being the term used in the Constitution
— was broad enough to include the right to prohibit altogether.
As to foreign commerce, the right to prohibit had been exer-
cised in the first years of the Republic by embargoes which were
finally sustained, but it was contended that the power over foreign
commerce is necessarily broader than the power over inter-State
commerce, and that the design of the Constitution was to secure
absolute freedom for inter-State trade. As to inter-State commerce
the right to prohibit had rarely been exercised, except in cases
which affected public health, such as the transportation of diseased
meat or dangerous explosives, and it was contended that the Federal
government could not prohibit inter-State shipments for the pur-
pose of regulating the morals of the people, for the reason that such
regulation was within the reserved police power of the States. In
the Lottery Cases, the Supreme Court negatived this contention
and sustained the power of the government to regulate by absolute
prohibition. The Court in a learned opinion by Mr. Justice
Harlan, said:
"Are we prepared to say that a provision which is in effect a prohibition
of the carriage of such articles from State to State is not a fit or appropriate
mode for the regulation of that particular kind of commerce — or may not
Congress for the protection of the people of all the States, and under the power
to regulate inter-State commerce devise such means within the scope of the
Constitution and not prohibited by it, as will drive that traffic out of commerce
among the States?"
In answering this question, the court in its majority opinion
unquestionably laid stress upon the supposed immoral nature of
lotteries. It broadly claimed the same right for the Federal
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Government as the State possessed with reference to domestic
trade, "to take into view the evils that inhere in a paeticular
form of commerce." But the court continued:
" In this connection it must not be forgotten that the power of Congress to
regulate commerce among the States is plenary, is complete in itself, and is
subject to no limitations, except such as may be found in the Constitution."
And then the Court pointedly asks :
" What provision in that instrument can be regarded as limiting the
exercise of the power granted? What clause can be cited which in any
degree countenances the suggestion that one may of right carry or cause to
be carried from one State to another that which will harm the public morals?"
Here was an affirmative suggestion that at least so far as the
public morals are concerned Congress may determine what commodi-
ties can be conveyed through the channels of inter-State trade.
The question remains, however, whether this comprehensive
power to prohibit is limited to such commerce as in its nature and
effect has some relation either to the physical health or moral wel-
fare of the people, or does it extend to any form of commerce or
any method of conducting it, which is prejudicial to the public wel-
fare in an economic sense? Could, for example, the Federal govern-
ment exclude from the channels of inter-State trade inter-State
shipments by industrial monopolies? If they could, it is obvious
that the trusts are to a very great extent subject to Federal power.
It was this consideration which gave to the Lottery Case
exceptional interest. It was justly regarded that the trust
problem was in a measure involved. The court did not in
words decide the question, but logically it unquestionably did.
Possibly remembering that in the Dred Scott case it had at-
tempted beyond the necessities of the case to solve a political prob-
lem, the court refused to say whether its decision necessarily —
"led to the conclusion that Congress may arbitrarily exclude from com-
merce among the Scates any article, commodity or thing of whatever kind or
nature, or however useful or valuable, which it may choose, no matter with
■what motive, to declare shall not be carried from one State to another."
While not deciding any question so extreme, it took occasion
to say that the power to regulate "cannot be deemed arbitrary
since it is subject to such limitations or restrictions as are
prescribed by the Constitution." But the court had already quoted
such restrictions and shown that they do not limit the power to
The Federal Power Over Trusts i<>5
determine what form of commerce was prejudicial to the public
welfare. The court, in its opinion, had already in effect, and indeed
in words, decided that there was no sound distinction between
considerations affecting public morals and those affecting the
economic welfare of the people; for it had said:
"The Act of July 2nd, 1890, known as the Sherman Anti-Trust Law, and
which is based upon the power of Congress to regulate commerce among the
States, is an illustration of the proposition that regulations may take the form
of prohibition. The object of that Act was to protect trade and commerce
against unlawful restraints and monopolies; to accomplish that object Congress
declared certain contracts to be illegal. That Act in effect prohibited the
doing of certain things, and its prohibitory clauses have been sustained in
several cases as valid under the power of Congress to regulate inter-State
commerce."
If, therefore, Congress has the power to declare invalid any
contract or combination in the nature of a monopoly which affects
inter-State trade, it must of necessity have the lesser power to ex-
clude from the channels of inter-State trade the shipments of such
unlawful combinations. Indeed, the Act itself provides for the
confiscation of all products in process of transportation, and if the
goods can be confiscated in course of shipment, they assuredly can
be excluded before they enter the channels of inter-State trade.
The Court did not define what it meant by the word "arbitrary,"
but it apparently meant an Act and clearly unjustified by "the general
welfare," and subversive of the fundamental rights of the people.
Such an exercise of power can be imagined. If Congress
should deny the privileges of inter-State traffic to any men of a
given political party, the ground of the discrimination would be
so foreign to any just consideration of the "general welfare" and
so subversive of the fundamental right to life and liberty, that
the courts could declare it unconstitutional; but the prohibition
of an industrial monopoly cannot be regarded as arbitrary, for in
England and America the policy of the law, for five hundred years,
has steadfastly set its face against oppressive combinations to control
the sale of the necessaries of life. It follows that if Congress has the
power to prohibit, it has the power to permit subject to such
conditions as it may prescribe, and this unquestionably affords a
wide field for the exercise of legislative wisdom with respect
to combinations of capital. I must not be understood as
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advocating any restrictive legislation for the repression of these
vast combinations of capital, which for a time result in practical
monopolies. Recent events give force to the suggestion that the
trust evil will cure itself, if left to natural developments, and if
there be a natural remedy, it is infinitely preferable to restrictive
legislation. Too often legislative cures are worse than the. disease,
and produce in their operation "confusion worse confounded." The
purpose of this paper, I repeat, is to discuss solely the ab-
stract question of power under the Constitution. When that is
determined the secondary question of the wisdom of its exercise rises
for solution. My conclusion is that Federal power over inter-State
commerce is ample to meet the abuses of the Trusts. I leave to
others to discuss the wisdom of its exercise,
Before concluding this paper, I may briefly refer to the most
rectnt and interesting illustration of Federal power over inter-State
commerce. I refer to the Northern Securities case — quorum pars
minimum fui — for I had the honor to be of counsel for the Gov-
ernment in the lower Court.
Few, if any, cases since the Legal Tender decision have excited
greater interest, but this interest is more due to the magnitude
of the money interests involved than to any novel principle of
jurisprudence thereby declared.
The decision did not, in my judgment, trespass upon the
rights of the States as to the formation of corporations. The
charter of the Northern Securities Company was not invalidated,
but was expressly affirmed. The court held that the language
of the New Jersey Enabling Act, authorizing the charter of corpora-
tions "for any lawful purpose" was not intended to authorize any
act which violated either State or Federal Laws. The purchase of
a controlling interest in competing inter-State carriers was, there-
fore, held to be ultra vires under the laws of New Jersey. The
case did decide that the purchase of a controlling interest in
competing inter-State carriers was, per se, a restraint of inter-
State trade. This, however, was not a novel principle, for
the unlawfulness of consolidating parallel and competing lines,
either by technical merger or by indirect means, had been
written into the organic law of nearly every State, and the
inhibition of the Sherman Anti-Trust Law of such con-
The Federal Power Over Trusts 107
solidation as to inter-State carriers was but a reaffirmance of
the settled public policy of the American people. The merger
of these competing transcontinental carriers was permanent in
duration, absolute in power, and infinite in possible extension;
and if the government had permitted it, but had forbidden the
mere pooling of rates it would assuredly have "strained at a gnat
tut swallowed a camel."
The underlying question, however, is as to whether com-
petition between railways is either practicable or desirable.
Other nations have reached the conclusion that the consolidation
of railways into a few and even into one system is of greater benefit
to the public than a number of separate systems. But it must be
remembered that in most of these countries the question is solved
by the merger of the railroads into the government, which thus
owns and operates them. Whether in the absence of State owner-
ship the consolidation of transportation companies is desirable is
a question about which men may reasonably differ, and no question
should receive earlier and more earnest consideration at the hands
of Congress.
The Northern Securities decision is also of interest as indicating
a possible future retreat by a majority of the Supreme Court from
the extreme position of the Joint Traffic Case, that the Sherman
Anti-Trust Law forbade all restraints of trade, whether they were
at common law reasonable or unreasonable. At common law the
courts reserved the right to determine whether under the circum-
stances of a particular case a contract in restraint of trade was
reasonable or unreasonable, and unquestionably the increasing
tendency of the courts in later years has been to regard such re-
straints, except in extreme cases, as reasonable. As to ordinary
contracts between man and man this does not impose an excessive
burden upon the judiciary, but I believe that it would be most
unfortunate to cast upon the judiciary the burden of determining
when a railroad consolidation was reasonable or unreasonable.
Such contracts between transportation companies are not analogous
to ordinary contracts. They affect the public profoundly and the
companies are quasi-public bodies vested with public franchises
und they therefore owe a higher duty to the State than the indi-
vidual. The courts are already overburdened with questions
IOS The Annals of the American Academy
that are semi-legislative, and upon Congress, as the representative of
the American people, should rest the responsibility of determining
by a well conceived law the extent, if any, to which the consol-
idation of inter-State competing carriers should be permitted.
In this connection it has been suggested that all inter-State
carriers should be required to operate under a Federal charter.
It would not subject them to any greater extent to Federal power,
which is already plenary, but it would enable the Federal govern-
ment to deal with thern in a less indirect manner. In the
Constitutional Convention of 1787, James Madison twice
proposed an article authorizing Congress "to grant charters to
corporations in cases where the public good may require them and
the authority of a single State may be incompetent." The propo-
sition does not seem to have been seriously considered by the framers,
although supported by Randolph and Wilson, and was side-
tracked without a direct vote upon its merits, probably be-
cause so few corporations were then in existence and so little
need existed for any. In 1791, Mr. Hamilton, in proposing
that a charter be granted to create a bank of the United States,
contended that Congress could "create a corporation in relation to
the trade with foreign countries or to the trade between the States,
because it is the province of the Federal government to regulate
those objects," and this view the Supreme Court sustained in McCul-
lagh vs. Maryland, where Chief Justice Marshall expressly said
that Congress could issue a charter to "a railroad corporation for
the purpose of promoting commerce among the States." As a
matter of fact, both the Northern Pacific and the Union Pacific
railways were originally incorporated under Federal laws.
For this exercise of Federal authority there was little need
as long as the States used judgment and discretion in granting their
charters, and as long as there was a reasonable uniformity between
them as to corporation laws. In recent years, however, many
States have vied with each other in the shameless and inconsiderate
peddling of corporate franchises. In the Northern Securities case
the country witnessed the extraordinary spectacle of the Governors
of five Western States, whose policy forbade the consolidation of
parallel and competing lines, invoking the protection of the
The Federal Power Over 'J' rusts 109
Federal government against the pretended powers of a New Jersey
corporation.
The difficulty, however, with a Federal charter is that its
authority is necessarily limited to inter-State trade and can confer
none to operate wholly within the borders of a State. This would
subject the average railroad to the necessity of two charters, and
thus make "confusion worse confounded." In view of the cen-
tralizing tendencies of steam and electricity our country will
eventually consider the propriety of such an amendment to the
Constitution as will grant to transportation companies the right to
transact their business throughout the country, whether inter-State
or infra-State, under the protection of a Federal charter. Such a
suggestion would have shocked Jefferson as much as the creation
of the Bank, and perhaps even Hamilton would not have been
prepared for so far-reaching an exercise of Federal power.
But neither Hamilton nor Jefferson ever conceived the possibility
of the railroad or the telegraph. Through their centripetal
tendencies we are no longer a group of States, united with a
slender thread of Federal power, but a national organism, whose
arteries are the railroads and whose sensitive nerves are the telegraph
wires, and this organism can no more be divided as to commerce
into separately vital parts than you could divide the human body.
As Mr. Justice Bradley strongly said, ''In matters of foreign and
inter-State commerce there are no States."
To paraphrase one of the most distinguished of living publicists,
"it is a condition and not a theory which confronts us." Indeed
that great President gave one of the most striking manifestations
of the unity of the nation for commercial purposes when, in disregard
of the clamor of labor agitators and political demagogues, he forcibly
cleared the channels of inter-State trade from unlawful obstruc-
tions. Rarely has the supremacy of Federal power over inter-State
trade been more strikingly manifested. If, as many believe, these
channels are now obstructed by more powerful forces, which restrain
the free flow of commerce and oppress the people by stifling com-
petition, then assuredly an equal duty exists to vindicate the
freedom of commerce from unlawful monopoly. The problem
will not be solved in a day or a generation, and in the course of
its solution many existing theories, legal and economic, will doubtless
no The Annals of the American Academy
be swept away. The question should be approached with neither
passion nor hysteria, and to its solution the policy of publicity,
which we largely owe to President Roosevelt, will make a valuable
contribution. As the President well said in his last Message :
" Publicity in corporate affairs will tend to do away with ignorance and
will afford facts upon which intelligent action may be taken."
If the problem be approached in this spirit, it may be confi-
dently predicted that in its solution the American people will not ulti-
mately fail.
The Scope and Limits of Congressional
Legislation Against the Trusts
By Charlton T. Lewis, LL.D.
(in)
THE SCOPE AND LIMITS OF CONGRESSIONAL LEGISLA-
TION AGAINST THE TRUSTS
Charlton T. Lewis, L,L.D.
In this discussion the word "trust" is accepted as meaning
any aggregation of capital in corporate hands, so large as to be an
important factor in any branch of industry. This is an abuse of
the word, and has its origin in the fact that the earliest attempts
to combine competing masses of capital which excited public appre-
hension were organized in the form of trusts, in which trustees
controlled a plurality of corporations by holding the legal title to
most of their stock. The application of familiar principles of the
common law by the courts proved fatal to this form of organization.
Individual corporations, however, soon arose, representing aggre-
gations of capital as great or greater than any of the trusts had
controlled, and the name of "trust" is indiscriminately applied
to them in popular language. It is freely used by careless or preju-
diced minds with the implication of illegality, which properly applies
to the trust organization. But it is impossible to restore the term
to its correct use, and with this explanation we must accept it.
A tendency to form these vast aggregations of capital has been
singularly active of late. About five years ago began an extra-
ordinary awakening of the spirit of enterprise throughout the civil-
ized world. There had been a long period of comparative stagnation
in most branches of industry, limiting invention, experiment, new
construction, and the activity of speculation in general. But under
the stimulus of overwhelming accumulations of saved capital in
all markets seeking profitable investment, of new discoveries and
large production of the precious metals, of revolutionary invention,
especially in developing and applying electric power, there was a
rapid and almost sudden outburst of speculative energy in Europe
and America. It was natural that its forms should be profoundly
impressed with that spirit of association which is the basis of civili-
zation. This tendency had been foreshadowed in the social and
political life of all civilized countries through the last half of the
C"3)
II4 The Annals of the American Academy
Nineteenth Century. The most characteristic feature of universal
history during that period has been the combination of States and
nations into vast empires, of divided races into political units
conscious of their kindred, of factions into parties, of workingmen
within their industries into differentiated and interdependent
groups, and outside of these industries, into Unions with vast aims
and impulses ; in short, the great inventions by which the barriers
to intercourse were broken down had been the symbol of the entire
social life of civilized humanity, from the diplomatic and adminis-
trative forces of government down to the parody upon true com-
bination which is represented by the schools of Socialism.
Accordingly, it is a simple truth of social science that the for-
mation of the trusts under this spirit of association is simply the
application in the industrial world of the true law of progressive
civilization. I cannot here justify this assertion in detail. It is,
however, admitted by all intelligent students of the subject that
the so-called "trusts" have already taken their place among the
most beneficent forces of our industrial and commercial life. No
measure can be made of the degree in which they have economized
production, cheapened commodities, raised the average standard
of comfort in life, organized intellect in all departments of practical
work, opened new ways to ability and honorable ambition, and
contributed to adjust the relations of labor to employers. But
in each of these ways a work so important as to be revolutionary
has been begun under their influence, and none can question that
the natural tendency of their development, unless some counter-
acting forces be found which fatally interfere with it, must be
steadily to increase the obligations to them of society at large.
How, then, are we to account for the widespread hostility
felt toward the trusts? What is there in them, or in their influence
and tendencies, to justify apprehensions of danger, from them,
either to the economic or to the moral and political interests of
society? The hostility to them rests largely on an undefined dread
which seems to have its origin in the vague declamations of dema-
gogues, or in the prejudice of minds which are rebellious towards
the entire organism of our industrial society. The cry of "Mo-
nopoly!" against the trusts is repeated and emphasized in a thousand
forms and has great influence in exciting such prejudice. Yet no
Congressional Legislation Against Trusts 115
serious student finds any foundation for a legislative attack upon
large combinations of industrial capital in a real apprehension of
monopoly. In fact, the popular and political tendency to respond
to the denunciations of the great corporations as monopolists is
certainly a temporary phenomenon, which is already beginning to
disappear, and which must give place to more serious grounds of
opposition if hostility to their existence is to be the permanent
policy of any enlightened people. Students of high authority,
however, have discovered and emphasized evils which have been
associated with the recent growth of the great corporations. These
are presented by public men claiming to be statesmen as a suf-
ficient reason for indiscriminate attacks upon all corporations of
this class. These evils are described in great detail as seen from
different points of view, but for our purposes they may be summed
up as substantially covered by two heads: first, improper discrim-
inations in price of service by public service corporations between
great industrial combinations and private shippers, resulting in the
aggrandizement of the trusts at the expense of smaller and inde-
pendent industries. Indeed, in several instances it is asserted
with apparent reason that these discriminations have been the
principal means of building up the. power of certain trusts. Secondly,
an evil which has essentially characterized the movement towards
combination during recent years is commonly indicated by the
word "over-capitalization," which really is used to point out all
kinds of dishonest practices in the formation of trusts, by which their
shares have been given to the public at inflated values, and pro-
moters vastly enriched at the expense of investors. In short, the
word commonly implies all the swindling processes in the produc-
tion and manipulation of securities, which are facilitated by the
vast volume of these combinations, in connection with the care-
lessness, the want of intelligence, and especially the low moral
standard which are so general among investors and in the mer-
cantile community at large.
These are the realities under the vague and often shadowy
complaints which are made of the trusts. But careful reflection
shows that all these evils really lie, not at all in the nature of the
trusts themselves, but in the nature of the people who control
them and deal with them. These forms of wrong have existed
n6
The Annals of the American Academy
as long as commercial immorality itself, and have become con-
spicuous in connection with the trusts solely because they become
greater and more dangerous when perpetrated on so large a scale
as that which has been opened to them in these combinations.
It is the business of government to prevent evils of these classes.
Holders of a public franchise must administer it with equity, respect-
ing the equal rights of all citizens. The police power of the govern-
ment is as much bound to compel this course and to prevent unjust
discrimination as it is to protect any form of private property
against robbery. Fraud by direct or indirect misrepresentation of
value, by deception wrought on a large or small scale, through
forms of organization or falsehoods of bookkeeping, must be pre-
vented, and, if perpetrated, must be punished with all the energy
of which the strong arm of society is capable. Whether such wrongs
are wrought in the handling of small or of great affairs makes no
difference in principle ; it is one of the first duties of organized society
by its governments to suppress such wrongs, and if it fails to do
so the fault lies in itself. But it must be carefully kept in mind
that these classes of wrongs, like all other crimes against property,
are and have been from the first direct violations of laws long estab-
lished, and which it is the recognized duty of the courts to enforce.
There is absolutely nothing in the nature of a large corporation to
affect in any degree the character of these acts. There is nothing
in the extent of the combinations of capital which have arisen in
recent years to make these wrongs more dangerous in their nature,
or more frequent. The growth of wealth, of course, holds out to
fraud a greater promise of reward, and by increasing the temptation
to wrong increases the necessity of vigilance against it, and of a
thorough enforcement of the laws ; but it has no tendency to make
any new principles of law necessary. Fraud of every kind, in
the organization and administration of the greatest of conceivable
corporations, is in its nature the same as fraud in the most trivial
dealings between individual citizens. If by reason of the great
interests with which it deals it excites apprehension lest it be found
impossible to suppress it, the reason must lie in a fear lest the gov-
ernment be too weak to execute the laws against the rich and power-
ful.
That an agency can be abused is not sufficient reason for
Congressional Legislation Against Trusts 117
destroying it. Railroads, if mishandled, may be instruments in
many ways, not only of fraud, but of danger to life. This proves
the obligation to regulate them and to hold their administrators
rigidly to their duty, but not to tear them up. Equally true is it
that the trusts, which are becoming the great means of facilitating
the advance of industry and improving the industrial organization
of society, may be abused. In many instances, doubtless, the
process of their formation and development has been tainted with
fraud, and their organization has sometimes been controlled by
interests not in harmony with the good of society at large. But
what they need is regulation, and not destruction. Let all unfair
discrimination be suppressed, let misrepresentation and fraud in the
financial conduct of these great masses of capital be prevented,
and the sources of just reproach against them will be stopped.
They will then be recognized as beneficent and potent agents in
the development of all national wealth and of social organization.
The more we reflect upon the conditions now confronting our
industrial society and the period of transition through which it
is passing, the more profoundly we shall be convinced that the
essential defect is in the government itself, and is of a two-fold
character. In the first place, it fails in its aims. It is an unques-
tioned fact that selfish aims, personal interests, class preferences,
have to an extraordinary extent submerged statesmanship in our
politics. So true is this that if in any public position a man appears
whose actions and speech indicate an unreserved devotion to the
public interests, with entire independence of local or class preferences,
he is wondered at as a strange phenomenon. Such a man is noted
as a theorist, a sentimentalist — as anything but a practical poli-
tician. It is hardly conceivable that a man of this stamp could
obtain leadership in any party, or even a position as a representative
candidate of any great political group. In the second place, gov-
ernment is defective in the misdirection of its efforts, through
prejudice. Nothing more illogical, nothing more inconsistent
with the principles of our institutions can well be imagined than
the statutes by which trusts have been assailed in our State and
National Legislatures; unless it be the curious absurdities of legis-
lation which have not yet been adopted, but are strenuously advo-
cated by many public men.
u8 The Annals of the American Academy
It would be interesting to review these in detail, but it is enough
for our present purpose to point out that the most familiar of such
statutes, those which have attracted the most attention— the Inter-
State Commerce Act of Congress for the regulation of railroads
and the so-called Sherman Law for the control of great industrial
corporations, are of an essentially political character. Each of
them is an undisguised bid for popular support on the part of a
political faction. That is to say, it is an appeal to prejudice and
ignorance, rather than an expression of constructive statesman-
ship. In the case of neither of these laws had the authors any
conception of its real meaning, as that meaning has been evolved
by the courts, nor of its ultimate effect. They did not know what
they had done in passing them. The report of the Attorney-General
of the United States presented to Congress in 1893 remains to this
day one of the most important documents in the history of the
subject. It stands in pointed contradiction to the work of Congress,
as followed up by logical compulsion in the courts, from that day until
now; but in its statesmanlike grasp of the real conditions of the
questions before us, it has not since been equalled, and its funda-
mental positions have not been answered. It is as true to-day
as it was then, that Congress has no power to limit corporations
or citizens in the amount of property which they may acquire;
that it has no power to make a crime of any act which is done by
a corporation or a citizen under the sanction of the State, in the
management of property which has been lawfully acquired; and
that contracts in unreasonable restraint of trade are void at common
law. Everything which has been done or attempted in violation of
these principles, or in extension of them, by acts of Congress, and
by judgments of the courts in pursuance of these acts, has served
but to confuse the subject and to divert the intelligence of the
country and the energies of the government from the proper work
of enforcing the principles of the common law and preventing
fraud.
The statement of what the evils to be apprehended from the
trusts really are is enough to point out the direction in which the
remedy is to be sought. It is the enforcement of the principles
of the common law, which are nothing more nor less than the rules
of business honesty, which is needed. The salient obstacle to this
Congressional Legislation Against Trusts 119
enforcement in any case is the difficulty of obtaining legal evi-
dence of fraud. This difficulty arises wholly from the fact that
the wrongful transactions are carried on in secret. It would be
impossible for a public-service corporation to discriminate un-
justly between patrons, if every contract for its service were public.
Complete publicity governing all the circumstances and all the
business relations of such corporations would put an end to improper
discrimination. Notwithstanding the many devices and tricks
by which this kind of favoritism is sometimes disguised, it cannot
be successfully concealed from experts who have access to truthful
records of all the dealings. Objections are often urged to such
publicity as improperly exposing business affairs to competitors.
The objection has little application to corporations enjoying and
operating public franchises. But whatever force there is in it in any
case may be removed by fixing a limit of time within which the dis-
closure shall not be required. There is no good reason why any
corporation, commercial or industrial, should not at any given
date disclose without reserve every transaction which was closed
upon its books not less than a twelve month before that date.
Legislation designed to make it certain that such disclosure will
be complete, unreserved and truthful, would have a definite and
proper aim. It would be auxiliary to the enforcement of the prin-
ciples of common law, and would in no sense be anti-trust legisla-
tion, as distinguished from legislation against fraud in general.
But were it efficient, the apprehension of certain exposure in the
near future would be a potent preventive of unjust discrimination and
of kindred wrongs.
The same principle of enforced publicity applies with equal
clearness, and without the necessity of any time limitation, in
the organization of corporations, and especially of those which
are planned to any extent as holders of the shares of other corpora-
tions. The moral sense of the community has been offended in
many cases by the methods of promoters and organizers. It has
become known that in the formation of several great corporations
immense profits were obtained by the handling of securities at
the expense of the ultimate shareholders, who invested their money
in entire ignorance that such a dispositon would be made of much of
it. The laws of Great Britain in this respect are vastly superior
120
The Annals of the American Academy
to those of any of the United States, though it is recognized that
experience has revealed imperfections in them. But they point
the way for an excellent system of control in providing that the
promoters of every new enterprise of a corporate character shall
make a complete and candid disclosure of their own relations to
the corporation and of their interests and possible profits. Any
concealment from those who are invited to invest in such properties
of the cost of the machinery employed in the organization should
be made impossible. It is so clearly a cover for fraud that it should
be prohibited and punished as itself a fraud. This cannot be
accomplished, of course, without the co-operation of a large number
of State governments ; but there are fields of jurisdiction belonging
to the National government in which it might well set the example.
The prime need of the times is that the moral tone of the organ-
ized community be strengthened. At present our politics reflect,
in its lowest and basest side, the moral character of the nation ; our
legislation is the least developed and least scientific expression of
our social organization; our beautiful civilization, with its glorious
aspirations, its education, its patriotism, its progressive elevation
of thought and life, its advance in culture, in humanity, in benevo-
lence, finding expression in science, in literature, in social life, and
in active charity, finds as yet no corresponding fulfillment of itself
in government. Apart from the courts of law, where the traditions
of a lofty standard of thought and of conscience are still to a large
extent controlling, every branch of our government is infected by
the commercial spirit, which often holds a veto upon statesman-
ship that interferes with class interests or with certain personal
ends. This degeneration of political life taints and impresses with
its own feebleness the moral energies of the community everywhere.
Statesmanship in our State governments is no longer expected by
public opinion, and its appearance would strike the nation with
amazement. Hence it is that when frauds are perpetrated, either
in the organization or in the administration of the trusts, govern-
ment has neither the virtue nor the intelligence to apply the remedy.
Legislation has failed to add anything whatever to the principles
of the common law, in its attempts to regulate these combinations.
Let the old and accepted principles of law be applied and enforced,
and the problem would be solved. But these rules of justice must
Congressional Legislation Against Trusts 121
needs be applied alike to the greatest corporation and to the poorest
laborer.
One serious obstacle to such enforcement lies in the division
of jurisdiction under our Constitution. The nation and the indi-
vidual State must have the limits of jurisdiction and of power
defined for each of them. The fact that commercialism and cor-
ruption have obtained great influence in the States led public
opinion to accept the National government as a refuge. This did
much to throw the moral sense of the country on the side of central-
izing power in Congress. The natural and necessary result has
been rapidly to lower the character of our national legislation and
administration, until the}' have approximated the level to which
the State governments had fallen. But the tendency to centralize
power in the national administration and in Congress has been
fostered by other influences, and is in fact but a part of the general
movement of the association and combination which is the chief
characteristic of our contemporary civilization. It has row gone
too far to hope than it can be checked, even if a check were desirable.
The ultimate appeal in every case which, like that before us,
involves the future of our institutions and of our civilization, is
to the public intelligence and conscience. The present situation,
and especially the present degradation of our political life, must
be clearly acknowledged, but it is no reason for despair of the
problem before us. There are already indications that public opinion
is slowly becoming enlightened upon the social as well as the eco-
nomical principles which must control the question, and this enlight-
enment promises to be the first step to a thorough awakening of
the public conscience to the duties of government in the regulation
of capital, and in particular, to the absolute necessity of enforcing
sound moral principles in dealing with great commercial forces.
Important changes in the attitude of vast communities upon kindred
subjects are not without precedent. A century ago the entire civil
service of Great Britain was permeated with corruption. Offices
of state were largely subjects of bargain and sale ; every department
of administration was hampered and enfeebled by influences which
were wholly controlled in private interests, as distinguished from
those of the nation at large. To-day the picture is reversed: the
tone of public morality is changed from its foundation, and the abuse
122 The Annals of the American Academy
of public office to private gain is as definitely a crime to the common
mind as any form of vulgar theft. In several divisions of the Ger-
man empire a similar change has taken place. In both these
countries, there is now practically no question of the ability of the
government to deal with any commercial or industrial power which
has a prospect of existence. The moral strength of our republic
may be somewhat slower to develop, but there are instances enough
in our history of the capacity of the people for moral indignation,
and for a wise expression of it in law and administration, to justify
us in full confidence that a similar process will furnish in the end
a complete and permanent solution of this problem also.
The Northern Securities Case
By James Wilford Garner, Ph.D., University of Pennsylvania
(123)
THE NORTHERN SECURITIES CASE
James Wilford Garner, Ph.D.
University of Pennsylvania
The history of the conception, organization and undoing of the
Northern Securities Company cannot fail to be of interest to students
of transportation problems and constitutional law.
The recent decision of the Supreme Court which restrains
the company from carrying out its real purposes is generally regarded
as one of the most important ever pronounced by that august tribunal.
Opinions differ widely, however, as to the merits of the decision ; some
have gone so far as to say that it means more to the people of the
United States than any other event which has happened since the
Civil War;1 others assert with equal confidence that a more
iniquitous decree was never made by a court.2 In this article an
effort will be made to review the steps leading up to the organiza-
tion of this remarkable corporation, the purposes for which it was
formed, the various legal prosecutions which it underwent, the
decision of the Supreme Court in its various bearings, and the per-
plexing question of readjustment following the decision.
I. Conception and Organization.
The Northern Securities Company is a corporation formed
under the laws of New Jersey in November, 1901, for the primary
purpose of acquiring and holding a majority of the stock of the
Northern Pacific Railway Company, a Wisconsin corporation, and
a part of the stock, but not a majority (so the Company alleges)
of the Great Northern Railway Company, a Minnesota corporation.
The ultimate purpose, it was asserted, was not to vest the con-
trol of the two railroad systems in one body with a view to sup-
pressing competition, but to protect the Northern Pacific road
from the destructive raids of a third system and for the creation
and development of a great volume of trade among the States of
the Northwest and between the United States and the Orient by
1 Remarks of Governor Van Sant, of Minnesota: Associated Press dispatch of March 14th.
* Prof. C. C. Langdell: Harvard Law Review, vol. 16, p. 549.
(125)
! 26 The Annals of the American Academy
establishing and maintaining a permanent schedule of cheap trans-
portation rates.
The Great Northern and Northern Pacific railroads are sub-
stantially parallel lines extending from Lake Superior through
the States of Minnesota, North Dakota, Montana, Idaho and Wash-
ington to the Pacific Ocean, each connecting with lines of steam-
ships at their termini on the Great Lakes and the Pacific Ocean.
Their aggregate length exceeds 10,000 miles and although separated
at most points by an intervening country hundreds of miles in ex-
tent, they touch at several places, notably Duluth, St. Paul, Fargo,
Helena, Spokane, and Seattle. The total amount of their inter-
state traffic which may be said to be distinctively competitive, is
relatively small. Mr. Hill testified that it did not exceed ten per
cent.3 while counsel asserted that it did not exceed three per cent.4
and this the Government did not deny, but asserted that even if the
minimum estimate were true the total amount of traffic affected
would approximate $800,000 per year.5 Whatever may be the actual
facts as to this point, the Supreme Court had already decided in
a previous case that the two roads were parallel and competing
lines.6 Both have competitors in the Union Pacific Rail-
road on the South and the Canadian Pacific Railroad on the
North, each of which extends to the Pacific Ocean, and the latter
of which touches at St. Paul.
The policy of the Great Northern Railroad since 1893 has
been determined mainly by Mr. James J. Hill and his associates, not
through the ownership of a majority of the stock, for they have
never owned more than one-third of the total, but by reason of the
implicit confidence which the stockholders have reposed in Mr. Hill's
remarkable ability and success.7 The destinies of the Northern
Pacific since its reorganization in 1896 have been mainly controlled
by Mr. J. P. Morgan and his associates, who have acted in concert
with Mr. Hill in matters affecting the interests of both systems.
The first instance of this joint action was in 1896, when Mr. Morgan,
3 Record, pp. 714, 715.
* Mr. Young's brief, p. 7; Mr. Grover's brief, pp. 4-7.
6 Brief for the United States, p. 11; Mr. John G. Johnson, of Counsel for the defendants,
thought as much as 2s per cent, of the interstate traffic of the two roads is nominally competi-
tive, but that more than one-fifth of this could be transported by other systems. — (Johnson's
brief, p. 5.)
8 Pearsall vs. Great Northern Railway, 161 U. S., 646.
7 Record, p. 6g8.
The Northern Securities Case 1 2 7
in effecting a reorganization of the Northern Pacific, entered into
an arrangement with Mr. Hill by which the stockholders of the
Great Northern were to take over one-half the capital stock of
the Northern Pacific and to guarantee its bonds. This arrange-
ment, however, was held to be a violation of the law of Minnesota
which forbids the consolidation of parallel and competing lines
of railroad, and the decision marks the first of the series of
defeats which the Hill-Morgan interests have encountered in their
efforts to establish a "community of interest" between the two
roads. A second instance of the kind was a joint attempt early
in 1 90 1 to purchase the Chicago, Milwaukee and St. Paul Railroad,
but the negotiations fell through. A joint effort was then made
to purchase the Chicago, Burlington and Quincy, an extensive
system embracing about 8,000 miles, traversing the States of Illinois,
Iowa, Missouri, Nebraska, Wyoming and Colorado. This effort
was successful, the purchase price being $200 per share, or about
$216,000,000 in all, payable in the joint bonds of the two companies.8
The motive alleged for the purchase was the desire to effect an ar-
rangement by which west-bound freights could be secured for
the empty lumber cars returning from the Mississippi Valley
to the Pacific Coast, so as to reduce transportation rates on
lumber and other heavy natural products from the far West.
If markets for Eastern and Southern products could be created
on the Pacific Coast and in the Orient, the problem of return freights
for empty cars would be solved. To create this new trade it was
necessary to give the Oriental importer assurance that the low trans-
portation rates offered would be permanent. No such assurance,
it was asserted, could be given if the Burlington road, which con-
stituted an essential link in the connecting chain of transportation,
might in the future be induced to make changes in its rates.9
Immediately after the purchase of the Burlington became known,
those interested in the Union Pacific Railroad, chief of whom
was Mr. E. H. Harriman, realizing the danger from a permanent
competition which the transfer of the Burlington to the Hill-Morgan
combination assured, made overtures for an allotment to them of
a portion of the Burlington shares, but their request was denied.10
8 Mr. Young's brief, p. 31.; brief for the United States, p. 17.
9 Mr. Johnson's brief, p. 7.
10 Mr. Hill's testimony, Record, p. 44-46.
128 The Annals of the American Academy
Thereupon ensued the "raid" of the Union Pacific or Harriman
interests on the Northern Pacific shares, culminating in the mem-
orable panic of May 9, 1901. They succeeded in acquiring a ma-
jority of the total capital stock of the Northern Pacific Company,
but fortunately for the Hill-Morgan interests nearly one-half of this
stock belonged to the preferred class and was subject to retirement
at any moment before January 1, 1917. It was the mistake of the
Union Pacific interests in buying preferred instead of common
stock that saved the Hill-Morgan interests from losing control of
the Northern Pacific. The retirement of the preferred stock and
the purchase of additional shares of common by Messrs. Hill and
Morgan still left them in possession of a small majority of the shares.
But there was always the danger that this majority might be con-
verted into a minority at any moment by changes of ownership
resulting from the death or weakening of the allegiance of
friendly shareholders.
The effect of the acquisition of a majority of the shares of the
Northern Pacific by the Union Pacific interests, Mr. Hill asserted,
would be to put its control practically in the hands of those who
were hostile to its growth and development and destroy its value.
The interests of the Great Northern shareholders, he asserted, would
be similarly affected.11 To prevent the possibility of such a con-
tingency in the future and to protect the Northern Pacific Company
from the recurrence of future "raids," it was determined by Mr. Hill,
Mr. Morgan and their associates to form a holding corporation to
which should be. transferred in full ownership the shares of the
Northern Pacific Company held by Mr. Morgan and his associates
as well as those held by Mr. Hill and his friends in the Great Northern.
This would give the proposed company a majority of the Northern
Pacific shares, but less than one-third of those of the Great Northern.
To use Mr. Morgan's language: "What I wanted to accomplish
was to put that stock where it would be protected."12 It was first
proposed to organize the holding company as a Minnesota corpora-
tion provided a territorial charter could be found which was be-
yond the power of legislative amendment, but a diligent search
failed to find such an one.13 Organization under the general laws of
11 Mr. Hill's testimony, p. 694.
12 Mr. Morgan's testimony: Record, p. 344.
13 Colonel Clough's testimony: Record, p. 784.
The Northern Securities Case 129
the State of Minnesota was not favored because of the double lia-
bility imposed on shareholders and the general unfriendliness of
the State towards corporations. After an examination of the
laws of West Virginia, New York, and New Jersey, the latter State
was selected "principally because its incorporation laws were of
earlier date and had been more thoroughly construed than those
of other States."14
On November 13, 1901, the projected company was incor-
porated under the name of the Northern Securities Company... It
was agreed that ?ts shares should be given in exchange for Northern
Pacific shares on the basis of $115 per share and for Great Northern
stock on the basis of $180 per share, the price in both cases being
somewhat less than the market value, a fact which is not without
significance. The original plan was to capitalize the concern at an
amount only sufficient to acquire a majority of the Northern Pacific
stock and the holdings of Mr. Hill and his friends in the Great North-
ern which amounted to less than one-third of the total. Subsequently
the scheme was enlarged so as to give all the shareholders an oppor-
tunity to sell their stock to the new company, not for the purpose, it
was asserted, of acquiring a majority of the Great Northern stock, but
to give all the shareholders the same opportunities that were given
to Mr. Hill's friends. The capital stock of the Northern Securities
Company was, therefore, fixed at $400,000,000, the estimated
amount necessary to take over at the exchange valuation agreed upon
the entire capital stock of the Great Northern and Northern Pacific
companies. Shortly after the organization of the company a consider-
able number of the ' 'outside " holders of Great Northern stock upon the
advice of Mr. Hill that they could do so with profit and advantage
to themselves, accepted the offer of the Northern Securities Com-
pany and sold their holdings on the basis mentioned above.15 The
result was that within a month after the organization of the North-
ern Securities Company it had acquired about 76 per cent, of the
entire capital stock of the Great Northern Railroad. A few weeks
later the Union Pacific holders of Northern Pacific stock seeing
that they were outdone sold their stock to Mr. Morgan, receiving
pay partly incash and partly in Northern Securities stock, as a result
14 Mr. Young's brief, p. 69; Mr. Grover s brief, p. 46.
18 Brief for the United States, p. 46; also Mr. Hill's letter- Record, p. 703.
l^0 The Annals of the American Academy
of which the Northern Securities Company came into possession of
about 96 per cent, of all the shares of the Northern Pacific. The
effect was to place the control of the two roads in the hands of
a single corporation, the Northern Securities Company, and to
substitute in the place of two distinct sets of stockholders with rival
<*nd competing interests, one set of stockholders with common
interests, or, to use the language of the Court, "the stockholders of
fche.two competing companies disappeared, as such, for the moment,
but immediately reappeared as stockholders of the holding company
which was hereafter to guard the interests of both sets of stock-
holders as a unit."
II. Tim Securities Company in Court.
Soon after the full import of the organization became known
a conference of Governors and Attorneys-General representing
the States directly affected was held, . upon the suggestion of the
Governor of Minnesota, at Helena (December 30) and it was decided
that the State of Minnesota should bring suit under the Sherman
Act against the Securities Company in the United States Supreme
Court. Permission, however, to file a bill for this purpose was denied.
The State of Minnesota then instituted proceedings in its own courts ;
the case was transferred to the United States Circuit Court and eventu-
ally earned to the Supreme Court, when a decision was rendered
April 11, 1904, against the State on a ground of jurisdiction.
But the suit that was destined to result in the undoing of the
Securities Company was that instituted on March 10, 1902, on behalf
of the United States, in the Federal Circuit Court for the District of
Minnesota. The case was heard before the four judges of the Eighth
Circuit in accordance with the Act of February 11, 1903, for expe-
diting the hearing of anti-trust cases, which provides that such cases
shall be heard before not less than three Circuit Judges of the Circuit
in which the suit is brought and that appeals from them shall lie
directly to the Supreme Court. On April 9, 1903, a unanimous
decision was rendered holding that the acquisition by the Northern
Securities Company of a majority of the Stock of the Northern
Pacific and Great Northern roads was a combination or conspiracy
in restraint of trade among the States, and a decree was issued
prohibiting the company from acquiring further stock of the two
The Northern Securities Case 131
roads, from voting stock already acquired, from receiving divi-
dends thereon, and from exercising any control over either road.
The defendant railroads were enjoined from permitting their stock
to be voted to the Northern Securities Company or paying dividends
to the Northern Securities Company. Subsequently one of the judges
suspended that part of the decree which forbade the payment of
dividends, pending an appeal to the Supreme Court, to which the
case was now carried.
The several lines of argument upon which the defendants relied
may be roughly grouped as follows:
FirU, the acquisition by the Northern Securities Company of
a majority of the shares of the two defendant railroad companies
was not a "contract, combination or conspiracy" in restraint of
trade or commerce among the States nor a "monopoly" of such
trade but simply a contract of purchase and sale in no way con-
nected with interstate trade or commerce. An agreement among
competing lines to fix rates as in the Trans-Missouri case, or an agree-
ment among manufacturing concerns not to compete among them-
selves for the sale of their products, as in the Addyston Pipe case,
were true contracts in restraint of trade, but only by the wildest stretch
of the imagination, they contended, could an agreement to acquire
property be placed in the same category. Nor could it be said that
there was any monopoly even though it were granted that the
purpose of the "merger" was to suppress competition, since mo-
nopoly involves the idea of the exclusion of other supply. There could
be no monopoly unless all the existing roads were acquired by the
Securities Company and the building of others was forbidden.
Second, there was no evidence of intention upon the part of the
defendants to restrain or monopolize trade among the States as
charged by the Government. The underlying motive, they asserted,
was not to suppress competition, but to protect from the hostility
of an enemy an arrangement designed to create and extend commerce
both among the States and with foreign countries. In support of
this proposition it was shown that the lumber business had been
enormously developed, that a large trade in cotton and steel products
with the Orient had been created and that transportation rates had
been considerably reduced — so much so that a loss of $1 ,000,000 in net
earnings had resulted. It was, for example, shown that flour was being
1t>2 The Annals of the American Academy
transported from points in the Mississippi Valley to China, a distance
of nearly 8,000 miles, at the rate of 80 cents per barrel, while the
rate to New York from the same points, distances less than 1,500
miles, was fifty-five cents per barrel.16 The problem of return
f 1 eights had been solved and a large coal traffic between Illinois-
and the States traversed by the Great Northern and Northern Pacific
lines had been developed, the result of which was to relieve the
inhabitants of this region of dependence upon the distant mines of
Pennsylvania. In short, from whatever point of view it was con-
sidered only results of the highest benefit to the public at large
had followed the "merger " and although this did not prove the
absence of criminal intent, it constituted a very strong presumption
against such intent. The defendants insisted that if the mere
act of acquiring the stock ot the two roads itself constituted restraint
the presence or absence of evil intent was immaterial, but if it did*
not and this seemed self-evident, and if such acquisition had not
resulted in restraint and the contrary was conclusively proven by
the defendants and was not denied by the government, then the
existence of criminal intent was necessary to constitute an offense.
The government took the position that both questions were immaterial1
and the Court sustained the contention.
To the allegation of the government that the Securities Com-
pany had been able to acquire a majority of the shares of the Great
Northern (Mr. Hill and his friends owned but twenty-seven per
cent, of the total) only by the "advice, procurement and persuasion'^
of Mr. Hill, the defendants replied in effect that the Company never
contemplated taking over any of the Great Northern stock except
that owned by Mr. Hill and his friends, and in fact would have
preferred not to admit "outsiders," but not wishing to expose
themselves to criticism it was decided to allow them to exchange
their shares for Northern Securities stock if they wished. Being,
applied to for advice Mr. Hill prepared a circular to be sent only
to those making inquiries, stating that in his opinion the Northern
Securities offer could be accepted with profit and advantage.17
Further than this there was no "advice, procurement or persuasion."
Third, the Northern Securities Company did not possess the
19 Mr. Johnson's brief, pp. 13-16; see also Mr. Grover s brief, pp. 105-109; Mr. Hills,
testimony: Record, pp. 677-737; Mr. Young's brief, pp. 29-41.
' 17 Mr. Young's brief, pp. 79, 80
The Northern Securities Case 133
power to restrain the trade of either road. It was merely an invest-
ment company and was not engaged in the business of transporta-
tion. The two railroad companies still remained as separate cor-
porations with separate boards of directors, and by the laws of
Minnesota and Wisconsin, no person who was a director in one
company could serve on the board of directors of the other. Each
was left free to conduct its own business independently of the other
and it was therefore immaterial who held the shares since the affairs
of a corporation are managed not by the shareholders but by the
directors.18 When it is remembered, however, that the election of
the boards of directors of both roads was vested in the Securities
Company this argument will be seen to have little weight.
Fourth, granting arguendo the contention of the Government
that the Northern Securities Company had acquired the power to
•suppress the relatively insignificant amount of distinctly interstate
traffic it did not follow that the power would be exercised. The
mere possession of power to do wrong is not criminally reprehensible
if not exercised. It is the abuse of power, and not the possession of
it that the law condemns. The man who purchases a gun acquires
the power to commit a crime, but it is the exercise of the power
that is punishable. There is no identity between the power to sup-
press competition and suppression any more than there is between
potentiality and actuality. Moreover, the failure to exercise the
power for more than two years after acquiring it rather constituted
a presumption that it would not be exercised.
Fifth. The power of Congress to regulate interstate commerce
does not include the power to regulate the acquisition, transfer and
ownership of shares of stock in corporations created under State
law\ The defendants contended that the overt act which had been
committed was nothing more than the acquisition by one State cor-
poration of the shares of two other State corporations. It was
only a transaction of purchase and sale which had no more to do
with interstate commerce than did the purchase by a farmer of an
additional farm or the acquisition by a manufacturer of a neighboring
factory or other enterprise. The corporations concerned being
creatures of the State it necessarily followed that the power to
determine who should own their shares of stock, the conditions under
18 Mr. Young's brief, pp. iot, 192, 196.
I34 The Annals of the American Academy
which they should be held or transferred, the voting power which
should attach to each, the liability of the shareholders, etc., belonged
to the States which created them and to no other authority.19
Sixth. Still another line of argument which deserves more
consideration than it has received was the contention of the defend-
ants that the Sherman Act was not intended to include agreements
to purchase railways or to acquire the shares of competing lines or
to consolidations, inasmuch as Congress well knew that at the
time of the enactment of the Anti-trust Law the greater part of
the railway system of the country rested upon such combinations
either expressly authorized or tacitly permitted by the States,
some of them having existed many years. If, therefore, it had
been the purpose of Congress to declare such arrangements illegal,
their securities void, and the State legislation authorizing them
to be unconstitutional, it would have been so declared in more
specific language than is employed in the Sherman Act. Many
"mergers" have occurred since the enactment of the Sherman
law and they have all been a matter of common knowledge.20 But
in no instance has the Sherman law been invoked against one of
them, although they have practically destroyed competition in the
territories traversed by them. The explanation offered was, that
in the judgment of the Government, they were not combinations
directly in restraint of interstate commerce and consequently the
Sherman Act had no application. The defendants in the Northern
Securities Company insisted that if the act did not apply to those
combinations it should not be construed to apply to theirs.21
Seventh. The Sherman Act was directed only against unreason-
able restraints of trade such as restrictions with regard to the place
of carrying on trade, the amount to be done, the regulation of prices,
the use of trade secrets, etc., and not against those incidental and
reasonable restraints that were always regarded as unobjectionable
at common law.
Eighth. The Sherman law being a criminal statute should be
strictly construed, or at least should not be enlarged by construction.
19 Mr. Young s brief, pp. 227-237; Mr. Johnson's brief, pp. 60-67.
28 It was pointed out for example that of the six railroad and steamship lines between New
York and Boston not one was free to compete with the others. Likewise the several
originally competing lines between Washington and New York are now all under the control
of a single road.
21 Mr. Young's brief, pp. 238-272. . .
The Northern Securities Case 135
This being true, the first section should not be stretched so as to make
criminal every agreement that merely tends to restrain trade or that
merely confers power to restrain.22 To be brought under the con-
demnation of the Anti-Trust Act the agreement must be one which
will of itself operate as a restraint and not one from which restraint
results only as an incident of the ownership of property. This was
the doctrine of the Hopkins case where it was said that the Sherman
Act applied only to those contracts whose direct and immediate
effect is restraint.
Ninth. The Government was not entitled to maintain this
action for the conspiracy charged, if it ever existed, had accomplished
its purpose and had come to an end before proceedings were com-
menced against the defendants. The overt act had already been
done and could not, therefore, be restrained after its consummation.
The relief which the Sherman Act affords is power to restrain execu-
tory acts and not those already executed.
III. The Opinion of the Court.
The arguments in the case were heard at Washington, Decem-
ber 14th and 15th, and the decision of the Court was announced
on March 14th. The decree of the Circuit Court was affirmed by
a vote of five to four. Justice Peckham, who wrote the majority
opinions in the Trans -Missouri and Joint Traffic cases, Chief Justice
Fuller, who concurred in both of these opinions, and Justices Holmes
and White, dissented in the present case. Neither Justice Peckham
nor Chief Justice Fuller have undergone a change of view, as is
sometimes asserted, but were forced to separate from their col-
leagues with whom they had concurred in the two preceding cases,
on account of the presence of a new issue in the present case, namely,
the right of Congress to regulate the ownership and control of prop-
erty in State corporations. No such question as this was raised
in either of the traffic cases, the main issue there relating, so far as
the power of Congress was concerned, to agreements or arrangements
among interstate railroads to regulate their rates and pool their
traffic. Their positions in those cases and in this one are, therefore,
not at all inconsistent. The prevailing opinion in the present case
was written by Justice Harlan, who had written the dissenting
opinion in the Knight case.
22 Mr. Young's brief, p. 119. . _^.
jg6 The Annals of the American Academy
Brushing aside as immaterial various minor contentions of the
•defendants the Court went directly to what it considered the two
main questions involved. These were, first, whether through the
organization of the Northern Securities Company the power had
been acquired to restrain or monopolize commerce among the States
and, second, whether the application of the Sherman law could be
extended to such cases as this one where the right of the individual
to acquire and hold property in a State corporation was in issue.
Without directly imputing bad motives to the defendants the Court
declared that the effect of placing a majority of the shares of the
stock of the two roads in the hands of a holding corporation, which
the Court described as a "mere custodian," was to give it the power to
control the operation of both roads in the interest of those who
were the stockholders in the constituent companies, as much so
for every practical purpose as if it had been itself a railroad corpora-
tion which had built, owned and operated both lines for the exclusive
benefit of its stockholders. It necessarily resulted from this arrange-
ment that the constituent companies ceased to be in active compe-
tition for trade and commerce along their lines as formerly, and
became practically "one powerful consolidated corporation, the
principal object of which was to carry out the purpose of the original
combination under which competition between the constituent com-
panies would cease." No scheme or device, the Court thought, could
more effectively suppress competition between the two roads, and
that was enough to bring it under the terms of the Sherman Act.
From this it will be seen that the Court took the position which the
defendants had vigorously denounced as untenable, namely that under
the Sherman Act the mere acquisition by the Securities Company
of the stock of the two roads in question was in itself a contract,
combination or trust in restraint of trade among the States. It
refused to consider this transaction as the mere preliminary step
in an arrangement which might result in restraint, but treated the
preliminary act as the thing itself that was prohibited. In other
words, it refused to recognize in this particular case, at least, any dis-
tinction between that which restrains and that which may result in
restraint; between cause and result; between the possession of power
and the exercise of power; between actuality and potentiality. In
acquiring the power to do the things made, unlawful by the Sherman
The Northern Securities Case 137
Act the Securities Company had in effect committed the forbidden
-act. The acquisition of the power to suppress competition being,
in the opinion of the Court, forbidden by the Sherman Act, neither
•goodness of motive nor proof that there had been no actual restraint
could condone the offense.
The contention of the defendants that the Sherman Act was
intended to prohibit only those restraints which are unreasonable
~at common law was also dismissed by the Court as immaterial since
this question had already been passed upon by the Court in other
-cases and was, therefore, res ad judicata. To their contention that
the Sherman law prohibited only those acts in direct and immediate
restraint, and not such as were merely "incidental to the ownership
of property" the Court in effect answered that it had become a
-settled rule in the interpretation of the Anti-Trust Act that its
application was not restricted to those combinations which result
or may result in a total suppression of commerce or in a complete
monopoly, but included as well those which by their necessary
operation tend to restrain or monopolize and to deprive the public
■of the advantages that flow from free competition.
Taking up the proposition toward which the defendants directed
their strongest efforts, namely, that the fundamental question in-
volved in this case was, whether the power of Congress over inter-
state commerce extends to the regulation of the acquisition, owner-
ship and disposition of stock in railroad corporations created under
.State law merely by reason of their being engaged in such commerce,
the Court undertook to show that such a statement of the issue
was wholly misleading and unwarranted; that it was merely setting
up men of straw to be easily stricken down; that there was no
reason to suppose that Congress had intended to interfere with
the ownership and control of stock in State corporations ; and that
the Court did not understand that the Government had made any
-such contentions. But, said the Court, the Government does
•contend that Congress may protect the freedom of interstate com-
merce by any means that are appropriate and not prohibited by
the Constitution and that no State corporation can stand in the
way of the enforcement of the national will, legally expressed, by
projecting its authority across the continent into other States. It
*vas not so much a question of whether Congress may control State
I38 The Annals of the American Academy
corporations as a question of whether State corporations may con-
trol Congress by mterposing obstacles in the way of the exercise-
of its Constitutional powers. To admit that a State may endow
one of its corporations with authority to restrain interstate com-
merce was to say that Congress, in exercising its power to regu-
late such commerce, must act in subordination to the will
of the States when exerting their power to create corporations.
No such view, said the Court, could be entertained for a moment.
So far as the Constitution of the United States was concerned,,
said the Court, the States may create corporations of every kind,
authorize them to engage in commerce, foreign as well as domestic,
regulate all the incidents of corporate existence to the exclusion of
the power of Congress, but they cannot empower any person, corpora-
tion or combination to defeat the will of the United States expressed
through its Constitution and the laws passed in pursuance thereof.
To avoid the appearance of imputing to the State of New Jersey
conscious intent to endow the Northern Securities Company with
power to violate the Sherman Act the Court took occasion to say
in passing that nothing in the record tended to show that the authori-
ties of New Jersey had any reason to suspect that those who took
advantage of its liberal incorporation laws had in view a purpose
to destroy competition between two great railway carriers en-
gaged in interstate commerce in distant States of the Union. The
contention of the defendants that the Securities Company was not
a railroad corporation, but an investment company, and that the
transaction complained of imported simply an investment in the-
stock of other corporations, the Court seemed to think was not
seriously made. This view was declared to be wholly fallacious-
and inconsistent with the actual facts, since there was no actual
investment whatever there may have been in form.
The Northern Securities Company, the Court intimated, was.
not organized in good faith, but was merely a contrivance, a custodial*
or trustee for affecting indirectly a purpose which could not be
accomplished directly. The suggestion of counsel for defense that
no effective relief could be granted, since the alleged combination
had accomplished its object before the commencement of the suit,
the Court likewise treated as unworthy of more than a passing
notice. It would be a novel, not to say absurd, interpretation of
The Northern Securities Case 139-
the Anti-Trust Act, it was asserted, to hold that after an unlawful
combination had been formed and had acquired the power to re-
strain commerce by suppressing competition and was proceeding to
use that power, it should be left in possession of such power with un-
obstructed freedom to exercise it.
The many suggestions made in the course of the arguments
that an interpretation of the Anti-Trust Act in accordance with the
views of the government would seriously interfere with legitimate
business interests and work widespread financial ruin were treated
by the Court as gratuitous assertions. Such predictions had been
made by the defendants in all the preceding cases arising under
the Act and in no instance had they been verified. They were,
therefore, entitled to no weight in the decision of the present case.
The judgment of the Circuit Court of Appeals was, therefore, con-
firmed.
Mr. Justice Brewer, while concurring in the judgment, felt con-
strained to reject some of the reasons on which it was sustained
for fear, as he said, "that the broad and sweeping language of the
Court might tend to unsettle legitimate business enterprises, encour-
age improper disregard of reasonable contracts and invite unnecessary
litigation." Instead of holding that the Anti-Trust Act included
all contracts in restraint of trade, reasonable or unreasonable, the
ruling, he said, "should have been that the contracts involved in
this case were unreasonable restraints of interstate trade and, as such*
were within the scope of the Act." He based this opinion on the
language of the title of the Act which showed that it was directed
only against "unlawful restraints and monopolies" which, according
to a long course of decisions at common law had reference to unreas-
onable restraints and not those "minor contracts in practical restraint
of trade" which had always been upheld as reasonable. His idea
was that there being no national common law Congress intended
merely to engraft upon the jurisprudence of the United States
that well understood part of the common law which related to
monopolies and combinations in restraint of trade; and, unless
it clearly appeared from the language of the Act that a departure
from the rules and definitions of the common law was intended, no
such purpose should be construed. Furthermore, he expressed
the opinion that the general language of the Act was limited by the
14o The Annals of the American Academy
inalienable right of the individual to manage his own property
and make such investments as his judgment dictated. Applying
this principle to the present case, he asserted that had Mr. Hill
owned a majority of stock of the Great Northern Railway Co. he
•could not by any Act of Congress be deprived of the right of investing
liis surplus capital in the purchase of Northern Pacific stock, although
such purchase might give him control over both companies. That
is, he should have the same right to purchase Northern Pacific
^tock which all other citizens have. In other words it was his
idea that to be an unlawful restraint under the Sherman Act, there
must be a combination of two or more persons ; restraint, however
great, by a single individual if the result of the exercise of his right
of investment could not be objectionable. It is respectfully sub-
mitted that this view is not justified by a reasonable interpretation
of that part of the Sherman Act which relates to monopolies.
However, the opinion of Justice Brewer on this point was
•obiter, as the right of a single individual to invest his means according
to his own will was not presented in this case. Here was a combina-
tion of individuals, and the prohibition of such a combination, he
admitted, was not at all inconsistent with the right of an individual
to purchase the stock of a corporation.
The views of the dissenting Justices were expressed in two
separate opinions, one written by Justice White, the other by Justice
Holmes. Justice White laid down the proposition that the funda-
mental question involved in the case was, whether Congress has
power to regulate the acquisition and ownership of property in
:State corporations, and on this he wrote a long, ingenious, and, it
must be admitted, able argument. It is submitted, however, with
all due deference, that his premise was wholly erroneous, being due
to a mental confusion of the right of the individual to acquire and
•own property with his right to enter into a combination for the
purpose of violating a law of the United States. With such a pre-
mise it was not difficult to prove his point and he did so effectively.
His opinion contained some extreme propositions and sweeping
assertions, rather notable as effective displays of rhetoric than as
logical deductions from the real question decided. Such was the
statement that the contention of the majority was "absolutely
destructive" of the reserved rights of the States and that upon
The Northern Securities Case 141
the ruins of the Federal system would be erected a government
V endowed with arbitrary power to disregard the great guaranty of
life, liberty and property and every other safeguard upon which
organized civil society depends."
Justice Holmes addressed himself mainly to the question of
whether, conceding the power of Congress in the premises, the Sher-
man Act applied to the present case. His argument against the
contention of the majority on this point was, first, that the Sherman
Act is a criminal statute and should not be construed to punish acts
which have always been lawful unless it expressed its intent in clear
and unmistakable language. The present act, he said, should be
read as if the question were whether two small exporting grocers
should be sent to jail. In the second place, he contended that the
forbidden contracts and combinations in restraint of trade were those
dealt with and defined by the common law. Contracts in restraint
of trade at common law were contracts with a stranger for the pur-
pose of restricting the freedom of the contractor; combinations in
restraint of trade were those formed with a view of keeping strangers
to the agreement out of the business. In the present case there was
no attempt to exclude strangers to the combination from competing
in the business which it carried on. The Sherman Act, he declared r
was not aimed at community of interest arrangements, but was
intended to prohibit contracts with a stranger to the defendantsr
business, such as that involved in the Trans-Missouri Freight Asso-
ciation. Thirdly, to say that "every contract in restraint of trade"
and "every attempt to monopolize any part" of interstate com-
merce was punishable would, he said, send to prison the members
of every partnership and the owners of practically every railroad,,
for there was hardly one that did not monopolize, in a popular
sense, some part of interstate commerce. Such a view could have
no other effect than to make eternal the helium omnium contra omnes
and disintegrate society so far as it could into individual atoms.
IV. The Problem 01? Readjustment.
The decree of the Circuit Court, as affirmed by the Supreme
Court, did not work a dissolution of the Northern Securities Company,.
did not, in fact, affect its legal status in the least, but only enjoined
it from acquiring further stock or from voting that which it had
I42 The Annals of the American Academy
already acquired, or from exercising any control over either road;
nor did it have any perceptible effect on the price of Northern Securi-
ties stock. Within a week after the decision its shares had risen eight
points in the market. The decree did not, as was generally reported,
command the return to the original stockholders of the two roads of
the shares transferred by them to the Securities Company in exchange
for its stock, but merely directed that nothing contained in the
decree should be construed as prohibiting such return. That is to
say, the decree was permissive rather than mandatory so far as the
question of the return of the stock was concerned.
As the two railroad companies, however, were enjoined from
paying dividends to the Securities Company on the stock which it
had acquired from them nothing was left but to return it or suffer
the loss of dividends. On March 2 2d, following the decision of the
Supreme Court, a circular letter was sent to the stockholders an-
nouncing that the Directors had decided to continue the existence
of the Company but to reduce its capital stock by 99 per cent., the
remaining 1 per cent., amounting to about $4,000,000 and consisting
of securities other than Northern Pacific or Great Northern stock was
to be retained until it should be decided to wind up the affairs of
the Company.
The 99 per cent, representing stock acquired from the Great
Northern and Northern Pacific railroads was to be returned to
those who had given it in exchange for Northern Securities stock.
This could be done in either of two ways, namely, by a pro rata
method, each shareholder receiving back an equivalent of his North-
ern Securities holdings in the stock of both roads, or by returning
to each shareholder the original stock held by him in one road.
The Hill-Morgan interests adopted the first method. Figured on
the basis of 180 for Great Northern and 115 for Northern Pacific
•each holder of one share of Northern Securities Stock would get back
$39.27 of Northern Pacific stock and $30.15 of Great Northern stock.
This would amount in effect, not to a restoration of the status quo
ante, but a redistribution, the effect of which would be to give each
original owner of stock in one road a joint interest in both roads.
The far-reaching consequences to the Harriman holders of this
method of redistribution were soon apparent. It will be remembered
that at the time of the formation of the Northern Securities Company
The Northern Securities Case 143
the Union Pacific interests represented by Mr. Harriman and his
associates held a majority of the shares of stock in the Northern
Pacific, which shares were acquired by the Northern Securities Com-
pany under circumstances which have already been described
in the early part of this article. By the methods of redis-
tribution proposed the Harriman interests instead of getting
back their original Northern Pacific shares, and with it their
control over the Northern Pacific, would get back a ratable pro-
portion of Great Northern and Northern Pacific stock. This
would leave them jointly interested in both roads without a con-
trolling interest in either. At the readjustment conference which
followed shortly after the announcement of the Supreme Court,
the Harriman representatives protested against the proposed plan of
redistribution as an evasion of the true intent of the decree, and
being overruled by the Hill-Morgan interests, Mr. Harriman and Mr.
Pierce, acting as trustees for the Oregon Short Line, an appendage
of the Union Pacific, began, on April 3, proceedings in the United
States Circuit Court in St. Paul asking the Court to direct the North-
ern Securities Company to return to the original shareholders of
Northern Pacific stock the shares exchanged by them for Northern
Securities stock instead of an equivalent of stock in both roads.
The purpose, of course, was to enable the Union Pacific interests
to secure control of the Northern Pacific road and was a renewal of
the old fight which had been temporarily suspended by the truce
resulting from the organization of the Northern Securities Company.
Both parties were represented by an array of counsel which
for brilliancy and numbers even exceeded that which appeared in
the case before the Supreme Court, and the legal contest which en-
sued was one of the sharpest of recent years.
The chief contention of the Harriman interests was that the res-
toration to each shareholder of the original shares which he had
exchanged for Northern Securities stock was the most logical and
reasonable scheme, and seemed to be most in accord with the decree
of the Court and the principles of natural justice. It must be ad-
mitted that it looked more nearly to the reestablishment of the
status quo, which, it would seem, should have been the chief end to
be kept in view in effecting the readjustment. Moreover, it was
-contended that redistribution according to the Hill-Morgan plan
I44 The Annals of the American Academy
would be merely to continue their control over the Northern Pacific-
and Great Northern roads which it was the purpose of the decree to-
prevent.
The contention of the Hill-Morgan shareholders was that the
return of the stock on the basis of the plan proposed by the petitioners,
meant the return to the Harriman people of a majority of the stock
of the Northern Pacific Company, the effect of which would be to-
put in the hands of the Union Pacific Railroad and the Oregon Short
Line the absolute control of the Northern Pacific, a parallel and,
competing line. Furthermore, the right of the petitioners to ask
for intervention of this kind was denied. Having participated in*
the acts of the Northern Securities Company, which had been*
declared illegal, they now sought from the Court preferential treat-
ment at the expense of the innocent. "The shares Harriman put
into this corporation," said Mr. John G. Johnson, of counsel, "have
become merged and their identity is lost and who can identify them ? "'
"Are there any other marks on them to show which ones were put in
by Harriman V "There have been 1800 transfers of stock and no
one knows where the individual shares are." The United States,
was not a party in this suit but through the Attorney-General inter-
posed an objection against the right of the Court to intervene, stating,
that it neither admitted nor denied the allegations of the petition
but stood on the decree as affirmed by the Supreme Court and was*
only concerned to see that it was faithfully observed by the de-
fendants according to its terms.
The Court refused to intervene in the matter, chiefly on the
ground, as reported, that the decree was wholly prohibitory, only
enjoining certain things to be done, viz.: the voting of stock and!
the acceptance of dividends, and so long as these things were not
done, further action by the United States was unnecessary. That
is to say, the Circuit Court was concerned only with the observance
of the decree and not with the manner of the distribution of property
among its stockholders. It being intimated that this was a matter
within the jurisdiction of the Courts of New Jersey no time was lost
by those concerned in resorting thereto, and application for an injunc-
tion to prevent the execution of the Hill-Morgan scheme of distribu-
tion was filed before Vice-Chancellor Bergen at Jersey City by the-
Continental Securities Company.
The Northern Securities Case 145
Whether in instituting these proceedings it was acting for the
Harriman interests it is not quite clear; at least the latter disclaimed
any knowledge of the suit. On April 25th, the application for the
injunction was denied. Resort was then had to the United States
Circuit Court for the District of New Jersey, and Harriman, Pierce and
others secured a temporary injunction restraining the Northern
Securities Company from carrying out its proposed distribution.
In the latter part of May elaborate arguments by distinguished
counsel were heard by Judge Bradford on the application of the
petitioners to have the injunction made permanent, but at the time
this article went to press no decision had been rendered.
V. Conclusions.
The following observations and conclusions, based on a careful
study of the various Federal cases arising under the Anti-Trust Act,
and particularly the recent decision of the Supreme Court, are respect-
fully submitted:
First. That Congress by virtue of its power to regulate foreign
and interstate commerce may forbid transactions of purchase and
sale when in its judgment the result of such transactions is to con-
fer upon two or more persons the power to destioy competition
between competing railroads. In the exercise of this power it is
immaterial whether the forbidden transactions are expressly author-
ized by State law or not, or whether the property involved is the
stock of railroads engaged wholly in interstate commerce or not, or
whether the said railroad companies are incorporated under the law s
of the United States or of a State. Likewise it is immaterial whether
the intent of the transaction is to restrain commerce or to create
and develop new commerce, or whether the power to restrain is
exercised or not, or whether if exercised the resulting restraint is
reasonable or unreasonable, or whether direct and immediate or
remote and incidental.
Second. The decision of the Court does not sustain, as is often
asserted, the contention that Congress may regulate the acquisition,
ownership and disposition of property of State corporations or any
of the incidents relating thereto. What it does hold is that no
State by virtue of its power to create corporations and regulate the
I46 The Annals of the American Academy
acquisition and ownership of property may endow any person or
corporation with power to interpose obstacles in the way of free
trade among the States.
Third. The Anti-Trust Act should not be interpreted as for-
bidding those reasonable restraints which were never objectionable
at common law. In fact, it would seem as if a majority of the
Court have come around to this view. But as the contrary interpreta-
tion stands as the law, Congress should amend the Act so as to
restrict its application to unreasonable restraints. Early in the last
session of Congress Senator Foraker proposed an amendment with
this end in view, but it did not meet the approval of the administra-
tion and was, therefore, dropped. As the statute is now interpreted,
it is too sweeping and if strictly enforced will work injury to legitimate
business interests. It is doubtful if the frarners intended to enact
such a statute and the debates show unmistakably that the members
of the Senate Committee on Judiciary, notably Senators Edmunds,
Hoar and George, who, perhaps, had as much to do with the framing
•of the law as any other members, understood that it merely enacted
the old doctrine of the common law relating to restraints of trade.
Fourth. The Eastern " mergers," embracing about 85 per
cent, of the railway mileage of the United States, will not
be disturbed by the Government. This comforting assurance
was given by the Attorney-General in an interview following
the announcement of the decision of the Supreme Court. He
declared that the Government during the prosecution of the
Northern Securities Company refused to give any heed to the con-
tention of the defendants that all the railroad "mergers" in the
country were on trial, but insisted that it was the validity of the
Northwestern "merger" only that was in issue. Having succeeded
in suppressing this one the Government did not propose to run
amuck. No explanation was given why this particular one was singled
out for prosecution and the others allowed to go free.
Fifth. The refusal of the Circuit Court to intervene in the
Hill-Morgan scheme for redistributing the shares originally given
in exchange for Northern Securities stock leaves the Northern Pacific
road in the hands of Mr. Hill and his friends.
It thus happens that although the original act of the Northern
Securities Company has been virtually suppressed, the "community of
The Northern Securities Case 147
interest" arrangement which the Securities Company was designed
to protect, still survives. It is, therefore, questionable whether
after all anything of permanent value has been gained by the prose-
cution and the resulting decree of the Court.
IV. The Immigration Problem
(149)
Problems of Immigration
By Honorable Frank P. Sargent, United States Commissioner
of Immigration
U5J
PROBLEMS OF IMMIGRATION
By Honorable Frank P. Sargent,
United States Commissioner of Immigration
No question of public policy is of greater importance or affects
so closely the interests of the people of this country for the time
present and to come as that of immigration. It presents both a
practical and a sentimental side. It cannot be dealt with as other
public issues. It does not deal with the question of revenue. Its
subjects are not inanimate like merchandise; they are human
beings. They have aspirations, hopes, fears and frailties. The
methods by which other laws are administered' cannot, with regard
to such a subject, be resorted to in the enforcement of the immi-
gration laws. These laws, be it remembered, with one exception,
are not laws of exclusion, but laws of selection. They do not
shut out the able-bodied, law-abiding and thrifty alien who seeks
to make a home among us, and to help at once his individual con-
dition and the welfare of his adopted country. To such it is the
part both of policy and good government, as well as of justice and
fair play, to extend the hand of welcome. But it has long since
been learned in the school of practical experience that the uni-
versal welcome which should be extended by a free people to those
of oppressed nations, should be restrained by considerations of
prudence and a regard for the safety and well-being of the country
itself. Hence it has become an established principle of this Gov-
ernment to frown upon the efforts of foreign countries and of inter-
ested individuals and corporations to bring to the United States,
to become burdens thereupon, the indigent, the morally depraved,
the physically and mentally diseased, the shiftless, and all those
who are induced to leave their own country, not by their own inde-
pendent volition and their own natural ambition to seek a larger
and more promising field of individual enterprise, but by some
selfish scheme, devised either to take undue advantage of some
classes of our own people, or for other improper purpose. That
such a policy is a wise one, as well as obligatory upon the Govern-
(153)
I54 The Annals of the American Academy
ment of this great country, is too obvious to require elaborate
argument.
The total estimated alien immigration to the United States,
from 1776 to 1820 was 250,000. The arrivals, tabulated by years,
from 1820 to 1903, aggregate 21,092,614, distributed among the
foreign countries as follows:
Netherlands 138,298
France 409,320
Switzerland 211,007
Scandinavia, which includes Denmark, Norway and Sweden 1,610,001
Italy 1,585,477
Germany 5,100,138
Austria-Hungary 1,518,582
United Kingdom (Great Britain and Ireland) 7,061,710
Russia 1,122,591
Japan 64,313
China 288,398
Other countries such as Roumania, Greece, Turkey, Portugal and
Poland 1,984,779
The total number of arrivals for the fiscal year ending June
30th, 1903, was 857,046, divided as follows:
Netherlands 3,998
France 5,578
Switzerland 3,983
Scandinavia 77,647
Italy 230,622
Germany 40,086
Austria-Hungary 206,011
United Kingdom (Great Britain and Ireland) 68,947
Russia 136,093
Japan 19,988
Other countries, such as Roumania, Greece, Turkey, Portugal and
Poland 64,113
This is the greatest number that ever applied for admission
in a single year. The nearest approach to this was in 1882, when
789,000 were admitted.
The character of the arriving aliens, however, during the past
years differs greatly from that of 1882 and the years previous.
Since the foundation of our Government until within the past fifteen
years practically all of the immigrants came from Great Britain and
Ireland, Germany and the Scandinavian countries and were very
Problems of Immigration 155
largely of Teutonic stock, with a large percentage of Celtic. Fifteen
millions of them have made their homes with us. In fact, they have
been the pathfinders in the West and Northwest. They are an
intelligent, industrious and sturdy people. They have contributed
largely to the development of our country and its resources, and
to them is due, in a great measure, the high standard of American
c;tizenship.
The character of our immigration has now changed. During
the past fifteen years we have been receiving a very undesirable class
from Southern and Eastern Europe, which has taken the place of
the Teutons and Celts. During the past fiscal year nearly 600,000
of these have been landed on our shores, constituting nearly 70 per
cent, of the entire immigration for that year. Instead of going
to those sections where there is a sore need for farm labor, they
congregate in the larger cities mostly along the Atlantic seaboard,
where they constitute a dangerous and unwholesome element
of our population.
About 50 per cent, of the 196,000 aliens who came from South-
ern Italy during the past year were unable to read or write any
language, and the rate of illiteracy among the rest of these Mediter-
ranean and Slavic immigrants ranges from 20 per cent, to 70 per
cent., while among the Teutonic and Celtic races the rate of illiter-
acy is less than 1 per cent, to 4 per cent. This change which has
taken place during the past fifteen years has resulted in raising the
average of illiteracy of all aliens from about 5 per cent, in former
years to 25 per cent, at the present time.
What I desire, however, to call attention to, I have already
indicated, and that is that in the enforcement of the immigration
laws, since the subjects thereof are human beings, the treatment
is two-sided. One-half of the work incumbent upon the Govern-
ment has been done when those whose presence would militate against
the interests of the people of this country have been detected and
returned to their homes. Under the direction of the Bureau of
Immigration all aliens are carefully examined by immigrant inspec-
tors and surgeons of the Marine Hospital Service at the ports of
entry for the purpose of rejecting those not admissible under the
provisions of the immigration laws. During the past year more
than 1 per cent, of those who applied for admission were rejected
I56 The Annals of the American Academy
.
and returned to the countries whence they came. The total numb
thus debarred during the year was 8,769, for the following causes, viz. :
Paupers ; 5,812
Afflicted with a loathsome or a dangerous contagious disease 1,773
Contract laborers 1,086
Convicts 51
For all other causes 47
In addition thereto 547 were deported who were found to be
in the United States in violation of law.
There still remains the larger question, the question that more
individually and vitally affects the interests of our people. What
shall we do with the thousands that are admitted? Shall they
be allowed to form alien colonies in our great cities, there to main-
tain the false ideals and to propagate the lawless views born thereof
as the result of their experience — foreign not alone from their
origin geographically, but foreign as well to this country in their
ideals of human liberty and individual rights? To answer this
question affirmatively is simply to transfer the evils which may be
admitted to exist in foreign countries to our own shores. Immi-
gration left thus is a menace to the peace, good order and stability
of American institutions, a menace which will grow and increase
with the generations and finally burst forth in anarchy and disorder.
It is thus necessary, as a measure of public security, to devise and
put in force some means by which alien arrivals may be distributed
throughout this country and thus afforded the opportunities by hon-
est industry of securing homes for themselves and their children,
the possession of which transforms radical thinkers into conserva-
tive workers and makes all that which threatens the welfare of the
commonwealth a means to preserve its security and permanency.
The Department of Commerce and Labor, through the Bureau
of Immigration, should, in my judgment, furnish information to all
desirable aliens as to the best localities for the profitable means
of earning a livelihood, either as settlers, tradesmen or laborers.
The States and Territories which need immigration should file
with the Department such evidence of the advantages offered to
aliens to settle in localities where conditions are favorable, so that
the tide of immigration will be directed to the open and sparsely
settled country. That the Bureau of Immigration should be the
Problems of Immigration 157
medium of distributing the aliens is to my mind as much of a duty
as it is to decide to whom the right to enter shall be given.
There are confined in the penal, reformatory and charitable
institutions of the eleven States from Maine to Maryland, including
Delaware, 28,135 aliens. The Irish, Slavs, Germans, Italians and
English make up 85 per cent, of the total. There are 9,390 Irish;
5 372 Slavic; 4,426 Germans; 2,623 Italians, and 2,622 English.
In the State of Pennsylvania there are 5,601 aliens confined in
these institutions, 90 per cent, of whom are of the same five races
in the following numbers : 1,772 Slavic ; 1,218 Irish ; 1 , 078 Germans ;
673 Italians, and 423 English.
As I have already stated, the question has two sides. The
other side is the humanitarian. It refers to the claims upon our
consideration of alien arrivals as fellow beings. This side equally
demands of a just and humane government the adoption of prac-
tical methods for such a distribution of these people as I have
already indicated. On their own account, and in consideration of
their ignorance and helplessness, they should be taken out of the
great centers of population, where restricted space compels them
to live together in a very unheal thful and unsanitary condition,
and where competition for the means of existence forces them to
prey upon each other and upon American citizens engaged in the
same pursuits by a system of underbidding for work, a condition
which reduces the cost of labor and lowers the standard of living.
Such colonization, furthermore, by its consequent disregard of
sanitary laws, threatens the physical health of the communities
affected.
I cannot, in the brief space at my disposal, do more than merely
advert to the principal features of this great governmental policy
regulating immigration, a policy whose administration, to some
extent, has been confided to my hands. I feel with every day of
added experience the gravity of the interests involved, and that it
calls for all that is best and highest in ability and moral stamina
to accomplish the best results. It would be impossible for any
right-minded man — it certainly has been to me — to undertake
such a task without soon learning how much it exacts. In every
moment of doubt or uncertainty, however, I have endeavored to
be governed by that fundamental principle of our Government
158 The Annals of the American Academy
which recognizes the sacredness of right and individual opportunity,
whether the person affected has fortunately been born under the
shadow of the stars and stripes, or whether, when the opportunity
comes to him to exercise his own volition in selecting a home for
himself and his children, he seeks that protection. Exact justice
to all, irrespective of present or previous condition, is the rule by
which I have endeavored to enforce the immigration laws, bearing
in mind always that in any conflict of interests between my own
people and those of other countries my primary duty is so to act
that the balance will incline in favor of the citizens of this country,
in whose service I am employed.
The Diffusion of Immigration
By Eliot Norton, Esq., New York City
(159)
. )
THE DIFFUSION OF IMMIGRATION
By Eliot Norton, Esq.,
Of New York City
Since January of 1850 to July of 1903, 18,998,383, or say nineteen
million immigrants have come to this country, which gives an aver-
age of just about three hundred and fifty-five thousand a year for this
period of fifty-three years and a half. Apart from this average,
and taking the year from July 1st, 1902, to July 1st, 1903, by itself,
the enormous number of eight hundred and fifty thousand, in round
numbers, was reached. In the previous twelve months there had
been, in round numbers, six hundred and forty thousand.
It is impossible to say whether these great figures will be kept
up. A falling off from certain countries is sure to happen. Italy
cannot continue for long to send us the number that she has been doing
— over two hundred thousand last year. But whether the de-
creases that there may be from some countries will not be made
up by increases from others is a question which does not permit
of any absolute solution. Still it seems reasonably safe to prophesy
that the yearly average of three hundred and fifty-five thousand
will be kept up for another generation. In round numbers this
will mean a total of thirteen millions of immigrants in the next
thirty-six years. And judging from the records of the past about
seven-eighths of these immigrants will be between fourteen and
forty-five years old. About two-thirds of them will be very poor,
and will have less than thirty dollars of money apiece. And the
average of ignorance will be high; at least a fifth will not know
how to read or write, while scarcely any will have the simple edu-
cation that a boy or girl can get at the common schools in this
country.
Whether this coming immigration will be of advantage to
this country is not an easy question to answer. It is clear that
our material development would have been slower had the large
immigration of the past fifty years not occurred. Assuming that
there is still enormous material development to be made, which is
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j52 The Annals of the American Academy
quite certain, and assuming that to do so rapidly is of benefit (which
I think is doubtful), then the coming immigration will be of benefit.
No other way in which this immigration will be of benefit suggests
itself to me.
Does this immigration bring with it dangers to this country?"
This I think can be easily answered in the affirmative. We are
trying to govern a great territory with a large population by a
system of government which demands as a prerequisite for con-
tinued success, certain political and moral beliefs, and an intelligent
interest on the part of its inhabitants in public affairs. It is not
sufficient to have a Constitution and members of legislatures. It
is necessary that the moral and political truths which underlie
that Constitution be commonly understood and highly valued.
It, is also necessary that legislators should be the political repre-
sentatives of a people who, however divided by party politics,,
are united in an intelligent effort to realize in their government
these moral and political conceptions; and that as such repre-
sentatives they should at all times be animated by these truths,
and should try to embody them in practical legislation.
The introduction of nineteen millions of immigrants in the
past fifty years who were wholly ignorant of our political notions
has lowered the average political intelligence of the country, and by
so far affected representative government to its detriment. This
can be readily seen in some of our cities where great numbers of
immigrants have collected, and where their political influence is
most strongly felt. Here a representative and republican govern-
ment no longer exists except in name and outward form. Tammany
Hall is not the kind of government that this country was founded
to give its inhabitants. And if its defense is that it is a government
such as the majority of the people of New York are pleased with,
then we see the absence in that majority of the moral and political
conceptions necessary to sustain a republican form of government.
We can see the same effects to a greater or less extent elsewhere;,
and as immigrants continue to come over, all of whom are ignorant
of the political and moral truths which underlie our form of govern-
ment, we are likely to see them increase. If there were only enough
of such immigrants they would tolerate a mild tyrant in the White
House as they do a mild city boss.
The Diffusion of Immigration 163
There is another danger I wish to mention. If one considers
the American people from say 1775 to i860, it is clear that a well-
defined national character was in process of formation. What
variations there were, were all of the same type and these variations
would have slowly grown less and less marked. It needs little
study to see of what great value to any body of men, women and
children a national or racial type is. It furnishes a standard of
conduct by which any one can set his course. The world is a diffi-
cult place in which to live, and to establish moral standards has
been one of the chief occupations of mankind. Without such
standards man feels as a mariner without a compass. Religious
rules, laws and customs are only the national character in the form
of standards of conduct. Now national character can only be formed
in a population which is stable. The repeated introduction into-
a body of men of other men of different type or types cannot but
tend to prevent its formation. Thus the nineteen millions of im-
migrants that have landed have tended to break up the type which
was forming and to make the formation of any other type diffi-
cult. Every million more will only intensify this result, and the
absence of a national character is a loss to every man, woman and
child. It will show itself in our religions, rules of conduct, in our
laws, in our customs.
These and other dangers which various observers have noted
have led to some agitation for the passing of laws that would restrict
immigration. Now to restrict immigration by a few thousand
would not be of any particular value, and none of the laws which
have been so far suggested would have a greater effect than this.
There is no likelihood that any law could be passed that would
materially reduce immigration — say cut it down one-half or even
one-third — and before such a law could be passed a great many
very intelligent and influential people would have to be convinced
that the cutting down of our immigration would not be a detriment
to this country. Personally I believe that these people in all good
faith lose sight of the sure and lasting benefit through fear of a
possible detriment.
We must therefore consider how to minimize the dangers of a
yearly immigration of not less than three hundred and fifty thousand
poor and ignorant people for an indefinite period. It is obvious that
1 64 The Annals of the American Academy
the dangers which the immigration of the past has contained have
been minimized by the great size of the country and the scattering
of the immigrants over it. They are found in every State, from
Maine to California, from Canada to the Gulf. This has enabled
them to be brought in contact with the native born, and both
have been modified by the process. The result has not been in any
proper sense of the word "assimilation/' but whenever immigrants
have been diffused they have rapidly been educated so as to get
along with the native American.
But this natural diffusion is ceasing, and we not only find that
immigrants tend naturally to the cities but when there form colonies,
so that we have "little Germanies," "little Hungaries," and "little
Italics," and "Syrian colonies" and "Jewish colonies."
These colonies tend to perpetuate among the immigrants that
ignorance of our laws, customs and political and moral notions
that is one of their great dangers. Nor so long as they are denizens
of these colonies do they in any sense of the word become Americans.
They remain Italians, Germans, Russians and Hungarians. Obvi-
ously so long as immigration continues these colonies will tend to
grow, and by their growth magnify the dangers already mentioned.
Since we cannot depend on the immigrants to scatter, means
must be taken to diffuse them throughout the country and to localize
them away from the great cities.
It might be supposed that this would be a very difficult thing
to accomplish; it would be so if the immigrant himself objected,
but for the most part the immigrant does not object provided
certain requirements are met with. These requirements are as
follows :
First. The place where the immigrant is to be located must
be one where the climate is about such as he has been accustomed
to, for otherwise he would immediately be dissatisfied and would
drift to the cities.
Second. He must be assured of a reasonable livelihood in
excess of what he would earn in his own country. He has come
to this country because he thinks it is easy to make money, and,
relatively to what he makes abroad, it is easy; consequently his
hopes and expectations must be sustained.
The Diffusion of Immigration 165
Third. He must have his railroad fare paid to his destination,
for he usually does not have the money to do so himself.
Fourth. The immigrant must not be wholly solitary; if he
is set down in no matter how good a place to earn his livelihood, in
no matter how pleasing a climate, he will be uncomfortable and
tend to move away unless he can have a few of his own country-
men within comparatively easy reach.
These four requisites are easy to arrange for. Good manage-
ment, a comparatively small fund of money, and an intelligent
understanding of the immigrant are all that are needed.
There is a fifth and last requisite, to wit :
He must be protected both as regards a shelter over his head
and food enough to eat while getting settled and until his livelihood
begins coming in. This is not a serious matter where his livelihood
begins shortly after arrival, but where he is expected to make it
out of the earth, which will be the common case, he, and his family,
if he has one, must be looked out for until the crop is sown and
harvested, a period of not less than six months.
There are many land owners who will furnish immigrants
with houses and will make very satisfactory terms with them for
the use or ownership of land, but the keeping the immigrant and
his family until the first harvest comes in is the difficulty in most
cases. To overcome this obstacle a large fund is needed. Unless
such a fund is raised little or nothing can be done. An excellent
example of such a fund confined in its use to a particular race is seen
in the Hirsch endowment and the colonization plans which have
been carried out so satisfactorily in connection with this fund.
The Salvation Army has also various schemes of colonization, but
their desire to get the government to back them with its money
seems to me a mistake. The Society for the Protection of Italian
Immigrants is trying to raise the necessary funds to establish large
and small colonies of Italians.
These are the only efforts that I know of which are being made
to diminish the damages attendant upon our large immigration by
scattering the immigrants and getting them to settle away from
the cities.
Selection of Immigration
By Prescott F. Hall, Secretary of the Immigration Restriction
League, Boston, Mass.
(167)
<\'
SELECTION OF IMMIGRATION
By Prescott F. Hall
.Secretary of the Immigration Restriction League
The two factors of race migration and race survival have had
most potent effects upon the world's history. But, while these
factors are conspicuous when we look backward through the cen-
turies, we often fail to appreciate the importance of their influence
in the immediate past and in the present. The immigration ques-
tion in this country has never had the attention paid to it which
its importance entitles it, but has been sometimes the scapegoat
of religious and racial prejudices, and always in recent years an
annual sacrifice to the gods of transportation.
The causes of such indifference are not far to seek. In the
early days of this country the people were busy with other matters.
Immigration was small, and not especially objectionable in quality.
Later, the doctrines of the laissez faire school, and the obviously
narrow and prejudiced theories of the Know Nothing movement,
helped to continue the existing status of free movement. More
recently, a misapprehension of the doctrine of "survival of the
fittest" has led many intelligent citizens to adopt an easy-going
optimism, in many respects kindred to the benumbing fatalism
of Oriental peoples. This misapprehension is caused by the fact that
the doctrine of the "survival of the fittest" is usually stated in a
catchy and condensed formula, with the authority of modern science,
and accepted without critical understanding. The doctrine is that
the fittest survive; fittest for what? The fittest to survive in the
particular environment in which the organisms are placed. The only
teleological valuation in this formula is the almost* mechanical one
of survival in time. Those who survive need riot be the fittest
for any other purpose whatsoever, except the continuation of life and
reproduction. Were the citizens of the Netherlands inferior to the
soldiers of Alva, or many. of the victims of the French Revolution
to those who slew them? Were the Polish patriots inferior to their
Russian conquerors, or are the Finns inferior to those who are now
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1yQ The Annals of the American Academy
engaged in taking away their constitutional rights? Yes, but only
in the matter of survival in time. But if the duration of human
life on this earth is limited, as we are told it is by the same scientists
who lay stress upon the "survival of the fittest," the mere success
in duration for any race seems of no great value in itself, and may
it not be worth while to consider other valuations as we go along,
•so that the whole world history shall be as valuable as pos'sible from
all points of view ?
I have dwelt on this point because, while the value of artificial
selection in breeding animals, in producing seedless fruits and new
grains, in fact in nearly every department of life, is now generally
recognized ; and while some advanced persons are talking of regulat-
ing marriage with a view to the elimination of those unfit for other
purposes than mere survival; yet most people fail to realize that
here in the United States we have a unique opportunity, through
our power to regulate immigration, of exercising artificial selection
upon an enormous scale. What warrant have we for supposing that
the Divine Power behind things does not intend human reason to
be applied to these matters as well as hunger, steam, steel, and the
lust for gold?
In such cases as the present an appeal is usually made to the
fathers of the Republic, and to the argument that they recognized
the right of every human being to migrate wherever he chose, and
to produce as many children as he pleased, and, in general, to pursue
happiness by living the kind of life that suited him. How-
ever the fathers may have been influenced by the French political
theories of their time, they were practical men with much common
sense, and it is by no means certain that if they were present to-day,
the vastly changed conditions would not lead them to hold the views
of the present article. Washington writing to John Adams in
1794, said:
"My opinion with respect to immigration is that except of useful mechanics
and some particular descriptions of men and professions, there is no need of en-
couragement, while the policy or advantage of its taking place in a body (I mean
the settling of them in a body) may be much questioned; for by so doing they
retain the language, habits and principles, good or bad, which they bring with
them."
Can there be any question how Washington would feel about
Selection of Immigration 171
•excluding the thousands of immigrants who have recently come to
create and to occupy the slum districts of our Northern and Eastern
cities?
But even the prophetic vision of Washington could not possibly
have seen the unparalleled change in the conditions of immigration
from his day to ours. From 182 1, when statistics were first kept,
to 1900, a total of 19,115,221 immigrants has come to our shores;
and the annual immigration has increased from 9,127 in 1821 to
^57,046 in 1903. The modern immigration problem, however, dates
from 1870; and it is necessary to emphasize this point because much
of what is said in recent discussion ignores the profound change
which has taken place in the character of immigration since that
date. It may be frankly admitted that this country owes a large
share of its development, its wealth, its power and its ideals, to the
•early immigration as well as to the best part of the later immigra-
tion; but any arguments based upon the effects of early immigration
•cannot be applied to the new comers as self-evident truths, for the
data are by no means the same.
However much social prejudice there may have been against
the Irish and German immigrants of the forties and fifties, and
while even that immigration tended to diminish the native stock
as I shall show later, it still remains true that prior to 1870 immi-
-gration was chiefly of races kindred in habits, institutions and tra-
ditions to the original colonists. Mr. Lodge said upon this point
in addressing the Senate, March 16, 1896:
' ' It will be observed that with the exception of the Huguenot French, who
formed but a small percentage of the total population, the people of the thirteen
colonies were all of the same original race stocks. The Dutch, the Swedes and
the Germans were simply blended with the English-speaking people, who like
them were descended from the Germanic tribes whom Caesar fought and Tacitus
•described. During the present century, down to 1875, there have been three
large migrations to this country in addition to the always steady stream from
•Great Britain ; one came from Ireland about the middle of the century, and some-
what later one from Germany, and one from Scandinavia, in which is included
Sweden, Denmark and Norway. The Irish, although of a different race stock origi-
nally, have been closely associated with the English-speaking people for nearly a
thousand years. They speak the same language, and during that long period
the two races have lived side by side and to some extent have intermarried.
The Germans and Scandinavians are again people of the same race stock as the *
English who built up the colonies. During this century then, down to 1875, as
jj2 The Annals of the American Academy
in the two which preceded it, there had been scarcely any immigration to this
country except from kindred or allied races, and no other which was'sufficiently
numerous to have produced any effect ©n the national characteristics, or to be
taken into account here. "
How marked the change in nationality has been since 1869 is
shown by the fact that in 1869 less than 1 per cent, of the total
immigration came from Austria-Hungary, Italy, Poland and Russia,
while in 1902 there were over 70 per cent.; on the other hand, in
1869, nearly three-quarters of the total immigration came from
the United Kingdom, France, Germany and Scandinavia, while
in 1902, only one -fifth was from those countries. Or, to put it in
another way: in 1869 the immigrants from Austria-Hungary, Italy,
Poland and Russia were about one one-hundredth of the number
from the United Kingdom, France, Germany and Scandinavia; in
1880, about one-tenth; in 1894, nearly equal to it; in 1902 three
and one-half times as great. In 1903 the largest element in immi-
gration was the South Italian with 196,117 souls, and the next
largest was the Polish, with 82,343.
It does not, therefore, at all follow that because this country
has been able to assimilate large numbers of kindred races in the past,
it can in the future assimilate vastly larger numbers of races alien
in customs, traditions and ideals. Immigration in 1903 amounted
to over 850,000 persons. In 1923 or 1943 it may be two million a
year, and the mere fact that the two million may bear no larger
proportion to the total population of that day than the immigration
did to the population in 1870 is no guaranty of our power of assimi-
lating such a number of such races, especially when our total popu-
lation will contain such a large proportion of these very races which
are difficult of assimilation. Within the last year or two there has
been a marked increase in the number of sailings from Europe,
and especially from the Mediterranean ports. Recently, the White
Star Line has established a Mediterranean service, the Cunard Line
has a guaranty of 30,000 emigrants per year from Austria-Hungary,
and a new line has been established between Odessa and New York ;
also the steamers which formerly ran between Austria and Central
America now are to run to New York. There are increased sailings
of the North German Lloyd and Hamburg- American lines, and the
size of all new vessels has enormously increased. All these steam-
Selection of- Immigration • 173
ship lines are in the business for profit, and immigrants, who require
no loading and unloading, are by far the most profitable cargo.
The thousands of agents of these lines all over Europe, Asia Minor
and Northern Africa are bound to create all the business they can
for their respective lines, and naturally they are concerned only with
the selection of such applicants for tickets as will not certainly be
rejected under the laws of this country.
The influence of these conditions upon the quality of immigra-
tion has been forcibly expressed by General Francis A. Walker,
formerly Superintendent of the Census, as follows :
"Fifty, even thirty, years ago, there was a rightful presumption regarding
the average immigrant that he was among the most enterprising, thrifty, alert,
adventurous and courageous, of the community from which he came. It re-
quired no small energy, prudence, forethought and pains to conduct the inquiries
relating to his migration, to accumulate the necessary means, and to find his way
across the Atlantic. To-day the presumption is completely reversed. So
thoroughly has the Continent of Europe been crossed by railways, so effectively
has the business of emigration there been exploited, so much have the rates of
railroad fares and ocean passage been reduced, that it is now among the least
thrifty and prosperous members of any European community that the emigra-
tion agent finds his best recruiting ground Illustrations of the ease and
facility with which this Pipe Line Immigration is now carried on might be given
in profusion Hard times here may momentarily check the flow; but it
will not be permanently stopped so long as any difference of economic level exists
between our population and that of the most degraded communities abroad."
Speaking of the probable effect of recent immigration General
Walker continues :
"The entrance into our political, social and industrial life of such vast
masses of peasantry, degraded below our utmost conceptions, is a matter which
no intelligent patriot can look upon without the gravest apprehension and alarm.
These people have no history behind them which is of a nature to give encourage-
ment. They have none of the inherited instincts and tendencies which made it
comparatively easy to deal with the immigration of the olden time. They are
beaten men from beaten races; representing the worst failures in the struggle for
existence. Centuries are against them, as centuries were on the side of those who
formerly came to us."
The main point to remember in regard to recent immigration
is that much of it is not voluntary in any true sense of the term.
The limits of this article do not permit a detailed statement of the
facts supporting this allegation, but anyone who will read in the
I74 The Annals of the American Academy
report of the Commissioner -General of Immigration for 1903 the
remarks of Special Inspector Marcus Braun, who has just been upon:
a tour of investigation in Europe, will find abundant evidence.
The same thing was brought out in the investigations of our Indus-
trial Commission. The race migration at present going on is not,
therefore, even a "natural" movement. It is an artificial selection
of many of the worst elements of European and Asiatic populations
by the steamship companies.
It is significant that no general immigration legislation was
found necessary until some years after the newer kind of immigra-
tion had begun to come hither. The first general immigration act
was passed in 1882 and imposed a head tax of fifty cents; the con-
tract labor acts were passed to prevent the immigration of the
cheapest mining labor in 1885 and 1887 ; the general law was revised
in 1 891; an administrative act was passed in 1893; the head tax
was raised to one dollar in 1895; and a general codifying act was
passed in 1903, raising the head tax to two dollars. These Acts
were passed in pursuance of the principle that the nation, as an
attribute of its sovereignty or under the commerce clause of the
Constitution, has a- right to exclude or to expel from its borders
any aliens whom it deems to be dangerous to the public welfare.
This principle has been sustained by several decisions of the Supreme
Court of the United States, the most recent one being in the case of
Turner, the Anarchist.
So far from it being an established principle of our country to
admit any and all persons desiring to come, it was early recognized
that Congress has complete control over this matter, and Congress
has established numerous classes of persons to be excluded. (1) An
Act of 1862 -prohibited the importation of Oriental "coolie" labor,
and the later "Chinese Exclusion Acts" have rigorously enforced
this principle. The Act of 1875 added (2) convicts, except those
guilty of political offenses, and (3) women imported for immoral
purposes. The act of 1882 added (4) lunatics, (5) idiots, (6) persons
unable to care for themselves without becoming public charges.
The Act of 1887 added (7) contract laborers. The Act of 1891
added (8) paupers, (9) persons suffering from loathsome or dangerous
contagious diseases, (10) polygamists, (11) "assisted" immigrants,
i. e.y those whose passage has been paid for by others, unless they
Selection of Immigration 175
show affirmatively that they are otherwise admissible. The Act of
1903 added (12) epileptics, (13) persons who have been insane
within five years previous, (14) professional beggars, (15) anarchists,
or persons who believe in or advocate the overthrow by force or
violence of the Government of the United States or of all government
or of all forms of law, or the assassination of public officials, (16) per-
sons attempting to bring in women for purposes of prostitution, (17)
persons deported within a year previous as being contract laborers.
It is apparent that, however formidable the foregoing list of ex-
cluded persons looks upon paper, it practically is by no means an
adequate protection to the country. Out of the 857,046 immigrants
arriving in 1903, only 9,316, or a trifle over one per cent., wrere de-
barred or returned withm one year after landing. In previous years
the percentage has usually been less than this. The theory of the
law is that the transportation companies will not sell tickets to per-
sons liable to be excluded, and this undoubtedly keeps some unde-
sirables away. But, after all, the present system of excluded classes
utterly fails to attack the main problem of the proper selection of
immigrants. In the Report of the Commissioner-General for 1903,
the Commissioner at New York speaks of this matter as follows :
"I believe that at least 200,000 (and probably more) aliens came here, who,
although they may be able to earn a living, yet are not wanted, will be of no
benefit to the country, and will on the contrary be a detriment, because their
presence will tend to lower our standards; and if these 200,000 persons could have
been induced to stay at home, nobody, not even those clamoring for more labor,
would have missed them. Their coming has been of benefit chiefly, if not only,
to the transportation companies which brought them here."
It is probable that most citizens would agree on a definition of
"undesirable" immigration. At any rate, for the purposes of this
paper, I shall call that immigration undesirable which is ignorant
of a trade ; which is lacking in resources ; which has criminal tenden-
cies; which is averse to country life and tends to congregate in the
slums of large cities; which has a low standard of living and lacks
ambition to seek a better; which fails to assimilate within a reason-
able time, and which has no permanent interests in this country.
Now how far does our recent immigration fulfil this definition?
It is to be remembered that in 1903 about three-quarters of it came
from Southern and Eastern Europe and Asia; 65 per cent, of it
xy6 The Annals of the American Academy
was destined for the four States of Illinois, Massachusetts, New York
and Pennsylvania. Over 80 per cent, was totally unskilled or had
no occupation at all. On the average, each immigrant had only
$19 with him, and many only one or two dollars. Those from South-
ern and Eastern Europe admitted an illiteracy of 39.7 per cent., as
against 3.9 per cent, for those from Northern and Western Europe.
The true illiteracy was probably much higher for the former class,
as they are known to be coached on this subject in view of the agita-
tion for an illiteracy test, and whenever the writer has made prac-
tical examinations of immigrants he has found considerable misrep-
resentation in this regard. Taking up first the matter of distribu-
tion, we see a marked difference between the immigration prior to
1870, which built up the Northwest, and the races which now come
to us. The census of 1900 shows that in the 160 principal cities of
the country there were only \ to J of the Scandinavians, less than
i of the British, and about £ of the Germans, as compared with over
I of the Irish, Italians and Poles and J of the Russian Jews. Of
the Poles in Illinois, 91.3 per cent, were in Chicago; in New York
State, 75.5 per cent, were in New York City and Buffalo ; in Michigan
and Wisconsin, over J were in Detroit and Milwaukee. Of
the Italians in Illinois, 72 per cent, were in Chicago; of those in New
York State, 79.8 per cent, were in New York City. Of the Russian
Jews in the United States, 71.8 per cent, were in six States, as com-
pared with 54 per cent, in 1890. Of the Russian Jews in Illinois,
84.2 per cent, were in Chicago; of those in New York State, 93.7 per
cent, were in New York City; of those in Pennsylvania, 56.8 per
cent, were in Philadelphia. Only 3.9 per cent, of the Poles, 4.4 per
cent, of the Hungarians and 8.7 per cent, of the Russian Jews live
in the Southern or Western States.
The Seventh Special Report of the U. S. Commissioner of Labor
shows that Southeastern Europe has furnished three times as many
inhabitants as Northwestern Europe to the slums of Baltimore, 19
times as many to the slums of New York, 20 times as many to the
slums of Chicago, and 7 1 times as many to the slums of Philadelphia.
In these same slums the illiteracy of Northwestern Europe was 25.5
per cent., that of Southeastern Europe 54.5 per cent, or more than
double, while the illiteracy of the native American element in the
slums was only 7.4 per cent.
Selection of Immigration 177
The concentration of these large bodies of ignorant foreigners
in the slums of our Eastern cities is a serious matter. Forming racial
settlements, they do not tend to assimilate, but, as Washington pre-
dicted, keep to their native customs and standards of living. They
cannot even read the newspapers, board of health notices and trade
journals printed in their own language, and as a necessary consequence
are slow to become acquainted with any other standards except those
of their immediate neighbors. The census of 1890 seems to show
that, taking an equal number of the foreign element and of the native
element, the foreigners furnish i£ times as many criminals, 2 J times
as many insane, and 3 times as many paupers as the natives. It is
not strange that there should be many foreign-born paupers when we
consider that the South Italians bring on the average $8.84, the
Hebrews, $8.67 and the Poles, $9.94 each, as compared with $41.51
brought by the Scotch, $38.90 brought by the English and $28.78
brought by the Germans. The statistics as to the nationality and
parentage of dependents and delinquents in the various States are as
yet too incomplete for very accurate conclusions, but it is evident
that the present laws do not exclude the unfit. In the final report of
the Industrial Commission, p. 967, it is stated that ' 'the second genera-
tion, i. e., the native children of foreign parents, furnish the largest
proportion of commitments and prisoners of all race elements in the
population." According to a recent investigation in New York
State there were 13,143 persons of foreign birth in the public institu-
tions of that State. Recent testimony of the New York State
Lunacy Commission was to the effect that the State of New York
is paying $10,000,000 annually for the support of the alien-born
insane alone. Two of the largest hospitals in New York City have
been obliged to suspend part of their activities on account of the bur-
den of the foreign patients. The point of this is that things were not
thus until the change of nationality took place. One of the man-
agers of the House of Refuge in New York City writes :
"I notice the large number of children that are placed in charitable institu-
tions for no crime or misdemeanor, but to relieve their parents of their support.
They are principally from Southern and Eastern Europe."
In 1902 the number of arrests of Greeks in New York City ex-
ceeded the entire Greek population of the city for the year 1900;
I78 The Annals of the American Academy
£ of the foreign whites in the United States over ten years of age can-
not speak English, and of these 89 per cent, are over 20 years of age;
that is to say, they are not likely to receive any schooling. Consider-
ing New York State alone, these persons who cannot speak English
are chiefly Italians, Russian Jews and Austro-Hungarians.
In addition to perpetuating a low standard of living and a wil-
lingness to underbid native labor, this ignorance has a bad side
politically. On the one hand, it means an indifference to civic mat-
ters, and a lack of knowledge of and interest in our institutions;
and, on the other hand, it means bad material out of which to make
citizens. The average percentage of British, Germanic and Scan-
dinavian aliens among the males of voting age in 1900 was 11.5;
of the Slav, Latin and Asiatic aliens, 45.3. Of these aliens, tV had
been in this country long enough to be naturalized. This in the face
of the great inducements to naturalization held out by political party
leaders, and the fact that many municipalities insist on the employ-
ment of citizens only upon public works. It has recently been es-
timated that there are 50,000 fraudulent naturalization papers held
in New York City alone. However this may be, it is evident that
many of our present immigrants are not the stuff of which patriots
are made. This is a highly dangerous condition in a country where
we are once for all committed to the principle of government by
force of numbers.
Some persons who are in favor of indiscriminate immigration
admit, as indeed they must, the force of facts like those recited above;
but they say the whole matter is a question of distribution. Let
us get these people out of the cities, they say ; let us put them upon the
unsettled regions of Texas or Oklahoma, and the results will be very
different. In regard to this plan several things may be said. (1)
The immigrants will not go there of their own accord, as appears from
what has been already said. Most of them cannot afford to go in-
land if they could. (2) The experience of the Hebrew Charities on
a small scale shows that even where colonization is successful —
and in many cases it has been an utter failure — it is altogether too
expensive to be applied on a large scale. (3) If it could be applied
to those already in the city slums, the slums would fill up faster than
they could be bailed out, unless we adopt some further regulation of
immigration as to newcomers. (4) It is, therefore, proposed to bar
Selection of Immigration 179
aliens not destined to an interior locality. But it would require a
policeman for each immigrant to see that he did not sell his ticket
on landing, and that he actually went to his destination. (5) Even
if our recent immigrants were able and willing to go to the West and
South, these States do not want them. In 1896 every one of the asso-
ciations formed to encourage immigration into the Northwest
petitioned Congress for an illiteracy test for immigrants and stated
that they did not want Southeastern European immigrants. A
Government Commission in 1 896 took steps to ascertain the wishes
of the States in this matter by communicating with their governors,,
labor commissioners and other officials. Of 52 replies received all
expressed a preference for native born or Northwestern Europeans,
chiefly for British, Germans and Scandinavians. There were only
two requests for Southeastern Europeans and these were for Italian
farmers with money. Within a month the Immigration Restric-
tion League has repeated the experiment of the Government Com-
mission, and the thirty replies received to date are most instructive.
Of the States desiring immigrants practically all wish native born,
or immigrants from Northern Europe, Britain, Germany and Scan-
dinavia. All are opposed to having the slums of eastern cities
dumped upon them. In regard to immigrants not desired, three
States desire no immigrants at all ; two, no foreign born. Five desire
no Southern and Eastern Europeans. Eight wish no illiterates.
Of the rest, immigrants settling in cities, the Latin races, persons
who cannot speak English, Asiatics, and in general any but the best
classes of immigrants, are objected to.
Before considering remedies for the existing state of things, I
wish to return to what was said at the outset and to emphasize the
most important reason of all for further selection in admitting im-
migrants. The late Bishop Brooks, who was a large-hearted man
if there ever was one, in a public address used these words :
"If the world, in the great march of centuries, is going to be richer for the
development of a certain national character, built up by a larger type of manhood
here, then for the world's sake, for the sake of every nation that would pour in
upon us that which would disturb that development, we have a right to stand
guard over it We have a right to stand guard over the conditions of that
experiment, letting nothing interfere with it, drawing into it the richness which
is to come by the entrance of many men from many nations, and they in sym-
pathy with our constitution and laws."
180 The Annals of the American Academy
Now in order to develop our institutions in the spirit of those
who built them up we must guard our power of assimilation, and not
only refuse to take in immigrants whom we cannot assimilate, and
refuse to take any immigrants in faster than we can assimilate
them, but we must see to it that we ourselves and those whom we
assimilate shall continue to exist and to hand on the torch of civiliza-
tion to worthy successors. All statistical discussions of immigra-
tion and its effects are defective in two respects. First, under our
census system the children of immigrants are classed as native
Americans. Second, no account is taken of the children which are
never allowed to be born. In other words, the question is not really
between us and the immigrants now coming, but between their chil-
dren and the children of future immigrants and our children. To put
the matter concretely, the greatest danger of unselected immigra-
tion is its effect upon the native birth rate.
Take a teacher in New York City with a high standard for him-
self and his children. He has but two because he cannot give them
what he wants to give them in education and the decencies of life.
Compare him with a Southern Italian or a Syrian living not a mile
away who has ten children, and who brings them up regardless of
any high standard of living, any education they get being paid for
by other people. Once on a time half of these would have died.
Now, with our improved public sanitation, they live. Perhaps, as
stated above, some of these children are supported at the public
expense until they are able to go into a sweatshop. There can be no
doubt which is the higher type of citizen or of family, yet the higher
barely tends to perpetuate itself and the lower "survives" to five
times the extent of the higher.
Of course the falling of a birthrate may be due to many causes
which I have not time here to discuss. But in general it is caused by
the desire for the "concentration of advantages," and one of the
principal provocatives of this desire is the effects of immigration.
Consider for a moment the typical town of a hundred years ago with
its relatively homogeneous society. The young men drive the om-
nibus and tend the store. Everybody knows them, and, while not
ranking with the judge, or the parson, or the doctor, they are in
general as good as anybody. Now suppose a small factory is started
and some of the village girls are employed there. For a time no great
Selection of Immigration 181
change occurs. Then a number of unskilled immigrants settle in
the town. Being unskilled they naturally take up the easiest kind
of manual labor. At first they are regarded as curiosities. More
come, enough to form a class. They naturally group more or less by
themselves. They do not enter into the existing clubs and amuse-
ments of the town. After a time they constitute the larger part of
the help in the factory. Being poor, they live in the cheapest loca-
tion and in the most frugal style. The natives gradually withdraw
from social contact with them, the girls dislike to work with them in
the factory, the boys do not want to be with them in the fields and
the mills. After such a caste system invades a town the natives are
unwilling to marry, or, if they do marry, to have children, unless they
can be sure of enough means to secure employment for their children
in an occupation where they will not be classed with the immigrants.
The girls no longer go out to service, but go into book-keeping, or
certain kinds of stores ; and the boys are sent to the High School or, if
possible, to college. At any rate, the children of the natives seek
only the so-called better grades of employment. After a time there
is an invasion of French Canadians or Italians into the town, and the
same process tends to operate in the case of the earlier immigrants.
That this is no flight of the imagination but an actual descrip-
tion of what happens is testified by many students of the question.
The writer has personally inquired as to the cause of the small
families in various parts of our Eastern States and has been repeatedly
told by parents that this social reason was the controlling one in
their own families. Dr. Roberts and Dr. Warne report the same thing
in the mining regions of Pennsylvania. General Walker says :
"The great fact protrudes through all the subsequent history of our popu-
lation that the more rapidly foreigners came into the United States, the smaller
was the rate of increase, not only among the native population of the country as a
whole, including the foreigners If the foregoing views are true, or contain
a considerable degree of truth, foreign immigration into this country has, from
the time it assumed large proportions, amounted not to a reenforcement of our
population, but to a replacement of native by foreign stock."
The Industrial Commission also says in its report, p. 277 :
"It is a hasty assumption which holds that immigration during the nine-
teenth century has increased the total population."
!82 The Annah of the American Academy
R. R. Kuczynski has shown that in Massachusetts the foreign
born mother has two-thirds more children than the native-born
mother, and three-fifths more children living.
Now in many discussions of this question it is said that the
natives are displaced by the foreigners, but are "crowded up" into
higher occupations. I do not believe that this can be shown to be
true, even of the natives in existence at the time the process operates.
Some are undoubtedly crowded up, some are crowded out and go
elsewhere, many are crowded down and become public charges or
tramps. But the main point is that the native children are mur-
dered by never being allowed to come ibto existence, as surely as if
put to death in some older invasion of the Huns and Vandals.
In this question of immigration we are dealing with tremendous
social forces operating on a gigantic scale. How careful should we be,
then, to turn these forces in the right direction so far as we may guide
them. It is no doubt true that hybridization has often pro-
duced better stocks than those previously existing ; and some infusion
of Mediterranean and Alpine blood into the Baltic immigration
of the last century may perhaps be a good thing. But if we were
trying such an experiment on plants or animals would we not exer-
cise the greatest care to get the best of each stock before mixing
them ? And has it not been said that human beings are of more value
than many sparrows? The success of the American Republic is of
more value to the world than the good of a few thousand immigrants,
whose places are filled up at home almost before they reach this side
of the Atlantic. It is by no means certain that economic reforms
would not already have taken place in Europe which have been de-
layed because those countries have had the safety valve of emigra-
tion to the United States, and have thus been able to keep up the
frightful pressure of militant taxation in their own domains.
If we are to apply some further method of selection to immi-
grants, what shall it be? The plan of consular inspection in Europe,
once popular, has been declared impracticable by every careful
student of the subject. A high headtax might accomplish something,
but it is not a discriminating test, and hits the worthy perhaps
harder than the unworthy.
Two plans have been suggested. One, more in the nature of a
palliative than a cure, is to admit immigrants on a five-year proba-
Selection of Immigration 183
tion, and to provide that if within five years after landing an immi-
grant becomes such a person as to be within the classes now excluded
by law, whether the causes of his changed condition arose prior or
subsequent to his landing, he shall be deported. There are various
practical difficulties with such a plan, the chief one being that of
identification, but, in view of the decision in the Turner case, such a
plan would probably be held to be constitutional.
The other plan is to adopt some more or less arbitrary test,
which, while open to theoretical objection — as any practicable test
must be — nevertheless will on the whole exclude those people whom
we wish excluded. It must be a definite test, because one trouble with
the "public charge" clause of the present law, under which most
exclusions now occur, is that it is so vague and elastic that it can be
interpreted to suit the temper of any of the higher officials who may
happen to be charged with the execution of the law. As I have else-
where repeatedly shown those persons who cannot read in their own
language are, in general, those who are also ignorant of a trade, who
bring little money with them, who settle in the city slums, who have
a low standard of living and little ambition to seek a better, and who
do not assimilate rapidly or appreciate our institutions. It is not
claimed that an illiteracy test is a test of moral character, but it
would undoubtedly exclude a good many persons who now fill our
prisons and almshouses, and would lessen the burden upon our schools
and machinery of justice. In a country having universal suffrage it
is also an indispensable requirement for citizenship, and citizenship
in its broadest sense means much more than the right to the ballot.
The illiteracy test has passed the Senate three times and the House
four times in the last eight years. It has been endorsed by several
State legislatures, a large proportion of the boards of associated
charities of the country, and by numerous intelligent persons famil-
iar with immigration matters, including the State associations for
promoting immigration above referred to. This test has already
been adopted by the Commonwealth of Australia and by British
Columbia, and would have certainly been adopted here long since but
for the opposition of the transportation companies.
It is no doubt true that many of the newer immigrants are
eager to have their children educated, and that many of these chil-
dren are good scholars. But this fact strikes us the more forcibly
184 The Annals of the American Academy
because it is the one ray of hope in a dark situation. I do not know
that anyone has ever claimed that these foreign-born children are
superior in any way to native-born children, and the latter acquire
the most valuable part of civic education by hearsay and imitation
in their own homes, while the foreign born have their only training
in the school. Furthermore, everyone admits the enormous burden
of educating such a large mass of children, illiterate as to even their
own language. This is in addition to the burden of the adult illit-
erates imposed on a country which already has its problems of
rural and negro education. There is no doubt that an illiteracy
test would not only give us elbow room to work out our own prob-
lems of education, but would greatly promote elementary education
in Europe. Why should we take upon ourselves a burden which
properly belongs to the countries from which these immigrants
come?
Whatever view we may take of the immigration question there
can be no doubt that it is one of the most important, if not the most
important, problems of our time, and, as such, it deserves the careful
study of all our citizens. We are trustees of our civilization and in-
stitutions with a duty to the future, and as trustees the stocks of
population in which we invest should be limited by the principle of
a careful selection of immigrants.
Immigration in its Relation to Pauperism
By Kate Holladay Claghorn, Tenement House Department,
New York City
<i85)
IMMIGRATION IN ITS RELATION TO PAUPERISM
By Kate Holladay Ci,aghorn
Tenement House Department, New York City
While it is plain enough that foreign immigration has some
connection with the problem of pauperism since common observa-
tion and all the statistics available unite in showing that the ma-
jority of the recipients of our charity, public and private, are of
foreign birth, it is equally certain on the other hand that pauperism
is not something that the immigrant brings with him, but is the
result of a considerable period of life and experiences here.
In 1903, even with the careful scrutiny now given by the immi-
gration department, out of 857,000 foreign immigrants only 5,812,
or less than seven-tenths of one per cent., were deported as likely to be-
come public charges, and only 547 persons, or less than one-tenth'
of one per cent, of the immigration of the previous year, were
returned within one year after landing as having become such.
In age distribution the immigrant group is the diametric oppo-
site of the pauper group; the former consisting mainly of young
adults, a group at the height of working power and ability for self-
help; the latter of children and the old. This of itself indicates that
much pauperism among the newly arrived is unlikely.
Furthermore, as a matter of fact, it takes some time for the
immigrant to find his way to the poorhouse. The census of 1890
showed that 92 per cent, of the foreign-born male almshouse paupers
had been in this country ten years or more, and their average length
of residence here was probably much higher.
It is, in short, the immigration of past decades that is filling
our poorhouses to-day. Of the foreign-born almshouse paupers
enumerated in 1890, 83 per cent, were Irish, Germans and English —
our older immigrants — while Italians, Austrians and Russians, the
newer arrivals, were hardly to be found in almshouses at all. And
this preponderance of the older immigrants in the almshouses
was not merely due to their preponderance in the general population
at that time. The ratio of paupers to the million of the same nation-
(187)
1 88
The Annals of the American Academy
ality in the population at large was also far higher for the older
than for the newer immigrants, being 2,163 for the English, 2,436
for the Germans, and 7,550, just three-fourths of one-per cent., for
the Irish; while for the Italians it was only 817, for the Austrians,
779, and for the Russians, 586.
In view of the present uneasiness with regard to the changed
racial character of immigration, and its great and increasing vol-
ume, it is of importance to learn, as far as possible, whether the
newer Italians, Austrians and Russians will follow their Irish,
English and German predecessors to the poorhouse in about the
same proportion, or whether there are other elements at work to
make the situation more or less favorable.
Taking the new immigrants by races, rather than by national-
ities, the bulk of them are included in three groups — Italian, Slavic
and Hebrew — which, together, now make up about two-thirds of
our immigration year by year.
Assuming that the immigration for last year may be taken as
typical, the following table indicates some of the group -character-
istics which are significant with regard to probable pauperism :
Immigration for the Year End-
ing June 30, 1903-
Percentage of Males
who are
««- c
o**
933
Italians
Hebrews
Slavs and Magyars :
Bohemians and Moravians... .
Croatians and Slovenians. . . .
Lithuanians
Magyars
Polish
Russian
Ruthenian
Slovak
Total, Italians, Hebrews and
Slavs
Total Immigration
233,546
76,203
9,S9i
32,907
14,432
27,124
82,343
3,608
9,843
34,427
524,024
857,046
81
.41
15.00
58
113
54.00
61
1-43
44 -5o
89
. 12
5.65
75
.06
5-33
75
.42
9.88
72
.08
6. 10
80
2.28
16.80
78
.08
2. 10
7i
.06
5-6°
74.00
16.00
32.00
93- 00
89.00
83.00
85.00
69.00
96.00
88.00
43
26
E#
35
4i
10
30
31
SO
$12.93
9.70
22. 67
12.37
9 05
12.59
9-54
25.06
9.40
12.00
The Italians, it is seen, make up the largest single group, and
in 1903 exceeded in number any single race group for any preceding
year, with the sole exception of the Germans in 1882.
Immigration in its Relation to Pauperism 189
This group is peculiarly favorable as regards pauperism in respect
to age and sex composition, with the highest percentage of males
of any of the groups except the Croatians, and a high percentage
of persons between fourteen and forty-five. But they are also the
most illiterate of any of the groups but one — the Ruthenian — and
the money shown is only $12.93 Per capita.
It must be kept in mind, however, with regard to the poverty
of immigrants as indicated in the immigration reports, that, for
all classes of immigrants, the amount of money shown is probably
far short of the money brought, as the immigrant from motives
of caution will naturally exhibit only so much as he thinks neces-
sary to gain him admittance.
The 74 per cent, of males classed as "laborers" were mainly
farm laborers, from the country districts. The 15 per cent, skilled
workers were, for the most part, from the towns, and were mainly
barbers, carpenters, masons, shoemakers and tailors. The few
"professionals" were musicians, sculptors and painters, and teachers.
The typical Italian immigrant, then, is the illiterate, unskilled
laborer, with no capital but his sturdy arms and legs, and the poverty,
illiteracy and lack of skill that characterize him are the qualities
so often adduced in present-day discussion to show that our new-
coming immigrants are on "the brink of pauperism." If so, a
"brink" must be wider than is generally supposed — it takes the
Italian, at least, so long to get over it.
The Italian immigrant comes here not only because of economic
pressure at home, but because of a definite economic demand on
this side for unskilled labor. In particular, the construction com-
panies, now busily engaged in providing every city and town in the
country with subways, trolley lines, power houses, mills, factories
and skyscrapers, are absorbing this class of labor so freely that
the Italian unskilled laborer, upon arrival, is quickly picked up
and placed, and we hear nothing of him in relation to poverty or
pauperism for some time.
A part of this good result must be, in fairness, ascribed to
the padrone system, which, with all the evils it involves, at least
makes the connection of laborer with employer much more rapid
and certain than it could be without some such system.
An important factor in keeping the Italian laborer off the
I9o The Annals of the American Academy
hands of charity in his early period of residence is the great mobility
of the newly-arrived Italian immigration. Up to the present time
no statistics of departures have been kept, but it has been generally
known that at the close of the busy season for unskilled work, or
in a year of industrial depression, the return current to Italy is
strong. In the past year it has been calculated that the number
of east-bound steerage passengers was from 28 to 30 per cent, of
the number of west-bound steerage passengers. The percentage
for Italians alone would have been much higher than that, as they
are by far the most mobile of any of the race groups in our immigra-
tion.
This very mobility is often regarded as an especial danger of
Italian immigration ; it should rather be regarded as a safety valve,
or rather as a self-acting "law of settlement" which returns to
their native communities those who are in danger of pauperism here,
but who are able, in the home country, owing to the lower scale of
prices and living, to maintain themselves until they are needed on
this side again.
After a few years, however, the Italian immigrant saves up
enough to bring his wife and children to this country, or to marry
here, and then we begin to find him as a dependent.
As the Italian population is found mainly in the large cities —
62 per cent, of them living in the 100 principal cities in 1900 —
the conditions among the Italian poor in New York City may be
taken as fairly typical. Accordingly, to learn something about the
emergence of dependence among the Italians, a study of Italian
cases in the records of the New York Charity Organization Society
for five city blocks, chosen for the density of their Italian population,
was made. For the cases studied, the average period of residence
in the United States for the head of the family was eight years and
three months at the time of the first application for relief. In
three-fourths of the cases the head of the family had been in the
country five years or more. Only 6 per cent, had been in the
United States less than one year. As to occupation, the male heads
of families in the cases studied were about equally divided between
the skilled and unskilled trades, in contrast to the proportion of
one skilled to five unskilled in immigration; and about 5 per cent,
of the applicants for relief were of the professional class, again in
Immigration in its Relation to Pauperism 191
contrast to the less than one per cent, of that class among Italian
immigrants in general.
It is to be noted, furthermore, that these "professional" cases
got into difficulties, not only in greater proportion, but in a much
shorter time than the skilled and unskilled workers. In contrast
to the eight years average residence shown for all cases taken to-
gether, the greater number of the professional cases were forced to
apply for relief within a few months of arrival.
These followers of the professions were teachers, lawyers and
musicians, and were, apparently, among the hardest to care for. One
case, of a teacher, may be taken as typical of the fate of the edu-
cated, but poor, Italian in this country.
This man, a widower, with several children married, and in
professional circles in Italy, came to this country with his two
youngest sons, boys of twelve and fifteen. Unable to find em-
ployment in his own line, he undertook to support himself and one
of the boys by rolling cigars. As he knew nothing about the trade,
he was obliged to confine himself to the cheapest grades of the pro-
duct, and, working night and day in his little tenement room,
was able to roll, rather badly, about 200 cigars a day, for which his
net earnings were forty cents. When he was at last obliged to apply
for relief, he had been in the country only four months.
A prominent Italian who was applied to in relation to this
case, stated that "as a rule, the educated Italian does not amount
to much in this country."
In three-fifths of the cases studied, applicants for relief had
relatives here, so that the placing of burdens upon those who are
of blood kindred, which is one of the first principles of organized
relief, could be, and, as a matter of fact was, applied in a considerable
proportion of instances.
In somewhat less than half of the cases where there was a male
head of the family, the wife followed some occupation, usually
"sweat-shop" work — such as finishing coats, "pants" or skirts, or
making artificial flowers. Where there was no male head the
mother of the family was, naturally, more often found with an
occupation.
In many of the families the older children were employed, but
not so frequently as might, perhaps, have been expected. Less
I92 The Annals of the American Academy
than one-quarter of the cases studied showed employment of children.
The boys occupied were in factory work of some kind, or were boot-
blacks or newsboys — none were in outdoor, unskilled labor. The
girls were in factories, or did sewing at home, like their mothers.
In cases where family relations were unbroken, the causes of
need were mainly sickness and lack of work. The typical case may
be pictured something like this: The man of the family, with his
wife's aid, has been earning just enough to live on, and lay up a little
something besides. A period of unemployment, or an illness, has
drawn upon the little hoard until it is exhausted, and then appeals
are made for food, for coal, or for payment of rent. In a large pro-
portion of these cases, after a brief period of relief-giving, the head
of the family finds work, or the sickness comes to an end, and the
family is on its feet again.
An encouraging feature of the situation is that few cases were
shown where the cause of need was shiftlessness or laziness, or the
"beggar spirit," and almost none in which drunkenness appeared as
a factor.
The moral causes of Italian dependence are of another kind.
Many of the cases studied were of families broken up by the deser-
tion of husband or wife, by the separation of husband and wife,
or by the imprisonment of the husband for some offense or other,
leaving his wife and children a burden on the public. Many of
these cases of desertion seemed to be due to sheer inability of hus-
band and wife to get along peaceably together. In one of the cases
where the family was in distress owing to the imprisonment of
the husband, the offense for which he was sent up was that of chok-
ing his wife in a fit of anger. In other cases, the man cannot endure
his wife, or his wife's relatives, and simply vanishes, to find peace
in his own way. In still other cases, a man with a wife in Italy
takes another in this country, and, on the appearance of wife num-
ber one on these shores, finds it convenient to disappear, leaving
both wives and sets of children upon public care.
This easy throwing off of family ties is attributed by Italians
largely to the influence of the new country upon the immigrant.
At home, the church does not permit divorce, and holds the man
fast to his marital duties: on this side, the grasp of the church is
loosened, and, for the immigrant, there is no organized body of
Immigration in its Relation to Pauperism 193
social opinion to take its place in restraining him from taking ad-
vantage of what he conceives to be the privileges of a "land of
liberty."
A feature of Italian dependence, usually regarded as especially
characteristic, is the large number of commitments of children asked
for. This has been taken to indicate in the Italian lack of parental
affection, and the presence of the pauper spirit.
In justice to them, however, it should be said that in the cases
studied, three-fourths of the instances where commitment of children
was asked, were in families which were already broken up, because
of desertion, or for the more creditable reason of death of husband
or wife. And it should also be said that Italian parents are in
general unwilling to part with their children permanently, or to-
have them placed out in distant homes, but want them near at hand,
where they can be visited, and want them to return home as soon
as they are able to help maintain themselves.
The Slavic group cannot, like the Italian, be considered as a
whole. Reference to the table given above shows that the group
includes a number of sub-groups, of more or less widely differing
characteristics, from the Bohemians and Moravians, with their low
percentage of males, and persons between fourteen and fifteen, and
high proportion of literacy and money per capita, to the Ruthenians,
Lithuanians and Croatians, with their high degree of illiteracy and
poverty, and large proportion of adult male unskilled laborers.
These people, however, are alike in one respect, and also like
the Italians — the high proportion shown of unskilled laborers or
peasant farm laborers from country districts. There are few
representatives of the cities among them.
Their destinations, too, are as diverse as their kinds. Some
of the sub-groups mass themselves in special regions of two or
three States, others scatter widely; some are found in the cities,
others in the country, or in small towns. It is, then, impossible,
without a study of each people in each center of aggregation, to
give a comprehensive or detailed account of their conditions as to
pauperism. The most that can be done in the present space is to
show briefly some of the salient features of the main groups.
Taking the immigration report of 1903 as some indication of
their destination it is seen that all of the various Slavonic groups
jg^ The Annals of the American Academy
go in large proportion to Illinois and Pennsylvania, to work in the
mines and mills of both States. Many of those who go to Illinois,
however, find their way to Chicago, where they enter the sweat-
shop industries characteristic of foreign life in our large cities.
Ma#y Croatians and Slovenians go to Minnesota and Missouri,
tQt&ie mines; a considerable number of Lithuanians were found
headed for Massachusetts, and of Slovaks to New Jersey. Ohio
also claims a considerable proportion of several of the groups, for
manufactures and farm labor.
None of the sub-groups, however, is so generally scattered as
the Poles, by far the largest of them numerically, who are found
en route to nearly all of the States, to become, with equal readi-
ness, coal miners in Pennsylvania, steel workers in Illinois, farm
laborers in Connecticut and Massachusetts, and, in surprising num-
bers, farm owners in these same States, where they are bringing
back to productiveness the farms abandoned by native-born
owners in the mad rush for the cities and the more fertile West.
Of these various classes and kinds, the city groups, engaged
in sweat-shop work, suffer the effects of the sharp competition in
that line of occupation, and fall into temporary distress from which
they have to be helped out.
The farm laborers apparently have no difficulty in making their
way, and there is practically no occasion for charitable aid toward
them. It is from their ranks that the farm owners are recruited,
and, the fact that it is comparatively easy to pass from one class
to the other seems to show that the Slavic farm laborer's condition
is in general a good one.
The Slavic mine and mill workers are still another class — to
general thinking the typical Slavic immigration, whose coming is
felt as a danger. The situation of these workers is peculiar in many
ways. Take the anthracite coal miners as an instance. To three
Pennsylvania counties one-tenth of the entire Slavic immigration
into the United States is called, whether by the general expectation
of employment, or, as is claimed by some, directly by the employers,
who want to keep on hand more men than they can employ continu-
ously, in order to lower the rate of wages, and break the power of the
unions. In this restricted district, with thousands of new recruits
pouring in every year, with labor disputes constantly arising, with
Immigration in its Relation to Pauperism 195
ups and downs in the market for the product of the mjLnes, there are
long periods of, unemployment for a considerable proportion of the
miners. ...'.:,.;• .:.!■;;. ■ ; :,' . • , ■ ; .,..■;
. It is not surprising to learn, then, that in the three anthra-
cite counties the number per thousand of the population receiving
outdoor relief is about three times the general average for the
State.. . .!■■:■' ■
. This is by no means,, however, due entirely to direct economic
pressure. Some of the excess i§ due to what may be counted as
an incident of the industry, and in that sense an economic cause—
the accidents characteristic of coal mining, w,hich leave women and
children to be cared for by the public.
Another factor is the intemperance so conspicuously absent in
the Italian. The Slav miner is a hard and ferocious drinker, and
this habit must inevitably have its e Ject on the rate of pauperism.
There does not seem to be, however, much distress due to deser-
tion. In general the mine workers1 are said to work hard for the
maintenance of /their offspring, and are anxious to clothe and feed
them well.
Finally, it is interesting to note, as a suggestion with regard
to pauperism generally, that one careful observer of the situation
attributes a great part of this high rate of pauperism to political
influence in the giving of charity. Roberts shows the present rates
of persons relieved for Coal Township to be 22.8 to the 1000, while
for Schuylkill County it is only 7.3 to the 1000, and says further:
"Three years ago the latter had about the same; proportion as the
former, but in the last few years the Taxpayers' Association of
Schuylkill County took the list of outdoor relief in hand and
thoroughly purged it of its abuses, and, without working injury to
the worthy poor, succeeded in reducing the number 50 per cent., and
the expenditures were cut down from $40,000 to $25,000." 2
The remaining class of our newer immigrants, the Hebrews, difr
fer in certain important respects from both the Slavs and the Italians f
The bulk of immigration of this people is inconsiderable — less than
one-third the number of Italians in 1903, and only about nine per
cent, of the total immigration; but they come almost entirely, by
1 Roberts, Anthracite Coal Communities, p. 300.
2 Roberts, Anthracite Coal Communities, p. 142.
196 The Annals 0} the American Academy
reason of economic and social pressure at home, without any special
economic demand on this side for their services, and they settle
in an abnormally high proportion in two or three of our largest cities.
Reference to the table shows a comparatively small proportion of
males, but a high percentage of persons between the ages of 14 and
45. A small proportion of old people makes early pauperism
unlikely, as only five and one-half per cent, were forty-five and over.
The percentage of illiteracy is not high, and is less important even
than the figures would show, as the illiterate are mainly women,
whose lack of education would have no significance in the economic
struggle, but the amount of money shown was only $9.70 per capita.
Again it should be remembered, however, that not all the money
brought is shown, and the Jews, being an especially cautious people,
would be less likely than the Italians to show all they had.
The Italians and Slavs come mainly from country districts ; the
Jews, owing to the peculiar conditions fixed for them in their own
countries, largely from cities. Another contrast is found in the
range of occupations ; the Hebrews showing over one percent, of the
males belonging to the professional class, and fifty per cent, to the
skilled class, while only fifteen per cent, were classed as laborers.
The skilled workers were mainly clerks, carpenters, painters and
glaziers, shoemakers and tailors. The last class, the tailors, was
the most numerous, making up about two-fifths of the male skilled
workers, and twenty-one per cent, of all male arrivals. Five per
cent, of the male arrivals were classed as "merchants," meaning
small traders, peddlery, etc.
The typical Jewish immigrant, then, is of the small trading and
artisan class of the towns, and finds his natural habitat in the cities
on this side. As there is no crying demand here for the work the
Jewish immigrant can do, the labor market in these lines being
already well stocked, he is obliged to pick up whatever he can, and
usually finds his way into the sweat shop, or starts out as a peddler,
in competition with thousands of others, as poor and as eager for
work as himself.
Owing to this great economic pressure, it would naturally be
expected that the Jewish immigrant should have recourse to charity
sooner than some other classes of immigrants. The report of the
United Hebrew Charities of New York for 190 1 showed that forty
Immigration in its Relation to Pauperism 197
per cent, of the new applicants for relief in that year had been in
the country less than one year. It is encouraging to find, however,
that this early recourse to relief does not mean an early retreat to the
almshouse, or, apparently, the beginning of a permanent burden on
private charity. It was stated in an article on Jewish Charities,
published in the Annals of the Academy in May, 1903, that, out
of a Jewish population in Greater New York approximating 600,000,
there were only 17 Jewish paupers on Blackwell's Island. As
to private charity the same writer states that, of 1000 applicants
for relief at the United Hebrew Charities in October, 1894, 602 had
not applied for assistance after December, 1894, and of the re-
mainder, only 67 families were dependent in any way on the Society
in January, 1899. I*1 other words, over ninety-three per cent, of the
cases had become independently self-supporting.
According to the Report of the United Hebrew Charities for
1 90 1, the main causes of need appear to be sickness and lack of work,
as with the Italians. These two causes run into each other, indeed.
When work is not plentiful proper provision cannot be made for
sickness, while sickness, on the other hand, exhausts not only sav-
ings, but vitality, besides throwing the worker out of employment,
so that securing employment subsequently is more difficult. More
than half of the cases were distinctly of this nature, while a consider-
able proportion of the remainder involved these causes.
In these cases, as well as among the Italians, there seems to
be a general absence of moral causes of need, and, perhaps, to an
even greater degree, a conspicuous absence of drunkenness as a
cause, or of thriftlessness and shiftlessness.
Among the Jews, as among the Italians, we find a considerable
proportion of cases of deserted wives, and requests for commitment
of children. But here the cause seems rather another variety of
the purely economic cause. Family affection and loyalty are so
strong among the Jews that when the Jewish husband leaves his
family, or the Jewish parent of either sex asks commitment of child-
ren, it is usually through sheer inability to earn the bread necessary
to fill all the mouths.
The general conclusions to be drawn with regard to the newer
elements in immigration, as a whole, seem to be, first, that among
them the unskilled worker gets along better than the skilled, and
igS The Annals of the American Academy
the illiterate than the literate. This is not to say that skill arid edu-
cation are in themselves a handicap in the industrial contest, or that
all racial groups with a large proportion of illiterate, unskilled labor
get along better than all those with a high degree of literacy and a
larger proportion of skilled labor.
The industrial success of any group in this country depends
upon its adjustment to conditions of demand here, and some of the
race groups seem able to find suitable openings for skill and educa-
tion.
But on the whole there is more chance for the newcomer into
any social aggregation to find foothold if he is willing to begin at
the bottom, and in this country in particular there is less demand
for skilled labor from outside, owing to the fact that the present
inhabitants are willing to follow those lines of work themselves,
but are unwilling to occupy themselves in unskilled labor. On the
other hand, the skill, and especially the education of the newer
European immigrant, have been directed along lines that do not
suit American conditions. In the evolutionary phrasing, undiffer-
entiated social elements can more easily adapt themselves, by
specializing, to fit a new environment, than can the elements which
have been already differentiated to fit a former environment.
Any restriction of immigration, then, that is based on an edu-
cational qualification, would be meaningless with respect to the
growth of pauperism. Such a qualification would, among the newer
immigrants at least, let in the class which, though small, is the most
difficult to provide for, and would keep out the class that can best
provide for itself.
The next conclusion to be drawn with regard to the newer immi-
gration is that it relieves us in large proportion of that part of
pauperism due to drunkenness, as the Italians and Hebrews, who
make up three-fifths of the number, are temperate people.
The following table not only shows the importance of the drink
habit as an accompaniment of pauperism, but also confirms the con-
clusions already arrived at as to the respective tendencies of the
different race elements in this regard :
: . •
Immigration in its Relation to Pauperism
199
Proportion of cases due to drink for
Percentage of
7,225 C. O. S.
cases (8).
Percentage due to intemperate
habits of some member
of family.
29,823 CO. S.
cases (•).
8,420 almshouse
paupers (7).
Irish
English
•American
German
Italian
♦Russian and Polish
23.62
16. 93
15.14
7.83
5- 60
3.24
37.84
25.07
23.89
20. 16
3.42
6.73
44-55
40.75
34-95
27.88
9.09
12.96
Again, the causes of need among the newer immigrants appear
to be more largely economic than moral. The following table shows
statistically how far this conclusion is justified, and how the newer
immigrants compare with the older immigrants :
Proportion of 7,225 C. 0. S. cases
• due to various causes (8).
Irish.
English.
Ameri-
can.
German.
Italian.
Russian-
Polish.
31.63
29.25
27.99
16.95
18.67
Drink
23.62
5.78
1.58
.65
66.26
16.93
7.12
2.36
2.84
68.15
15.14
9.19
1 .40
2 . 26
68.84
7.83
7.48
.58
1 .06
79-28
5- 60
8.4.1
3-73
•93
78.51
3.24
7.09
Shiftlessness or inefficiency
1 .29
85.13
5.07
18.87
19.80
22.52
2 . 11
3.16
24.68
22.94
17-37
2.60
4. 11
24-57
20.31
19.85
3-17
4.27
28.62
22.92
13-47
3-77
6.54
30.85
16.82
24.30
2.82
23.87
29.65
100.00
100.00
100.00
100.00
100.00
100.00
It may be of interest to see how the newer immigrants compare
with the older as to deserting their wives and families. The fol-
lowing percentages9 of 8,028 charity cases show a fairly uniform
rate, except for the Russians and Poles, which is more than double
that of any of the others:
3 Includes native born of foreign parentage.
4 Includes Hebrews and Slavs.
(5) Warner: American Charities, p. 44.
(6) Koren: Economic Aspects of the Liquor Problem, pp. 76-7.
(7) Op. cit., pp. 1 14-15.
(8) Compiled from Warner : American Charities, Table viii.
9 Compiled from Warner, American Charities p. 53.
200
The Annals of the American Academy
Irish.
English.
American.
German.
Italian.
Russian-
Polish.
44.00
6.00
45.82 46.63
58.40
5-53
60.68
5.Q8
62.50
Deserted wives
7.78
7 .00
15-34
Worthy of note, besides, in the above figures, is the steadily
increasing proportion of applicants for relief living in normal family
relations, as we pass from the Irish, at the head of the older immi-
grants, at the left of the table, to the Russians and Poles closing
the list of the newer immigrants at the right. This indicates the
more occasional, temporary, or emergent nature of the need of the
newer immigrants, the true pauper being shaken loose to great
degree from family ties.
The same thing is shown by the following percentages10 of num-
bers of persons in families asking aid in 4, 1 76 Boston and New York
charity cases :
Irish.
English .
American.
German.
Italian.
Russian-
Polish.
34.96
46.38
18.62
36.69
49. 19
14.14
35.7i
47.02
17.27
29.49
50.49
20. 11
18.33
51.36
30 . 26
13-27
49-99
36.60
One to two in family. .
Three to five in family-
Over five
It will be seen here that English, Americans and Irish lead
in proportion of what may be called fragmentary families — one
person, or husband and wife, deserting or deserted by their children—
and that the Italians and Russians lead in large families, while the
proportion of medium-sized, but normal, families is very much the
same for all of the groups.
In the above tables it is to be borne in mind that under the
heading "Russians and Poles" the unlike race groups, Slavs and
Hebrews, are united. We cannot, then, draw conclusions for these
peoples separately, but only for the newer immigration as a whole.
The main source of danger as to pauperism from our immigrants
of to-day is in the severe economic pressure they are subjected to.
While the unskilled laborer finds immediate employment on arrival
here, and is thus kept for the time being from the need of charity,
it is at such a low wage that there is little margin for provision
10 Compiled from Warner, American Charities, pp. 50, 51.
Immigration in its Relation to Pauperism 201
against the accidents and enlarging needs of life — sickness, unem-
ployment, increase of family cares, . old age and death. Is this
pressure actually so great that these needs cannot be met, and that
our newer immigrants, after a period of ups and downs, during which
they are helped along by temporary relief, must in large proportion
find their way to the poorhouse at last?
There are two influences at work — the one beginning as the
other slackens — to stave off this fate : in the early period of the new
immigrant's life here, a phenomenal thrift that enables him to save
money from a wage that seems hardly sufficient to sustain life; in
the later period, a gradual raising of the standard of life that, with-
out diminishing the determination to get on in the world, shifts
the stress of effort from saving to earning.
As a result of these tendencies a rapidly growing prosperity
is to be seen among these newer peoples.
The Italians are for the most part still in the saving stage,
but their savings are surprisingly large. It has been estimated
that the Italians in New York hold property to the amount of
$60,000,000 and over, a value which is, however, far below that of
the Italian colonies of St. Louis, San Francisco, Boston and Chicago.11
The amount held by Italians in savings banks alone in New
York is estimated at over $15,000,000, and the savings sent home
to Italy are sufficient in many cases to set whole villages on their
financial feet again.
The Jews are under greater economic pressure than the Italians,
but, on the other hand, they have a greater and more intense per-
sonal ambition, which is always pressing and pushing to lift them
upwards. The increase of wealth on the East Side in New York
is as noteworthy as the increase in poverty. A considerable propor-
tion of the tenements of the city are owned, one or two in a hold-
ing, by Jewish immigrants, and the amount of savings laid away in
the banks of the East Side is surprising.
Even the Slav miners of the anthracite region show a consider-
able financial surplus. In four towns of the mining region it has
been estimated that the Slavs own $2,500,000 in real estate, or about
$100 per capita of the Slav population in those towns. In one town
they owned 39 per cent, of the homes, the values ranging from $350
11 Gino C. Speranza; " Charities," May 7, 1904, p. 462.
2o 2 The A finals oj the A merican Academy
to $7,000, and averaging $953. The payments on land are prompt.
There is, in addition, much money sent home, and the banks are
doing well by reason of Slavic custom.
Furthermore, the standard of life is undoubtedly rising among
these people. They live in better houses than ten years ago, and
in dress and other outward tokens are showing the effect of contact
with people in a more advanced social stage.
While this process of economic improvement is going on, how-
ever, with the newer immigrants, there are other influences at work
that make in the direction of pauperism. Overwork, poor food,
and life in the airless, sunless and crowded tenements of the city, of
in the equally crowded and even more unsanitary dwellings of the
mill- or mining-town — the conditions accompanying the early stages
of the immigrant's progress — tend strongly to break down the
physical health of the sturdy Italian or Austrian peasants, or even
of the Jews, more accustomed to the unsanitary conditions of city
life. An alarming increase of tuberculosis among the Jews and
Italians in our large cities, the phenomenally high death rate of Italian
children in the same, and of Slavic children in the anthracite region,
seem to show that the tendency is already a strong one.
As a secondary result of enfeebled health, and as a direct result
of overcrowding, there is the further danger of moral as well as
physical breakdown, both in the first and second generation, and
an emergence of the causes of pauperism which have been so far nota-
bly absent — drunkenness, vice and idleness.
In our large cities the Italians and Hebrews are learning to
patronize the saloons, and are being drawn into the meshes of organ-
ized vice. There is no reason to think, however, that this tendency
will spread through the mass of either people. In the history of
immigration so far the race groups that have shown general intem-
perance here have brought it with them as a race trait; those who
were temperate on arrival have, in general, remained so.
The drink difficulty, so far as the newer immigrants is con-
cerned, is not so great that it cannot be in great part checked by
municipal forethought.
It is in insuring conditions favorable to physical health, how-
ever, that the municipality or other form of local government has
the most important part to play. Keep the immigrant population
Immigration in its Relation to Pauperism 203
in a fairly normal condition of health, and they will, of themselves,
go far towards working out the rest of their salvation. And this
can undoubtedly be done by intelligent municipal regulation,
especially of housing conditions. The history of tenement house
reform shows that the tenement house in itself has been responsible
for much of the physical and moral degradation seen in our large
cities. It is, indeed, impossible to calculate how great has been
the social loss and waste, how heavy the additional burden of pauper-
ism, due to the policy of allowing landlords to hive as many human
beings as possible upon a given space of land, without regard to
health or decency.
In country districts, also, housing conditions are of the utmost
importance, although this has largely been overlooked in the great
interest aroused in city conditions. In the anthracite region, for
instance, a high disease rate and infant death rate among the Slavs,
as well as some of the social and moral evils there prevalent, are
certainly due in large part to the wretched general sanitation of the
towns, to the relegation of the Slavs, as far as possible, to unde-
sirable quarters in the towns, and to the "company houses" — the
poorer ones at least — in which about sixteen percent, of the miners
are obliged to live.
Improvement in housing conditions has this special advantage
as a means of social betterment, that its effects are relatively per-
manent. General sanitary laws as to cleanliness, disposal of refuse,
etc., may be obeyed to-day and disregarded to-morrow ; but if houses
are once put up with adequate light and ventilation, if windows
are once cut, court space provided for, sufficient distance from
adjoining buildings secured, the height restricted, and proper
plumbing installed — all this cannot be done away with in a day;
and in fact, there is no great inducement to do away with it when
the house owner has once made the investment.
There is, in short, no surer and more comprehensive means of
raising the standard of life among the poor than by compulsory
improvement of their dwellings. If rents in the crowded sections of
cities are raised in the process, it is one inducement the more to
the spread of population into more open, and cheaper, districts,
thus relieving congestion in the older quarters.
Finally, there is a more or less remote danger of the emergence
Australasian Methods of Dealing with
Immigration
Bv Professor Frank Parsons, Boston, Mass.
(207)
AUSTRALASIAN METHODS OF DEALING WITH
IMMIGRATION
By Professor Frank Parsons
Boston, Massachusetts
From the first the Anglo-Saxon colonies of Australia and New
Zealand have regarded the immigration problem as one of the most
important that could engage the attention of their statesmen, affect-
ing most vitally the public health and morals, the wage level and con-
ditions of labor, freedom and civic life — determining, in fact, the
quality of the materials used in the construction of their institutions
and civilization.
Until well toward the middle of the last century, England looked
upon her colonies as convenient dumping grounds for social refuse ;
receptacles for criminals and paupers. Later, the influx of colored
aliens, yellow, brown and black, coming spontaneously or brought
in by capitalists, became a matter of serious moment. Swarms of
Chinese and masses of black Melanesian laborers, called Kanakas,
picked up in the islands of the Western Pacific and taken to work on
the sugar plantations of Queensland, carried with them a deplorable
deterioration of the labor level and constituted a dangerous breach
of social homogeneity and strength. The colonies needed immi-
grants to develop their resources, but such immigrants were worse
than none. It was felt that the development of civic and social
life on a high plane was more important than the working of mines,
plantations and factories with cheap labor, or any other question of
wealth production, and that immigrants unfit for free institutions
and high civilization must be rejected, no matter how great the need
for labor might be.
From these facts and this feeling, three strong movements re-
sulted: First, an agitation that aroused enlightened public sentiment
in England and put an end to the dumping of convicts and social
rubbish in the Australasian colonies; second, the adoption by coloniz-
ing companies and the colonial governments of various plans of
scientific colonization under which immigrants were carefully selected
(209)
212
The Annals of the American Academy
a degraded standard of life and inherently adapted to despotism
rather than democracy.
The Chinese have no idea of becoming part of the community.
They go to the colonies to earn a little money as small shopkeepers,
servants, factory workers, etc., and then return to China. They do
not bring their women. Out of 14,000 living in New South Wales
in 1 89 1, only 60 were women. The New Zealand Year Book for 1903
gives the number of Chinese in that colony as 2,792, of whom 31 are
females. These immigrants have no family responsibilities, no social
interests, no capital, no knowledge of English. They live in hovels
and scorn sanitation. They are unclean, conceal contagious diseases
from the authorities, and are a menace to the public health. They
can live on next to nothing and save money on wages that would
not support a white man and his family even at the slum level. They
have no conception of free government and civic responsibilities.
As early as 1848 there were Chinese shepherds in Queensland,
but the first important influx into Australia occurred a few years
later during the rush to the gold mines of Victoria. The whites
quickly took the alarm and for fifty years have been practically a
unit on the policy of keeping out the yellow race. In 1855 tne nevv_
born Victorian State enacted that no ship should bring more than one
Chinese to each 10 tons of its tonnage, and that a shipmaster must
deposit .£10 with the collector of customs for each Chinaman he
brought. A similar law was passed by South Australia in 1857, and
by New South Wales in 1861. Queensland began, or tried to begin,
by imposing a special license fee on the Chinese working in the gold
fields. But the English Colonial Office, though it had permitted the
Victorian legislation and its copies, vetoed this Queensland bill and
in a despatch to the Governor of the Colony, March 1877, laid down
the principle that "exceptional legislation calculated to exclude
from any part of Her Majesty's dominions the subjects of a State at
peace with Her Majesty is highly objectionable." Queensland,
however, evaded the rule by adopting an act similar to the Victorian
law previously sanctioned by the Home Office, lowering the financial
bar a little but encouraging good conduct and quick departure by
providing that, if the immigrant left within three years without
breaking the criminal law or receiving charitable aid, his ^10 should
be returned to him. This act England allowed to become law.
Australasian Methods of Dealing with Immigration 213
These laws were fairly effective. The incoming tide was checked
and the outgo led to a rapid diminution of the Chinese population
of the colonies. Victoria, for example, had about 42,000 Chinese in
1859, while in 1863 there were only 20,000 left. Public fear subsided
and the exclusion law was repealed after being eight years in force.
New South Wales also repealed her exclusion act after using it six
vears. From 1867 to 1881 the Chinese could go and come pretty
much as they pleased outside of Queensland and South Australia.
But the yellow tide rose again in 1880 and '8r and in the latter
year exclusion laws more drastic than those above mentioned were
passed by New South Wales, Victoria, South Australia and New
Zealand. The four acts were much alike,1 the essence of them being
that every Chinaman must pay an arrival tax of ,£io, and that only
one could come for each 100 tons of tonnage in any ship. South Aus-
tralia provided in addition that the Chinese immigrant must have
been vaccinated.
Queensland left her Chinese tax at ,£10 and her tonnage ratio
at 1 to 10 tons until 1884, when she found it necessary to raise the
bars as the Chinese were jumping over the old fence in uncomfortable
numbers. The arrival tax was lifted to ,£30 (about $150) absolute,
payment not to be refunded on leaving the colony, and the propor-
tion of Chinese immigrants was not to be more than one to 50 tons.
After this there was a lull until 1888. Then it was learned that
nearly 4,500 Chinese had entered New South Wales in the previous
twelve months. .They were pouring into other colonies also. There
was a panic. Henry Parkes, Prime Minister of New South Wales,
telegraphed to England urging the Imperial Government to negotiate
a treaty with China similar to that which had just been secured by
the United States, but before diplomacy could be tried an emergency
arose which drove the Colonial Governments to drastic measures
for their immediate defense.
The emergency was brought by the steamer A fghan, which reached
Port Philip in April, 1888, with 264 Chinese on board — 250 more
than her tonnage entitled her to bring under the Victorian law of
1 88 1. Some of the Chinese passengers claimed to be naturalized
British subjects and showed naturalization papers. These were
alleged to be fraudulent and the collector of customs refused to allow
1 Tasmania followed with a similar law in 1887.
214 The Annals of the American Academy
any of the Chinamen to land. The Afghan then went to Sidney and
there, with three other steamers carrying Chinamen, met a similar
refusal. Parkes induced the House to suspend the standing orders
and, in a few hours, passed a strong exclusion bill. The Senate re-
jected the measure. The Chinese, meanwhile, appealed to the Su-
preme Court and it held that those who were British subjects, or had
previously lived in New South Wales, could land. The rest had to
go away. About a hundred of them were somehow landed in New
Zealand, which led to a brilliant executive order, erecting a medical
wall against the Chinese by declaring the Far East and the Malay
Archipelago to be infected countries. This gave the authorities power
to detain in quarantine all ships coming from those regions. No
use was made of this device however, as the drastic laws adopted
by the Colonies soon after the Afghan incident made it unnecessary
to resort to such medicinal inventions.
An inter-colonial conference discussed the situation in June,
1888, and passed resolutions urging further restriction of Chinese
immigration by diplomatic action of the Imperial Government and
by uniform colonial laws. It was recommended that Chinese pas-
sengers in any ship should not exceed 1 to each 500 tons; and that
it should be made a misdemeanor for a Chinaman to go from one
colony to another.
New South Wales was the first to act. With public opinion
behind him, Parkes pushed through another exclusion bill, which
became law in July, 1888, a few weeks after the conference. It
raised the arrival tax from ,£io to .£100 and the tonnage per China-
man from 100 tons to 300 tons. British subjects were exempted
from the act but no Chinese alien could thereafter be naturalized.
The penalty for breach of the law might be as high as .£500. The
act was assented to by the Home Office in spite of its scruples about
legislation against specific nationalities, and the new law proved its
effectiveness at once. In 1887 New South Wales had 4,436 Chinese
arrivals; in 1889, the number fell to 9; and ten years later only 5
Chinese aliens entered the colony.
Victoria passed a law in 1888 limiting Chinese passengers to 1
for every 500 tons as suggested by the inter-colonial conference. The
arrival tax was abolished, but a Chinaman entering Victoria by land
without the Governor's permission must pay not less than ,65, nor
Australasian Methods of Dealing with Immigration 215
more than ^20. This law has not proved as effective as the statute
of New South Wales.
New Zealand raised the tonnage to 100 tons per Chinaman, but
left the arrival tax at .£10 for almost another decade. In 1896, aftei
a struggle with the Senate, or Legislative Council, as it is called, the
Seddon Government succeeded in raising the entrance fee to .£100.
From this it would appear that civilization comes high to a China-
man. It is the penalty he pays for being born in bad company.
These laws so far discouraged Chinese immigration that the cen-
sus of 1891 showed but 42,521 Chinese in all the seven colonies, 01
only about as many as were in Victoria alone in i860.
We come now to a decided change of method in colonial immigra-
tion laws. The laws we have now to study are not specific anti-
Chinese acts, but provisions against low-grade immigrants in general.
This alteration of method was due partly to the change of the Chinese
stream from an invasion to an outgo, together with the fact that other
inferior peoples were beginning to come in numbers sufficient to
cause uneasiness, and partly to the definite policy established by
Joseph Chamberlain as head of the Colonial Office that, for the future,
exclusion laws must not be aimed specifically at the people of any
nationality but at undesirable persons generally. The Natal law
of 1897 followed his suggestion, and has since been copied, more or
less completely, by the Australasian colonies. It excludes: (1) Any
person who fails to write in some European language an application
for admission; (2) A pauper or person likely to become a public
charge; (3) An idiot or lunatic; (4) One having a loathsome or con-
tagious disease; (5) One convicted within two years of a serious non-
political offense; (6) A prostitute or person living on the earnings
of prostitution. The New Zealand law (1899) omits the second and
last, and stipulates that the writing test shall not be applied to per-
sons of British birth. Tasmania (1898) omitted the sixth clause.
New South Wales (1898) struck out five of the six clauses, leaving
only the first. West Australia (1897) enacted all six clauses, im-
proving on the first by requiring immigrants to write fifty words in
English taken from some British author, a method that allows a better
test than the mere writing of a stereotyped application form, usmg
the same set of words each time which might therefore be mastered
by very ignorant applicants.
2i6 The Annals of the American Academy
On January first, 1901, the Australian Commonwealth came
into being and in the enumeration of powers in the Constitution,
the Federal Parliament was given authority to legislate with re-
spect to "the influx of criminals; immigration, emigration," etc.
Early in the first Federal session, the Commonwealth Premier,
Mr, Barton, took up the exclusion question and a Federal law was
enacted in October, 190 1 , modeled after the Natalian act and repealing
the State acts on the same model.
The main points of the act are: (1) a provision for a writing test
of fifty words dictated to and written by the immigrant in some
European language directed by the customs officer; and (2) a clause
prohibiting the importation of "persons under a contract or agree-
ment to perform manual labor within the Commonwealth," except
"workmen exempted by the Minister for special skill," and crews of
vessels engaged in the coasting trade, the agreed wages not being
below the rates ruling in the Commonwealth.
In addition to contract laborers and persons who fail to stand
the European writing test, the class of "prohibited immigrants"
includes :
(3) "Anyone likely to become a charge upon the public or upon any public
or charitable institution;"
(4) "Any idiot or insane person;"
(5) "Any person suffering from an infectious or contagious disease of a
loathsome or dangerous character;"
(6) "Any person who has within three years been convicted of an offense,
not being a mere political offense, and has been sentenced therefor, and has not
received a pardon;"
(7) "Any prostitute or person living on the prostitution of others;"
Ambassadors or others accredited to the Commonwealth or sent on
any special mission by their Government ; the King's regular land and naval forces;
the crew of any public vessel of any Government; the wife of a man who is not
prohibited and the children under eighteen of a person not prohibited ; and per-
sons who were formerly domiciled in Australia, are exempt from the prohibitions
of the act. The Minister for External Affairs may give to anyone he sees fit a
certificate of exemption for a limited period, subject to cancellation by order of
the Minister at any time. The crew of any vessel may land while the ship is in
a Commonwealth port, going out with the ship when it leaves the harbor.
In his speech upon the bill, Premier Barton said that the selection of
the language for the writing test would not be arbitrary and that the test would
not be applied at all to persons who were manifestly desirable citizens. This
would seem to place a large discretion in the customs officers. The law provides,
Australasian Methods of Dealing with Immigration 217
however, that any immigrant may be subjected to the writing test at any time
within a year, and if he fails under it, he shall be deemed a prohibited immigrant.
A person who fails in the writing test may, in the discretion of the officer, be
allowed to enter or remain in the Commonwealth on deposit of .£100, subject to
refunding, if within thirty days he obtains a certificate of exemption from the
Minister, or leaves the country. If he does neither, the deposit may be forfeited
and he may be treated as a prohibited immigrant.
Violation of the act subjects the prohibited immigrant to risk of six
months' imprisonment and deportation. And masters, owners and charterers of
any vessel from which a prohibited immigrant enters the Commonwealth are
subject to a penalty of £100 for each, prohibited immigrant so entering the Com-
monwealth.
The Barton Government next grappled with the black problem —
the Kanakas on the sugar plantations of Queensland. It was claimed
that white men could not work in the terrible heat and under the
other peculiarly trying conditions of the plantations, and that even
if white labor could stand the strain, it would be so much more ex-
pensive that this great business, supplying one of Queensland's main
products, would be ruined. The people of Australia, however, were
determined to wipe out the black spot on their map. They will have
a white Australia, cost what it may, so the Federal Parliament
passed the Pacific Islands Laborers Act (1901) putting an end to all
agreements with Kanaka workers after 1906. After January 1, 1907,
the blacks must go. To protect the planters from ruin, a tariff of
.£6 per ton is put on foreign-grown sugar. The excise duty on sugar
grown in Australia is only .£3 and £2 of this is handed back to planters
who use only white labor.
These two Commonwealth Acts and the New Zealand statutes
of 1896 and 1899 above referred to constitute substantially the present
immigration laws of Australasia.
This vigorous legislation for the preservation of civilization was
not secured without opposition. Some capitalists desire cheap
labor, regardless of social and political effects. Some economists
also focus their gaze on cheap production and a low wage rate, 2
2 It is argued that the Chinese are very industrious and give the Colonists a large amount
of valuable service for a small compensation. The statesmen of Australia and New Zealand
reply that a man may be industrious and yet be dirty, miserly, ignorant, a shirker of social
duty, a source of weakness in the civic life, and a danger to the public health. All these most
of the Chinese immigrants are. Moreover, their low plane of living makes even their industry
a curse instead of a benefit. The white workman is expected to be clean and comfortably
dressed; to marry and have children; be well fed and clothed and educated; to have a home
that will be a credit to the neighborhood; to read books, magazines and newspapers; take part
in the social life of the community and give a reasonable amount of time and intelligent atten-
tion to public affairs. To accomplish this he must have short hours and good wages. But in
2i 8 The Annals of the American Academy
oblivious of the fact that manhood in the long run is the most potent
factor in wealth production, as well as being itself the highest wealth,
the most important product of an industrial system. Some humani-
tarians think it unjust and cruel to shut the door against a man be-
cause he is ignorant and penniless and undeveloped. And some, on
religious grounds, regard the incoming of non-Christian masses as a
providential facilitation of their propaganda. But the great majority
of thoughtful persons regard the matter as a choice of evils, and be-
lieve it a lesser evil to limit the locomotion of the unfit than to imperil
the civilization of the more progressive countries by an inundation
of low-grade life.
A family does well to be careful about the sort of people it admits
to daily contact and intimate association with its children. And a
nation may wisely exercise a similar care. A flood of undesirable
humanity is a much more serious problem than the importation of a
mass of undesirable merchandise. The condition of the lower classes
in the old world is pitiable, but even if they go in crowds to a new
country, the space they leave soon fills up again with the same sort
of social molecules or cells, and the principal effect is the degradation
of the new country.3
Distance and cost have so far protected Australasia from any
large amount of immigration from the lower classes of Italy, Hungary
and Russia. But if such an inundation threatened, the disposition
to prevent deterioration of the average citizenship and labor level is so
strong that, no matter where it comes from, low-grade immigration
is likely to be resisted by law.
Countries like New Zealand and some of the Australian States
that aim to secure work for the unemployed and pay pensions to the
aged poor, have special reason to exercise care in selecting those they
take into partnership, and for whose well-being they become re-
sponsible. They claim the right to exclude from their association
all new comers who do not seem calculated to make reasonably use-
many trades that do not require much intelligence, but only good staying qualities — something
alive that can keep moving — a Chinaman without family, or social, or political interests, or
even a stomach that calls for good food, can keep at work 16 hours a day and live on 8 or 10
cents' worth of rice in two meals a day, and be as fresh in the i6th hour as he was the first.
His competition is unfair. He degrades the standard of living. He comes only to extract
what he can from the colony and take it back to China. After scraping up two or three thou-
sand dollars he goes home. At one time the returning Chinese were taking an average of more
than a million dollars a year from the Australian Colonies.
3 The idea of excluding the products of low grade labor abroad by a tariff wall while
admitting the low grade labor itself, is one of the absurdities of a politico-economic philoso-
phy that carefully guards merchandise and profit but leaves the wage level open to attack.
Australasian Methods of Dealing with Immigration 219
ful members of it ; the right to keep their soil for men fit to be free
and self-governing; the right to prevent the lowering of their standard
of life.
The effectiveness of the laws now in force is unquestioned. The
Chinese in Australia and New Zealand fell from 42,521 in 1891 to
34,638 at the census of 1901. The strength of the recent Australian
statutes and the vigor of the Government's policy are well shown
hi the speech of Mr. Deakin, Premier of the Commonwealth, at
Ballarat, October 29, 1903. Discussing the question of a white
Australia, the Premier said:
"In this theatre, two and a half years ago, I laid special stress upon the white
Australia policy of the Government. After that there was a fierce conflict in
Parliament as to whether the means we proposed to exclude the undesirable and
colored aliens would suffice. There were those who wished that on the face of
the statute the prohibition against them should appear in so many words. We
believed that we studied Australian interests, and also lessened the difficulties
of the mother country, if, instead of saying in so many words they should be ex-
cluded, we placed in the hands of the Government an educational test which
could be applied so as to shut out all undesirables. We have had two years' ex-
perience of the working of our test, and it has worked well. You have seen from
time to time how few have managed to survive it. The returns for the last nine
months show that 31,000 persons entered Australia from over sea, 28,000 being
Europeans. Of the remainder, many of the colored persons came to Australia
to engage on pearling vessels. The arrangement we have made is that they land
only to sign their articles. A guarantee is taken from those who bring them that,
when their time is up, they shall leave the country. By this means they never
really enter Australia. They merely fish in our waters or just outside them.
I find that out of 408 Japanese who came to Australia, 374 went at once to the
pearling vessels; 11 others had been in Australia before, and were entitled to
return ; while one deserted and managed to escape our clutches. Of 406 Malays
who came to Australia to engage in the pearling trade, only one was entitled
to enter the country, and again we had one deserter. While of the 73 Papuans
who came over to assist in pearling, none deserted, and all will return. To come
to the persons who, either under the State law or since, have secured domicile in
Australia, the return shows that 2,571 colored persons entered the Common-
wealth during the nine months, of whom 2,561 entered under the authority of
the law. There were only 10 to whom we could not or did not apply the test.
Besides these there were 785 Pacific Islanders, who came in under permits, which
cease on March 31st next, after which no Kanaka is authorized to be brought
into Australia. While 785 came in, 978 went out. There were 755 Chinese
entered the Commonwealth, while 1,456 went out. Altogether 3,172 colored
people left Australia. The alien colored population is being steadily reduced.
"Now, as to the test. Of course, this is not much applied, because ship-owners
220 The Annals of the American Academy
know that if they bring colored aliens to this country who are not legally entitled
to land, they will have the pleasure of taking them back to their native land.
During the nine months 121 such immigrants presented themselves; 9 only got
through. Out of these, two were entitled to do so because they simply came
from Ceylon to purchase horses, and of the others I found that five were prob-
ably colored sailors who deserted from one ship and enlisted on another. I don't
think that during the next nine months even nine are likely to enter. You prob-
ably believe that a white Australia is secure. I hope it is, but it won't be secure
unless a vigilant watch is kept upon proposals to tamper with it. None of a
serious character have been put forward by anybody in a responsible position, but
there are indications that we may have to defend the principle yet. So far as
this Government is concerned it will be ready for the emergency. A white Aus-
tralia does not by any means mean only the preservation of the complexion of the
people of this country. It means the multiplying of their homes, so that we may
be able to occupy, use and defend every part of our continent; it means the
maintenance of conditions of life fit for white men and white women; it means
equal laws and opportunities for all; it means protection against the underpaid
labor of other lands; it means social justice so far as we can establish it, including
just trading and the payment of fair wages. A white Australia means a civiliza-
tion whose foundations are built upon healthy lives, lived in honest toil, under
circumstances which imply no degradation. Fiscally a white Australia means
protection. We protect ourselves against armed aggression, why not against
aggression by commercial means? We protect ourselves against undesirable
colored aliens, why not against the products of the undesirable alien labor? A
white Australia is not a mere sentiment; it is a reasoned policy which goes
down to the roots of national life, and by which the whole of our social, industrial
and political organization is governed."4
4 For further information, see the Report of the Royal Commission on Alien Immigra-
tion. London, 1903; the Parliamentary debates of the various Colonies and of the Common-
wealth, for the years indicated by the dates of the laws mentioned in the text, especially Mr.
Barton's Speeches, pp. 3497 and 5492 of the Australian Hansard; "A White Australia," by Sir
H. Tozer, Empire Review, Nov. 1901; the Australian Review of Reviews and the columns of
Australian newspapers, especially the Sydney Bulletin for 1901 ; "Australia From Another Point
of View," Macmillan's Magazine, March 1890; "The Chinese in Australia," Quarterly Review,
July 1888; "Chinese Exclusion in Australia," by H. H. Lusk, North American Review, March
and April 1902; "Chinese Problem in Australasia," by C. A. Barnecoat, Imperial and Colonial
Magazine, April 1901; "Exclusion of Aliens and Undesirables," by W. P. Reeves, National
Review, Dec. 1901 ; "Australian Immigration," by J. Henniker Heaton, Leisure Hour, July igoij
''Australia for the White Man," by Gilbert Parker, Nineteenth Century, May 1901; Reeves'
"State Experiments in Australia and New Zealand; Dilke's "Problems of Great Britain;"
Correspondence Relating to Chinese Immigration into the Australasian Colonies, English
Parliamentary Papers, July 1888; and Proceedings of a Conference between the Colonial Secre-
tary (Rt. Hon. Jos. Chamberlain) and the Premiers of the Self-Governing Colonies, English
Parliamentary Papers, 1897.
Proposals Affecting Immigration
By John J. D. Trenor, Esq., Chairman of the Committee on Immi-
gration, appointed by the National Board of Trade, for 1904
(221)
PROPOSALS AFFECTING IMMIGRATION
By John J. D. Trenor, Esq.
NEW YORK CITY
Chairman of the Committee on Immigration, appointed by the National
Board of Trade, for 1904
At the outset of the examination of any proposals affecting
immigration there should be a full realization of the magnitude of
dependent interests and of the injury that will be wrought by
ill-considered and misjudged legislation. No subject of national
concern demands more assuredly impartial and thorough consider-
ation— in the colorless light of facts determined and determinable
— without any bias of prejudice, of misinformation, or selfish,
short-sighted interest.
It is needless to enter into any presentation in detail of the
contribution of immigration to the upbuilding of this country.
It is conceded that the marvellous growth of our nation in every
exhibit of industrial progress has been greatly aided by the influx,
during the last century, of so many millions of honest, willing and
industrious laborers seeking homes and opportunities here for them-
selves and their children. They have taken part in every mem-
orable achievement and their decisive influence has been cast in
the scale to sustain every effort for the maintenance of the life and
integrity of the Union.
During the past forty years, there has been a persistent sifting
of immigration, with the design of excluding all classes and condi-
tions incapable of assimilation or offensive to our civilization. The
Act of 1862 prohibited the importation of "coolie" labor from Ori-
ental countries and subsequent "Chinese Exclusion Acts" have
broadly shut out the Chinese as persistently alien and detrimental
to the character and homogeneity of our nation. The Act of 1875
excluded convicts, except those guilty of political offenses, and
women imported for immoral purposes. By the Act of 1882, luna-
tics, idiots, and persons unable to care for themselves without
becoming public charges, were comprehended in the exclusion.
(223)
224 The Annals of the American Academy
The Act of 1885, by implication, and the Act of 1887 expressly, added
"contract laborers." By the Act of 1891, paupers, persons suffer-
ing from loathsome or dangerous contagious diseases, polygamists
and "assisted" immigrants were specifically excluded. The Act
of 1903 added epileptics, persons who have been insane within five
years previous, professional beggars and anarchists. By the
same Act also, there was a stringent exclusion of persons deported
within a year previous, as being "contract laborers." If by any
oversight of inspection any of the excluded persons should succeed
in obtaining an entrance to this country, their deportation at any
time within two years after their entry is secured when their pres-
ence is detected.
The comprehensive Act of March 3, 1903, entitled "An Act
to regulate the immigration of aliens into the United States," was
professedly the crystallization of thirty years of experience, investi-
gation, debate, and legislation in the solution of the so-called "prob-
lems of immigration." The testing of the operation of this Act has
barely begun; but, without waiting for any exact determination
of substantial defects or insufficiency, further proposals of change
are hazarded. Of the two deserving special mention, one would
effect a radical change in administration through consular inspec-
tion and certification at the ports of embarkation ; the other urges
a sweeping exclusion, not based on moral character or capacity for
labor and self-support, but on literary qualification and compre-
hension of political institutions — the ability to read and presumably
to appreciate a text taken from the Constitution of the United States.
Proposal for Consular Inspection. — The proposal for a change
of administrative method, through consular inspection and certifica-
tion, is a belated revival of a proposition that has received more
careful and expert consideration than any other measure affecting
immigration that has been urged upon the attention of Congress.
Every material point in the case was raised and determined in the
investigation of the "Weber Commission" of 1890-1891. The ad-
verse report of this Commission was formally endorsed by Secre-
taries Gresham and Carlisle and its conclusion has been enforced
by the repeated examination and judgment of successive committees
on immigration. In the latest hearings before the Senate Committee
on Immigration in 1902, the undesirability of regulation by con-
Proposals Affecting Immigration 225
sular inspection was expressly attested by Mr. Charles Warren,
representing the Immigration Restriction League, who stated: "I
do not think that there is a prominent man who has taken up the
subject, who advocates it;" and the Chairman of the Committee
confirmed this conclusion by observing: "I understand that the
idea of consular inspection has been practically abandoned."
Proposal for "Educational Tests." — The proposition for the
introduction of the so-called "educational test" was judicially
considered and rejected in the message accompanying the veto of
President Cleveland on March 2d, 1897. No statement of the case
is more obviously impartial or can carry a greater weight of individual
authority.
In this statement he observed: "A radical departure from
our national policy relating to immigration is here presented. Here-
tofore we have welcomed all who came to us from other lands,
except those whose moral or physical condition or history threatened
danger to our national welfare and safety. Relying upon the jeal-
ous watchfulness of our people to prevent injury to our political
and social fabric, wre have encouraged those coming from foreign
countries to cast their lot with us and join in the development of
our vast domain, securing in return a share in the blessings of
American citizenship.
"A century's stupendous growth, largely due to the assimilation
and thrift of millions of sturdy and patriotic adopted citizens, attests
the success of this generous and free-handed policy, which, while
guarding the people's interests, exacts from our immigrants only
physical and moral soundness and a willingness and ability to
work.
"A contemplation of the grand results of this policy cannot fail
to arouse a sentiment in its defense; for, however it might have
been regarded as an original proposition and viewed as an experi-
ment, its accomplishments are such that if it is to be uprooted
at this late day, its disadvantages should be plainly apparent and
the substitute adopted should be just and adequate, free from uncer-
tainties and guarded against difficult or oppressive administration.
"It is not claimed, I believe, that the time has come for the fur-
ther restriction of immigration on the ground that an excess of
population overcrowds our land.
226 The Annals of the American Academy
"It is said, however, that the quality of recent immigration
is undesirable. The time is quite within recent memory when the
same thing was said of immigrants who with their descendants are
now numbered among our best citizens.
"It is said that too many immigrants settle in our cities, thus
dangerously increasing their idle and vicious population. This is
certainly a disadvantage.* It cannot be shown, however, that it
affects all our cities, nor that it is permanent; nor does it appear
that this condition, where it exists, demands as its remedy the
reversal of our present immigration policy.
"The best reason that could be given for this radical restriction
of immigration is the necessity of protecting our population against
degeneration and saving our national peace and quiet from imported
turbulence and disorder.
"I cannot believe that we would be protected against these evils
by limiting immigration to those who can read and write in any
language twenty-five words of our Constitution. In my opinion
it is infinitely more safe to admit a hundred thousand immigrants
who, though unable to read and write, seek among us only a home
and opportunity to work, than to admit one of those unruly agi-
tators and enemies of governmental control, who can not only read
and write, but delight in arousing by inflammatory speech the
illiterate and peacefully inclined to discontent and tumult. Vio-
lence and disorder do not originate with illiterate laborers. They
are rather the victims of the educated agitator. The ability to
read and write as required in this bill, in and of itself, affords, in
my opinion, a misleading test of contented industry and supplies
unsatisfactory evidence of desirable citizenship or a proper appre-
hension of the benefits of our institutions. If any particular ele-
ment of our illiterate immigration is to be feared for other causes
than illiteracy, these causes should be dealt with directly instead
of making illiteracy the pretext for exclusion, to the detriment of
other illiterate immigrants against whom the real cause of complaint
cannot be alleged." •
Hon. Samuel J. Barrows, Secretary of the Prison Association
of New York, has characterized this test as a suggestion of literary
dilettanteism — not measuring the extent of education in its true
meaning as the drawing out of faculty, or the capability for
Proposals Affecting Immigration 227
useful and needed service, nor gauging the moral character of
any immigrant. In view of this apparent certainty, it may be
noted without unfairness that the probable effect of the adoption of
this test seems to be of much more concern to the bulk of its advo-
cates than the justice and fitness of its application. It is the sim-
plest and handiest resort for cutting down immigration and it is
calculated that it will bear chiefly on the immigration from Southern
Europe, which is the most novel and hence least expert in settle-
ment and least supported by widely distributed roots here.
Without discussing further, therefore, the application of this
particular device of reduction, it is of prime importance to meet
the broader issue — the pressure for the curtailing of immigration.
Its advocacy must be based, necessarily, on one of two assumptions
— that, in spite of all present safeguards, part of the present influx
is unfit to enter this country, or that there is no longer an opening
here for the labor seeking admission.
In maintenance of the first proposition, it is alleged broadly
that our foreign-born population shows a higher percentage of
criminality than the native born ; that the immigration from South-
ern Europe is more burdensome proportionately to our prisons and
asylums than the immigration from Northern Europe; and that
these immigrants are the makers of the slums of our great cities
and are largely thriftless and unprogressive. These are too common
impressions through prejudiced and misinformed disparagement,
but records of unquestionable authority demonstrate that none
of these assertions is correct.
The Immigrant and Crime. — In view of the services of the immi-
grant in upbuilding this country, there might be some just pallia-
tion of a percentage of law breaking in excess of that of the native
born. The immigrant has not been reared in conformity with our
laws and social restrictions and has been negligently housed in the
slums. Yet in spite of our slum traps it does not appear that the
record of the immigrant needs any special consideration. Hastings
H. Hart, General Secretary of the National Conference of Charities
and Correction, has contributed a notable demonstration of the com-
parative criminality of our foreign and native-born population,
in a communication to the American Journal of Sociology for No-
vember, 1896.
228 The Annals of the American Academy
Mr. Hart shows from the United States Census returns (a)
" that as a matter of fact the foreign-born population furnishes
only two-thirds as many criminals as the native-born; (6) that
while it is true that the native-born children of foreign-born parents
furnish more criminals proportionately than those whose parents
are native born, yet in more than half the States the showing is
in favor of the children of the foreign born ; (c) that the combined
ratio of prisoners of foreign birth and those born of foreign-born
parents to the same classes in the community at large is only eighty-
four per cent, of the ratio of native-born prisoners to the same class
in the community at large."
A common error arises, as he notes, ''from comparing the crim-
inal population, foreign and native, with the whole of the general
population, foreign and native. The young children of the com-
munity furnish practically no prisoners, and nearly all of these chil-
dren are native born, whether the parents are native born or not.
The consequence is that Mr. Hawes has not only given the native
population credit for its own children, who are not criminals, but
has taken the native-born children of foreign parents, adding them
to the native-born population and counting them against their
own parents."
"Of the prisoners of the United States 98.5 per cent, are above
the age of sixteen years; 95 per cent, are above the age of eighteen
years; and 84 per cent, are above the age of twenty-one years.
The native-born population of the United States in 1890 numbered
53,390,600 ; the native-born prisoners 65,977 ; ratio 1235 in a million.
The foreign-born population numbered 9,231,381; the foreign-born
prisoners 16,352; ratio 1,744 m a million; an apparent excess of
foreigners over native of 41 per cent. But the number of native-
born males of voting age was 12,591,852; native-born male prisoners
61,637; ratio 4,895 in a million. The number of foreign-born
males of voting age was 4,348,459; foreign-born male prisoners
14,287; ratio 3,285; showing an actual excess of natives over for-
eigners of 50 per cent."
The accuracy of Mr. Hart's conclusions has since been sustained
by a number of independent inquiries of less extended range em-
bracing the ascertainable returns of a number of States whose records
are most complete and reliable. The basis of his reckoning of parent-
Proposals Affecting Immigration 229
age is criticized in the statistical report of the United States Industrial
Commission on Immigration transmitted to Congress on December
5th, 1 90 1, but his general conclusion is affirmed as follows, viz.:
''From this table it will be seen that taking the United States as a
whole, the whites of foreign birth are a trifle less criminal than the
total number of whites of native birth."
In the report of the Commission there is further noted very
significantly the nationality which has contributed far more largely
than any other to raise the average of the criminality and pauper-
ism of the foreign born:
"Taking the inmates of all Penal and Charitable Institutions
we find that the highest ratio is shown by the Irish, whose proportion
is more than double the average for the foreign born, amounting
to no less than 16,624 to the million."
There are, unfortunately, too few States that* have taken
pains to secure and record exact statistics of crime and pauperism
for the comparison of nationalities and birth. Among these few
is the State of Indiana, and the report of State Statistician
Johnson for 1902 significantly shows that a common impression
as to the relative criminality of the foreign born is by no means
a reliable guide for restrictive legislation. In this report it is noted:
"The great majority of Indiana evil-doers wTho find their way eventu-
ally to the State Prison and Reformatory are American born. In
the State prison, out of 751 convicts, 531 are white Americans
and 122 American negroes, 48 Irish, 27 Germans, 7 English, 4 French,
3 Scotch, 1 Welsh, 1 Russian, 1 Pole, 1 Belgian."
"At the Reformatory at Jefferson ville, with 919 inmates, 696
are white Americans, 191 American negroes, 10 Germans, 2 French,
3 Canadians, 8 English, 1 Scotch, 1 Belgian, 1 Swiss and 2 Irish."
There is a further special contention of the Immigration Restric-
tion League, bearing most severely upon the Italian immigrant,
that a "parallelism exists between the criminal tendencies and
the illiteracy of the same races." In addressing the Senate Com-
mittee on Immigration of the last Congress, Prescott F. Hall, Sec-
retary of this League, cited in support of his contention a tabu-
lated statement from the Twenty-fourth Annual Report of the
Massachusetts Prison Commissioners for the year ending September
30th, 1894.
230 The Annals of the American Academy
The conclusion which he sought to draw from this report was
opposed on the floor of the Senate in December, 1896, by Senators
Gibson, Caffery, and others, and the general character of the filtered
immigration was attested in particular by an extract from a report of
the Commissioner General of Immigration for the year 1895-6 as
follows :
"It is gratifying to me to be again able to report to you that
I know of no immigrant landed in this country within the last year
who is now a burden upon any public or private institution.
"With some exceptions the physical characteristics of the
year's immigration were those of a hardy, sound laboring class,
accustomed and apparently well able to earn a livelihood wherever
capable and industrious labor can secure employment."
There was, however, no direct challenging of the statistical
prop of the Immigration Restriction League and its inference until
it was picked up and shaken by Samuel J. Barrows, Secretary of the
Prison Association of New York, on December 9th, 1902, in a hearing
given by the Senate Committee on Immigration. "The Italian
people," said Mr. Barrows, "as a whole are a frugal and industrious
people. In our statistics we sometimes make discriminations
against them that are not correct. We had an illustration of this
in Massachusetts. A report was prepared by the Immigration
Restriction League which was based upon the criminal record of
the Italians in Massachusetts, leaving out all crimes which had been
produced through intoxication. That is the way that ingenious
plan of statistics was drawn. So they tried to make out a bad case
against the Italians.
" Now Massachusetts is the one State in the Union that has made
the most thorough examination of the whole question of the relation
of intemperance to crime, and the report on that subject in 1895
by the Bureau of Labor Statistics there shows that about 87 per cent,
of all the crime in Massachusetts grew out of intemperance in some
form. When you take then the Italian population of Boston and
of Massachusetts, and ask how many of those people were imprisoned
or arrested or committed crime because of intemperance, you find
that they rise away above all the Northern races — that is, commit
fewer crimes from this cause. The Italian people are a temperate
people, and while in Massachusetts three in a hundred of the North-
Proposals Affecting Immigration 231
ern races, including the Scotch, the Irish, the English and the Ger-
mans, were arrested for intemperance, only three in a thousand of
the Italians were arrested. What a remarkable bearing that has
upon desirability and availability."
The evidence of Mr. Barrows is further specifically attested in
the report of the United States Industrial Commission on Immi-
gration, covering the tables compiled by the Prison Commissioners
of Massachusetts, referred to by Mr. Hall. This report states:
"It appears from the table that of prisoners committed to all insti-
tutions in proportion to a thousand population of the same nativity
those born in Massachusetts numbered 7.5 per thousand, but
that, omitting those committed for intoxication, the number
is 2.6 per thousand. Below this proportion stand immigrants from
Portugal, Austria, Germany, Russia and Finland. The leading
nationality above this average is that of the Irish, whose commit-
ments per thousand were 27.1, but omitting intoxication was 6.
Next in order of commitments are Welsh, English, Scotch, and Nor-
wegians, all of which show a large predominance of intoxication.
The Italians are a marked exception, the commitments numbering
12.9 for all causes, and 10 for causes except intoxication.
The Immigrant and Pauperism. — An allied contention of
the Immigration Restriction League is the rolling up of the burden
of pauperism through the influx of Southern Latin immigration.
As Massachusetts has been picked out by preference on the basis
of its exhibit, invidiously distinguishing the Italian immigrant,
Massachusetts authority of unimpeachable character is here cited
in flat contradiction of this assumption.
In the Twenty-third Annual Report of the Associated Charities
of Boston, November, 1902, it is stated:
"The variation in the number of Italians applying for assistance
is interesting: 54 families came to us in 1891, and only 69 in the
last year, though the Italian population of this city has in the mean-
time increased from 4,718 to 13,738. This fact seems to corroborate
the report of Conference 6 (embracing the North-End District or
Italian quarter), which described the Italian immigrant as usually
able to get on by himself except in case of sickness, when temporary
help is needed."
It is obvious that this report marks not only a low rate of
232 The Annals of the American* Academy
pauperism but a very material decrease in the percentage of appli-
cants for charity in the face of the much decried influx during the
closing years of the last century.
The report of District 6 Conference, referred to in the above
summary, remarks: "As the Italian families so largely outnumber
the others, and as the Italian element is now predominant in the
district, it is worth while to note the chief causes of extreme poverty.
11 We observe that intemperance is not found as a chief or as a
subsidiary cause in any of this year's list of Italian families. Sick-
ness was the leading chief cause (io) and also the leading subsidiary
cause (9); next in order, come the following chief causes: lack of
employment due to no fault of employee (4) ; physical or mental de-
fects (2) ; roving disposition (3) ; dishonesty (2) ; disregard of family
ties, lack of training for work, and lack of thrift (1 each).
' ' If any general inference is fair from so small a number of cases,
it is that the Italian families referred to us have not been in the great-
est distress. The majority of the Italians are apparently fairly
thrifty and those who have trouble are often helped by their country-
men. The little that we have been called upon to do has in some
cases set a family at once upon its feet."
The assumption that illiteracy is a prolific source of pauperism
is not sustained by the examination of cases known to this Confer-
ence, so far, at least, as the Italian immigrant is concerned. "In
the matter of illiteracy," the Conference of District 6 states, "we
can give positive information about only 45 of the 68 families (ap-
plying for aid) — mostly Italians." The record shows 32 Italian
families, with 64 parents born in Italy. "Among heads of these
families, we find 32 who can read and write; 2 who can read and
not write, while 11 can neither read nor write."
As to the burden imposed by recent arrivals the report of
Conference 4 is noteworthy: "We found that none of the new
arrivals (needing help) were recent immigrants and that almost all
of the parents were born in the United States or Great Britain."
Another exact and authoritative record giving an exhibit of
pauperism in New York City and its distribution by nationalities
is presented in the Thirty-fifth Annual Report of the State Board of
Charities of New York, containing the proceedings of the New York
State Conference of Charities and Correction at the Second Annual
Proposals Affecting Immigration
233
'Session held in New York City, November 19th, 20th, 21st, and
22d, 1901. At this Conference an address on "The Problems of
the Almshouse" was given by Hon. W. Keller, President of the Depart-
ment of Public Charities of the City of New York. In the course
of his discussion the following table was presented showing the
nativity of persons admitted to the Almshouse in 1900:
United States
Ireland
England and Wales 11 . . .
Scotland
France
Germany 290. .
Norway, Sweden and Denmark
Italy
Other countries
Total 1,695.... 1,241
Male.
Female.
Total.
355...
199...
554
808...
809...
1,617
111...
87...
198
25...
14...
39
19...
2...
21
290...
84...
374
22...
6...
28
15...
4...
19
50...
36...
86
2,936
"Out of a total of 2,936 only 554 were born in the United States ;
2,382 were foreign born, and of this number 1,617 were born in Ire-
land alone."
The determination of the general distribution of pauperism
by nationalities has been made in the report of the United States
Industrial Commission on Immigration transmitted to the Fifty-
seventh Congress. "The proportion of the nationalities among
the paupers in our almshouses varies very greatly. The Irish
show far and away the largest proportion, no less than 7,550 per
million inhabitants, as compared with 3,031 for the average of all
the foreign-born. The French come next, while the proportion of
paupers among the Germans is somewhat unexpectedly high. The
remarkably low degree of pauperism among the Italians is possibly
due to the fact that such a large percentage of them are capable
of active labor, coming to this country especially for that purpose."
These citations are not made with the design of casting any
particular reproach upon the Irish nationality, but simply to correct
a prevalent impression discrediting the influx of the Southern
Latin races and the alleged relation of illiteracy to pauperism, for
it is morally certain that the alleged "educational test" would not
236 The Annals of the American Academy
to this country. There has been a very considerable attraction
Italians already to the sugar cane plantations, and the influx t(
the Southern States should grow with the extending familiarity
of the immigrants and the rising appreciation of their peculiar
adaptation for varied plantation service. Even if the South con-
tinues to draw largely from the North and West, as at present,
instead of enlisting the newcomers directly, the drain of older settlers
must be filled by immigration or the North will suffer.
There is further an expanding demand for the heavy outdoor
labor of the recent immigrant in the extension of public works
of all kinds, railway building, etc. These elemental undertakings
in industrial development are necessarily dependent on the certainty
of the supply of willing and sturdy labor, and their progress will
inevitably be checked by any shrinkage of this supply. It is ap-
parent that the effect of this employment and the consequent devel-
opment of the country should be to expand the demand for workers
in every line of industry. Hence the entry of immigrants does
not operate to exclude American laborers now here from profitable
occupation, but surely in the long run to increase the demand for
their labor.
II. The Government Regulation of
Banks and Trust Companies
(Continued)
(237)
The Relation of Trust Companies to Industrial
Combinations, as Illustrated by the United
States Shipbuilding Company
By L. Walter Sammis, Esq., Editorial Staff New York "iSun
(239)
THE RELATION OF TRUST COMPANIES TO INDUSTRIAL
COMBINATIONS, AS ILLUSTRATED BY THE UNITED
STATES SHIPBUILDING COMPANY
By L. Walter Sammis, Esq.
Editorial Staff New York Sun.*
The industrial combinations of to-day are not the simple
result of business conditions; neither are they, as they actually
exist, the simon-pure offspring of economic principles. Trusts
are made, not born. They are in part creatures of invention which
find their origin in the brain of the promoter whose inventive facul-
ties are stimulated by the desire for unearned wealth. ' 'Necessity
is the mother of invention," even as applied to the invention of a
trust, but the necessity in this case is not a necessity created by
economic laws, but the necessity of the promoter.
Trust companies and similar institutions sometimes bear
the same relation to industrial combinations as manufacturers do
to the product of the mechanical or scientific inventor's brain.
They produce it, place it on the market, and find purchasers for it,
compensating themselves, by getting the largest obtainable profit
for the least possible risk or responsibility.
Through the protracted legal proceedings against the United
States Shipbuilding Company, the public has had an opportunity
to observe the methods by which an industrial combination was
actually financed.
My purpose is to produce a photograph of how it was done,
not a thesis on how it should be done.
*I deal with this topic in my personal capacity, and not in any sense as representing any
other body or bodies of men, and without reflecting the views of any one else.
It is my good fortune to be a member of the editorial staff of the New York Sun, but it
must be distinctly understood that neither the substance nor the language of this article has
been submitted to any of my associates, nor is the New York Sun in anywise responsible for
my statements.
It is important that my position shall be clearly understood as to combinations of capital,
commonly called trusts, and also as to "trust companies," both actual and nominal.
Whatever may be said in this article with reference to the morale of the Shipbuilding
Trust must not be understood as defining, or even reflecting my attitude towards all combina-
tions. I do not take the position that the combination movement in itself is bad, nor that
all combinations are evil-producing in their results; and it is too palpable to require affirma-
tion, not only that trust companies were originally fiduciary institutions, but also that many
of them remain so, in the true sense of the word, to-day.
(241)
THE RELATION OF TRUST COMPANIES TO INDUSTRIAL
COMBINATIONS, AS ILLUSTRATED BY THE UNITED
STATES SHIPBUILDING COMPANY
By L. Walter Sammis, Esq.
Editorial Staff New York SunA
The industrial combinations of to-day are not the simple
result of business conditions; neither are they, as they actually
exist, the simon-pure offspring of economic principles. Trusts
are made, not born. They are in part creatures of invention which
find their origin in the brain of the promoter whose inventive facul-
ties are stimulated by the desire for unearned wealth. ' 'Necessity
is the mother of invention," even as applied to the invention of a
trust, but the necessity in this case is not a necessity created by
economic laws, but the necessity of the promoter.
Trust companies and similar institutions sometimes bear
the same relation to industrial combinations as manufacturers do
to the product of the mechanical or scientific inventor's brain.
They produce it, place it on the market, and find purchasers for it,
compensating themselves, by getting the largest obtainable profit
for the least possible risk or responsibility.
Through the protracted legal proceedings against the United
States Shipbuilding Company, the public has had an opportunity
to observe the methods by which an industrial combination was
actually financed.
My purpose is to produce a photograph of how it was done,
not a thesis on how it should be done.
*I deal with this topic in my personal capacity, and not in any sense as representing any
other body or bodies of men, and without reflecting the views of any one else.
It is my good fortune to be a member of the editorial staff of the New York Sun, but it
must be distinctly understood that neither the substance nor the language of this article has
been submitted to any of my associates, nor is the New York Sun in anywise responsible for
my statements.
It is important that my position shall be clearly understood as to combinations of capital,
commonly called trusts, and also as to "trust companies," both actual and nominal.
Whatever may be said in this article with reference to the morale of the Shipbuilding
Trust must not be understood as defining, or even reflecting my attitude towards all combina-
tions. I do not take the position that the combination movement in itself is bad, nor that
all combinations are evil-producing in their results; and it is too palpable to require affirma-
tion, not only that trust companies were originally fiduciary institutions, but also that many
of them remain so, in the true sense of the word, to-day.
(240
242 The Annals of the American Academy
The United States Shipbuilding Company was incorporated
under the laws of the State of New Jersey, by dummies furnished
for the occasion, on June 17, 1902, with a subscribed capital of
$3,000. On July 3d following, the capitalization was, on paper,
increased to $45,000,000 in stock and $26,000,000 of bonds. On
the nth and 12th of August the United States Shipbuilding Com-
pany purchased the Union Iron Works, the Bath Iron Works,
Limited, The Hyde Windlass Company, The Crescent Shipyard
Company, The Samuel L. Moore & Sons Company, The Eastern Ship-
building Company, The Harlan & Hollingsworth Company, The
Canda Manufacturing Company and the capital stock of the Bethle-
hem Steel Company, paying for them $6,000,000 in cash, $14,050,000
of bonds and $28,000,000 of stock. The entire amount of securities
disposed of to acquire these companies and to provide $1,500,000
working capital and to pay the profits of the various persons and
institutions concerned in the promotion amounted, at par value,
to $69,500,000. For this $69,000,000 of securities the combination
received, besides the required cash working capital of $1,500,000,
constituent companies which, omitting the Bethlehem Steel Com-
pany, were valued later by competent men at $12,441,518.26.
The Mercantile Trust Company was the Trustee under the first
mortgage on the Shipbuilding plants, securing $16,000,000 of bonds
and the New York Security and Trust Company was the Trustee
under the mortgage on the capital stock of the Bethlehem Steel
Company, which was also a second mortgage on the Shipbuilding
plants, securing $10,000,000 of collateral mortgage bonds.
The Trust Company of the Republic was banker for the issue
of the bonds, and, through its President, advanced large sums
• of money, much of which was obtained by borrowing on Shipbuilding
securities. When the crash came the Trust Company of the Republic
was able to figure up a cash loss of $982,334.
With the fall of the United States Shipbuilding Company
my story has nothing to do. My theme is the methods by which
it was established, false and insecure as that establishment was,
and my story must 'end at the point where it was left to stand alone,
for at that point it reached its meridian.
To a full understanding of the matter it is necessary to take up
the tale at the beginning.
Relation of Trust Companies to Industrial Combinations 243
John W. Young was a promoter who had the idea that it would
be a good stroke of business to combine the leading shipbuilding
industries of the country into one gigantic corporation, and had
worked out a theory by which it could be done with much profit
to the promoters.
Young's idea was good, but his method, which he made insep-
arable from his idea, was bad. After many futile attempts, he suc-
ceeded in finding a group of men who accepted his theory, and using
it as a base, constructed thereon a condition which they called a
trust, and which was incorporated under the name of the United
States Shipbuilding Company. The theory was impossible; the
condition was untenable; the trust, as it was manufactured, was
impracticable, and the United States Shipbuilding Company was
insolvent.
The financial world was absorbed at the time in creating indus-
trial combinations, some of which were either actually bankrupt
or were on the verge of bankruptcy, inflating values and watering
stocks, successfully offering new securities to a public eager to buy
them and finally dividing with promoters and vendors profits which,
even in that era of inflation, were considered enormous. Young
got his first start when he met Lewis Nixon.
Mr. Lewis Nixon had been a constructor in the United States
Navy but had resigned from the service to engage with the Cramps.
As a naval constructor he designed the Oregon, the Indiana and
the Massachusetts, and these vessels established his reputation
as one of the ablest shipbuilders in the world. Five years, at least,
before he met Young he had leased the Crescent Shipyards at
Elizabethport, N. J., and later acquired various properties until
he had bought all the available waterfront adjacent to the original
shipyards property. Subsequently he organized the Crescent
Shipyards Company, and this was capitalized for $1,200,000. Young
interested Nixon by showing him an option for the purchase of the
Newport News Shipbuilding and Dry Dock Company, and Nixon
gave Young an option on his own plant and agreed to work with
him in forming the proposed combination. This was the start.
Young now had two options and the name and reputation of the
greatest shipbuilder of the United States to work with.
He had the co-operation of Col. John J. McCook, a director in
244 The Annals of the American Academy
the Mercantile Trust Company and as well an active partner of
the law firm of Alexander & Green, counsel for the Mercantile
Trust Company, counsel for the United States Shipbuilding Com-
pany, and from time to time counsel for Nixon and Dresser as the
Shipbuilding Syndicate. Col. McCook, as he has told me, became
intensely interested in the proposed combination and did all he
could to accomplish it. Young occupied a room adjacent to the
offices of Alexander & Green, and Alexander & Green, Col. McCook
and Young worked in unison. Options on other shipbuilding com-
panies were obtained and the plan was submitted to the banking
house of H. W. Poor & Co., on Wall Street, which finally consented
to become banker for an issue of bonds and a prospectus was pre-
pared. The companies which were then to be included were sub-
stantially the same as those which finally entered it. The prospectus
was ready for issue on May 7, 1901, but on that day occurred what
is known as the Northern Pacific panic, and the pamphlets were not
distributed. Some say this was because of the panic; others
that it was because no satisfactory report could be obtained of the
annual earnings of the constituent companies. Whatever the reason,
the project fell flat and Poor & Co. did not attempt to revive it.
The promoters had all their work to do over again. For nearly a
year they tried unsuccessfully to get other financial houses to as-
sume the undertaking. Meanwhile, they succeeded in renewing
some of their options.
On the 31st of March, 1902, the Trust Company of the Republic
opened its doors for business at 346 Broadway. Its capital was
$1,000,000, and its surplus $500,000. The Trust Company of the
Republic proposed to deal with cotton growers in the South, who
are accustomed to borrowing money at the New York legal rate of
interest plus a bonus. It intended to lend money to the cotton people
against crops stored in warehouses, at the legal rate of interest and
without bonus, and to borrow money in the North against these
crops and on other securities which it should accumulate. The
opportunities for a large and lucrative business were bright and
alluring. The new Trust Company had among its organizers and
directors men whose names stood then and stand to-day for strength
and probity in the world of finance.
As the head of this concern whose future promised so much,
Relation of Trust Companies to Industrial Combinations 245
the directors selected Daniel LeRoy Dresser. Mr. Dresser was a
merchant, not a financier.
However, here was a new Trust Company, anxious for business,
with a man inexperienced in financial affairs at its head. In the
same city were an eager promoter and a firm of lawyers, who had
for a long time used every effort to obtain the support of a financial
institution in their joint project without success. Such a combi-
nation has its possibilities. These were sufficiently attractive for
Mr. Young, the promoter, to seek an alliance with Mr. Dresser.
He succeeded, but not until it had been made apparent to Mr.
Dresser that Col. John J. McCook was associated with Young, in
the plan which he had to propose. The subject of the United
States Shipbuilding Company was not at first broached to Mr. Dresser
by the promoters. He was told of a syndicate of French bankers
who desired to trade in American industrial securities and do their
trading on this side of the Atlantic so that they might avoid the
tax to which such transactions are subject when accomplished
within the jurisdiction of the laws of France. It was represented
to Mr. Dresser that the syndicate had been formed and was waiting
only to make a connection with a responsible and reputable house
in the United States. Profits derived from business which they
should transact together were to be divided equally.
This seemed to Mr. Dresser to be an excellent opportunity for
the Trust Company of the Republic, especially since the capital of
the French Institution was represented to be 20,000,000 francs,
and before the Trust Company of the Republic was a month old
the preliminary arrangements for a working agreement had been
completed and put in writing. Before binding agreements were
attempted, however, the matter of the French banking house, of
the existence of which no conclusive proof has been adduced, was
dropped, and the plan for forming a shipbuilding combination was
substituted. Exactly how this was accomplished it is almost im-
possible to determine. The truth is difficult to ascertain when
the statements of the individuals most interested vary so widely.
As a matter of fact, though, while negotiations concerning the
French banking house were still uncompleted Young sailed for
Paris, leaving his affairs in the hands of his laywers. This was on
April 22, 1902.
246 The Annals of the American Academy
Mr. Young was absent on this trip to Paris about three weeks,
returning to America about May 15th. During his brief stay in
this country, before he took his second trip to Paris, copies of a
prospectus dated April 19, 1902, and marked "Private and Confi-
dential," for the consolidation of the shipbuilding plants under
the name of the United States Shipbuilding Company appeared,
with the name of the Mercantile Trust Company as trustee of the
mortgage and Alexander & Green as counsel.
Mr. Dresser was asked to take up the matter of exploiting
the United States Shipbuilding Company. A memorandum was
shown to him, setting forth the profits which were to be derived
from the successful performance of this work. Mr. Dresser agreed
that the Trust Company of the Republic should act as banker, its
name was inserted and the prospectus was ' 'confidentially" issued.
The original proposition was to issue $16,000,000 of bonds
and $20,000,000 of stock, divided equally into common and pre-
ferred shares. This was before the Bethlehem Steel Company was
considered.
A digest of the memorandum shows that it was proposed to
dispose of $9,000,000 of bonds, $2,500,000 of preferred stock and
$2,500,000 of common stock in order to realize $8,100,000 in cash.
Of the cash and securities then remaining and in hand $6,400,000
in cash, $4,050,000 of bonds, $4,000,000 of preferred stock and
$4,050,000 of common stock were to be paid to the owners of the
properties to be acquired, leaving $1,700,000 cash, $2,950,000 in
bonds, $3,750,000 of preferred stock and $2,750,000 in common stock.
Of this, $1,500,000 in cash and $1 ,500,000 of bonds were to be retained
in the treasury of the proposed combination for working capital.
This left $200,000 cash, $500,000 bonds, $3,750,000 preferred stock
and $3,750,000 common stock — a grand total of $9,150,000, figuring
the securities at par value — to go to the promoters. From it they
were to defray the expenses of promotion. Before the constituent
properties were purchased, however, $400,000 cash was added to
this profit by reducing the aggregate price to be paid for constituent
companies to $6,000,000. The underwriting contract was with,
and ran to the Mercantile Trust Company.
The Trust Company of the Republic was asked to obtain
$3,000,000 of the $9,000,000 of underwriting and was assured that
Relation of Trust Companies to Industrial Combinations 247
the remaining $6,000,000 was obtained or would be obtained, in
Paris and London. In a letter written to the Trust Company of
the Republic later John W. Young promised that its compensation
should be $67,000 in cash, $250,000 in bonds, $700,000 in preference
shares and $700,000 in common shares. This was large bait, and
it was swallowed. The hook made its presence felt later.
From this time on Mr. Dresser, acting for himself and for his
company, worked with Lewis Nixon in promoting the combination.
When Young sailed for Paris he left his options, which were made to
Lewis Nixon as trustee, with Alexander & Green and gave Mr. Nixon
power of attorney over them. Young left also a tender of all
the companies which were to be included in the combination. The
Trust Company of the Republic desired some further information
than was contained in the prospectus, and one W. T. Simpson, the
accountant upon whose figures the prospectus was based, was sent
to Mr. Dresser. The accountant succeeded in showing Mr. Dresser
and his advisers that the companies to be taken in were in good con-
dition and that to combine them was desirable. The Trust Com-
pany of the Republic then took up the favorable consideration of
the tender of the companies which were to form the trust.
By the terms of the underwriting agreement the $9,000,000
of bonds were to be underwritten at 90 and each underwriter was
to receive as a bonus 25 per cent, of his underwriting in each kind
of stock. A public offering was to be made of the underwritten
bonds at 97^, and the difference between this and the underwriting
price was to be shared pro rata among the underwriters, less expenses
of advertising, etc.
Just at this time the agitation for a subsidy on American-built
ships had reached its height and the measure before Congress seemed
certain to succeed. English companies were casting something
more than longing eyes in the direction of our shipyards in conse-
quence, and were making substantial efforts to form such a combi-
nation as Young proposed. On the surface, with two-thirds of
the bonds to be underwritten abroad, the plan seemed certain of
success — and the profits to accrue to the principals in the under-
taking were most enticing. The Trust Company of the Republic
agreed to undertake that portion of the labor assigned to it and
obtain $3,000,000 of underwriting. It did this more willingly
248 The Annals oj the American Academy
since word had been received from Young in Paris, that he was suc-
ceeding and that the underwriting allotted to the French capital
would be completed in a few days.
The investing and speculating public had, seemingly, recovered
tone and was at least supposed to be ready again to absorb securities
of industrial combinations. It was not apparent at that time that
the market was in the condition so excellently described by the
most successful reorganizer the country, perhaps the world, has
ever seen — glutted with undigested securities. Promoters and
underwriters alike prophesied an easy sale for the bonds and a
correspondingly easy reaping of profits.
The Trust Company of the Republic performed its share of
the labor without great difficulty, for the prospect of a large bonus
of stock without the investment of a dollar appeals to underwriters.
Indeed, so good did the proposition seem that $320,000 of bonds
were paid for by the underwriters and withdrawn from the public
offering, and $2,500,000 was represented to have been sold abroad.
When Young went to Paris, ostensibly to attend to the matter
of the French bank, but really to obtain underwriting for the Ship-
building Company, he found no difficulty in accomplishing his pur-
pose so far as obtaining names was concerned. He had been in
Paris before on promotion enterprises and had among his acquaint-
ances a certain Baron P. Calvet-Rogniat. Him he enlisted in
the undertaking, and when he returned to New York in the middle
of May he brought a written contract in which the Baron agreed to
obtain $3,000,000 of underwriting in France.
Rogniat's undertaking was as follows :
"Paris, May 7, 1902.
John W. Young, Esq.,
Dear Sir:
In consideration of the premises I for myself and as the representative of
a group of financiers headed by Mr. Victor Schreyer, hereby undertake and
agree to obtain the signatures of said group of substantial underwriters {who
are good, and who have agreed to underwrite the same) to the underwriting letter
of the United States Shipbuilding Company, a copy of which is hereto
attached, dated April 19, 1902, to the full amount of three millions five hundred
thousand dollars of the bonds of said company on or before May 21st properly
verified, the same to be cabled to Messrs. Alexander & Green, 120 Broadway,
New York City, on or before that date.
Relation of Trust Companies to Industrial Combinations 249
1 also undertake and agree to procure either the withdrawal of said bonds
under the terms of said underwriting letter; or the public issue of said bonds
under the terms of said letter through either the Franco-Swiss Bank of Paris
or other equally substantial bank, simultaneously with the public issue of the
said company's bonds in America, it being understood in accordance with
clause one of the said underwriting letter that this agreement shall not be bind-
ing upon the undersigned unless the entire amount of $9,000,000 of bonds shall
have been underwritten.
Yours truly,
P. Calvht Rogniat."
Rogniat and those who were associated with him in Paris
obtained names to this underwriting agreement and nominal sub-
scriptions for this amount and more. It was easy to do so because
a list of names signed to the underwriting agreement seemed suf-
ficient. The element of responsibility was not closely inquired into
nor thought essential.
Representations were made to prospective underwriters there
that the American public was eager to buy the securities of industrial
combinations, and that all that was required was a list of names with
amounts set opposite to each which should aggregate $3,000,000;
that the securities would find a ready market here, and that the
issue of $9,000,000 would be oversubscribed. This, it was ex-
plained, would leave the underwriters in the enviable position of
taking profits without investing a single franc. This is usually,
of course, the ideal of an underwriter, but it is customary, even
in Wall Street, for an underwriter to be able to meet his obligation.
So far as can be ascertained few substantial Parisians placed
their names on the agreement. Strenuous efforts which were made
later to compel these underwriters to pay their obligations failed
absolutely, except that the Baron Rogniat did contribute $25,000,
for the recovery of which amount he has brought suit against the
Mercantile Trust Company. A total of $4,250,000 was underwritten
in this manner in the French capital and a list of the names obtained
was forwarded.2
Mr. Dresser, who obtained the underwriting allotted to him,
was advised by Col. McCook that because of the coronation prepara-
tions which were being made in London it had been found impos-
2For an article on the "History of the French Baron-Underwriter," see the New York
Evening Post of January 6, 1904.
250 The Annals of the American Academy
sible to conclude arrangements for obtaining the $3,000,000 of under-
writing which had been assured from the English capital. Mr.
Dresser was asked if he would undertake to obtain here an additional
$1,750,000. The list sent by Rogniat indicated that Paris would
take $4,250,000, which left only $1,750,000 of the foreign under-
writing to be secured. Mr. Dresser agreed to perform this extra
work. The burden was being shifted gradually to the shoulders of
the Trust Company of the Republic. The proposition contained
in the cable (q. v.) of Mr. Alexander from France, to Alexander
& Green, New York, to assign the underwriting to the Trust Com-
pany of the Republic was significant.
The bonds of the United States Shipbuilding Company were
offered to the public on June 14, 1902. On that date a prospectus
was published in the public prints which stated what was not true.
The question whether the responsibility for this prospectus rests
with the Trust Company of the Republic or with the Mercantile
Trust Company or with both is before the courts.
The prospectus stated, among other things, that the United
States Shipbuilding Company had been organized under the laws
of the State of New Jersey, and mentioned as directors a number
of responsible men. It goes without saying that these gentlemen
were not directors, because the company had not yet been incor-
porated. Some of them say they were not consulted about the use
of their names, and only four of them ever served as directors
when the company was organized some months later. The pros-
pectus went on to say that Alexander & Green, counsel for the new
company, certified as to the validity of the organization and of
the securities issued and the title of the company to the property
acquired. It stated that the plants were earning $2,250,000 a
year and had abundant facilities for additional work and increased
earnings. On June 18th the books were opened for subscrip-
tions in twelve cities in this country, and in Paris, and the fisher-
men sat back and waited for the public to take the bait.
The response was not only discouraging; it should have been
fatal. The public sent subscriptions for only $490,000 of the bonds.
This was again a period where the Trust Company of the Republic
should have thrown the undertaking overboard and charged the
expense it had incurred to profit and loss, but they seemed to have
Relation of Trust Companies to Industrial Combinations 251
relied upon the French underwriting. The public did not rise to
it, the underwriters generally did not want it sufficiently to take
their bonds before they were offered at public sale, and the whole
thing was flattening out.
The promoters turned to Bethlehem (not in the scriptural
sense) for salvation.
On June 12, 13 and 14, 1902, Mr. Dresser and Mr. Nixon dis-
cussed with Charles M. Schwab, then President of the United States
Steel Corporation, the advisability of acquiring the Bethlehem
Steel Company for the Shipbuilding Company, and submitted
to him financial statements of the shipbuilding plants, their re-
sources, liabilities and earnings. The Bethlehem Steel Company
was prosperous and remunerative and, besides, would place the
United States Shipbuilding Company, if acquired by the combina-
tion, in the enviable position of being able to build armored vessels
and thus compete for government work.
Some idea of the value and importance of this company can
be learned from the earning capacity of the property. At the
time of its transfer to the Shipbuilding Company, it was earning at
the rate of $1,500,000 a year, and is now earning, I am informed,
at the rate of $3,000,000 a year. The interest charges on the under-
lying bonds make the only fixed charges of $557,500, which would
leave substantially, at the present rate of earning, for distribution
upon the securities issued on account of that property 5 per cent,
on the $10,000,000 of bonds, 6 per cent, on the $10,000,000 of pre-
ferred stock and 14 per cent, on the $10,000,000 of common stock.
Mr. Schwab asked for the Bethlehem Steel Company $9,000,000
in cash, besides a certain amount of securities. The cash was,
of course, out of the question. The promoters had peddled all
the securities for which they could find a market and did not see
their way clear to sell outright bonds against the Bethlehem Steel
Company, which was the only way in which they could raise money
to pay the demand of Mr. Schwab. They proposed therefore to pay
for the Bethlehem Steel Company with securities issued against
that plant itself. Mr. Schwab told them that Mr. J. P. Morgan,
who was then in Europe, would have to be consulted, because J. P.
Morgan & Co., as managers of another syndicate, held the
stock of the Bethlehem Company and were entitled to participation
252 The Annals of the American Academy
in any profit realized from such a sale. Mr. Morgan was communi-
cated with by cable and an answer was received. In the afternoon
of June 14, 1902, Mr. Nixon and Mr. Dresser closed the negotiations
for taking the Bethlehem Steel Company.
Nixon and Dresser agreed that Mr. Schwab should receive
$10,000,000 collateral mortgage bonds and $10,000,000 of each kind
of stock, $30,000,000 in all at par, for the capital stock of the Bethle-
hem Steel Company. Later the common stock was increased by
an additional $5,000,000. By this method it was proposed to increase
the capitalization of the Company, advertised as $20,000,000 with
$16,000,000 bonded indebtedness, to $45,000,000 stock and $26,-
000,000 bonded indebtedness.
After the negotiations for the Bethlehem property were con-
cluded, Mr. Schwab called in his counsel, Mr. Max Pam, to prepare
the necessary contracts. This was Mr. Pam's first connection
with the matter.
On June 17th, three days after the prospectus was published, the
United States Shipbuilding Company was incorporated in New Jer-
sey by an officer and two employees of the Corporation Trust Com-
pany with a capital of $3,000. These men acted as directors also,
taking their instructions from the promoters. In July the capital
of the company was increased to the amount I have already men-
tioned, a dummy board of directors having been furnished for this
purpose.
On July 2d Mr. Nixon and Mr. Dresser went to Mr. Schwab's
office to sign the formal agreement under which they were to take
over the Bethlehem Steel Company. They contracted to pay
to J. P. Morgan & Co., as syndicate managers, $7,246,871.48
in cash and $2,500,000 of each kind of stock of the Shipbuilding
Company for the 299,910 shares of the Bethlehem Company which
were held by J. P. Morgan & Co. as syndicate managers. This
was the entire issue of Bethlehem stock, with the exception of
ninety shares. The par value of each share was $50. In order to
get the money with which to pay J. P. Morgan & Co., Mr. Nixon
and Mr. Dresser signed with Mr. Schwab an agreement which
assured to them this cash requirement.
Under this agreement Mr. Schwab contracted to furnish the
cash necessary to acquire the stock of the Bethlehem Steel Company
Relation of Trust Companies to Industrial Combinations 253
and to accept in return $10,000,000, par value, 5 per cent., twenty
year collateral gold bonds, and $7,500,000 of each kind of stock
of the United States Shipbuilding Company. The mortgage on
which the bonds were to be issued was to be a second mortgage
lien upon the properties of the Shipbuilding Company and to have
a voting power equal to the same amount of stock, although the
first mortgage on the constituent companies was not to cover the
Bethlehem Steel Company. The shares of the Bethlehem Steel
Company, acquired thus with Mr. Schwab's money, were to be de-
posited with the New York Security and Trust Company as security
for the mortgage; the Shipbuilding Company was required to
guarantee a dividend of 6 per cent, on the capital stock of the
Bethlehem Company; to provide the Bethlehem Company with
work sufficient to earn this dividend, or to advance the money there-
for, and to see that the Bethlehem Company should always have
the $4,000,000 working capital which it then claimed to have.
It was also agreed that the holders of the collateral bonds in
the absence of any default should elect a full minority of directors
of the Bethlehem Steel Company. The form and provisions of the
bonds to be issued under this agreement were to be satisfactory to
Mr. Schwab and his counsel, and the deal was not to be concluded
until the other constituent companies had been duly acquired and
paid for.
Mr. Schwab and Mr. Pam have been criticised severely for
making the terms of this contract stringent. I asked Mr. Pam
recently why Messrs. Nixon and Dresser agreed to the terms of
that contract, and he replied that the terms of the contract were
not unreasonable; that they were intended to protect Mr. Schwab
against any untoward contingencies; that the agreement was sub-
mitted by Messrs. Nixon and Dresser to their counsel and was
fully discussed and passed on by their counsel before being signed
by them; that the terms of the agreement were assented to and
the contract signed after conference and negotiation between him-
self Jand Messrs. Nixon and Dresser and Messrs. Alexander and
Green, who, in this matter, were acting as Nixon and Dresser's
counsel.
Mr. Alexander, while abroad, had gone to Paris to see if any
money could be collected from the underwriters there, but he
254 The Annals of the American Academy
apparently found them averse to paying anything. In the first
place, they are reported as saying they had been induced to under-
write by being told that payment would never be expected ; in the
second place, after the pitiful failure of the public offering, a cable
was sent to Paris saying that the public issue was a success. This
the Paris underwriters interpreted as meaning that the entire $9,000,-
000 of bonds had been taken by the public and that nothing re-
mained for them to do except to take their profit. They refused
to accept Mr. Alexander's explanation that it was the custom in this
country to call an issue a success, no matter how badly it had failed,
and to peddle the bonds afterwards. The best Mr. Alexander was
able to accomplish was to get the Frenchmen to give their notes for
the amounts they had underwritten. These notes were to mature
on October 6th. That the French underwriting was nil was not,
however, admitted by the contracting parties. It was still carried
as a good asset and counted as part of the underwriting.
Assurances were received from Paris, from time to time,
reiterated, that the money from the French underwriters would be
forthcoming.
On the 23d day of July, 1902, by cable, the French under-
writing was called.
The calls were made by cable, possibly to avoid legal complica-
tions under French laws. The following cable is an example of the
call:
"July 23, 1902.
Odero,
C/o Panta [the cable address for Rogniat] Paris.
Have allotted you $8,000 bonds of the Shipbuilding underwriting. Pay
Morgan & Harjes twenty-five per cent, on allotment July twenty-fifth. Upon
payment we will issue negotiable receipt in New York to your order.
Mercantile Trust Co."
A call was made in America at the same time.
The American underwriters had responded promptly to the
call, and an inquiry from New York as to why Paris did not pay
brought the following:
"Paris, July 25th, 1902.
Maccook, N. Y.
All I hear indicates general response. Short notice creates slight delay.
Relation of Trust Companies to Industrial Combinations 255
Appreciate money must be in New York before August. Underwriters contem-
plate simultaneous payment. Have payments been made New York.
(Signed) Beatty."
(Maccook was the New York cable address of Alexander &
Green, and Beatty was the Paris cable address of C. B. Alexander.)
On the 5th of August, 1902, matters were approaching a crisis
and the following was sent :
"New York, August 5, 1902.
Oppenheim, Young and Mayer,
C/o Trebor, Paris.
Can you not give us an exact statement of the present condition of pay-
ments by underwriters each for twenty-five per cent, due July twenty-fifth
and August first respectively, and when cash remittances will be actually paid ?
We must know on account of commitments here, and so far have nothing except
promises. Where is the hitch and why the continued delay after everything
so far as we can gather from your cables is settled.
Republicus Maccook Nixon."
Finally on the 7th, the following cable was sent to Young:
"New York, August 7, 1902.
Young,
C/o Trebor, Paris.
We are getting tired of promises to pay to-morrow. We must make our
payments here and must have French money to do it with.
Repubucus."
The following cables further explain the situation :
"New York, August 8, 1902.
Cai/vet Rogniat,
C/o Trebor, Paris.
Monday last day for closing Bethlehem. All other plants must be paid
for before closing this transaction. It is absolutely essential to have your
money in New York Saturday.
Repubucus."
"New York, August 11, 1902.
Calvet Rogniat,
C/o Trebor, Paris.
No payments received to-day from French underwriters. Please cable
immediately when money is to be in New York.
Repubucus."
v
256 The Annals of the American Academy
"Paris, August 12, 1902.
Republicus, N. Y.
Rogniats Russian returns delayed yesterday; learn part arrived, he and
others pay to-day; Schreyer and all seem now ready to pay. Know nothing
of second call. Have wired Alexander to come here.
Our persuasion and his iron hand in velvet gloves of course will bring desired
results.
Young."
And finally we have this significant suggestion by cable :
"St. Moritz, August 13, 1902.
"Maccook." Alexander & Green, N. Y.
Suggest Mercantile assign to Shipbuilding Company call, who can sue
or to Republicus with consent of Shipbuilding Co.
Alexander."
As late as September 8th the theory was still current that
there would be results from the French underwriting.
About the 6th of October, 1902, Mr. Dresser arrived at Paris
and within a few days after his arrival cabled to the Trust Company
of the Republic that the French underwriting was valueless.3
The Mercantile Trust Company was a party to the underwriting
agreements, in manner as appears from the printed form of such
agreements, and which is the same as the signed originals except
that it contains the words ' 'Private and Confidential" and the date
1 'April 19, 1902," at the top. The printed form is as follows:
PRIVATE AND CONFIDENTIAL APRIL 19, 1902.
THE UNITED STATES SHIPBUILDING COMPANY.
A corporation to be organized under the laws of the State of New Jersey,
either by that or some similar name, proposes to acquire the plants and equip-
ment of the following concerns or their capital stocks, free from any liens:
The Union Iron Works, San Francisco, California.
The Bath Iron Works, Limited,
and Bath, Maine.
The Hyde Windlass Company,
3For detailed history of the cables and correspondence, see New York Evening Post, October
8, 1903.
What is reported to be Rogniat's version of the Shipvard transaction appears in the New
York World of January 11, 1904.
Relation of Trust Companies to Industrial Combinations 257
The Crescent Ship Yard
and EHzabethport, New Jersey.
The Samuel L. Moore & Sons Company,
The Eastern Shipbuilding Company, New London, Connecticut.
The Harlan and Hollingsworth Company, Wilmington, Delaware.
AND
The Canda Manufacturing Company, Carteret, N. J.
UNDERWRITING AGREEMENT.
For $9,000,000 Series A First Mortgage, Five Per Cent. Sinking Fund,
Gold Bonds, due 1932, part of an authorized issue of $16,000,000, Bonds of
$1,000 each, $5,500,000 being Withdrawn from Public Issue for Disposal under
the Vendors' and Subscribers' Contracts, and $1,500,000 being Reserved in the
Treasury of the Company. Additional Bonds may be issued only for the Pur-
pose of Acquiring Additional Plants and Equipment and for Improvements
and Betterments, upon such Terms and Conditions as shall be Approved by
the Holders of a Majority of the Bonds under the Present Issue Outstanding
at the Time of such Approval.
We, the undersigned, agree, each for himself, with The Mercantile Trust
Company, for itself and for the United States Shipbuilding Company, and to
and with each other, to subscribe to, receive and pay for the amount of five per
cent, first mortgage, sinking fund, gold bonds of the United States Shipbuilding
Company of one thousand dollars each, set opposite our respective signatures
hereto, at the price of $900 for each bond, 25 per cent, to be paid upon allotment
and the balance upon the demand of The Mercantile Trust Company.
We further agree to receive and pay for any smaller amount than that
subscribed for which may be allotted to us respectively.
The conditions of this underwriting agreement are as follows:
1 That this agreement shall not be binding upon the undersigned unless
the entire amount of $9,000,000 of bonds shall have been underwritten.
2 That within such reasonable time as shall be fixed by The Mercantile
Trust Company the said $9,000,000 of bonds (less any amount withdrawn by
the underwriters as hereinafter set forth), will be offered to the public, through
such banker or bankers or brokers as shall be designated by The Mercantile
Trust Company, for subscription at not less than 95 %.
3 With the consent of the Mercantile Trust Company, any other concern
may be included in this combination, or others substituted therefor, provided
the working efficiency or values are not lessened or impaired.
4 That, if the amount of bonds subscribed and paid for upon such public
issue shall be at least equal to the amount of bonds so offered to the public,
then all liability under this agreement shall cease.
5 That, in case the amount of bonds subscribed for upon such public
offering shall be less than the total amount of bonds so offered to the public,
or in case the bonds subscribed for upon such public issue shall not be paid for
:;v Annals oj the American Academy
it the rate of 95 %. to the total of such public offerin
n subscriptions and payments trill, upon the demand
pany, be made good by the subscribers hereto in tl
in the proportion their subscriptions for bonds in
from pubhc issue bear to the total amount of bonds
7"hit e*ci underwriter shall receive in pcefeaied and common sto(
Shipbuikimf Company, twenty-five per cent, of the p
ereby underwritten in each kind ai stock, and also th
exceed 5 V realized from the sale of the bonds at pub
. after deducting issue < ifw mm v. shal belong to the und«
Thai any underwriter shall have the option of withdrawing from t
.snx any ci the bonds hereby —aiaiiiu ■ by mm, provided that
MercastDe Trust Gwiipa ny five days prior to the dav fixed for t
jsoe. that be elects to purchase said bonds, m widen* tint in the prop;
the bonds so purchased he waives his said right to participate in t
pacceeds reahred from the pnhnc issne.
5 Thai no Underwriter shall sell or oner far sale the bonds so purchase
;he bonus shares of stock he receives, until twelve months after t
ruyraest. wrthc«t the conjtnt of The
Nrw Yonx. April 19. 1902.
I have seen a printed copy of this aaort&agf dated August
iqoc. between the United States Saupbannnmf Coaupany and ■
Mercantile Trust Company. It was signed in behalf of the Unit i
States SEnpomfchng Company and by Levis Nixon, as We- Preside ,
^i by Frederick R. Seward, as Secretary ; and m behalf of te
Mefcactne Trust Company by Ahrm K_ Kirch, \lce- Preside.,
attested by J D. Ostrander. Assistant Secretary, and acknowledgi
oc tie i ith day of August. 1903. In this nantfaft the form of te
bond is provided and declares that Series A to be issned under tls
a*xr§a*e shall not exceed $16,000,000.
There s> a further pcovisian that * this bond shall not beco e
e&Vctzve or obligatory for any parpen? imh and until h shall be
been anthentkated by the certificate thereon i.ndrw*rri by the sd
apany."
The mort^a^e contained the
Relation of Trust Companies to Industrial Combinations 259
pany and delivered to the Trustee for authentication, and the Trustee shall
immediately and without awaiting the recording of this indenture authenticate
and deliver the same upon the order of the President or Vice-President and
Treasurer of the Shipbuilding Company."
and the further provision that
Article I, Section 4.
1 ' The Shipbuilding Company covenants that it will not issue, exchange, sell
)r dispose of any bonds hereunder in any manner other than in accordance
with the provisions of this indenture and the covenants and agreements in
:hat behalf herein contained."
That the Mercantile Trust Company had any legal title to the
)onds or had control of their possession or distribution by the Ship-
building Company does not appear to be the fact.
The only apparent interest on the part of the Mercantile Trust
Company was its compensation as Trustee, unless it be true, as has
>een asserted, that the Mercantile Trust Company was one of the
mderwriters, which subscription was subsequently, as I haye been
nformed, personally assumed by Mr. Alvin W. Krech.
On June 24, 1902, John W. Young undertook to transfer and
ell to the Shipbuilding Company the various shipbuilding and
>ther properties mentioned, with a certain amount of cash,
md his payment was to come from the issue of the $16,000,000 of
irst mortgage bonds, of which $1,500,000 were to remain in the
reasury.
The Shipbuilding Company did not acquire title to the ship-
building plants until the nth of August, and up to that time no
onds were, apparently, deliverable by or on the behalf of the Ship-
uilding Company, on any account whatever. Any issue of the
onds by the Shipbuilding Company prior to that time seems
trange to the uninitiated.
On the nth day of August, when the Bethlehem properties
ere to be turned over, the promoters of the Shipbuilding enterprise
rere facing a crisis. Under the contract for the sale of the Bethle-
em property it was provided that the properties of the Shipbuilding
ompany should not only be acquired, but the title vested in the
hipbuilding Company ; and this required the payment of $6,000,000,
esides the possession of a cash working capital of $1,500,000.
260 The Annals of the American Academy
The provisions of the agreement showing the caution exercised
in behalf of Mr. Schwab, to assure the full compliance with these
conditions and to assure the good faith of the transactions before
the Bethlehem was turned over, are as follows :
"At the time of the said purchase of said shares of stock of the Bethlehem
Steel Company by said Nixon and Dresser and the sale to said Schwab of the
bonds, preferred stock and common stock to be issued by said Shipbuilding
Company, as herein provided for, said Shipbuilding Company shall have dxdy
purchased and become possessed of the property and assets or the capital stock
or both of said 'Subsidiary Companies.'
"Said Nixon and Dresser shall furnish the certificates of Messrs. Alexander
& Green, of Counsel for said Shipbuilding Company, and the other parties
financially in interest in such form as shall be satisfactory to said Schwab, of
the validity of the organization of the said Shipbuilding Company, of the acqui-
sition by it of the properties, plants and assets or capital stock or both of said
'Subsidiary Companies' of the acquisition by it of said stock of the said Bethle-
hem Steel Company, of the issuance of full paid, non-assessable shares of pre-
ferred stock and common stock of the Shipbuilding Company to be delivered
to said Schwab under this agreement, and of the validity thereof, and of the
authorization and issue of the stocks and bonds of the Shipbuilding Company,
together with satisfactory evidence of the consent and authority of all parties
in interest, for the issue of the said stocks and bonds of said Shipbuilding Com-
pany, as herein provided for."
To summarize, it was insisted in behalf of Mr. Schwab that
the Bethlehem Company should not come into the combination
until the other properties had been acquired and paid for, the titles
vested in the Shipbuilding Company and the considerations for the
issuance of the various securities properly received.
The necessary certificate of Alexander & Green was furnished
to both J. P. Morgan & Co. and Mr. Schwab, as is shown by the
evidence taken before Mr. Oliphant, United States Commissioner,
in the Shipbuilding hearing.
A cable to Young, in Paris, on August 8th, said :
"Under our contract to purchase Bethlehem, which must be consummated
Monday, we have to have all other plants fully paid for and transferred to Ship-
building Company first. This means all cash must be in hand Saturday, en-
tirely irrespective of date of option. There is serious danger in Bethlehe
matter as they will give no extension of time.
Repubucus."
Relation of Trust Companies to Industrial Combinations 261
Bethlehem could not be acquired until all the cash requirements
were in hand to acquire the plants and working capital.
It was determined to borrow the money on the Shipbuilding
securities to take the place of the non-forthcoming funds of the
French underwriters.
Dresser and Nixon got some loans, but they were unable to
get enough, so Dresser arranged with different institutions for
deposits of the Trust Company of the Republic's funds, and then
they borrowed the amount of this money individually, placing with
the loaning institutions double the amount borrowed in Shipbuildin
bonds, giving their joint notes and the guaranty of the Trust Com-
pany of the Republic, signed by D. LeRoy Dresser, President.
Some of these loans were on the books of the Trust Company
of the Republic, but all new loans were not at first put upon the
books of the Trust Company of the Republic as an indebtedness
of the Trust Company. Some were entered as contingent liabilities
and some were carried as assets.
In one instance, five hundred thousand dollars were deposited in
a trust company by Mr. Dresser as an interest-bearing deposit, a credit
to the Trust Company of the Republic. Five hundred thousand
dollars were borrowed from this same trust company by Mr. Dresser
upon $1,000,000 of Shipbuilding bonds, accompanied by the joint
note of Mr. Nixon and Mr. Dresser and a guaranty executed
by Mr. Dresser in the name of the Trust Company of the Republic.
All of this was done, according to the testimony, in the branch office
of the Trust Company of the Republic at 71 William Street, New
York City, and the minutes of the Trust Company of the Republic
do not show that the transactions were at the time done with the
knowledge of the Board of Directors.
The check of the other trust company, to the order of Nixon and
Dresser, was deposited in the Trust Company of the Republic to
the credit of the loans of Nixon and Dresser.
There certainly was a failure to observe proper banking methods.
The Knickerbocker Trust Company declined to loan on Dresser's
and Nixon's notes supported by the collateral of the Shipbuilding
bonds, and required additional collateral. It obtained an assignment
in the following form :
262 The Annals oj the American Academy
Know all Men by these Presents, that the Mercantile Trust Com-
pany, a corporation of New York, hereby releases to the United States Ship-
building Company (a corporation of New Jersey), its successors or assigns,
all the right, title and interest of said The Mercantile Trust Company in and
to certain underwriting agreements relative to the First Mortgage Five
Per Cent. Sinking Fund Gold Bends of the said Shipbuilding Company, hereto
annexed, and respectively executed by the following named Subscribers, for
the amount of bonds set opposite their names, to wit:
C \Y. Wetmore $200,000
E. G. Bruckman 200,000
J.W.Gates 100,000
Alex. R. Peacock 100,000
Edwin Gould 100,000
George J. Gould 100,000
Dumont Clarke 25,000
Stuyvesant Fish 50,000
Richard Delafield 25,000
C. M. Schwab 500,000
Ex. Norton & Co 125,000
\V. L. Stow 50,000
S. P. McConnell, &c 25,000
Dated August 11, 1902
Mercantile Trust Company,
By A. W. Krech,
Vice-Presidenl.
In the presence of
W. W. Green.
In connection with this loan there was executed the following:
The Trust Company of the Republic hereby certifies that, under the under-
writing agreements relative to the first mortgage, five per cent, sinking fund
gold bonds, Series A, of the United States Shipbuilding Company, of which
several copies are hereto annexed, the entire amount of $9,000,000 were under-
written as provided in Clause (1) of said agreements.
Dated New York, August 11, 1902.
Trust Company of the Republic,
By James Duane Livingston,
Vice-President.
There was a second assignment by the Shipbuilding Company,
also signed by James Duane Livingston, Second Vice-President of
the United States Shipbuilding Company, to Lewis Nixon and D.
LeRoy Dresser, which assignment was as follows:
Relation of Trust Companies to Industrial Combinations 263
This Agreement, made this 11th day of August, 1902, between the United
States Shipbuilding Company a corporation of New Jersey, hereinafter some-
times called the Shipbuilding Company , party of the first part, and LEWIS
Nixon and D. LeRoy Dresser, party of the second part, WITNESSETH:
The Shipbuilding Company, through its agent, the Mercantile Trust
Company, entered into several agreements, called "Underwriting Agreements,"
relative to the sale of the First Mortgage Five Per Cent. Sinking Fund Gold Bonds
of the Shipbuilding Company, including, among others, the agreements hereto
annexed, signed by the below-mentioned subscribers, for the amount of bonds
respectively set opposite their names:
C. W. Wetmore $200,000
E. G. Bruckman 200,000
J. W. Gates 100,000
Alexander R. Peacock 100,000
Edwin Gould 100,000
George J. Gould 100,000
Dumont Clarke 25,000
Stuyvesant Fish 50,000
Richard Delafield 25,000
C. M. Schwab 500,000
(J. D. L.) Ex-Norton & Co 125,000
W. L. Stow & Co 50,000
S. P. McConnel 25,000
Upon each of the foregoing underwriting agreements, 50 per cent, of the
amount subscribed has been called and paid, Lewis Nixon and D. LeRoy Dresser
are about to borrow from Knickerbocker Trust Company the sum of seven
hundred thousand dollars ($700,000) and to assign as collateral security therefor,
the above described underwriting agreements to the extent of the unpaid lia-
bility of the subscribers thereon together with the First Mortgage Five Per
Cent. Sinking Fund Gold Bonds of the Shipbuilding Company to the amount
in par value of $1,600,000, and Preferred Stock of the Shipbuilding Company
to the amount of 4,000 shares and Common Stock of the Shipbuilding Company
to the amount of 4,000 shares.
Now, therefore, this agreement WITNESSETH: That the Shipbuilding
Company, in consideration of the promises and the sum of one dollar to it in
hand paid, the receipt whereof is hereby acknowledged, assigns to Lewis Nixon
and D. LeRoy Dresser, their assign or assigns, each and all the underwriting
agreements above described, and hereto annexed, with all the right, title and
interest therein of the Shipbuilding Company, with full power to said Lewis
Nixon and D. LeRoy Dresser, their assign or assigns, in the name of the Ship-
building Company, or otherwise, to enforce the said agreements, and each of
them, to make calls thereon, or cause the same to be made, and to do any other
act which the Shipbuilding Company might, could or should do to fully be
entitled to the benefit and security of the said agreements.
264 The Annals of the American Academy
In witness whereof, the Shipbuilding Company has caused this agree-
ment to be executed in its name by its Second Vice-President, and its corporate
seal to be hereto affixed and attested by its Secretary, this 11th day of August,
1902.
United States Shipbuilding Co.,
[seal] By James Duane Livingston,
2d Vice-President.
Attest.
Frederick Seward,
Secretary.
Upon this document was endorsed a further assignment in
the following language:
1 ' For value received we hereby assign, transfer and set over to the Knicker-
bocker Trust Company all our right, title and interest in and to the foregoing
instrument, and in the underwriting agreements therein mentioned.
Dated August 11, 1902.
Daniel LeRoy Dresser,
Lewis Nixon.
In the presence of
Brainard Tolles."
Mr. Dresser had reached the end of his own resources and had
exhausted those of the Trust Company of the Republic. Both
were in danger, and he knew it. The responsibility had been
shifted upon his shoulders. No help seemed forthcoming from the
originators of the undertaking and the promises of other promoters
as to French financial returns were becoming shadowy. In this
predicament he sought Mr. Schwab's counsel, Mr. Schwab being in
Europe at the time. Mr. Pam took Mr. Dresser over to the office
of J. P. Morgan & Co. and introduced him to Mr. Perkins.
Mr. Dresser requested a loan of $2,500,000, but Mr. Perkins
said he could not make loans on Shipbuilding securities. Mr. Dresser
said that he and his associates were expecting remittances in a week
or ten days from the French underwriting and would need the
assistance only that long. Mr. Perkins was told by Mr. Dresser
that the proceeds of the French underwriting would not long be
delayed. Mr. Dresser called again the next day and told Mr. Perkins
that several financial institutions would be willing to assist them
if they could have the additional funds, and again requested a loan.
Relation of Trust Companies to Industrial Combinations 265
Mr. Perkins was unwilling to make a loan, but he did finally
say that he would deposit $2,100,000 in any three responsible Trust
Companies Mr. Dresser might name for ten days or two weeks.
Mr. Dresser mentioned the Knickerbocker Trust Company,
the Trust Company of the Republic and the Manhattan Trust
Company.
The Manhattan Trust Company did not accept the deposit.
The other two companies did receive $1,400,000, issued their certifi-
cates of deposit to J. P. Morgan & Co. and loaned this amount to
Mr. Nixon and Mr. Dresser.
Mr. Perkins introduced Mr. Dresser to the New York Security
and Trust Company, which made a loan to Dresser and Nixon of
$350,000, making the total assistance secured in that way $1,750,000.
The $1,750,000 thus borrowed, while it was a great help, was
not sufficient to place the promoters in a position to buy the proper-
ties for which they held options. They were still short of the
necessary cash requirements. But the Trust Company of the
Republic had more than $4,000,000 in deposits.
Methods similar to those described were taken with other
institutions, until, in the joint names of Mr. Nixon and Mr. Dresser,
secured by the guaranty of the Trust Company of the Republic
issued by Mr. Dresser, and the Shipbuilding Company collateral
some millions were raised sufficient to draw the checks to the vendors,
which checks aggregated $6,000,000.
The Trust Company of the Republic had received from under-
writers and subscribers $2,327,812.50, of which it had contributed
$250,000 of its own money. It had lent directly to Mr. Nixon and
Mr. Dresser, or supported their notes by its guaranties, $3,672,187.50.
Under these conditions the fateful day for paying for the prop-
erties arrived. The Trust Company of the Republic prepared
twenty-four checks, aggregating $6,000,000, fifteen of which were
made out to the order of Lewis Nixon, and through the latter, as
holder of the options under Young's power of attorney, it is said
the checks were delivered to the owners of the constituent com-
panies. Besides this cash the vendors, of whom Mr. Nixon was one,
were supposed to receive $4,050,000 in bonds and $4,000,000 in
each kind of stock.
The great Shipbuilding Company was now an accomplished
2 66 The Annals of the American Academy
fact with the exception of taking over the Bethlehem; but the
structure was built upon a dangerous foundation, likely to give way
at any time. The weaknesses were the extravagant values placed
upon the shipyards and the French underwriting.
The Bethlehem transfer, which was performed on August 12th,
though of vast importance, was very simple. Mr. Nixon and Mr.
Dresser met the various parties in interest in the office of J. P.
Morgan & Co., and there received the stock of the Bethlehem Steel
Company, paying for it with Mr. Schwab's check for $7,246,871.48,
and passing over $10,000,000 collateral mortgage bonds, $10,000,000
of preferred stock and $10,000,000 of common stock, of which
$2,500,000 of each kind of stock was delivered to J. P. Morgan & Co.
as syndicate managers. It remained only for the new holders of
the Bethlehem stock to deposit it with the New York Security and
Trust Company as security for the collateral mortgage. This they
did without delay.
It is not my intention to follow the fortunes of the United
States Shipbuilding Company to their conclusion. It is clear, how-
ever, from the disclosure of the facts, that, with the exception of
the Bethlehem Steel Company, the Union Works and the Hyde
Windlass Company, the constituent companies were indebted
far beyond their ability to pay, and the new trust was without the
earning capacity to meet the heavy fixed charges fastened upon it
by the promoters' issue of $16,000,000 of bonds. The subsequent
failure and fall of the company was inevitable, no matter who was
in charge of its affairs or how efficient its management.
Mr. Schwab and Mr. Pam have been repeatedly charged with
wrecking the United States Shipbuilding Company. I have devoted
many weeks to the examination of the evidence, documents and
facts in connection with the entire matter, and have thoroughly
informed myself from all available sources of information with
reference thereto. From the evidence at hand it appears that
neither Mr. Schwab nor Mr. Pam had any connection with pro-
moting, organizing or financing the Shipbuilding enterprise nor
with the various transactions in connection therewith. Whether
the criticism of Mr. Schwab, in securing for himself so large a con-
sideration for the Bethlehem Steel Company stock is justified
(considering that he is the only one who received no cash for his
Relation of Trust Companies to Industrial Combinations 267
property, having received his entire pay in securities) is not for
me to say. Nor is it within my province to comment on the criti-
cism and complaint made against his counsel, Mr. Pam, for his
faithfulness in protecting his client's interests in the preparation
of the contract and mortgage. It was Mr. Pam's effort to safeguard
and protect his client's interests against any unforeseen contin-
gencies. Whatever may be the facts pertaining to the safeguarding
of Mr. Schwab's interests, the conclusion is inevitable that it was
not to this, but rather to the financial transactions which occurred
prior to his contract with the Shipbuilding Company that its down-
fall must be traced.
While I shall not follow the United States Shipbuilding Com-
pany any further, having told now in outline the story of how it
was established, it is well to continue with the Trust Company of
the Republic until the final effect of its operations has been shown.
The parties in interest must have fairly groaned with relief when the
properties were paid for, although the methods by which they
accomplished this reminds one rather of the shiftless Micawber
than of any other person or thing in fiction or in history.
It must also be borne in mind that this transaction was all
completed in a short space of time and during the months of July
and August of the summer of 1902, when there were few if any meet-
ings of the Board of Directors of the Trust Company of the Republic.
The transactions were not entered upon the minute-book of either
the Executive Committee or the Board of Directors.
The troubles of the unfortunate Trust Company of the Republic
were just beginning. The French underwriting produced not a
dollar. Dresser's ambition to organize a gigantic trust had been
satisfied, but in the process the capital, surplus and deposits of the
Trust Company of the Republic had been nearly wiped out and it
was in an exceedingly precarious position. Only immense success
on the part of the creature it had made could save it from the fate
of Frankenstein. It had gambled on the result of the French under-
writing and had lost. Although the great Shipbuilding Company
had been launched and the required $1,500,000 of working capital
had been credited to the United States Shipbuilding Company
on the books of the Trust Company of the Republic as of August
12th, the funds therefor were lacking to meet its drafts. It became
3
268 The Annals of the American Academy
necessary to provide that amount. Armed with guaranties signed
by Dresser in the name of the Trust Company of the Republic and
a vast amount of Shipbuilding securities, Mr. Nixon and Mr. Dresser
borrowed, on August 30 and September 4 and 5, 1902, $1,500
from New York banks on their notes, secured in what had no
become the usual manner.
The returns from the American underwriters and subscribers
were applied to the reduction of the obligations of Mr. Nixon and
Mr. Dresser. They brought the total in which they were indebted
to the Trust Company of the Republic down to $3,279,909, to repay
which they had nothing more substantial in sight than the French
underwriting. This amount was afterwards reduced to $982,334.10.
At this point the bank examiner visited the Trust Company of
the Republic. Its difficulties were not a matter of general knowl-
edge, and it was esteemed a most prosperous institution. Its ware-
house business in the South was growing at a phenomenal rate, the
newspapers were filled with tales of its progress and its brilliant
prospects in an almost virgin field. But when the State Bank
Examiner finished his inspection the world was informed of the
almost inextricable tangle it had got into through its connection
with the Shipbuilding Trust, and its stock dropped to below par.
At this critical juncture a syndicate, which became known
as the Sheldon Syndicate, was formed to take over the financial
obligations of the Trust Company of the Republic, accepting in
payment therefor securities of the Shipbuilding Trust. The Syndi-
cate did take over these obligations and thus relieve in part the
situation. Even then, had the Shipbuilding Company been estab-
lished upon a sound basis, or had it even acquired properties which,
exclusive of the Bethlehem, and the two others mentioned, were
sound and self-supporting, the Trust Company of the Republic
would have won its way clear financially. But since the Ship-
building Company was itself insolvent and a failure, it was not
possible for the Trust Company of the Republic to realize on the
securities which it held of the combination and thus replace the
large amount in which it was involved. Its reputation, too, had
been sacrificed. It was reorganized under a new name and is
to-day only a memory, and its history only a contention in the
courts.
Relation of Trust Companies to Industrial Combinations 269
It is not to be assumed that I have covered the whole question
of the relation of the trust company to the industrial combination ;
nor even the whole question as to the relation of these two trust
companies to the Shipbuilding Corporation. On the contrary,
I have carefully avoided discussion of certain topics which may be
the subject of litigation, and I have touched only so far as was
necessary to fill out the lines of my view of the situation upon
matters pertaining thereto which are in doubt and which may be the
subject of litigation.
The tendency of financial institutions — known in our State
as ' 'moneyed corporations " — is to affiliate too closely with industrial
propositions, the ultimate outcome of which cannot be adequately
determined from the showings made by promoters and others inter-
ested in their flotation.
There is a side of the picture which is less unpleasant than
the side which I have turned to you. It is that the lesson which
has been taught by the organization of the Shipbuilding Company
had a wholesome effect upon Wall Street and other financial insti-
tutions. It is, too, that because the present Superintendent of
Banks in the State of New York ably supervised the adjustment
of the intricate details, so far as his jurisdiction was concerned,
no financial panic resulted from a disclosure of the condition into
which the Trust Company of the Republic had been led by its Presi-
dent.
I have no time to draw a parallel, but I think that those who
are familiar with the history of similar undertakings in England
and Scotland will admit that they show a more dangerous affiliation
in those countries between financial institutions and industrial pro-
motions. Across the water many men in high financial position
acted as directors of flotations which were similar to this one, but
which had really a less stable foundation. Many financial institu-
tions not only fathered industrial propositions which failed to
turn out as expected, but they endorsed them. The result was
that in England, after a collapse, financial institution after financial
institution closed its doors and a panic resulted.
From the standpoint of a single individual I believe that I
have portrayed the final example of an undertaking of the kind
which I have been describing. To-day, as a consequence of the
270 The Annals of the American Academy
lesson which has been learned by the false establishment of the
United States Shipbuilding Company, our financial leaders and our
financial institutions are gradually withdrawing from affiliations
with industrial combinations, and each one is assuming its true
position.
The reader will agree with me that the institution and the
industrial combination are of value, each in its place, but a close
partnership between the two is dangerous, inasmuch as the financial
institution and the industrial combination must necessarily stand
upon a different footing in their relations to the public. The salve
in the situation is that the general public did not become a partici-
pator in the flotation of which I have been speaking, and did not
invest largely in the securities of the Shipbuilding Company.
The result has been unfortunate for those who did become
investors, but the heaviest loss fell upon men who were in a financial
position to stand it: namely, the underwriters, who entered for
profit and who expected large returns with but little responsibility.
Even as concerns the Trust Company of the Republic it is a
subject for congratulation that by the wiser subsequent manage-
ment which undertbok its reorganization, its financial credit has
been sustained and as a consequence of the assistance rendered
by the men who formed the ' 'Sheldon Syndicate," who can well
afford the loss, it is in a position to continue business as an institution
of integrity.
Appendix
(270
REPORT OF THE ANNUAL MEETING COMMITTEE
EIGHTH ANNUAL MEETING
OF THE
American Academy of Political and
Social Science
Philadelphia, April 8 and p, 1904..
In choosing "The Government in its Relation to Industry"
as the general topic of the Eighth Annual Meeting your Committee
was desirous of focusing the attention of the members of the Academy
upon certain of those questions of government regulation now
in the forefront of public discussion. To this end the relations of
our governments to banking and trust companies, to the expan-
sion of foreign trade, to the restriction of immigration, and to
the control of large industrial and commercial corporations or
trusts were chosen as the subjects of the four sessions of the Annual
Meeting. Your Committee desires to express its appreciation of
the courtesies extended to members and visitors at the Annual
Meeting by the Provost of the University of Pennsylvania, the
officers of the Manufacturers' Club, the Union League, and the
Philadelphia Commercial Museums. As in former years, the ex-
penses of the meeting have been defrayed principally from a special
fund contributed by friends of the Academy. The generous sup-
port received from these sources has enabled the officers of the
Academy to enlarge the scope of the meeting and to give to the
printed Proceedings a correspondingly broader circulation. The
thanks of the members of the Academy is due to these friends
[ of the organization who have made possible the extension of its pub-
lic usefulness.
(273)
274 The Annals of the American Academy
SESSION OF FRIDAY AFTERNOON, APRIL 8TH.
The Presiding Officer, Honorable Frank A. Vanderlip, of New
York City, introduced Joseph Wharton, Sc. D., Chairman of the
Local Reception Committee. In welcoming the members and
visitors to the annual meeting Mr. Wharton spoke as follows :
Mr. Chairman, Members and Guests of the Academy of Political and
Social Science.
As the years pass by it becomes more and more evident that not
only is there room in the United States for such an institution as this
Academy, but that in fact the information and the ideals which it
can disseminate are urgently needed by the people of this nation.
The world is growing to appreciate more and more the predominating
part which national and personal economy play in the great events
which constitute the history of a race or nation.
When our minds are withdrawn from the contemplation of some
hero or statesman who seems to have molded the community in
which he dwelt, we often find that he was little more than the figure-
head, or mouthpiece, of the great mass of undistinguished persons
who had reached upon one or more points, convictions so clear and
urgent that they were ready to take shape as irresistible forces, so
soon as a competent leader arose to make them effective.
It is obvious, for instance, that commercial independence and in-
dustrial independence were more the underlying aims of our Amer-
ican Revolution than the mere political severing of the ties binding
this country to the British throne.
Every reader of American history very well knows that resistance
to taxation without representation, of which the Stamp Act was
a conspicuous feature, the Non-Importation Resolutions of Ameri-
can merchants, the destruction of tea in Boston Harbor and the send-
ing back of cargoes of tea from this port and New York were im-
portant factors leading to the Declaration of Independence, yet
we are rather too much inclined to let our attention be drawn
away from these underlying causes by our interest in the actual
combat, and our admiration for the brilliant characters of the great
men who became the nation's leaders.
Another instance of great historic changes resulting from some-
what obscure causes is the revolt of the peoples of Northern Europe
Appendix 275
from the domination of the Roman Catholic Church, which was also
due in a large measure to economic causes ; namely, the exactions of
the Roman hierarchy in draining money from those countries for
its support and for its enterprises ; among them the building of the
great Cathedral of St. Peter in Rome. We have heard in a general
way of the begging friars who went up and down through Europe
taking toll from the inhabitants, and we have heard of the sale of
indulgences by the monk Tetzel and others, but these things have
perhaps never been so clearly set forth as factors in the Reformation
as in the recent statement by our distinguished fellow citizen, Mr.
Henry C. Lea, in his contribution to "The Cambridge Modern
History, " edited by Lord Acton, in which he describes the condition
of Europe before the Reformation, and the causes leading to that
Reformation. Mr. Lea emphasizes the important, if not the prin-
cipal, part which these money exactions played toward bringing
men's minds to the point of declaring their independence from the
domination of Rome; a matter evidently quite apart from any
question of religion.
After giving all allowance to the brave spirit of Martin Luther,
it cannot be denied that he entered upon a field already ripe unto the
harvest, so that his great work was practicable as otherwise it could
not have been.
When an earthquake carries destruction over a great territory,
destroying many lives and changing the face of nature, that disrup-
tion and that overturning do not result from some cause born at
the moment, but the shock is the result of causes which have been
quietly operating for years, centuries, or for long ages ; such as the
contraction of the earth's crust by loss of heat, or the shifting of
enormous masses of earth from the various affluents of a great river
to the delta at its mouth — either of these causes producing new
strains gradually increasing to the point of rupture.
This Academy naturally turns a part of its attention to such
enduring and unobtrusive social forces.
Another proper subject for the consideration of the Academy is,
I think, the enormous waste and destruction of the several funds pro-
vided by nature as for the special use of man, such as the timber
forests of a country, its supplies of coal, mineral oil, or iron ore and
similar resources. The waste of forests might seem not fairly com-
2 -6 The Annals oj the American Academy
parable to the waste of minerals which do not grow and when ex-
hausted can never be replaced, but, although other trees may grow-
to replace those which are destroyed, new forests do not, in fact, appear
except in a very moderate degree. Destruction not merely con-
sumes the fund of utility possessed by the timber itself, but by alter-
ing climatic conditions makes unproductive and almost uninhabitable
great regions which originally were well watered and fertile.
Our forests have been most wastefully destroyed and are still
so being destroyed. In our Southern Atlantic States, for instance,
vast regions of pine forest are now being denuded, principally for
the comparatively small fund of turpentine which they can be made
to yield, but partly to clear up the ground for cultivation, which
latter is largely shiftless and destructive to the elements of fertility
which the soil contains. The timber in these cases is wasted by
burning, because it is just now too far from easy transportation to
compete with that which lies a little nearer.
The exhaustion of coal and iron ores now going on in Great Brit
ain, giving to that country a temporary power to draw wealth from
those lands to which its manufactures are exported, is an instance
of another sort of waste, which must result before long in the dis
tinct lowering of Great Britain's place among the nations. Hasty
legislation cannot be expected to prevent waste of our own enormous
natural resources, but a wholesome public sentiment must be created
which will lead to abhorrence of the waste and ultimately to suet
prudent legislation as may diminish it. I shall not attempt to in
dicate all the various lines of action or education in which this Acad
emy may be useful, but shall conclude by offering to those member;
and guests of the Academy, who do us the honor to come here from
their various homes, a cordial welcome to Philadelphia. We hope
that they may find their stay here both profitable and pleasant
The Presiding Officer announced as the general topic of the
afternoon session, "Government Regulation of Banks and Trust
Companies." The first address, on "Government Control of Banks
and Trust Companies," was delivered by Honorable William Barret
Ridgely, Comptroller of the Currency, Washington, D. C. Mr.(
Ridgely's address will be found on pages 15-26.
The second address on, "Control and Supervision of Trust
Appendix 277
Companies," by Honorable Frederick D. Kilburn, State Super-
intendent of Banks, Albany, N. Y., will be found on pages 27-42.
The fourth address, on "Financial Reports of the National
Banks as a Means of Public Control," by Professor Frederick A.
Cleveland, New York University, will be found on pages 43-66.
SESSION OF FRIDAY EVENING, APRIL 8TH
The session of Friday evening, April 8th, was presided over by
Dr. Charles Custis Harrison, Provost of the University of Penn-
sylvania. Dr. Harrison introduced the President of the Academy,
Professor L,. S. Rowe, of the University of Pennsylvania, who pre-
sented a review of the work for the year 1903-04.
Dr. Rowe spoke as follows :
This year marks the fifteenth anniversary of the founding of
the Academy — a period presenting an unbroken record of activity
and broadening influence. Through the combined efforts of our
members in all sections of the country, the Academy has acquired
an educational influence, national in scope, and contributing in no
small measure towards the development of an enlightened public
opinion.
At no time in our history has the country stood in greater
need of such educational agencies. With each year industrial,
social and political problems are becoming more complex and with
this increasing complexity the dangers involved in attempts at
hasty and ill-advised solutions are increased. Throughout the long
period of heated and, at times, acrimonious discussion that has
marked the development of American public policy during the
last fifteen years, the Academy has held itself free from all entangle-
ments and has constantly labored for the frankest discussion at its
meetings and for the fullest presentation of facts in its publications.
During the year that has elapsed since our last annual meeting,
we have published six special volumes covering the following sub-
jects :
1903, May — Problems in Charities and Correction.
July — The United States and Latin America.
September — Southern Educational Problems.
" November — Business Management.
1904, January — Tariff Problems — British and American.
" March — Municipal Problems.
Note. — The third address on "The Relation of Trust Companies to Industrial Combina-
tions, as Illustrated by the United States Shipbuilding Company," was delivered by L.Walter
Sammis, Esq., Associate Editor, New York Sun. This address will be found on pp. 239-268.
278 The Annals of the American Academy
Each of these volumes contains a well co-ordinated mass of
scientific material on one of the great problems confronting the
American people. By means of these publications the members
of the Academy have been able to secure trustworthy information
on questions affecting the vital interests of the country and have
thus been in a better position to perform their duties as citizens.
The influence of these publications has not been confined to
our members. The public press has made liberal use of the material
gathered under the auspices of the Academy and has assisted in
broadening the influence of our publication work. We, of the
East, do not fully appreciate the position which the Academy has
assumed in the Far West. A considerable number of clubs and
reading centers depend upon the publications of the Academy for
the material with which to conduct their inquiries and discussions.
This phase of our educational work has been growing so rapidly
that the time is now ripe for the creation of a special bureau of
research and information, which will not only furnish guidance for
special investigations, but will also bring members into closer touch
with one another. One of the greatest services which the Academy
can perform will be to co-ordinate the effort that is being put forth
by our members in the study of industrial and political questions.
With every section of the country fully represented in our member-
ship, the Academy is in a position clearly to mirror the intelligent
opinion of the American people as well as to present the results of
the most advanced research.
In spite of this increasing influence, the Academy has hardly
begun to utilize its possibilities of usefulness. In a great democracy
such as ours a national organization which will maintain the highest
ideals of truth and sincerity possesses unlimited possibilities for
good. To realize these possibilities, however, each member must
feel a keen sense of the responsibilities involved and a willingness
to co-operate with his fellow members in developing the work and
extending the influence of the Academy. The plea that I wish to
make this year is for the further development of this spirit of co-
operation. With it the Academy's educational influence will advance
from year to year until every section of the country will profit by
the research and investigation conducted under your auspices.
The Presiding Officer, Dr. Charles Custis Harrison, then intro-
Appendix 279
duced the speaker of the evening, Honorable George Bruce
Cortelyou, Secretary of the Department of Commerce and Labor,
Washington, D. C.
Dr. Harrison spoke as follows:
"The growth of the United States of America is much more
striking to all of us than is the development of the machinery of
Government. In fact, the slow processes under which new Depart-
ments have been created to meet new needs are curious in the
extreme."
After stating the rise and history of the several Departments of
the Government, Provost Harrison concluded as follows :
"For many years duties have been assigned to these several
Administrative or Executive Departments which have been wholly
incongruous and unrelated to their proper functions ; and for many
years, too, as we all know, the development of the manufacturing
interests of the country, and the mining interests of the country, has
been so great as to force upon the attention of Congress the estab-
lishment of a Department in recognition of our national develop-
ment upon these lines; and so, in 1902, the Department of Commerce
— or, as it is now called, the Department of Commerce and Labor —
was established. No one who has not read the Act can at all under-
stand the multiform and multitudinous duties which devolve upon
the Chief of this Department. When Oliver Wendell Holmes was
a Professor at Harvard, he had so many subjects to teach that he
called his Chair at Harvard a 'Settee!' And I think that Mr.
Cortelyou may call his Chair in the Cabinet a Settee !
"Of course, all of us feel a peculiar interest in Mr. Cortelyou,
entirely apart from the duties of his new and high office — an inter-
est which has grown out of his affection for and intimacy with our
late and much beloved President, William McKinley; for Mr. Cor-
telyou bore very much the same relation to Mr. McKinley as Mr.
Nicolay and Mr. Hay bore to Mr. Lincoln, and it is an episode not
to be overlooked that these two men, holding very much the same
relations to two of our great Presidents, should find themselves
together in the present Cabinet.
"We do not intend, to-night, to trouble Mr. Cortelyou with telling
us of all the duties of his office. He can leave the Settee and take
the 'Chair of Commerce/ and we shall be glad to hear from him
280 The Annals of the American Academy
upon the subject upon which he has consented to speak to us— that
is to say, of 'Some Agencies by which the Domestic and Foreign
Trade of the United States may be Increased.'
"Ladies and gentlemen, I have very great pleasure in present-
ing to you the Honorable George B. Cortelyou, a member of the
Cabinet, and Secretary of Commerce and Labor."
Secretary Cortelyou then delivered the annual address on "Some
Agencies for the Extension of our Domestic and Foreign Trade."
This address is printed on pages 1-12 of this volume.
At the close of Mr. Cortelyou's address the President of the
Academy said :
"Before the adjournment of this meeting I wish to express to
the Secretary of Commerce and Labor the sincere appreciation of
the Academy for his admirable address. Called to one of the highest
positions in the administration of our National Government, he has
shown a breadth of view combined with an executive capacity which
has aroused the admiration and inspired the confidence of the busi-
ness community throughout the United States. It will be the privi-
lege of the historian a hundred years hence fully to describe the
difficulties that had to be overcome in the establishment of this
great new Department and to gauge at their true value the courage
and tact that were required to assure to this Department its full
measure of usefulness. We stand so close to the formative period
of this Department that we cannot appreciate in all its bearings the
great edifice which is being reared by the Secretary of Commerce and
Labor. But the results already accomplished are sufficient to
enable us, in welcoming the speaker of the evening, to pay tribute
to the zeal, energy, faithfulness, devotion and the ability with which
the new work has been undertaken."
SESSION OF SATURDAY AFTERNOON, APRIL 9TH.
The Presiding Officer, Honorable Samuel McCune Lindsay,
Commissioner of Education, Porto Rico, announced as the general
topic of the afternoon session, "The Immigration Problem," and
introduced the first speaker, Honorable Frank Pierce Sargent,
Commissioner-General of Immigration, Washington, D. C. The
address of Commissioner Sargent, on "Problems of Immigration,"
will be found on pages 151 158.
Appendix 281
The second address on "The Problem of Assimilation,'' was
delivered by Franklin H. Giddings, LL. D., Professor of Sociology,
Columbia University, New York City. A summary of Professor
Giddings' remarks follows:
In popular discussions of the effects of immigration upon the
characteristics of the American people the word assimilation is
used for two distinct but related phenomena: one, a gradual con-
version of the mind and conduct of the immigrant to American
standards, an approximation to an American type; the other an
admixture through intermarriage of the immigrant blood w ith that
of the native-born population. The commingling of bloods is
the process of amalgamation. The modification of mind and con-
duct through initiation and education is the process of assimilation.
In the present paper I shall examine the known facts relating to
both assimilation and amalgamation as they are taking place in
the United States to-day.
There never has been a time since immigration to the United
States began on a large scale in 1820 when it has not been opposed
by an influential class or party of the native born, which has tried
to secure the enactment of restrictive legislation. This effort
assumed formidable proportions in the Know-nothing movement
of 1854. It barred out Chinese laborers in 1892, and now it is at-
tempting to restrict the incoming of the peoples of Southern and
Eastern Europe, admittedly more unlike the older American stock
than were the Irish and German immigrants of former years. How
far a restrictive policy is expedient can be determined only by a
study of assimilation and of amalgamation, as these processes are
statistically known, in the light of the past experience of the human
race, which from the earliest times has been undergoing continual
modification through the meeting of minds and the commingling
of bloods.
These statistical facts and the lessons of history are plain to
those who will read them without prejudice. Twenty-one millions
of foreign-born persons have come to the United States since
1820, and yet to-day on the mainland of the United States only
1,403,212 persons are unable to speak the English language. Within
the same area there are only 3,200,746 whites unable to read or
write and of these 1,913,611 are native born. Few sober-minded
282 The Annals of the American Academy
students would venture to affirm that American standards of living,
or American legal and political institutions have as yet undergone
any considerable change for better or for worse in consequence of
the presence here of the immigration that arrived before the year
1890. Assimilation has been astonishingly complete, and the pessi-
mistic predictions of the Know-nothings have not been verified.
Amalgamation proceeds slowly, and statistics of the inter-
marriages of native and foreign born, or of different nationalities
of the foreign born, do not adequately represent it. We have no
way of knowing how rapidly it proceeds among the children and
grandchildren of immigrants when all distinctions of European
nationality have been lost. The only question we can raise is:
When admixture of the stocks now resident here has been accom-
plished what will the resulting population be like? This question
can be answered with a high degree of certainty. In the entire
United States 53 per cent, of the foreign born are of English and
Teutonic stocks and 21 per cent, are of Celtic stocks. Practically
75 per cent, of our foreign born are of English, Teutonic and Celtic
stocks. This is the fact that is made significant by history. The
English people, and its offspring, the American people of English
descent, are a product of the blending of Teutonic with Celtic bloods
during the first ten centuries of the Christian era. Unless the in-
flow of Latin and Slavic peoples into the United States from this time
forth should be out of all proportion to any phenomenon of immi-
gration yet seen in the world's history, the American people must
remain what it has thus far been, essentially English in blood,
mental qualities, character and institutions.
Admitting that many of our immigrants now are physically
and mentally inferior, our practical problem is to exclude undesirable
persons without barring any nationality as such. This conclusion
applies only to immigration of the white race. Dilution of the Ameri-
can blood by other color races, as for example, the Chinese, is highly
undesirable, and should not be contemplated.
The third address, on "Immigration in its Relation to Pauper-
ism," by Miss Kate Holla day Claghorn, of the Tenement House
Department, New York City, will be found on pages 185-205.
"The Diffusion of Immigration" was discussed by Eliot Norton,
Appendix 283
Esq., oi New York City. Mr. Norton's address is published on
pages 159-165.
Miss Anna Freeman Davies arid Mr. Frank Julian Warne, of
Philadelphia, then took up the discussion of the general problem
from the standpoint of social work and of the racial problems in-
volved.
SESSION OF SATURDAY EVENING, APRIL QTH.
The Presiding Officer, Joseph G. Rosengarten, Esq., of Phila-
delphia, announced as the general topic of the session, "The Scope
and Limits of Federal Anti-Trust Legislation." In opening the
session Mr. Rosengarten spoke as follows:
"The Academy is fortunate in having as its guests this evening
three gentlemen who have played an important part both in the
development of corporate enterprise and in the solution of the
corporate problems of recent years. Mr. James B. Dill, by reason
of his familiarity with and active participation in the formation of
many large and important corporate undertakings, is particularly
well equipped to express views on Government regulation from the
standpoint of the corporation itself. Mr. Charlton T. Lewis, through
his long and varied practice in corporation law and from the many
social and public-spirited organizations with which he has been con-
nected, is also peculiarly fitted to discuss this question from the
standpoint of the corporation and the public at large ; while the first
speaker of the evening, the Honorable James M. Beck, former
Assistant Attorney-General of the United States, has been actively
instrumental in determining the legal relations of the National Gov-
ernment with large commercial companies, and in the execution of
the anti-trust laws of the United States. Mr. Beck needs no intro-
duction to a Philadelphia audience, as he has for years been, and we
shall always consider him to be, a Philadelphian. To each and all
of them I can promise your careful attention, and to you the instruc-
tion that always follows a close logical discussion by experts able,
earnest and capax rerum."
Honorable James M. Beck, Assistant Attorney-General of the
United States, 1902- 1903, delivered the first address, on "The
Federal Power over Trusts, " which will be found on pages 87-110.
284 The Annals of the American Academy
James B. Dill, Esq., of New York City, discussed Mr. Beck
paper, pointing out the negative and conflicting character of th
present legislation.1
An address on "The Scope and Limits of Congressional Legis
lation Against the Trusts," by Charlton T. Lewis^ LL.D., then fol
lowed. Mr. Lewis' address will be found on pages 111-122.
1 The Editors regret that, by reason of the serious and protracted illness of a membi
of Mr. Dill's family, he has been prevented from preparing his address for publication.
THE ANNALS
AMERICAN ACADEMY
POLITICAL AND SOCIAL SCIENCE
ISSUED BI-MONTHLY
VOL. XXIV, No. 2
SEPTEMBER 1904
Editor: EMORY R. JOHNSON
associate editors: SAMUEL McCUNE LINDSAY, JAMES T. YOUNG
PHILADELPHIA
American Academy of Political and Social Science
1904
Copyriget, 1904, by the American Academy of Political and Social Science
All rights reserved.
ARBITRATION OF INDUSTRIAL DISPUTES
The idea of arbitration contemplates that parties who are unable
to agree upon any point or points at issue between them shall
submit the disputed point or points to the decision of a person
or a tribunal mutually agreed upon. Conferences and negotiations
between employers and employees, or intervention in the form of
conciliation or mediation, are sometimes erroneously spoken of as
arbitration. At times, some one person, in whom both have con-
fidence, is selected as sole arbitrator, but the custom usually adopted
in industrial circles is for each of the contestants to name one or
more and if an umpire's services are necessary, or stipulated, have
the ones thus chosen select such umpire.
It is believed by some who have given the subject much thought
that unless an acceptable adjustment can be reached by a board
consisting of an equal number of representatives from each side,
and without an umpire, the conference had better fail. The dis-
position to charge disloyalty, or worse, to the representative who
agrees with the other side, and the improbability of one who would
do so being named by either side as a direct representative of its
interests and contentions, would probably, in most cases, prevent
arbitration, or at least render any definite adjustment through
it impossible. If the idea that it is better to have a board equally
chosen and no umpire is to be accepted, it clearly follows that
both sides must select representatives or arbitrators who are en-
tirely outside the sphere of influence of either of the contestants;
men of undoubted judicial temperament and natures. The great
difficulty which would then present itself would be the lack of prac-
tical or technical knowledge of the subjects in hand on part of
the arbitrators. It seems, therefore, that the plan of trying to agree
without an umpire and of choosing an umpire if such an agreement
cannot be reached promises the best results. The decision of the
arbitrators is accepted in advance as final and binding. It
necessarily follows that, in order for arbitration to be effective,
the parties in controversy who so submit their differences shall
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act in perfect good faith, both in presentation of their claims and
in acceptance of the award.
In order that arbitrators may know exactly the points upon
which they are to find an award, and that the disappointed party
mav have no opportunity to contend that there was lack of under-
standing, or, that if understandings had been different the award
would have been in his favor instead of against him, it is desirable
and proper that the submission shall stipulate clearly the point or
points to be decided.
A tendency on both sides to permit sentiment to outweigh
cold common sense has often blocked the way to satisfactory settle-
ments. Insistence by the workers on some point of imaginary
importance and unwillingness on the part of the employer to recog-
nize the workers in their collective capacity have brought on serious
conflicts in many cases which otherwise might easily have been
settled by arbitration.
Some employers have seemingly undertaken to put their
employees in a wrong light by insisting that their endorsement of
the principle of arbitration committed them to the acceptance
of a proposition to arbitrate "any points that may arise." Hu-
manity possesses certain rights which have been emphatically
declared to be inalienable and so, both employers and laborers
and labor unions have principles which are not arbitrable. An
employer would not arbitrate his right to manage his business
and a labor union would not arbitrate the question of the right of
its members to belong to the union or of the union to assist and
represent its members.
Doubtless, in many cases, employers have refused arbitration
because of their utter unwillingness to disclose facts with regard
to their business which the arbitration would be likely to bring
out and probably, in other instances, because they preferred that
concessions should be granted through decision of arbitrators
rather than by their voluntary act, have carried points to arbitra-
tion upon which they felt satisfied the decision would be against
them.
Necessarily, the questions affecting only the employment of
the individual or a group of individuals in a certain industry are
simple as compared with the complex questions involved in the
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Arbitration of Industrial Disputes 3
conduct of the business of a large industry in a competitive field,
and it is not improbable that these differences account in some
measure for the fact that the workers are so much more ready
to submit to arbitration than are the employers. The problem of
equitable wages and working conditions cannot be settled on the
one basis of supply and demand as can the sale and purchase of pro-
duce or manufactures. The wage question involves a human
equation which must not be ignored by those who would fairly and
justly decide it.
The benefits of arbitration to organized labor have been many
and great. It would be impossible to undertake here a recital of
the instances in which controversies between employers and em-
ployees have been submitted to arbitration and in which the con-
tention of the employees has been upheld in whole or in a major
part.1 Such instances are innumerable and it may safely be said
that in practically every instance where disputes over wages or
hours or conditions of labor have been submitted to arbitiation,
the award has been, in its greater part at least, favorable to the
employees.
These benefits come, in fact, to organized labor because where
there are no labor organizations there is no arbitration of such
disputes. The whole history of organization in the ranks of labor
shows that practically every labor organization that has ever existed
has, at some time in its history, and usually in its younger days,
been bitterly opposed by the employers of those who form the union.
It does not seem that it should be so but it is a fact that every
one of the strongest and most influential of the labor unions of this
day, including those that are pointed at now most frequently and
with most pride as conservative and businesslike institutions, have,
in their day and turn, been obliged to fight for recognition and the
right to an unmolested existence.
Recognition of the union does not necessarily mean acceptance
of the closed shop principle or any other principle as far reaching
or similar in its effect. Recognition as here spoken of means rec-
ognition of the right of a union to negotiate through its chosen
representatives with employers of its members regarding terms
v\Much detailed information as to arbitration 'in this and other countries is given in Vol.
A.VII of the report of the Industrial Commission of 1900. Some thirty different trades in
America are reported on.
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4 The Annals of the American Academy
and conditions of employment for its members when it actually
and fairly represents a clear majority of those for whom it seeks
to legislate.
This principle has been recognized by the United States Congress
in "An Act Concerning Carriers Engaged in Interstate Commerce
and their Employees," approved June i, 1898, which provides
for arbitration between the organization or organizations repre-
senting the affected employees and the employing company and
stipulates that the commissioner, whose duty it is to undertake to
secure arbitration when conciliation and mediation have failed,
shall decline to call a meeting of arbitrators under an agreement
between the employing company and its employees individually
instead of as represented by a labor organization "unless it be shown
to his satisfaction that the employees signing the submission repre-
sent or include a majority of all employees, in the service of the
same employer and of the same grade and class and that an award
pursuant to said submission can justly be regarded as binding upon
all such employees."
The theory or principle of arbitration had its origin in a desire
to find a more rational and civilized method of adjusting differences
than by the exercise of physical strength in a strike or lockout,
and it is a significant fact that the principle has had much more
support and encouragement from working people than from em-
ployers. Thinking men in labor circles realize that labor unions
have made many mistakes and are at all times liable to make mis-
takes. Disaster and suffering and loss have come through ill-
advised strikes, and, realizing the possibility of error, but still
convinced that their contentions are right, laboring men generally
are found willing to submit such contentions to arbitration, believing
that in so far as they are right they will be sustained, and preferring
that if they are, in part or in whole, in error it should be demon-
strated in a peaceable way rather than otherwise.
The spread of this sentiment among working people has had a
strongly ennobling influence. It teaches more consideration for
the rights of others; it inspires an inclination to study more care-
fully the ethics involved and tends to a more businesslike disposi-
tion. This is proven by the fact that the spirit of toleration,
consideration and arbitration prevails more generally and in a
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Arbitration of Industrial Disputes 5
greater degree in the older and more experienced labor unions than
in the new and inexperienced ones. The principle of arbitration
involves elevating sentiments, and when entertained, is calculated
to bring out the better elements of human nature. It is the essence
of doing unto others that which we would have those others do
unto us. It is an unadulterated desire to be, and to do, right
and to uphold simple justice.
And so the benefits which arbitration have brought to organized
labor have been perhaps as great in moral effect as in material
and tangible advantages awarded by arbitrators. Organized
labor must succeed ; and it must succeed through adopting, following
and upholding principles which are morally and economically
right and sound. No extremist has ever held for long the confi-
dences of the people generally. Extreme ideas and measures
are not lasting either in themselves or in their effect. Extremists
are not those who would naturally or probably be selected as arbi-
trators and hence, the more arbitration is indulged in, the wider
will be the spread of the judicial spirit of perfect fairness which
appeals to, and is admired by, nearly all mankind.
If arbitration had been subscribed to by the miners and mine
owners in the Cripple Creek District in Colorado we would now
find there a peaceful and contented community, in which employer
and employee were doing well in the pursuit of their business and
employment instead of the deplorable condition of anarchy which
obtains. Excesses and arbitrary methods on part of one side
have been rebelled against by those on the other side and, for-
getting that tyranny is tyranny, that wrong is wrong, that defiance
of law is defiance of law, that anarchy is anarchy just as much
when perpetrated by one as by another, the members of the Citi-
zens' Alliance, assisted by some State officials, have resorted to,
and adopted, the same extreme, radical and arbitrary methods
which they so strongly condemned in others. The Miners' Union
said that none but those bearing the working cards of the union
should work in the Portland Mine. The owners of the mine agreed
to that plan and all was going smoothly when the Citizens' Alliance,
assisted by the military, closed the mine and declared that no man
should work therein unless he withdrew from the union and pre-
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6 The Annals of the American Academy
sented a card from the Citizen's Alliance. It is difficult to discover
the difference in principle between the two.
The principle underlying arbitration is one of the great truths
which are everlasting and the good influences of which are ever at
work in a continually widening circle. The elevating and civilizing
impulses which have their origin in the doctrine of arbitration will
still continue to bring good to organized labor and to all mankind
even if the happy time shall come when there are no disputes to
be arbitrated.
A prominent and influential trades union incorporates in all
of its working agreements with its employers a provision that
any contention which may arise during the life of the agreement,
with regard to matters covered by that agreement, shall be referred
to a committee upon which the employers and the union have equal
representation and which is authorized to make a final award.
If the committee is unable to agree by a majority vote, the mem-
bers of it select a disinterested person as umpire and the award is
final and binding. The agreement also stipulates that pending
such arbitration of differences there shall be no strike or lockout
or suspension of work. The national secretary of that union,
writing on this subject, says:
"Experience has taught us that the method of adjustment of disputes by
adjustment committees has been of much good. The system has not only
brought employer and employee together to discuss the points, but as a result
of such meetings, a better feeling has been engendered and, in many cases,
employers and workmen follow a more rational course than they otherwise
might do because of the fact that their action might show them to be grievously
in error when reviewed by such a tribunal. Apart from the good thus derived,
it aids greatly in the settlement of any disputes to have workmen remain at
their employment pending consideration of the grievance and decision on same,
for, where men either go on strike before an effort of the kind is made at adjust-
ment, or if employers lock them out without following the process set forth
in these agreements, we find it much more difficult in nearly every case to satisfy
the aggrieved party about the strike or lockout than it is to adjust the original
grievance."
The national officer of another strong labor union says :
"On the matter of arbitration I wish to say that it is one of the principles
of our Association, even embodied in our constitution, to encourage arbitration
wherever possible, and in nearly all of our written agreements with the various
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Arbitration of Industrial Disputes 7
companies a clause providing for arbitration for settlement of disputes is em-
bodied. Our Association has been very successful in the matter of arbitration.
One of the influences of the arbitration clause in our agreements is to bring
about satisfactory mediation between the companies and our locals and it is
but seldom that questions are allowed to reach the arbitration stage. Appar-
ently, the company and the employees rather distrust the outcome of arbitration
and the provision stimulates conciliation and were the agreements not pro-
tected by the arbitration clause, I apprehend the questions at issue would
not receive serious and candid consideration that they now receive from both
parties. The results of arbitration, so far as our experience goes, are generally
beneficial, although at times the disappointed party feels that the other has
gained an advantage by the decision, but when the storm blows over and the
field is surveyed, the results are very satisfactory and serious conflicts are aborted
and generally avoided. The greatest number of our arbitration cases have grown
out of serious contentions where no provision existed between the parties for
such arbitration. For instance, there are but very few strikes that do not
ultimately reach some form of arbitration and which are not so decided and
even then the result is no better and possibly not so beneficial as it would have
been had the issue been arbitrated previous to the strike."
That the railroad brotherhoods believe in the adoption of
arbitration as a means of settling differences which are of an arbi-
trable nature is evidenced by the declarations of their international
conventions on the subject; by their strong and active efforts to
secure the enactment into law of the Federal statute hereinbefore
referred to and by the numerous instances in which they have sought
the good offices of arbitrators in practical ways. Their experiences
with arbitration have been satisfactory and encouraging.
The National Founders Association, organized some three
years since, now has 400 members, employing 30,000 men. Joint
conference with representatives of the Iron Molders Union was
sought for the purpose of laying the foundation for permanent
peace in the industry. The conference agreed upon a plan of arbi-
tration which was promptly ratified by both associations, and
which provided that there should be no strike or lockout until after
arbitration had failed to find an adjustment of the differences.
This agreement has proven most satisfactory and the arbitration
feature of it has been frequently called into operation with grati-
fying results. It has not served in every instance to avert friction
but in general it has done so and has operated to draw the em-
ployers and the employees in that industry much closer together
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8 The Annals of the American Academy
in relations of business confidence, out of which still greater
good must grow.
Recent expressions and acts on the part of some who are promi-
nent in employers' associations justify the conclusion that human
nature is human nature whether it be under overalls or white vest.
The Secretary of the Chicago Manufacturers' Association is quoted
recently as saying "Arbitration is a fraud of the rankest kind"
and "It was stricken from the principles of the Association after
a three months' trial." Such expressions are as intemperate,
extreme and inconsistent as the utterances of the veriest blath-
erskite under the guise of a labor leader.
Guy Warfield, in the World's Work for March, discusses
conditions among the anthracite coal miners of Pennsylvania since
the filing of the award of the Anthracite Coal Strike Commission.
He sums up his conclusions as follows :
1 . " The Board of Conciliation and Mediation has proved a greater advan-
tage to the coal companies than to the miners.
2. "The nine hour day is no shorter or more profitable than the ten-hour
day.
3. "The old difficulties which the arbitration board was supposed to
have removed still exist.
4. "Even with the ten per cent, wage advance and the sliding scale,
the average miner complains that he is no better off financially.
5. "Arbitration has not proved as successful as it was expected to be."
It is not worth while to discuss the statement that a nine-
hour day is no shorter than a ten-hour day, or that workers are
no better off after having received 12 or 15 per cent, wage advance.
What the Commission hoped for in the formation of the Board
of Conciliation and the requirement that disputes be settled through
and by it was that the coal operators and the coal miners, who had
drawn as far apart as it was possible for employers and employees
to get, would, through experience in this Board of Conciliation,
come to realize the desirability and importance of adopting con
ciliatory methods and, if necessary, arbitration, in the settlement
of disputes rather than the strike and lockout which have been so
freely resorted to in the past. If the Board of Conciliation has
proved a greater advantage to the companies than to the employees
no doubt it is because the contentions of the companies in the cases
[292]
Arbitration of Industrial Disputes 9
that have been brought to the Board were possessed of more merit
than were those of the opposing side. It was not to be expected
that all the bitterness and suspicions that had been engendered
through years of strife and warfare could be set aside within a few
months, and it is yet too soon to say that the experiences of three
years under the methods of conciliation and arbitration will not
in the end bear the fruit that was hoped for by those who made
the provision. The fact that this greatest of industrial struggles
was submitted to arbitration was one of the highest triumphs of
1 the principle and the most marked example of the final recogni-
tion of the rights of the affected public the world has ever seen.
Benefits far in excess of those which would have been willingly
! accepted by the miners at an earlier stage came to them through
i the award of the Commission. A national calamity was averted
and organized labor was lifted to a higher plane than it had before
occupied.
Much has been said and written about compulsory arbitration.
The term is paradoxical and self-contradictory. The true meaning
1 of arbitration is a quality of perfect fairness under which the con-
testants are willing and prepared to act in good faith. There is
no compulsion about it and when compulsion comes in, the true
spirit of arbitration must necessarily depart. Volumes have been,
and will be, written as to the advantages and disadvantages of
compulsory arbitration in New Zealand, but even if it be admitted
i for argument's sake that the practice is generally satisfactory
there, it by no means follows that it would be of advantage or that
1 it would fit in at all in this country where conditions, ideas and
1 ideals are so radically different from those in New Zealand. On
I the whole, compulsory arbitration may be said to have not been
i a shining success in the colonies where it has been tried. In free
America it is a glittering impossibility. The paternalism which
, the system necessarily exercises dwarfs rather than develops indi-
vidual character and initiative. It would not harmonize with the
progressive ideas of the Western Hemisphere. In New South
Wales, recently, two hundred miners refused to comply with the
award of the State Arbitration Court and an attempt to punish
I them utterly failed. A recent award made by the New South
Wales Arbitration Court stated that the award "contemplated"
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IO The Annals of the American Academy
a continuance of operation. It did not say that the employees
should remain at work or that the operators should keep the
industry going, but did say that while work continued it must
be under the terms of the award.
Many of the States of the Union have provided State Boards
of Mediation and Arbitration. In numerous instances such boards
have succeeded through mediation in materially relieving strained
situations and in some instances have averted serious conflicts.
Their duty is to offer their services and not infrequently peace
can be maintained through mediation of a third, disinterested party
when neither of the contestants would suggest a middle ground
upon which both could stand. The feeling seems to be that to
suggest a compromise would be a sign of weakness. There has,
however, never been much of a disposition to accept the State
Boards as arbitrators. Standing boards of official arbitrators
are not looked upon with favor, especially by the unionists.
There has been but little effort to give arbitrary or compulsory
power to such State Boards. In 1899 the State of Kansas enacted
a law for compulsory arbitration of disputes between railroad
companies and their employees, which provided that the railroad
might be placed in a receiver's hands if necessary to secure compli-
ance with the act. This law was promptly declared unconstitu-
tional and was never effective. A law, said to be a drastic measure,
and providing for compulsory arbitration of labor disputes, is
reported to have been passed in the closing hours of the last session
of the Legislature of Maryland. Its operation and fate will be
watched with interest.
Martin F. Murphy, writing for the Glass Worker, says :
"The industrial problems, so-called, can be adjusted in a large degree
along the lines of least resistance and the line of least resistance, in my opinion,
is voluntary arbitration." . . . "I conceive it to be the solemn duty, yea,
the greatest duty of the men, who to-day happen to be in some degree the
molders of thought on these profound questions, to spread the gospel of con-
ciliation and arbitration, lest there come a crash between the economic forces
in this land that will destroy the republic. I call upon those who are wage-
payers to study their relations to their employees with a determination to get
at the equities and uphold them. I warn some of you that you have many
prejudices to bury and much wisdom to gain. I call upon those conspicuous
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Arbitration of Industrial Disputes 1 1
leaders of labor unions to beware of the temptations begotten by the arrogance
of power."
Endorsing these expressions and with apologies to William
ElleryChanning, and paraphrasing somewhat his forceful utterance,
1 would say : We should teach all labor leaders and managers of
industries that there is no measure for which they must render
so soiemn an account to their constituents as for a declaration of
industrial war; that no measure will be so freely, so fully discussed; ''
that none of them can succeed in persuading the labor unionists
or the stockholders to exhaust their prestige and their treasure
and the comforts of their families in supporting industrial war .
unless it be palpably necessary and just.
If we were to eliminate confidence in the integrity of fellow
man from business relations, our whole commercial structure would
crumble to the ground. If we were to destroy belief in the honesty
of judicial minds, all protection to property would disappear with
the passing of the system of judiciary. If we place no reliance
in the devotion to duty on part of those charged with conducting
transportation by land and by water we would destroy the useful-
ness and effectiveness of our means of intercommunication. If
we can — and we do — find plenty of men possessed of the necessary
integrity, honesty of purpose, loyalty and devotion to insure the
reliability and stability of our commercial, judiciary and transpor-
tation systems, surely there need be no great difficulty in finding
those whose judgment and honesty can be confidently depended
; upon as arbitrators to fairly and intelligenty decide industrial
disputes.
The best conditions possible of attainment in our industrial
world must come through a willingness on the part of both sides
to give careful and proper recognition to the rights of their oppo-
nents, as well as to the rights of the large numbers who are neces-
sarily affected by a conflict between the two, and must come
through a spread of the principles of the Golden Rule which
includes the true spirit of arbitration.
E. E. Clark.
Order of Railway Conductors of America, Cedar Rapids, Iowa.
[295]
THE NEW UNIONISM— THE PROBLEM OF THE UNSKILLED
WORKER
The rapid economic evolution of the last decade, which brought
about the organization of a third of our industries into monopolies
and combinations, has brought with it an equally portentous
change in the organization of labor. A new form of industrial
organization, ' 'the trust," now dominates the world of capital.
The "trust" came from a former decade, but the thing as we know
it, ' 'a dominating combination of money, property, brains, industrial
or commercial enterprise or experience," is a creation of the
last few years. The new ' 'labor" unions, the form of labor organi-
zation the last decade has brought into power, are as distinct from
the old ' 'trade" unions as is the new industrial trust from the old
legal makeshift that went by that name, or as are the new allied
banks, trust companies, railways and municipal corporations from
predecessors which accepted competition not as the exception but
as the rule.
If the era of trusts has required the rewriting of political economy
and industrial history, the era of new unionism requires the re-
writing of the economic theory of labor unions and the recasting
of the history of their development. The standard works on trade
union economy and- trade union history, based on English experi-
ence and the industrial organization of a period rapidly passing
away, are as obsolete to-day as are the competitive economics of
Adam Smith.
The policies of the new unionism, whether good or bad, are
not the result of arbitrary acts of labor leaders. The evolution of
industry itself, the introduction of new machinery, the further sub
division of labor and the integration of industries brought about
by the increasing number of functions of the larger establishments
and trusts, is forcing the new policies. We may approve of the
increasing democracy of the new unionism, of the decreasing
frequency and success of the restrictions on machinery, output,
and apprentices ; or we may disapprove of the reduction of wages
to a level, of the growing use of the boycott, the sympathetic strike
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The New Unionism \ ^
and political action and the increasing area and intensity of the strike.
But each and every one of these policies is a direct and necessary
result of the fundamental change evolution of industry is effecting
in the character of the work the workman is required to perform.
In Great Britain, and in this country until recent years, the
unions were composed of workmen relatively skilled, because in
most industries skilled work was formerly more important than
unskilled. Now the situation is almost completely reversed. New
machinery and the better organization of industry has reduced the
relative number of skilled men employed, has simplified their
.work and has bridged the gulf that formerly separated them from
(the unskilled by introducing an elaborate system of helpers and
general hands. In times of severe strikes these latter workmen can
replace a large part of the skilled men. Recognizing this fact
from hard experience one union after another has decided to take
the unskilled in. Once taken in the unskilled form a majority of
the union. Then follows the abandonment of time-honored customs,
:he adoption of new policies as unwelcome to the employer and
ess understood by the public than were the old, and in short a
•evolution in the labor movement.
The key to the new unionism is the new importance of unskilled
abor. The old unions, consisting of skilled men, demanded higher
Aages for themselves and left unskilled labor where it was. The
economic basis of their demand was the ''skill" they possessed.
Their monopoly or partial control of a certain grade of labor, their
'rent of ability" was due either to dexterity, that is, to the greater
lifficulty and longer apprenticeship of their trades, or to its degree
)f separation from the next most similar operation of some other
:lass of workmen. The introduction of new machinery and the
urther subdivision of labor both decrease the amount of dexterity
equired and place helpers at operations nearer to that of the
skilled" worker. Both his skill and his monopoly of his trade are
hreatened with extinction.
Intelligence, a general understanding of machinery, an ability
o co-operate with the next man, are perhaps more required than
-ver, but the old ' 'skill" of the artisan and the old exclusive lines
)f the trade are becoming a thing of the past. Men are more special-
zed than ever, in the sense of being divided into more classes.
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But the difficulty of passing from one of the new classes to another is
not so great as it was nor is so much time required to learn the trade.
The reader will recognize the truth of the above generalizations
as to the changes in the character of the modern workman's tasks,
but he will not appreciate their importance until he has examined
the result of the recent Census.
Already the unskilled constitute a heavy majority in industry.
In 1900, there were 11,358,312 working men in the United States,
if we include as workingmen all employees in trade, transportation,
manufacture and direct service, and exclude only agriculture
and professional service. (See Census of Occupations, Twelfth
Census, Vol. II, p. ex. ; I, IV.) Of these a large proportion
are relatively unskilled, including for instance 2,505,267 laborers,
1,106,306 clerks and salesmen, 538,029 teamsters. But this is
only the beginning. Among the enumerated employees of the
building trades are some 1,200,000 workingmen. Of these 600,000
are carpenters, mostly not very skilled and about 100,000 are
helpers, apprentices, etc. Of the 581,728 employees of mines
and quarries in 1902, only 324,430 are entered as miners and quarry-
men. Of the others 152,302 are entered as other wage-earners
who are principally unskilled; 18,376 are miners' helpers, 8,740
firemen, 13,544 timbermen, 11,857 boys under sixteen years of age,
etc. (See Bureau of Census, Bulletin 9.) Of 1,189,315 railway
employees enumerated by the Interstate Commerce Commission
in 1902, 886,220 were neither officers, station masters, engineers,
firemen, conductors, machinists, carpenters nor telegraphers, but
"other" station men, trainmen, shopmen, trackmen, switchmen
and clerks, all classes that are relatively unskilled.
So with the manufacturing industries. Here we may divide
the workers into relatively skilled and unskilled, by selecting as
a dividing line some wage rate which includes above it those classes
known as skilled workers, and below it those known as unskilled
in the trade itself. The Census of Wages and Employees showed
that three-quarters of the men in the cotton industry, for instance,
were employed in occupations in which the majority did not receive
as much as $10.00 a week, and a majority of the women in occupa-
tions in which most of them did not get $6.50 a week when the mills
were in operation. The same proportions applied to all the industry.
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I
The New Unionism 15
as well as to the establishments examined, would show 105,000 males
and 63,000 females in the class of relatively unskilled workers.
The same method of calculation shows large numbers to fall
within the classes of the relatively unskilled in nearly every industry.
A majority of the indicated number of employees in the industries
in Table I received less than the indicated remuneration when at
work. The average earnings are not given. As distinct from the
wage rate, the earnings would in each case be less than the latter
in proportion to the number of days the men were idle through
the closing of the works, accidents, sickness or any other cause.
I In some of the industries the regular seasonal idleness is as much as
a fourth of the year, and to this must be added all idleness affecting
i the individual workman.
Class
Cotton
Clothing, factory product
Lumber and Planing Mills
Iron and Steel Mills
Carriages and Wagons
Boots and Shoes
! Flour Mills
, Agricultural Implements ,
Foundries and Metal Working.
Printing
Table I
ELEVEN LEADING INDUSTRIES.
No. of
Relatively
Unskilled
272,575
Per cent.
total
Employees
90
Highest Me-
dian Rate ci
Wages per week
$10.00
249,852
91
11.50
263,780
74
10.50
212,000
80
12.00
48,741
69
12.50
107 215
75
12.50
25,951
70
12.50
31,741
78
12.50
227,500
65
13.50
66,410
41
9.50
26,937
51
11.50
I Glass
Among the maie employees in the cotton industry I have
classed as skilled only the foremen, beamers, loom fixers, spinners
and section hands, and as unskilled the general hands, laborers,
helpers, weavers, etc. ; in the lumber and planing mills the unskilled
include the laborers, machine tenders, sorters and teamsters; in
the foundries and machine shops, assemblers, laborers, helpers,
machine operators, and general hands; in the carriage and wagon
factories, finishers, laborers, helpers and general hands; in the
clothing trade, sewing machine operators, bushelers, general hands,
etc. ; in the flour mills, all except millers and foremen ; in the printing
establishments, the women workers, general hands, laborers, helpers
[299]
!6 The Annals of the American Academy
and apprentices ; in the boot and shoe industry, the women workers
and all male employees except cutters, edgers and foremen. Accord-
ing to this classification, a large majority of the workers are unskilled in
every industry specified except printing and glass. The figures chosen
as the dividing line between skilled and unskilled in these trades
is a low one, but the relatively greater proportion of skilled labor
is nevertheless exceptional since there are very few workers in either
industry of the middle grade. They are, for the most part, either
low-paid as indicated or else very well paid with weekly wages of
$13 to $16, $18, or even $20. It must be remembered, however,
that employment is very subject to fluctuation in both industries
and that the annual earnings are correspondingly reduced.
It is probably a safe estimate then that less than one-third of
the 11,358,000 male employees of industry can be classed as rela-
tively skilled workers; that is to say, as men whose wages approach
$2.25 a day or $13.50 a week in good times and when employed.
What annual income this means can only be roughly estimated.
The Bulletins of the Department of Labor of New York show an
average amount of unemployment of about 15 per cent, among
the members of unions in good times. The proportion of idleness
among the unskilled workers (who are so largely unorganized)
would be considerably greater. If we estimate unemployment,
however, at 15 per cent, this would make the annual income in
good times, slightly less than $600 for that class of labor we have
classed as relatively unskilled. More than two-thirds of the male
employees of the industries of the United States will fall in this class.
Three fundamental tendencies in the organization of the armies
of industry have caused this astounding increase of unskilled labor:
First — Unskilled operations have been taken away from the
artisan and placed in the hands of the unskilled.
Second — Skilled operations have been subdivided and special-
ized and the new work largely taken away from the skilled and
distributed among unskilled workmen. At the same time the
work remaining to the skilled men is simplified and the degree of
skill required is lessened. To this double tendency is due the increas-
ing uniformity of rates of wages of the skilled and unskilled.
Third — A third tendency results from the fact that similar
differentiations have been going on in many different industries at
[300]
The New Unionism 17
the same time. Machinists, molders, woodworkers, machine
tenders, porters, packers, assemblers and common laborers, etc.,
are now employed in a large proportion of the great industries.
Each of these tendencies can be studied in the Census returns.
First — Unskilled operations have been taken away from the
skilled worker and placed in the hands of the relatively unskilled.
This is clearly shown by the Census of Wages and Employees. (See
Table II.) Dividing the employees between skilled and Unskilled
as before, we get the following increase of the number of skilled and
unskilled workers in some of the leading industries. The relative
1 increase of the unskilled is striking in every industry mentioned
except cotton, which underwent the change before this decade, as
is evident from the fact that nine-tenths of its employees fall within
our class of the relatively unskilled.
Table II.
RELATIVE INCREASE OF SKILLED AND UNSKILLED EMPLOYEES
IN LEADING INDUSTRIES.
Class 1890 — Men — 1900 Increase P. C.
Agricultural Implements:
Skilled 604 1,705 1,101 184
Unskilled 1,623 6,728 5,105 314
Lumber and Planing Mills:
Skilled 260 284 24 10
Unskilled 337 418 81 24
Flour Mills:
Skilled 132 128 4* 3*
Unskilled 803 1,381 574 70
Printing:
Skilled 1,847 1,290 557 30
Unskilled: 605 894 289 44
Carriage and Wagon Factories:
Skilled 463 382 81* 17*
Unskilled 395 504 109 28
:ron and Steel Mills:
Skilled 671 735 64 9
Unskilled: 12,573 ...... 19,396 6,823 54
Cotton:
Skilled 753 1,038 285 38
Unskilled 599 772 173 29
3oots and Shoes:
Skilled 294 355 61 21
Unskilled 240 457 217 90
♦Decrease.
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The Annals of the American Academy
Second — Skilled operations have been simplified and subdivided.
Part of the work has been given to the relatively unskilled groups.
The result has been (i) that the wages of the two groups have
been brought towards a common level, and (2) that the wages of
individuals of the same group or class have been equalized to a large
degree.
The following tables (from the Census of Employees and Wages)
show both tendencies. The Census replaces averages by medians;
that is, the rate above which half the workers are paid and below
which half are paid. Foundries and Metal Working has been selected
for the first tendency as one of the most highly organized industries.
It will be noticed that the skilled workers show, on the whole, a
slight decrease while the unskilled show a considerable increase
in the rate of wages. (See Table III.)
Table III.
RELATIVE CHANGES IN WAGES IN SKILLED
1890
AND UNSKILLED LABOR
Medians Change in
1900 per cent.
Foundries and Metal Working, Skilled :
Foremen, "
..$18.00..
..$18.00 ....
00
Blacksmiths, "
.. 16.50...
.. 15.00*
9*
Boilermakers, "
. 13.50...
.. 13.00*
3*
Molders, "
. 13.50...
.. 15.00
11
Carpenters "
. 13.50...
.. 13.00*
3*
Woodworkers and Pattern
Makers, "
16.00...
.. 16.50
3
Sheet Metal Workers, "
. 13.50...
.. 13.00*
3*
Engineers, "
. 13.50...
.. 13.00*
3*
Erectors and Assemblers, "
. 12.50...
.. 12.00*
4*
Foundries and Metal Working, Unskilled :
Machinists, " ...
. 9.00...
.. 10.00
11
General Hands, Helpers
and Laborers, "
. 8.00...
.. 8.50
6
Helpers, Blacksmiths, "
. 11.00...
.. 10.50*
5*
Helpers, Boilermakers, "
.* 9.00...
.. 9.00
00
Helpers, Machinists,
. 9.00...
.. 9.00
00
Helpers, Molders and Core-
makers, "
. 8.00...
.. 9.00
12
Machine Tenders and 2d
Class Machinists, " ...
. 9.00...
. . 10.00
11
♦Decrease.
The tendency of the wages of a majority of the individuals
[302]
The New Unionism 19
in each class to approach a common level is also shown by the
Census of Employees and Wages. ' 'Quartiles" are those wage rates
between which lie the wages of half the employees of each class.
The difference between the quartiles is the range of the wages of
half the employees of each class. The range in wages of the more
important classes of labor in several industries is given. It will
be noticed that the range of the wages of a majority of nearly every
class of employees has either remained about stationary or decreased
since 1890. (See Table IV.)
Table IV.
DECREASING RANGE IN WAGES.
Range in Wages.
(Difference in Quartiles).
1890 1900
Boots and Shoes:
General Hands $5 .00 $5 .00
Bottom Finishers 6 .50 6 .00
Stock Fitters 9 .00 5 .00
Clothing Trade:
Sewing Machine Operators 7 . 50 7 . 00
Bushelers 2 .50 3 .00
General Hands 5 .00 6 .00
Agricultural Implements :
Assemblers 5 . 50 4 . 50
General Hands, Helpers and Laborers 4 . 50 4 .00
Machine Operators 5 . 00 4 . 00
Foundries and Metal Working:
Erectors and Assemblers 7 .00 5 .50
General Hands, Helpers and Laborers 2 .50 2 .50
Helpers, Blacksmiths 4 .00 3 .50
Helpers, Boilermakers 3 .50 3 .50
Helpers, Machinists 2 .50 3 .00
Helpers, Molders and Coremakers 3 .00 2 .00
Machine Tenders and Second Class Machinists. . . 5 . 50 5 . 00
Lumber and Planing Mills:
Laborers 6.00 5.00
Machine Tenders 3 .50 5 .00
Sorters 2.50 1.50
Teamsters 2 .00 1 .50
The third cause of the increase of the importance of the un-
skilled is the increasing importance of certain common operations
as transportation, packing and power production in every industry.
[303]
Increase
P.C.
646,729
34
169,764
46
83,600
59
29,623
123
20 The Annals of the American Academy
This tendency has greatly added to the number of workers in these
occupations in every industry where they are found. (See Table V.)
Table V.
INCREASE IN RELATIVELY UNSKILLED OCCUPATIONS.
(See Census of Occupations.)
1890 — Men — 1900
Laborers (not specified) 1,858,558 2,505,287
Draymen, hackmen, teamsters, etc. . . 368,265 538,029
Engineers and F'm'n (not locomotive) 139,718 223,318
Porters and Helpers (in stores, etc.) . . 24,002 53,625
We have shown that unskilled labor is already in the major-
ity in most industries; that its importance is increasing; that
it is becoming less separated from skilled labor; that there is a ten-
dency toward a leveling in wages, and that not only the lines sepa-
rating the trades within each industry are breaking down, but also
there is a great group of trades that flourish in several, or in
nearly all industries, thus bringing them into the same labor market.
We must now show the social results of these economic forces. First,
two great facts that urge the unskilled worker to active discontent
must be recalled to mind.
First, unskilled labor has not secured its share in our prosperity.
The Census of Employees and Wages shows that wages in many
industries were stagnant from 1890 to 1900, a period in which the
per capita wealth and income of the nation increased over 19 per
cent. Of twenty-five leading industries examined in the Census
of Wages and Employees, only eight showed any noticeable increase;
four showed marked decreases and 13 paid about the same wages
in 1900 as in 1890.
Second, unskilled labor has suffered most from instability of em-
ployment. The railroads discharged 93,000 employees from July 1,
1893; to July 1, 1894, nearly 11 per cent, of the total employed.
The number 0/ officers and station agents was, however, actually
increased during the year. Section foremen were practically undis-
turbed. Less than 1 1 per cent, of the engineers, firemen, conductors,
switchmen, machinists and other shopmen were let out. But 12
per cent, of the relatively unskilled trainmen and shopmen, 16
per cent, of the section hands and 19 per cent, of the ' 'other" em-
ployees and laborers were discharged. The unskilled workers
[304]
The New Unionism 21
go first because they can be more easily replaced when needed
again. They are made to shoulder most of the burden of hard
times. The unrest of labor is not then to be attributed to the
unions, but to low wages and irregular employment. Since the
census of 1900 the wages of the unskilled have risen slightly, but
none of the statistics available indicate a rise as rapid as that of the
cost of living. Moreover, the tendency of wages is now downward
again and steadily decreasing employment has already thrown
hundreds of thousands out of work. Under these conditions the
pressure to strike comes, not from the labor leaders, but from the
rank and file and even in very many instances from the unorganized.
The unions are no longer ignoring unskilled labor. There
is hardly one of them, the very existence of which is not threatened
by this reserve army of hungry, restless and unorganized workmen.
They have boldly tackled the problem, but they have not solved
it. It is only recently that their efforts to organize the unskilled
have met with any success. Until the last decade their work
had been almost entirely with the relatively skilled.
Only about 3,000,000 workers are so far organized into the
unions. Since there are almost 4,000,000 in the class of the rela-
tively skilled, it has been widely, but wrongly, inferred that the
unions are operating and must operate nearly altogether within
the ranks of skilled labor, and it has been doubted if the trade
unions have shown any ability or anxiety to handle the problem of
the unskilled. From English testimony it would seem that this
has largely been true in that country, but the history of the trade
unions in the United States in the past five years has tended to
prove the very reverse to be the case in this country. Not only
are the unions here taking up the organization of the unskilled in
order to strengthen their present position but they find that they
are forced to organize them in self-defense.
The newer, more successful and more rapidly growing unions
belong to another economic period from that in which the old
ones had their origin. As a result of the growing importance of
unskilled labor they are dominated by its demands, the char-
acter of their membership has changed, their methods of fighting
have changed and their attitude towards industry and the public
is the process of becoming completely reversed.
[305]
22 The Annals of the American Academy
The militant policy of the new unions as that of the old rests
on the fundamental assumption that the members do not expect
to rise from their class but with it. The wage earner in the words of
Mr. Mitchell, "has made up his mind that he must remain a wage
earner and that he will never become a capitalist." But the new
unionist has gone further than this. Forced by economic develop-
ment he has broadened his conception of what constitutes his class.
He has come to see that his future does not lie in building up a
monopoly of labor in his trade. He has already made up his mind
that he must cast in his lot with all the workers in his industry and
he is now coming to feel that his lot is bound up with that of
the whole working class. The old trade unions are rapidly being
absorbed by the new trade and industrial unions, and these in their
turn by the nation-wide labor movement.
No better or more important illustration of how the new union
rights can be found than the Anthracite Coal Strike. The success
of the miners was based on the following policies :
First — The organization of all the men skilled or unskilled
about the mines, including even laborers, teamsters and engineers —
the appeal to unskilled labor.
Second — The appeal to all other union men and to sympathi-
zers in the mining districts ; successful calls for financial aid, for
social ostracism of non-union men, for the use of the boycott and the
political action which resulted in the State law which forbade
imported miners to operate without a license.
Third — Finally the union appealed to the whole public. The
broadest policy of the union was to conduct itself so as to prevent
consumers of coal from placing the blame for their sufferings on
the shoulders of the miners. Favorable public opinion not only
in the mining camps, but of the nation at large had to be secured.
It was this primarily and not the sufferings of the men that
forced the President to interfere in the union's favor, and brought
about the final union success.
The United Mine Workers as a result of this strike is not only
the strongest organization in the country, both financially and
numerically, but also the most typical of the new unions. Let
us contrast its fighting methods with the Machinists' Union, which
was a few years ago struggling in vain with the old policies and
[306]
The New Unionism 23
has only recently adopted the new standpoint. Several years
ago the machinists instituted what became almost a national strike.
Employers were not organized and the union at first met with con-
siderable success. But it was following the old restrictive policies.
It was attempting to maintain control over the supply of skilled
labor. The unskilled it kept out. The normal course of industry
soon brought it about that there were more ' 'helpers " and ' 'machine
hands" outside of the union than there were "machinists" in it.
The employers now organized, adopted the open shop and the employ-
ment bureau (a potential blacklist), and wielded this reserve army
against the union. In many localities the union has found itself
helpless. In some of the largest manufacturing centers the em-
ployers have almost succeeded in putting it out of business. During
the late industrial boom, union wages were paid and union hours
prevailed, but the union was not recognized, and union machinists
fear that this presages a reduction of wages and an increase of hours
when work becomes slack.
The union at last saw that the revolution which had taken
place in the industry demanded a revolution in the union. At
the recent convention in Milwaukee, the most momentous struggle
in its history took place between the advocates of the old and the
new unionism. After a series of the stormiest sessions, it was de-
cided that the old policy must be abandoned. Helpers, machine
hands and everybody that works about lathes, planers, drills, etc.,
are to be admitted to the union ranks. The decision has already
been acted on. Only recently one of the metal workers' unions,
which had already taken in a number of unskilled men, has been
amalgamated with the Association of Machinists and tens of thou-
sands of unskilled workers admitted by a single act.
The attitude of the new Unionism toward industry itself is
as completely the reverse of that of the old unions as is its attitude
toward the unskilled workers, toward the labor movement and
toward the public. As a result of the need of the co-operation of
the unskilled workers in the unions, all effort to restrict the entrance
of new men into the union or the trade is abandoned. Since
nearly all workers are becoming potential competitors, the union
is anxious to secure as many members as possible. The rigid
definition of the line between skilled and unskilled work is given
[307]
24 The Annals of the American Academy
up because the unskilled workers constitute a majority of the new
union and insist on free admission to the ranks above them;
restriction of apprentices is gradually abandoned. The wages of
the unskilled workers are advanced more in proportion than
those of the skilled workers for the same reason. The subdivision
of the workers into the many different classes is opposed on the
ground that it has a tendency to bring internal conflicts into the
union.
Restriction of output, if still maintained, is maintained on
new grounds : the unwillingness of the men to overexert themselves
to the verge of nervous exhaustion, spells of sickness and premature
old age. The old unions systematically restricted output and
worked for an under supply of skilled labor. This they could obtain
either by diminishing the supply or increasing the demand. By
means of tacit or expressed agreements among the employed to do
less work they increased the demand. They called this making
the work go round or making it last over into periods of slack em-
ployment. Now, with a surplus supply of labor accessible, if not
actually at hand, the competition for employment among the
members of the unions and the potential competition of those who
may become members of the union at any moment is so great
that these old policies are being abandoned. It is only in the union
shop that such tactics can be safely and continuously employed.
The open shop with the freedom it gives the employer to discharge
unsatisfactory men has given them their death blow.
Restriction of machinery has taken a new form. It now pre-
vails principally where some revolutionary change is in progress
as in the introduction of mining machinery in the coal mines. The
new coal-mining machines are being fought by the unions not
directly, but through a differential against the machine. A higher
rate is charged for the machine men, not so much because their
labor is more skilled, as because of the desire to check somewhat
the introduction of the machines. This differential is, however,
frequently changed. There is no effort to prevent the introduction
of machinery, but only to make it sufficiently gradual, so that
there will not be a sudden replacement of the men by a different
class of workers. Since the unskilled are now generally in control
the effort to prevent a machine from taking the place of some small
[308]
The New Unionism 25
group of skilled workers has been almost entirely abandoned.
The new employers' associations have been fighting effectively the
remnants of this policy that still remain.
The startling union successes of recent years have been among
the unions that follow the new policies. This is shown by the
relative numerical increase of the various unions. Since the be-
ginning of the recent days of prosperity in 1898 or 1899 all the
unions have grown. Their total membership has been more than
doubled, but the growth has been very unequally distributed. The
old type of union of skilled workers has grown steadily but slowly
with an average increase of something more than 50 per cent.
Among these are : The Railway Employees, The Building Trades,
Printers, Cigarmakers, Brewery Workmen, Iron Molders, Boiler-
makers and Blacksmiths and Iron, Steel and Tin Workers.
Another group of organizations, all of them either new or prac-
tically reorganized in recent years, has had a total growth of
approximately 300 per cent., as indicated by its representation
at Conventions of the American Federation of Labor : It includes
The Coal Miners, The Metal Miners, The Street Railway Employees,
The Seamen, The Longshoremen, The Ready-made Clothing Makers,
The Boot and Shoe Workers, Meat Packers and Butchers, The
Machinists, The Teamsters, The Woodworkers, The Stationary
Engineers and Firemen.
These newer unions would seem at first to have nothing in
common. The teamsters and longshoremen work in trades where
there is little or no machinery to be handled while the woodworkers
and machinists are exclusively machine employees. The miners
embrace all the miscellaneous trades employed by the mines, whereas
the stationary engineers and firemen are isolated either as individuals
or small groups in every sort of an establishment where steam power
or heat is required. The clothing makers and the boot and shoe
workers are quite largely women while the trades just mentioned
are exclusively men. But all are composed largely of relatively
unskilled labor. The new growth among these unions as well as
most of that of the old unions is almost entirely among the unskilled.
The new growth in the old unions of the building trades is largely
among those branches called unskilled by the trade itself.
The new unions fall into two widely different classes which
[309]
26 The Annals of the American Academy
seem on the verge of disrupting the whole labor movement, the
"industrial" union and the new ' 'trade" union. The "industrial"
union claims to embrace every employee of its industry in all
its trades. The miners, for instance, embrace both teamsters and
engineers employed at the mines. The new ' 'trade" union claims
to have a right to embrace all the workers at the trade in every
industry. The old unions were called ''trade" unions but they
were fundamentally different from the new "trade" unions of
to-day. They were largely recruited from a single trade within a
single industry. The compositors, for instance, are undoubtedly
a trade union, but they are employed only in printing establish-
ments. The machinists are a trade union of a new type. They
are employed in machine shops, engine shops, boiler shops, ship-
building yards, carbuilding shops, agricultural implement shops
and in nearly every important industry. Teamsters, to take a
newer and even more striking example, are employed by nearly
every industrial establishment in the country, as also are engineers
and firemen.
The causes that gave origin to the industrial unions are
the increasing proportion of unskilled workers in the industry, the
decreasing sharpness of definition of the line between the skilled
and unskilled trades and the greater ease with which the occupa-
tions of the skilled can be learned by the unskilled.
The origin of the new trade unions lies in the ability of workers
in the various trades to take up similar occupations in other indus-
tries than those in which they are employed. A change of industry
always necessitates some adaptation in the workman, nor is it
possible for men of a given trade to transfer themselves from a given
industry to every other industry in which men of the same trade
are employed. But it is possible for employees in a trade A, to
transfer themselves to another trade, B, and for the employees
of the trade B, to transfer themselves to the trade C, etc. A milk
wagon teamster cannot become a coal teamster in every case,
but he can usually find some teamster's or driver's work less strenu-
ous to which he may adapt himself, while many classes of teamsters,
such as van drivers, etc., can learn to replace the coal teamster.
Both forms of new unionism then, industrial unionism and the
new trade unionism, are the result of these deep-seated economic
[3io]
The New Unionism 27
characteristics of our age. They both result from the increasing
importance of unskilled labor.
Industrial unionism requires the organization of the unskilled
primarily because the modern strike means a shut down of the whole
industry. But the shut down of an industry means that all must be
idle. Skilled and unskilled must strike together and share the ex-
penses as well as the benefits of the conflict.
The new trade unionism means the organization of the unskilled
because no boundary between skilled and unskilled labor can be
drawn inside of the trade. How is any rigid test to be set up for ad-
mission into the organization of the firemen or teamsters' unions, or
' even those of the machinists or of the woodworkers ? There may be
high degrees of specialization and even of skill within the trades,
and yet the specialties are so closely related that they shade off into
one another by imperceptible degrees.
These two new forms of unionism are everywhere superseding
the old. The machinists, the iron, steel and tin workers, the brewery
workmen and the printers have already broadened their policies to
adapt themselves to the new idea. The building trades have long
been closely associated in the cities and towns in the Building Trades
Councils where the trade organizations are preserved, but are closely
federated into an industrial group.
The two forms of organization seem to be opposed at every
point. The industrial union fights for the control of the industry..
It comes to see, therefore, that it cannot afford to antagonize the con-
sumer of the product of that industry. In some cases, as in that of the
miners, the public sympathy of the consumer alone is enough to insure
victory. In others he must be persuaded to boycott non-union men,,
to patronize the union label or to refuse to ride in the street cars of
an ' 'unfair" corporation. The trade unionist, on the other hand, has
little to fear or to expect from the consumer. He often does not
hesitate to antagonize him. The trade unionists' wages are not a
very large factor in the cost of any given product and do not, there-
fore, concern the purchaser of the product.
The contrast between the two types of unions can also be seen
in their attitude towards politics. Where labor is well organized, as
in the mining camps and manufacturing towns, one or another of the
28 The Annals of the American Academy
industrial unions dominates local politics. The trade unions are
powerful politically only in the large commercial centers.
The contrast is equally marked in the fight with organized em-
ployers. Wherever a combination or monopoly does not already
exist to unite the employers, the industrial unions have given rise
to the relatively conservative employers' trade associations. The
trade unions, on the other hand, have been the principal cause of
bringing into being the local employers' associations, which have, in
many cases, taken into their ranks, not only every class of manu-
facturer, but also banks, commercial houses and even professional
men. These are the radical associations that lead in the fight for the
open shop and are the first to introduce the new blacklist, the so-called
employment bureau.
The industrial organizations are universally favorably disposed
towards the trusts and larger employers while the trade unions are
as likely to prefer the smaller employers and competitive industry.
Industrial unions are universally and necessarily in favor of the regu-
lation of the trusts. Their aim is the representation of the industry in
politics and in many cases, as that of the brewery workmen, the boot
and shoe workers and the Western Federation of Miners, they favor
socialism or the assumption of industrial functions by a democratic
state.
Again the industrial organizations are very often protectionist.
They realize that the lowering of the tariff might, in some cases, mean
a serious decrease in the amount of employment afforded by their
industry. The trade unionists are usually free traders. They are
anxious to obtain a lower cost of living and have little to lose from
the lowering of the tariff on any particular industry, e. g., the build-
ing trades, teamsters, stationary firemen, engineers, etc.
The trade organizations are more interested in local politics,
sometimes on account of laws regulating their trades as with the en-
gineers and building trades, sometimes on account of the conditions
of public contracts they can control, as with the teamsters, the build-
ing trades, and so forth. The industrial organizations operate prin-
cipally in industries that have a national market and are more sub-
ject to the national and state governments.
The last and most important differentiation is the direct conflict
arising when jurisdiction over the same men is claimed by both types
[312]
The New Unionism 29
of unions. The new trade unions, such as the teamsters, engineers and
firemen, machinists and woodworkers, are engaged in bitter conflicts
with the industrial unions, miners, brewery workers, slaughter house
employees, etc., to decide to which union workingmen belonging to
the former trades, but at work in the latter industries, shall belong.
The contest between the skilled and unskilled workers that was for-
merly waged within the labor movement and threatened to limit it
to the upper third, the aristocracy of labor, has disappeared. In
its place has risen the fight between the industrial and the trade
union, a fight that, far from disrupting the labor movement, can
have but one result — to solidify all the unions into one complex and
differentiated but unified whole.
Neither type of union can drive the other out of existence since
both are the result of deep-seated economic causes. It is sometimes
hastily assumed that the new type of union is the industrial union and
that it is replacing the trade union. On the assumption of this neces-
sary conflict the whole labor movement is at present split into two
camps, the trade autonomists and the industrialists. Mr. Gompers
is a trade autonomist. Mr. Mitchell is an industrialist. Of course,
they have effected a working compromise but every convention of the
American Federation of Labor is torn by the dissensions of the two
factions. The fight is largely based on the failure to distinguish be-
tween the old and the new "trade" union. Neither industrialist nor
trade autonomist can win, because each represents a principle of
modern industry. The trade autonomists reflect the tendency of all
industries to introduce into their development certain common classes
of employees, and, therefore, certain common elements. In the ranks
of capital a similar tendency is seen in the common control by some of
the large monopolies of subsidiary industries in which some product
of the monopoly is an important factor. The industrial union, in rec-
ognition of this tendency, seeks to include in its ranks all the em-
ployees of this new type of industrial organization.
Another tendency of capital is to tie several industries together
on the community of interest plan. Railroads, banks and groups
of capitalists gain the control of industries with which they are affili-
ated. The only bond of affiliation seems to be the common need of
all industries of financial and transportation facilities. So the new
trade unions, recognizing the common need of many industries for
[313]
?)Q The Annals of the American Academy
certain classes of labor and the fact that these industries compete
against one another for this labor, have organized it along trade lines
in all these industries to prevent the hostile employer from drawing
non-union labor from other industries.
In the sphere of capital it is evident that no agreement between
the two tendencies can be reached until all industries are thoroughly-
integrated and organized in a single mass. Already a few groups of
capitalists dominate the more important industries. In the same
way, the conflict between industrial unions and trade unions of the
new type must continue until both are fused into a unified labor
movement.
The trade and industrial unions are not in necessary conflict —
they are the warp and the woof of the new labor movement. As all
the workers in an industry must fight together or not at all, they
must belong to a single industrial union. Since workers in different
industries are employed at similar tasks, and are in competition with
one another and must also be organized by trades, if they are not to
be used against one another by the employers; since the labor
market for some trades is not confined to a single industry ; there-
fore, the union cannot be confined to that industry.
The only possible solution is one already coming into vogue —
the exchange of cards between the unions and the recognition that
trade and industrial unions must act together. This is not the prin-
ciple of the Federation of Labor, which recognizes trade and in-
dustrial autonomy, but a radically new one. It can lead to but one
result — the solidification of the labor movement with all the far
reaching implications that must follow when the barriers that the
unions have so long recognized between trade and trade and indus-
try and industry fall. For the unions of the larger industries must
then act closely with the unions of many trades, and the unions
of all the trades must co-operate with those of many industries.
With the innumerable combinations that must arise there will
inevitably be woven the texture of a unified labor movement.
Already the sympathetic strike, the financial assistance lent by
all the unions to those involved in severe struggles, the boycott and
common political aims, such as the eight hour and anti-injunction
laws, require for their success the generous support of many unions
and forecast a unified movement.
[314]
The New Unionism 31
Organized capital is fast becoming one. Organized labor is not
far behind. But the coming of monopolies and a general community
of interest of capital has not been accompanied by monopolies in
labor, but by precisely the reverse tendency, the increasing com-
petition among individuals, the opening up of the skilled trades to
the unskilled, the combination of the two classes in each industry,
the development of a general labor movement, the broad appeal to
the consumer and finally to the general public and the state.
When the industrial unions and trade unions shall have formed
an effective treaty of peace, there will be no interval or stopping place
until the complete organization of labor is reached. The amalgama-
tion of all the labor unions into a single body or the increasing agree-
ment on the part of all the unions on certain common lines of action,
will create perhaps the most powerful economic and political force
this country has produced. When once the union policies have been
so broadened as to make room for unskilled labor as is the case to-day,
there seems to be no reason to suppose that they will stop short of
complete unity. They will then have, acting together in one organ-
ization, the majority of the consumers, voters and citizens of every
industrial community in the United States.
William English Walling.
\New York City.
[315]
POLITICAL ACTION AND TRADE-UNIONISM
The proposal to make political action a feature of American
trade-unionism, although always a topic of discussion among organ-
ized workers, and at times a subject of practical experiment by cer-
tain bodies, may be said to have first assumed definite national
form at the convention of the American Federation of Labor held
in Chicago in 1893.
The history of the debate and action thereon, covering the
intervening decade, constitutes perhaps the most important epoch
in the labor movement of the present generation. Upon this pre-
sumption these events seem to justify more detailed and consecu-
tive treatment than has as yet been accorded them. During the
period covered by this paper the growth of organization among the
workers in the United States has been phenomenal. The extent,
character and circumstances of that growth have presented a great
opportunity, and also a great danger. Speaking generally, it may
be said that the labor movement has fairly well availed itself of
the former and in the main avoided the latter of these situations.
Throughout the various crises of the decade, the American
Federation of Labor has maintained the course that, as the results
have frequently shown, is best calculated to conserve the true
interests and continued progress of its own membership and of
the industrial world at large. The disposition and power to main-
tain this attitude is due mainly to the long discussion of political
action as a necessary or desirable adjunct, or complement, of trade-
unionism.
At the Chicago convention a "political programme" was intro-
duced. The discussion thereon shortly resolved itself into a pro-
posal to refer the entire subject matter to the affiliated unions
for "favorable consideration" and instructions to the next conven-
tion. A resolution to this effect, but with the word "favorable"
stricken out, was adopted. When the convention met in Denver,
in 1894, the "political programme" was again brought up for action.
[3i6]
Political Action and Trade-Unionism 33
The preamble of the programme was as follows :
Whereas, The trade-unionists of Great Britain have by the light of experi-
ence and the logic of progress, adopted the principle of independent labor politics
as an auxiliary to their economic action, and
Whereas, Such action has resulted in the most gratifying success, and
Whereas, Such independent labor politics are based upon the following
programme, to wit:
Mr. Adolph Strasser, a representative of the Cigarmakers'
International Union and a leader of high intellectual attainments
and wide knowledge of the economic and political activities of the
workers throughout the world, moved
That the preamble be stricken out, being a misrepresentation of facts.
The debate on this motion centered upon the question as to
how far the preamble misrepresented the action taken by the British
Trade-Union Congress held in Belfast during the previous year.
The prevailing opinion was that the action of the Belfast
gathering was without warrant in the sentiment of its constituents,
and had been repudiated by them. During the debate the author
of the preamble admitted the comparatively slender basis of his claim
in these words :
I simply want to say that, in the statement in the preamble, there is a suffi-
ciency of truth to at least protect any man from being charged with bold mis-
representation.
Mr. Strasser' s motion to strike out the preamble was adopted
by a vote of 1,345 to 861, representing a membership of 134,500
to 86,100, respectively.1
The "political programme" here alluded to contained a num-
ber of planks, but the purpose of its mover and his supporters was
embodied in a single one of these declarations, known as "Plank
10," which provided for " The collective ownership by the people
of all means of production and distribution."
This was a plain declaration for Socialism, and was so regarded
by its opponents and so admitted by its advocates throughout
the debate upon it. However, it is characteristic of this and all
inADelegates to tne convention of the American Federation of Labor cast one vote for each
100 members, or major fraction thereof, represented by them.
[317]
34
The Annals of the American Academy
subsequent efforts to commit the American Federation of Labor
to political action, that while the language of the proposals has
studiously excluded the term "Socialism" (the term "political
action independent of the old parties" being used in preference),
its real object has been none the less apparent. Several amendments
were introduced and discussed, and finally the convention adopted
the following substitute:
The abolition of the monopoly system of land holding and the substitution
therefor of a title of occupancy and use only.
"Plank 10," in the form finally adopted, was a victory of Single
Tax sentiment over that of Socialism. A motion to adopt the
planks "as a whole" was defeated, owing to a misunderstanding.
However, the succeeding convention formally adopted the planks,
not as a "political programme," but as "legislative demands!"2
Notwithstanding their defeat at the Denver Convention of
1894, and notwithstanding the action of that gathering was based
upon presumably settled lines of trade-union policy, the delegates
holding socialistic views upon political matters have persisted in
the effort to secure an endorsement of these views from each suc-
ceeding convention of the Federation. The result has been uni-
formly the same in each instance, i. e.f refusal to pledge or advise
the trade-unions to take part, as such, in any movement in the
nature of partisan politics. The following table shows the result
of the vote on the "Socialist Resolutions" at each convention during
the past ten years:
Year
Convention
City.
No. of
Dels.
Voting.
For
Political
Action.
No. of
Dels.
Voting.
Against
Political
Action.
1894
1895
Denver
New York
34
16
42
91,300
21,400
68,500
36
68
111
121,700
167,600
1896
1897
1898
1S99
Cincinnati
Nashville
Kansas City
Detroit
1900
Louisville
416,900
2 This convention also adopted a constitutional prohibition against the discussion of
partisan political subjects.
[318]
Political Action and Trade-Unionism
35
TABLE — Continued*
1901
1902
1903
Scranton
New Orleans .
Boston
90
65
417,100
214,700
140
299
489,700
1,128,200
These figures show that during the seven years from 1895 to
190 1 (inclusive) the sentiment of the conventions was very strongly
against political action. Five of the conventions held during
that period disposed of the subject by viva voce vote. The vote
taken at the New Orleans Convention of 1902 would indicate that
sentiment had turned in favor of political action. The figures
in this case afforded merely a surface indication, however. It is
a feature common to all the votes that have been taken upon this
question, that in the final alignment of the delegates a number
have been actuated by secondary motives. This was especially the
case at the New Orleans convention. On that occasion seven reso-
lutions were introduced, all having political action as their expressed
or implied purpose. These were reported back with a recommenda-
tion that the convention non-concur therein, and, instead, adopt a
reaffirmation ol the declaration, made by the preceding convention,
that "our meetings, local and national, are now, and always have
been, free to the discussion of any legitimate economic or political
question, but, on the other hand, are equally pronounced against
any partisan politics, religious discussions or race prejudices."
To this report an amendment was offered, advising the working
people "to organize their economic and political power to secure
for labor the full equivalent of its toil and the overthrowal of the
wage system and the establishment of an industrial, co-operative
democracy." The latter was, in turn, amended by a delegate
3Delegates to the convention of the American Federation of Labor cast "one vote for every
one hundred members or major fraction thereof " represented by them. In the table two ciphers
have been added to the tally of votes cast, for the purpose of approximating the total member-
ship represented in each case. Delegates from city trades councils and State Federations cast
but. a single vote each, but as the number of such delegates is usually relatively small the in-
clusion of their votes under the rule here adopted does not materially affect the result attained.
Usually a number of delegates have, for one reason or another, failed to vote. Again, the actual
membership of the Federation is always considerably in excess of that represented at the con-
ventions. For instance, at the Boston Convention of 1903 — an unusually representative gather-
ing— the number of delegates present was 496, while the number recorded as voting was but
364. The actual membership was estimated at 1,465,800, while the delegates voting represen-
ted but 1 ,342,900.
The majority vote in the New York Convention of 1895 expressed the sentiment that the
failure of the Denver Convention of the previous year to adopt the "political programme"
as a whole "was equivalent to a rejection and, therefore, we declare that the American Federa-
tion has no political platform. " Immediately following this vote a motion was adopted, pro-
viding that "these resolutions (*. e., the planks adopted by the Denver Convention) be kept
standing in the American Federationist as 'legislative demands.' ' '
[319]
36 The Annals of the American Academy
representing the United Mine Workers, so as to strike out every-
thing after the word "toil." This was accepted by the delegate
who offered the first amendment, and thus the lines were merged.
The political action amendment, having apparently been rendered
innocuous by the proposal of the Mine Workers' delegate, received
the vote of the delegates from the latter organization (representing
a membership of 185,400) and also of many other delegates who
upon a more definite presentation would have been recorded in oppo-
sition. The fact that, notwithstanding the misunderstanding in
the New Orleans convention, the proposal in favor of political
action failed of adoption by a considerable majority is significant
of the powerful sentiment prevailing in the American Federation of
Labor against such action.
However, the delegates of the Socialistic faith, and indeed
the Socialists throughout the country, proclaimed the result of the
vote at New Orleans as a victory for the principle of political action,
presaging the "capture" of the Federation at an early date. These
representations, although lacking any justification in the real
facts of the case, had the effect of placing the labor movement in
an equivocal position before the country. It was therefore deter-
mined, by common consent of the delegates in attendance at the
Boston convention of 1903, that a decisive test should be made upon
the issue, Politics versus Trade -Unionism. Ten resolutions of a
political nature were introduced during the sessions at Boston.
When these were reported back to the convention the committee
briefly recommended unfavorable action. The custom on previous
occasions had been to report some form of amendment to, or sub-
stitute for, the original resolutions, thus leaving the report itself
open to amendment, with the resultant confusion of the issues.
In this instance, the committee's object was, as announced by
President Gompers, in ruling out a proposed substitute, to insure a
clear understanding on both sides. This ruling of President Gompers
was twice appealed from, and on both occasions it was sustained
by a large majority, the convention thus expressing its acceptance
of the lines of debate suggested by its presiding officer.
The discussion lasted nearly two days. The tone of debate
was substantially the same as in former instances, although there
was a more notable tendency on the part of many delegates to dis-
[320]
Political Action and Trade-Unionism 37
cuss the merits of Socialism and the attitude toward the American
Federation of Labor of the individual Socialist inside and outside of
the labor movement. Upon the whole, however, the debate was
confined to the question as to whether the Federation should com-
mit itself to political action on party lines or preserve its identity
as a purely trade-union body.
The adoption of the committee's report against political action
by a vote of 1,128,200 to 214,700 (the approximate membership
represented^ by the delegates voting) may be regarded as demon-
strating the result of ten years' constant and active agitation on
the subject. Making every possible allowance for the uncertain
quantities that enter into a calculation of this kind, there remains
a reasonable assurance that the vote against political action repre-
sents at most the mean, rather than the maximum, of the sentiment
on that score; whereas, the vote in favor of political action may
be regarded as over rather than under the representation to which
those holding that viewT are properly entitled. The nature of the
subject and the circumstances of its discussion bear out this state-
ment. Enthusiasm is proverbially and naturally the more preva-
lent among the aggressive minority in any conflict of arms or ideas.
In any conflict involving a political issue the quality of enthusiasm
is especially potent, since politics, being essentially a matter of
faith, is largely a matter of individual leadership. In this view of
the subject it may reasonably be assumed that the leaders of political
action sentiment in the conventions of the American Federation
of Labor have derived part of their support from men actuated by
a spirit of admiration for their leadership rather than by a sense of
conviction upon the merits of the ideas expounded by them.
The convention of the American Federation of Labor is, within
the widest practicable limits, an absolutely free forum. "Pro-
gramming" is unknown; debate follows the limits of latitude which
the individual delegate chooses to impose upon himself, rather
than the strict rules of parliamentary usage. These conditions
insure a perfectly free discussion upon all questions; moreover,
they enable the delegates to exploit their views by devices calcu-
lated to appeal to the wish rather than to the thought of their hearers.
On the whole, it is reasonably certain that the vote against
political action is fairly representative of the sentiment prevail-
[321]
^8 The Annals of the American Academy
ing among the two million workers affiliated with the Federation.
Taking into consideration the probable sentiment of the labor
organizations unaffiliated with the latter body, the membership
of which may be estimated at half a million, and deducing their
views upon this subject from the fact of their conservatism in
other connections, it follows that the vote here noted falls con-
siderably short of recording the full strength of the opposition to
political action among the trade-unions of the United States.
The position of the American Federation of Labor, as gathered
from its records, is that, while rejecting the proposal of political action
by the trade-unions, as fundamentally opposed to the proper pur-
pose of these bodies, it favors discussion and action upon legislative
lines. In other words, it seeks to secure favorable legislation from
the existing legislative bodies without reterence to their political
make-up, leaving to the individual trade-unionist, in his capacity as
a citizen, the duty of voting as his experience and judgment dictate
and, if need be, of organizing with his fellows for the attainment of
political ends. As a guide to the trade-unions in seeking legislation
and as a means of concentrating their efforts upon points of common
agreement, the Federation has declared for certain measures, not as
in the nature of a "political programme, " but simply and specifically
as "legislative demands." These measures, as adopted at the Den-
ver convention of 1894, are as follows:
LEGISLATIVE DEMANDS.
1. Compulsory education.
2. Direct legislation through the initiative and referendum.
3. A legal workday of not more than eight hours.4
4. Sanitary inspection of workshop, mine and home.
5. Liability of employers for injury to health, body and life.
6. Abolition of the contract system on all public works.
7. Abolition of the sweatshop.
8. Municipal ownership of street-cars, water works and gas and electric
light plants for public distribution of light and heat.
9. Nationalization of telegraph, telephones, railroads and mines.
10. Abolition of the monopoly system of land holding and the substitution
therefor of a title of occupancy and use only.
11. Repeal of all conspiracy and penal laws affecting seamen and other
workmen, incorporated in the Federal laws of the United States.
12. Abolition of the monopoly privilege of issuing money and substituting
therefor a system of direct issuance to and by the people.
4 This provision is intended to cover public works only, as in the case of the National
Eight-Hour Law.
[3"]
Political Action and Trade-Unionism 39
The adoption of these declarations did not impose upon the
affiliated bodies any obligation to depart from the purely trade-union
sphere of action. Such obligation as is involved is predicated upon the
indorsement of the declarations by the individual unions. This
point was made quite clear by President Gompers at the Denver con-
vention, when, in reply to a question designed to elicit an authorita-
tive and definite expression on the subject, he said :5
The American Federation of Labor is a voluntary organization; the resolu-
tions or platforms adopted by it at its convention are expressive of the consensus
of opinion of the majority of the organized workers affiliated with it. The reso-
lutions and platforms adopted by it cannot be imposed upon any affiliated
organization against its wishes, but they are presumed to be observed by all
organizations.
The position of the Federation in respect to the question of
political action is further exemplified by that feature of its constitu-
tion which bears thereon, which reads as follows:6
Party politics, whether they be Democratic, Republican, Socialistic, Popu-
listic, Prohibition, or any other, shall have no place in the conventions of the
American Federation of Labor.
Upon all questions of policy affecting the American labor move-
ment the example of the British trade-unionists is an important con-
sideration. Especially is this true with regard to the question of
political policy, since it is to that example that the exponent of
' political action on the part of the American trade-unions most fre-
quently refers in justification of his views. It is, therefore, of in-
terest to note the current tendency in this connection of the trade-
unionists of Great Britain. An American publicist, writing from
London, under recent date, says:7
No statistics are in existence giving the exact strength of the labor move-
ment here. If London were as well organized as is Chicago, its trade societies
would contain a membership of 750,000; at best I can count only 135,000. The
London Trades Council has a membership of 57,601, with an income of $3,357, of
which $280 was last year spent for the aid of labor candidates, and about $1,000
for officers' salaries. But London is divided into two cities and twenty-seven
boroughs, and some of these have trade councils of their own. Active political
centers of influence are these trade councils, and it sometimes seemed to me that
the political side of the labor movement had greater attractions for the members
than did the matter of hours of labor and wages.
■j Official proceedings, A. F. of L. Convention, Denver, 1S94.
° Constitution of the American Federation of Labor, Art. Ill, Sec. S.
' Judson Grenell, London, June 4, 1904.
[323]
40 The Annals of the American Academy
Every prominent labor man has his eye upon Parliament. He desires an
official position in his union, for it is the natural stepping-stone to becoming a
Councilman or an Alderman for a borough, from whence he naturally steps into
an official position in the County Council. Then he is ready to stand for some
Parliamentary district, which needs not be the one in which he resides. He is
free to select any constituency, and as strong men are sought after, a man who
has made a good record in subordinate political positions is sought after in close
districts, in the hope that the weight of his popularity may help to overcome the
opposition.
These observations suggest that the poor state of industrial
organization among the London workers is either the effect of the
condition under which office in a trade-union is regarded as the
"natural stepping-stone" to political office, or that the comparative
lack of interest among the workers in the matter of hours of labor
and wages is the cause of personal political activity among the
workers' representatives. The situation prevailing among the Lon-
don workers, as here described, is typical of that existing among
American workers in all similar circumstances. Throughout the
United States the growth and effectiveness of the trade-union is
generally in inverse ratio to its political activity, or to the political
activity of those intrusted with the administration of its affairs.
To quote further from the same source :8
It has often been asked: What will workingmen do if they ever obtain full
political power? Battersea, a city of 171,000 inhabitants, a borough of London,
and the home of John Burns, from which he is regularly returned to Parliament,
answers this question in part. Here the organized labor element "runs things,"
electing two-thirds of the administrative and legislative officials and using their
power to the fullest extent possible for those objects for which trade-unions and
governments are supposed to exist.
The platform upon which, presumably, the political efforts of
the organized workers of Battersea are centered stands for these
objects: Public baths, public wash houses, workingmen's homes,
sterilized milk for infants, public gymnasium and billiard rooms,
electric lighting for public and private use, workshops for making
building and road material, public lavatories, public libraries, work-
shop inspection, waterworks to supply the public baths, labor bureau.
These are not trade-union objects, but social objects. They
are objects for the attainment of which ' ' governments are supposed
" Judson Grenell, Battersea (London), June 1, 1904.
[324]
Political Action and Trade-Unionism 41
to exist;" but they are not objects which can properly occupy the
chief attention of a trade-union. With the exception of the demands
for "workshops for making building and road materials," "work-
shop inspection, " and "labor bureau, " the platform in question con-
tains nothing of interest especially and peculiarly to the workers, as
such: certainly, it contains nothing of immediate personal interest
to the workers of any particular craft. It is a platform in which the
public at large is, or ought to be, interested, and for the attainment
of which the public should organize. To say that the organized
labor element "runs things " — having in mind the things here noted —
is to suggest that it is neglecting the things which it ought to run, that
it is letting these things run themselves or leaving them to be run by
other elements.
In judging the work of organized labor it is not sufficient that
that work is in line with those objects for which governments are sup-
posed to exist, or with those objects concerning which most men are
agreed in theory. The prime test of organized labor consists, not in
the record of its public activities, not in the record of what it has
i forced from the government in the way of legislation, but in the record
of what it has forced from the employer in the way of higher wages,
shorter hours and improved working conditions generally — in short,
in the record of that which only a trade -union can do, ot that which
no government can do, of that which even the best government
ought not to attempt to do. It is by this test that the student must
judge the causes of the strength or weakness of trade-union sentiment
among the workers in any craft or locality, as it is by this test that
the workers themselves judge the trade-union and decide whether or
not it is of use to them.
An organization of workers may accomplish much good in social
and political ways, yet may be a trade-union in name only — may, in-
deed, be a complete failure in all the essential requirements of trade-
unionism. There is no necessary connection between social legisla-
tion and industrial reform. Indeed, to judge by the more conspicuous
instances of governmental concern for the welfare of the working class
it would appear that a Jow wage rate and a long workday are natural
concomitants of these forms of paternalism. Whether it be attrib-
utable to coincidence or to cause, a fact of common observation is
that in many localities in which ultra-progressive methods of govern-
[325]
42 The Annals of the American Academy
ment prevail there also prevails a low standard of industrial conditions.
The advocate of political action by the American trade-union cites
the example of those organizations in Europe which by their activity
in political affairs have compelled the enactment of much "reform"
legislation, meanwhile ignoring the more important point that in
their devotion to these measures the organizations in question have
abandoned all concern for the immediate and primary conditions of
labor. To this the opponents of political action reply by citing the
record of the American trade -union in the matter of increasing wages,
reducing the length of the workday and numerous other improve-
ments in the conditions under which labor is performed — improve-
ments unknown to the European worker or known to him only in
his dreams of political regeneration — and which make more im-
mediately and more fundamentally toward the comfort and inde-
pendence of the individual worker than any political or legislative
measure can possibly do. In principle there is little or no difference
between the public and the private measure of social or domestic
reform; the principle in each case is essentially eleemosynary; the
ultimate effect to be anticipated in each case is the same. The
workers who regard with suspicion the philanthropy of the individual
employer may, and in fact do, regard with equal distrust the philan-
thropy of the government, inspired, as both systems are, by the same
mistaken conception of the workers' real needs and by the same dis-
position to overlook the causes of poverty and degradation, and
having the same significance in the sum of things. The fact that
these measures of public philanthropy are secured through the agency
of the workers' organizations does not alter their character, does not
make them more palatable nor redeem them in any degree from the
error upon which they are based. That fact merely commits the
labor organization to responsibility for the false conception of the
principles of industrial reform, and to that extent weakens the labor
organization in the esteem of those who should, and who in the end
must, depend upon it for any real and permanent redress.
The Battersea platform declares for certain social or public re-
forms as the primary and essential objects of the body supporting
it; whereas, the platform of the American Federation of Labor, in
declaring for similar objects, also declares that these are secondary
and incidental to the real business of trade-unionism. This differ-
[326]
Political Action and Trade-Unionism 43
ence of conception regarding the fundamental purpose of the platform
leads the Battersea trade-unionists into politics and keeps the Amer-
ican trade-unionists within the sphere of trade-unionism. The im-
mediate result of this difference is seen in the difference between the
political club and the trade-union ; its final result is seen in the differ-
ence between the poorly organized condition of the workers in Lon-
don and the well organized condition of the workers in the average
American city.
It is apparent that the comparative lack of trade-union interest
among the London workers is the effect of undue political activity
on the part of those already organized or their representatives. The
statement that every prominent labor man in London regards official
position in his union as the "natural stepping-stone" to political
office contains in itself ample explanation of a lack of interest in
trade-unionism. The trade-union official who seeks political office
is the bane of the labor movement. The trade-union which adopts
the policy of political action makes political ambition inevitable on
the part of its officials. Devotion to the proper business of trade-
unionism on the part of its representatives is essential to the success
of a trade-union, as it is essential to the respect and confidence of its
members and their fellow -craftsmen. It follows, of course, that the
trade-union which would secure and retain the services of efficient
and devoted men must guard against imposing upon its officers any
duties or obligations of a political nature.
There can be no intermediate form of organization between the
trade-union and the political club. No form of organization can
?ombine trade-unionism and politics. The trade -union can not "go
nto politics" and remain a trade-union; if it would remain a trade-
mion it must keep out of politics ; if it takes political action it must
oecome to all intents and purposes a political body. The trade-union,
)y strict adherence to its proper functions, may raise wages, shorten
he workday and effect numerous other improvements in the con-
litions of labor; but, in the view of those who insist upon political
iction, these results are, after all, merely " palliatives, " unworthy the
lignity and deserts of the sovereign masses, and not to be compared
vith the beneficent and wholesale reforms obtainable by the simple
)rocess of organizing for one great ' ' strike at the ballot-box " ! Even
idmitting the power of the government to accomplish these ends,
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44 The Annals of the American Academy
the condition precedent to the exercise of that power, namely, prac-
tical unanimity among the workers upon questions of political prin-
ciple and policy, is an impossibility, a fact of which the advocates
of political action are themselves a sufficient proof, since dissension
and division are notoriously the common features of their political
activities. The only point upon which there is any unanimity among
the men who hold these views is that of hostility, overt or covert, to
trade-unionism. The adoption of political action by the trade-unions
by removing the only ground of common agreement among their
critics, within the labor movement, would inevitably result in split-
ting the latter into as many parties or factions as there are men in
that movement ambitious of leadership and capable of commanding
a following.
The proponents of political action hold that labor's wrongs arise
from a two-fold source, industrial and political; that the organiza-
tion of labor, to be fully effective, must use the political weapon of
the ballot as well as, and in preference to, the economic weapon of the
strike ; that the effort to reform the conditions of labor by economic
methods exclusively is a failure, and that the trade-union, being
already well established in the field of economic effort, should enter
the political field.
The opponents of political action take the ground that political
matters can be dealt with only by political organizations ; that labor
organizations, to be effective at all, must confine themselves to labor
matters ; that the purely economic policy of the trade-unions, so far
from being a failure, is a success the proofs of which are visible in
every step of the workers' progress, and that the trade-union which
enters the political field simply sacrifices whatever immediate good
it may be capable of, without accomplishing anything of promise for
the future.
The records of the labor movement contain numerous instances
of failure and destruction directly traceable to intervention in political
affairs, while they contain no instance of real and permanent ad-
vantage due to that cause. This record, while generally admitted
by those who favor political action, is variously ascribed to party
blunder and individual dishonesty, causes which, it would seem, are
very largely inherent in the nature of the subject. At any rate, the
facts go to prove that the mere talk of organizing the workers so that
[328]
Political Action and Trade -Unionism 45
they shall "vote as one man" is dangerous to the trade-union which
indulges in it. Wherever talk of that kind has reached the point of
realization it has resulted in undermining the spirt of unity, upon
which, more than upon mere numbers, the trade-union must depend
in those tests of physical endurance and personal loyalty to which
it must inevitably be subjected.
There can be no gainsaying the wisdom of the policy adopted
and adhered to by the American Federation of Labor and other
successful labor organizations, namely, the exclusion from the affairs
of trade-unionism of all matters upon which men are more inclined
to divide than to unite. The trade -union grows out of the trade in-
terest ; so long as it is controlled by that interest it is a body whose
elements are cohesive and whose power is concentrated. The trade-
union controlled otherwise than by the immediate interests of its
members is a mass of incongruous elements, without power, pre-
cision or permanency. The trade-union which is organized upon the
basis of common agreement among the workers concerning the con-
ditions of labor in a given industry, and which adheres to that basis,
is capable of improving these conditions to an extent proportioned
mainly to its awn numbers, intelligence and devotedness. In the
end it is improvement of this kind that tells in the progress of labor
generally. The prime usefulness of the trade -union consists not in
the power to elect public officials or to secure legislation, but in the
power to improve the immediate and personal conditions under which
labor is performed, to increase wages, to reduce hours, to make "shop
rules," to maintain a measure of equality in the terms of contract
between employer and employee, to interpose an alleviating influence
between master and man, and generally to do those things which
only a trade-union can do, which the trade-union must do if they are
to be done at all.
The fundamental error upon which political action is based con-
sists in crediting government with the power to solve the problems
that now affect the relations between employer and employee. So
long as the people exercise the controlling influence in government,
the wisdom of the latter can not rise above that of the people them-
selves, nor can its powers exceed those delegated to it by the people.
Upon the theory that lies at the root of a government of limited
powers, to wit, that in the people resides the source of all authority,
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46 The Annals of the American Academy
it is obvious that no government can be wise enough or strong enough
to do for its constituents that which the latter are not wise enough
or strong enough to do for themselves. To question these principles
is to question the power — nay, the right — of the people to govern
themselves. The theory of governmental control in the industrial
relations of the people, while logical enough in its origin— that is,
in European conceptions of government — is directly opposed to the
genius of American institutions. Precisely as the American citizen
leads in the political conception of government, as an agency re-
stricted to the performance of certain more or less clearly denned
functions of a public nature so the American worker leads in the in-
dustrial conception of trade-unionism, as an agency which, both of
right and of necessity, must discharge the functions appertaining to
the industrial phase of society.
The psychological basis of the sentiment, for political action is
to be found in that intellectual despair to which all men are momen-
tarily subject in their treatment of problems which press for solution
but which defy all known formulas. Where instinct commands and
reason fails the disposition to appeal to extrinsic sources of aid becomes
strong. The attitude of the American trade-unionist is that of appeal
to the spirit of independence and to a realization of the truth that
the workers are themselves the sole repository of power to better their
lot.
The solemn lesson of history, to-day and every day of our lives,
is that the workers must depend upon themselves for the improve-
ment of the conditions of labor. Their power inheres in labor, not
in the ballot ; it is the power to produce, and, in the last analysis, the
power to stop production. To conserve and concentrate that power
is the first and last duty of trade-unionism. The forces that domi-
nate society are physical, not intellectual. The labor problem can-
not be solved by rule and formula ; it can only be solved through con-
stant labor and more or less continual suffering. You can not solve
the labor problem by the ballot, nor by the bullet. As well might you
try to appease hunger by the intellectual process of reading a menu
or by the physical process of destroying the palate!
W. Macarthur.
San Francisco, Cat.
[33o]
COMPULSORY STATE INSURANCE OF WORKINGMEN
The merits of a teleological institution, such as a system of
compulsory State insurance of labor undoubtedly is, must be judged
by the degree of its success in accomplishing the results aimed at.
A certain agreement as to the final aim is therefore necessary
for an intelligent and fruitful discussion of the subject. The pur-
pose of labor insurance is a very definite one. It is not expected
to solve the "social problem in its entirety, " insofar as this prob-
lem embraces the whole question of equitable distribution of wealth
and a harmonious development of society towards higher forms
of organization. Labor insurance, or rather, insurance of work-
ingmen, is in many respects no different from all the other forms of
insurance — it is an effort to substitute a social guarantee against
the results of emergencies and accidents for the purely personal
responsibility which is still the rule in many countries.
Now, for that very reason, any system of labor insurance is vio-
lently objected to by many. If one prefers individual responsibility
to a social guarantee, whatever his argument, he will necessarily
, object most strenuously to a system of compulsory State insurance,
for the more complete and efficient the system, the more objection-
able will it seem to him. The limits of this paper do not permit an
exhaustive discussion of the comparative merits of labor insurance
> and saving, which is the only alternative of provision against the emer-
gencies of the future. It may briefly be indicated, however, that in
no other branch of insurance has the alternative of saving ever been
seriously insisted upon. Think what this principle would lead to in
the domain of fire, marine or any other form of insurance. The
modern business man prefers to insure himself against the effects of a
possible burglary, or even against the fluctuation of the markets.
This has always been pointed out as evidence of the greatest and most
commendable prudence. The increase of frequency of conflagrations
:>r burglaries or shipwrecks, even if it could be easily proven to be the
result of them, could never be seriously used as an argument against
the various forms of insurance.
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48 The Annals of the American Academy
Yet it cannot be denied that the workingman is much more
liable to meet with adversity than the comfortable home of a well-to-
do man is to go up in smoke and flame. Sickness, death, accident,
sudden unemployment — all these stare into the face of each and
every workingman. Old age, with accompanying incapacity to
work, is the inevitable fate of him whose only means of existence is
his labor power, and then only if wanted by the employer of labor.
To claim that any considerable degree of saving is possible for the
mass of the wage workers is to claim that the average wage of an
American worker is much too high for the satisfaction of his legitimate
immediate wants — an optimistic view of which the most partisan crier
for prosperity is but seldom guilty. And even if such saving were
possible, where is the guarantee against all these emergencies (sick-
ness, death, accidental injury), if they occur before the necessary
savings have been accumulated? It may be well to prepare oneself
for the "rainy day, " but will the "rainy day" delay its coming until
one is prepared?
The claim has recently been made by a trained economist and
sociologist,1 that saving (*'. e., a purely individual guarantee) is a much
higher, more efficient and commendable method of gaining the
security against possible emergencies, than insurance (i. e., a social
guarantee), and that only that form of insurance is commendable
which is a modified form of saving. This view is not infrequently
met with among American economists, notwithstanding the vast ex-
perience of Europe, which all points in the direction of insurance
rather than savings. When this European experience is pointed out,
the answer is invariably given that, no matter how successful in
European countries, with their strongly bureaucratic administra-
tions, State labor insurance is utterly at variance with the individ-
ualistic ideals of the American people. Things which are un-Amer-
ican to-day are very apt to become very much American to-morrow,
however, as the social history of this country for the last fifty years
teaches us, and the extreme individualism of the American people
(a purely historic growth which has acquired in the eyes of some the
appearance of almost generic immutability) has had its foundation
very much weakened of late by the continuous attacks of perceptible
social forces. If European experiences and figures can be best used
1 Prof. J. H. Hamilton: "Savings and Saving Institutions."
[332]
Compulsory State Insurance of Workingmen 49
to impress the general feasibility, practicability and usefulness of
State insurance, American experiences and statistics are perfectly
sufficient to break down the defense of inadaptability to local con-
ditions and our national psychology. In the magnificent building
for Social Economics at the Louisiana Purchase Exposition may be
found a small booth of a purely American insurance company which
makes a specialty of insurance of laborers, and only one branch of
that — the least important one — insurance against death. The booth
is decorated with statistical figures which bear directly upon the prob-
lem under discussion. The 13,448,000 industrial insurance policies
which are in force at the present time in the United States( as against
6,667,000 savings-bank accounts, only a smaller part of which prob-
ably belong to the wage-earning class of the country) bear strong evi-
dence that the American wage worker, no less than his European
brother, adheres to the principle of insurance and prefers a social
guarantee to purely personal responsibility and ' 'self-help."
This bit of social statistics may be used against the plan of well
regulated State insurance. It may be claimed, and in fact it has been
often claimed, that insofar as there is a demand for labor insurance,
it has been or may be supplied by private initiative, and that intro-
duction of the State into this undertaking would be an unnecessary
and harmful extension of governmental activity in competition with
private enterprise. It devolves upon us, therefore, to determine
whether State or private insurance is the better, the more efficient,
the more useful plan.
Judged simply by numerical results, the advantages of State in-
surance can hardly be overestimated. A comparison of German in-
surance statistics with the meager data obtainable in this country
leaves an impression which is hardly in favor of this country. Accord-
ing to the latest data2 "the following number of working persons have
enjoyed the benefits of: 1. Sick insurance — 3,617,022 sick persons
(with 66,652,488 sick days) with 163,400,000 marks indemnity
(sickness, death-money, as well as cost of medical attendance); 2.
Accident insurance — 585,596 wounded, 12,128 married women, 26,-
612 children, 256 parents (as dependent upon the wounded being
cared for in hospitals), 53,481 widows, 87,035 children, 3,147 parents
. . 2 Official catalogue of the exhibition of the German Empire at the International Expo-
sition, St. Louis, 1904. P. 342. The English of the original is faithfully followed.
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^o The Annals of the American Academy
(of deceased) — total, 768,255 persons, with 100,000,000 marks in-
demnity; 3. Invalid insurance — 549,000 invalid pensions amounting
to 66,300,000 marks, 203,000 old age pensions amounting to 24,700,-
000 marks; total number of pensions, 752,000, amounting to 91,000,-
000 marks; 191,000 persons with 6,900,000 refunded; 33,000 persons
in medical treatment with 7,100,000 marks, total, 976,000 persons
with 105,000,000 marks indemnity."
" From the above statement it will be seen that in one year over
five million persons in need of help received about 370,000,000
marks. " "Help" is rather an unfortunate word, smacking of char-
ity. Over five million people received a social indemnity for in-
dividual accidents and mishaps. What has the United States to
show as against this tremendous record?
There are no figures. As was recently shown by the writer else-
where,3 instead of sickness insurance we have medical charity with all
its harmful results, instead of accident insurance a series of common
law doctrines which make the employer's responsibility for injury
almost a myth, and instead of life and death insurance "the tre-
mendous system of exploitation of the poorest and neediest which
goes by the name of industrial insurance."
"We have in the United States labor insurance by unions, which
are financially weak and in which all the burden falls upon the workers
themselves. We have insurance by small private companies whose
object is gain, whose financial standing is doubtful, and whose methods
are often dishonest because of lack of control. And, finally, we have
insurance by employers, which, applying only to a few employees, is
probably accounted for in the difference of wages."
Experience, therefore, corroborates the conclusions of a priori
reasoning that nothing short of compulsory insurance can make the
benefits of insurance universal. A study of European statistics will
clearly indicate this deduction — that the less compulsory a system of
insurance is, the fewer people partake of its benefits.
Here we have the most powerful argument in favor of a system
of compulsory State insurance. The advantages of universal in-
surance are not only quantitative, in that it bestows the benefits of
insurance upon everybody instead of the selected few, but also qual-
itative, as we shall presently see. Here again a few "first principles "
8 Journal of Political Economy, June, 1904. P. 379.
[334]
Compulsory State Insurance of Workmgmen 51
must be enunciated. The writer takes the standpoint that it is the
condition of employees, and not of American employers, that calls
for corrective measures. That, he imagines, is pretty well agreed
upon by the modern, progressive American economist. It seems
clear, therefore, that the burden of labor insurance must not lie too
heavily upon the wage workers of the country. "The escape from
futi re suffering must not, if possible, be provided at the expense of a
perceptible reduction of present happiness, of which the average work-
ingman's stock is by no means any too large. " An efficient system
of labor insurance must not be a burden to the workingman, and from
the standpoint of the latter that system will be most efficient, the
weight of which will be felt least by him. Socially, the expenses of
labor insurance can in no way be considered an element of cost while
it represents a legitimate claim upon the value of the product, just
as fire or marine insurance does. And if this claim cause a distur-
bance in the existing process of "normal distribution, " it is certainly
desirable that this new claim should not be shifted upon the portion
the workingman had received. In other words, the "cost" of labor
insurance should fall upon the employer. Of course each system of
State labor insurance endeavors to meet this just demand by enforc-
ing contributions from the employers. Yet, even if the employer be
forced to pay all the expenses of labor insurance (which no system of
labor insurance at present requires), will the burden be shifted upon
the workingman and react upon his wages if the system should em-
brace only a portion of the wage earners instead of the whole class ;
for where the advantages of labor insurance are granted only to a
limited group, a certain mobility ot labor wTill act as a ready corrective
in adjusting wages.4 And universal insurance can only mean com-
pulsory insurance — that is, compulsory by the State. For a system
of insurance may come under the definition of "State insurance, " as,
for instance, the case with the German Krankenversicherung, the
actual work of which is done by co-operative organization under
voluntary control. State insurance need not necessarily mean that
the actual work of detail be done by bureaucratic organization. The
compulsion, regulation and control are the necessary factors.
To quote again from a previous study, "Proceeding from the
* For a fuller discussion of what the writer has called "the incidence of labor insurance"
see the article quoted in the Journal of Political Economy.
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52 The Annals of the American Academy
assumption that the incidence upon profits is the more desirable one,
we see that such incidence is less open to question where the employer
pays the premium rather than the employee." The necessity for
such contribution is hardly questioned by this time in Germany.
In America the fear of such contributions is the prime force of the
opposition to any system of labor insurance. Yet, if labor insurance
be intended to do away with degrading medical charity, with tedious
damage suits, and with poor- and workhouses, the justice of such con-
tributions from the industry and assistance from the State will appear
as self-evident and legitimate as is at present the appropriation for
charities and corrections. Any equitable distribution of the ex-
penses of insurance, based either upon the paying ability or the
responsibility for diseases, accidents, invalidity and fatalities, must
include the employer. This can be accomplished only through
some system of State insurance.
Moreover, if some system of universal labor insurance be acknowl-
edged necessary, it can easily be shown that State insurance is the
cheapest and most economical system in comparison with the re-
sults accomplished. Not only can a system of collection of contribu-
tions be best organized and cheapest, but a great many other econo-
mies may be introduced. Private insurance is a business, and as
well as any other business exists for profit. But any justification for
profit is here utterly lacking. The business of insurance is not a pro-
ductive business ; it is simply a process of distribution. The highest
business genius, the best management cannot add any increment of
value, no matter what theory of value we advocate. As a machine
for the transformation of heat into active energy is judged by the
percentage of loss of energy, so an insurance organization must be
judged by the relation of its business expenses and 'profits to the sum
total of money received. The only virtue, the only social service
private insurance business can lay claim to is the process of "solicit-
ing business," of spreading the advantages over larger and larger
areas ; but that can be done at one stroke by a legislative enactment.
As a basis of comparison between the expenses of State and private
insurance we have our American system of "industrial insurance" as
against the German system. Now, it is a well-known fact that the
very process of collection, the moving of premiums from the pockets
of the insured into the general treasurv consumes from 20 to 25 per
[336]
Compulsory State Insurance of Workingmen 53
cent, of the premiums.5 This does not take into consideration the
enormous expenses of the vast administrative machinery, central as
well as local, salaries, rent, etc. With the high commission the
agents are a set of miserably underpaid fellows, for a needlessly
large force of agents is kept, in order to stimulate them towards
writing "new business, "_ on which the commission is very high.
The work of collection scarcely demands more than two days' work
through the week, so that the rest of the time may be devoted to
soliciting. In other words, it is not a fair claim that the nature of
the business and the character of the insured necessitate this high ex-
pense ; it is not the material that causes so much friction, but the very
organization of the machine, constructed with the view of increasing
the business. The intelligent business or professional man, who gets
the insurance policy under the very best conditions, to whom in-
surance is often a most profitable investment, has no conception of the
peculiar conditions of an industrial insurance policy.
Our case for compulsory State insurance may be summed up in
the following few statements:
1. The economic condition of the wage earner is such as to pro-
vide no guarantee against poverty and destitution in case of injury,
sickness, or loss of work.
2. Individual saving cannot be relied upon to correct this evil,
and some sort of insurance becomes necessary.
3. Unless insurance be universal it will react heavily upon the
finances of the wrorkingman.
4. To be universal the system of insurance must be enforced and
controlled by the State ; that is, it must be a system of compulsory
State insurance.
5. A well regulated system of State insurance must be more
economical and efficient than private insurance systems.
As against these advantages many arguments are brought against
State insurance of labor, both from theoretical considerations as well
as from the practical study of the insurance results. It will be worth
while to examine these arguments.
It maybe said that ( 1) labor insurance represents an unwarranted
. 8 The collecting agent usually receives 15 per cent., or even 20 per cent. The ability of
investing the funds is here not taken into consideration, for it is of importance only in the
ordinary" branch of insurance, which approaches saving and is not available to the wage
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54 The Annals of the American Academy
interference of the State with private industry, with the relations of
capital and labor; (2) that it is an effort to abrogate the personal
liberty of the employer and employee; (3) that its object is to create
an unfair competition to the business of private insurance; and (4)
that it is tantamount to a process of confiscation from the employer
to the employee, and is, therefore, an obnoxious piece of class legis-
lation. It is this line of argument that is made use of in the effort
to show how perfectly un-American a system of "compulsory State
insurance" would be.
Our views of the legitimate functions of government are under-
going very rapid changes just now. Beginning with the protective
tariff and leading up to the "Oleomargarine law" and the efforts to
pass the Merchant Marine Subsidy Act, the American State has often
influenced conditions of private business. A system of well regulated
sickness and accident insurance is no more an infringement upon per-
sonal liberty than an efficient employers' liability act would be; in
fact, it is but a modified system of employers' liability, more efficient
and less troublesome. And if it create a competition to private in-
surance, this competition would be an excellent test to determine
how far this business of insurance is economically legitimate ; i. e.,
how far its profits are economically defensible, for a system of State
insurance would not eo ipso destroy the private business. The
economist has heard quite enough of this argument, we imagine, in
connection with the projects of parcels post, postal savings banks, and
the government ownership of telegraphs. And as to the personal
liberty of the employee, we might place against it the interests and
rights of the helpless wife and children, who are often left without
the slightest provision for the immediate future. In short, we still
have to hear of an argument which would represent anything more
than the natural inertia against any departure from the old, com-
placent practice of non-interference.
An exception must surely be made in favor of the argument of
excessive cost to the employers. Here we have a real social force
whose opposition to an important social measure is at least well de-
fined and easily understood.
In an extensive criticism of the German labor insurance law an
American writer emphasizes this point :6 "The general effect of the
• Henry W. Farnam, " The Psychology of German Workingmen's Insurance," Yale
Review, May, 1904.
[338]
Compulsory State Insurance of Workingmen 55
insurance law has been to permanently turn a certain stream of income
from the pockets of the taxpayers and employers into the pockets
of the wage receivers. " The force of this statement as an argument
against labor insurance will not appear self-evident to everybody,
however. For it has truly been said7 that if compulsory labor in-
surance influences wages in the broad sense of the word, *. e.y influ-
ences the true returns to the laborers for his work — it is no different
from the legislative regulation of the hours of labor, of sweating,
child labor, etc. If the point be that wages have been influenced in
the undesirable direction, it has to be shown that the wages in Ger-
many are too high and the profits too low ; that Germany is losing its
hold on the international market. Whoever makes an effort to prove
all that will have quite a difficult task on his hands. If the economic
effects of labor insurance be such as this criticism indicates, one of the
most serious economic objections to the system is thus removed;
viz: that the cost of insurance, being an element in the cost of pro-
duction, will be reflected in the price of the goods and thus the work-
ingmen, as consumers, will return what gain they obtained as pro-
ducers.
The author quoted, however, finds in the working system a
series of highly harmful psychological effects. "Compulsory insur-
ance has not filled the working classes with gratitude toward the
government, since it was avowedly a measure aimed at the Social
Democratic party and, therefore, regarded with suspicion, nor has it
made the workingmen friendly and conciliatory toward the employers,
since the burden of insurance is borne involuntarily by the latter. On
the other hand, the effect of giving them allowances and help in time
of trouble has apparently been to weaken the spirit of self-help, to in-
crease the demands upon the public purse, and to make them less
wise and responsible in their expenditure."
Surely the claims of novelty cannot be made in favor of these
arguments. They are interesting, nevertheless, in showing that
opposition to compulsory State insurance soon reduces itself to
opposition to the very principle of labor insurance, with the wise
pointing at savings as the real method. Yet no effort has ever been
made to show that the system of private saving could accomplish
those enormous economic and social results which labor insurance
7 Norbert Pinkus, "Workmen's Insurance in Germany," Yale Review, May, 1904.
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56 The Annals of the American Academy
evidently does. Opponents of labor insurance have not tired of
putting forth that argument of increased carelessness, of the practice
of deception for the last thirty years. It seems that by a process of
natural selection this argument has survived all these years as the
most weighty one, but the statistical basis of this claim will not stand
the most superficial analysis. Where dozens of causes and factors
have combined to increase the frequency of accidents, it is extremely
hazardous to put forth the system of labor insurance as the only real
factor. As well might we say that increase in ordinary life insurance
is the cause of the growing number of suicides, and rail against life
insurance; as well might we say that fire insurance has caused the
Chicago, the Baltimore, and the East River horrors, and loudly advo-
cate the abolition of fire insurance. Statistical evidence which is
usually brought in support of this view shows nothing beside the mere
fact that since the introduction of labor insurance in Germany — i. e.,
during the last two decades — the number of accidents reported has
increased. No more glaring example of the old fallacy, "Post hoc,
ergo propter hoc, " could be committed. The claim that labor in-
surance has been the main cause of the growth of German industry,
of German exports, and of half a dozen other important social phe-
nomena could be equally well established. In fine, has not the fre-
quency of accident grown in countries that have no system of labor
insurance as well ? Let us look at the statistics of railway accidents
in this country, for instance, where one out of each eleven trainmen
is injured each year, and one out of each 130 is killed. Above all
things, let us be fair and consistent, and let us not deny the over-
worked workingman the same human right to an excusable degree of
carelessness which even the men of leisure possess.
The assertion that compulsory labor insurance has not created
gratitude toward the government and conciliation toward employers
is to our view entirely beside the mark. Shorn of its oratorical flowers,
it simply means that compulsory State insurance of labor has not
sounded the death-knell to all other efforts of the wage workers to-
ward their betterment. This, however, is not the proper function
of labor insurance at all, no matter what the secret designs of a Bis-
marck may have been. That labor insurance might have such a re-
sult was certainly feared by the progressive German wage workers and
their friends. Because of this fear the plan of labor insurance, was
[34o]
Compulsory State Insurance of Workingmen 57
objected to by the German Social Democrats on one side and by ad-
vocates of trade-unionism, like L. Brentano, on the other. These fears
have been shown to be unfounded. For that very reason the antag-
onism between the wage workers' political and economic organiza-
tions on one hand and labor insurance on the other has gradually
vanished. German workingmen have long since found out, and the
American workingmen may soon find out, that a legally enacted and
controlled system of insurance against sickness, accident, invalidity,
old age, and death, instead of competing with, actually supplements
, the work of their labor organizations. Schultze-Delitch's ideal of a
trade-union as an organization for mutual charity has long since been
thrown overboard. American as well as English unions sometimes
still keep up some activity in that line, but they do it out of sheer
necessity, as a workingman brought to destitution by an accident or
disease may prove unsafe in his trade union-principles. It has been
acknowledged by many practical employers, as well as the majority
of American employees, that the trade-union is primarily a highly
specialized machine for a very definite object — a machine for collec-
tive bargaining — a machine whose function it is to use all legitimate
means to strike as good a bargain for its members as conditions will
permit. Though as yet there is no concerted demand on the part of
American-trade unionists for a system of compulsory State insurance,
it can hardly be doubted that the plan would appeal to them if
properly presented. It would greatly relieve the treasuries of those
unions which have at present a system of sickness and accident
benefits. With the transfer of the burden from the union to the State,
the former would be better prepared to furnish the one kind of
insurance that the unions are best able to grant — insurance against
unemployment.
The various efforts to provide for some system of State insurance
against unemployment have invariably failed, and this failure was
in no sense accidental, but inherent in the very nature of the problem.
Unemployment is rapidly becoming a more frequent cause of poverty
than even sickness or accident.8 But a free supply of means of ex-
istence to a healthy worker would be detrimental to character. Be-
sides, it would be perfectly idle to expect modern society to contri-
8 Prof. Farnam evidently forgets this break in the German system of insurance when he
quotes statistics of poverty and charity as an evidence of the inefficiency of State insurance.
[341]
58 The Annals of the American Academy
bute toward this support, when an army of unemployed is considered
a necessary condition for the working out of "economic laws."
Nor could the ordinary unemployment be easily differentiated
from voluntary unemployment, whether in its individual form of re-
fusing anything less than the union wage or the social form of strikes.
The basis of State insurance against unemployment must necessarily
be assistance in case of absolute impossibility to obtain work for
wages ever so small. The basis of trade-unionism is "No work for
less than the standard wage. " It is evident, therefore, that unless
the State be ready to regulate wages it cannot conduct a system of
unemployment insurance which would be satisfactory to the union
worker. Assistance in case of unemployment, as out-of-work bene-
fits as well as strike benefits, are the natural functions of the trade-
union. But even outside of this consideration the relegation of all
other forms of insurance to the State would in no way relieve the
unions from any interest in the matter. The benefits of labor insurance
will not accrue to a perfectly passive class of wage-earners. As Mr.
Pinkus says : ' ' Regulation of wages ought to, and indeed may, include
besides the means of support, also the insurance premium for sick-
ness, accident, invalidity, old age and lack of employment." The
tendency to discount the value of the insurance from the wages will
have to be actively contested ; the honest execution of any insurance
law must be actively guarded by the trade-unions. We may add that
an efficient system of labor insurance will never be legally enacted—
will never grow and develop without the active influence of trade-
union votes. A short experience would easily convince the union
worker that a well regulated system of compulsory State insurance
of labor will prove of great assistance to the trade-unions in their
struggle for the economic and social betterment of the American
workingman.
I. M Rubinow.
Washington, D. C.
[342]
WOMAN'S PLACE IN INDUSTRY AND LABOR
ORGANIZATIONS
This paper is about one-fourth of an unpublished monograph dealing in a comprehensive
way with " The Effects of the Industrial Organization of Society on the Status of Woman."
— -[The Editor.
Woman's Status in the Past.
Woman's status throughout the civilized world is different now
, from what it has been. This difference is not due to the special
' physical or mental merits suddenly discovered in her. And it is
: not because of her so-called increased industrial activity. From
time immemorial woman has been an industrial producer. We have
no accounts of the battles she has fought and won, no record of her
inventions, discoveries or creation of new ideas and ideals, but nearly
; every parent industry calls her mother. As far as primitive history
. can be reconstructed, it was she who originated and fostered the
peaceful arts of life. She it was who discovered the ability of labor.
She, "the slave before the slave existed," laid the foundation of
civilization, but, as regards her present industrial contributions, she
compares most unfavorably with woman of old. In savage or bar-
, barian society as food-bringer, weaver, skin-dresser, potter and
burden-bearer, she was the acknowledged economic factor. In
the words of a Chippawayan chief, ' ' Women are made to labor, one
of them can carry or haul as much as two men can do. They also
; pitch our tents, make and mend our clothing * * * and in fact,
there is no such thing as traveling any considerable distance in this
country without their assistance." l
In Greece and Rome woman's function as slave or supervisor of
slaves was generally recognized. This is true all through the Medi-
aeval Ages. "Her duties were so manifold that a conscientious
housewife had to be at her post from early in the morning till late
at night to fulfill them, and even then it was only possible to do. so
with the help of her daughters. * * * She had to spin, weave and
bleach, to make all the linen and clothes, to boil soap and make
candles and brew beer. In addition to these occupations she fre-
1 Spencer: "Principles of Sociology," vol. ii, p. 727.
[343]
6o The Annals of the American Academy
quently had to work in the fields and the garden and to attend to
the poultry and cattle. In short, she was a veritable Cinderella,
and her solitary recreation was going to church on Sunday."2
While woman's labor was thus very much in demand hitherto,
at present, when organized industry displaces domestic work, men
would only be too glad to do away with her industrial activity alto-
gether. They claim the ability to produce all the necessaries of
life conducive even to a higher standard of living than is possible at
a time when women competitors crowd the factories, shops, offices,
schools, and so forth.
Woman's present status is not due to her increased physical,
mental or industrial importance as compared with that of man.
Is it due to his increased chivalry, charity, generosity, liberality or
effeminacy? Perhaps. But the majority of men, whom we cannot
by any means deny to be possessed of most of those attributes,
are sincerely and intensely hostile to the so-called woman's move-
ment. They do all they possibly can to check and hinder her
advance. They give also very plausible reasons why woman should
not go beyond her "sphere" determined by natural instincts, trad-
itional and universal custom, etc. And yet, whether or not men's
claims and protests are fair, just and expedient, the fact is that they
are being respectfully ignored.
Within the last century woman has almost revolutionized
society as far as it concerns herself individually. As late as 1789
the situation of woman in France reaffirmed the triumph of the trad-
itional idea of her inferiority and the necessary subordination. Rich
or poor, women were equally removed from all public life, equally
deprived of all the means to cultivate their intelligence. Those who
had to earn their livelihood found it impossible because of their
ignorance. In England, the publication of the "Vindication of the
Rights of Woman" (1792) brought upon the author "torrents of
the vilest abuse." She was "denounced as a social outcast." "A
philosophizing serpent," Horace Walpole politely called her. In
the United States "up to 1848 the condition of married women under
the law was nearly as degraded as that of the slave on the plantation !"*
To-day, the industrial, educational, professional, social, legal, every
2 Bebel: "Woman in the Past, Present and Future," p. 40.
3Chauvin, Jeanne: "Les Professions Acessibles aux Femmes," p. 188.
[344]
Woman's Place in Industry and Labor Organizations 61
one except the political, status of woman in those countries, is sur-
prisingly high.
This great and rapid change cannot of course be accounted
for by any single reason. Ages of human experience in theory and
practice were necessary to enable both men and women not only to
develop, but also to accept, the new condition. As in all other
movements in human history the various influences and causes
leading to a great social upheaval combine ultimately into one great
force or principle which becomes the moving spirit in transforming
an entire social system, so in the woman's movement the same law
prevailed. Woman has early learned "to labor and to wait. " But
when the time had come for the recognition of the "feminine element"
in the progress of civilization, women without concert of action,
unknown to each other in every civilized country began, directly or
indirectly, to demand a broader sphere, direct representation in
society and the State. Lady Montague, Abigail Smith Adams,
Mary Wolstoncraft, Harriet Martineau, Mme. Stael, Mme. Rolland,
George Sand, Mme. D'Herricourt, Margaret Fuller, Elizabeth C.
Stanton and others, in as many different ways, demanded the same
thing. Aware of the necessity and the rightfulness of this demand
woman has taken her "cause" in her own hands. And, whether or
not men approve of it, whether or not her personal happiness is
thereby increased, woman is bound to demand her "rights" and
public opinion must sanction it. The condition in the modern
organization of society makes it unavoidable.
Conditions Favoring a Rise in Woman's Status.
The argument for a woman's "sphere " may continue to be advo-
cated by a certain type of men and women, too, but the question
itself becomes less important as society conceives its raison d'etre
to be neither military nor religious nor any other purpose but the
well-being of its constituent, individual members. In a democratic
society of this kind, wThere individuals have their choice in selecting
vocations and the power to determine social values, they will naturally
demand and receive their desired place in society. We see this idea
realizing itself in the growing demands and gains of men since they
became independent individuals, instead of being the property of or
belonging to a state, an individual or a group of individuals. As
[345]
62 The Annals of the American Academy
long as men fought or worked for a chief, a king, an emperor, a lord
on earth or served professionally a King in Heaven, they also stood
in successive grades of subordination. For it was not society
including themselves that determined men's position in the world.
"L'etat, c'est moi" is the well-known motto of kings, and the same
is carried out in the hierarchy of the Church. "By the grace of the
Lord, the King, is a man high or low." ' Similar was the case of
woman, but, of course, in a more complex form, since she was a
subject's subject as well as an object of his emotions. As long as
the father or husband was the sole employer there could be no question
of social remuneration. A woman worked for a private man who
paid her "in kind," according to the dictates of his caprice, "finer
sentiments," or reasonableness. There was practically no society
or state for her apart from the man she happened to belong to. She
did not work for society and, therefore, had no place in it, except as
a man's property or protege\4 In the exceptional cases, where she
was supposed to serve the State, as in Sparta and in Plato's Republic,
she was given a very high position.
But as soon as woman entered the factory, she became not only
a social producer, but also an independent worker; i. e.} her work
had to be paid for at a definite rate, otherwise she could leave one
employer for another. She now came into contact, moreover, with
a new order of man, the strange employer who was emotionally
indifferent to her, who had no claims over her, either as father,
husband, or master, except as a wage-payer. He had no special
reason to suppress or subject her. Individual skill had to be acknowl-
edged. Of course he met a very humble, submissive, ignorant, non-
resisting creature and he took full advantage of these "feminine
virtues" in cutting down her wages to the lowest point possible.
"The mass of women had neither power nor wish to protest, and thus
the few traces we find of their earliest connection with labor show us
that they accepted a bare subsistence as all to which they were
entitled, and were grateful if they escaped the beating which the
lower order of Englishmen still regards it as his right to give !"5 The
employers' cruel treatment of women and their followers, the chil-
dren, the conflict between the employers and the workingmen over
•Johnson's Cyclopedia: p. 612.
8 Campbell. Helen: "Women Wage-Earners," p. 52
[346]
Woman's Place in Industry and Labor Organizations 63
woman's employment and the fact that women were now social
producers forced society to interfere in their behalf by means of
legislation.
On the other hand, since the Industrial Revolution has taken
place, the State, in the progressive countries, is ever more assuming
the characteristics of an industrial organization. We may call it
a limited monarchy, a republic or a political democracy; but its
essential, its dominant interests are industry, and its concomitants,
trade and commerce on an international scale. In their external
relations the leading modern States are bent upon extending their
economic activities through treaty right and acquisition of territory
as markets. Internally their legislatures are largely busying them-
selves with the adjustment or the regulation of economic interests.
"The past twenty-five years have been a period of incessant activity
by legislatures and courts in prescribing the duties and limiting the
powers and privileges of railway and express companies, telegraph
companies, industrial combinations and trusts."6 The warrior and
the clergyman are still present. But military force is a last resort,
when other diplomatic means fail to secure commercial privileges;
whereas, the Church, incorporated religion, is a private affair which
may or may not be supported by individuals or groups of individuals.
The captain of industry and the ethical teacher are gradually taking
the place of the soldier and the theological teacher, respectively.
Both have a place for woman's activity. One has given her a chance
to become economically independent, the other, the moral motive
"that makes for largeness of conscious life," the belief "that many
things can be made better than they are at present and that life in
many ways can be made more desirable."
The conditions in modern society favorable to a rise of woman's
status are chiefly these : the opportunities for economic independence
and direct service to society; the chances that man, the educator,
the employer, and the legislator, may judge her rationally instead of
emotionally as heretofore the father and the husband did ; the decreas-
ing importance of man as a military power, thus in a sense equalizing
the social value of men and women ; and the modern ethics advocating
an increase of human happiness in this world rather than in some
other one. Here woman is specially fit to do something.
6 Prof. Giddings: "Democracy and Empire," p. 108.
[347]
64 The Annals of the American Academy
Industrial Activity of Women.
Economic writers generally explain woman's entrance into in-
dustry as a "wonder" of the age. Machinery, necessity, starvation
or its extreme opposite "love of luxury" are given as chief causes.
The fact that woman is only following her old pursuits while sharing
in the general expansion of industry is rarely if ever, emphasized.
She is regarded as usurping man's place, whereas in reality "the spirit
of the living creature in the wheels of machinery is the genius of
industrialism originated and fostered by women."7 What this
industrial age has effected is not woman's entrance into industry,
but the social recognition that woman is an independent, economic
factor as distinguished from a domestic worker. Writes Carroll D.
Wright : " It cannot be said that women and children constituted an
economic factor during the colonial days. Their labor was not in
demand except in a domestic sense, to any great extent."8 "But
their (women's) more extended employment as independent wage-
workers dates practically from the period between 18 15 to 1830.
They followed the textile industries from the household into the
factories and the consolidation of industry in large establishments
instead of small individual shops, broadened the field and gave women
opportunities of entering independently in the gainful pursuits
* * * which they gladly embraced."9 Under the new conditions,
"it is evident," says John A. Hobson, "that many forces are at
work which tend to equalize the productivity of men and women in
industry, the evolution of machinery adapted to the weaker physique
of women; the breakdown of customs excluding women from many
occupations ; the growth of restrictions upon male adult labor with
regard to their working day, etc., correspondent with those placed
upon women; improved mobility of woman's labor by cheaper and
more facile transport in large cities; the recognition of a growing
number of women that matrimony is not the only livelihood open to
them, but that an industrial life is preferable and possible."10
The proof of the economic value of women's industrial produc-
tivity is undoubtedly given by the fact that their numbers in all
industries are steadily increasing. If their work did not pay, em-
7 Mason, Otis: "Woman's Share in Primitive Culture," p. 4.
•Wright, Carroll D.: "Industrial Evolution of the United States," p. 200.
9 Wright: p. 202.
10 Hobson: "Evolution of Modern Capitalism," p. 304.
[348]
Woman's Place in Industry and Labor Organizations 65
ployers would certainly not admit them. In England, according to
Mr. Hobson, during the half century 1841 and 1891, the number of
women engaged in manufactures has increased by 22 1 per cent., while
that of men increased by 53 per cent. "But the movement," he
adds, "is by no means peculiar to the textile and dress industries
which may appear specially adapted to the faculties of women.
Wherever women have got a firm footing in a manufacture a similar
movement is traceable ; the relative rate of increase in the employ-
ment of women exceeds that of men, even where the numbers of the
latter do not show an absolute decline. Such industries are, wood
furniture and carriages ; painting and bookbinding; paper, floorcloths,
feathers, leather, glues ; food, drink, smoking; earthenware, machinery,
tools. Women have also obtained employment in connection with
other industries which are still in the main 'male ' industries, and in
which no women or very few were engaged in 1841. Such are fuel,
gas, chemicals; watches, instruments, toys. The only group of
machine industries in which their numbers have not increased more
rapidly than those of men since 1851 are the metal industries. Over
some of these, however, they are obtaining an increased hold. In
the more mechanical portions of the growing 'cycle' of industry,
hollow-ware and in certain departments of the watch-making trade
they are ousting male labor, executing with machinery the work
formerly done by male hand-workers."11
The following table, taken from the Twelfth Census of the United
States, shows the general progress of American women in all gainful
occupations, since 1880, as compared with that of men:
1900 1890
1880
Number
Per
Cent
Number
Per
Cent
Number
Per
Cent
All occupations, Males
23,754,205
5,319,912
9,404,429
977,336
828,163
430,576
3,485,208
2,095,449
4,263,617
503,397
5,772,788
1,313,204
100
100
39.6
18.4
3.5
8.1
14.7
39.4
17.9
9.4
24.3
24.7
18,821,090
3,914,571
7,887,042
678,884
632,646
311,687
2,553,161
1,667,651
3,097,701
228.421
4,650,540
1,027,928
100
100
41.9
17.3
3.4
8.0
13.6
42.6
16.4
5.8
24.7
26.3
14,744,942
2,647,157
7,119,365
594,510
425,947
177,255
2,242,309
1,181,506
1,803,629
62,852
3,153,692
631,034
100
100
Agricultural Pursuits, Males
48.3
Females
Professional Service, Males
22.5
2.9
" Females
Domestic and Personal Service, Males. .
' " " Females
Trade and Transportation, Males
Females . . .
Manuf. and Mechan. Pursuits, Males . .
" Females
6.7
15.2
44.6
12.2
2.4
21.4
23.8
11 Hobson, p. 295.
[349]
66 The Annals of the American Academy
In the least "female" occupation, "trade and transportation,"
the percentage for women has increased from 2.4 vs. 12.2 for men in
1880 to 9.4 vs. 17.9 for men in 1900 ; while the percentage in the lead-
ing female occupation, "domestic and personal service," is gradually
decreasing from 44.6 in 1880 to 42.6 in 1890, to 39.4 m 1900. "All the
industries in the United States, and their variety is practically unlimi-
ted, were assigned, " says Mr. Wright, "to one of three hundred and
sixty-nine groups at the Census of 1890. An examination of the totals
of these groups discloses the fact that in only nine of them are no women
and children employed. Their employment, therefore, either as clerks,
operatives or apprentices, may be considered universal. The appar-
ent number of vocations in which women cannot engage is constantly
diminishing and is now relatively very small."12 This statement
may be compared with one made in 1840 by Harriet Martineau, who
found "only seven employments open to women: teaching, needle-
work, keeping boarders, working in cotton mills, type-setting, book-
binding and domestic service."13
Women's Wages.
The growing appreciation of woman's work is indicated by a
relative rise in wages. "The greatest percentage of gain in average
wages in the cotton industries is in favor of the female employees. " 14
The average weekly earnings in cotton factories of New England for
women in 1831 ranged from $2.20 to $2.60, and for men, from $4.50
to $7.00. For women in 1880 it was $6.37, and for men, $9.05.
In the same industry for the entire United States the average weekly
wage for women in 1890 was $5.53, ranging from $3.21 to $6.42.
For men in 1890 it was $7.75, ranging from $5.17 to $10.44. "In
1 83 1 men's wage was twice as great as women's; in 1880 it was less
than one-third greater. Between 1831 and 1880 men's wages had
increased 38 per cent.; woman's, 149 per cent. * * * A careful
examination of the actual earnings of women discloses the fact that in
many industries their average earnings equal or exceed the earnings
of men. This is especially true of the piece workers. "15 In general,
however, it must be said that woman's wages as compared with
man's is considerably icvver. But this is easily explained, when we
12 Wright, p. 209.
™Ibid., p. 202.
™Ibid., p. 210
16 Ibid., p. 210.
[350]
Woman's Place in Industry and Labor Organizations 67
consider the fact that "she has stepped out of industrial subjection
and come into the industrial system as an entirely new economic
factor. If there were no other reasons this alone would be sufficient
to keep her wages low and prevent their very rapid increase. "lfl
Women in Labor Organizations.
Professor Mason, in his book on "Woman's Share in Primitive
Culture," devotes a chapter to woman as a Jack-at-all-Trades, and
remarks that in the entire course of human history the combination
of abilities in one woman stands in sharp contrast with the co-opera-
tion of many individuals at one duty or activity among men. "In
co-operation, " he says, "women have always been weak. There are
few duties that they have in common. Even as beasts of burden
they seldom worked in pairs. " 17 Unless we can realize what must be
the effect of centuries of isolated work we can hardly explain the ill-
success of women's trade-unionism, nor appreciate the progress
already made by women in co-operating with one another for various
other purposes. "In industry women, as a class, are just beginning
to understand the power and the force which come from organiza-
tion, "18 says Mr. Wright. This is true; but woman's entrance into
labor-unions took place before she became conscious of her "class."
The employers' persistence in keeping women at the trades,
wherever wages could be saved, and the workingmen's conviction
that they must either leave their trades or admit women to their
unions was the real cause of women's first connection with unionism.
There was, of course, a strong opposition. "The eighteenth century
trade clubs of hatters, basketmakers or compositors would have
instantly struck against any attempt to put a woman to any part of
their craft. " The intensity of resentment and abhorrence with which
the average workingman regards the idea of woman entering his
trade equals that displayed by the medical practitioner of the last
generation. "19 The Lancashire weavers alone never made any sex dis-
tinctions. The various organizations of weavers have from the intro-
duction of the power-loom included women on the same terms as
men.
"Wright, p. 212.
17 Mason, p. 160.
18 Wright, p. 213.
19 Webb, p. 496. (' ' Industrial Democracy. ")
[351]
68 The Annals of the American Academy
The typical status of woman in the "male" occupations may be
illustrated by the following resolution passed by the London society
of compositors, 1886: "While strongly of opinion that women are
not physically capable of performing the duties of a compositor,
this conference recommends their admission to membership of the
various Typographical Unions upon the same conditions as journey-
men, provided always the females are paid strictly in accordance
with scale. "20 The standard rate practically excludes sex competition,
while it does not debar a woman from a man's work, provided she
wins her way "by capacity not by underbidding."
In Germany, the workingmen for a long time believed that the
employment of women could be restricted. "But, in spite of all
efforts of restriction, the employment of women increased constantly
until five and a half millions, according to the Census of 1882, were
wage -earners. * * * Then only did the workingmen realize that
women workers were no longer a factor to be neglected, and that equal
duties towards society gave them equal rights. At their Partei-
tag or Annual Congress held at Halle in 1890, the Social Democrats
therefore passed a resolution demanding the full equality of the sexes
in the State and society; and the next year at Brussels, the Inter-
national Socialists' Congress adopted the same resolution unani-
mously. After 1892 women were permitted to choose delegates to
the Annual Congress and now the members of the workingwomen's
association are an integral factor of the Social Democratic Party."21
In the United States, the Knights of Labor and the Granger
associations of the Western Farmers have been very liberal in the
admission of women. The Western Farmers formulated (1870) "a
principle" that no Grange should be organized or exist without women.
The more conservative men, too, began about 1884 to receive women
in their unions. The rapid advance here made is evident in the
United Garment Workers' Union. "In its establishment (1891)
women bore no part, either directly or indirectly," says Miss Hurd.
"In April, 1902, the union was composed of 179 local bodies, of which
83 admitted men only, while 96 were made up either exclusively of
women or of both men and women."22 Their number of delegates
at the conventions increased from 2 out of 53 m 1894 to 18 out of 56
20 Webb, p. 500. t '
21 Russell, Alys.: "Social Democracy and the Woman Question in Germany," pp. 187-8.
22 Hurd, p. 168.
[352]
Woman's Place in Industry and Labor Organizations 69
in 1900 and 23 out of 88 in 1901.23 "An interesting phase of the chang-
ing attitude of women toward unions is revealed, " says John Mitchell,
"by the action of the Chicago Federation of Teachers. The teachers
of Chicago, recognizing that they were wage-earners and realizing
the similarity of their aims and ideals with those of the great body
of trade-unionists, threw their fortunes in with their fellow -workers
anc1 became affiliated with the Chicago Federation of Labor. " That
woman as a factor in organized labor is considered important, the
words of the most prominent labor-leader of to-day amply testifies:
"The future will undoubtedly show a vast strengthening of the labor
movement through the compact organization of the women employed
in American industries."24
New York City Sophie Yudelson
23 Hurd, p. 169.
2* Mitchell : ' ' Organized Labor, " p. 135.
[353]
COMMUNICATION
STREET RAILWAYS IN PHILADELPHIA SINCE 1900
In order to understand the recent developments in the street railway situation
in Philadelphia, it will be necessary to review the peculiar conditions which
existed a few years ago. The development of the city has been along unusual lines
— a glance at the map will show that in a north and south direction the city is
from fourteen to eighteen miles long, while in an east and west direction the city
limits extend only six miles from the Delaware River.
Several causes can be assigned for this peculiar and unusual phenomenon: in
the first place it has been only a comparatively short time since the Schuylkill
River was spanned with bridges capable of fulfilling modern requirements; again,
the poor transportation facilities existing until the introduction of electricity
forced the merchants and their employees to live close to the Delaware, along
which stretched the manufacturing and mercantile district. As a consequence,
the growth towards the north has been unnaturally great and only during the
past decade has the movement towards the west been at all rapid.
Ten years ago a change of cars was necessary to travel the six miles to Sixty-
third and Market Streets, while at the same time one could ride three times as
far, without a change, on a number of lines running north and south. Another
fact to be noticed is that the numbered streets were very generally occupied by
car tracks before 1893, while those running east and west were not so generally in
use.
In 1895 the Union Traction Company had been formed for the purpose of
leasing and controlling every road in the city. Scarcely had this been accom-
plished when the new company, confident in the security of its monopoly, abol-
ished the free transfers, and in other ways curtailed the privileges which the pub-
lic had come to look upon as inviolable. Developments established the correct-
ness of their conclusions for the angry protests brought forth no results, and in a
short time the agitation for retaliatory measures died out entirely, the people
seeming to be reconciled to the new conditions.
This was the situation when, in the early part of 1901, a plan was announced
in the Philadelphia North American, which, if carried out, would destroy the
monopoly which the Union Traction Company enjoyed. The Johnson syndicate,
composed of Tom L. and Albert, who had amassed a fortune and made them-
selves famous by their street car lines in Cleveland, proposed constructing a net-
work of street railways over the unoccupied streets of Philadelphia, the backbone
of their system being a Broad Street surface line. This was designed to be the
Philadelphia connection of their extensive system known as the Lehigh Valley
Traction Company. They asked, however, for few lines running east and west,
because they had no suburban lines in that direction. Their application to the
City Councils for the necessary franchises, in which they promised to give the
[354]
Communica tion 71
on
people the most liberal service was opposed in the Councils by the Uni
Traction Company and the other existing transportation interests in the city.
The State Legislature, however, for reasons that have not been fully ex-
plained, was quite willing to pass laws giving away electric railway franchises.
In the spring of 1901 two bills were introduced into the Pennsylvania
Legislature known as the Emery and Focht Bills, which were rushed
through the committees, given the necessary preliminary readings, and
earlv in June were passed. Some of their important features are as
follows: Senator Focht's bill is entitled "An act to provide tor the in-
corporation and government of passenger railways, either elevated or
underground, or partly elevated or partly underground: with surface rights."
On its face the bill seems to limit the corporation to elevated or underground roads.
Section 14 gives the right to operate connecting lines on any turnpike or turn-
pikes, which in addition to the right of eminent domain contained in section 7,
it is believed, will permit the road to operate a continuous line on the surface of
the property acquired under this grant and on the public turnpikes. It was pro-
vided that the capital stock shall not be less than $50,000 for every mile of road
to be constructed, and before articles of incorporation are filed at least $25,000
of stock for every mile of road shall have been subscribed and 10 per cent, in cash
paid to the directors. Section 6 permits the corporations to borrow money not
to exceed the amount of capital stock authorized, and not equal to the cash capital
paid in, as was provided in other acts. This would permit the unlimited issue of
bonds with practically no cash outlay in stock. The Emery Bill, which amends
the general act of 1889 and all local and special laws, is the enabling act and is
broad in its scope. Under its provisions no street or boulevard is excepted, pro-
vided the City Councils see fit to grant the necessary franchise. One section
provides for the forfeiture of the charter if the work is not begun within two years
and completed within five years. One power granted under the act permits the
corporation to sell its own franchise and road and acquire others by purchase, if
it sees fit. This can even be so of corporations formed under other acts, there
being no limitations to the right. An amendment adopted to the act forbids any
company so incorporated from connecting its tracks with the tracks of any rail-
road company carrying both passengers and freight, or interchange of cars with
any such company. This was added at the instance of the steam railroad com-
panies who feared that otherwise their position might be seriously weakened.
Governor Stone signed these bills at midnight on June 7. At once there
followed a great rush of charters for street railroad companies to operate surface,
elevated or underground lines, as the case might be, not only in Philadelphia and
Pittsburgh, but also in Montgomery, Chester and Delaware Counties and many
cities throughout the State. Each applicant understood that if he should be
officially recognized as the first for the particular streets named in the application,
he could, under the new law, exclude all others from obtaining a charter for those
streets during the two years allowed for obtaining permission from the local
authorities, and for seven years more, by obtaining the permission and going
on with the work. Under such conditions, disputes arose as to who should receive
[355]
72 The Annats of the American Academy
the coveted prizes. Accordingly, on June 19, the Legislature passed two sup-
plementary bills: the first, known as the Scott Bill, supplements the Focht Bill
and places in the hands of the Governor, Attorney-General and the Secretary of
the Commonwealth the power to say what charters shall be issued. The other
bill, known as the Focht Supplement for the Emery Law, authorizes the
construction of rapid transit roads only on securing the consent of the local
authorities.
Turning again to a consideration of conditions in Philadelphia we find,
on June 12, 1901, that both branches of the City Councils of Philadelphia passed
ordinances authorizing thirteen new companies, one underground, five elevated,
and seven surface lines, which were given the right to operate street railways on
practically all the lines available for that purpose, including Broad and Diamond
Streets. The incorporators of all of them were Robert H. Foerderer, Clarence
Wolf , Michael Murphy and John M. Mack. A list of the roads with the authorized
capital stock follows:
The Broad Street Subway Passenger Railway Company $1,250,000
The Broad Street Rapid Transit Street Railway Company 150,000
Passyunk Avenue Elevated Passenger Railway Company 350,000
The Chestnut Hill and Glenside Rapid Transit Street Railway Com-
pany 150,000
The Market Street Elevated Passenger Railway Company 1,500,000
The Ridge Avenue Elevated Passenger Railway Company 850,000
The Frankf ord Elevated Passenger Railway Company 750,000
The Germantown Avenue Elevated Passenger Railway Company . . . 900,000
The Southern Rapid Transit Street Railway Company 90,000
The Eastern Rapid Transit Street Railway Company 540,000
The Central Rapid Transit Street Railway Company 60,000
The Western Rapid Transit Street Railway Company 360,000
The Northern Rapid Transit Street Railway Company 228,000
These lines covered over a hundred and twenty miles of street, and prac-
tically shut out forever all other companies from the streets of Philadelphia.
Some of the provisions of these ordinances were: Five cent maximum fares on
all lines; work to be started within two years and completed within seven; from
the net earnings of the Broad Street Subway, after exceeding six per cent., the
company was to pay five per cent, of the excess profits into the city treasury;
the surface tracks on Broad Street were to be so constructed as to permit the erec-
tion of elevated roads; the companies were to pave and maintain all streets
traversed by their tracks without cost to the city; the cars were to run on the
elevated roads every five minutes between six and nine A. M., and between four
thirty and seven P. M. No provision wTas made for running night trains. The
Broad Street Subway was allowed to rent to other corporations tubes for pipes,
conduits and wires, except sewer and water pipes. The underground and ele-
vated railroads were authorized to occupy the highway as needed for stations and
approaches without paying rentals.
As a protest to the Mayor against signing these ordinances, giving away
[356]
Communication
73
franchises of great value, Mr. John Wanamaker, on June 13, offered to
pay to the city $2,500,000 for the same franchises and deposited $250,000 with the
Real Estate Trust Company as security of his sincerity. The Mayor, however,
signed the ordinances the same night. Nine days later Mr. John Wanamaker,
renewing his offer to the city of $2,500,000 for the franchises, offered also a $500,-
000 bonus to Congressman Foerderer and his associates if they would convey to
him the grants and corporation privileges they had secured. He also agreed to
guarantee three-cent fares during certain hours of the day and to return the
franchises to the city any time within ten years, provided the city j5ay him back
the actual money invested. If his offer was not acceptable, he requested that the
owners of the franchises name the sum which they would take for the privileges.
However, no notice was taken of his communication.
It at once became apparent that efforts were being made to force the Union
Traction Company to buy the franchises. The most powerful weapon held by
those opposing the Union Traction Company was the city ordinance of 1893,
granting the overhead trolley privilege which required the company to place all
their wires underground whenever the Councils should so direct. If Councils
should insist on this, the Union Traction Company, already staggering under
immense fixed charges, would be forced into the hands of a receiver. The positive
denials of the officials of the Union Traction Company of any proposed purchase
of its interests by its rivals changed gradually to evasions, and by the end of 1901
finally to an admission that "while nothing definite had been done, yet cordial
relations now existed between the two groups." The final outcome was not
left long in doubt, for on March 3, 1902, the Board of Directors of the Union Trac-
tion Company passed resolutions recommending to the stockholders the accept-
ance of the offer of John M. Mack and his associates to lease the road to a new
company to be incorporated to be known as the Consolidated Traction Company,
which was to have a capital stock of $30,000,000, divided into $50 shares, of
which $5 was to be paid in at present. The lease was to be for 999 years from
July 1, 1902, on the following conditions: The new company was to guarantee
$1.50 per share (3 %) on the stock of the Union Traction Company for the first
two years; $2 per share (4%) the third and fourth years; $2.50 per share (5%)
the fifth and sixth years; and $3 (6%) the seventh and the remaining nine hun-
dred ninety-two years of the lease ; also to pay all fixed charges of the underlying
companies' rentals, interest and taxes of every kind and nature.
The Consolidated Traction Company agreed to acquire all the stock of the
thirteen companies which had obtained franchises in the previous June. The
stockholders of the Union Traction Company were given the right to subscribe
for $7,500,000 of the stock of the new company, or one share for each four shares
of their Union Traction Stock holdings the remaining shares of the Consolidated,
$22,500,000 to be subscribed for by Mr. Mack and his associates. A special meet-
ing of the stockholders was called for May 5 to consider the acceptance or
rejection of this proposition.
In the meantime opposition had been centering around the proposed con-
struction of the elevated road on Market Street. Business men complained that
[357]
74 The Annals of the American Academy
it would lessen the usefulness of the thoroughfare and cut off the light in their
stores. The determining factor, however, was the opposition of the Pennsyl-
vania Railroad Company, which had sometime previously secured from Councils
the privilege of erecting a covered way over Market Street, between the Arcade
Building and Broad Street Station. This practically had the effect of blocking
the proposed elevated line. The syndicate was forced to find some new plan if
they wished to make the sale to the new company. Accordingly, in April 1902,
an ordinance was passed by Councils and signed by Mayor Ashbridge, granting
to the Market Street Elevated Passenger Railway a franchise to build an under-
ground railway under Market Street, from the Delaware River to the County
line, or any part thereof, with the right to come upon the surface of Market Street
between Twenty-second Street and the Schuylkill River. Work must be begun
within one year and completed within three years thereafter. Under the franchise
the company is required to lay improved grooved rails and repave with asphalt
the entire street surface from the Delaware River to Fifteenth Street.
On May 1, 1902, the Philadelphia Rapid Transit Company was chartered
with $10,000 capital stock. The incorporators were all clerks in the employ of
John M. Mack and James P. McNichol. The capital stock was at once increased
to $30,000,000 in shares of $50 each. This corporation was to take the place of
the Consolidated Traction Company, whose proposition regarding a lease the
stockholders of the Union Traction Company were to consider four days later.
The result was the unanimous ratification of the proposition to lease the Traction
Company's properties to the new corporation upon the terms already given. The
stock of the new company was soon afterwards listed on the Philadelphia Stock
Exchange. On July 1, 1902, the actual transfer took place.
The Rapid Transit Company started with fixed charges $900,000 a year
greater than the Union Traction Company had had to meet, and this will be grad-
ually increased as the rental advances. The new company possessed all the
Mack-Foerderer franchises except the Broad Street Subway, which was not trans-
ferred until some months later. President Parsons estimated that between six
and eight million dollars would be required on the Market Street Subway-Ele-
vated System, excluding the Woodland and Lancaster Avenue elevated exten-
sion. This necessitated the assessment of the stock of the new company, and,
on May 18, the directors voted to call for an additional $5 per share,
thus making the shares $10 paid. With this money work was started in a desul-
tory manner upon the subway, and numerous improvements and betterments
were made to other parts of the system.
The time was drawing near when the Rapid Transit Company must either
actually begin work on all their franchises or forfeit them. Since they could not
afford to do this, a plan was devised of taking advantage of the provision in the
charters allowing consolidation, and accordingly, the Market Street Elevated
Passenger Railway Company was formed with $5,600,000 of authorized capital
stock, by the consolidation and merging of the following companies : The Market
Street Elevated Passenger Railway Company, the Germantown Avenue Elevated
Passenger Railway Company, the Passyunk Avenue Elevated Passenger Railway
[358]
Communication 75
Company and the Broad Street Subway Passenger Railway Company. This
action was validated by an ordinance of Councils which, while relieving the Rapid
Transit Company of the obligation to begin work within the two year period
originally provided, requires the completion of the several lines in a certain order
within periods ranging respectively from two to ten years. It also requires the
company to furnish a bond of $250,000 to cover the performance of this agreement.
The actual commencement of work on the Market Street Subway, it is held by
eminent counsel, satisfies the provisions of the State law and keeps alive the
other franchises now held by the Market Street Elevated Passenger Railway
Company.
In order to make the monopoly in Philadelphia absolutely complete and to
prevent the recurrence of the conditions which brought about the formation of
the Rapid Transit Company, the following new companies were incorporated in
June, 1903, by representatives of the Rapid Transit Company to build 119 miles
of street railway as follows: The Glenwood Rapid Transit Street Railway Com-
pany, capital stock $270,000, 45 miles of line; the Moyamensing and Southwark
Rapid Transit Street Railway Company, $282,000, 47 miles of line; the Parkside
Rapid Transit Company, $42,000, 7 miles of line; the Bustleton and Byberry
Rapid Transit Street Railway Company, $120,000, 20 miles of line.
What did the syndicate actually realize from the franchises for which the
city received practically nothing ? Under the terms of the consolidation the mem-
bers of the syndicate were to subscribe for $22,500,000 of the stock of the new com-
pany, paying down for the 450,000 shares, $5 each, or $2,250,000. At the time
the stock was listed it was quoted at $9 per share. On this basis the profit would
have been $1,800,000. After $10 had been paid in, the stock sold as high as
18 7-8 and as low as 12. Averaging this, the profit would have been somewhat
greater, or $2,250,000. We see then, that Mr. W^anamaker's valuation of the
franchises was above wThat they actually netted their owners. However, he
believed the city should receive the benefit, and not the syndicate.
Taking up the actual construction so far as it has been outlined, we find that
the plan calls for an elevated railroad from Sixty -third and Market Streets east
to the Schuylkill River, which they cross by a new bridge. At Twenty-third
Street the elevated descends into the subway, in which are to be four tracks be-
sides cable ducts. Two of these tracks are to be for express trains, two for ac-
commodation. At Delaware Avenue the Company has acquired a tract of ground
on which large power-houses, car -barns and a station are to be erected. An
elevated road is to be built south on Delaware Avenue as far as the Reading
Railroad piers, thus placing them on the same footing as the Pennsylvania for
the Jersey service.
At the western end of the line, beyond Sixty-third Street, the company has
purchased a large tract of ground on which they propose to erect, besides the ter-
minal, storage yards and extensive repair shops. The actual work of construc-
tion is already well under way. President Parsons announces that the Subway
will be finished as far as Fifteenth Street within a year, at which time they hope
[359]
76 The Annals of the American Academy
to have the elevated completed. This section will be put in operation while the
work of construction is carried on on the down- town portion of the line.
The query naturally arises, what effect will this have upon the direction of
the development of the city in the future? When we consider that in order to
make the city square, fully twelve miles of ground west of the terminus of the
new line must be developed, it seems apparent that the great future growth will
be towards the west. The officials realize that, burdened as the Rapid Transit is
with heavy fixed charges, new traffic must be developed for the new system, be-
cause if the elevated merely takes people which the surface lines formerly carried,
the gross earnings will not be increased, while the capital charges will have grown
much heavier. The only hope which they have of ever securing dividends on the
Rapid Transit stock is to develop new trade for the elevated, at the same time
discouraging the nearby riders from using it in order that the surface lines may
be fully employed. The result of this will be that the Rapid Transit Company
or some affiliated organization will, on the completion of the system, proceed to
open up the country west of the city limit, which is, practically speaking, sparsely
occupied at present. The future .growth, therefore, seems certain to be in a
western direction, the growth to the north and to the south being arrested, or
at least checked, by the more favorable location (considering transportation
facilities) which the western section will have to offer to its residents.
Although the elevated-subway system is yet far from completion the first
steps have already been taken to develop the eastern portion of Delaware County,
and it seems certain that several "feeders" will be in operation by the time the
elevated is completed. The rate at which the growth will take place can only be
surmised — it is safe to say, however, that it will surpass anything in the history
of Philadelphia and will equal that which has invariably occurred on the com-
pletion of similar improvements in other cities.
Thomas Conway, Jr.
Lansdowne, Penna.
[3H
COMMUNICATION.
PUBLIC OWNERSHIP AND LOW RATES
In the same country and under similar conditions otherwise than in respect
to ownership and control, public ownership tends as a rule to make lower rates
than private ownership. This tendency results from the fundamental difference
of aim between the two systems. Private monopoly aims at dividends for stock-
holders; public ownership aims at service for all. A normal public institution
aims it the public good, while a normal private monopoly aims at private profit.
It serves public interest also, but such service is incidental, and not the primary
purpose. It serves the public interest so long as it runs along in the same direc-
tion and is linked with private profit, but when the public interest departs from
or runs counter to the interests owning or controlling the system, the public
interests are subordinated.
The conflict between public and private interest is specially strong in the
matter of rates. The rate-level that yields the greatest profit is much higher
than the rate-level that affords the greatest service, or the greatest service without
deficit, and since private monopoly aims at profit it seeks the higher rate-level.
Public ownership aims at service, not at profit, and therefore gravitates to the
lower rate-level, where traffic and service are greater.
The diagram will make the matter very clear.
X c
78 The Annals of the American Academy
In the figure, L O is the rate line with zero rates at the bottom and at the
top rates so lofty as to be prohibitive ; T T T is the traffic curve expanding
rapidly as the rates are lowered ; E E E is the expense curve beginning with the
minimum of fixed charges and operating cost which must be incurred even with
the smallest traffic and expanding with the traffic, though not in the same ratio.
A considerable traffic can be handled at a slight advance upon the minimum cost
(the fixed charges being nearly the same with 60 passengers per car as with 1,
while the operating cost is only slightly increased), and for the later ranges of
the traffic curve the expense account expands at so much less a rate than the
traffic that an enlargement of 100 per cent, in the traffic frequently increases
expenses only 30 to 50 per cent., and sometimes scarcely at all, as when Hungary
adopted the zone system in 1889. R R R is the curve of receipts, which is a
function of the rate and the traffic, and can be easily platted from them; YRN,
the part of the curve of receipts that extends beyond the expense line, represents
profits. H I is the rate-level that yields the greatest profit, and M N is the rate-
level that yields the greatest traffic without incurring a deficit. It is the level
at which the line of receipts crosses the expense line, so that there is neither
profit nor deficit, but service at cost. M N, the line of greatest traffic without
deficit, is always a considerable distance below H I, the line of greatest profit.
As you go down the rate line from H the traffic increases and the profit diminishes,
until you come to a point where the rates are so low that profit vanishes, and there
you have the rate-level of greatest traffic without deficit.
Now, private monopoly aiming at profit tends to establish rates at the level
H I, the rate-level for profit, while public ownership aiming at service tends to
bring rates down to the level M N, the rate-level for service.
Private monopoly aiming at profit tends to put rates at H with the traffic
H P and the profit X I, while public ownership aiming at service tends to put
rates several flights of stairs lower down, at M, with the very much larger traffic
M S and no profit. I say "tends, " because actual rates may not be on the lines
H I and M N — public ownership may place the rates above M N (though rarely
or never as high as H 1) or below M N, even down to the zero level, and private
ownership may, through miscalculation, put rates above H I or below it (though
rarely or never so low as M N). The significant fact is that private rates gravitate
to the high level H I with large profit and comparatively small service, while public
rales gravitate to the low level M N, with large service and no profit, and in later
stages of development may seek a lower level still and even cultivate the zero
line.
The curves in the figure would vary, of course, with the location and character
of the business. Under some circumstances a 50 per cent, reduction of rates would
double traffic and increase expenses 30 per cent, perhaps, while in another case
a 50 per cent, reduction would increase the business 20 per cent, and the expenses
10 per cent, or 15 per cent. In some cases the traffic curve becomes concave
toward the left as it nears the zero level, while in other cases it might be concave
toward the northeast and strike the zero level at a great distance to the right.
But through all the various phases of these curves the essential facts remain the
[362]
Public Ownership and Low Rates 79
same, viz: (1) The rate level that yields the greatest profit carries a relatively-
small traffic and lies above the rate-level that yields the largest traffic attainable
by lowering rates without incurring a deficit, and (2) private ownership seeks the
high rate-level with maximum profit, while public ownership seeks the low rate-
level with maximum service at cost.
A few illustrations of the vigorous manner in which this law works out in
practice may be of advantage here:
The Hungarian Government at a single stroke in 1889 reduced State rail-
way fares 40 to 80 per cent. Austria and Prussia have also made great reduc-
tions in railway charges. Belgium started in the thirties with the very low rate
of four-fifths of a cent on her public railways. In New Zealand and Australia
also the government managements have adopted the settled policy of reducing
railroad rates as fast as possible.
When England made the telegraph public in 1870, rates were lowered 30 to
50 per cent, at once, and still further reductions were afterwards made.
When France took over the telephone in 1889, rates were reduced from
$116 to $78 per year in Paris, and from $78 to $39 elsewhere, except in Lyons,
where the charge was made $58.50.
Private turnpikes, bridges and canals levy sufficient tolls to get what profit
may be possible ; but when these same highways, bridges and canals become public
the tolls are often abolished entirely, rendering such facilities of transportation
free, and when charges are made they are lower than the rates of private monop-
olies under similar conditions, and generally reach the vanishing point as soon as
the capital is paid off or before.
When Glasgow took the management of her street railways in 1894, fares were
reduced at once about 33 per cent., the average fare dropped to about 2 cents,
and 35 per cent, of the fares were 1 cent each. Since then further reductions
have been made, and the average fare now is little more than a cent and a half ;
over 50 per cent, reduction in 6 years, while we pay the 5-cent fare to the private
companies in Boston and other cities of the United States the same as we did six
years ago, instead of the 2\ cent fare we would pay if the same percentage of
reduction had occurred here as in Glasgow.
According to Baker's Manual of American Waterworks, the charges of private
water companies in the United States average 43 per cent, excess above the
charges of public waterworks for similar service. In some states investigation
shows that private water rates are double the public rates.
For commercial electric lighting Prof. John R. Commons says that private
companies charge 50 to 100 per cent, more than public plants.1
We could offer many other illustrations of the law that public ownership
tends to lower rates than private monopoly, but this discussion may be sufficient
to indicate the complexion of the facts and put the reader upon inquiry, which
is the purpose of this brief article.
Frank Parsons.
National Public Ownership League, Boston, Mass.
lSee "Municipal Monopolies," p. 156. j iJ
[363]
BOOK DEPARTMENT
NOTES
Steps in the Expansion of our Territory, by Oscar P. Austin,1 is a volume
in the "Expansion of the Republic Series," and is designed to "tell in simple
terms the steps by which the United States has been transformed from thirteen
political communities into fifty." The author divides the territorial history of
the country into thirteen periods and discusses the various territorial and political
changes occurring in each, accompanying the text by an elaborate series of
black line maps. The latter form the most important feature of the work.
The author's preference for an extremely simple style leads him to adopt a
colorless one. He is likewise guilty of a few minor inaccuracies hardly excusable
in a statistician of national reputation. Among these we may note his statement
(122) that in 1803 the United States became owner of both sides of the Mississippi
"from the source to the mouth;" that the United States acquired the Alabama
portion of West Florida in 1812 (143); that Spain, in 1795, sold West Florida to
France (145) ; that the desire to acquire the Floridas was due wholly to the "slave
power" (145) ; that in 1819 we exchanged Texas for the Spanish claims above the
forty-second parallel ; and that Texas land warrants played a more important part
in the South than in the North (167) in forcing the annexation of that State.
These inaccuracies which may be taken as typical of many others detract much
from the value of the book as a graphical representation of the growth of the
United States.2
The reappearance of "Sophisms of Free Trade and Popular Political
Economy Examined," by Sir John Barnard Byles,3 at this particular juncture in
England will be readily understood. As an ex parte argument upon a much
vexed question it has its merits ; among which frankness and courage of conviction
are conspicuous. These, however, are not all; for it successfully controverts
many of the tenets of the "orthodox economists" and places before the reader
in a good literary form what we are now acquainted with as the stock arguments
for protection. It repeats some of the old errors also.4
Religious Freedom in American Education, by Joseph Henry Crooker,5 is
a little book which deserves wide reading among American students. The
author's main purpose is to discover the true status of religion in its relation to
1 Pp. 258. Price, $1.25. New York: D. Appleton & Co., 1903.
2 Contributed by Isaac Joslin Cox.
3 Newly edited from the eighth edition with notes and introduction by N. S. Lilly & C. S.
Devas, London, 1904. Pp. Hand 424. Price, $1.25. London: 1849. New York: John Lane, 1904.
* Contributed by J. E. Conner, Ph.D.
5 Pp. ix, 216. Price, $1.00. Boston: American Unitarian Association, 1903.
[364]
Notes 8 1
public education. To this end he discusses lucidly the function of the "secular"
state, the Bible in the public schools, the need of religious neutrality, the
religious motive in its relation to higher education, etc. There is an interesting
chapter embodying the results of a painstaking investigation into the practices of
some of the larger universities with regard to the holding of chapel exercises. A
final chapter, in some respects the best in the book, contains the author's con-
clusions and recommendations on the subject of religion in its relation to educa-
tion.
The Stock Exchange6 is a little book of interest to all Americans who have
to do with stock exchange transactions. Within a brief compass the author has
given full and excellent description of the London Stock Exchange and of its
methods. The book is naturally compared with Pratts's "Work of Wall
Street." It is by no means as complete as the latter, nevertheless it contains
all the information concerning stock exchange transactions in London in which
the general reader will be interested.
Two German Government officials connected with the collection of cus-
toms in South Germany have recently written a volume7 on the commercial policy
of the Empire. They state the purpose of their book to be "to give a survey of
the development of customs duties and of the economic significance of these
duties, as well as to show the connection, direct and indirect, between customs
duties and the whole economic life of the nation." This, however, is only part
of their purpose. It is soon evident that their ultimate aim is to urge the forma-
tion of a customs union of the nations of Central Europe, as the only defense
against disastrous transoceanic competition.
This subject of "transoceanic competition" is of interest to American readers
for the United States is in German eyes the chief offender. Separate chapters
are devoted to Russia, England and America, which constitute, according to
the authors, the three great economic domains. In the chapter on America the
authors express fear of a Pan-American customs union, which, they feel, would
mean nothing but probable economic disaster to the nations of Europe. They
openly advocate a preferential tariff for European competitors (as opposed to
American competitors) pending the formation of a Central-European Zollverein.8
By au, means the best brief account of the development of English
public charities is that given by Charles A. Ellwood, Professor of Sociology in
the University of Missouri, in his recent pamphlet, " Public Relief and Private
Charity in England," which appears as Vol. II, No. 2, of the University of
Missouri Studies. The style is clear and concise and the author is to be con-
gratulated that he has so well told a long story in less than one hundred pages.
•By Charles Duguid. Pp. 173. Price, 2s. 6d. London: Methuen & Co., 1904.
7 BrennendeAgrar-, Zoll-, und Handelsfragen. Bearbeitet und herausgegeben von Hermann
Egner und Karl Schuemacher. Pp. 378. Price, 3 marks, or one dollar. Karlsruhe: J. J.
Reiff, 1903.
8 Contributed by Dr. C. W. A. Veditz, Lewiston, Me.
[365]
82 The Annals of the American Academy
In his work, "How England Averted a Revolution by Force," Mr. B. O.
Flower9 presents a study of the anti-Corn-Law movement in England, or, to put
it more broadly, "a survey of the social agitation of the first ten years of Queen
Victoria's reign." But his purpose is deeper than to present a mere historical
statement. He says we have come to depend on Old World precedents for our
action as a nation to a greater degree than in our earlier history. And he tells
his story to show how the rights of the people may be successfully asserted, and
how the ends of justice may be reached by peaceful, orderly means. The book
deals with the causes of popular unrest, the origin, progress and result of chartism,
the history of the Corn Laws, and of the movement which culminated in
their repeal.10
It happens but seldom that an American student is able to anticipate or
to supersede the indefatigable Germans in the study of the history of their own
country. In a monograph, entitled "Hanover and Prussia," Dr. Guy Stanton
Ford11 has established for himself a strong claim to this distinction. His study
is a careful account based upon a critical use of the sources, printed and in manu-
script form, of the relations of Prussia and Hanover to each other, and to the
epoch-making international events set in motion by revolutionary France at the
end of the eighteenth century.
By the treaty of Basel in 1795 Prussia withdrew from the first coalition against
France and for eleven years she maintained a strictly neutral policy, during which
her running-mate in Germany, Austria, suffered defeat in three disastrous wars
with the French. Little wonder then that Prussia has been accused of bad
faith, and of indifference to the interests of the fatherland, though it can scarcely
account for the fact that even German historians, like Treitschke, treat the period
as altogether inglorious, one of "unrelieved weakness and disgrace." It is
against this attitude that Mr. Ford protests by a vigorous array of well mar-
shaled facts. That he establishes the case for making the period the really
critical one of modern Prussia can scarcely be admitted, but his main contention
against the German point of view he clearly proves. Mr. Ford shows conclu-
sively that had neutrality been made effective by an adequate military force, as
the author of the policy urged, the whole result and therefore also the aspect of
the period would have been changed. That it was not must be attributed to
King Frederick William III. (not King William III., page 131). Prussia lost a
golden opportunity and prepared the way for her own disasters.
Another feature of the study is the clear case made out for the practical
identification of the interests of Hanover with those of Prussia, notwithstanding
the personal union of the former with England. This Mr. Ford shows to have been
inevitable because of the geographic position of Hanover, its proximity to Prussia
on the one side, and to Holland, then occupied by France, on the other.
•Pp. 288. Price, $1.25. Trenton: Albert Brandt, 1903.
10 Contributed by C. T. Wyckoff, Ph.D.
"Hanover and Prussia, 1795-1803. A Study in Neutrality. Pp. 315. Price, $2.00.
New York: Columbia University Press, 1903.
[366]
Notes 83
The style and manner of presentation are excellent. There are occasional
slips as for example one cited above, the identification of Count Hardenberg with
the Prussian statesman, the undue importance attached to the acquisition of the
title of King of Prussia (p. 21), and one might prefer to see the form Tsar in place
of Czar in a monograph on modern European affairs. But these are minor
matters scarcely to be noticed in a work so generally meritorious.12
German students preparing for the degree of " Doctor of Political Sciences"
now conferred by two or three universities of the Empire are required, among
other things, to prepare and publish an original essay on some economic subject.
In this requirement the term "original" is taken rather seriously, for the essay
must not duplicate previous contributions to the literature of economics. The
result of this requirement, combined with the almost universal attitude of oppo-
sition, among economists of the German historical school, to the present further
development of economic theory pure and simple, is an annually increasing out-
put of " Doktordissertationen " treating, with the greatest possible care and
minuteness, of some narrowly confined field or period of economic history.
These microscopic investigations, universally prompted by the kind suggestion
of some "verehrter Lehrer," are piled higher and higher from year to year.
Their greatest service of course consists not so much in the instruction they
convey to possible readers as the profit (of a purely scientific nature) which
they bring to the respective authors themselves.
From time to time, however, an essay is deemed worthy of a wider circulation
and is incorporated in the "publications" of one of the great German seminaries
of economics. Five essays of this class recently received by the Annals for re-
view bear the following titles: "The Industries of Silesia under the Influence of
Caprivi's Commercial Policy," "The Industries of the Rhine Provinces from 1888
to 1900," "The Commercial Interests of the German Cities on the Baltic Sea,"
Financial Trust Societies," and " The Westphalian Community of Eversberg. M1?
The first of these essays is an appeal, based on data drawn from recent experience,
for a foreign commercial policy which shall not curtail but, if possible, extend
the foreign markets of Silesia, whose geographical position makes foreign com-
merce especially desirable and important. The second essay, somewhat more
interesting to the American economist, is an investigation of the effects of the
protectionist policy on certain trust-made commodities. The third contains a
discussion of the present imperial policy with regard to the coast trade on the
12 Contributed by W. E. Lingelbach.
13 Schlesien' s Industrie unter dent Einflusse der Caprivi 'schen Handelspolitik, 1889-1900.
By Arthur Friedrich. Pp. ii and 192. Price, 4£ marks.
Die Industrie der Rheinprovinz, 1888-1900. Ein Beitrag zur Frage der Handelspolitik und
der Kartelle. By Theodor Vogelstein. Pp. x. and 112. Price, 3 marks.
Handelspolitische Interessen der deutschen Ostseestaedte, 1890-1900. By Stephan Jonas
Pp. vi and 92. Price, 2 marks.
Finanzielle Trustgesellschaften. Bv Maz Joergens. Pp. xii and 160. Price, 3 marks,
60 pf.
Die Westfaelische Gemeinde Eversberg. Eine Wirtschaftliche Untersuchung. By August
Engel Pp. iii and 144. Price, 3 marks and 30 pf.
# All of these essays belong to the Muenchener volkswirtschaftliche Studien. and are pub-
published by J. G. Cotta (Stuttgart and Berlin), 1902 and 1903.
[367]
84 The Annals of the American Academy
Baltic. The fourth is a study of so-called investment trusts in England and
Germany — their economic function and legal organization. The last is an
economic history, from the middle ages down, of a little town in eastern West-
phalia.1*
President Hadley's book on "The Relations Between Freedom and Re-
sponsibility in the Evolution of Democratic Government"15 grew out of the Yale
lectures on "The Responsibilities of Citizenship." The object of the lectures
was "to show what the ethical basis of democracy is, how it has arisen and what
happens if we try to ignore it." The seven papers included in the volume dis-
cuss the working of democratic institutions in the United States, and the basis of
individual liberty. There is also an analysis of freedom as a religious conception,
as a legal institution, and as a foundation of ethics. The limits of individual
freedom are pointed out, and the outlook for the future is discussed.
The book has the clearness, conciseness and humorous touches characteristic
of President Hadley's writings. The industrial and political dangers threatening
democratic institutions in the United States are well presented, but the outlook
for the future is optimistic. The author believes we shall succeed in developing
ethical standards regarding business and politics, that will enable us to per-
petuate personal liberty and democratic institutions.
Outlines of Comparative Politics, by Prof. B. E. Hammond, of
Trinity College, Cambridge,16 is a volume designed to serve as a textbook for be-
ginners in the study of Comparative Politics. The work is the outgrowth of the
author's experience as a teacher of this subject, and is founded, he tells us, on the
lectures of the late Professor Seeley. It contains a general survey of the more
important states and their governments, their beginnings, growth and present
political organization. Something like two-thirds of the volume is devoted to
the politics of the ancient and mediaeval states, thus leaving the constitutions of
modern national states very inadequately treated. Twenty pages are given to
the United States, two of which, strangely enough, are devoted to a description
of Tammany Hall and its methods.
Charles James Fox : A Political Study, by J. L. LeB. Hammond,17 is not
a biography of the brilliant but erratic Whig leader. It is merely a series of
essays dealing with various phases of his public career, as, for example, his atti-
tude on the Irish question, on the Indian question, on the French Revolution,
on Parliamentary Reform, on religious toleration, and the like. It is a philo-
sophical study of Fox the statesman, written by a man who is thoroughly in sym-
pathy with his subject. There are few facts presented which cannot be found
in the pages of Russell, Trevelyan, or Lecky, but Hammond's conclusions some-
times differ from theirs. He shows us what Trevelyan might have shown if he
14 Contributed by Dr. C. W. A. Veditz, Lewiston, Me.
15 Pp. 175. Price, $1.00. New York: Charles Scribner's Sons, 1903.
,fiPp. 485. London: Rivingtons, 1903.
>7Pp. xii, 370. Price, $2.00. New York: James Pott & Co., 1903.
[368]
Notes 85
had not been diverted from his subject, that Fox's place in history has been very
much underrated. Unfortunately, he rather weakens his argument at times by
making invidious comparisons between Fox and Pitt. Hammond's defense of
him is interesting if not quite convincing (pp. 57-60). In his opinion it was
North rather than Fox who sacrificed his opinions, for the primary object of the
coalition was to limit the power of the crown.
Among so many pages of unalloyed praise it is a relief to find an occasional
note of disapproval. Mr. Hammond admits, quite unnecessarily, it seems to the
reviewer, that Fox was wrong on the Regency Bill of 1788.
Mr. Charles Waldo Haskins was at the time of his death easily the best
known accountant in the United States. Within the short space of eight years
he had developed the largest accounting business in the world. Conspicuously
successful in his profession, and, therefore, largely preoccupied with the duties
which it laid upon him, Mr. Haskins yet found time to do much for the cause of
business education in which he was deeply interested. In bringing together in
permanent form the scattered papers and addresses of Mr. Haskins upon the sub-
ject of "Business Education and Accountancy,"18 Dr. Cleveland has performed a
meritorious service.
The principal chapters in the book are those entitled: "Business Training,"
"The Scope of Banking Education," " The Possibilities of the Profession of
Accounting as a Moral and Educational Force," "The Growing Need for Higher
Accounting," "The Place of the Science of Accounts in Collegiate Commercial
Education," "History of Accountancy," "Accountancy in Babylonia and
Assyria," and "The Municipal Accounts of Chicago."
Mr. Haskins' plea was constantly for greater definiteness in economic work.
He argued strongly that the economy which did not succeed in interpreting the
movements of the business world was a useless science, if indeed it properly
deserved the title of science at all. He urged upon the economists of the country
the importance of taking into account business facts and business problems, and
of relating their science to the activity of the business world.
In a word Mr. Haskins advocated that every business presented a fund of
knowledge which can be reduced to law and system, and which can be imparted
in class-room instruction, and that it was to the interest of every man contem-
plating a business career to first provide himself as far as possible with what
might be termed the scientific principles of his business. He believed that busines
education was as necessary to success in business as an engineering education was
essential to success in that profession. It' is to be hoped that the work which Mr.
Haskins inaugurated and which he developed to such a considerable extent will be
carried on to success by those who were fortunate enough to come within the scope
of his influence. If this book should prove to be an anticipation of the future
development of scientific accounting Mr. Haskins could wish for no more lasting
memorial.
^Business Education and Accountancy. By Charles Waldo Haskins, C. P. A., late Dean of
the New York University School of Commerce, Finance and Accounts. Edited by Frederick
Albert Cleveland, Ph.D. ' Pp. 239. Price, $2.00. New York: Harpers, 1904.
[369]
86 The Annals of the American Academy
The Louisiana Purchase and the Exploration, Early History and
Building of the West, by Ripley Hitchcock,19 is one of the numerous volumes
evoked by the St. Louis Exposition. It contains a very readable account of the
discovery and settlement both of the Mississippi Valley and of the Far West region.
Part I (86 pages) is devoted to a rapid review of the coming of the Spanish and
the French, and of the occupation of Louisiana down to the transfer to the United
States in 1803. Part II (87 pages) gives a spirited narrative of the Lewis and
Clark Expedition, while Parts III and IV (197 pages), tell the story of the
explorers that followed in the wake of Lewis and Clark, with a rapid survey of the
winning of the West by sturdy pioneers. As a result of the haste in which the
book was doubtless written, a number of minor errors have crept in. For ex-
ample, on page 4, the Rio Grande and the Rio Bravo are given as separate rivers;
page 27, La Salle is represented as exploring the whole course of the Mississippi;
page 87, the treaty of Ildephonso is said to contain a clause denying the right of
alienating Louisiana ; page 94, Louisiana is said to have seceded in the spring of
1861. However, the work was not written for critical scholars, and perhaps in
no other volume of so small and so convenient a compass, can a busy American
find so much interesting information about the central, and western portion of
the United States.20
In Les Origines Diplomatiques de l'Independance belge, by l'Abbe
Fl. de Lannoy,21we have an interesting narrative of the London Conference of
1830-1831, a sub-title sufficiently comprehensive. To a general review of the
antecedents and the preliminaries of the Conference, which has been so fully
treated by Rene Dollot, in his recent work on the origin of the neutrality of Bel-
gium, about fifty of a total of more than three hundred pages are given. Inde-
pendence, neutrality, the search for a king, the regency, the election of Leopold
and the Eighteen Articles, and the campaign of ten days and the Twenty-four
Articles serve as chapter headings. The author quotes freely from the published
writings of the several plenipotentiaries, especially from the correspondence of
Prince Talleyrand with Mme. Adelaide. We note that omissions in the "Me-
moires" have occasionally been supplied (see pages 122, 133). The repeated mis-
spelling of such common English words as "foreign" is indicative of undue
haste.22
Prop. Andre Lefevre's little book 23 on the Teutons and the Slavs is
clear and well-written. The thirty-two maps it contains, showing the migra-
tions of these peoples, are especially instructive. The author treats, principally,
of the origins of the Germanic and Slavonic peoples, their invasions of Europe,
and their mythologies. The purpose of the volume is merely one of populariza-
19 Pp. xxii, 349. Price, $1.25. Boston: Ginn & Co., 1903.
20 Contributed by Prof. John R. Ficklin.
21 Pp. xiii, 309.
22 Contributed by Samuel B. Crandall. Ph.D.
23 Germains et Slaves. Origines et Croyances. By Andre Lefevre. Pp.247. Price, 3.50
francs. Paris, 1903. Schleicher Freres. (Bibliotheque d'Histoire et de Geographie Utiiverselles.
[370]
Notes 87
tion. It must be observed that the philological parts of the book are, to say the
least, subject to criticism.
The Educational Conquest in the Far East,24 by Robert E. Lewis, M.A.,
reads more like a romance than a statement of facts. Perhaps the part relating
to Japan is more interesting, and particularly since it shows in a very great meas-
ure the reasons for the marvelous development of this far East Empire during the
past *hirty years. The results accomplished in Japan as here portrayed are per-
haps among the marvels of our past century's progress. The influence of the
German, the English and the American school teachers in Japan is clearly por-
trayed, and presents such an array of interesting incidents as challenge the
admiration and increase the convictions of all friends of education.
In China the results of the modern spirit at work in the educational system
are not so apparent. Some good has been accomplished, partly from the heroic
efforts and activities of missionaries from the enlightened parts of Europe
and the United States, but China has not progressed as Japan did, and she is well
nigh in the mist and shadows of her dominant and effete influences. We have
in China the working out of its logical ends (for the Chinese mind is logical in a
way) of a system of examinations, which in every application work riot and ruin
to an educational system such as our present civilization has demonstrated to be
most helpful and most useful. The effect of all this manifests itself in two direc-
tions. First, illiteracy predominates; as the possibility of passing this rigid
examination is beyond the reach of the masses, and no other outlook or guidance
being apparent, the children receive no education whatever. In the second place,
the traditions of the Chinese religion are fastened indelibly upon the minds of
each succeeding generation. There is nothing to prepare the child for this
examination save the old commentaries which have been in use for the same pur-
pose not only for centuries, but for thousands of years, and the whole culture of
the people is rendered static by holding rigidly to these unchanged and in-
volved commentaries on the State Religion. Evidently the need of China is
the establishment of training schools under State control and the creation of a
thoroughly distributed system of primary or elementary Public Schools, the
function of which would be not primarily to breed rulers and office holders, but
to put each individual in possession of elementary knowledge and a form of
culture which would break up his contentment with present conditions and
compel him to seek, through increased activities, the realization of the newer
ideas imparted to him by these schools. Until China succeeds in accomplishing
this, her outlook as a nation will continue to be what it now is. Mr. Lewis'
book gives many interesting statistics. These are scattered over his pages at
random. One cannot help but regret that these statistics are not used in a
more helpful manner to the scholar, but the student is able to vision the con-
ditions for which they stand. On the whole, the book is really readable, is full
of information and suggestion and presents the advance in education in these
two great Oriental nations in a suggestive and stimulating manner. Certain
24 Pp. 248. Price, $1.00 New York: Fleming H. Revell Co., 1903.
[371]
88 The Annals of the American Academy
textual errors might be pointed out ; for instance, on page 149, Chili should be
Shih; and again, on page 152, the enumerating of mental acquisitions is set
forth with evident carelessness. These minor matters are no doubt due to the
haste in which the book seems to have been prepared, and perhaps to the fact
that the author did not have the opportunity to make a final revision of his
material. These typographical errors do not seriously mar the value of the
book. Its general effect is helpful. It is a distinct contribution to the
educational literature of the year.25
The Professional Training of Secondary Teachers in the United
States,26 by G. W. A. Luckey, Professor of Education, University of Nebraska, is
the most extensive work yet issued on this subject; and yet, as the preface well
says, it is "at most, scarcely more than a beginning. " The book proper consists
of 258 pages, divided into five chapters. Chapter I gives a brief historical sketch
of the "beginning and growth of the professional training of teachers in Ger-
many;" Chapter II a much briefer treatment of the rise of the Normal School in
the United States; Chapter III is devoted to the movement within colleges and
universities, especially in the West, for the preparation of teachers chiefly for
the elementary schools; in Chapter IV is given a fuller account, by selected types,
of "the special movement" — likewise in colleges and universities — "for the pro-
fessional preparation of secondary teachers, " which began in the University of
Michigan, about 1880, and within the next twenty years spread to almost all col-
leges and universities of prominence in the country. Chapters V and VI con-
clude the book proper. Of these, the former is devoted to an attempt to answer
the questions: "What, When and Where?" of professional training for secondary
school teachers; the latter discusses the questions, whether teachers of elemen-
tary and of secondary schools should have essentially the same sort of professional
training, and whether this training should be given for each class in one and the
same institution. The author reaches a negative conclusion to each question;
he holds that elementary school teachers can be most advantageously trained in
the Normal Schools, and teachers of secondary schools in the educational depart-
ments of colleges and universities. The whole book is marred by numerous slight
inaccuracies and misprints; still, though the great book on this subject remains
to be written, the present work is well worth reading.27
The Middle Ages, by P. V. N. Myers,28 is a revision of the first part of the
author's "Mediaeval and Modern History," which appeared in 1885. The
revision consists chiefly in incorporating into the text the results of recent
researches in the field of Mediaeval History, and in emphasizing more the institu-
tional side of history rather than the dynastic and military phases. The best chap-
25 Contributed by Prof. M. G. Brumbaugh.
26 Pp. 391. Price, paper $2.00 net; cloth, $2.50 net. New York: The Macmillan Company
1903. (Columbia University Contributions to Philosophy, Psychology and Education.)
27 Contributed by W. S. Thomas.
28 Pp. x, 454. Boston and London- Ginn & Co.
[372]
Notes 89
ters are those on Monasticism, Feudalism and Chivalry, the Papacy, the Towns,
the Universities, and the Renaissance. Some of the dozen maps are new; others
are the usual stock maps. A useful addition is the critical bibliography of
sources and secondary works appended to each chapter. A quantity of good
illustrative material is given in the footnotes, and references are made to the best
modern authorities. The revision of the second part of the original text will
appear
later.29
Austro-Hungarian Life in Town and Country, by Francis H. E. Palmer,30
constitutes the ninth volume in the series, "Our European Neighbors," edited
by William Harbutt Dawson. The excellence of the earlier volumes has given
the series a well-merited popularity, and to this Mr. Palmer's appreciative study
of the life in Austria-Hungary will add materially. It gives us a glimpse of con-
temporary conditions; the daily life, manners and customs of the people of this
polyglot kingdom. The German Austrians are treated in four chapters, the
Hungarians in two. In the latter sufficient distinction is not made between the
two strata of society, the Magyar and the Slav. A chapter each devoted to the
northern Slavs, the southern Slavs and the minor nationalities brings out the
strange diversity of races and customs of the Hapsburg lands. The last part of
the book, in five chapters, is devoted to the political, industrial, intellectual and
religious conditions of the monarchy, while a special chapter is devoted to the
two capitals Vienna and Buda-Pesth.
A posthumous book by Fernand Pelloutier,31 who for seven years was the
Secretary of the General Federation of Labor Exchanges in France, gives a well-
written account, from the standpoint of a socialist, of the so-called "bourses du
I travail," or labor exchanges. These exchanges, which have had the rare for-
tune of meeting with the approval not only of radical socialists, but also of hide-
bound liberal economists such as M. de Molinari, are centers where laborers may
discover the opportunities for employment that exist in their own and in other
localities, in order to profit by this knowledge in offering their labor for sale in
' the best market. They resemble stock exchanges, except that instead of regulat-
ing the market for the sale and purchase of securities, they regulate it for the sale
and purchase of labor, and with a view to improving the condition of labor.
They furnish laborers, like the corporations of the middle ages, with the means
necessary for traveling to such places as offer better conditions of employment.
They provide help in cases of loss of work or in case of illness. .They attempt to
establish trade schools and to collect statistical data of importance to the labor-
ing classes. Since 1892 their development in France has been rapid, and now
they may be found in all parts of France, bound together into a national federation.
The whole movement in France, however, is strongly influenced by socialistic
doctrines.32
"Contributed by Walter L. Fleming, Ph.D.
30 Pp. 300. Price, $1.20. New York and London: G. P. Putnam's Sons, 1903.
nHistoire des Bourses du Travail. Origines, Institutions, Avenir. By Fernand Pelloutier.
p- ^and 232- Price- 3.50 francs. Paris: 1903. Schleicher Freres.
32 Contributed by Dr. C. W. A. Veditz.
[373]
90 The Annals of the American Academy
North Carolina: A Study in English Colonial Government, by Charles
Lee Raper, Ph.D.,33 embodies the results of a critical study of the struggle between
the representatives of the crown in North Carolina and the popular party.
There are chapters on the Governor, Council and Assembly and on the ter-
ritorial, fiscal, judicial and military systems. He shows us how inevitable it
was that the Governor and Council should have been arrayed against the lower
house of the Legislature. Many of the controversies are discussed in detail.
The last two chapters summarize the chief questions in dispute, explain their
constitutional significance, and trace the immediate steps which led to the down-
fall of royal government.
Few writers on Colonial History have emphasized sufficiently the fact that the
king was the landlord as well as the head of the government in the royal province.
Dr. Raper's work is hardly open to this criticism. He describes the administra-
tive side of the land system and calls attention to the incessant quarrels over the
payment of quit rents, which served to embitter the feelings of the colonists
against the crown.34
Volume VII. of the " Publications of the Mississippi Historical Society,"
edited by Franklin L. Riley, Ph.D.,3!> surpasses in bulk, if not in quality, all of
the previous volumes of the Society. The present volume contains twenty -nine
papers, including the address of welcome delivered before the Society at its annual
meeting, by Hon. John Sharp Williams. Most of the papers are chiefly of local
value, although there is hardly one that cannot be read with interest by the general
student of American history. There are several papers on local phases of the Civil
War and Reconstruction periods, one on makeshifts during the war, one on
historic homes in Mississippi, one on the cholera epidemic of 1849, and one on
British West Florida. There are a number of biographical sketches, those of
most general interest perhaps being sketches of the noted Indian, Greenwood
Leflore, the late Senator George and Colonel Claiborne, the historian of the
State. The second annual report of Mr. Dunbar Rowland, the State Director
of History and Archives, shows encouraging progress in the collection and
arrangement of the historical records of the State.
Decidedly above the average doctor's dissertation in scholarship and
practical usefulness is Dr. George L. Scherger's "Evolution of Modern Liberty,"3'
a study of the genesis and development of the political theory embodied in the
American Bills of Rights and in the French Declaration of Rights. The work
is divided into four parts: (1) the history and development of natural law from
the earliest times to the present ; (2) the history of the doctrine of the sovereignty
of the people ; (3) the American Bills of Rights with particular reference to their
origin and development; and (4) the French Declaration of the Rights of Man.
33 Pp. xiii, 260. New York: The Macmillan Company, 1903.
3* Contributed by W. Roy Smith, Ph.D.
35 Pp. 531. Printed for the Society. Oxford, Miss., 1903.
36 Pp. x, 284. Price, $1.10. New York: Longmans, Green & Co., 1904.
[374]
NotCS g J
Especially valuable is the author's discussion of the influence of the American
Bills of Rights upon the French Declaration.
Eighty Years of Union, by James Schouler,37 is made up of extracts taken
bodily from the author's larger work, and hence any criticism upon the subject
matter would only be to pass judgment anew upon disconnected parts of a work
which has gained a permanent place in the bibliography of American history.
It was prepared, so says the author, "at the request of some eminent educators
for the special use of students and the casual reader." The full presentation of
some of the more important events of our history may be of service to students
using only the smaller texts, and the "appreciations" of the prominent characters,
from Washington to Lincoln, will interest the casual reader. The claim of the
publishers that it "comprises a consecutive narrative of our United States his-
tory" for the period 1783-1865 can hardly be substantiated. When one finds
that the Louisiana treaty, the head of which has been cut off, is disposed of in a
little more than two pages, mostly rhetoric that makes not unpleasant reading,
and nearly four pages given to the Burr-Hamilton duel and a eulogy upon Hamil-
ton, who has already occupied considerable space, he is inclined to doubt if a due
sense of proportion has been preserved.38
"The interests of the laboring classes," says Leon de Seilhac in his
; book39 on French labor organizations, "have been defended in two different
ways: (1) By strikes, which are industrial wars; (2) By trades-unions, which
mean armed peace." Thereupon he discusses the raison d'etre of trades-unions,
the obstacles which stand in the way of their formation and effectual opera-
tion, and their development in France since the law of 1884. He describes
i several types of trades-unions, and sketches the federative tendency among
large numbers of these unions. Two federations already in existence — the
French Federation of Bookworkers and the Glassmakers Federation of France
— are described in considerable detail.
I The second part of the book discusses the so-called labor exchanges (bourses
du travail), which are rapidly becoming an important factor in the French
industrial situation. Throughout the entire book the author's attitude is one of
sympathy toward labor organizations. He regards trades-unions "as a sole
basis upon which it is possible to establish a rational organization of industrial
society."40
Arnold's March from Cambridge to Quebec, by Justin H. Smith,41
Professor of Modern History, Dartmouth College, is a monograph which
bears striking and conclusive testimony to the satisfactory results which mayjfre-
37 Pp. 416. Price, $1.75. New York: Dodd, Mead & Co., 1903.
38 Contributed by D. Y. Thomas, Ph.D.
nSyndicats ouvriers, Federations, Bourses du Travail. By Leon de Seilhac. Pp. 341.
Price, 3.50 fr. Paris: Armand Colin.
40 Contributed by Dr. C. W. A. Veditz, Lewiston, Me.
41 Pp. xix, 486. Price, $2.00. New York and London- G. P. Putnam's Sons, 1903.
[375]
92 The Annals of the American Academy
quently be had from the intensive cultivation of a very small field. Professor
Smith has set himself to the single task of thoroughly investigating the topog-
raphy of the route followed by Benedict Arnold and his forces on their march to
Quebec during the autumn of 1775, and no one will gainsay the fidelity with
which the author has performed his task.
The author begins by discussing the extent to which the route was known
before Arnold's time. Attention is called to the fact that the French author-
ities in Canada considered it feasible in a proposed attack on Boston and that both
Shirley and Pownall had it in mind as a practicable route whereby to menace
Quebec. During the operations against Canada in 1759 despatches to Wolfe
had been sent by way of the Kennebec and Chaudiere and a little later, General
Amherst had had the route carefully examined by an engineer. Arnold, however,
was the first to test its feasibility with any considerable force. Then follows an
examination of "the witnesses" in the course of which the author passes sound
judgment on each fragment of contemporary evidence. Of these there is, in
truth, no dearth, and the main task lies in winnowing the wheat from the chaff.
To this end the Journals of Arnold, Henry, Dearborn, Meigs and others; the
orderly books, reports of engineers, accounts and correspondence are all scruti-
nized as to their accuracy and comprehensiveness. Next begins the main
theme, an almost inch-by-inch tracing of the route followed.
A generous number of small maps is included in the volume, while in the
matter of notes and citations the recognized canons of scientific historical writing
are scrupulously observed. Indeed, the critical notes are models of their kind.
Arnold's own journal is appropriately included in an appendix with explanatory
notes. Bibliography and Index leave nothing to be desired. The author may
rest assured that his work will never have to be performed again.42
South Carolina as a Royal Province, by Dr. W. Roy Smith,*3 is a welcome
addition to the series of studies which present the results of research work
initiated in the seminary of Colonial History of Columbia University. The
present work is a most thorough and scientific study based upon contemporary
sources, both printed and manuscript.
In distinction to the recent elaborate narrative history of this colony by the
late General McCrady, this monograph selecting South Carolina as the type of a
Royal Province essays, by means of a topical treatment to unfold its constitu-
tional and administrative development, in the course of which many of the chief
historical events are discussed in order to illustrate the political evolution. A
comprehensive introductory chapter reviews the proprietary period, noting even
in these early years the tendency of the Assembly to encroach upon the rights of
the proprietors. Then logically follows three chapters of about fifty pages deal-
ing with the land system. These present the relations between the king, who
succeeded to the rights of the proprietors as landlords and the colonists who were
the tenants, and the resulting controversies over land grants and quit rents, in
*2 Contributed by William Bennett Munro.
«PP. xix. 441. Price, $2.50. New York: The Macmillan Company, 1903.
[376]
Notes 93
both of which the king was worsted. The main part of the volume, however, is
devoted to the government, treating successively the executive, the legislative
and judicial departments, with chapters upon the colonial agency, the military
and financial systems, and finally presenting an extended review of the events
between 1760 and 1776 leading to the downfall of the royal government.
Through a study of the political and institutional development of this
typical colony, the author seeks to demonstrate the truth of ' ' the thesis that the
American Revolution was the climax" of the "continual conflict between two
opposing tendencies," common to the colonies in general, represented by the
party of the royal prerogative on the one hand, and the popular party on the
other. The first, composed of the Governor, the Council and the other crown
officials, as the agents of the imperial government and the representatives of the
king, stood for the monarchical principle and British interests, while the House of
Assembly, as the representatives of the people stood for democracy and for what
they regarded as "the rights of Englishmen." When, after 1760, the English
Government attempted to strengthen the administration and curb the Assembly,
the effort came too late to be successful, and only excited the growth of the spirit
of rebellion in the colony, while at the same time its general colonial policy
developed the sentiment of union.
In conclusion it may be said without fear of contradiction, that there is no
clearer presentation of the actual workings of the legislative branch and of the
various administrative organs of the royal province than that found in this
volume.44
Among the writings of the early French explorers in the Mississippi Valley
none has received more attention than the works of Father Louis Hennepin.45
This has been due, not so much to their intrinsic merit, as to the barefaced men-
dacity of the author, who not content with vilifying La Salle with whom he was
associated for a time, attempted to rob him of the credit of being the first Euro-
pean to explore the lower courses of the Mississippi. The love of adventure and
the fascination of the unknown sentiments so deeply influencing the men of the
16th and 17th centuries, are nowhere better exemplified than in the experiences
of this Flemish friar, but his actual contribution to the knowledge of North Amer-
ica consists in an account published by him in France in 1683 of a journey under-
taken three years before at command of La Salle from the Illinois River north
toward the source of the Mississippi, where he fell into the hands of the Sioux
Indians and spent some months in captivity, wandering about with these savages.
This account, which appeared under the title of " Louisiane," was translated into
English by Shea in 1880. For this reason Mr. Thwaites has chosen to edit the
latter, but in some respects more interesting, work of Hennepin, in which is in-
corporated, together with the "Louisiane," the apocryphal narrative of the friar's
descent of the Mississippi and an account of the Indian tribes in its valley. Not-
44 Contributed by Dr. Herman V. Ames.
48 Hennepin's A New Discovery in America. Edited with introduction, notes and index by
19(tt G°ld Thwaites- pP- lxiv» 711; 2 vols. Price, $5.00. Chicago: A. C. McClurg & Co.,
[377]
94 The Annals oj the American Academy
withstanding the falsity of its claims the second part of the book contains much of
interest, for it was drawn with few changes from Le Clercq's Etablissement de
la Foi, which included the journal of Father Membre, who really made the descent
of the river with La Salle in 1682. The editing of the reprint has been done
with care. An introduction gives all that is known of Hennepin's life in
Europe and a resume* of his American experiences.
The most valuable part of the critical apparatus is the careful and scholarly
Hennepin bibliography appended to the introduction and prepared by Victor
Hugo Paltsits of the Lenox Library, New York. Various attempts at such a list
have been made before, notably by Harisse, Sabin, Shea, Winsor, Remington
and Dionne, but they were all marked by great inaccuracy. We now have for
the first time a complete and systematic bibliography of Hennepin's works.46
The History of Liquor Licensing in England, Principally from 1700
TO 1S30, by Sidney and Beatrice Webb,47 is really a chapter from a larger study
they are making of English Local Government. The volume has largely an his-
torical interest for us, but for the English who are now seeking the best means of
controlling the liquor traffic it will prove of greater value, for it shows that many
of the present proposals were tried — and in vain — long years ago, while the more
successful plans are also clearly described.
REVIEWS
The United States in Our Own Time. A History from Reconstruction to
Expansion. By E. Benjamin Andrews, Chancellor of the Univerity of
Nebraska, and sometime President of Brown University. Pp. xxxvii,
961. Price, $5.00. New York: Charles Scribner's Sons, 1903.
This work is a continuation of the author's "History of the United States
During the Last Quarter of a Century, " which appeared several years ago. The
plan and method of treatment of the earlier work are followed here without
change. The history opens with an account of the industrial, social and political
conditions in the United States at the close of reconstruction (1870) and ends with
a reference to the postal frauds of 1903, embracing a period of thirty-three years
and comprising a volume of nearly one thousand pages. Some of the many sub-
jects which are fully treated are, frauds and scandals in the public service, be-
ginning with the Tweed ring, and including the whisky frauds, the credit mo-
bilier, the various scandals of Grant's second term, the Star route frauds, and
ending with those of 1903 in the postal service. No other period in our history has
been so fruitful of scandal in the public service and the uninformed reader of
President Andrews' book is likely to get the impression that government frauds
were matters of daily occurrence. Other subjects treated are, expositions and
national anniversaries, so numerous that descriptions of them become tiresome;
earthquakes, fires, floods, strikes, financial panics, Indian massacres, polar ex-
«LContributed by Prof. A. C. Howland.
*7 Pp. viii, 162. Price, $1.00. New York: Longmans, Green & Co., 1903.
[378]
The Problem of Wealth and Poverty 95
peditions, anarchistic riots, etc. Entire chapters are devoted to Indian wars in
the West, the agrarian movement in the seventies, Arctic expeditions, the
World's Columbian Exposition, and the negro. The latter chapter, however,
being based on the Eleventh Census, taken fourteen years ago, has little present
value. The book contains a good deal of quotation and nearly one thousand
illustrations, some of which add to its value as a popular work. It is, in fact,
intended for popular readers and not for critical students for whom it can have
little value. A serious defect consists in the inadequate treatment of political
and constitutional questions which have too often been neglected for non-political
matters, such as fires, floods, earthquakes, and other happenings, that have
exercised no influence on the development of the country. To take an example :
scarcely a page is given to our controversy with Great Britain in 1896 over the
Venezuelan incident, while immediately following, the Lexow investigation in
New York City and the A. P. A. controversy are each given four or five times as
much treatment. Finally, the book is full of loose, inaccurate statements. To
mention only two: the statement is made on page 917 that the Northern Securi-
ties Company was created with a capital stock approaching a billion dollars and
on page 927 it is stated that the Elkins Act created the Department of Commerce
and Labor. It should not be forgotten, however, that he who essays to write
contemporary history must needs rely largely on newspaper reports for his mate-
rials and hence errors of inaccuracy are often unavoidable. In spite of all defects
President Andrews' book is interestingly conceived and written and, being the
only one that covers the later period of our history, it supplies a real want.
James Wilford Garner.
Getting a Living: The Problem of Wealth and Poverty — of Profits, Wages and Trade-
Unionism. By George L. Bolen. Pp. 769. Price, $1.50. New York:
The Macmillan Company, 1903.
"The purpose in writing this book .... is to give the connected and some-
what complete view that all intelligent citizens should have of the many economic
divisions of the great problem of labor and life, but which is possessed
now by perhaps less than a tenth of even college graduates." It is a rather
inclusive study of the labor problem. The twenty-eight chapters deal with such
topics as "Rent and Land Ownership," "Interest," "The Employer and His
Profits," "Co-operative Industry," " Profit Sharing, " "Wages," "Trade-Unions
and Poverty."
The author usually approaches the various problems from the point of view
of a third party. The text and footnotes (of which there are entirely too many)
constitute a veritable encyclopaedia of miscellaneous facts. But it must be said
that the author is more interested in stating what should be and what must be
because of the unfailing operation of natural law, than in setting forth and
explaining what actually is. In the course of his discussions Mr. Bolen gives
us the results of some acute thinking and many common sense opinions. But
the book brings with the good much that is bad.
In the first place, it is difficult to read. In some chapters perhaps half of
[379]
q6 The Annals oj the American Academy
the matter is found in the footnotes, some of which must be read to get a proper
understanding of the text. The style is also bad, and grammatical errors are
numerous. In the second place, the material is not well organized. This makes
much repetition necessary and adds to the difficulty experienced by the reader in
getting at the author's thought. Again, some of the discussions are not very en-
lightening. The author is at such pains to justify interest and profits that little
light is shed upon them. On page 52, wages, we learn, may not be higher than
prices will justify, and because of the competition for laborers, they will usually
be the maximum marginal employers can afford to pay. We are assured many
times over that laborers will get all they produce. In the discussion of the prin-
ciples determining the rate of wages, we are told that there is a "wage fund"
(p. 130) . " This fund consists of all that employers stand ready to spend in wages
whether the money paid remains from the original starting capital, came from
recent sales of product, or is yet to be obtained from sales, loans or additional
investment (p. 131).
Another chapter in which the reader will be disappointed is that bearing
the title : ' ' Have Wage Workers Obtained their Share ? " The average reader will
expect to find information relating to what wage workers have as a matter of fact
received. But of such information little will be found there or elsewhere. The
author holds (p. 363) that they have obtained "a constantly increasing share of
a constantly increasing product." This opinion is based upon the theory that
competition among employers causes prices to fall with the diminished expense
of production so that if laborers do not gain directly by obtaining higher money
wages, they must gain indirectly as consumers. Inasmuch as many writers have
expressed doubt as to the varying proportions in which the product has been
divided, would it not have been better for the author to establish the truth of his
opinion by citing facts rather than, in effect, by stating that it must be so?
But while much of the book is disappointing, it contains several very good
chapters. Among others, those on "Co-operative Industry," "Profit Sharing,"
"The Shorter Work Day," "The Injunction in Labor Disputes," and "Prison
Labor. "
H. A. Millis.
Leland Stanford Junior University.
Militarism. A Contribution to the Peace Crusade. By Guguelmo FerrBRO.
Pp. 320. Price, $3.50. Boston: L. C. Page & Co., 1903.
In the English version of this work the original text as published in 1898 has
been modified to answer the objections of its critics, and enlarged so as to include
new problems for consideration. The avowed purpose of the book is to encourage
"the grand work of pacifying civilized nations," and to demonstrate that a
"general European war would be a world calamity and would produce
incalculable evils without recompense."
The author launches his theme with a general discussion of the principles
and policies that actuate the conduct of nations in reference to peace and war at
the end of the nineteenth century, devoting some attention to the significance of
[380]
Tenement House Problem 97
the brief struggle between Spain and the United States. He traces the remote
origin of the instinct of war back to the brutish passions and vagaries of barbarous
multitudes or "hordes, " of which the followers of the Mahdi furnish a recent type.
The defects of Greek and Roman civilization, and of course the militarism
incident to it are then passed in review. This enables Signor Ferrero to analyze
keenly the prevailing conditions in the Ottoman Empire, the "death throes"
of which he finds to be a heritage from the bellicose convulsions of ancestral
hordes and a manifestation of impotence before the giant strength of a Euro-
pean civilization whose real development is one of peace. The Napoleonic Wars
constitute a natural prelude to the particular forms of militarism as evolved in
the contemporary history of France, Italy, England and Germany. The char-
acter and purposes of the militarism prevailing in these countries are examined,
and the relative influence of Caesarism and Jacobinism noted on the conditions
more especially of the Latin states. A study of the economic forces that now tend
to militate against war concludes the book. These, the author hopes, may usher
in "the age of Pax Christiana of longer duration and more glorious
than the Pax Augusta."
The historical method of treating the theme has led the author at times to
lengthen his illustrative episodes unduly. Stilted phrases and numerous
errors, also, which occur in the translation diminish the force of the propositions
advanced, although they do not greatly obscure the earnestness and logical
power with which Signor Ferrero has marshaled his deductions from the past
and assumptions from the present. The impartial reader, nevertheless, is hardly
convinced that the primary instincts of the human race have become so altered
in the course of civilization as to render the love of country any the less sensitive
to dishonor, or the desire for national and individual aggrandizement any the
less inclined to profit by an opportunity, even at the risk of war.
William R. Shepherd.
Columbia University.
Tenement House Problem. Including the Report of the New York State Tenement
House Commission of 1900. By various writers. Edited by Robert W.
de Forest and Lawrence Veiller. Pp. xxx, 470; 516. Two vols. Price,
$6.00. New York: Macmillan Company, 1903.
These volumes contain more helpful material on the housing problem and
ways to meet it than any score of volumes hitherto published. They will be
classics wherever public or individual interest in the housing conditions of the
working classes exists. In fact, they will be needed wherever social needs are
scrutinized and social wrongs challenged, for, while primarily devoted to housing
they contain valuable chapters on tuberculosis, the social evil, public baths,
immigration policy, playgrounds and park systems. Very properly is the study
designed as a "contribution to the causes of municipal reform, to report progress
made, and to guide progress still to come." These volumes are the production
of two men who more than any others were responsible for the successful installa-
[381]
98 The Annals of the American Academy
tion of New York's Tenement Department, as well as for the agitation leading
immediately to the legislation creating that Department.
The first volume, of nearly five hundred pages, is devoted to problems
peculiar to tenements. The historical resume' is followed by a critical exposition
of the essentials of the tenement problem and the essentials of remedial and pre-
ventive policies. This discussion is of interest to builders, and statesmen, as
well as lay students. The chapter on the period 1834-1890 is of a high order of
historical writing, it seems to the reviewer, in that it marshals facts and lines
them up "according to height. " Essentials stand out so clearly that even casual
reading shows both the greatness of the ideals and the weakness in execution of
the organizations that waged the early battles against overcrowding. True, it is
easier to see in retrospect the need for sustained effort and eternal vigilance than
it was when distinct gains seemed to have been achieved. But to us who review
the history of over a half century of agitation, the lesson is clear. An incomplete
victory means sure defeat, or to paraphrase the Indian hater, ' ' the only safe prob-
lem is a dead problem."
Descriptive matter follows containing facts with regard to housing in various
American and European cities, with interesting illustrations. » Special studies
are added on The Non-Enforcement of Laws in New Buildings, Fires and Fire-
Escapes, Back-to-Back Tenements, Sanitation, Small Houses for Working Men,
Financial Aspects of Recent Tenement House Operations in New York, Specula-
tive Building, The Tenant's Side, The Inspector's Side, Tuberculosis in Tene-
ments.
The second volume of about five hundred pages deals with the collateral or
incidental problems mentioned above. Here again illustrations render excellent
service in telling the story of baths, playgrounds, etc. The various appendices
give the proceedings of the New York Commission, testimony, etc., the new code,
the act which created the present department, other proposed legislation, valu-
able data as to rentals, and illuminating schedules which will help wherever an
investigation is intended.
William H. Allen.
New York City.
Contemporary France. By Gabriel Hanotaux. Translated by John Charles
Tarver. With portraits. Vol. I. (1870-1873). Pp. xiv, 696. Price,
$3.75. New York: G. P. Putnam's Sons, 1903.
M. Hanotaux brings to the writing of his "History of Contemporary France"
an unusual combination of abilities as an historian, for he combines with the
scientific training of a man of letters a practical experience derived from having
been premier of France some years ago. Moreover, the "atmosphere" of the
period of which he writes was actually breathed by him. As he himself says,
speaking of the war of 1870: "I was at that time sixteen. The generation to
which I belong was barely emerging from childhood: it saw everything, its intellect
was matured by that cruel spectacle. I came to Paris to begin my studies some
months after the commune. The city was dejected and there were traces of
[382]
Contemporary France 99
bidden agitation. From that time pressing questions arose in me: What had
been the causes of the greatness of France in the past? What were the causes of
heY defeat? What would be the moving forces in her approaching resurrection?
My manhood has applied itself to the solution of the problems put by my youth.
It has sometimes allowed itself to be diverted from its studies, but it has never
lost sight of them. " (p. viii.)
Beginning with the condition of France in 1870, M. Hanotaux shows how
specious were the foundations of the imperial regime of Napoleon III.; how "he
had the power to reign only by abandoning himself body and soul to the policy
of intervention;" how "like the illustrious founder of his race, he was obliged
to war and condemned to a succession of victories. " (p. i.) Contrasting the
characters of Napoleon III. and the great Bonaparte, he sums up the two
respectively in this phrase: "The one had genius; the other, ingenuity." (p. 2.)
In tracing the origins of the Franco-Prussian War he seems to spare the Empress
Eugenie as much as he deals out blame to the Emperor. As to the events of the
war itself, they are briefly passed over, and almost the entire book is taken up
with the political complications ensuing after Sedan. Some of the facts which he
discusses are of exceeding interest : notably, the early determination of Prussia to
demand Alsace-Lorraine (pp. 18-19), and the evidence that Bismarck was opposed
to this demand, but was forced into it by the Prussian general staff — a difference
of opinion which resulted in a bitter breach between Bismarck and Moltke, (in-
deed, much of the writing of the book revolves around the divided sentiments of
the great German minister and the German general, and the hostility existing
between Thiers and Gambetta) ; the nature and extent of the Prussian domination
in France, which was so complete that the elections of February, 1871, took place
under the eyes of the enemy : " In forty-three departments postal communication
was forbidden, and circulation in the departments under occupation was very
nearly impossible In that part of our territory the electoral decrees
were posted up by the agency of the German authorities. " (p. 30.) In passing it
may be stated that the extent and efficiency of the Prussian administration of
France here alluded to is a very interesting matter to follow up in M. Hanotaux' s
book. .
Throughout the book admirable character sketches are to be found; the
judgment of Bismarck, all things considered, is a moderate one. The book as a
whole might just as well have been called a history of the ministry of Thiers
under the Third Republic, for in reality he is the central figure. Readers of Mr.
Andrew D. White's " Recollections," now appearing in one of the current maga-
zines who read his biting criticism of Thiers, will be interested especially in the
judgment of a compatriot of the little minister.
The present volume concludes with May 24, 1873, culminating in the fall
of the government of Thiers. The succeeding volume, it is promised, will be de-
voted to the presidency of Marshal MacMahon and the founding of the Republic;
while the third and fourth will deal with the history of the parliamentary republic.
For the satisfaction of the interested reader the author assures us that ' ' I have
[383]
ioo The Annals of the American Academy
made arrangements so that the four volumes may follow one another in rapid
succession."
The English edition is not all that one might wish, for the reader who is
sensitive either to good English or to good French will find much to pardon.
Such slipshod phraseology as "woken up" (p. 5), "notoriety" used for fame
(pp. 53 and 64), "He (Bismarck) was always on deck" (p. 115) are examples of
the loose parlance that abounds. There is a curious literalness also in the trans-
lation of French abstract terms, for the translator continually translates the
article with the noun; e. g., "the democracy," when speaking of democracy as
a principle of government.
James Westfaix Thompson.
University of Chicago,
Autobiography of Seventy Years. By George F. Hoar. With portraits. Two
volumes. Pp. ix, 434, and viii, 493. Price, $7.50. New York: Charles
Scribner's Sons, 1903.
Ex-Senator George F. Edmunds is reputed to have once credited Senator Hoar
with being one of the half dozen men who did the whole work of the Senate.
However this may be, Senator Hoar's continuous service in the Senate exceeds
in length that of any other man now living, and he has represented Massachusetts
in the Senate for a longer period than any of the other great men who have served
that ancient Commonwealth in the Upper House. For thirty-six years he has
been a member of one or the other House of Congress, and almost from his first
entrance into the Senate he has occupied a position of leadership among the able
men of that distinguished body. During twenty-two of his twenty-seven years
in the Senate, he has been a member of the Judiciary Committee, and during about
half of the time he has served as its chairman. The personal recollections of few
public men, therefore, should be more entertaining and instructive than those of
Senator Hoar. Of the volumes under review it truly can be said, that so far as
genuine entertainment is concerned, they hardly can be excelled by the remi-
niscences of any of our public men. Senator Hoar's style has a certain charm
about it that never fails to hold the interest of the reader. He possesses a rich
fund of anecdotes which is frequently drawn upon to enliven the pages of his
story, while his abundant illustrations from the classics give evidence of his
wide reading and scholarship.
But to the serious student the autobiography is not all that could be wished
for. It does not begin to approach Grant's Memoirs in compactness, information
and dignity, while it falls below some of the latter military reminiscences in one
or the other of these qualities. Trivial incidents and personal references, despite
the author's disclaimer that he is not a vain man, abound altogether too
frequently. Irrelevant matter, such as is found in the chapters on the
"Saturday Club," the "Worcester Fire Society," the "Forest of Dean," etc.,
still further swells the compass of the "autobiography" Here and there chap-
ters not exceeding two pages in amount and dealing with unimportant
incidents are thrown in, thus giving the story a scrappy appearance.
[384]
Histoire de France ior
The most valuable features of the autobiography are the portraitures of pub-
lic men whom Senator Hoar has known. The more important of these are found
in the chapters, entitled "Some Judges I have Known," "Some Orators I have
Heard," "Some Southern Senators," and "Leaders of the Senate in 1877." It
is somewhat surprising to note the high estimate which he has placed upon
some of the Southern leaders whom he has known but always opposed uncom-
promisingly. Thus a whole chapter, entitled "President Cleveland's Judges," is
in fact devoted to an appreciation of Justice L. Q. C. Lamar. Among Repub-
lican leaders Webster, Sumner, Chase and Henry Wilson are the subjects of ex-
tended eulogy. Conkling, he thinks, was not the equal of either Blaine, Sher-
man or Carl Schurz. Only in dealing with General Butler does the venerable
Senator lose his moderation. An entire chapter is devoted to Butler's "record"
and a severe judgment passed upon his public character. Aside from portraitures
of public men there is an excellent chapter on Harvard sixty years ago ; there
are also chapters on "Four National Conventions," the "Credit Mobilier," the
"Foundation of the Republican Party," the "Political History of Massa-
chusetts," and many others of less importance.
J. W. Garner
Lavisse: Histoire de France, Tome V, Part 1, Les Guerres d'ltalie — Lc France
sous Charles VIII., Louis XII. et Francois Ier (1492-1547). Par Henry
LemonnieR. Pp. 394. Price, 6 fr. Paris: Hachette, 1903.
Lavisse: Histoire de France, Tome V, 2, La Lutte contre la maison d'Autriche.
La France sous Henri II. (1519-1559). Par Henry Lemonnier. Pp.380.
Price, 6 fr. Paris: Hachette, 1904.
The co-operative Hsitoire de France has reached the sixteenth century. In
Part I of Volume V, M. Lemonnier describes the evolution in politics, administra-
tion and intellectual life from 1492 to 1547. About one-third of the volume is
taken up by the Italian wars, which brought France into contact with all Europe.
Excellent chapters describe the growth of centralism and absolutism. A large
space relatively (about one-quarter of the volume) is devoted to the intellectual
evolution. Finally, there is a compact account of the beginnings of the Reforma-
tion movement in France.
The transformation from feudal conditions is clearly marked in the govern-
ment, in the finances, in the formation of the new nobility. In the Church, too,
the Concordat of 1516 brought about a great change from mediaeval conditions.
As a whole, the volume gives the impression of rapid evolution in all the spheres of
national activity.
The economic situation under Francis I., the new literary and artistic move-
ments, and the character of some of the chief actors, are especially well portrayed.
Instead of being a confused mass of material, relating, sometimes to the political
life, sometimes to the wars, sometimes to the intellectual and religious phases of
the time, M. Lemonnier has succeeded in producing a well-proportioned narrative,
in which each subject is described briefly but satisfactorily. He has paid greater
attention than the authors of the preceding parts to the fine arts and to pedagogy.
[385]
102 The Annals of the American Academy
In fact, as noted above, the general impression, both as a whole and when we
examine the volume in detail, is that France is entering upon a new sphere of
life, that the Middle Ages have been left definitely behind, and that France is
taking the shape which she will retain until the Revolution, and, in part, until the
present day.
The first two books in this second part of Vol. V are entitled, respectively:
La Lutte entre Francois Ier et Charles-Quint (1519-1547) and La Politique a" 'Henri
II. The author's judgment on the matters in these two books may be gathered
from his statements on pp. 180, 181 and 182. " Les rois de France furent medi-
ocres dans la politique et dans la guerre. * * * * Francois Ier s'acharna d la reprise
du Milanais, Henri II. laissa renaitre la chimZre des expeditions napolitaines.
"Dans les combinaisons diplomatiques, Charles VIII. et Louis XII. avaient
montre toute leur inexperience. Francois Ierf avec un sentiment plus juste des
nicessitis pratiques, manqua $ esprit de suite. * * * * Quant d Henri II., on ne
voit pas tr£s bien ce qu'il a voulu. * * * * Les operations mililaires ne furent
gu£re mieux conduites. * * * * Les rois ne surent pas trouver d'hommes de merite.
* * * * En rialite, le royaume s'est soutenu et il a grandi d cette tpoque par la
classe moyenne."
"En 1559, une he est close. Les conditions de la politique Internationale
vont se transformer, ou plutdt il n'y a plus de politique Internationale au sens
Hroit du mot, car les interests se subordonnent d des passions, et ce qui divise surtout
les nations et les hommes, ce sont des divergences religieuses . " * * * *
The next book is devoted to Calvinism, its expansion and organization.
In Book X (" La Formation de V esprit Classique en France "), it is clearly shown
that this led to an almost mediaeval deference to authority. "lis eurent le respect
presque superstitieux des maitres, d condition que ces maitres fussent les Anciens.
En tout ce qui vena it des Grecs et des Romains, V esprit du temps ne faisait aucune
difference entre le meilleur et le pire. On cite, on admire les auteurs mediocres
presque d Vegal des grands; on accepte, mime en matifre scientifique, les assertions
les plus hasardees. Presque personne, par exemple, ne songe d discuter les ricits
les plus Hranges de Pline V Ancien. Les ouvrages a" erudition ne sont bien souvent
que des recueils de citations non contrdltes." (p. 281.) The author does not,
however, neglect the reaction. He shows (on p. 285) that all the world did not
take part in this extreme love of humanism. The old romances were reprinted
in the second half of the fifteenth century and the old mysteries were still played.
In Book XI, M. Lemonnier discusses the literature and the fine arts. He
does not belittle the good effects of the Renaissance. "Elle suscita tout d'abord
un grand mouvement d'idies, un elargissement d'horizon pour les esprits, de nobles
curiositis, la passion de savoir." But his final judgment of its work is: " Ainsi
se pre par a 'I'honne'te homme' du XVIIe sQcle, nourri dans le culte des anciens,
forme par une Education tout intellectuelle, propre d concevoir un certain ideal de
beauti litteraire et artistique, mais fermi d toute conception qui n'etait pas classique,
Peu curieux le plus souvent de connaissances scientifiques, aussi incapable de com'
prendre Shakespeare que de s'interisser d Newton, indifferent aux problemes
poliliques ou sociaux, dedaigneux des questions economiques et industrielles, isoU
[386]
The Truth About the Trusts 103
dans la sphhe de la pensie pure et dans le monde antique ou il s'enferme. Pour lui
V Europe reste toujour s celle des Grecs et des Romains, et V Amerique n'a pas He
dicouverte."
It is unnecessary to add that the work is thoroughly scholarly and abreast
of the most recent research. The outlines and quotations above will give a bet-
ter idea of the nature of the work as a whole than would be possible in any brief
criticism.
D. C. Munro.
University of Wisconsin.
The Truth About the Trusts. A Description and Analysis of the American Trust
Movement. By John Moody. Pp. xxii, 514. Price, $5.00. New York:
Moody Publishing Company, 1904.
Trusts of To-day. Facts Relating to their Promotion, Financial Management and
the Attempts at State Control. By Gilbert Holland Montague, A. M.
Pp. xvii, 219. Price, $1.20. New York: McClure, Phillips & Co., 1904.
The importance of the trust question is indicated by the rapidly increasing
volume of literature devoted to that subject. The comprehensive reports of the
Industrial Commission and the excellent little book, prepared by Professor Jenks»
summarizing the main conclusions he had reached as the result of his connection
with the Industrial Commission and others of less note, are now supplemented
by Mr. Moody's volume on "The Truth About the Trusts." This book is a com"
pilation of information made possible by the activity of Mr. Moody's Bureau of
Corporation Statistics which was established to secure the data required for the
publication annually of " Moody's Manual of Corporation Securities." This
Manual has within the short space of four years come to fill a useful place in the
current literature regarding corporations.
"The Truth About the Trusts " contains four parts: (1) an introduction
devoted mainly to definitions of the Trusts, of Monopoly, and of Watered
Capital; (2), a description, history and analysis of the greater and lesser Industrial
Trusts, of the more important franchise trusts, and of the larger groups of
railroads; (3), the classified statistics of the three kinds of trusts just mentioned,
and (4) a general review of the trust movement, containing a statement of the
magnitude and power of the trusts, and a brief discussion of "so-called remedies. "
There is appended to the book a brief list of books and articles treating of the
trust question.
The larger part of the volume, and by far the most valuable part, is devoted
to a description and the history of the "seven greater Industrial Trusts" and
eighty-five of the "lesser Industrial Trusts." Every student of the trust ques-
tion must feel indebted to Mr. Moody for the compilation of this descriptive and
historical material.
The next most important feature of the book is the "classified statistics of
trusts." The statistics cover 318 active Industrial Trusts. The total number
of combinations — industrial, franchise and transportation — listed in the volume
is 445. The information contained in this statistical compilation is so valuable
that the author's summary may well be briefly stated in this review. He says:
[38-]
104 The Annals of the American Academy
"The aggregate capitalization outstanding in the hands of the public of the
318 important and active Industrial Trusts in this country is at the present time
no less than $7,246,342,533, representing, in all, consolidations of nearly 5,300
distinct plants, and covering practically every line of productive industry in the
United States."
"Of the 318 active Industrial Trusts here given, 236 have been incorporated
since January 1, 1898, and 170 are organized under New Jersey laws. Those
incorporated prior to January 1, 1898 (the year in which the modern Trust-
forming period really dates its beginning), represent a total capitalization of but
$1,196,724,310, while those formed since that date make an aggregate of
$6,049,618,223." Speaking of the extent to which these trusts exercise control
in their respective industries or markets, Mr. Moody says that the percentages
"range all the way from 10% to 95%, and there are many cases in which the
Trust does not control more than 40 %. Of the total 92, " however, 78 control
50% or more of their product, and 57 control 60% or more. Twenty-six
control 80 % or over. "
The author's list of important Franchise Trusts includes 111 entries. "In
this list are embraced important public service consolidations, including telephone,
telegraph, gas, electric light and other electric railway companies, representing
about 1,336 original corporations. The total outstanding capitalization of these
Franchise Trusts is as reported, $3,735,456,071."
In discussing railroad consolidations Mr. Moody describes six groups or
"Communities of Interest," which together "represent a combined outstanding
capitalization (par value of stocks and bonds) of $9,397,363,907, or nearly 80 %
of all the floating railroad capitalization of this country. " Mr. Moody says these
six railroad groups control directly and indirectly, "nearly 95 % of the vital and
American railway mileage. " "This railway consolidation embraces about 1,040
original companies."
"Thus it will be seen that including industrial, franchise, transportation and
miscellaneous, about 445 active trusts are represented in the book with a total
capitalization of $20,379,162,551. They embrace in all about 8,664 original
companies."
"To analyze these figures slightly in detail we find that of the Industrial
Trusts 10 have $100,000,000 capitalization or over, 30 have $50,000,000 or over
and 129 have $10,000,000 or over. Of the Franchise Trusts 11 exceed $100,000,-
000, 23 exceed $50,000,000 and 94 exceed $5,000,000. Of the six Great Railroad
Groups, all exceed $1,000,000,000 capital, while the Morgan Group exceeds
$2,200,000,000."
Mr. Moody's account of the grouping of railroads by Communities of Interest,
though brief, is instructive ; but his discussion of the causes which have brought
about railway consolidations, is a decidedly weak and trite rehearsal of the facts
compiled by C. F. Beach, Jr., Esq., in a brief prepared for submission to the
Supreme Court, in connection with the Northern Securities case.
Mr. Moody's summary of the Trust problem in his "General Review of the
Trust Movement" is disappointing. What he says about the magnitude and
[388]
Trusts of To-dvy IQ5
powerful influences of the Trusts is based on concrete data and is highly valuable,
but what the author says regarding the remedies, reveals a superficial knowledge
of the literature and laws regarding trusts; and his general conclusion shows a
narrow bias against all governmental interference with the activities of the power-
ful trusts. There is much said against existing legislation regarding trusts, but
nothing against the control of production and prices by unregulated combina-
tions. Moody says: "It is a peculiar fact that while the term monopoly is more
or less obnoxious to us all, the thing itself does not seem to be."
Mr. Montague has written a readable and well-balanced little book in which
he discusses the views of the Industrial Commission regarding trusts, considers
the recent legislation of the States and Congress, analyzes the recent decisions of
the courts on questions involving the common and statutory law as applied to
monopoly and restraint of trade, and sets forth the work accomplished by
Ex-Attorney General Knox. The general reader will find the book a good
survey of the Trust problem.
Six chapters of the volume deal with the development of industrial com-
bination, the savings of combination, the evils of practical monopoly, the evils
in present trust organizations, the history of anti-trust legislation and the out-
look for trust regulation.
The conclusion reached in discussing the evils of practical monopoly, is that
the ills connected with the industrial monopolies tend to correct themselves, but
that the evils of "railway discrimination stand out as the ill that is not self cor-
rective. " The other abuse calling for correction by law is found in the "defective
organization and faulty management ' ' of modern trusts. ' ' Over capitalization, ' '
the author says, "is the first great evil of modern trust organizations." This
evil tends to correct itself so slowly, that some statutory remedy must be applied.
Mr. Montague summarizes his views concerning the method by which the
trust question may be solved, in the following words: "By enforcing publicity in
interstate trading corporations — assuming that the trusts are demonstrably en-
gaged in interstate commerce — the whole evil arising from the form of modern
trust organization might be corrected. By strengthening the Interstate Commerce
Act to prevent freight discrimination, the whole evil of practical monopoly might
be corrected. These two last remedies, be it noted, carry in themselves the cure
of most trust ills. In harmony with stricter State corporation laws, enacted
along the lines laid down by the proposed New York Companies' Act and the
recommendations of the Industrial Commission these remedies might relieve the
trust situation. "
Emory R. Johnson.
[389]
io6 The Annals oj the American Academy
Introduction to Economics. By Henry Rogers Seager, Ph.D., Adjunct Pro-
fessor of Political Economy, Columbia University. Pp. 565. New York:
Henry Holt & Co., 1904.
Counting works that have already been published and others that are likely
to appear during the coming months the present year will prove uniquely pro-
ductive of high-grade college text-books in economics. But if none other had
appeared or were to appear than the book before us, the year would still have been
rich in product, for Professor Seager not only has given us an unusual text-book,
but he has made as well an important, if not original, contribution to the litera-
ture of economics. Indeed, it is not too much to say that he has brought the
work of contemporary American theorists into its proper relation to the work of
Professor Marshall, much as Professor Marshall himself had already adjusted the
theories of the Austrian economists to those of the English classical school.
The book naturally divides itself into three parts. The first, comprehending
two chapters, deals with the economic history of England and of the United States.
The remaining two parts are evenly proportioned between an exposition of the
principles of economists and an application of those principles to practical prob-
lems.
The historical sketches are more than mere statistical summaries in that they
picture significant tendencies quite as clearly as they do important facts. The
chapters on practical problems are models of exposition and argumentation, the
treatment of the trust and labor problems being particularly clear and compre-
hensive. The point of view throughout this part of the work, although far from
concealing the existence of present-day evils and the desirability of reform, is
quite conservative, and the discussion sane, dignified and fearless.
But from the standpoint of the economist the theoretical portion of the book
is of chief interest, for the author has on the whole very acceptably performed
the task of re-interpreting and harmonizing various more or less isolated and
apparently divergent theories. The chapter on the consumption of wealth dis-
tinctly shows the influence of Professor Patten's writings, as do those on produc-
tion the work of Professor Marshall. Like Marshall the author thinks that rele-
vancy to actual facts, if not to the needs of economic theory, demands that land
be regarded and treated as one of four distinct factors in production : land, labor,
capital and business organization. In his comparatively exhaustive treatment
[39o]
Introduction to Economics 107
of distribution, however, at least as regards essentials he places himself squarely
on the same footing with those adherents of the productivity theory to whom the
above classification of the factors of production seems to be especially objection-
able. To his view, as to theirs, under normal or static conditions each factor
gets what it produces. In the development of the theory the mathematical
method with its use of the marginal and differential concepts is employed through-
out. In his treatment of the rent of land gradations between different kinds of
land and the different powers in each kind are regarded as so far from being in-
finitesimal as to warrant a classification analogous to the author's classification
of labor groups — which, it may be added, is modeled after Cairns' theory of non-
competing groups. From a pedagogical standpoint the whole discussion of dis-
tribution is full of difficulties, for except under the most skillful exposition at the
hands of a thoroughly equipped teacher the average student will fail to eliminate
the frictional forces from his view of normal economic processes and will not
acquire the habit of reasoning in marginals and differentials. On the other hand,
frequent, thorough and accurate summaries of arguments here as elsewhere in
the book, and unambiguous and consistent use of terms (e. g., in the distinctions
between capital and capital goods, between cost and expense and between pain-
ful effort and sacrifice) ought to do much to neutralize these difficulties.
In conclusion it ought to be said of the work as a whole that the author's
manifest attempt to make it at once concise, comprehensive and authoritative,
although adding to its merit as a treatise on economics, is likely to detract from
its usefulness as a text-book with students of immature mind. But even when
this has been said the reviewer cannot avoid the opinion that the book is alto-
gether the best introduction to the study of economics that has yet been written.
Roswell C. McCrea.
Bowdoin College.
The Expansion of Russia, 1815-1900. Francis Henry Skrine, F.S.S. Pp.
viii, 386. Price, Qs. Cambridge: University Press, 1903.
A concise historical account of the expansion of Russia in the nineteenth
century, relating not only to the military and diplomatic events connected with
it, but also exposing the underlying racial and economic causes, would be a wel-
come addition to the ever increasing literature on the Eastern situation. Mr.
Skrine's book, however, only partially meets this need. The title which he has
chosen is not a true index of the contents. The work is in reality a general his-
tory of Russia written after the style of the Oxford series of European History,
edited by Hassall. The author has not made the salient features of Russian ex-
pansion the central theme of his book, but has simply grouped the events of for-
eign and domestic importance under the reigns covering the period with which he
deals. True to English precedent, he treats politics and diplomacy with great
detail. Considerable attention is devoted to the part played by Alexander I.
in the European settlement of 1815, to the Russification and government of
Poland, to the Turkish question, and to the advance in Asia. One of the most
interesting features of the book is the attitude which the author, a retired Indian
[39l]
108 The Annals of the American Academy
civil servant, takes toward Anglo-Russian relations in the East. While believ-
ing that the true interests of Russia lie in the Asiatic rather than in the European
advance, Mr. Skrine scouts the idea of Russian designs upon British dominions.
Quite rightly he regards the successive stages of Russian advance into the south-
east as the result of unforeseen and inevitable circumstances rather than of a far-
sighted and conscious policy. The Russian movements in the direction of India
he considers merely as menaces to England in case the latter power attempts
to thwart her real purpose in the Asiatic advance which is the opening of Eastern
trade routes through the ice free ports. The author condemns British foreign
policy in the East as "one of undignified protest and panic," and pleads for a
modus vivendi and cordial relations between the two countries. This view is
held by a large number of Englishmen — even Lord Beaconsfield thought Asia
wide enough for both Russia and England — but the logic of recent events may
alter their opinion. Had Mr. Skrine written his book after the outbreak of the
Russo-Japanese War, he might not have been so optimistic, even though he
regards Japan as intoxicated by the "lust of dominion" — a species of intoxication
not peculiar to that people. In the competition for the land-borne Indian trade
and predominance in Persia, the author considers Germany "a more subtile
antagonist than England." On the Finnish question, Mr. Skrine takes middle
ground, holding that "perfervid patriotism has led the Finlanders to forget past
favors and the wisdom of conciliating their mighty neighbor," while Russia
"might probably have secured all her aims by adopting strictly legal methods
and appealing to the steadfast loyalty of the Finnish people. " Russian social and
economic questions are not neglected in the book, although their interesting
character makes one wish that more space had been devoted to them. Domestic
reforms in civil and military administration, abolition of serfdom, extension of
the railway system and, especially, the industrial developments of the last quar-
ter of a century are treated somewhat at length. Mr. Skrine believes in the
"intrinsic soundness" of the new capitalist undertakings, notwithstanding some
apparent instability. He points out the imminence of the social revolution which
must follow the shifting of economic forces and classes brought about by the
industrial revolution. The book closes with a brief account of the Tsar's
peace circular and The Hague Conference, which is held to be "not devoid of
solid results. " The value of the work is enhanced by a full and well-selected
bibliography, a carefully prepared index, and three maps — two of which are of
special importance, showing step by step the extension of the frontiers and the
present expanse of the Empire with all its important railway trunk lines. | j
Charles A. Beard.
[392]
BOOKS RECEIVED FROM APRIL i, 1904, TO AUGUST 1, 1904.
Annuaire-Almanach l'Action Populaire: Guide Social, 1904. Paris: Lecoffre.
Bayot, A., Le Roman de Gillion de Trazegnies. Louvain: Chas. Peeters. 4 fr.
Beard C. A., The Office of Justice of the Peace in England in its Origin and Development.
Macmillan. $1 .50.
B^chaux, A., La Reglementation du Travail. Paris: Lecoffre. 2 fr.
Blondel, G., La Politique Protectionists en Angleterre. Paris: Lecoffre. 2 fr.
Bour'guin, M., Les Systemes Socialistes et revolution Economique. Paris: Armand Colin.
10 fr.
de Bray, A. J., La Belgique et le Marche Asiatique. Brussels: Polleunis & Ceuterich.
Chavee, F., Proprietaires et Fermiers en Angleterre. Louvain: Chas. Peeters.
de Coubertin, P:, La Chronique de France, 1903. Auxerre-Paris: A. Lanier.
Curtis, F., The Republican Party, 1854-1904. 2 vols. Putnams. $6.00.
Doherty, H. L., Editor, Ohio Gas Light Association, 1904.
Dopp, K. E., The Tree-Dwellers. Chicago: Rand, McNally Co. $0.45.
Du Bois, W. E. B., Ed. by. The Negro Church. Atlanta, Ga.: Atlanta University. $0.50.
Duguid, C, The Stock Exchange. London: Methuen & Co. 2s. 6d.
Elson, H. W., History of the United States of America. Macmillan.
Ensor, R. C. K., Ed. by. Modern Socialism, as set forth by Socialists in their Speeches, Writ-
ings and Programmes. Harpers. $1.50.
Freund, E., The Police Power. Chicago: Callaghan & Co. $6.00.
Gilman, N. P., Methods of Industrial Peace. Houghton, Mifflin & Co. $1.60.
Halsey and Dale, The Metric Fallacy. New York: D. Van Nostrand Co. $1.00.
Hamilton, A., Korea. Scribners. $4.00.
Hammond, B. E., Outlines of Comparative Politics. London: Rivington.
Haskins, C. W., Business Education and Accounting. Harpers. $2.00.
Hatch, L. C, The Administration of the American Revolutionary Army. Longmans, Green
& Co.
Howard, G. E., A History of Matrimonial Institutions. 3 vols. Chicago- University Press,
$10.00.
Les Industries Insalubres. Jena: Gustav Fischer.
Jellinek, G., L'Etat Moderne et son Droit. Paris: Albert Fontemoing.
Johnson, W. F., A Century of Expansion. Macmillan. $1.50.
Jones, T. J., The Sociology of a New York City Block. Macmillan. $1.00.
Ladoff, I., American Pauperism and the Abolition of Poverty. Chicago: C. H. Kerr & Co.
$0.50.
de Lannoy, Fl., Les Origines Diplomatiques de l'lndependence Beige. Louvain: Chas. Peeters.
Lavisse, E., Histoire de France. Tome V, pt. 2. Paris: Hachette & Cie.
Liegeois, C, Gilles de Chin, 1' Histoire et la Legende. Louvain: Chas. Peeters. 4 fr.
Luckey, G. W. A., The Professional Training of Secondary Teachers in the United States.
Macmillan. $2.00.
Marx, K., A Contribution to the Critique of Political Economy. New York: International
Lib. Pub. Co. $1.50.
von Mayr, G., Allgemeines Statistisches Archiv. Tubingen: H. Laupp 'sche Buchhandlung.
McDermott, E. R., Railways. London: Methuen & Co. 2s. 6d.
Miltoun, F., Ships and Shipping. London: Alexander Moring. 5s.
Moody, J., Truth About the Trusts. New York: Moody Pub. Co. $5.00.
Miiller, D. H., Die Gesetze Hammurabis und ihr Verhaltnis zur mosaischen Gesetzebung sowie
zu den XII. Tafeln. Wien: Alfred Holder. 10 M.
Miiller, D. H., Uber die Gesetze Hammurabis Vortrag gehalten in der Wiener Juristischen
Gesellschaft am 23 Marz, 1904. Wien: Alfred Holder. 1 M.
[393]
no The Annals of the American Academy
Municipal Problems in. Michigan, Papers and Discussions at the joint Meeting of the Michigan
Political Science Association and the League of Michigan Municipalities held at Ann Arbor,
Feb. 11-12, 1904. $1.00.
Murphy, E. G., Problems of the Present South. Macmillan. $1.50.
Osgood, H. L., The American Colonies in the Seventeenth Century. 2 vols. Macmillan. $5.00.
Owen, D., Ports and Docks. London: Methuen & Co. 2s. 6d.
Peirce, P. S., The Freedmen's Bureau — A Chapter in the History of Reconstruction. Iowa
City: University of Iowa,
de Peralta, M. M., Costa Rica y Costa de Mosquitos. Paris: Generale Lahure.
de Peralta, M. M., Expose des droits territoriaux de la Republique de Costa Rica. Paris:
Generale Lahure.
Platter, J., Grundlehren der Nationalokonomie, Kritische Einfiihrung in die soziale Wirtschafts-
wissenschaft. Berlin: J. Guttentag.
Post, L. F., Ethics of Democracy. New York: Moody Pub. Co.
Riviere, L., La Terre et 1' Atelier, Jardins ouvriers. Paris.: Lecoffre. 2 fr.
Robinson, C, A History of Two Reciprocity Treaties. New Haven, Conn.: Tuttle, Morehouse
& Taylor Press.
Rowe, L. S., The United States and Porto Rico, with Special Reference to the Problems Arising
out of our Contact with the Spanish -American Civilization. New York: Longmans,
Green & Co. $1.30.
vonJSchierbrand, Russia — Her Strength and Her Weakness. New York: Putnams.
Scott, S. P., History of the Moorish Empire in Europe. 3 vols. Philadelphia: Lippincott Co.
$10.00.
Shaler, N. S., The Neighbor — The Natural History of Human Contacts. Houghton, Mifflin
& Co. $1.40.
Shambaugh, B. F., Ed. by. Messages and Proclamations of the Governors of Iowa. Vols. I-IV.
Iowa City: State Historical Society.
Strachan, W., Cost Accounts: The Key to Economy in Manufacture. London: Stevens &
Haynes. 3s. 6d.
Straker, F., The Money Market. London: Methuen & Co. 2s. 6d.
Strong, J., Social Progress: A Year Book and Encyclopedia of Economic, Industrial, Social
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Talbot, E. A., Samuel Chapman Armstrong: A Biographical Study. New York: Doubleday,
Page & Co. $1.50.
Tenement House Department of the City of New York. 2 vols. New York: Martin B. Brown
Press.
Terlinden, Ch., Le Pape Clement IX. et la Guerre de Candie (1667-1669). Louvain: Chas.
Peeters. 5 fr.
Thomas, D. Y., A History of Military Government in Newly Acquired Territory of the United
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Thorndike, E. L., Heredity, Correlation and Sex Differences in School Abilities. Macmillan.
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Le Travail de nuit des Femmes dans 1' Industrie. Jena: Gustav Fischer.
Van Roey, E., De Justo Auctario ex Contractu Crediti. Louvain: Van Linthout.
Verhoeven, L. G., Des Effets de Commerce. Louvain: Chas. Peeters. 3.50 fr.
Vermaut, R., Les Graves des Chemins de Fer en Hollande en 1903. Groningen, P. Noordhoff.
Vermaut, R., Les Regies Municipales en Angleterre. Paris: Victor Lecoffre.
Vidal, Georges, Considerations sur 1 IJtat Actuel de la!Criminalit6 en France. Paris: Librairie
Nouvelle de droit et de Jurisprudence.
Ward, A. W., Prothero, G. W., and Leathes, Stanley, Ed. by. The Cambridge Modern History.
Vol. VIII. Macmillan. $4.00.
Washington, B. T.t Working with the Hands. New York: Doubleday, Page & Co. $1.50.
Wilson, A. J., The Business of Insurance. London: Methuen & Co. 2s. 6d.
[394]
NOTES
I. MUNICIPAL GOVERNMENT
Denver. — Home Rule for Cities} The Twentieth Article — better known
as the Rush Amendment — to the Constitution of Colorado, was, on the 18th day
of March, iqoi, submitted to the electors of the State and, by them, ratified at
the general election in November. The Governor, by proclamation, declared
the amendment in force December i. Immediately the courts were asked to
pass on the constitutionality of the amendment. The decision of the Supreme
Court, sustaining the constitutionality of the amendment, was handed down
February 27, 1903.
While the amendment was intended, principally, to create the "City and
County of Denver," and give it home rule, there was added a section extending
the privilege of home rule to cities of the first and second classes if they desired it.
But not one of these cities has taken advantage of the opportunity to adopt a
charter and govern itself under organic laws of its own creating.
The charter adopted by the First Charter Convention of Denver, in session
from June 9 to August 1, 1903, was rejected by the people. A second Charter
Convention has been held and a new charter, radically different from the first,
is now before the people. If it is rejected, March 29, a new election for members
of a third Convention must be held within thirty days, and the members elected
must proceed to the making of a new charter. In the meantime the organic
laws of Denver remain the same as they were when the Twentieth Article went
into effect. If the people ratify the present proposed charter, it becomes the
organic law of the "City and County of Denver" as soon as the City Clerk files
two duly certified copies of the same with the Secretary of State. The legisla-
ture has no authority in the matter.
The question of most serious import is, Is the City and County of Denver
entirely without the jurisdiction of the State Legislature.
The amendment declares that Denver "shall have the exclusive power to
amend its charter, or adopt a new charter, or to adopt any measure, " and further
declares that "no such charter, charter amendment or measure shall diminish
the tax rate for State purposes fixed by an Act of the General Assembly," or
interfere with the collection of State taxes. In the case of State of Colorado,
ex rel Elder vs. Sours, in which the constitutionality of the Twentieth Article
was determined, Justice Campbell declared Denver to be "absolutely free from
all constitutional restraint and from any supervision by the General Assembly."
But Justice Steele declared: "The provision that every charter shall designate the
officers who shall, respectively, perform the acts and duties required of county
1 Communication of Professor Frank H. Roberts, University of Denver, March 15, 1904.
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officers to be done by the Constitution or by the general law, as far as they are ap-
plicable, completely contradicts the assumption that regards such duties as
being subject to local regulation and control."
After naming the officer to perform some strictly county duty, the Charter
Convention, then, said he, "shall perform the duties of the office of as pre-
scribed by the general laws of the State," or by the Constitution, "and such other
duties not inconsistent with such laws as the Council may by ordinance direct."
But in matters that are purely municipal the charter either prescribes the duties
or leaves them to be prescribed by ordinance.
It is generally believed that it will require a great deal of litigation to deter-
mine exactly the status of Denver.
Missouri. — Home Rule for Cities.2 The Constitution of Missouri, adopted
in 1875, and now in force, empowered the city of St. Louis to frame a charter for
its own government. (Article 9, Sections 20 to 23 inclusive.) The Constitution
also authorizes cities having a population of more than 100,000 to frame a charter
for their own government. (Article 9, Section 16.) Under these Constitutional
provisions, the charter must be consistent with and subject to the Constitution
and laws of the State. The charter is first prepared by a Board of thirteen free-
holders, and is then to be submitted to the qualified voters of the city at an
election held for that purpose. If a majority of the electors voting at the election
in St. Louis, or four-sevenths of the qualified voters in other cities, ratify the
same, the proposed charter becomes the charter of the city and supersedes any
existing charter or amendments thereto. The Constitution provides, in cities
other than St. Louis, that the charter shall, among other things, provide for a
Mayor and two Houses of the Municipal Council, one of which, at least, shall be
elected by general ticket.
The people of the former county of St. Louis, on August 22, 1876, ratified
the "Scheme and Charter" prepared under the authority of the Constitution,
and this became the charter of St. Louis sixty days thereafter. (State ex rel
Finn, 4 Mo. App. 347). Kansas City has accepted the charter-framing privilege
and adopted a charter, which became operative May 9, 1889. (Kansas City vs.
Bacon, 147 Mo. 259.) The Constitution provides that the charter shall become
operative in the City of St. Louis sixty days after ratification by the voters, and
in other cities thirty days thereafter; and that a copy shall be filed in the office
of the Secretary of State and one recorded in the office of the Recorder of Deeds,
in the county in which the city lies, and thereafter all courts shall take judicial
notice thereof. Approval by the legislature is unnecessary. The State legis-
lature has no power to amend such charter. The Constitution provides that such
charters may be amended only by the qualified voters of the city.
There are only three cities in Missouri of sufficient population to take ad-
vantage of this provision of the Constitution, and of these St. Louis and Kansas
City have availed themselves of the privilege. In no instance has such charter
been rejected by the people.
2 Communication of H. L. McCune, Esq., Kansas City, Mo.
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Municipal Government 113
Charters drawn under the authority of the constitution "must be consistent
with and subject to the laws of the state." This provision has been construed
by the Supreme Court as limiting the municipality to legislating only with
reference to matters of purely local concern. It has therefore been held that
where the provisions of a city charter creating a board of police commis-
sioners conflict with an act of the legislature governing the same subject, the
charter provisions must give way. This for the reason that laws providing for
a metropolitan police system for large cities are based on the elementary propo-
sition that preservation of the public peace is a governmental duty resting
upon the state and not upon the city. [State vs. Police Commissioners, 71
S. W., Rep., 215].
The provissions of the state statute with reference to the payment of
expenses of the police department and of the salary rolls also supersede the
charter provision governing the method of apportioning and paying city
funds, and the municipality must pay such expenses when the police board has
certified the amount thereof. [State vs. Mason, 153, Mo., 23].
Washington. — Home Rule for Cities.3 The Constitution of Washington
provides that "any city containing a population of 20,000 inhabitants or more
shall be permitted to frame a charter for its own government consistent with
and subject to the Constitution and laws of this State." The charter of any such
city must be framed by fifteen freeholders elected by the qualified voters and
ratified by a majority of the voters voting thereon. "Such charter may be
amended by proposals therefor submitted by the legislative authority of such
city to the electors thereof at any general election" and ratified by a majority
of those voting thereon. The Constitution further provides that "any county,
city, town, or township, may make and enforce within its limits all such local,
police, sanitary and other regulations as are not in conflict with general laws."
The indebtedness of cities is limited by the Constitution to one and one-half
per cent, of the taxable property therein, except with the assent of three-fifths
of the voters, at an election held for that purpose, in which case the total indebt-
edness shall not exceed five per cent, of the assessed value of all taxable "property.
For the purpose of supplying the city with water, light and drainage, owned and
controlled by the municipality, a further indebtedness of five per cent, may^be
incurred, if assented to in the manner above mentioned.
The first legislature after the admission of Washington as a State passed
what is known as the Enabling Act, for cities of the-first class, which enumerated
the powers of such cities and authorized them "to provide in their respective
charters for a method to propose and adopt amendments thereto."
The method of amending city charters was before the legislature again in
1895, when an Act was passed requiring the City Council, on petition of one-fourth
of the qualified voters, to cause an election to be held for the choice of freeholders
to propose changes in the existing charter. An Act of the last legislature conferred
the power to propose amendments to a city charter upon application of fifteen
per cent, of the qualified electors.
3 Communication of Professor J. Allen Smith, Universitv of Washington, Seattle, Wash.
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H4 The Annals of the American Academy
Many Acts have been passed changing the general law applicable to, and
amending the charters of, cities of the first-class. The Constitution recognizes
the principle of municipal self-government, but permits the legislature to deter-
mine how far the principle shall be carried in practice. The Supreme Court of
this State has intimated that the constitutional provisions recognizing the right
of municipal self-government are not self -executing, and does not seem disposed
to concede to cities of the first-class any important powers, except such as have
been expressly conferred by statute. For example, the statutes of Washington
authorize cities of the first-class "to regulate and control the use" of gas supplied
by a private corporation, and the charter of Tacoma gave the City Council power
to fix the price of gas so supplied. Suit was brought to enjoin the city from
exercising this power. The city of Tacoma claimed this power under the consti-
tutional and statutory authority given to cities of the first-class. The Supreme
Court held, however, that while it had the power to regulate and control, expressly
given it by statute, it did not have the power to fix the price.
Duluth. — ' ' Home Rule" Charters in Minnesota . 4 Some years since, the ques -
tion of charter revision prominently engaged the larger municipalities of the
State of Minnesota. In 1897 the legislature of Minnesota (see Chap. 280, General
Laws of 1897) proposed an amendment to the State Constitution granting to
cities, and villages desiring to incorporate as cities, the privilege, under certain
specified restrictions, of framing their own charters. This amendment was voted
upon at the general election on November 8, 1898, and was carried, the vote
standing 68,754 f°r> anc* 32»°68 against, the same. It became operative through
the proclamation of the Governor of the State on December 29, 1898.
The Constitutional amendment expressly provides that the local law shall
be consistent with the laws of the State, and specifies in detail numerous governing
provisions :
1. The several charters are to be prepared by Boards of Charter Commis-
sioners, composed of fifteen freeholders of the respective localities, appointed by
the judge or judges of the local district courts. The charters must be submitted,
upon thirty days' published notice, to popular vote; and, upon receiving the af-
firmative vote of four-sevenths of the qualified voters voting at the election,
are thirty days thereafter to become effective.
2. The said Boards are permanent bodies, vacancies in which are to be filled
in the same manner as original appointments are made, and the term of office
of the several members thereof shall not exceed six years.
3. Amendments may be proposed by the Board and submitted to popular
vote, and must be so submitted on petition of five per cent, of the legal voters.
A three-fifths affirmative vote is necessary for their adoption.
4. It is a prescribed feature of all such charters that they shall provide
for a chief magistrate and a legislative body of either one or two houses; and, if
of two houses, that at least one of them shall be elected by the general vote
of the electors.
The State legislature, on April 20, 1899 (see General Laws of 1899, Chap.
4 Communication of W. G. Joerns, Duluth, Minn.
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Municipal Government 115
351), passed the required Enabling Act, which, in the main, followed closely the
language of the Constitutional amendment, but fixed the term of office of the
Charter Commissioners at four years; and provided, that "such charters may pro-
vide for regulating and controlling the exercise of any public franchise or privilege
in any of the streets or public places in such cities, whether granted by such
municipality or by or under the State or any other authority;" that no perpetual
franchises shall be granted, and no exclusive franchise except on a majority vote
of the qualified voters, and then not for a period exceeding ten years. Substan-
tial restrictions are also placed upon the debt-creating capacity of the munici-
palities.
From the foregoing it is, therefore, evident that:
1 . Such charters need not receive the approval of the State legislature
before taking effect; albeit the legislature was first required to make the Consti-
tutional amendment effective by the passage of the Enabling Act before referred to.
2. The power of the State legislature to amend individual charters is cir-
cumscribed by a Constitutional inhibition on special legislation and the provision
in the charter amendment providing for general legislation as applied to specified
classes. How far the legislature might, by general laws not entrenching on the
provisions of the Constitutional amendment, affect the provisions of local charters,
as for example, on the question of franchises, would be a matter for judicial
determination.
The cities that have availed themselves of the privilege to thus frame their
own charters, as reported from the office of the Secretary of State at St. Paul —
with the date of the filing of a copy of such several charters in that office as
required by law — are as follows:
Barnesville July 25,1 898.
Blue Earth April 11, 1899.
St. Paul ■ May 28, 1900.
Moorhead June 20, 1900.
Duluth Sept. 24, 1900.
Fairmont April 11, 1901.
Willmar Dec. 1, 1901.
Little Falls Feb. 8, 1902.
Ortonville April 1 2, 1902.
Ely March 21, 1903.
Austin April 13, 1903.
There are in Minnesota fifty- three municipalities that, by the census of 1900,
have a population of over 2,000; and of these, thirty-five have less than 5,000;
eleven have more than 5,000 and less than 10,000, and only six have more than
10,000, namely: Minneapolis, St. Paul, Duluth, Winona, Stillwater and Mankato,
the first three only being in any sense metropolitan cities. Of the municipalities
before enumerated as having adopted charters, two, namely: Barnesville and
Ortonville, have each less than 2,000 inhabitants.
The first charter that was framed in Duluth failed of adoption. Some of
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the changes advocated were, perhaps, too radical, and its adoption was also opposed
by a contingent of ward politicians, who were being legislated out of office. Pos-
sibly, also, the people may not, at that time, have awakened to the substantial
import of the charter movement. The second attempt, however, proved suc-
cessful, some modifications having been incorporated, though many very whole-
some features were retained. The Duluth charter has been amended since its
adoption, but not in any important particular.
The result in Minneapolis is well stated in the words of the kind reply of a
Minneapolis official to my inquiry, herewith quoted, as follows: "Minneapolis is
not operating under a 'home rule' charter. Our charter was adopted in 1872,
and was subject to amendment until about 1891, when the State legislature
passed an Act prohibiting the future amendment of our charter. At each of the
three last municipal elections (1898, 1900 and 1902) a new charter was drafted
by a Charter Commission and submitted to the voters for adoption, but failed in
each instance to receive the necessary number of votes. Another charter has
been drafted and will be submitted at the election to be held in November of
this year. It is, I think, generally understood that the reason no new charter
has been adopted is that the framers have made too many changes from our
present charter, and have incorporated provisions which have antagonized cer-
tain interests "
California. — Home Rule Charters.* The Constitution of 1879 granted t%
the cities of over 100,000 inhabitants charter framing privileges. This provision
was amended in some details in 1887, but still applied to cities of over 100,000
inhabitants. In 1892 the provision was amended, and its provisions were
made to apply to cities of 3,500 inhabitants and over. Such charters must
be approved by the State Legislature before taking effect. The Legislature
has no power to amend such a charter, but must accept or reject it as a whole.
The cities that have availed themselves of charter framing privileges are
as follows:
CITIES WITH FREEHOLDERS' CHARTERS.
Date of
Population. Adoption.
San Francisco 400,000 • 1899
Los Angeles 125,000 1889
Oakland 70,000 1889
Sacramento 30,000 1893
San Jose 22,000 1897
Stockton 18,000 1889
San Diego 18,000 1889
Berkeley 15,000 1895
Fresno 13,000 1901
Pasadena 10,000 1901
Vallejo 8,000 1897
Eureka 8,000 1895
6 Communication of William Denman, Esq., San Francisco.
[4OO]
Municipal Government 117
CITIES WITH FREEHOLDERS' CHARTERS.
Date of
Population. Adoption.
Santa Barbara 7,000 1899
Grass Valley 5,000 1893
Napa 5,000 1893
Watsonville 4,000 1903
Salinas 4,000 1903
Total — 17. See statistics of the years given for copies of same.
No charters have ever been rejected by the Legislature — nor amendments
thereto.
Charters rejected by Electors:
San Francisco twice
Alameda once
San Jose once
Santa Cruz once
Redlands once
Santa Rosa once — but re-
ceived a majority voting on the question — but not a majority of votes at the
election.
Boards of Freeholders have been elected to frame charters in Santa Rosa
and Riverside.
Agitation of the matter in Santa Clara, Redlands, San Bernardino. The
only measure of general importance affecting municipal home rule in this
State is a proposition to authorize municipalities to give to the holders of
subordinate positions in the public service a tenure during good behavior.8
As the Constitution now stands, it provides that all offices in the State shall
have either a tenure for four years or less, or that they shall hold at the pleasure
of the appointing power. Our Courts have held that such subordinate positions
as deputy health inspectors, police officers and clerks, are offices within the
meaning of this section. Some of the Civil Service reformers seem to think
it is necessary to guarantee to the holders of these subordinate positions a
tenure which will last until they shall have been tried on definite charges and
removed for cause. There are many of us who consider ourselves equally
strong Civil Service men, who are opposed to this measure. As the Consti-
tution now stands, the charters may provide that such position shall be filled
only from an eligible list made up after examination by the Civil Service Board.
It seems to us that once having taken away from the head of the office the
power to remove at will, the spoil system has been destroyed. Heads of offices
will not remove competent men when they have no opportunity to fill the
vacancy with their personal friends and political followers. The difficulties
attending the trial of persons charged with incompetency are so great, and the
6 In San Francisco we now have appointments from an accredited list, and a charter
provision providing for a trial before removal. The latter provision is unconstitutional and
the proposed amendment is to make it effective.
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1 1 8 The Annals of the American Academy
friends of the party under trial create such disturbances in the newspapers,
that many heads of offices would hesitate to attempt removals in such a manner.
As a matter of fact, in the School Department, where that system prevails,
there never has been to my knowledge, and I think I am informed of all the
cases, a removal for incompetency, and the result of the tenure during good
behavior and for removal for cause in that department at least has been that
the only persons that have been removed are those whose delinquencies are so
flagrant that a trial is entirely unnecessary.
San Francisco. — Charter.1 The Charter of the City and County of San
Francisco, which went into effect a little more than four years ago, has proven
fairly satisfactory. It has been necessary, of course, to change a few details
here and there in the light of experience so as to obtain the most effective
administration. Seven amendments of this nature were adopted by the
electors at a special election held December 4, 1902, and approved by the
Legislature a few months later.
One of the amendments adopted a year ago removes all doubt as to the
power of the municipal authorities to compel the joint use of tracks by street
railway companies. Another, in order to induce good men to become candi-
dates for office, increases the salary of the assessor from $4,000 to $8,000 per
year, while a third authorizes an appropriation (not exceeding $5,000) for
pensioning certain "aged, indigent, and infirm exempt firemen." Two amend-
ments relate to the improving, cleaning and sprinkling of streets. Application
for street improvements, it is provided, must be made by owners of property
assessable for costs or by the constituted authorities of the city. The tax-
payers are thus rid of the activity of the contractor who was interested in further-
ing plans for street improvements. The Board of Public Works is given more
power in making improvements where objection is met with. Formerly objec-
tion by the owners of two-thirds of the property assessable for costs constituted
an absolute bar to further proceedings without beginning anew. Now such
an objection shall cause a "delay" of six months after which the improvement
may be made, and where but a small part of a street (not exceeding two blocks)
remains unimproved, such an objection need not even cause delay. The pro-
visions of the Charter are extended and made applicable to sidewalks also.
But more important, the Charter is amended so as to permit the city' to provide
for cleaning and sprinkling of streets by contract or by direct labor. Till then
it was limited to the contract system, which has been unsatisfactory because
of the inability of the Board of Public Works to compel the contractors to fulfill
their entire obligation to the city. Another amendment permits the city to
borrow for the purchase of building sites as well as for the erection of buildings.
And finally, Article XII, relating to the acquisition of public utilities, was
amended so as to rid the city of expense incurred for unnecessary labor.
The Charter declares it "to be the purpose and intention of the people
of the City and County that its public utilities shall be gradually acquired and
ultimately owned by the City and County." To that end it was provided that
7 Communication of Prof. H. A. Millis, Leland Stanford Junior University.
[402]
Municipal Government 119
•• within one year from the date upon which this Charter shall go into effect,
and at least every two years thereafter until the object expressed in this pro-
vision shall have been fully attained, the Supervisors must procure through
the City Engineer plans and estimates of the actual cost of the original construc-
tion and completion by the City and County, of water works, gas works, electric
light works, steam, water or electric power works, telephone lines, street rail-
roads ,and such other public utilities as the Supervisors or the people by petition
to the Board may designate." This, if complied with, would involve much
work for the City Engineer — most of it of little practical value. The section
was amended so that now such plans and estimates shall be made only where
public ownership is seriously considered.
The Charter declaration quoted above was accepted by the Committee of
One Hundred and by the Board of Freeholders without a dissenting vote. Yet
when a referendum vote was taken December 2, 1902, to decide whether or not
to purchase and operate the Geary Street Car Line as a municipal enterprise,
it failed to receive the necessary two-thirds majority (the vote being 15,120
"for" to 11,334 "against"). At present ihe attitude toward municipal owner-
ship is not as favorable as it was four years ago.
While the Charter as a whole has proven fairly satisfactory it has come
into conflict with the State Constitution at one vital point — in the matter of
Civil Service. An attempt to secure amendments to the Constitution so as to
give full effect to the Charter provisions relating to this point has proved futile.
The government of San Franciso is a consolidated government; that is,
it is the government of the City and County of San Francisco. The Charter
provides for merit rule in practically all the departments of the administration.
But in Crowley vs. Freud (132 Cal. 440) the Supreme Court of the State (by
a vote of four to three) held that the provisions were void in so far as the
so-called county offices were concerned. These are the offices of the sheriff,
clerk, recorder, coroner and assessor — some of the largest departments of the
consolidated government.
Subdivision 4 of Sec. 8| of Article XI of the State Constitution says:
"Where a city and county government has been merged and consolidated
into one municipal government, it shall be competent in any charter framed
. to provide for the manner in which, the times at which, and the terms
for which the several county officers shall be elected or appointed, for their
compensation, and for the number of deputies that each shall have, and for the
compensation payable to each of such deputies." The Supreme Court holds
that this does not confer power to prescribe the conditions of appointment
of deputies, but merely to fix their number and their compensation.
Civil Service. — Again the Charter (Sec. 12, Article XIII) provides for per-
manency of tenure. This, though it has not been adjudicated (see Cahen vs.
Wells, 132 Cal. 447) is believed to conflict with that part of the Constitution
which provides that the duration of any office, not fixed by this Constitution,
shall not exceed four years.
To remedy these two defects and to give the merit system the general
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120 The Annals of the American Academy
application intended by those who drew up and ratified the Charter, two amend-
ments to the Constitution were presented to the last Legislature. One was
defeated in the Senate largely by the vote of San Francisco politicians (seven
of nine Senators voting "No") and the other was withdrawn. Consequently
the civil service provisions apply to only a part of the city government.
But even here all is not well. In San Franciso, as elsewhere, merit rule has
had every possible obstacle placed in its way by those whose personal interests
are sacrificed. In some instances, the courts have granted injunctions against
the holding of examinations to establish lists of eligibles. Some of these have
been granted with little reason, as where the holding of an examination was
enjoined on the ground that it was non-competitive because those under a
certain height would not be accepted as applicants. This particular restraining
order was temporary, it is true, but in effect it was something more for many
months have brought no final decision with reference to whether or not it should
be made permanent. But in spite of legal obstacles progress was being made
till recently and in 1902 most of the departments of the city government had
come to look upon merit rule with favor and the others looked upon it as an
evil which must be accepted as fixed. More recently, however, great inroads
have been made with the civil service and its friends have cause to fear for
its more immediate future.
The Charter makes it incumbent upon the Mayor to appoint as Civil Service
Commissioners three men "known by him to be devoted to the principles of
Civil Service Reform." Some of the recent appointees, to say the least, are
not known to be devoted to such principles. One chairman of the Commission
was guilty of "raising" the examination questions. But of such dishonesty
there has been little. The chief difficulty comes from the fact that the admin-
istration is highly centralized and the city has been unfortunate in its selection
of a Mayor. The three members of the present Commission are appointees
of the present Mayor and their work, as does that of most of the departments
of the city government, expresses his will. He has attempted, with much
success, to build up a strong Union Labor Party, with himself in charge of its
machine. In furthering this plan wherever possible he has used the spoils of
office, evading the spirit or violating the letter of the Charter. This attitude
has licensed his lieutenants in charge of departments to do the same thing.
This very unsatisfactory administration of the Charter provisions explains the
fact that at present some four hundred non-civil service appointees are on
the city's pay-roll where civil service appointees are required by law.
Sixty day appointments may be made in exceptional cases with the consent
of the Civil Service Commission. Many of these are made without any good
cause and without the knowledge of the Civil Service Commission. The salary
warrants are audited and paid contrary to law. Recently the Health Depart-
ment was reorganized by abolishing places held by civil service men for the most
part and creating new places with practically the same duties but bearing dif-
ferent names, which when created were filled without regard to merit principles.
The pretext was economy; the reason was so-called political necessity, as the
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Municipal Government
121
discharged employees were informed. It is suggested that inasmuch as a part
of this action was perhaps legal, the Civil Service classification should be on
a broader basis so that evasion would not be possible by merely changing names
or duties slightly. The Civil Service Commission has disapproved of some of
the appointments mentioned but the new appointees are being retained. The
auditor has audited their salary warrants because he had made a hundred
and fifty appointments without regard to Charter provisions and audited the
warrants of these employees, so that he dared not do otherwise. Any further
payments, however, have been enjoined at the request of the Merchants' Associa-
tion. Still more recently illegal appointments have been made in the Depart-
ment of Elections and a reorganization of the Board of Public Works was pre-
vented only by threatened injunction proceedings. Whether the Civil Service
provisions of the Charter shall retain any meaning at all depends upon the
outcome of the injunction proceedings now before the courts.
In the long run Civil Service principles will obtain in the government of
San Francisco for there is no doubt that the great majority of the electors heartily
favor them. But administrative centralization is making it possible for the
time being for the will of the people to remain without effect. The situation
is causing the first questionings and feelings of doubt to arise in the minds of
the electors whether the policy of centralizing so much power in the hands of
the Mayor is after all a good one.
Bond. Issue. — Another matter of interest is the recently authorized bond issue.
The electors of San Francisco by a referendum vote, September 29, 1903, author-
ized the issue and sale of $17,771,000 of 3^ per cent, forty year bonds for the
making of much-needed improvements; $1,000,000 is for erecting a new city
and county hospital; $7,250,000 for constructing a new sewer system ; $3,595,000
for building new school houses and providing play grounds; $1,621,000 for
repairing and improving accepted streets; $697,000 for building a new county
jail and improving the Hall of Justice; $1,647,000 for purchasing a site and erect-
ing a library building thereon; $741,000 for purchasing land for children's play-
grounds; and $1,220,000 for acquiring lands for various parks.
San Francisco has been very negligent in the matter of public improvements.
Taken as a whole the expense for construction and repair of streets and school
buildings regularly recurs and should have been met for the most part from the
ordinary revenues. But the ordinary revenues have been small and insufficient.
The tax rate for all city purposes except for paying interest and sinking fund
charges and for maintaining parks, is limited to one per cent, or to one dollar on
the hundred. As a consequence the tax rate is the lowest met with in the large
cities of the country with which San Francisco may be properly compared.
Little attention has been given to developing additional sources of revenue.
Few loans have been made, the bonded debt being but $250,000 or about one-
half of one per cent, of the assessed valuation of property when the present
bond issue was authorized. The city has followed a pennywise policy in spend-
ing for improvements and so has little in the way of public property.
The present City and County Hospital is said to be among the worst, if
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122 The Annals of the American Academy
not the worst, in the world. In 1901 the School Department had seven brick
and sixty-four wooden buildings and rented twenty-seven more. At present
many of these are in a very unsanitary condition and it may be necessary to
close some of them at once. It is planned to build twenty-seven new school
houses with the borrowed funds. The so-called sewer systems, covering but a
part of the city, is a patchwork beginning nowhere and leading nowhere in par-
ticular. The contemplated system involves the construction of one hundred
and twenty miles of new sewers connected with two intercepting sewers empty-
ing into the Bay at a distance from the shore such as will render the city's waste
harmless. But few of the streets are well paved. At present there are two
jails, neither of which is good, making the administration both inefficient and
expensive. They are to be replaced by one modern institution. The Public
Library, the largest west of the Missouri River, is poorly housed in the City Hall.
The city now has a park area of some 1,400 acres. The contemplated purchases
will add greatly to this and will make possible the creation of parks readily acces-
sible to those living in the older and more crowded sections of the city.
By incurring this debt of more than seventeen and three-quarters millions,
San Francisco plans to provide herself with the ordinary public conveniences
of a progressive city. Though the Charter declares it to be the purpose of the
city to municipalize all the public utilities, at present she owns none. She is
one of the few large cities of the United States still dependent upon a private
corporation for her water supply. Possibly a municipal system will be estab-
lished in the not distant future. If this is done it will add greatly to the city's
debt.
Boston. — Percentage of Voters.6 The daily papers are filled with outcries
against corruption in our great cities, whole columns being given over to the
description of vice "which stalks abroad at noonday" until we are convinced
that whatever there is of disrepute in the world must be within the cities. Maga-
zines and publications of various sorts ascribe this state of affairs to a lack of
civic patriotism and a loss of civic pride. Whatever this may mean certain it
is that there is a most surprising indifference exhibited on the part of the voters
measured by the number of ballots cast in the city elections of Boston. At the
Boston municipal election of December 15, 1903, the actual vote was but 57.70
per cent, of the possible vote, the highest percentage of votes 69.91 being cast
for the Mayor, the lowest 51.69 for Aldermen. Of the registered voters only
72.66 per cent, voted. The percentage of registered voters who voted at the
municipal elections for five years preceding is as follows:
1899 1900 1901 1902 1903
79.94 70.80 79.94 60.03 72.66
The percentage of the actual to the possible vote for the same period:
1899 1900 1901 1902 1903
69.10 61.45 65.31 52.70 57.70
^Communication of Ward Wright Pierson, University of Pennsylvania.
[406]
Municipal Government
[23
This means that considerably less than two-thirds of the voters of Boston
had sufficient interest in municipal affairs to spend the time to go to the polls.
Wisconsin and Milwaukee. — The Liquor Question.9 The Wisconsin statutes
provide that "each town board, village board and common council" may-
license any proper person to sell liquor, the amount of the payment for such
license (subject to the power of the local electors to increase the same within
certain limits) to be $100.00 in towns containing no city or village within their
bourdaries, provided there be a population of five hundred or more. In all
cities, villages and "other towns" the license shall be $200.00, subject to the
same local power to increase it. No such license shall be granted to the owner
or keeper of a house of prostitution. The electors of cities, villages and towns
may hold special elections at a specified time to fix the amount of saloon licenses,
provided no other question is submitted to the electors at such election. In
towns, cities and villages where the license is generally fixed by statute at $100.00,
it may be increased by said electors to either $250.00 or $400.00; and in locali-
ties where the general statute license is $200.00, it may be increased to either
$350.00 or $500.00. The license has never been raised above the statutory
amount in Milwaukee.
Before receiving his license every applicant is required to file a bond to the
State in the sum of $500.00 with proper sureties and approval, conditioned that
the applicant shall keep an orderly house, prevent gambling, refuse to sell
liquor to minors or intoxicated persons, and that he shall pay all damages
provided for in Section 1650. Said section grants specific right of action to
any person, suffering in property or means of support by reason of the sale of
liquor to minors or intoxicated persons. Any unlicensed saloonkeeper who sells
liquor to such persons is guilty of a misdemeanor, and punishable on conviction
by a fine of not less than $50.00 nor more than $100.00 with costs; or by
imprisonment for not less than three nor more than six months. A subse-
quent conviction involves both fine and imprisonment. In case any person,
by reason of excessive drinking, wastes or lessens his estate, licensed liquor
dealers may be forbidden, by his wife or specified officials or both, to sell liquor
to such person for the space of one year.
There is a penalty of not less than $5.00 nor more than $50.00 for selling
liquors to minors, and upon a written complaint, duly filed, by any resident of
any town, village or city, that any licensed person therein keeps a disorderly
house, permits gambling or sells liquor to minors without the written order of
the parents or guardians of such minors, or sells liquor to intoxicated persons
or habitual drunkards, the proper board may, upon a hearing, revoke the license.
Section 1565a of the Statutes provides that " Whenever a number of the qualified
electors of any town, village or city, equal to or more than 10 per centum of the
number of votes cast therein for governor at the last general election, shall pre-
sent to the clerk thereof a petition in writing, signed by them, praying that the
electors thereof may have submitted to them the question, whether or not any
person shall be licensed to deal or traffic in liquor, such clerk shall forthwith
9 Communication of John A. Butler, Esq., Milwaukee, Wis.
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124 The Annals of the American Academy
make an order providing that such question shall be so submitted on the first
Tuesday of April next succeeding the date of such order."
This brief resume of the State laws of Wisconsin gives a fair and accurate
idea of their spirit. The degree of their enforcement naturally depends upon
local public opinion. That they are not abused in any excessive degree is indi-
cated by the absence of conspicuous public discussion in the newspapers or
otherwise, and the general prosperity and good order which characterizes the
State.
The City Charter of Milwaukee, the largest city of the State, with a popula-
tion of 326,000, gives the Common Council authority to regulate all places where
liquors are sold, and to regulate and grade the amount to be paid for licenses,
in proportion to the amount dealt in or vended ; to prescribe the duration of such
licenses; and to restrain the sale of liquor by anyone not duly licensed by the
Common Council, provided the amount charged for any license be not less than
the minimum, nor more than the maximum required by the State laws. No
license shall be transferrable, or be granted for less than six months. There
are no specific hours for closing saloons in Milwaukee, but not more than a half
dozen saloons are open all night. Saloons are open all day Sunday. All saloon-
keepers are required to give bonds as required by Section 1549 of the Statutes.
Minors are undoubtedly admitted to saloons, but they are not visited by them
to a noticeable extent, and there is probably no American city of the same size
which, on the whole, is so free from drunkenness and immorality as Milwaukee.
A drunken man is rarely seen on the streets, and public safety is unusually great,
owing to an admirable police force on a Civil Service basis, and to the orderly
character of the population. The present city administration is, unfortunately,
favorable to a "wide-open town," and the Common Council has granted some
licenses against the energetic protests of the Chief of Police. There are a few
saloonkeepers in the Council, fewer than formerly, when a half dozen or more
played an unsavory role in politics; but, speaking generally, the "saloon in
politics" is less conspicuous in Milwaukee than elsewhere. The best way to
eliminate it, in my opinion, would be to require the election of aldermen at
large, instead of from wards, enforce a high license, establish a proportion
between the number of saloons and the population and give the power to grant
or revoke licenses to the executive head of the city government rather than a
Council Committee.
Colorado Springs. — The Liquor Question.™ The founders of Colorado Springs,
desiring to make it in some sense a model city, provided at the beginning for the
exclusion of liquor saloons. To this day, every warranty deed for the transfer-
ence of property contains a clause which stipulates "that intoxicating liquors shall
never be manufactured, sold or otherwise disposed of, as a beverage, in any
place of public resort in or upon the premises hereby granted, or any part thereof;
and it is herein and hereby expressly reserved . . . . that in case any of
the above conditions concerning intoxicating liquors are broken by said ....
10 Contributed by T. D. A. Cockerell, Esq.
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Municipal Government 125
then this deed shali become null and void, and all right, title and interest of,
in and to the premises hereby conveyed shall revert," etc.
Although ordinary saloons are effectually excluded by the above provisions,
it is not found that the liquor traffic is altogether abolished. The drug stores
are licensed to sell liquor in quantities of not less than one quart, not to be
consumed on the premises. As might be expected, they do not always keep
the law, and as a matter of fact several of them have continually and flagrantly
violated it. The city officials have been lax in this matter, and during the
present year the clergy and others have felt it their duty to organize an anti-
saloon league and take active measures to bring the culprits to book. As a
result, several druggists have been tried and convicted, and the practices com-
plained of have almost or quite ceased. The time for the removal of licenses
was an opportune one for raising the whole question of the sale of liquor in the
city, and enough pressure was brought to bear on the City Council to prevent the
granting of new licenses to certain druggists wTho have been proved in the courts
to have grossly violated the law. It is not supposed, however, that a permanent
victory has been won; on the contrary, it is certain that things will return to
their former condition whenever the interest created through the efforts of a
comparatively small band of reformers shall have died out. The greatest ob-
stacle in the way of those who stand for decency is the apathy of the nominally
decent elements in the community.
Unfortunately, the drug stores are not the only offenders. Clubs, high and
low, retail liquor to their members, and it is extremely difficult to reach them
by any process of law. It is understood that the suppression of the drug store
traffic has led to an increase in the number of clubs, one or more of which have
an initiation fee of only twenty-five cents!
All things considered, there can be no doubt that Colorado Springs is greatly
benefited by its liquor ordinances; but on the other hand continual vigilance
is required to prevent their being rendered meaningless by evasions of the law.
District of Columbia. — Report- of the Commissioners.11 Of the large num-
ber of activities covered in the Annual Report of the Commissioners of the
District of Columbia, 1903, three are of particular interest — Finance, Education
and Health.
Finances. — The report shows the total expenditure for the year, exclusive
of those for the water department and expenditures on account of special and
trust funds were $9,088,554.67. This amount embraced $9,051,980.09 appro-
priated for the fiscal year 1903 and prior years, and $36,754.58 appropriated
for the fiscal year 1904. During the year the indebtedness of the District for
advances from the United States Treasury was reduced from $1,759,238.34
to $1,653,517.51. The total indebtedness June 30, 1903, was $14,877,147.69.
The Commissioners repeat their recommendation that the Secretary of the
Treasury be authorized to make advances from the United States funds to enable
the District to meet its share of the cost of the extraordinary municipal
improvements — filtration plant, sewage disposal system, the District Building
11 Communication of Ward Wright Pierson, University of Pennsylvania.
[409]
126 The Annals of the American Academy
of which the District of Columbia is required to pay half the cost — the advances
to be repaid by the District in installments with interest.
Education. — The public schools of the District were never before so well
housed and equipped. The total number of pupils enrolled for the year was
48,745, an increase of 0.64 per cent.; of these 32,987 were white and 15,758
were colored; 1,371 teachers were employed of whom 925 were white and 446
colored.
Death Rate. — During the calendar year 1902 the lowest death rate, 19.99
per thousand, for ten years with one exception (1897 — 19.79) was reached. The
average for the decade was 21.22; for whites, 17.29; for colored persons, 29.13.
The most potent factor in the high death rate of colored persons is the mortality
of children under one year representing the death of between 400 and 450 out
of every 1,000 colored children born. ,
Drainage. — During the year 16J miles of sewers were constructed and
eleven miles of new water mains laid. 1,448 additional buildings were connected
with the public water system, making the present number 49,929. 255 new
meters were installed, the present number being 1,748.
Pennsylvania. — Report of the Executive Committee of. the Civil Service Reform
Association.12 The increased efficiency of the individual in the classified service
of the United States, leads at once to the conclusion that the application of
the principles of the merit system in the selection of clerks and other employees
in all the municipalities and the State at large, would produce a far better force
than is at present secured under the spoils system. With this in view the
Civil Service Reform Association of Pennsylvania has set itself the task of edu-
cating public opinion to a degree that the establishment of the merit system
will be demanded of the Legislature in no uncertain way.
Although the City Charter of Philadelphia provides that the appointment
of "all officers, clerks and employees" with certain exceptions shall be made in
pursuance of "rules and regulations" providing for the ascertainment of the com-
parative fitness of all applicants for appointment or promotion by a systematic,
open and competitive examination of such applicants, hitherto the public
has believed that no candidate — no matter how high his mark could secure
an appointment unless he possessed great political influence. But through the
efforts of the Executive Committee of the Association the veil which shrouded
the administration of the Civil Service Bureau during the recent city adminis-
tration has been lifted in a measure and representatives of the Association
admitted to the municipal civil service examinations.
While much of the Twenty-third Annual Report is given over to a discus-
sion of cases, it shows clearly the difficulties to be overcome and presents a method
of correcting existing faults. The Committee of the Association on Legislation
has prepared a draft of an "Act to Regulate and Improve the Civil Service
of the Commonwealth of Pennsylvania." The proposed bill provides for the
appointment of a State Commissioner and the establishment of the "Competi-
12 Communication of Ward Wright Pierson, University of Pennsylvania.
[4I0]
Municipal Government 127
tive System" for selecting subordinate officials in the Service of the State and
its principal cities.
FOREIGN CITIES.
Paris. — Prostitution.13 A very interesting report upon the question of prosti-
tution has recently been presented to the Municipal Council of Paris, France,
by a committee of that body. The report is in three sections: (1) A General
Survey by M. Henri Turst. (2) Brothels and Houses of Assignation by M.
Adrkn Mithouard. (3) Regulation from an Administrative View-point by Henri
Turst. The various reports give a good historical account of the efforts to
regulate prostitution in France, the various methods suggested and used, the
effect of police control, the results of medical inspection and detailed discussion
of the present situation.
The' Committee thinks that the exisj^ng plan is largely a failure. (1)
There have been some bad mistakes made by the police in arresting reputable
women. (2) The greater number of prostitutes are not enrolled. Hence (3) the
medical examinations cannot accomplish their purpose since so many avoid
them, nor are they sufficiently thorough. (4) There is a question whether police
intervention is really legal.
It is suggested that certain changes are necessary for two reasons:
1. Prostitution is not a crime (dilit), hence unless the public peace and
order are offended the police should have nothing to do with prostitution.
2. Syphilis should not cause punishment any more than any other disease
but like other communicable diseases should be safeguarded for the sake of the
public health. To accomplish this it is recommended (1) Free consultations
should be given in all hospitals and dispensaries subsidized by the city of Paris.
(2) Substitution of treatment in general hospitals for that in the special insti-
tutions now existing.
The Committee believes that in suggesting these important reforms it
"substitutes for the arbitrary regime which is too severe a system both legal
and inspired by a desire to exercise pity in a field hitherto ruled by brutality
I and egoism." "We believe that we have proposed a scheme for safeguarding
I at the same time individual liberty and the rights of society."
To make certain that advantage will be taken of the treatment offered by
hospitals the transmission of syphilis is to be made a criminal offense for both
men and women. Such legislation now exists in Norway.
Although few in America will welcome the suggestion to make prostitution
a matter to be dealt with solely on sanitary grounds the discussions and pro-
posals are worthy of careful consideration. The chief papers are in the Rap-
ports, Conseil Municipal de Paris, 1904, No. 3; and a supplementary discussion
concerning foreign conditions chiefly in England and Italy in No. 7.
13 Communication of Dr. Carl Kelsey, University of Pennsylvania.
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128 The Annals of the American Academy
II. DEPARTMENT OF PHILANTHROPY, CHARITIES AND
SOCIAL PROBLEMS
Training for Social Service. — The constant demand for trained workers in
social service is an encouraging indication of the impression which organized
charitable effort has made upon the public. This new profession has justified
itself in action, and the most hopeful thing about it is that the workers who have
made the administration of charities and corrections their profession, are them-
selves jealous and zealous for the uplifting of the professional standard, and the
extension of special educational requirements. As a natural result, new plans
are constantly being made to meet the demand. The Summer School of Philan-
thropy has been conducted by the New York Charity Organization Society during
this summer. Henceforth there will be a winter session, from October to June,
under the same auspices. Dr. E. T. Devine is to be the director, assisted by
Mrs. Anna Garlin Spencer and Alexander Johnson. Students of the school will
also have the benefit of the Extension Courses to be given under the auspices of
the Committee on Social Settlements and Allied Work of the Faculty of Columbia
University, in co-operation with the Association of Neighborhood Workers. In
addition, the school sessions will be arranged in such a manner as to allow qualified
students to take advantage of such special courses at Columbia University,
including Barnard and Teachers' Colleges as are most important for their train-
ing in the science and art of social service.
A training center for Social Workers was started last year, under the auspices
of the University of Chicago, and the University has just announced the estab-
lishment of a College of Political and Social Science, which is to be under the
general supervision of the faculty of the divinity school.
The School for Social Workers which has been established in Boston by the
co-operation of Simmons College and Harvard University, will open in October,
under the direction of Dr. Jeffrey R. Brackett, assisted by Miss Zilpha D. Smith.
The topics which are included in the programme of instructions cover the whole
field of "charity, corrections, neighborhood uplift, and kindred forms of social
service;" but no mention is made of political economy, or political science or
history, or psychology, all of which are required courses in the Chicago college.
With these new and useful developments for the equipment of ministers and
others, the theological seminaries will have to look to their laurels, unless they,
too, are led to see the light.
Poor Belief in Indiana. — The March number of the Indiana Bulletin, which is
published by the Board of State Charities, contains a valuable study of official
outdoor relief in Indiana. The township trustees in the State are required by
law to make full reports to the State Board of Charities. There are 1,015 of these
townships and the total number of persons receiving aid in 1903 was 40,012. j
The report gives the comparisons by years. The Indiana Board was created in
1890. The value of poor relief which was given at that time was $560,232, but
[412]
Philanthropy, Charities and Social Problems 129
it was impossible to ascertain the number of persons who were aided. The first
time nearly complete figures were obtained was for the year 1895 — $630,168.
In 1896-97, 82,235 persons received aid. The total value of aid given was
$388,343.67, an average of $4.72 to each person aided. Through the influence of
the State Board of Charities outdoor relief has been systematized and pauperism
checked, with the result that last year the number of persons aided was less than
half the number in 1896-97. The cost of relief given in 1903 was $245,745.82,
being an average of $6.14 per capita, which is perhaps an indication that the
relief, while of a temporary nature, was more adequate in 1903 than in previous
years.
It was popularly supposed that the decrease in the amount of relief given to
the poor by the township trustees would result in a large increase in the popula-
tion of the poor asylums. The result shows that there not only has not been an
increase, but there has been a decrease, both actually and proportionately.
The population of the poor asylums August 31, 1890, was 3,264; on August
31, 1900, 3,096; a decrease of 168, or 5 per cent. Since 1900 there has been a
further reduction of four per cent, in the population of the poor asylums, the
number present on August 31, 1903, being 2,962, or 134 less than on the same day
in 1900. The total reduction, therefore, from 1890 to the present date, is 9 per
cent. Compare these figures with the population of the State. In 1890 this was
2,192,404; in 1900, 2,516,462; an increase of 14 per cent.
Six years ago a law was enacted, presumably under the inspiration of the
State Board's reports, which placed upon each township the burden of its own
poor relief. A study of the subsequent reports shows a very notable decrease in
the number of high taxed levies and a corresponding increase in the number of
townships which made no levies or a very low one. Under the compulsory
education law of Indiana, children, under 16 may be given assistance to enable
them to attend school. Of the 40,012 persons who received aid in 1903, 17,848
were children under 16 years of age.
The Report of the Oregon State Conference of Charities and Corrections, which
was held at Portland last March, takes high rank among documents of this charac-
ter. Governor Chamberlin, in the course of a thoughtful address, commended
the efforts to organize a Prisoners' Aid Society. This was accomplished during
the Conference under the Presidency of Dr. E. P. Hill. Mr. James N. Strong
delivered an inspiring address on the "March of Reform, " in the course of which
he made the following statement:
"The managements of our State Prisons and insane asylums have in the past years been
strictly political. Now comes Governor Chamberlin, and in an announcement of no little
importance, names a warden for the prison, and tells him in so many words that he will be held
strictly responsible for its management, and that he, the Governor, to preserve his own freedom,
as the representative of the people to criticise, will not even suggest the names of sub-employees.
It is not a law nor is it binding on future Governors, but it is an announcement that responds
to and helps healthy public opinion, and that in the end makes law that no future Governor,
however politically venal he may be, will dare to disregard."
Among the resolutions passed by the Congress was one favoring separate
boards of supervision and control of the State Correctional and Educational
institutions, the membership of which was to include both men and women.
The Conference instructed its chairman to appoint special committees to examine
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i^o The Annals of the American Academy
and visit all of the State Institutions for criminals and dependents, and report
their condition to the conference of 1904. The needs of the State for proper
provision for defectives and the inadequacy of probation and truancy laws were
set forth frankly.
The New York Fiscal Supervisor of State Charities has recently published his
report for the year ending September 30, 1903. This department was created
by the Legislature of 1902 at the instance of Governor Odell, for the avowed
purpose of better regulating the finances of the State institutions and effecting
economies. Mr. H. H. Bender, the supervisor, declares that his main endeavor
has been to see that the wards of the State should be better clothed and better
fed than hitherto without increasing the cost, and that the question of effecting
a saving of money he has regarded of secondary importance. By systematizing
the purchase of supplies, he claims that the average per capita cost has been
reduced from $168.97 to $163.54, a saving of $5.43, and calls attention to the fact
that this had been done in a year when the prices of all kinds of provisions were
unusually high, and the coal strike had raised the price of coal to unprecedented
figures.
Prior to Mr. Bender's appointment, each of the 15 institutions which are now
under his fiscal direction bought its own supplies separately, and while it was
limited as to price to the lowest market quotations of its vicinity, it was clearly
apparent that the supplies could be bought in the open market for all institu-
tions at lower prices. This was on the theory, that as the total population of the
institutions was over 8,000 any bidder could afford to place a lower figure on goods
sufficient in quantity to supply this number, than upon supplies for a single
institution with a population of from 200 to 500. Mr. Bender secured statistics
showing the quantities of the leading staple articles in use in the different
institutions, which were to serve as a basis of calculation for bidders, and a com-
mittee of six superintendents of institutions was appointed to select a list of
articles which could profitably be purchased by joint contract. The committee
appears to have done its work with great thoroughness and care, and decided that
the following articles could be bought jointly: graham flour, hominy, macaroni,
rice, coffee, evaporated apples, raisins, laundry starch, salt codfish, mackerel,
tea, vinegar, baking powder, crackers, evaporated peaches, prunes, currants and
butter.
They found that among the commodities that cannot profitably be purchased
by joint contract are: flour, meats and milk.
Mr. Bender expects to effect a great saving in the cost of heating by equipping
a number of institutions with coal-saving devices.
In Mr. Bender's report he is clear and frank, and thoroughly business like,
although he may claim a little too much from a single year's experience.
The 31st Annual Session of the National Conference of Charities and Correction
at Portland, Maine, which closed June 22, was characterized by a very large
attendance of delegates from twenty-eight States and from Canada, by an un-
usually brilliant series of papers on a great variety of topics, and by an unpre-
cedented local interest in all its proceedings. On several occasions the audience
[4H]
Philanthropy, Charities and Social Problems 131
numbered more than one thousand persons. It reflects great credit on the
executive ability of the President for 1903-4, Dr. Jeffrey R. Brackett, formerly of
Baltimore, but recently chosen to serve as head of the new training school at
Boston for charity workers, organized by Harvard University and Simmons
College for Women.
Among the names of those present are many which are well known to charity
workers throughout the United States: among them may be mentioned Dr.
Cha-les R. Henderson, of Chicago University; Prof. Graham Taylor, of Chicago
Commons; Miss Jane Addams, of Hull House, Chicago; Mr. Robert W. de Forest,
of the New York Charity Organization Society; Mr. Homer Folks, ex-Commis-
sioner of Charities of the city of New York; Mrs. Florence Kelley, of the Con-
sumers' League; Mrs. Anna Garlin Spencer, of the New York Winter School of
Philanthropy; Mrs. Vladimir Simkhovitch, of Greenwich House, New York; Mr.
Robert Treat Paine, and Mr. Joseph Lee, of Boston; Dr. George F. Keene, of
Howard, R. I.; the venerable Gen. Roeliff Brinkerhoff, of Ohio; Judge Benjamin
B. Lindsey, of Denver; Mr. F. H. Nibecker, of Philadelphia; Mr. Hugh F. Fox,
of New Jersey, and many others of equal ability and reputation. Dr. Charlton
T. Lewis, of New York and New Jersey, was to have been there, but died a few
weeks before the meeting. The paper he had prepared was read by Dr. F. H.
Wines and heard with peculiar and tender interest by a large audience. Dr.
Henderson described it as a voice from the grave, or rather, as a voice from
heaven. Mr. F. B. Sanborn, of Concord, Mass.. Dr. Wines, of New Jersey, and
Rev. John L. Milligan, of Allegheny, were the only three in attendance who have
been with the movement from the beginning ; they were at the original Cincinnati
Prison Congress of 1870, organized by Dr. E. C. Wines and presided over by
Rutherford B. Hayes, then Governor of Ohio.
It may be said of this Conference that the papers and discussions were at
once more scientific, more practical and more spiritual and idealistic than at
any former session; and the published volume will form a noble addition to the
literature of philanthropy. It may seem invidious to single out certain addresses
for special praise, but it is difficult to refrain from naming the opening address by
President Brackett, the annual conference sermon by Rev. Dr. Crothers, of
Cambridge, Mass., Dr. Keene's lucid and profoundly scientific paper on "The
Genesis of the Defective" — Mr. Sanborn remarked that we are more interested
in his "Exodus;" the exquisite essay by Dr. Lewis on "The Principle of Proba-
tion," which is a literary gem as well as a masterpiece of philosophic insight;
Mrs. Simkhovitch' s elaborate and exhaustive account of "The Public School as
a Social Center," admirably supplemented by Mr. Lee's analysis of boy nature,
in his talk on "Playgrounds as a Part of the Public School System;" Mr. Nibecker's
review of the reform school movement in America; Dr. Henderson's history of
the origin and growth of the juvenile court; and the inspiring paper by Mr.
Francis H. McLean, of Chicago, on "Ideals and Methods of Co-operation. " It is
proper to mention also the address on "The Education of the Blind," by Mr.
Campbell of Boston, which was illustrated by stereopticon views, including some
moving pictures. The most unsatisfactory session was that on State Super-
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132 The Annals 0} the American Academy
vision and Administration, because the papers read, in favor of State boards of
control, consumed so much time as to leave very little for any opposing expression
of opinion from the floor, and the proceedings therefore fail to represent the pre-
vailing sense of the Conference, so that they will, when published, be misleading
as guides to political action by the States.
The principal social events were a sail through Casco Bay and a reception to
the ladies given by Mrs. George S. Hunt. To these must be added, as something
quite out of the common, a dinner at Riverton, at which Sheriff Pennell was the
host. It was attended by about thirty leading citizens — judges, lawyers, clergy-
men and men of affairs ; and its purpose was to interest them in the prison question
especially in that phase of it represented by probation and the juvenile court.
Short addresses were made by Mr. Sanborn, on the history of prison reforms;
by Mr. Warren F. Spalding, secretary of the Massachusetts Prison Association,
on its present state of evolution; by Dr. Wines, on its outlook and promise; and
by Mr. Lucius C. Storrs, of Michigan, on the need for a State board of charities
in Maine.
The central thought of all the talk on the prison question (and much atten-
tion was paid it at Portland) was that the retributory or penal theory of the
criminal law must sooner or later give way to that of the reformation of the con-
vict; that reformation is an educational process; and that the criminal should be
treated, as far as practicable, to quote Mr. Brockway's happy phrase, "in the
open. " Among the most remarkable utterances on this subject was the account
given by Mrs. Kate G. Hayman, police matron at Louisville, Ky., of the work
begun and planned for the future in the female department of the Louisville
jail, which is to be made a social center for reformatory influence over women with
criminal impulses and tendencies, in the nature of a social settlement; an entirely
novel conception of the proper function of a prison, and a real advance step in
practical criminology. It is also very noticeable that the conception of reform-
atory work with delinquent children as an educational process has taken deep hold
on the officers of reform and industrial schools, so that at Portland they effected
an independent organization, of which Mr. Nibecker was chosen President, to be
known as the Educational Association, having special reference to backward,
truant and criminally inclined youth of both sexes. This was the outcome of a
meeting which convened two days in advance of the Conference, and was very
helpful to all who took part in it. Another advance meeting was that of "visit-
ing" nurses. There is a national organization of "trained" nurses, but that is a
different affair. The visiting nurses will meet again next year as a section of the
Conference. The session of 1905 will be at Portland, Oregon. Some objection
to this choice was made by delegates from the Middle West, but it was the fifth
time that Oregon had asked for the Conference, and the selection was finally
assented to by a unanimous vote, in deference to the needs as well as the desire
of the Pacific Coast.
The National Conference of Charities is the only organization in the world,
so far as known, which claims and celebrates three distinct birthdays. The seed
was planted at Madison, Wisconsin, in 1872, when the newly created State boards
[4i6]
Philanthropy, Charities and Social Problems 133
of Wisconsin and Illinois first met for mutual exchange of experiences and views.
They afterward invited the Michigan Board to meet with them in Chicago. Then,
in 1874, all of these boards, numbering nine, then existing met, by invitation of
Mr. Sanborn, with the Social Science Association, at New York. Finally, in
1879, at Chicago, the Conference held its first separate session and effected an
independent organization. It was originally an almost purely official body,
representing State governments. For a number of years it boasted that it was a
body without a constitution, without rules, without principles, and without dues
— tiie freest association upon earth, a forum for free discussion, and nothing more.
In order that the members and officers of the State boards might better qualify
themselves for the discharge of their legal responsibilities, the superintendents
of State charitable and correctional institutions were encouraged to attend and to
read papers on the care and treatment of the insane, the idiotic, the deaf, the
blind, paupers, criminals, juvenile offenders and other special classes in which the
States take a paternal interest. The question at the bottom of all the discussions
was that of the duty of the State toward the victims of poverty, crime and mis-
fortune. Light on this important question was also sought from officials of
municipal and private charitable institutions of similar nature and aims.
The meeting at Louisville, in 1883, was the first at which a report was made
by a standing committee on charity organizations in cities. This incident
marked the beginning of a new departure in the policy of the Conference, the ulti-
mate effect of which was not at first apparent. The non-official element in its
composition was thus recognized, but it was not until the year 1895, at New
Haven, that any one was elected to serve as its President, who was not a member
or secretary of a State board. This honor belongs to Mr. Robert Treat Paine,
of Boston, who was at the head of the Associated Charities of that city. With the
rapid growth of the movement for the establishment of organized charity in
cities and towns, there came a great and increasing influx of persons but slightly
and incidentally interested in the original purpose of the Conference, whose main
desire in attending its sessions was to profit by their mutual experience in a new
but narrower field of philanthropic effort. Their numbers multiplied so fast that
they were soon able to outvote the original membership and shape the organiza-
tion to their own ends. They (and others) demanded the division of the body
into sectional meetings, in order to give them more time for their own problems.
A critical review of the annual reports of the committees on organization will
show the great difference between the earlier and the later programmes adopted ;
the creation of sections on needy families in their homes, on the work of social
settlements, on the proper division of work between public and private charity,
on tenement house reform, on child labor and truancy, on neighborhood improve-
ment, on fresh air summer outings, on boys' and girls' clubs, on recreation as a
means of developing the child, on playgrounds as a part of the public school
system, municipal lodging houses, the municipal regulation of newsboys and boot-
blacks, and the like. Some of these questions relate, it is true, to the work of
institutions and to subjects which demand legislative action; but their primary
interest is for private charity workers, dealing with individuals, one by one and
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134 The Annals of the American Academy
studying local municipal conditions rather than the condition and needs of the
entire body politic.
The departure to which reference has been made was natural and inevitable.
The Conference exists in order to assist in the accomplishment of three leading
aims: the increase of the sum of knowledge, philanthropic and sociological, by
the accumulation of facts and the development by scientific methods of sound
theories based on actual observation and experience; the education of its own
membership; and the exertion of a healthy, invigorating influence upon public
opinion, sentiment and action. The representatives of private charities, par-
ticularly of the associated charities, are as deeply interested in these as are public
officials. They are equally in need of such education and stimulus as the Con-
ference imparts. They are able to contribute to the aggregate result informa-
tion and suggestions of the highest value, of a character and along lines, especially
the line of preventive effort, not so readily or generally accessible to the represen-
tatives of institutions, public or private. This is a case where neither element in
the organization can say to the other, "I have no need of thee."
It must be admitted, nevertheless, that in these remarks a possible line of
cleavage is indicated, which marks a danger point. At Portland, the conviction
was widely and strongly expressed that the pendulum has swung too far in one
direction, and that a reaction is desirable, if not essential — a partial return to first
principles. The suggestion that the founders of the Conference, if dissatisfied
with its present drift, could secede and organize anew, though courteously made,
provoked a certain mild resentment. The older, if not the wiser members, re-
calling the years when the younger men and women were still in their pinafores,
if not in their cradles, declare that "the former times were better than these."
They think that, if the programme has gained in breadth, it has lost in depth,
in perspective and in true proportion. The larger part of the charitable and
correctional work in this country is in the hands of the State, and the State col-
lects the funds from all the people and serves all the people. The classes for which
the State cares are typical. Compared with the superintendent of a State institu-
tion, who is a professional expert, the average private charity worker is an ama-
teur. And the larger part of private charitable work is done in and by institu-
tions, to whose aggregate population the total number of "cases" handled in
any year by the associated charities bears an almost insignificant ratio. The
pioneers in this movement accordingly lament the loss from the Conference of so
many representatives of State boards, and so many experienced and skilled
superintendents of institutions, driven away from it, as they think, because of
the undue prominence given to subjects to which they sustain no definite and
close relation. The municipal problem may enlist a larger number of workers,
but the results attained do not affect so large a percentage of the population at
large, including the rural with the civic; nor are they so far reaching in their
bearing upon the future destiny of the nation.
Dr. Wines, in his speech of farewell, on the last evening, referring to this
divergence of views, compared the Conference to a vessel rolling in mid-ocean,
but staunch and powerful, always righting itself and sure to arrive in safety at
[418]
Philanthropy, Charities and Social Problems 135
its destined but far distant port. He also called attention to the fact that, when
the Conference was organized only a third of a century ago, there was not in the
United States a charity organization society, a social settlement, a modern
reformatory prison, juvenile courts, a probation officer, a training school for
charity workers, nor even a chair of sociology in any institution of learning.
The indeterminate sentence, graded prisons, and the parole were still in the State
described in the words, "And Jacob dreamed a dream." All of our insane hos-
pitals were constructed and conducted on the congregate plan. The movement
for special training of the idiotic and feeble-minded was in its infancy, and little
progress had been made in securing the adoption of the placing-out system in
the care of destitute and neglected children. "The Conference," he said, "has
not laid all these eggs, but it is the incubator in which they were hatched. " He
likened it to a power-house, supplying force to move the car of progress on its
way.
And all this has been done by quiet and unostentatious methods. One
principle has governed the body from the outset. It makes no deliverances upon
any question whatever, preferring to be al1 -inclusive rather than dogmatic and
dictatorial. It recommends- no legislation. Every member says what he thinks;
it is printed, and goes for whatever it may be worth. The consensus of opinion
may be inferred from reading the debates. So firmly is this principle inwrought
into the organization that the members refused to consent to an apparently
harmless little resolution, in response to a communication from the United States
Census office, authorizing the appointment of a committee of five to confer with
the Director of the Census as to the statistical information which it is desired to
procure touching the classes which the Conference seeks to benefit, and the
amendments to the Census Act necessary to obtain it. The parliamentary
squabble over this resolution was most amazing and absurd.
The President for the ensuing year is the Rev. Dr. Samuel G. Smith, of St.
Paul, who has been President of the State Board of Charities, President of the
Associated Charities, and is now Professor of Sociology in the State University
of Minnesota. Mr. Joseph P. Byers, the former Secretary, now warden of the
Eastern Penitentiary of Pennsylvania, felt himself under obligations to resign
that office, and is succeeded by Mr. Alexander Johnson, who has also had ex-
perience both in the service of the State board of Indiana and of the Chicago
Bureau of Charities, as well as at the head of a large State institution. These
gentlemen should be able, and no doubt will be able, to adjust and harmonize
all pending disagreements, wmich at worst amount in fact to no more than a
slight rift in the lute.
Women's Organizations. — "No person," says Mr. Samuelson, "who has
followed the philanthropic movement of the last few years can have failed
to be struck with the increase of woman's activity, both private and public,
in furtherance of every laudable, social enterprise." l The essential feature
in this activity, however, is the fact that it is no longer limited to assisting the
Samuelson, James Ed.: " Civilization of Our Day," p. i95-
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136 The Annals of the American Academy
outcasts of society, nor does it exclusively take the form of church charity,
although the church still remains the great receptacle of woman's munificence.
Women of the same or different social classes, seem to realize that they
do have interests as well as duties in common and that associated effort is indis-
pensable in order to secure the best results. Accordingly, organizations of all
sorts and descriptions are formed so that there is hardly a woman who is not
in some way connected with an association, either as contributor or recipient.
Some of these organizations have already developed into strong bodies. The
Woman's Christian Temperance Union, for example, has a membership of
200,000. Its building in Chicago, where the headquarters are, cost $1,200,000.
It has its own publishing house which prepares and issues all kinds of publica-
tions for the advancement of the objects of the society. Its official paper,
The Union Signal, has a subscription list of 80,000. " It has pushed through
the legislatures of thirty-seven States and Territories the laws that now compel,
in all public schools, instruction in the nature and effect of alcoholic drinks
and narcotics." 2 Sixteen million children are said to have been brought under
this instruction.3 In short, the organization comprises five distinct depart-
ments, "Preventive, Educational, Evangelistic, Social and Legal," all of them
are strenuously attended to. Of late the society has also identified itself with
the woman's suffrage movement and is rendering valiant service to the "cause."
The Young Women's Christian Association is another organization whose
branches are spreading all over Christendom. The work this society does here
may be seen in the following programme of the New York Women's Christian
Association founded in 1872: 4
I. The Bible class.
II. Free concerts, lectures, readings, etc.
III. Free classes for instruction in writing, commercial arithmetic, book-
keeping, business training, phonography, typewriting, retouching photo-nega-
tives, photo-color, mechanical and free hand drawing, clay modeling, applied
design, choir music and physical culture.
IV. Free circulating library, reference library and reading rooms.
V. Employment Bureau.
VI. Needlework department, salesroom, order department, free classes
in machine and hand sewing, classes in cutting and fitting.
VII. Free board directory.
This work is typical of the various working girls' clubs, college settlements,
industrial and educational unions, neighborhood guilds, , and girls' friendly
societies, all having for their object the "intellectual, industrial and social
advancement" of the self-supporting woman. In most of them mutual aid
rather than charity is emphasized. The humblest working woman who has
caught the spirit of the new era despises "charity" and is sensitively suspicious
of anything which has a taint of pauperism. The ladies of leisure and culture
2 Meyers, p. 270.
3 Henderson, C. R.: " The Social Spirit in America," p. 188.
4 Meyers, p. 338.
[420]
Philanthropy, Charities and Social Problems 137
must lay aside all airs of superiority, condescension, etc., if they wish to retain
the privilege of assisting her in any way.
The sick and the criminal have not been neglected. In many cities of the
Union women have established hospitals and managed them with "admirable
wisdom." The Woman's Prison Associaton and Home, in New York, incor-
porated in 1854, carries on its work faithfully, the members being to the front
in every effort for the prevention and the reform of criminal girls and women.
On the principle that "justice is better than charity" various other organi-
zations have been founded. The Illinois Woman's Alliance, for instance,
declares its object to be: (1) To agitate for the enforcement of all existing laws
and ordinances that have been enacted for the protection of women and children,
as the factory ordinances and the compulsory education laws. (2) To secure the
enactment of such laws as shall be found necessary. (3) To investigate all busi-
ness establishments and factories where women and children are employed
and public institutions where women and children are maintained. (4) To
procure the appointment of women as inspectors and as members of boards
of education and to serve on boards of management of public institutions.5
This Alliance has already been instrumental in procuring the passage of a com-
pulsory education law and has secured the appointment of women factory inspec-
tors. The Consumer's League is a similar organization which is promising good
service.
The Woman's Club Movement is another striking illustration of the co-opera-
tive spirit this age has awakened. The General Federation, in 1897, consisted
of nearly five hundred individual clubs, uniting in one body about a million
women representing nearly every State in the Union.6 Each constituent State
Federation has adopted immediately on its formation, in 1894, "a special line
of work, always educational in character and embracing education from
the kindergarten to the university as represented in the State systems * * *
public and traveling libraries, art interchanges, village and town improvement
associations and constructive legislation." 7
Women are taking an active part in all philanthropic organizations con-
sisting both of men and women members who are aiming to increase the "great-
est happiness of the greatest numbers" as well as the "perfection of the rational
and spiritual nature of conscious personality."
The Jewish Chautauqua Association held its eighth annual session at Atlantic
City, July 10-31. This is a national society, and its work is organized on the
familiar lines of the-parent association, consisting primarily in the establishment
of local "circles," with prescribed courses of reading and study. The annual
meeting is merely an incident, so that the small attendance of members is not
regarded by its officers as a discouraging circumstance. It differs, however, from
all similar organizations in having for its special aim the study of the Hebrew
Scriptures, which our Jewish friends, who reject the New Testament, call "the
. 6 Meyers, p. 343.
•Scribner's, 1897, pp. 486-7.
'Croly, J. C: " History of the Woman's Club Movement," p. ix.
[421]
138 The Annals of the American Academy
Bible." The same complaint is made by Jews as by Christians of the growing
indifference to the Bible, and the ignorance of its contents and spiritual significance
manifested by young men and women, otherwise fairly intelligent and well
informed. Accordingly, the official programme included courses of instruction,
particularly designed for the benefit of clergymen and students of divinity in the
Hebrew language, in the history of the Jewish Church and its ceremonial observ-
ances, and in archaeology and the higher criticism. Few persons are aware of
the fact that Hebrew is not a dead but a living tongue, with a contemporary
literature unknown to the world at large, including poetry and fiction. It is be-
lieved that more persons are to-day able to converse freely on all subjects of
current interest in this language than at any period in history since the "diaspora"
or the dispersion of the Jewish people after the capture of Palestine by the
Assyrians, in the eighth century, B.C. An interesting feature of this meeting
was the presence of a colored man, of unmixed negro blood, said to be an Episcopal
clergyman, who has now been a member of the Association for three years in
succession and has earned a certificate of his acquired ability, to read, write and
speak Hebrew — something that he could not have learned in any Christian school
in the United States.
The Jewish Chautauqua must not be confounded with the National Confer-
ence of Jewish Charities, which is a separate organization, made up originally of
delegates from the Hebrew relief associations, but whose scope has been enlarged
to include representatives of all Jewish charitable institutions, and which con-
fines itself to the discussion of the problems of general and specialized philan-
thropy.
The administration of charity by the Jews is noted, the world over, for its
wisdom, humanity and practical efficiency. They carry into it their deep relig-
ious feeling and their keen business sense. It is both shrewd and liberal, and it is
characterized by strict conformity to economic law. No other people is so deeply
imbued with the sentiment of moral responsibility to care for its own poor and
unfortunate members at its own cost, without resort to outside aid. In this
country, however, prior to the recent extraordinary influx of Jewish immigrants,
fleeing from the tyranny and oppression of Russia, there was comparatively
small demand for the expenditure of money in this particular direction. The
burden which American Judaism has now to carry is enormous, in comparison
to the size and wealth of the Jewish population, and it is rapidly increasing.
It is therefore not surprising to find, upon the Chautauqua programme, a week
devoted to work in the "department of applied philanthropy."
If the Jews do not ask American Christians for money, they show a remark-
able and praiseworthy willingness to accept help in the form of counsel by experts
in charities and correction not of their own religious faith; and the selection of
topics and speakers, during the final week of the session, by the Rev. Dr. Henry
Berkowitz, of Philadelphia, was admirable. Dr. Edward T. Devine, the able
Secretary of the New York Charity Organization Society, spoke on the value of
special professional training for all charity workers, as now given in three American
cities, New York, Chicago and Boston. Mr. Robert W. de Forest, President of
[422]
Philanthropy, Charities and Social Problems 139
the N. Y. C. O. S., and recently Tenement House Commissioner under Mayor
Low's administration, discussed the housing problem which is of peculiar interest
to religionists who furnish so large a percentage of the dwellers in the overcrowded
tenement districts of the East Side. He was followed by Miss Emily W. Din-
widdie, of Philadelphia. Mr. Marcus M. Marks, of New York, a manufacturer and
large employer of labor, who is a member of the Civic Federation, was announced
to speak on the labor problem in its relation to applied philanthropy, but con-
fined himself in fact to a general statement of the nature of the labor problem
and of the work of the Federation. He favored the "open shop. " Mr. Sargent,
U. S. Commissioner of Immigration, at an evening session which was attended by
a large audience, held the undivided attention of his hearers for two full hours by
a very happy talk on the immigration laws and their administration. He de-
tailed the recent changes for the better at Ellis Island and other immigration
stations; deplored the necessity under the law for so many reshipments to Europe,
and said that the remedy consists in inspection and detention at the port of depar-
ture; and dwelt at length on the necessity for a more general distribution of immi-
grants, especially in the West and South, which he thought would be promoted
by the creation of a free governmental bureau of information to be connected
with the Bureau of Immigration. Dr. Frederick H. Wines, for thirty years the
Secretary of the Illinois State Board of Public Charities, and more recently the
Assistant Director of the United States Census, explained the relation which
subsists between charity and correction, taking as the text of his paper the decla-
ration of a leading Jewish Rabbi, that the Hebrew word Vsadekah is used to express
the conception both of charity and of justice, since to Jewish thought charity
which is not just is not charity, and justice which is not tempered by mercy is not
justice. It is said that this was the first address ever delivered before a Jewish
audience on the problems of crime and its treatment; and its inclusion in the
programme was suggested by the fact that now, for the first time in our history
as a nation, the number of Jewish offenders, adult and juvenile, in our prisons
and reformatory institutions, is large enough to be appreciable. It is also said
that few, if any, of them are natives ; practically they are all recent importations.
This is also true of Jewish paupers. Mr. Nibecker, Superintendent of the Penn-
sylvania Reform School, at Glen Mills, discussed the question of juvenile crime.
Finally, Dr. Talcott Williams, of the Philadelphia Press, delivered a popular
lecture on the oppression of the Jews and other subject races by the government
of Russia.
All of the general sessions were held in the new assembly hall of the Royal
Palace Hotel, which is the headquarters of the Association. It meets in Atlantic
City year after year. The gathering is one marked by intense earnestness, and
no provision is necessary for the mere amusement of the members. The ' ' show "
feature common to most Chautauqua assemblies is entirely eliminated.
[423]
140 The Annals of the American Academy
III. NOTES ON COLONIES AND DEPENDENCIES
Hawaiian Finances. — In view of various conflicting and erroneous reports
as to the status of the territorial finances, the statement given herewith has
been furnished from an authoritative source in the Islands.
The finances of the Territory of Hawaii are in better shape to-day than they
have ever been since the date of annexation by the United States. Prior to
that time these Islands were in receipt of an annual revenue approximating one
and one-half million dollars, derived from Customs and Internal Revenue sources.
Since annexation this money has gone annually into the Federal treasury.
Notwithstanding the loss to the Territory of this large amount of revenue,
equal to ten dollars per capita of Hawaii's population, the expenses of the Ter-
ritory had been maintained upon their former basis, that is to say there had
been no reduction in the number of employees or the current expenses in any
single department of the government. In an effort to supply the deficiency
in the revenue the system of direct taxation was largely increased, but this
was insufficient to meet the requirements and each financial year found greater
deficiencies. The shortage of one year was made up by drawing upon the income
for the subsequent year. At the beginning of 1904, conditions were such that
Governor Carter, who had only been in office for five weeks, after a close exam-
ination of the Territory's condition, deemed it necessary to call an extra session
of the Legislature. This session lasted only twelve days. Most effective work
was accomplished in reducing the amount of expenditure which had been author-
ized by the previous Legislature and curtailing the disbursements which had
been authorized on salary account. The result is that, beginning with the first
day of July, 1904, appropriations for the fiscal year ending June 30, 1905, will
be slightly under two million dollars, while a conservative estimate places the
Territory's income for the same period at rather more than two and one-quarter
million dollars. Upon such a working basis the Territory will soon be in a posi-
tion to "make good" advances that have been furnished for the previous years'
disbursements and will again be running on an absolutely cash basis.
It is true that the affairs of the Territory were in an unsatisfactory condi-
tion, but they have been satisfactorily adjusted. As the Territory is unable
under its organic law to borrow money to cover any deficit in its income, it must
pay as it goes. Bonds can only be issued for public improvements, with the
approval of the President, the amount being limited by the Organic Act. At
the present time the total bonded indebtedness of the Territory does not exceed
two and one-half per cent, of the taxable property. By next November every
item of current indebtedness will have been paid. The outlook for economic
administration is decidedly more favorable than it was at the close of 1903.
The Territory's difficulty arose mainly through the habit into which the
Legislature fell of passing large appropriations without regard to the public
income, the previous administration not having placed any check upon them
[424]
Notes on Colonies and Dependencies 141
or drawn the attention of the Legislators to the fact that they were exceeding
the income.
Instances of the changes in revenue of the Territory can be shown by the
fact that the customs receipts from these Islands in 1899 amounted to almost
$1,300,000 and from the Post Office to $120,000— besides about $200,000 col-
lected through the department of Public Works. These sums have since gone
annually to the Federal departments in Washington. The receipts of the
tax office from property taxes have increased from $1,072,000 in 1899 to $1,678,-
000 in 1903. This shows a gain of $600,000 — as compared with the loss of
$1,600,000 — taken by the Federal Government. Revenues from the Water
Works and Public Lands Offices also show some little gain during the same period,
but it has been impossible to make up what the Federal Government has taken
and no effort was made to curtail the expenditures. At the present time, how-
ever, the outlook is infinitely more satisfactory than it has been since annexation
and under the present economic administration Hawaii should soon be working
upon a cash basis, with only the small bonded indebtedness which has been
incurred for public improvements of a permanent nature.
Filipino Students in the United States. — The second quarterly report of
Prof. Wm. Alex. Sutherland in charge of the Filipino students in the United
States has been received by the Bureau of Insular Affairs, War Department;
from it the following facts have been taken:
Upon their arrival in San Francisco in November, 1903, it was thought
best to have the students remain in Southern California during their first winter
in the United States, as they had never experienced any other than a tropical
climate, and as their medical attendance for the first six months has cost on an
average less than $2.50 per student, the wisdom of the plan has been proven.
The students have grown both in weight and height and the results
obtained in bearing and general appearance are very noticeable. The people of
Southern California have received the students into their homes and they have
also participated in the social life of the towns where they have been attending
school.
Many of the young men have taken part in the school entertainments
using the English language, and a number have addressed teacher's institutes.
They have also done well in school work as may be seen from a report made
by Professor Gates, President of Pomona College where eight Filipinos had been
located. He states, "I have made special inquiry at our faculty meeting about
your boys. I find that they are without exception doing exceedingly well.
It would be hard to the extent of practical impossibility to pick out any hap-
hazard bunch of eight students of whom the same could be said.
"The only weak spot was in the English work, which of course was nothing
against the boys. It was simply something that would happen to me if I were
in a Spanish school. It is the one place where the language handicap specially
shows, but in that their work is faithful and efficient."
The present plan is to collect the students at some suitable place after
the school year is over and give them a special summer course along the lines
[425]
142 The Annals of the American Academy
where special work is needed, and then after a short visit to the St. Louis Fair,
to place them in schools and colleges in the Central States.
The students, as far as they have expressed themselves, desire to pursue
a variety of callings upon their return to their island homes. Twenty-five per
cent, of them expect to become teachers, some desire to become civil engineers,
others to pursue a commercial course, a few wish to study medicine, two are
eager to enter the Naval Academy at Annapolis, and then find employment
in the coastwise service of the Philippines. One of these is reported to converse
in Spanish, English, Japanese, French, Tagalo and Visayan languages. A
few expect to study scientific agriculture and they will probably be placed in
some Southern Agricultural College, in order to secure practical training in the
cultivation of rice, sugar and cotton as well as acquaintance with modern agri-
cultural instruments.
If the present high standard of students is maintained and the original
plan of sending a hundred students each year to the United States for a four
years' course, is continued, their influence should before long be felt in the
islands and should become a powerful factor in the development of their native
land.
How Yellow Fever May Be Introduced Into The Philippines. — Dr. Rich-
ard P. Strong, Director of the Biological Laboratory at Manila, P. I., has a paper
in the fourth annual report of the Philippine Commision, about to be published
by the Bureau of Insular Affairs, showing how the Panama Canal may become
a factor in introducing yellow fever into our Eastern possessions and the entire
Orient. He shows that the Hawaiian Islands, Guam, and the Philippines,
will be exposed to the importation of cases of yellow fever or of infected Stego-
myia jasciata (the mosquito which carries the fever), unless the disease can be
banished from Panama.
The paper states: "One need glance only for a moment at the map and
then at the statistics of cases of yellow fever in numerous seaport towns during
the year 1902 to be again impressed by the relationship existing between com-
merce and yellow fever. During the past year among the seaport towns of the
eastern coast of the Western Continent, Port Limon, Progress, Vera Cruz, Tux-
pan, Tampico, Rio de Janeiro, Bahia, Manaos, Pernambuco, Para and Para-
maribo and among those on the western coast, Panama and Guayaquil have
all been frequent sufferers from this scourge. It does not seem improbable,
therefore, that unless extreme precautions are taken against vessels passing
from these regions and bound for ports in the Far East, infected ships, and
even actual cases of yellow fever will be conveyed from the above-mentioned
cities to Honolulu, or even directly to Guam, Hongkong and the Philippine
Islands.
"Mail steamers from Panama should reach Honolulu in thirteen or fourteen
days, and the Philippine Islands by a direct route in about twenty-eight days.
Vessels, even though leaving Panama with no cases of yellow fever on board,
and reaching Honolulu without a history of sickness en route, yet might obviously
be most serious agents of infection to the Hawaiian Islands, for if Stegomyia
[426]
Notes on Colonies and Dependencies 143
which had recently bitten persons suffering with yellow fever were taken on board
the ship at Panama, they would not be capable of conveying the disease until
about twelve days later, which at the earliest would be one or two days before
the arrival of the ship at Honolulu. * * * It has been shown that the Stego-
myia is capable of conveying the germs at least as late as fifty-one days after
biting a person suffering with the disease. * * * Should a case of yellow
fever (or even infected Stegomyia) reach Manila, without quarantine, the chances
would seem to be in favor of its not falling upon barren soil. Humidity and
hea., which seem to be the ideal coefficients for the preservation of the disease,
are always present in Philippine ports. The Stegomyia jasciata is found abund-
antly throughout these islands, and one may at any time readily obtain in a
few minutes a number from any of the dwelling houses in Manila. * * *
However, the matter has not altogether a dark side. For example, Wood
and Gorgas, stimulated by the work of the late Walter Reed, have recently
shown us that it is possible by proper sanitation to entirely stamp out yellow
fever from its natural endemic home, Havana. * * * Why then should
not the same be accomplished along the entire route of the Panama Canal?"
Trade in the Philippines. — The statement of Philippine commerce for the
calendar year 1903, made public through the Bureau of Insular Affairs of the
War Department, gives complete statistics for the past five years in graphic
and tabular form according to the leading articles of commerce, together with
a brief review of the trade, and reference to recent measures that may have
a bearing on the future industrial development of the islands. By comparison
the general result indicates a steady advance in the volume of business trans-
acted.
In 1902 the foreign commerce of the archipelago amounted to $62,014,070
as compared with $66,203,130 in 1903, imports aggregated $33,342,166 and
$33,811,384, respectively, and exports $28,671,904 as against $32,396,746 in
1903, which figures are exclusive of gold and silver and government supplies.
Ten years ago, 1893, the total value of imports and exports was but $38,073,725,
the increase in the decade being 75 per cent.
The effect of adverse agricultural conditions is shown from the fact that
the item of food supplies during the past year has been considerably larger
than manufactured articles, in the distribution by classes being valued at seven-
teen million dollars or more than one-half of the total imports, a material increase
over 1902 when the proportion approximated two-fifths.
With the exception of those producing rice all the principal countries,
United States, United Kingdom, Spain and Germany show a falling off in imports,
the rice purchases from Asiatic territory more than making up the loss in trade
with Europe and the United States.
Under exports the figures on hemp and copra, products that are in great
demand and require but little attention in cultivation, show a continuance
of the improvement characteristic of this branch of the island's commerce.
Hemp shipments reached $22,000,000, or two-thirds of the outward trade in
1903, an increase of $3,000,000 over 1902 returns, considerably more than one-
[427]
144 The Annals of the American Academy
half being destined for markets in the United States. An increase of more
than a million dollars is noticed in the copra trade, 1903 shipments aggregating
$3,800,000 in value, nearly all of which went to France. Sugar to the amount
of $3,000,000, and tobacco $1,900,000, fell slightly below the exports during
1902. In the early months of 1903 several fair-sized sugar cargoes left Philip-
pine ports for the United States, but the returns subsequent to June indicate
a complete cessation of trade doubtless in the hope that favorable action would
be taken on the effort for tariff reduction.
The trade between the United States and the Philippines, incoming and
outgoing, for 1903, was $16,908,526, or about 25 per cent, of the latter's total
trade. Imports from the United States for the past year were $3,387,100 against
$4,153,174 in 1902, a slight falling off in value. The exports to the United
States for 1903 were $13,071,426 against $11,475,948 for 1902, an increase of
$1,595,478. The balance in favor of the Islands in 1903 was $9,234,326.
Notwithstanding a net loss over 1902 in the value of shipments from this
country the amount of merchandise received at Philippine ports in American
bottoms doubled in value. Philippine products exported to the United States
show even greater improvement in the carrying trade, but while the increase
is noticeable in each case it will be observed that eighty-eight per cent, of the
cargoes either way is still confined to foreign bottoms. Of the $4,118,660
worth of imports (coin shipments included) coming from the United States last
year sixty per cent, was brought in British vessels, a million dollars less in
value than was shown in 1902 when all but one -fifth of our shipments entered
the Islands under that flag. Nearly three-fourths of the $13,000,000 return
trade reached United States ports through the same channel.
Disposition ol Friar Lands. — The Bureau of Insular Affairs of the War
Department has just received a copy of an enactment of the Philippine Com-
mission, providing for the administration and temporary leasing and sale of
certain haciendas and parcels of land, commonly known as "Friar Lands,"
for the purchase of which the Government of the Philippine Islands recently
contracted.
This enactment provides that a careful examination is first to be made
to ascertain the sufficiency and soundness of the titles to the land, and the Chief
Engineer of the Philippine Government is directed to have careful surveys
made of all haciendas and tracts of land, in order to determine with accuracy
and certainty the amount of land in each hacienda. After the determination
of these points payment is to be made for the lands, whereupon they are to
be placed under the immediate control and direction of the Bureau of Public
Lands of the Philippine Islands, the Chief of which, subject to the approval of
the Secretary of the Interior of the Philippines, is to administer the land. He
is enjoined by the enactment to ascertain the names and residences of the actual
bona fide settlers and occupants in possession of these lands, or any portion
of them, together with the extent of their holdings, and the character and
value thereof; and to ascertain whether or not said occupants desire to pur-
chase or lease their holdings. In case the present occupant does not desire
U28]
Notes on Colonies and Dependencies 145
to purchase, but does desire to lease, he may do so for a term not longer than
three years, at a reasonable rental, to be fixed by the Chief of the Land Bureau.
If the present settler or occupant of any portion of these Friar Lands desires
to purchase, he is entitled to do so at the actual cost to the Government, and
shall be allowed ten years from the date of purchase, within which to pay for
the same in equal annual installments if he so desires; all deferred payments
to pay interest at the rate of four per cent, per annum.
The present settler or occupant is to be given a refusal either to buy or
lease, as above set forth, but all unoccupied lands, or lands which the present
occupants do not desire to lease or buy, the Chief of the Bureau may lease, or
offer for sale to other parties, as may seem for the best interests of the Govern-
ment.
The Act also provides that all canals, reservoirs and other irrigation works,
common to all the properties, shall remain under the exclusive control of the
Government of the Philippine Islands, and the Government reserves, as a part
of the contract of sale, the right to levy an equitable contribution or tax for the
maintenance of such irrigation works, based upon the amount of benefits re-
ceived.
The Philippine Government is authorized to designate any of these lands
as non-alienable, if it so desires, and reserve the same for public use.
All money derived from the leasing or sale of these lands is to be promptly
deposited in the Insular Treasury, to be held separate and apart from general
Insular funds, and is to constitute a trust fund for the payment of the principal
and interest of the bond issued by the Philippine Government for the purpose
of raising money to pay the purchase price of these Friar Lands.
Philippine "Official Gazette.** — The annual report of the Philippine Com-
mission for 1903, which has lately been published, contains the report of the
editor of the Official Gazette, a publication printed in English and Spanish,
and issued weekly in Manila, under the general direction of the Secretary of
Public Instruction of the Philippine Islands.
This publication was authorized by an Act of the Philippine Commission,
approved September 2, 1902, and the first number is dated September 10, 1902.
It contains the acts of the Commission, executive orders, important decisions
of the Supreme Court, the Court of Custom Appeals and the Court of Land
Registration and other material designated for publication by the Secretary
of Public Instruction or which may be recommended by the editor and approved
by the Secretary.
A copy of each number of the Official Gazette is deposited with the Civil
Governor, the Secretaries of the several executive departments, the members
of the Philippine Commission and several other high officials of the Government
in the Philippines and is sent to the President of the United States, each mem-
ber of his Cabinet and other officials resident in this country. Each provincial
and municipal government is required to subscribe for one copy of the Gazette
which is safely kept with the public records of the provinces or municipalities
for reference.
[429]
146 The Annals 0} the American Academy
In this way the prominent officials of the Philippine Government as well
as those of the provinces and municipalities are kept in close touch with the
laws and other matters affecting governmental affairs.
Philippine Forests and Forest Reserves. — Among the recent enactments
of the Philippine Commission is one to regulate the use of the public forests
and forest reserves in the Philippine Islands, the short title of which is "The
Forest Act."
The public forests are made to include all unreserved public lands covered
with trees of whatever age and are placed under the jurisdiction of the
Chief of the Bureau of Forestry, his actions with reference thereto being
subject to the approval of the Secretary of the Interior of the Philippine Islands.
The Civil Governor upon the recommendation of the Chief of the Bureau of For-
estry is empowered to set apart forest reserves from the public lands and is
required to declare by proclamation the establishment of such reserves and
their boundaries.
After the reserves have been set apart they cannot be entered, sold or
otherwise disposed of, but must remain as such for forest use until the Civil
Governor may see fit to revoke his proclamation at which time the reserve cov-
ered thereby becomes a part of the public lands.
The Chief of the Bureau of Forestry prescribes such regulations as may be
necessary for the protection, management, reproduction, occupancy and use
of the public forests and forest reserves in such manner as to insure for the
future a continued supply of valuable timber and other products. For the
purposes of the Act the several provinces in the Islands are divided into two
classes and the various native trees into four groups.
The Chief of the Bureau of Forestry is given authority to issue licenses for
the cutting, collection and removal of timber, firewood, gums, resins and
other forest products from the public forests and forest reserves, each of the
licenses specifying in detail the right to which it entitles the holder and provid-
ing for the selection of the timber before cutting. No officer or employee of
the Bureau of Forestry is permitted to have any pecuniary interest in any forest
or in any business in lumber or other forest products.
The Chief of the Bureau of Forestry estimates that there are about 40,000,000
acres of forest lands on the public domain of the Islands.
[430]
THE ANNALS
AMERICAN ACADEMY
POLITICAL AND SOCIAL SCIENCE
ISSUED BI-MONTHLY
VOL. XXIV, No. 3
NOVEMBER 1904
Editor: EMORY R. JOHNSON
associate editors: SAMUEL McCUNE LINDSAY, JAMES T. YOUNG
PHILADELPHIA
American Academy op Political and Social Science
1904
Copyright, 1904, by the American Academy of Political and Social Science
All rights reserved
INSURANCE INVESTMENTS
The investments of our life insurance companies are attracting
mere and more attention among students of finance. The marvelous
growth of the funds held and invested by these companies leads us to
make inquiries about their volume, their character, safety, and
earning power.
To a full understanding of these questions it would be necessary
to discuss insurance as an economic institution, to explain the various
kinds or classes of policies, so as to show how the funds are made up
and classified, and to whom in the last analysis they belong. But
this would lead us into too many technical questions that lie beyond
the scope of the present paper. Suffice it to say that a company
which issues a large amount of endowment insurance, or one which
has a large proportion of its policies near maturity, must necessarily
have a larger amount of assets in proportion to the amount of insur-
ance in force than a company which is comparatively new, or one
which is making a specialty of "ordinary life" or "term policies."
Likewise, a company which has a large amount of deferred dividend,
or "semi-tontine" policies on its books, must necessarily show a
higher ratio of assets to liabilities than a company which makes a
specialty of annual dividend policies. Between these extremes there
are all sorts and grades according to the amount of investment in
the majority of the policies issued. That is to say, a company
which issues a large amount of investment policies will have a larger
proportion of its income coming from interest and rents than a com-
pany which issues a large amount of "ordinary life" and "term
policies. "
This being true the following propositions may be stated as
facts which demand careful consideration in any study relating to
insurance investments :
i. The assets are trust funds which bear absolutely no fixed
relation to capital stock, or to the amount of insurance in force.
2. The income, either gross or net, into which the premiums
enter, cannot be called earnings in any proper sense of that term,
because the premiums are not income either from money invested, or
[431]
2 The Annals of the American Academy
for services rendered, but are deposits that are to be held in trust
for the policyholders.
3. Dividends are of two kinds: 1, dividends to stockholders,
in stock and mixed companies, and 2, dividends to policyholders in
all companies, the latter being, in most cases, nothing more than
the return of an overpayment.
In the selection of investments, the companies are guided to
some extent by State laws relating thereto. Among the most con-
cise, yet comprehensive laws on this subject are those of Iowa.
They provide substantially as follows:
1 'The funds required by the law to be deposited * with the auditor
of State by any insurance company — organized under the laws of
this State — shall be invested in the following described securities and
no other:
1. Bonds of the United States.
2. State bonds (if at or above par).
3. Bonds, mortgages, etc., being first liens on real estate.
4. Bonds, etc., of counties, cities, towns and school districts.
5. Stock of solvent national banks (but not more than 5%
of the assets of the company can be invested in such stock).
6. Loans upon the company's own policies, but not to exceed
the net terminal reserve and not until the policy has been in force
for at least three years.
7. Such real estate as may be necessary for office buildings
for its own business, but rooms for rent may be added.
Similar provisions are found in the laws of most of the States and
they have, no doubt, aided the companies materially in winning the
confidence of the insuring public. The extent to which this con-
fidence has been won is shown both by the rapid growth and the
great magnitude of the life insurance business in recent times. To
illustrate, the following paragraphs from a well known authority
on the subject may be quoted.
"In i860 all the American life insurance companies together
had on an average about $5.00 at risk for each person in the United
States; in 1901 the amount per capita at risk had increased to some-
where near $85.00 ; in forty-one years the average had been multiplied
1 These deposits are increased from year to year to correspond with the obligations of the
company.
[432]
Insurance Investments 3
by seventeen. This is one of the factors that explain the future of
our life companies.
"The second factor is the rapidity with which assets overtake
insurance in force * * * We can illustrate this in a striking way
by citing the experience of the three great American companies:
"On January i, 1886, the New York Life, the Mutual Life,
ana the Equitable had about $986,000,000 of insurance at risk. On
January 1, 1902, sixteen years later, the same companies will have
in cash assets not far from the same total. In other words, cash
assets will approximate in 1902 what the insurance in force aggregated
in 1886. Does it follow that sixteen years hence these three com-
panies will have in cash assets a sum equal to the present outstanding
insurance — probably $3,500,000,000? Does it follow that to this
will be added an increase in the amount of insurance per capita?
"We need not speculate on what may happen. We have only
to deal with what is certain to happen, and we are forced to the con-
clusion that our life insurance companies during the next decade
will play a part quite different from what they have hitherto under-
taken.
"If no new insurance were written, if palsy should suddenly
seize the tremendous activities of these companies, the contracts
that are now outstanding and well established, in the very nature of
the case would bring in such sums of money that the companies
would be compelled to become an active factor in the investment
world."2
The above paragraphs, coming as they do from a man who has
had many years of experience in the business, and is thoroughly
familiar with the facts, are full of meaning.
The total amount of money in circulation in the United States
has been estimated at $2,002,931,791, and the total assets of the
life insurance companies alone, January 1, 1902, was estimated at
$2,263,000,000 or about $260,000,000 more than the total amount
of money in circulation in the United States. The total market
value of all taxable property in the State of Wisconsin in 1902,
including railroad property, was $1,724,687,950, or $438,312,045 less
than the amount of property held by these companies.3 The four
largest life insurance companies alone have sufficient assets to pur-
* Darwin P. Kingsley, Third Vice-President, New York Life Insurance Company, New York
Independent, December 19, 1901.
'See Wisconsin Tax Commission Report, 1903, p. 216.
[433]
4 The Annals of the American Academy
chase all the railway property in Wisconsin and pay for it five times
over, and this is all the more significant when we consider the rapid
growth of these funds.
Let us now consider these investments in detail. Our best
source of information is the State insurance reports. From the
facts there given it appears that on January i, 1902, the $1,773,916,-
359 of assets held by the twenty-eight leading life insurance com-
panies were distributed among the various classes of securities as
follows :
1. Bonds $728,919,287 or 41.1%
2. Mortgages 490,632,508 or 27.7%
3. Real estate 154,409,242 or 8.7%
4. Policy loans 92,388,507 or 5.2%
5. Cash in banks and office 83,987,628 or 4.7%
6. Loans on collateral 57,590,295 or 3.2%
7. Stocks owned 51,541,185 or 2.9%
8. Miscellaneous 114,447,707 or 6.5%
Total $1,773,916,359 100.0%
One important thing to be noted in the above table is the high
rank given to bonds, being over 41% of the total. It is equally
noticeable that stock falls to the lowest rank in the classified list,
being less than 3%.4 Mortgages hold an important place — 27.7%,
being second in the list. Then comes real estate with only 8.7%;
policy loans, 5.2%; cash in banks and office, 4.7%, and loans on
collateral, 3.2%.
As far as the individual companies are concerned, the statistics
show a great variety of holdings. Real estate does not rank very
high in any company except one which has 60. 1 % of its total assets
in this class; the next highest being 36.3%, 31.4%, 24.8%, etc.,
down to a trifle less than 1%. The larger companies as a rule, have
only a small portion of their assets in real estate. The largest amount
held by any one company is that of the Equitable of New York,
which is $38,293,092, or 11.6% of its total assets. The smallest
amount, as well as the lowest percentage, is that of the Union Central,
$292,590, or less than 1% of the total. Mortgages show a rela-
tively high percentage in all companies — there being but two below
10%. Fourteen are above 30%, ten above 40%, four above 50%,
and two above 75%. Stocks show the greatest variety, nine of the
* In fire companies this item is considerably larger than in life companies.
[434]
Insurance Investments 5
twenty-eight companies having no such investments, and one reach-
ing as high as 23.6%. The largest amount held by one company is
that of the Mutual Life of New York, $34,570,685, but this is less
than 10% of the assets of that company. Bonds show a high per-
centage in nearly all the companies. Four of them, however, are low,
three being below 3% and one slightly above 3%. Three have
between 10% and 20%; six between 20% and 30%; ten between
30% and 40%, and three between 40% and 50% of their assets in
this class. "Loans on securities pledged as collateral" are relatively
unimportant, both in amount and in character, for they represent no
distinct form of securities or class of investments, except insofar
as they may be called "quick assets, " that can be converted into cash
to meet extraordinary demands. Policy loans, on the other hand,
form a distinct class by themselves. They are of two kinds: 1,
policy loans proper, i. e.} loans on policies that have an accumulated
reserve and on which a part of that reserve is loaned; 2, "premium
notes and loans" which are only temporary loans to assist policy-
holders in keeping their policies in force when they are unable, or
when it is inconvenient for them to pay the premium when due.
The highest percentage shown in this class is 29.8%. Three are
between 10% and 20%; ten between 5% and 10%; and ten below
5%. "Cash in banks and office" ranges from 1.1% to 13%. By
far the larger part of this is in banks and is drawing a low rate of
interest, being kept in different parts of the country to facilitate
the business operations of the companies. The "miscellaneous"
are unimportant except in two cases where they reach 12% and 19.2%
respectively. The larger part of these consists of the one year's
premium which is reported as assets. The reason why the two
companies rank so high in this class appears to be that they are com-
paratively new, or because they are issuing a large amount of low
premium policies so that the accumulations are still small in propor-
tion to the annual premium collected.
In the selection of investments the companies should be, and are,
guided primarily by two things — safety and profit. Safety is of first
importance. This settled, the question of profit should be the best
guide. But in practice, other considerations play an important
part, and it is often a matter of "pride" or "policy, " or convenience,
or business connections that leads them to invest in one class of
[435]
6 The Annals of the American Academy
securities in preference to others. Taxation is also considered, but
not to any great extent.
On the question of safety the authorities differ, and the reports
of the companies differ in many respects. They all agree, however,
that policy loans, i. e., loans on policies pledged as collateral have
the best possible security. Bonds are so diversified that no definite
rule can be laid down that will apply to all. Naming them in their
order of security, they may be placed substantially as follows : Bonds
(i) of the United States, (2) of the State governments, placing Eastern
and Central States first, (3) counties (in well settled regions), (4)
cities whose credit is good, (5) towns, villages and school districts,
(6) bonds issued by private corporations, placing first those of well-
established railroad companies, and last those of new corporations
entering upon hazardous and untried undertakings. The bonds of
some private corporations should undoubtedly be placed above the
bonds of some towns, cities and villages, or even counties and States,
but it is safe to say that, as a rule, the bonds even of the small govern-
mental jurisdictions are superior to those of private corporations.
Real estate mortgages are looked upon by some companies with
great favor while others claim that they are subject to foreclosure
and loss by expense. One company which has over 77% of its assets
in mortgages claims that they are of unquestionable security.
Hon. F. L. Cutting, Insurance Commissioner of Massachusetts,
says:
"The reserves should be held in best earning, sure investments,
and among these there is no better model or one more generally unob-
jectionable than well-selected mortgages, one great advantage of
which is the absence of market fluctuations ; another the better average
rates of interest ; and another, the unlimited amount of them always
to be obtained by a respectable exertion on the part of the financiers. "
But, like bonds, the mortgages are of such variety that no single
rule can be laid down that will apply to all, save this, that the safety
varies (1) with the amount loaned (and we have seen that some
States limit this to 50% of the value of the land) ; (2) with the charac-
ter of the property and its general surroundings, and (3) with the
character and ability of the owner of the property. The latter,
which is sometimes called the personal equation, is also considered in
connection with some classes of bonds, but to a less degree than in
the case of mortgages.
[436]
Insurance Investments 7
The security of farm mortgages is highest in the well settled
regions of mixed farming and uniform climate, and poorest and lowest
in newly settled regions and in regions subject to extreme climatic
changes. As climatic changes affect the security of farm mortgages,
so commercial prospects often affect the security of mortgages on
city property. But they are also affected by the general character
of che population, and location with respect to money centers, etc.,
so that no definite rule can be laid down with reference to mortgages
any more than with respect to bonds.
Stocks form a distinct class by themselves, and it is a question
if the companies that invest in stocks are not acting beyond the
scope of their authority, for such companies are chartered to conduct
an insurance business, and not to engage in railroad, banking or
manufacturing enterprises. Such investments, however, have been,
as in the case of Massachusetts, specifically allowed by law. Nor
would it be wise to prohibit such investments on mere technical
grounds, for the funds are accumulating so rapidly that safe and
profitable investments sufficient to meet the demands can be found
only by the exercise of the greatest diligence on the part of the man-
agers, and there are numerous corporations whose stability and divi-
dend paying ability can scarcely be questioned.
The earning power of the different classes of investments varies
greatly. For a period of ten years (1892-1901) the average rates
have been as follows :5
Mortgages 5.30 %
Bonds and stocks 4 .70 %
Real estate 4.67 %
All other securities 4 .31 %
While the mean rate was 4.86%. In the last four years of this
period, however, real estate has earned a higher rate than that of
stocks and bonds.
The trend of these rates from year to year is extremely interesting.
During the ten year period under consideration, the rate on mort-
gages fell from 5.58% to 4.87%, a decline of seventy-one points;
stocks and bonds fell from 5.01% to 4.50%, fifty-one points; and the
rate on all other securities, except real estate, fell from 4.25% to
*B. F. Brown, "Complete Digest of Interest Rates, " etc. See also Walford's Handbook.
p. 69.
[437]
8 The Annals of the American Academy
4.05%, a decline of twenty points; while the rate on real estate rose
from 4.25% to 5.38%, a rise of one hundred and thirteen points.6
Judging from these facts, we would naturally expect that the
companies would increase their holdings most rapidly in the invest-
ments that yield the largest returns, and especially those on which
the rate of return is increasing. That, however, is not the case. The
total assets of the twenty-eight leading companies, in the ten year
period under consideration, increased 101%. But, taking the differ-
ent classes separately, it will be seen that the increase was far from
uniform. Stocks and bonds increased 155%; "loans on collateral,
policy reserve," etc., 151%; "cash in banks and office," 148%; real
estate, 72%, and mortgages, only 50%. Thus, with one exception,
the class yielding the lowest returns shows the greatest increase in
the amount invested, and the class yielding the highest returns shows
the smallest increase.
Real estate is an extremely interesting class. Being the only
class that shows an increase in earning power, we should naturally
expect to see a rapid increase in this class. We should also expect
that the amount invested would increase most rapidly in the periods
when its earning power has increased most rapidly. But, so far as
our statistics show, the exact opposite is true, for in the first half
of this decade, (i. e., 1892- 1896), the amount invested increased 41%
and the earning power increased .8%, while in the second half of
the decade (i. e., 1896-1901), the amount invested increased 11.65%
and the earning power increased 12%.
But the earning power of real estate cannot be measured by
these figures alone. The real estate held by these companies consists
largely of office buildings, only a small part of which is used by the
companies for their own business, the larger part being rented to
individuals and corporations. The returns shown by the above
figures are the cash rental values only, and from these there must
be deducted something for depreciation, repairs and taxes. Depre-
ciation and repairs are important items in this class, the others being
only slightly and remotely affected. Taxes are also of much greater
importance to real estate investments than to the other classes, as
can be seen from a comparison of statistics. In 1902, the twenty-
eight life companies before referred to, had $154,414,417 invested in
real estate on which they paid $1,878,211 in taxes. This is equal
6B. F. Brown's "Complete Digest of Interest," etc.
[438]
Insurance Investments o
to an ad valorem rate of .012 162. All other assets amount to $1,619,-
419,655, and aU taxes and fees, except taxes on real estate, amount
to $4,754,406. If this be considered as levied upon such "other
assets"7 it would be equal to an ad valorum rate of .00293, or less
than one-fourth of the rate on real estate.8
The continuous prosperity of late years in causing a great demand
for office room, thus enabling the companies to keep their buildings
fully and continually occupied, has, no doubt, had considerable
influence on the earning power of such real estate, and this fact
accounts in part for the rise shown in the rates. But a large part of
this apparent rise in the earning power is due to the fact that the real
estate holdings have been most liberally scaled down in the reports,
and the great increase in the amount invested during the first half of
the decade may have been due, in part at least, to the foreclosure
resulting from the panic of 1893.
Real estate in the form of office buildings yields one form of
income, which is unique, and that is the advertising value of such
buildings. It has been stated that one of the principal features of
all advertising is to keep continually before the public mind the fact
that the thing advertised is in existence and that it is in the market.
For this purpose, such buildings are admirably adapted: first,
because they are usually such imposing structures that they are
sure to attract attention, and second, because a great many of the
tenants use no other street address on their stationery than the name
of the building, such as "Home Insurance Building, Chicago," "New
Insurance Building, Milwaukee," "Equitable Life Building, New
York," etc., etc., thus continually reminding the public that such
companies are in existence. They also serve the purpose of satisfy-
ing a class of people who think they must have some ' 'visible, tangible
and unquestionable security" to make good their contracts. Al-
though this advertising value cannot be expressed in an exact num-
ber of dollars and cents, it is safe to say that if the companies should
publish literature of equal advertising value it would cost them many
thousands of dollars.
Another question deserving attention in this connection is that
of taxation. Lengthy dissertations have sometimes been indulged
7 The personal property of insurance companies is generally exempt from direct taxation.
573. Tl
: average
[439]
•The rate on gross assets would be .00373. The average rate on two hundred and twenty
electric light companies was .01097, and the average tax rate in the State of Wisconsin in 1901
was .012176.
io The Annals of the American Academy
in to show that the tax on intangible securities is always shifted by
the lender to the borrower. Some writers even go so far as to claim
that there is added a profit to cover the expense of shifting. Pro-
fessor Plehn, of the University of California, takes this view. As
proof of his assertion, he cites statistics gathered from the banks
of San Francisco9 (1880- 1898) to show that the interest rates on
"taxed real estate loans, " i. e., mortgages, are higher than the interest
rates on "bonds and first-class commercial paper" which is untaxed.
He does not point out, however, that according to his statistics the
interest rate on real estate loans fell considerably from 1880 to 1898,
while the rate on bonds, etc., which were untaxed, actually rose in
that period. We are led to believe that, in the first place, his stat-
istics have not been gathered with any great degree of care, and, in
the second place that the statistics gathered have not been fully
digested or correctly interpreted. Knowing, as we do, that interest
rates have fallen considerably in the last twenty or twenty-five
years10 we are led to believe that if bonds of the same class or quality
had been selected for each year, in Professor Plehn's compilation,
the statistics would not have shown an increase in the rate of interest.
Likewise the decline in the rate on mortgages shows that either the
rates have fallen with the increased supply of money and the
increased stability of values resulting from further settling and
improvement of the country, or there has not been sufficient care
exercised in the selection of mortgages. If we compare the interest
rate on mortgages with that on stocks and bonds of the twenty-
eight life companies before referred to, for a period of ten years, thus
making two hundred and eighty comparisons, we find that in fifty-
four cases or 19.25%, the stocks and bonds show a higher rate than
do the mortgages; while in the remaining two hundred and twenty-
six cases, or 80.75%, "the mortgages show a higher rate, and this can-
not possibly be due to taxation, for the stocks, bonds and mortgages
owned by these companies are all taxed alike insofar as they are
taxed. But what shall be said of the fifty-four instances where the
mortgages fall below stocks and bonds? An examination of the
investment schedules gives us the answer. From a cursory examina-
tion of such schedules it appears that the companies whose mort-
gage rate falls below that of stocks and bonds have a considerable
• See Yale Review, May, 1899.
10 The average rate of interest earned by twenty-nine leading life insurance companies
fell from 5.54% in 1883 to 4.42% in 1902. (See Insurance Year Book, 1903, p. 179.)
[440]
Insurance Investments n
amount invested in large mortgages on city property,11 running for
long terms so that the investors are willing to accept a lower rate on
that account. It is also seen in some cases that those companies
have comparatively large holdings in the securities of corporations
whose stocks and bonds, on account of either inferior security or
of monopolistic conditions, yield a higher rate than ordinary.12
The reason why mortgages earn a higher rate than stocks and
bonds must, therefore, be sought in some other place than in the tax
laws. The principal reasons may be stated as follows:
i. Investments in stocks and bonds usually require larger
amounts than mortgages.
2. They run for longer terms.
3. They possess a higher degree of convertibility, being much
more extensively quoted in the market.
4. They are less exposed to the risk of defective title, and have
less of the hazard due to personal equation. Mortgages usually
have to be carefully inspected and not only the title to the property
examined, but the character and ability of the owner must be
considered.
5. The ownership of bonds, and stocks especially, often gives
the owner desirable business advantages and financial relations that
do not follow with mortgages.
These facts must account in the main for the difference in the
earning powder of mortgages as compared with stocks and bonds,
for they are all taxed alike, insofar as they are taxed. The statistics
given above, gathered as they are from all parts of the country,
involving in the neighborhood of two thousand millions of dollars
invested in almost all kinds of securities and under the most varied
conditions, should give us as reliable a basis upon which to rest our
conclusions as any that have as yet been published. We do not
deny, however, that taxes have some influence on the interest rates
where one class is subjected to a higher tax than another, for it would
seem self-evident that investors would weigh this question as care-
! fully as they do all others and would attach toit the proper significance.
This can be seen in case of mortgages in which the mortgagor agrees
to pay all taxes on the mortgaged premises, but we must say the
11 Such mortgages are sometimes called real estate bonds.
"See stocks of some fire insurance companies held by life companies; p. 23 infra.
[441]
12 The Annals of the American Academy
claim that the whole difference in interest rate is due to a difference
in taxation is surely not borne out by the facts.
So far we have considered the investments made by insurance
companies and the earnings upon such investments. We deem it
proper in this place to say something concerning the stocks of insur-
ance companies, considered as an investment, from the standpoint of
the stockholder. The popular supposition is that all the "old line"
insurance companies are stock companies that are operated on a
stock basis for the benefit of the stockholders. As far as the life
companies are concerned, this supposition is incorrect, for they are
all, except one, either mixed or purely mutual. Most of the fire,
marine and casualty companies, however, are stock companies pure
and simple. The stock of the life companies is put in as a "guaranty
capital" to give the company a start, and is in many cases withdrawn
when the company has been well established; in others the capital
is allowed to remain, in which case it draws a regular or "standard"
dividend, more in the nature of interest on bonds than dividends on
stock. The dividends paid on the stock of fire, marine and casualty
companies, on the other hand, is determined by the earnings of
the companies as in other corporations.
That many companies, both stock and mutual, have failed to
meet their obligations and have gone into the hands of receivers
scarcely needs to be mentioned, and that a great many stock com-
panies have failed to make satisfactory profits to the stockholders
and have consequently combined with others or have voluntarily
disbanded, is equally well known. In spite of these failures and of
the loud outcry against "low premiums" and "excessive taxes"
there is a considerable number of companies that are paying enor-
mous dividends. As can be seen from the State insurance reports,
and the Insurance Year Book13 a large number of fire insurance
companies have for a period of twenty years or more paid dividends
of 10% or over; 20%, 25% and 30% are quite common. One com-
pany has paid 40% every year since 1876, and one company, from
1876 to 1896 paid dividends ranging from 80% to 120% on its capital
stock. Such dividends, however, are not paid in life companies
except in a very few cases. One company,14 from 1875 to 1877, paid
55%; from 1878 to 1886, 40%, and in later years it has been paying
13 Fire and Marine, published annually by the Spectator Company, of New York.
" The Manhattan Life. Some of those dividends may have been stock dividends, but tnere
is nothing to indicate it directly.
[442]
Insurance Investments 13
from 16% to 20%. Two companies have paid 12% from 1875 to
the present time; two have paid 10% almost every year since 1875;
one has paid from 11% to 18.5%, and several are paying regular
dividends of 6% to 10%. One notable case is that of the Phoenix
Mutual, which paid 6% from 1875 to 1881, 12% in 1882, 24% from
1883 to 1888, and 12% in 1889, when the stock was retired by vote
of che policyholders, leaving it to operate on the purely mutual
plan. In 1902 the average dividend on the stock of the life com-
panies was 7-44%-
The dividends paid to stockholders may be divided into three
classes, viz: (1) those paid by proprietary stock companies upon
declaration of the board of directors, in the same way as in other cor-
porations; (2) the dividends paid to stockholders in "mixed" com-
panies, which is usually a fixed rate resembling interest on bonds;
and (3) the dividends resulting from the non-participating branch
of the business. Concerning the last named, but little has ever been
written, and very little can be found in the reports.15 It has been
stated, however, that the non-participating business affords con-
siderable income to the stockholders in some companies. But,
compared with the business as a whole, they are not of much impor-
tance, for this part of the business is comparatively small, and the
stockholders that receive such dividends are few.
The price paid for such stocks often reaches a very much higher
figure than it is generally supposed. Some knowledge can be gained
on this point by a glance at the following table.16
Company. Par Value. Bid. Ask.
Boston Marine
Etna of Hartford
Connecticut
Hartford
National
Phoenix
Steam Boiler
Etna Indemnity 100 110 120
Etna Life
Connecticut General
Hartford Life
Travelers
American (Newark)
Firemen's
1S Wisconsin Insurance Report (Life) 1896, pp. 58, 183 and 208.
18 Commercial and Financial Chronicle Supplement, July 4, 1903, p. 47.
[443]
■ Value.
Bid.
100
242£
100
310
100
220
100
650
100
310
100
233
50
200
100
110
100
410
100
175
100
135
100
675
5
440
50
300
14 The Annals of the American Academy
Company. Par Value, Bid. Ask
Merchants' 25 110
Newark Fire 5 180
Prudential17 50 550
Continental 100 790
German American 100 640 690
Germania 50 340 360
Hamilton 15 110 115
Hanover 50 140 145
Home 100 345
Bang's County (Brooklyn) 20 185 190
Nassau (Brooklyn) 50 180
Niagara 50 280
North River 25 165
Phoenix (Brooklyn) 50 240 250
Westchester 10 380 400
The above list consists principally of fire companies, only a few
life companies being included. These figures, however, are com-
pletely eclipsed by the price offered for the stocks of the Equitable of
New York, whose stock is not quoted in the market. That company
has $100,000 of capital stock, divided into shares of $100 each, and
it pays a regular dividend of 7%. According to a New York corre-
spondent of the Philadelphia Press an offer was made of $7,500,000
for fifty-one (51) shares of this stock; or a trifle less than $150,000 per
share. The fifty-one (51) shares in question are now owned by the
H. B. Hyde estate which is in the hands of trustees who are not
allowed to sell.18
The question arises, what is it that induces financiers to offer
such prices for stock that can never, according to charter provisions,
pay over 7% annual dividends? It is evident that the profits
resulting from the ownership of such stocks cannot be measured
by the cash dividends alone. The profits are sometimes held over
for a year or two, or for a longer period, and the stocks meanwhile
rise in value with the increase in surplus. In many cases, the owner-
ship of such stock carries with it emoluments and business advantages
undreamed of by the uninitiated. Among these advantages may be
mentioned the well-paid offices in the gift of the companies ; the oppor-
tunity to arrange for ready loans on favorable terms when business
exigencies demand it ; and the opportunity for the exercise of influence
in the financial world. It requires no argument to prove that men
who have the power to say where the funds shall be deposited can,
17 Par value taken from charts published by the Spectator Company.
18 See Western Underwriter, p. 15, March 13, 1902.
[444]
Insurance Investments 15
in a private capacity, go to the banks where such money has been
deposited and obtain loans on favorable terms. How extensively
this is done it is difficult to say, but it is undeniable that the road is
open and that such things are done.
A word may be added here concerning the amount invested in
this class of securities, so that the influence they exert may be more
clearly understood. As already intimated, the capital stock is of
relatively greater importance in fire insurance than in life insurance.
The capital stock in the life companies is generally put in to give the
business a start and is sometimes withdrawn when the company is
well established. In fire insurance the capital stock continues to
be a working basis of the business. In this connection a few com-
parisons are interesting. The amount of stock in all the life com-
panies reaches about ten millions of dollars; the total assets exceed
two billions, making the stock less than one-half of one per cent, of
the assets. The total stock of all the fire companies is about $72,-
123,389; their total assets, $394,947,651, making the stock 18.3%
of the assets.
The largest amount of stock in any one life company is $2,000,-
000, the Metropolitan and the Prudential19 each having that amount.
The largest amount of stock in any one fire company is that of the
Etna, $4,000,000 ; the next highest, that of the Home Fire Company,
$3,000,000. The proportion between assets and capital stock, and
between capital and insurance in force is so variable in the different
companies that comparisons are of little or no avail, being all the way
from nothing up to nearly one hundred per cent.
This shows something of the nature, the extent and the com-
plexity of the business. The conclusion is naturally drawn that
our insurance companies are financial institutions of a very high
order. The best financiers of the country are investing large sums
of money every year in life policies, and wealthy men make provision
in their wills that the trustees shall invest the funds in the same class
of securities in which life insurance companies invest their funds.
The stability of the companies is also shown by the fact that the recent
slump in the values of securities had but little effect on their assets,
and only a few of the companies sustained losses worth mentioning.
The future of the business, therefore, promises to be even brighter
than the past. L. A. Anderson.
Madison, Wisconsin.
"The Etna Life increased its stock from $1,750,000 to $2,000,000 recently.
[445]
FIRE INSURANCE, EXPENSES, PROFITS, PROBLEMS
In any discussion of the business of fire insurance, two facts of
primal importance must be kept in mind. First, that the indemnity
must be of unquestionable value ; second, the demand of the buyers
of fire insurance indemnity, that they shall be able to purchase it
with the same ease and facility that they do their groceries and dry-
goods. The first demand has resulted in the reserve requirements
of the State. The second, in the agency system, as it now exists.
By keeping these two facts in mind, it will be easier to understand the
problems connected with the business of fire insurance.
The demand for unquestionable value in fire insurance indem-
nity arises not only from the belief of the individual that what he
buys he should receive, but also from the use to which he may put
his contracts of indemnity. To illustrate : a man purchases a policy
of fire insurance indemnifying himself against loss by reason of the
destruction of his home by fire. First, he wishes to know that he will
be indemnified in case of loss. Then he desires to borrow some
money upon the security of his home. The one who lends the money
not only takes a mortgage upon the home, but also requires that the
fire insurance policy be made payable, as his loss may appear, as
collateral security. Another illustration : a man buys grain, cotton,
wool, or other commodities, and stores them, pending sale and ship-
ment. He finds it necessary to borrow money while they are in the
warehouse. The bank requires that along with the warehouse re-
ceipt, there be an insurance policy. These two illustrations are
sufficient to show the absolute necessity that the policies have the
value that is claimed for them.
So thoroughly has this demand been met that it makes but little
difference to the holder of a fire insurance policy, issued by a stock
company, whether the company goes out of business and re-insures
its risks in another company, or carries them to expiration. The
reserve requirements of the State are sufficient, so that if the original
company finds that the business is becoming unprofitable it is
able to re-insure its risks in a going concern. Most buyers of fire
insurance policies have, at one time or another, purchased policies
of some company which has been re-insured in another company
[446]
Fire Insurance, Expenses, Profits, Problems 17
before the expiration of the policies. The policyholder was pro-
tected. It is only in very rare cases that a stock fire insurance com-
pany fails so that its contracts lose value. So infrequent are such
cases, that they may be fairly taken as a negligible quantity.
This reserve, required by the State, is technically known as
unearned premiums and the total unearned premiums of a fire
insurance company, taken together with the capital, form the major
part of the company's liabilities. This unearned premium fund
varies with the term of the policy. For an annual policy, it is fifty
per cent, of the original premium and it increases with the length of
the term, untiHn a five-year policy it is ninety per cent. This ratio
has been determined upon because it is just about a fair average of
the year's premiums. It varies with the varying volume of premium
income. Policies are expiring and new ones are being written, but
the ratio named suffices to cover the unearned premium liability.
The State requires that the company, in order to do business, shall
have a surplus over all liabilities and when it ceases to have such a
surplus it must either create one, or utilize its unearned premium
fund to re-insure its risks in a company which has a surplus. This
matter of the reserve is given thus fully, because a good many per-
sons in the discussion of the fire insurance business take no account
of this unearned premium liability and rather assume that all there
is in the determination of the profitableness or unprofitableness
of the fire insurance business is the difference between the premium,
income and the loss outgo. The application of the reserve principle,,
has given a certainty of value to fire insurance contracts, which is.
not excelled by the contracts of any other financial institutions of
the country or the world.
The second factor is that of facility in the purchasing of fire-
insurance policies. The fire insurance business is essentially a retaili
business with all the expense which attends retailing. The man in
the metropolitan city and the man in the new town in the far North-
west can purchase a fire insurance policy with equal facility. There
may not be as many companies to choose from in the frontier town
as in the metropolitan city, but the man in the frontier town can buy
as many insurance policies as he needs. He does not have to go to»
the city to purchase his insurance, but when he needs it one of his
neighbors will sell it to him. In probably no other business, can a
man in a small town supply his needs as easily as he can in the pur-
[447]
1 8 The Annals of the American Academy
chase of fire insurance policies. This widely extended retail business
involves a very large number of salesmen. In the case of the large
fire insurance companies, the number runs into the thousands. Some
of these retail salesmen or local agents, write a large number of policies
during the year, while others only write a few. Because of this
widely extended agency system, the company has to rely for infor-
mation concerning the desirability of the risk upon the local agent,
assisted by maps and diagrams. The amount involved in a single
agency will not, as a rule, warrant an inspection of any but the larger
and more important risks. The agent gives the information to the
company which it asks and upon which the men at the home or the
branch office are in the main obliged to depend for their inform-
ation concerning the moral and physical hazard and the desirability
of accepting or rejecting. Of course, a careful inspection of each
risk would probably reduce the fire loss, but the expense would
prove prohibitory. Another supervisory check which the company
has is found in its field men who have charge of States, or parts of
States and who are the inter- mediaries between the agent and the
company. They add to the expense, but their work is of great
importance to the companies. This system is now so firmly estab-
lished that it may be termed one of the fixities of the business.
It should be remarked here that the great bulk of the fire insur-
ance business of the country is transacted by the agency companies
through their local agents. Some special classes, such as owners of
large mills, employ the mutual system, which calls for no farther
attention here than to state that it is based upon a careful inspection
of the individual risk which as observed above is not possible for
the general fire insurance business. The mill mutual system is a
specialty for the few. The stock fire insurance companies' methods
and the mutual companies' methods are so variant, that neither
one can be used as a basis for a criticism of the other.
A question that is always to the front in the fire insurance
business is that of expense. In this particular, fire insurance is not
materially different from other lines of business. There is always
in all lines of business, a struggle to keep expenses down. The more
widely extended the business and the more thoroughly retail it is,
as regards extent of territory, naturally the greater the tendency to a
large expense. The managers of fire insurance companies strive
to keep the expense element at the lowest possible figure, but in spite
[448]
Fire Insurance, Expenses, Profits, Problems
of all their efforts the expense is very considerable. There are a
good many items in the expense account of a fire insurance company.
The heaviest item is that of commissions. The agent is compensated
by a commission upon the premium collected. This has gradually
increased. During the past five years, 1899 and 1903 inclusive, the
commission charges have increased from 20.59% to 2 1 .32% or a little
kss than one per cent. This seems large, but it is to be remembered that
it is the price which the buyer of fire insurance pays for the privilege
of doing business with his neighbor. It may not be amiss to take
note of the fact that the money paid for commissions remains in the
community where the business originates. A company, using the
word company in the sense of the stockholders, does not in any way
profit by the commission paid for the business. The company
simply enters into an arrangement with a man in a given community
to sell its fire insurance policies, to those who desire to buy them.
When he has collected the money, the company authorizes him to
retain a certain proportion for his services which at the present
time will average about twenty per cent, the country over. This
money is kept in circulation and is a benefit to the community in
that it furnishes employment and support to one or more of the mem-
bers of the community and thus takes them out of the competition
in other lines of activity. This is a commonplace, but it seems to
be lost sight of many times by those who assert that all money col-
lected on behalf of these insurance companies is withdrawn from the
community and sent to the headquarters of the company. Another
item of expense is the charge which the State imposes upon the busi-
ness in the shape of taxes. This amounts to nearly three per cent.
The following table gives the premiums received by the companies
reporting to the New York department for a period of five years,
the losses paid and the taxes:
Ratio of
Year
No. of
Premium
Losses
Taxes
Taxes to
Companies
Received
Paid
Premiums
1899
162
$134,450,638
$91,031,677
$4,495,332
3.34
1900
158
146,263,565
92,472,967
4,736,250
3.24
1901
146
163,526,207
96,363,509
4,621,006
2.83
1902
145
185,494,632
97,950,790
4,947,898
2.67
1903
147
196,532,866
96,834,018
5,474,156
2.78
$826,267,908
$474,652,961
$24,274,642
2.97
[449]
20 The Annals of the American Academy
It will be observed that the total taxes paid by these companies
for the five years is in excess of twenty-four million dollars, which is
almost as large as the underwriting profit of all the companies re-
porting to the New York department for the period of ten years.
The taxes are in exact figures $24,274,642, and the profits for the
ten years ended December 31, 1903, $27,636,698.
One item of expense which does not attract much public atten-
tion is that of inspections by field men, local boards of underwriters
and special organizations of technical men in matters of construc-
tion and equipment of buildings. Take the one item approving
materials entering into electrical equipments. This aids in prevent-
ing fires, and it should always be remembered that when a company
prevents the destruction of property it helps the public even more
than it does itself. Property burned is value destroyed which cannot
be restored though the owner may be indemnified for his loss. Every
dollar's worth of property destroyed leaves the country that much
poorer. The companies paid many millions of dollars to the citizens
of Baltimore by way of indemnity, but they did not restore to the
country one dollar of the value destroyed. The expense of prevent-
ing fires is for the public's benefit and aids not only the State by
lessening the amount of value destroyed, but also the individual
by lessening this fire loss tax.
Then there are the expenses of supervising the business through
field men, the adjustment of losses, and the home office expenses.
For 1903, the total expenses of each $100 of premiums was $36.91.
The ratio of expenses for the period of i860 and 1903, inclusive, was
$37.8 1 . The expenses for 1903 were nearly one dollar below the average
for the entire period of forty-three years. A great deal has been said
by persons who have studied the fire insurance problem, and those
who have only glanced at it, concerning the heavy expense ratio.
Those who have criticised it as unnecessarily large have-not given
any figures upon which a comparison could be based, between fire
insurance and other lines of business. It would be interesting if a
table could be prepared showing the expense in different lines of
industry attendant upon the process of transforming raw material
into manufactured products, and placing the same in the hands of the
consumer. Taking the fire loss as the raw material and computing
the expense of furnishing the indemnity for the same, it is quite
probable that the results would not be unfavorable to the fire insur-
[45o]
Fire Insurance, Expenses, Profits, Problems 21
ance business. In such a comparison, the premiums collected would
not be considered as the basis, but rather the amount of fire loss
covered by insurance. The expense would be the expense of dis-
tribution. It is sufficient to note this, at this time, without going
into the subject in detail. The men in charge of the fire insurance
business have made many attempts to reduce expenses and the
subject has been under special consideration during the past year
and is, at present, a very live question in fire insurance circles. It
is not easy to reduce the expenses of a business in which certain
customs have become established and certain factors have practically
become fixed charges. The commission charge cannot be very
materially reduced without entirely changing the system of securing
the business. The charges of the State are steadily increasing and
the incidental charges will of necessity about keep pace with the
growth of the business.
One of the questions much discussed by buyers of fire insurance
is that of the premium charge or, as more commonly known, rates.
The charge for fire insurance is of necessity based upon the expe-
rience of the companies. Whenever the fire loss is heavy and the com-
panies find it necessary to increase the charge, there is complaint of
extortion. It is then popular to style the fire insurance companies
trusts, and to claim that they are charging a price for the indemnity
furnished out of all proportion to the loss outgo. It may be fairly
stated that the normal tendency of fire insurance rates is downward ;
that when the companies have a series of unprofitable years great
difficulty is found in increasing the rates ; that just as soon as the fire
loss lessens, the rates begin to go down again. The competition is
so sharp between the companies that just as soon as conditions will
at all warrant it, the premiums are reduced to as low a point as is
consonant with safety. Given a series of four years of profitable
conditions, and fire insurance rates will be reduced in spite of all
that any man or set of men in the business can do to prevent it.
There is a good deal of supposition and imagination indulged
in in the consideration of the average premium charge. Take the com-
panies reporting to the New York insurance department for the period
from 1871 to 1903, inclusive. In 1871, the average rate of premium
of the 177 companies reporting to that department was $-9432 Per
hundred dollars of risk. In 1903, the average premium of the 147
companies reporting to the department was $1.1874. The average
[45i]
22 The Annals of the American Academy
for the entire period was $1.0228. The variation between the first
year of the period and the last year of the period was $.2442. This
shows that the average rate has not varied anywhere near as much
as the criticism of those who have not looked into the subject care-
fully would indicate. The companies are always endeavoring to
induce property owners to make such improvements in the risks and
take such steps in the matter of fire prevention that the fire loss may
be reduced, and when this is done the rates promptly respond to the
improvements. One of the important organizations of the business
is the National Fire Protection Association, composed of experts
who have given much attention to this phase of the business and who
are doing a great deal to bring about a more perfect system of fire
prevention and fire resistive construction and thus directly serving
the buyers of insurance indemnity.
The question of rating is a troublesome one, from whatever
standpoint it is viewed. The ultimate rate has to be based upon the
experience of the companies. Attempts have been made to find a
better system and improvements have been brought about in this
particular. The trouble has been to find a system sufficiently flex-
ible to provide for increases and decreases without resorting to flat
reductions or flat increases. Whenever it becomes necessary to
impose a flat increase in order to increase the premium income suf-
ficiently to provide for the fire loss, there is always friction. To
avoid this has been the object of those fire underwriters who have
given special attention to the question of rating. The latest attempt
and the best, so far devised, is one prepared by Mr. A. F. Dean, of
Chicago, entitled a "Mercantile Tariff and Exposure Formula for
the Measurement of Fire Hazards," which is in quite general use in
the Western States. This plan divides the cities and towns into six
classes, the sixth class being villages which have no protection.
An ordinary one story brick building in a town of the sixth class is
the basis. This tariff does not attempt to name what is known as a
basis rate. Given a basis building, the rates are worked out for
each town or district so that when the time comes to readjust rates,
they can be readjusted without the necessity of overturning an
empirical basis rate. Given this basis in a town of the sixth class,
the additions or deductions are made for good or bad features of
construction. These additions are made upon what are known as
the percentage plan. The rate for the contents is determined by
[452]
Fire Insurance, Expenses, Profits, Problems 23
a differential added to the building rate. This tariff also includes
an elaborate system for determining exposure hazards and charges.
This is not the place to enter into a discussion of the Dean tariff or
of any other fire insurance tariff, but the topic is briefly noted
for the purpose of showing that the underwriters are trying to
find the best possible means of formulating rates so that they will
fit conditions and produce the least possible irritation when changes
have to be made. The whole question of rates is exceedingly com-
plex. While the ideal is far distant, progress is being made. To
understand the difficulties surrounding the question, it is worth
while to pause and take a brief glance at the problems of the rater.
A company is doing business in forty different commonwealths.
The conditions are not alike in any two. There is a certain fire loss,
the burden of which is to be distributed over these States. It must
be distributed with regard to the total aggregate, but this factor is
to be modified or, at least, influenced by a group of perhaps a dozen
sections. The company has to take note of its entire business. The
proportion of the fire loss to the different sections will have an influ-
ence upon the construction of the rates for that section, but it can-
not be determined upon the section alone, because reference must
be had to the whole. Then, again, there are almost innumerable
hazards and the same general kind of a hazard is not just the same
in all the sections. For instance, a mill in New England turning out
the same kind of product that a mill in Illinois or a mill in Georgia
does will not have the same physical factors that either of the other
two have. The variations must be taken into account. This shows
the complexity of the problem and the difficulties under which
those labor who make the rates. When it is all taken into account,
the wonder is not that the rates are unscientific or a rule of thumb,
but rather, considering all factors, that so much progress toward a
scientific basis has been made and so much fairness used in treating
all the parties concerned.
The public complains of fire insurance rates more than of interest
charges. The man who protests most volubly of his fire insurance
rate may have borrowed money on a call loan. The bank notifies
him of an increase of rate if the loan is not to be called. He pays the
increase and makes no complaint because the bank simply followed
the course of the market. The Bank of England increases the rate
of discount when it chooses and every one acquiesces. It is done in
[453]
24 The Annals of the American Academy
accordance with the demand. The companies increase their rate in
accord with the increased loss demand and are styled robbers and
conscienceless trusts. The two interests, banking and insurance,
should be viewed from the same mental viewpoint, for each only
obeys the laws of the financial world in increasing their rates.
One of the principal counts in the critic's indictment of the fire
insurance business is that it is immensely profitable and, because of
this fact, that the rates should be materially reduced. This is a
serious charge and if the evidence supports the indictment then there
is reason for complaint. The findings, however, must be in accord
with the evidence, so that it is in order to consider the evidence which
may be educed. In determining the profit, several factors must be
taken into consideration: first, the amount of capital invested, and,
second, the balance available for dividend distribution, after provid-
ing for all the liabilities. Third, in determining the dividend distri-
bution, the hazards to which the capital is subjected must be taken
into account. In determining this question of profit, the figures
of the companies reporting to the New York insurance department
will be used, as they appear in the official reports of the insurance
department of that State. While these figures do not include all
the companies doing business in the United States, so large a propor-
tion of them are included that the results attending the operation
of these companies are controlling as to the profit of the insurance
business in this country. The first evidence to be introduced con-
sists of two tables made up from the figures of the New York depart-
ment. The first of these tables is for a single year, and that a profit-
able one. The second table is for a period of five years, in which the
figures of the first table are included.
EXPERIENCE OF 147 JOINT STOCK FIRE INSURANCE COMPANIES, AMERICAN AND
FOREIGN, REPORTING TO THE NEW YORK INSURANCE DEPARTMENT.
Premiums, Fire and Marine and Inland $196,532,866
Losses paid, Fire and Marine and Inland $96,834,018
Losses outstanding — increase 1,757,642
Unearned premium reserve — increase 11,351,822
All other claims — decrease 2,858,179
Actual expenses paid 72,506,480
Profit, 8.61 % of premiums 16,941,083
$199,391,045 $199,391,045
[454]
Fire Insurance, Expenses, Profits, Problems 25
five years, 1899 to 1903, inclusive.
Premiums, Fire, Marine and Inland, five years $826,267,908
Losses paid, Fire, Marine and Inland, five years.... $474,652,961
Losses outstanding — increase 4,458,502
All other claims — decrease 638,724
Unearned premium reserve — increase 49,542,358
Act lal expenses — five years 309,080,132
Loss, 1.31 % of premiums 10,827,321
$837,733,953 $837,733,953
These tables deal with the underwriting department of the
business as distinguished from the investment side of the business.
It will be noticed that the underwriting profit for 1903, the period
covered by the first table, amounts to $16,941,088, or 8.60% on the
premiums of $196,532,866. This covers a period of exceptional
prosperity. The second table covers a period of five years, 1899 and
1903, inclusive. Here it will be observed, that the loss amounts to
$10,827,321, or 1.31% on the premium income of $826,267,908.
From this it will be seen that the profit and loss fluctuations of the
fire insurance companies reporting to the New York department are
very marked in the period of five years. Despite a profit of 8.61%
in one of the five years, the account for the total period shows a loss
of 1.31%. In computing the dividends earned upon the capital
invested, only the American companies can be used, because the
foreign companies are represented in this country by branches;
therefore, we have no means of determining the proportion of the
foreign companies' dividends which should be credited to American
business. The average number of American companies reporting
to the New York department during the five years was 116, and the
average dividend on the capital was practically eleven per cent.
From this, it will be seen that for the five years, the companies lost
on a trade profit basis 1.31% on the premium income, while the
dividends paid amounted to eleven per cent. These dividends were
largely earned by the money which the State compels the companies
to hold, in order to make their indemnity unquestionable. This is
not a very large profit when all the risks written are taken into
account. The risks in 1899 amounted to $17, 79 7, 5 7 2, 061, and in 1903
to $22,007,442,608. Take the year 1903 when the companies had
$22,007,442,608 at risk and had a capital of $56,102,875; for each
[455]
26 The Annals of the American Academy
dollar of capital they had $392 at risk, which is a large hazard when
it is taken into account that a few conflagrations would not only-
use up all the surplus which the companies have accumulated, but
would also cause the retirement of many companies.
Taken upon this basis, 11% dividends do not seem to be an ex-
cessive return for the hazard to which the capital employed in the fire
insurance business is subjected. It is urged, however, by those
who estimate the fire insurance business a veritable gold mine, that
the companies are piling up an unnecessary and useless amount of
money in the surplus fund and that their claim that this accumulation
of surplus is justified by what is termed the conflagration hazard,
is unwarranted. It is said that conflagrations are of rare occurrence.
Away back in the seventies, there was a conflagration at Chicago
and another at Boston, but a gentleman, writing upon the subject
of insurance last year, soberly stated that there was not much likeli-
hood of a recurrence, owing to the largely improved fire fighting
service of the country. It is urged that the provision against the
possibility of conflagrations is simply a subterfuge on the part of
the companies to accumulate large funds and thus have an excuse
for not reducing rates. Some of these criticisms had scarcely been
made public, before along came the Baltimore conflagration and upset
all theories which attempted to reason that the day of conflagrations
had passed.
It might be observed that the stockholders of some of the com-
panies well known to-day were obliged, after the Chicago and Boston
fires, to go down into their pockets and practically recapitalize the
companies in order that they might continue as going institutions.
In other words, the stockholders had to make from fifty to one
hundred per cent, contributions in order that their companies might
continue in business. The Baltimore conflagration and the subse-
quent investigations into the conflagration hazard of some of the
large cities has revealed the fact that instead of the Baltimore con-
flagration being out of the ordinary, the wonder is that it did not come
sooner and that the companies, in view of the great hazards in the
congested centers of the country, have not made undue provision for
guarding against conflagrations. When a company is compelled to
pay a million dollars on account of a single fire, there is a good reason
for the accumulation of large surpluses as a safeguard against
conflagration losses. In the investigations into the conditions
[456]
Fire Insurance, Expenses, Profits, Problems 27
existing in our large cities, in addition to the officials of the National
Board of Fire Underwriters, the United States Government partici-
pated through one of its specialists. In reporting upon the con-
ditions at Pittsburg, this gentleman, after careful investigation,
endorsed all that the fire underwriters have been saying in regard
to the hazard to which they are subjected in the large cities, in their
work of distributing the fire loss of the country. This cannot in any
way be termed partial or biased evidence. It is evidence of a dis-
interested observer.
There is still another phase of this question of profit of the fire
insurance business. In computing the dividends from the figures
given in the report of the New York insurance department, only the
going companies are included. No account is taken of those com-
panies which have found the heat of the fire insurance business so
great that they have been compelled to retire from the field. Now,
in determining the profit of the business, account should be taken
of the capital which has been forced out because of lack of profit.
The two tables given herewith are very instructive upon this question
of profit. These tables simply cover American companies, because,
as has been said before, there is no capital basis for American branches
of foreign companies. The tables cover a period of twenty-five
years, beginning with 1878 and ending with 1903. In these tables
are included, as going companies, several which, since the beginning
of 1903, have been forced out of business by the losses sustained at
Baltimore. These tables show at a glance how capital has been
forced out of the fire insurance business. The first column of each
of these tables shows the companies which were in business and re-
porting to the New York insurance department, January 1, 1878.
The first section of the second column shows the small number of
companies which have survived the test of twenty-five years. The
second portion of the second column shows the companies which
have come into the business since 1878 and are still in. The third
section shows the companies which have come into the business since
that date and have retired during the period.
[457]
28
The Annals of the American Academy
NEW YORK COMPANIES IN AND OUT SINCE 1878.
Adriatic
American Exchange
American Fire
Atlantic
Agricultural
Albany
Broadway
Brooklyn
Buffalo
Buffalo German
Citizens'
City Fire
Clinton Fire
Commercial Fire . . .
Commerce
Continental
Duchess ■
Eagle Fire'..?
Emporium
Exchange Fire
Empire City
Firemen's
Firemen's Trust
Franklin
Firemen's Fund
Guardian
Gebhardt
Globe
German-American
Germania
Glens Falls
Greenwich
Hoffman
Hope
Hamilton
Hanover
Home
Importers and Traders':
Jefferson
Knickerbocker
Kings County
Lafayette
Long Island '.
Lor ri lard No. I
Man hat ta n No. 2
Mfrs. and Builders'
Mechanics' Fire
Mechanics and Traders'.
Merchants'
Montault
National Fire
New York Bowery
New York and Boston..
New York City
New York Equitable
N. Y. Produce Exchange
Northern
Nassau
New York Fire
Niagara
North River
Park Fire
People's Fire
Pacific
Peter Cooper
Phenix
Relief
Republic
Resolute . .
Stuyvesant
Safeguard . .
St. Nicholas
Standard . . .
Star
Sterling
Watertown .
Westchester
Williamsburg City
Survivors January r, /004V
Agricultural 500i000
Albany »5o.oo»
Buffalo German 200,000
Commerce 200,000
Continental 1.000,000
Duehess •• 200,000
Empire City ,00,000
German-American 1,500,000
Germania 1,000,000
Glens Falla «oo,ooo
Greenwich ,0*000
Hamilton 150,000
Hanover 1,000,000
Horae ••«■ 3.000,000
Kings County aoo.ooo
Nassau , <oo,ooo
New York Fire 200,000
Niagara soo.ooo
North Rivet 150,000
Pacific ioo.000
Peter Cooper 150.000
Phenix % ,000,000
Rochester German aoo.oos
Stuyvesant 200.000
Union , 100,000
United States 750,000
Westchester 300,000
Williamsburg City 150,000
.13,700,000
Companill organised sinct Janutry
1, 1S7S, and still in business.
Assurance Co. of Am... $400,000
British- American soo.ooo
Buffalo Commercial .... 100.000
Caledonian-American . . . soo,ooo
Colonial Assurance soo.ooo
Commercial Union 200,000
Commonwealth 500,000
German Alliance 400,000
Globe and Rutgers 404,000
Indemnity 200,000
Lafayette No. a 200,000
L. L. and Globe aooA»o
North B. snd M «oo,ooo
Northern SSo.oos
North German soo,ooo
Pelican . soo.ooo
Queen $00,000
Victoria 200.000
$4,850,000
Capital now in force. .$18,550,000
Companies organised since. ll;S cud
out before 1004.
Alliance |aoo,ooo
Armstrong Fire 400,000
City Fire Assurance 200,000
Eastern aoo.ooo
Empire State ... aoo,ooo
Fire Association 300,000
Franklin and Emporium. 200,000
Ins. State of New York. soo.ooo
International Co. No. 2. aoo.ooo
Liberty 800,000
Lincoln 200,000
Magdeburg 200,000
Manhattan No. 3 250,000
Mercantile Fire 200,000
National Standard ... 200,000
New York Central 100,000
Norwood 000,000
Prudential soo,ooo
Re- Assurance 200,000
Thuringia 200,000
Traders' 200,000
Washington No. J 200,000
$5,250,000
■ 3.853.000
Capital out $19,103,000
[458]
Fire Insurance, Expenses, Profits, Problems
29
NON-STATE COMPANIES IN AND OUT OF NEW YORK
SINCE 1878.
[459]
30 The Annals of the American Academy
Taking the table of New York State companies first, it will be
noticed that there were ninety-two companies in business at the be-
ginning of 1878. Of these twenty-eight were in business at the begin-
ning of 1904. Forty companies have been organized since 1878, of
which number eighteen are still in business. This gives total retire-
ments since 1878 of eighty-six companies, with a capitalization of
$19,103,000. The second table shows non-state companies reporting
to the New York insurance department. Ninety-four companies
were doing business in New York at the beginning of 1878. Of these
fifty-eight remain, while thirty-six have gone out of business. Sixty
companies have entered the State since 1878, of which ten remain.
Eighty-six companies, in all, have been in New York during the
period and are now out, representing capital amounting to $23,305,-
000. The total capital of companies reporting to the New York
department which have gone out of business in the past twenty-five
years is $44,408,000. Against this is to be placed the $56,102,875
of capital now represented in the State of New York. Any fair
consideration of the profit question must take into account this re-
tired capital. These companies went out of business because it was
not profitable to remain in the business. If 1 1 % be considered a fair
profit on $56,102,875 of capital now engaged in the business, what
shall be said when the capital is increased by $44,408,000 which has
gone out, making the total $100,510,875 of capital which has been
engaged in the insurance business during the twenty-five years. It
is impossible to figure out just where this would place the dividend
question, because it is not possible to here compute the length of
time that each of these companies did business. Sufficient, however,
is the fact that about three-fourths as much capital has gone out
as still remains.
Farther evidence along the line of profit is to be had in the fact
that during the marvelous industrial expansion of the past few years,
a very small amount of money has been put into the insurance busi-
ness. A very large amount of capital which has been invested in
industrial enterprises did not begin to earn 11% dividends. If the
business has been so marvelously profitable, capital would have
engaged in the business because capitalists are always looking for
investments which will earn large dividends with the minimum
amount of hazard. Only a few million dollars at the outside have
been invested in the fire insurance business in the past five or six
[460]
Fire Insurance, Expenses, Profits, Problems 31
years, while several enterprises have been floated with a capitaliza-
tion exceeding the entire capitalization of all the American fire
insurance companies reporting to the New York insurance department.
The evidence seems all to tend to the support of the proposition
that the fire insurance business has not been and is not unduly
profitable to the capital engaged in it. It farther appears that the
surpluses which the companies have been accumulating as a bulwark
against conflagration waves are not to be considered in any sense a
withholding of profits which belong to the public by reason of undue
prices. On the other hand, these accumulations of surplus appear
to be what they are claimed to be, simply a wise precaution on the
part of the men managing the corporations to insure that the indem-
nity they sell shall be worth under all circumstances what it purports
to be. Had the fire insurance companies reporting to the New York
insurance department distributed their surplus down to an amount
which would have been proper in a less hazardous business, many of
the companies would have been forced out by the Baltimore con-
flagration. Farther evidence of the wisdom of this accumulation of
surplus may be found in a comparison between the number of com-
panies forced out of business through the Chicago and Boston fires
and the number forced out through the Baltimore conflagration.
In the earlier days, the companies operated with a smaller surplus,,
and, as a consequence of insufficient safeguarding, they were unable
to stand the strain of a great fire. The managers learned a lesson
from those fires and so were in much better position to weather the
fire of last winter.
As was stated in the beginning of this paper, what the public
desire in the matter of fire insurance indemnity is unquestionable
value. Were it otherwise, business could not be conducted, because
the fire insurance policy enters into almost every transaction of any
importance in this country. As between lower rates and value, there
is scarcely any business man in the country who would hesitate about
choosing value. He may think from a cursory examination that he
is paying too much for his indemnity, but he would rather pay more
than less if the less lessened the value. The companies are striving
to reduce the expense of transacting the business, but such reduction
is difficult to effect and it is not probable that any very large reduc-
tion can be expected in the immediate future. Capital is entitled
to a fair remuneration for its use and the risks to which it is subjected,
[461]
32 The Annals of the American Academy
and taking the capital which is in the business and which has been
forced out of the business, through lack of profit, and the farther fact
that capital is very slow to engage in the fire insurance business at
present, it cannot be fairly claimed that the profits of the fire insur-
ance business are unduly large. The business is of wide scope, and
the man in the border sections of the country has the privilege of
buying insurance at home just the same as the man in the large
centers. Taken by and large, with all its shortcomings, with all its
problems, with all the hazards covered by it, the growth and
development of the fire insurance business is one of the striking fea-
tures of American finance, and has contributed more than can be
enumerated in a paper like this to the general prosperity of the
country.
F. C. OviATT.
Philadelphia, Pa,
1462]
THE TRUE BASIS OF FIRE INSURANCE
In a recent number of The Annals, the undersigned sought to
show that "Underwriting profits such as are insisted upon by the
insurance companies are in the nature of extortion. " In support of
this assertion, the condensed Income-and-Outgo account of the Amer-
ican fire insurance companies reporting to the Insurance Commissioner
of Connecticut was, inter alia, cited from this official's public report.
The figures quoted were those actually sworn to and presented by the
companies themselves. Yet they were referred to by an organ
representing the fire insurance interests, in this wise : " He (the author)
has tried to assimilate the Connecticut Fire Report for the present year,
but his maldigestion has produced the following astonishing net
return, which shows a profit so large that even the sellers of certificates
in gold mine probabilities could not duplicate it:" (Here followed a
reproduction of said Income-and-Outgo account.)
The astonished apologist whose words have just been quoted goes
on to say that "the experience of all companies with assets of
$1,000,000 or over" during "the year 1898 showed an underwriting
lossofii%; 1889,13!%; 1900, 4i%; 1901, 4i%. The balance for
1902 was in the companies' favor, showing an underwriting profit of
a fraction over 4%."
Let us look at the results of the operations of the Joint Stock
Fire Insurance Companies doing business in this country, and let us
deal with those very same years when the "million dollar com-
panies" saw such hard times. Yet first, let us remember the favorite
trick, exemplified above, of the Fire Physician : it is his habit to play
upon your relative ingenuousness, and whilst you, in broad general
terms, talk of fire insurance "business, " he will discuss mere "under-
writing. " Very carefully does he insist on this casuistic distinction
between "underwriting" and the other uses of money furnished by
the assured ; for it is in this distinction that he finds your undoing.
You would not seek long for the retort destructive, if an innkeeper
talked of his "losses" in a vein such as this: "With few exceptions,
every meal I serve has meant a loss — in fact, I shall have to raise the
price of meats 25% to every guest. However, the glass of beer
will continue to be sold at 10 cents. " You would know that because
[463]
34 The Annals of the American Academy
his till is full of money from meals on which he makes but 10%, he
can pay cash for kegs of beer on which he makes 300%. Just as
illogical is it for the fire insurance companies to say: "with few ex-
ceptions, every time we do any underwriting we do so at a loss. In
fact, we must raise rates 25%. However, our loans on first lien
mortgages will not be dearer. "
That these words of the underwriters may be viewed in all their
sophistry, it should be remembered that the premium paid in by the
assured is used for many purposes other than mere underwriting.
You, the assured, pay a million dollars to the insurers, and, in return,
receive promissory notes (called policies) collectible in certain con-
tingencies. What happens to that million dollars? Does it lie
dormant and unproductive? Patiently useless, waiting on con-
tingencies, which make it refundable? Not for a minute! It goes
immediately into real estate, loans on collateral security, "brisk
sales on the advance," commercial paper, call money, usury, and
other forms of banking — in fact, into the various channels in which
clean, liquid gold can flow with profit. However, all these channels
for gold have no direct connection with fire or "underwriting," and
though these secondary uses of this aforesaid million dollars of pre-
mium-money may produce a hundred thousand dollars per year,
this usufruct will be masquerading as "investments," and will be
invisible in the accounting of your mere premiums. Further, if
you, the assured, have been unwarrantably overcharged, so that the
great bulk of your premiums is still intact when all your fires have been
paid for, the overcharge will not be carried over to the credit of next
year's "underwriting" account; no, henceforth and forever, it figures
entirely in the surplus funds, its employment swells the ' 'investment"
account and that, too, is unconsidered on the day when the guileless
policyholder asks whether his premium bills are not much too high.
Some apologist or other merely tells him of the "underwriting"
results and asks him to reflect in apologetic humility upon the "under-
writing" profit "of tW of 1% for the last 10 year period." For
the kitchen accounts have nothing to do with the bar !
To return to those niggardly years beginning with 1898; and
let the ipse dixit of the Superintendent of Insurance of the State of
New York appear.
The Fortieth Report shows "the nature of the receipts" of the
Joint Stock Fire Insurance Companies "of the United States and
[464]
The True Basis of Fire Insurance 35
United States branches of Foreign Fire Insurance Companies of other
countries authorized to transact business in this State, for the year
ending December 1, 1898. " These receipts are tabulated upon pages
XCV to C of this Report. The various amounts of income are correctly-
counted, in accordance with the first rules of elementary arithmetic,
and the Superintendent of Insurance gives us the resultant "Total
receipts in cash. " Since then he has given us every twelve-month
the corresponding figures for succeeding years. By plain copying
from each of these consecutive reports, the following table is obtain-
able:
"Totai, Receipts in Cash."
Year 1898 $139,209,525
1899 146,644,663
1900 158,289,098
1901 175,588,073
1902 221,165,307
1903 213,695,274
Total for the period $1,054,591,940
In just the same way, the very next tables in each of these re-
ports show the "Nature of the Disbursements." Each of the main
items is given and then the report, still adhering strictly to elementary
arithmetic, gives the "Total Disbursements." So that, again, by
plain copying the following table is obtained:
"Totai, Disbursements."
Year 1898 $131,558,044
1899 150,662,824
1900 155,102,232
1901 163,907,522
1902 177,791,164
1903 182,218,555
Total for the period $961,240,341
As will be shown presently, the balances of shipments of money
between offices here and the home offices in Europe are not included
in the above disbursements. These balances add about $10,000,000
more, bringing the total disbursements for the years given up to
$97 1 , 240, 34 1 . If we compare these amounts, we find that the ' ' Total
receipts in cash" have been in excess of the "Total Disbursements"
for the last six years, 1898- 1903, inclusive, by more than $83,000,000.
[465]
36 The Annals of the American Academy
With absolute impartiality, the Superintendent of Insurance
for the State of New York, has merely reproduced the individual
sworn reports of the several fire insurance companies themselves,
each giving under oath "a just, full and true statement of the affairs
and condition" of each company on the 31st of December of each
year. 145 Joint Stock Fire Insurance Companies are represented in
the aggregate of 1903.
In order to understand the full value of these results one must
see what items are comprised in these ''total receipts in cash" and
"total disbursements." For purposes of illustration the last year
(1903) is taken. From page C (Recapitulation) and CVI (Recapitula-
tion) we gather the following totals under the several heads :
income
Premiums written $196,532,867
Interest and dividends 11,581,031
Rent 1,371,564
From other sources 4,209,811
Total income $213,695,273
OUTGO
Losses $96,834,017
Commissions 41,888,572
Officers' salaries 12,035,013
National, State and local taxes 5,474,157
DIVIDENDS 7,124,425
Other disbursements 18,862,371
Total disbursements $182,218,555
To this Outgo there should be added the profits of the Foreign
Insurance companies, represented by the "balance of remittances to
and from Home offices" in Europe. This sum was about $3,000,000,
and corresponded to the dividends of American companies, although
it became dividends only after reaching London and other home
cities. Adding this amount to the dividends, we get the "total dis-
bursement," $185,218,555, and an excess of income over disburse-
ments of every kind amounting to $28,476,718 for the calendar year
1903. By reference to page LXXIII of the same report (New York
[466]
The True Basis of Fire Insurance 37
State 45th Report), it will be seen that the "paid-up capital" of the
American companies together with the "net assets or U. S. capital"
of the Foreign Companies amounted, in the aggregate, to less than
$80,000,000. So that, despite the fact that 30% of the total dis-
bursements went to "commissions" and "officers' salaries," these
companies distributed over 12% dividends on the aggregate capital
and carried forward an extra 35% on the whole capital invested in
the business! These last six years, then, four of them "starvation
years" produced $83,000,000 of excess income over disbursements —
104% on the entire cash capital, and that, after deducting yearly
over 1 1 % for dividends and fabulous sums for commissions and other
wild extravagance !
It is no answer to such accusing facts to be told that many
companies lie in their graves: some were smothered that the sur-
vivors might claim a bigger share of the monopolized spoils; others,
conceived in indignation and born in anger, were bludgeoned in their
frail infancy; more were choked by their excessive greed, eating
poisoned fruit ; and still more disappeared, bled to death by faithless
servants. Diamonds, to-day, given the cost of production, are
extortionately dear, though hundreds of mines succumbed to the
Beits and Cecil Rhodeses. So it is with fire insurance.
The average business man, if given time and opportunity fur-
ther to analyze the various items composing the "total disburse-
ments" of the fire insurance companies under review, would be
dumbfounded on seeing the mountain of extravagance, of needless
and crying waste displayed year after year. He would be amazed
to find that conditions which long ago called for a remedy of an im-
mediate and radical character have been perpetuated and aggravated
until to-day they are worse than they ever were. The result is seen
in the fact that in 1903 the average cost of fire insurance in the United
States was much higher than at any time in the preceding half cen-
tury. And the burning shame of it all is, that all the waste, all the
extravagance, all the greed and folly, all the incendiarism and criminal
negligence has to be paid by the honest, the vigilant and the diligent,
who do not, and cannot afford to, burn down.
Will conditions improve as far as the public is concerned?
Whilst matters are worse to-day than ever before, there is as yet
no indication that the necessary radical and sweeping changes which
alone can bring alleviation, if not a remedy of the evil, will spring from
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38 The Annals of the American Academy
the companies themselves. Who among them should seek a change?
The stockholders? $10,000,000 dividends last year, plus $28,000,000
added as a surplus. The management? "Officers' salaries,"
$12,000,000. The brokers? $42,000,000 for "commissions." The
hangers-on? $19,000,000 for "other disbursements." Looking
from their point of view, does any sane man believe that the guests
at this Gargantuan feast are going to work for a Lenten fare just to
benefit the business man? Why, it would be utterly unbusiness-
like, wildly chimerical, absurdly altruistic for them to do anything
of the kind. The last thing that the fire insurance companies will
do will be to write a 1 for every 3 in the disbursement column. Why
should they grow perturbed about the outgo? The public always
foots the bills! Is it Baltimore you think of ? Now that all the
policies have been honored and paid for, the total loss thereunder is
less than $30,000,000. The stockholders have had to disgorge last
year's surplus and may be asked to get along with a beggarly 6%
dividend for this year, but in the meanwhile they are buying some new
traps to catch back all the loss ; and catch it they will !
Is there anyone knowing the actual conditions of fire insurance
and of our cities throughout the country, who can honestly aver that,
given a sincere desire on the part of the companies they could not
halve the insurance bills of the country? If they seriously contem-
plated such a reform, could they not, for instance, rid themselves of
that vampiric horde that exclaims, "You must do business in our
State through us, and us only, and our charge is $42,000,000 per
year?"
No one, too, who has considered the subject dispassionately
can doubt that if the heads of the insurance companies chose to
adopt forceful, intelligent measures, strictly within their legal and
constitutional rights, they could, by concerted action, within a
reasonably short time, so far remove the causes of fire and its exten-
sion as to make the chance of conflagrations exceedingly remote,
and the yearly fire loss of the country less by a half. For instance,
if only half of the $42,000,000 which was squandered last year
(mostly to renew policies, which would have been renewed anyhow)
had been devoted to improving inspections and to the thorough
cleaning-up of risks, every cent thereof could have been saved in
reduced fire loss, immediate and deferred. As it is, the inspection
of the Joint Fire Insurance offices, in innumerable instances, are of
[468]
The True Basis of Fire Insurance 39
a solemnly farcical perfunctoriness only comparable to the inspec-
tion of trunks passing through certain of His Majesty's Customs !
Whilst dozens of glaring and startling deficiencies in such "thorough
inspections" could be cited from casual personal observation, the
following excerpt from this year's "Report of the Insurance Com-
missioner of Connecticut" (39th Report, page XXIX) is official.
W;th reference to bad conditions discoverable, one reads: "For
example, in inspections made last year of 83 buildings, all contiguous
in one of the largest cities, 17, or about 20%, were found to be in
such dangerous condition that it was necessary to serve notices on
the occupants that same must be remedied at once." Again, the
Report of the Fire Insurance Patrol of the City of Philadelphia,
for the year 1903, says (page XI): "During the year, the Patrol
added to its work an Inspection system to cover the congested dis-
tricts; work was commenced November 10 ; * * * many defects were
found ; * * * As a matter of interest to our members some of these
defects are mentioned :
"Gas stoves, showing fire under same, 152; gas leaks, 16; gas
brackets, swinging, showing fire marks, 56; gas jets, not properly
guarded, 78; gas jets, close to stock, 85; gas bags for gas engines,
defective, 2; Bunsen burners, showing scorched woodwork, 6; saw-
dust under lighted gas stoves, 2 ; and numerous other defects arising
from improper use of gas. Broken windows, 590; steam pipes,
defective, 75; steam pipes contact with stock, 72; rubbish on steam
pipes, 63 ; there were also numerous defective flues, bad arrangement
of steam pipes, electric lights, open grates, stoves, heaters, etc., etc. ;
also many cases of hot ashes in wooden boxes, rubbish, and general
bad policing of risks. "
Immediately preceding the paragraph just cited are these words :
"During the last five years the results in this district (Congested Dis-
trict) show that 42% of the loss of the whole city occurred there,
* * * while but 25% of the premiums came from there * * * These
figures, of course, show a heavy loss for the period. "
Here is a small district of Philadelphia that for at least five
years shows "a heavy loss, " "42% of the loss of the whole city, " and
yet, "work was commenced on November 10" (1903) and, in a few
days hundreds of dangerous fire-inviting conditions are discovered
right in the heart of the conflagration district!
When these things happen under the very noses of the fire officers,
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40 The Annals of the American Academy
it is easy to understand why conditions of the gravest danger are to
be found at remoter distances, to the constant peril of the community
and for the perpetuation of inordinate fire bills.
The fire insurance officers could insist on profits due to fire
prevention, but, in the main, they choose to make money by per-
mitting big losses and raising rates afterwards. As is their inspection
of cities, so is their inspection of men. Do they shun a man who,
heedless of his own danger and scornful of the perils to his neighbors,
refuses to adopt the most elementary rules of safety? Do they com-
pel him to protect his premises and its contents? Seldom; and then,
in a half-hearted fashion! As a rule, conditions which invite fire
and render its spread almost certain cost sometimes less sometimes
no more, sometimes but a little more than conditions which render
the spread of fire almost impossible.
Every underwriter knows that science long ago gave us auto-
matic devices, unfailing in action, whereby a flood of water auto-
matically plays upon a fire breaking out anywhere in a building,
effectually preventing its spread and often extinguishing the flames.
These devices are so cheap that equipment companies will install
them free of extra cost to the insured. Were the owners of warehouses
and stocks in Baltimore, where values under single roofs ran into a
million dollars without being thus protected, refused insurance
because of obvious negligence so inexcusable as to be criminal in
its shortsightedness? Not at all. Was this wholesale district,
peppered with dozens of instances of such foolhardy recklessness,
placed under a ban, compelled by utter inability to procure insurance,
to install automatic fire extinguishing appliances? Not at all.
No more than they are in dozens of cities that can be named. Due
notice, followed in the event of general apathy by one emphatic
"No insurance to offer" all along the line, could have compelled
Baltimore, inside of a year, to make itself immune against sweeping
conflagrations. The refusal to accept the local premiums for a year
would have saved the companies and the public $30,000,000 in indem-
nity, and would have meant as a reward for a year's abstinence, a
profitable business for years after the ban had been removed.
It will be urged that such joint action could only be reached as
the result of conspiracy, punishable at law. By what process, for-
sooth, do a hundred fire offices in a city so stifle competition that
their uniform charge for insuring certain merchandise lying in a
[47o]
The True Basis of Fire Insurance 41
particular building is, say, $1.7639 per $100 — the price not varying
half a cent, though you rap at the doors of the hundred underwriters?
By conspiracy, of course. And conspiracy for obvious public
benefit could not be more reprehensible than for covert public pil-
lage. But the more dangerous the conditions, the higher the pre-
mium; the higher the premium, the greater the commission, and the
greater the scramble among the agents to induce their home offices
to issue dangerous policies. Apart from adequate inspections,
moral and physical, and the conflagration cure, is there anyone com-
petent to speak who believes that the losses due to isolated fires
could not be materially reduced by heroic remedies applied after a
fire for the purpose of preventing recurrences. For instance, fires
happen every year, in 500 school houses, 600 churches, and 1400
hotels, and yet the conditions which produce these fires are being
perpetuated. Why? In the greatest measure, because the fire
insurance companies contemplate such visitations with imperturbable
equanimity ! The losses come out of the pockets of those who do not
burn down. All that the brokers' principals do is to see that enough
people with property relatively immune against fire pay into the pool
enough money to refund the losses of those sure money-losers who
bribe heavily for admission to the same pool.
Yet, after all is said and done regarding the administration, it
is the system of insurance that, in the main, is defective. Born
long ago under conditions to which it was then far better adapted,
it has withstood the commercial revolution, the industrial upheavals,
and, as a whole, has stood unchanged, stubborn and unbending,
while the whole business world about it was being transformed.
Unless the ferment within is already at work producing changes not
yet visible outwardly, it looks as if the revolution in insurance
methods will have to be wrought through external agencies. Present
conditions cannot continue long after the business man realizes that
the figures in his insurance bills cover mostly disbursements for crim-
inal negligence and apathy, greed, incendiarism and a thousand pre-
ventable causes of fire and conflagration, and while the genuinely
unavoidable cost of fire could be covered for a tithe of what he now
pays. The whole business community is wretchedly served and
badly abused in its confidence ; it should work out its own salvation
and not wait to have it worked out by others. There is further-
more a large section of this same community that should seek special
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42 The Annals of the American Academy
relief because it can get special relief from this evergrowing burden
and abuse : it is that section which, besides being sound and upright,
financially and morally, has its property in such a condition that the
probability of fire is much below the average — the class of insurers
who do not burn down and who, under existing conditions, pay for
the losses of those who can afford to burn down, who do burn down-
in fact, pay the whole insurance bill of $200,000,000 a year. It is
that class of hotels, of newspaper plants, of furniture houses, of
breweries, of clothing makers, of hardware dealers, with the excellent
record who to-day are charged a "basic rate" by grouping them
with those who have the bad record and will continue to have fire.
What is to prevent the elect in these industries and a dozen more
from forming mutual fire insurance companies, membership in which
would be confined solely to persons engaged in the same industry,
known to each other as prosperous and of good character, with prem-
ises of a high standard viewed from the point of fire prevention, and
scattered widely throughout the United States? Such associations
would begin, preferably, by assuming but a portion of the risk of the
members, the remaining portion being insured through the old com-
panies. As the funds of such associations grew, the amount of the pol-
icies of the several risks could be gradually increased until in time
all the indemnity needed would be furnished. Space is lacking here
to show in detail how such a plan can be made most effective, to in-
dicate what difficulties will have to be surmounted, what safeguards
adopted, what antagonisms overcome. Yet certain principles are
fundamental to deserved success : the excellence of the mutual plan
must not be permitted to serve as a shield for the selfish efforts of
unscrupulous promoters and managers. Every plan, also, should
fix a limit upon expenses of management compatible with efficient
administration: 20% of the premium income should be ample for
this purpose. Another principle which must be closely watched
involves the indispensable scattering of risks, so that no two might
succumb to one and the same fire. To carry risks crowded into one
district or city is to invite disaster by a sweeping conflagration.
The chain of houses so formed should have one common industry
as a bond of union. The failure to observe these elementary safe-
guards has been the cause of the collapse of many a mutual company.
Given intelligent management and loyal co-operation among the
members, there is scarcely an industry in this country which cannot
[472]
The True Basis of Fire Insurance 43
form such associations for mutual benefit and thereby reduce its
present cost of its insurance 50 to 70%.
To many it will be a surprise that such associations have been
in existence on an extensive scale in this country for over fifty years
and have demonstrated that there is nothing visionary or imprac-
ticable about the plan of Mutual Insurance against fire loss. In
the year 1835, Zachariah Allen of Providence, R. I., organized the
Providence Manufacturers Mutual Fire Insurance Company. In
1848, the Rhode Island Mutual Fire Insurance Company was estab-
lished. These companies were associations of manufacturers en-
gaged mostly in the textile industries. To-day there are over thirty
of such companies with headquarters in New England and Philadel-
phia. True to their original intent, their membership is still con-
fined to mills and factories; some of these companies specially ex-
clude certain classes of .property whilst others admit them. In view
of their membership they are popularly known as the "Factory
Mutuals." These companies are banded into one association for all
purposes of common utility and for the greater economy of manage-
ment. Insofar as manufacturing properties are concerned, they
have been instrumental in revolutionizing insurance, and they have
developed the science of fire prevention to a degree of perfection
which, to the lay-mind, must be amazing. Although they will
insure nothing but mills and factories, although the consequent
inherent hazard of fire is admittedly greater than the general hazard
of the community at large, nevertheless they have succeeded in
furnishing their members with the soundest, yet cheapest, fire insur-
ance. They have done it by enlisting self-interest in the prevention
of fires. They have striven to anticipate fire rather than to cure it.
There can be no more eloquent tribute to the results thus obtained
by the Factory Mutuals than to say that the cost of their insurance is
but one-eighth of the average cost of insurance in this country last
year.
Individual company results still more brilliant than these could
be cited, but it is a fairer illustration of the system to indicate the
general results obtained. The joint business of these companies
for the last year obtainable is indicated below. Space is lacking for
more than this summary, as the whole subject is too big to be dealt
with, save specially. It should be remembered, however, that the
plan pursued by all these companies is to charge a certain equitable
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44 The Annals of the American Academy
premium on the issuance of policies, to debit this amount with its
proportion of expenses and losses, and then to refund to policy-
holders as "dividends" such portions of the full-earned premiums
as the respective Boards of Directors deem advisable to return.
1902.
Amount of insurance carried $1,253,358,000
Net premium thereon 9,688,956
Average gross cost of a policy for $100 (before dividends) 77$c.
Total losses incurred 979,741
" expenses incurred 617,954
" taxes paid 134,495
" disbursements 1,732,190
Dividends on premiums of terminated policies 7,343,261
Average rate of dividend of all companies 81 .45 %
Average net cost of a policy for $100 (after dividends) . ' 14 .35c.
These figures show that the average net cost of insuring the mills
and factories on the mutual plan was 14.35 cents per $100 in 1902.
By contrast, the average cost of insuring the general hazards of the
country under the system pursued by the Joint Stock Insurance Com-
panies was over 115 cents per $100 in 1902 and over 118 cents per
$100 in 1903.
The full significance of the startling disparity between these
results need not be indicated here. In the foregoing pages the reason
for such disparity has been partly shown. The lesson to be derived
from such comparative results should not go without practical applica-
tion by the best representatives of the mercantile community: if it
is possible and highly profitable for hosiery, shoddy, rubber, paper,
shirt, felt, carpet, hardware, silk, cotton and other kinds of mills and
factories to insure on the mutual plan for 14 cents per $100 per
year, why should this example not be followed by the most enlight-
ened and most intelligent members of the defrauded and plundered
mercantile community? If the mills and factories, by the introduc-
tion of common sense into fire insurance, can economize some fifteen
million dollars a year, why should these methods not be copied
wherever they are susceptible of application?
Walter C. Betts.
Philadelphia.
[474]
LIFE INSURANCE BY FRATERNAL ORDERS
Organization for mutual assistance is of great antiquity and wide
distribution. Societies of this kind have not always been as sharply
difierentiated as they are to-day. In common with other institu-
tions they have emerged from a comparatively indefinite similarity
to a comparatively definite heterogeneity, and have doubtless yet to
undergo further development.
The first systematic effort at mutual co-operation along altru-
istic lines was in the formation of the great trade guilds of the Middle
Ages. As the guilds degenerated and gradually outlived their useful-
ness, the need of substitute organizations became apparent. To
the recognition of this need we may trace the rise of the Friendly
Societies of Great Britain. Of these, it will suffice to consider a
typical specimen, for which purpose I have -selected the largest and
strongest, the Manchester Unity, I.O.O.F.
This great body, with a present membership of over a million,
is composed of and governed by the laboring classes. Local lodges
exist in all parts of the country and manage their own affairs in a
thoroughly democratic manner. They are as independent as the
New England town, being, like the latter, subordinate to a central
body of strictly limited authority, to which they send representatives.
In the local lodge itself one member is as good as another and dis-
cussion is perfectly free. The officers of the central governing body
are elected annually, with the exception of the Secretary, whose
tenure is permanent.
The founders of the Unity failed to appreciate the nature or
magnitude of the financial problems involved in their undertaking.
Although the plan of the society contemplated the payment of
definite sickness and funeral benefits, no attempt was made to cal-
culate adequate rates of contribution. Aside from the fact that such
a calculation would have been impracticable for lack of a sufficient
volume of reliable data, its importance was not recognized.
There existed in Great Britain the same feeling that we find
so prevalent in our own country : namely, that "Fraternity" could be
depended upon to overcome all the evil results of vicious business
habits. That Fraternity is capable of accomplishing much can be
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46 The Annals of the American Academy
doubted by no careful observer; but the tendency to regard it as a
panacea is sure, soon or late, to lead to disaster. This the Unity
learned in time by the teachings of bitter experience.
Organized in the year 1812, the Unity grew and flourished for
several years, because its rates sufficed while the members were all
young and mostly in good health. In fact, many of the lodges
became burdened with accumulated funds, of which they proceeded
to relieve themselves by exploiting the social virtues. They little
realized that these very accumulations formed their only safeguard
for the future when, on account of the increasing age and infirmity
of their members, the claims should become too heavy to be easily
satisfied from the proceeds of current collections.
After some thirty years of this loose, improvident operation, it
became abundantly manifest to some of the more thoughtful members
that the Unity had traveled far on the broad and pleasant road that
leads to destruction. Then began an agitation which threatened the
very existence of the society through the secession of individuals
and entire lodges, but which resulted in a thorough investigation
of its past experience and the formulation of adequate rate tables
for future use. With the adoption of these tables in 1854, the Unity
opened a new chapter in its history which thenceforth has been an
uninterrupted record of growth and prosperity. One more reform
needed to be, and was, instituted in the decade ending in 1870, by
which year quinquennial valuations had become compulsory.
The record of the Unity demonstrates that it is quite within the
capacity of the laboring classes to conduct a great business on dem-
ocratic principles. It is an object lesson which justifies a most
optimistic attitude toward future industrial conditions. As such,
it has attracted the favorable attention of the actuaries, economists
and legislators of Great Britain, all of whom seem to have recognized
the fact that they were confronted with a phenomenon of most
hopeful import. It is regrettable that a similar movement in this
country has received far less sympathetic treatment from experts
and officials. Some reasons for this difference of attitude will be
given later.
Before leaving the subject of Friendly Societies, of which the
Manchester Unity was selected as a type, some mention should be
made of the exhaustive investigation of their plans and circumstances
which was conducted between the years 1870 and 1875 by a royal
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Life Insurance and Fraternal Orders 47
commission. The report of this commission is in every respect a
model document, and the recommendations therein contained were
not only eminently practical, but were admirably calculated to assure
safety and permanence to institutions which had accomplished a vast
amount of good and had sinned chiefly for want of light. In 1875
the recommendations of the commission were incorporated in an act
of parliament which places the stamp of government approval on
such societies as take advantage of its provisions and comply with
its requirements.
In the United States, prior to 1868, there were no organizations
closely resembling the British Friendly Societies. It is true that
secret societies, such as the Freemasons and Odd Fellows, and trade
unions were accustomed to assist distressed members, but such work
was more or less incidental and not the main object of their existence.
Furthermore, the help so extended partook of the nature of charity;
that is, it was dictated by sympathy or fraternity instead of by con-
tract.
In 1868, however, John J. Upchurch, a Pennsylvania working-
man, founded the Ancient Order of United Workmen, in the plan of
which mutual insurance was dominant, although the features charac-
teristic of secret societies in general were by no means ignored. In
various centers in the State were organized local, self-governing
lodges which were entitled to send delegates to the grand lodge at
Meadville, the central legislative body, the elected officers of which
managed the financial affairs of the society and compelled obedience
to the by-laws on the part of the local bodies. In fact, the grand
lodge, although a representative assembly, was the real source of
authority, the self-government of the local lodge being based on
sufferance rather than on right.
As the society spread into adjacent States and additional grand
lodges resulted, the supreme lodge was organized at Meadville in
1 87 1, for the purpose of harmonizing the work. Its function is
advisory, rather than authoritative, the grand lodges having declined
to surrender their independence and having reserved the right to
repudiate their allegiance to the supreme body.
The rapid growth of the Workmen, indicating that it met a
popular want, of course inspired imitation, and to-day there are in
the entire country upwards of two hundred fraternal beneficiary
societies. They all have representative government, the lodge
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48 The Annals of the American Academy
system and ritualistic ceremonies ; in fact, these features are required
by the statutes of most of the States. In respect of benefits offered
and rates charged, they exhibit all the picturesque variety of which
the untrammeled human fancy is capable. That there need be any
particular relation between the respective values of the benefits
promised and of the contributions charged never seemed to occur
to the founders of these societies. In fact, all suggestions of that
nature were brushed aside as smacking of theory and, therefore,
unworthy of consideration by practical men who had competition
to meet and could guess just as clearly as their rivals.
In the seventies, a great impetus was given to the formation of
fraternal beneficiary societies by the failures of old-line life companies
and the startling disclosures as to the methods followed by some of the
most prominent among them. A description of these methods will
be unnecessary. They are fully set out in the reports of the Insurance
Departments of Massachusetts and New York, published in the
decade 1 865-1 875. Extravagance and mismanagement ran riot;
self-interest dominated official conduct and utter recklessness charac-
terized the investment of funds. There was a repetition in this
country of the methods adopted in England which disgraced and
demoralized the British Life Insurance business. In Martin Chuzzle-
wit they have been depicted for all time by the master hand of
Charles Dickens. Suffice it to say that the exposures, principally
by the New York and Massachusetts Insurance Departments, so
seriously affected public confidence in the life companies in America
that the business of the latter remained subnormal for years there-
after. In fact, it did not regain its former proportions until after
the passage of stringent inspection laws by several of the State legis-
latures.
The full tontine policy, now prohibited, but once common, by
which the lapsing member forfeited all surplus payments made to the
company over insurance cost and expense of management, was pro-
ductive of great dissatisfaction amongst those who had been com-
pelled by adverse circumstances to discontinue policies which had
often been kept in force for years, and to the credit of which there
were substantial reserve accumulations, to say nothing of deferred
dividends. To these disgruntled victims of old-line methods, the siren
voice of the fraternal beneficiary society was sweet indeed. Within
the sacred precincts of the lodge room they could denounce to a
[478]
Life Insurance and Fraternal Orders 49
sympathetic audience the "outrageous treatment" to which they
had been subjected by a "soulless corporation" and could resolve
to demonstrate to the world the possibility of combining the business
of mutual insurance with the practical exemplification of the golden
rule. The idea* was a noble one, albeit somewhat too elevated for
present-day human nature and insufficiently enlightened by a knowl-
edge of the cost of insurance,
To fraternalists the mathematical reserve on life policies has
always been a more or less unholy mystery. Having, in the old ton-
tine days, seen this accumulation confiscated in the case of lapsing
members, it was a natural inference that a similar course was followed
in respect of the dead. Obviously these millions of reserve bore a
sinister aspect and represented an unnecessary burden on the help-
less policy holder. Thus originated the popular battle cry of "Keep
your reserve in your pocket. "
For many years the societies remained true to their principles
and seduously avoided accumulation and only with the utmost reluc-
tance did they begin to abandon the practice under the irresistible
pressure of experience.
In the oldest societies, such as the Workmen, business principles
were at first completely subordinated to the demands of fraternity.
No discrimination was allowed because of age, occupation, residence
or physical condition — all members were on a perfect equality.
That such methods did not wreck the society before it was fairly
launched is conclusive proof that the fraternal tie is more than an
empty sentiment.
Slowly, but none the less surely, the faulty system of the Work-
men has been mended until now the supreme lodge urges with all
the force at its command the adoption of a plan prepared under
the guidance of a competent actuary. In other words, here, as in
Great Britain, the common people have demonstrated their capacity
to manage large enterprises on democratic lines. To one who has
the welfare of humanity at heart, few signs could be more encourag-
ing.
Few societies have imitated the Workmen's original example
of a uniform rate of assessment at all ages. We find the vast major-
ity adopting the system of rates graded to admission ages and remain-
ing level thereafter. Within a few years, a society so operated
would find itself composed of groups, corresponding to entrance ages,
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50 The Annals of the American Academy
each containing members of various ages paying the same rate.
In short, a compound Workmen plan had been substituted for the
original simple device, with little or no practical advantage.
Of one society, the National Union, special mention should be
made, because of the fact that it started on the step-rate principle,
the rates being graded by ages and each member being required to
pay the rate corresponding to his attained age. This plan was defec-
tive because of the fact that the rate schedule stopped abruptly at
age 65, no adequate provision having been made for members who
should pass that point. It is particularly gratifying to be able to
say that this weakness has now been overcome through the efforts
and upon the initiative of the members themselves.
In course of time, the older societies began to experience dif-
ficulties. In spite of their most strenuous efforts, they found them-
selves compelled to levy assessments more and more frequently,
with the result that they were unable to compete on equal terms
with their younger rivals. The latter, having learned something
from the experience of their predecessors, endeavored to prevent their
own future decay by every fantastic device that the wit of man could
conceive. Some of these were actually patented, which fact would
indicate that their inventors at least believed them to be effective.
A study of these various schemes to secure the advantages of a
mathematical reserve, without accumulating it, will convince any
unprejudiced mind that the ingenuity of ignorance is still in active
operation. Fortunately, the older societies do not find these vagaries
-attractive, but manifest a tendency to readjust along scientific lines,
with the assistance of expert advice.
An important distinction between the British friendly and the
American fraternal beneficiary societies should not be forgotten.
The main purpose of the former was and is the payment of sickness
and funeral benefits, and, although some of them offer ordinary
life insurance, the maximum risk assumed on any one life is 200
pounds. The American societies are essentially mutual life insurance
organizations, although some of them pay limited sickness and
accident benefits. The most popular certificates have a face value
of $1000 or $2000, but not infrequently they are written for $5000.
The foregoing distinction may help to explain why in the one country
the attitude of the actuaries is tolerant or sympathetic, while in the
other it is hostile. Practically all of these gentlemen are or have
[480]
Life Insurance and Fraternal Orders 51
been, connected with old-line companies, and have thus become
somewhat biased, perhaps unconsciously.
The British societies occupy a field of their own, their competition
with the business corporations being hardly perceptible. The
American societies, on the other hand, are active and most successful
competitors of life companies. Furthermore, the founders of the
fraternal societies provoked the experts by sneering at them and
ignoring their sometimes disinterested advice. At first glance the
situation would seem to be unfortunate, but the indications are that
it may result in the development of a new generation of actuaries,
unfettered by traditions.
The fraternal beneficiary system is now in its thirty-sixth year
and its amazing vigor is a source of perennial grief and astonishment
to its old-line enemies who regarded it at first with the kind of intol-
erant contempt that Alexieff used to display toward the Japanese.
It seems impossible for men to learn that there are more things in
heaven and earth than are dreamt of in their philosophy. The
Ancient Order of United Workmen which, by all the rules of ortho-
doxy, ought to have perished years ago, had, at the end of the year
1903, a membership of 435,015, carrying insurance to the amount
of $745,928,000. Only one society exceeds it in size.
It is evident that we are here confronted with a phenomenon
that defies mathematical analysis. The plans of the fraternal
beneficiary societies may be simultaneously abhorrent to mathematics
and acceptable to human nature.
The policy holders of an old-line company, even though it be
the mutual variety, are practically impotent to affect its management,
being without organization or knowledge of one another's ideas. As
few of them can attend the annual meetings, they usually designate
as proxies men of whom they never before heard, and of whose
opinions they are blissfully ignorant. They feel and are as helpless
as the depositors in a bank who place their trust in the honesty and
sagacity of the officers and hope for the best. This is business, pure
and simple, and to it business principles apply in all strictness.
The members of a fraternal beneficiary society are organized
in numerous local lodges which hold meetings at least once a month
and sometimes every week. Here the members become acquainted
and here they discuss every detail of their co-operative enterprises.
As the time approaches for the regular annual or periodical meeting
[481]
52 The Annals of the American Academy
of the supreme body, they elect thereto trusted representatives,
whom they may instruct if they so desire. There develops in these
members a very active feeling of proprietorship in their society
and of loyalty to its interests. It is, so to speak, their child, and they
will endure no inconsiderable sacrifices to conserve its existence. To
such a condition, business rules and principles are inadequate, as
they ignore the most vital feature of the phenomenon.
That the foregoing is the true explanation of the failure of facts
to verify actuarial predictions is indicated by another striking cir-
cumstance. About the time that the fraternal beneficiary move-
ment originated there were organized on the same faulty plans, but
with government similar to that of the old-line companies, a num-
ber of so-called assessment associations. Although their officers
were, as a rule, more keenly sensitive than those of the fraternals
to approaching dangers, yet, with a single exception, due to peculiar
conditions, every one of these associations has disappeared or has
been transformed into a legal reserve or stipulated premium com-
pany. As Carlyle would have said, "This is significant of much."
As a direct result of the lodge system, the societies minimize
the expense of field work. The members become voluntary solicitors,
without pay. They love and take pride in their organizations, and
believe that they render a genuine service to their friends by per-
suading them to join. A comparison of the respective costs of
management of the business companies and the fraternals is highly
enlightening. Thus, for the former, it is annually between eight
and nine dollars for each $1000 of insurance in force; while, for the
latter, it is less than one dollar.
If it be argued that lodge dues have been ignored in the com-
parison, the answer is that their main object is to pay for fraternal
features for which there is no counterpart in an old-line company.
Nor are these features imaginary. We find them sufficiently power-
ful to hold together vast societies like the Masons and Odd Fellows,
which do not pretend to conduct an insurance business. Millions
have been paid by the local lodges for the relief of members who
were sick, injured or out of employment. Other millions have been
expended in social entertainment, which is a feature not to be over-
looked when estimating what has been accomplished by these bodies.
I have noted, in many publications, slurs cast at this latter kind of
expenditure. Those who belittle the social feature evince ignorance
[482]
Life Insurance and Fraternal Orders 53
of one of the strongest points in favor of mutual insurance under the
lodge system. Life insurance, per se, is taken and carried for the
protection of dependents. No benefit is realized until the death of
the insured, and, consequently, he who carries and pays for the
insurance has no other satisfaction from it than that derived from
the consciousness that he has provided for loved ones in the event of
his death. Of itself, such a performance indicates a high and noble
purpose. Man owes a duty to himself, and when this can be com-
bined with that owed to his family, much has been accomplished
toward the consummation of a perfect system of social organiza-
tion. The lodge meetings not only provide the ordinary pleasures
of social intercourse, but under the influence of the teachings of the
ritual, they are an inspiration to higher ideals, and beget the altru-
ism that turns the mind outward and makes men wish to live for
others beside their own immediate families. This social feature of
the fraternities has saved thousands from drunkenness and other
forms of dissipation into which they otherwise would have plunged
in their blind quest of pleasure. Many of these societies accept mem-
bers of both sexes, and most of them absolutely bar alcoholic liquors
from their lodge rooms.
The combination of life insurance operation along with fraternal
and social relations is one that appeals to reason and sentiment and
tends to popularize co-operative effort for mutual protection. The
life companies have recognized this fact and have undertaken to
minimize its effect by representing that they sold policies under which
the insured did not "have to die to win."
The not unnatural desire of the policy holder to derive some per-
sonal benefit has been met by the business companies in the form of in-
vestment or endowment insurance, as well as by the promise of divi-
dends, the latter being simply such portion of his excess payment as
the company sees fit to return. Of endowment insurance it may be said
that it is an excellent refuge for the man who cannot trust himself
to make provision for his old age. The exceedingly wasteful charac-
ter of this form of investment has been by no one more scathingly
exposed than by President Greene, of the Connecticut Mutual Life
Insurance Company, a man who believes that the union of insurance
and investment is unsanctioned by nature.
In order to add to the attractiveness of dividend estimates and,
at the same time, to provide a huge fund to be used at discretion,
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54 The Annals of the American Academy
the business companies devised the semi-tontine or accumulation
policy, by which those who live to the end of the accumulation period
are to get magnificent returns, according to the estimates. Unfor-
tunately, actual results have always fallen far short of the estimates,
because, with so much money at their disposal, the companies could
not resist the temptation to indulge in extravagance. It is always
pleasant to spend the money of others, if one does not have to account
for it.
An important difference between the old-line and fraternal
systems is in respect of elasticity. The life company is rigid, the con-
tract being definite as to both benefits and contributions. For the
sake of safety, the company is, consequently, obliged to overcharge.
Some of this excess doubtless returns to the policy holders in the
shape of dividends, but as these are seldom guaranteed, the opportunity
for extravagance is obvious. Whether or not it is utilized may be
inferred from the fact that the companies make little or no effort to
sell non-participating policies, the premiums on which are only
moderately loaded for expenses. Some do not sell them at all. One
prominent stock company, which used to confine itself to the non-
participating form of policy has recently abandoned the practice.
Another large company, with a most enviable reputation for con-
servative and economical management, has of this kind of premium-
paying insurance in force only about $4,000,000 out of more than
three hundred millions.
In the fraternals the amount that a member will be required to
pay from year to year is seldom entirely definite. His assessment
rate may be established in the by-laws, but almost invariably these
are subject to amendment by the supreme legislative body. In most
of the societies the number of assessments that may be levied in a year
is limited only by the needs of the organization. Furthermore, it
is not unusual to find a provision whereby no claim can exceed the
proceeds of one assessment on the entire membership. As the pro-
vision for expense of management is generally quite definite, there
results not only the ability to collect each year the exact cost of pro-
tection, but a most effectual discouragement of extravagance. The
members have never shown a disposition to endorse the doctrine that
the services of some men are worth from fifty to a hundred times as
much as those of the average citizen, and, as a consequence, salaries
above $5000 are rare. Strange as it may seem to those conversant
[484]
Life Insurance and Fraternal Orders 55
with old-line conditions, capable officers are secured without dif-
ficulty, in spite of the uncertain tenure of their position. The wisest
selections may not always be made, but, on the other hand, the unfit
do not survive.
Democratic government naturally involves politics, and from
the latter it must be confessed that the fraternals are not exempt.
That this circumstance is to their detriment is by no means certain.
Political aspirations are distinctly honorable when not tainted with
graft. From suspicion of graft, the administration of the societies
has been singularly free. Although large sums of money have been
handled, the losses that have occurred have been due almost exclusively
to faulty judgment. Even such losses have been inconsiderable.
In fact, in respect of both honesty and economy of management, the
fraternals can well stand the test of comparison with old-line com-
panies.
Although enough has been said to indicate that the fraternal
beneficiary system is in harmony with existing conditions in the
United States, it will be useful to investigate its prospect of per-
manence. In the first place, let it be premised that the failure of
individual societies proves nothing against the principle upon which
they were founded if other adequate causes are known to exist. The
whole movement is still in the experimental stage, for which reason
alone uninterrupted success would be little short of miraculous.
Representative government has not in every instance proved equal
to the tasks imposed upon it, but it has shown an ability to profit
by experience. With few exceptions, the recent history of the
societies under consideration has been most encouraging. There is
every indication that the great majority of them will, through their
own efforts and without compulsion, so reform their faulty plans as
to assure their financial stability.
Unfortunately, the paternalistic tendency, which is becoming
more and more apparent in both State and Federal governments,
has so affected the various commissioners of insurance that they
are not content to let well enough alone, but must break the shell
to let the chicken out. Verily, a little knowledge is indeed a danger-
ous thing when the possessor thereof is a public official. At their
1903 convention, held in Baltimore, Md., the commissioners agreed
upon measures which, if carried into effect, would almost certainly
destroy the fraternal beneficiary system. It is difficult to avoid
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56 The Annals of the American Academy
the conclusion that they were influenced by either hostility or ignor-
ance. In this connection, how unfavorably do they compare with
the sympathetic, painstaking members of the royal commission that
investigated the British friendly societies.
On this subject I speak feelingly, because I believe that the
fraternals are beginning to solve one of the most important of indus-
trial problems and that their defeat through ill-advised legislation
would be little short of a public calamity. They should be required
to exhibit their financial condition in a more scientific manner than
has been customary, so that the accusation of deception may be
deprived of its plausibility, but we should hesitate to take from them
the right to establish such rate schedules as they wish. The members
are neither children nor imbeciles, and do not need the fatherly care
of insurance commissioners or State legislators. They enjoy the
advantages of representative government and have demonstrated
their ability to modify their plans when the latter have proven
unsatisfactory. They are attempting to provide cheap protection
for their families and they are accomplishing their design, not per-
fectly it is true, but with really amazing success. A single one of
these societies has since its organization paid in death claims not
less than $135,000,000. This enormous sum of money has gone to
the widows and orphans of men who would have carried far less
insurance or none at all had it not been for the existence of the
fraternals.
In the face of this fact there are not wanting critics with the
effrontery to assert that the societies are vicious institutions, because,
forsooth, they may fail some day or they may become too expensive
for old men who no longer have any excuse for being insured. Sup-
pose they do fail, as in the case of the American Legion of Honor.
The downfall of that society has hurt a mere handful as compared
to the numbers that have been benefited by its existence. As
fraternals have usually been operated, their failure does not involve
the loss of large accumulation, for these they do not possess. It
does involve, however, a very serious hardship to those members
who can no longer gain admission to other societies because of age
or infirmity.
Popular government has been sufficiently tested to justify my
belief that the fraternal orders will not fail, in the long run, if let
alone. They can be killed, doubtless, and against this danger the
[486]
Life Insurance and Fraternal Orders 57
only safeguard is eternal vigilance. Their success, as I have already
intimated, means much to the cause of humanity.
No thoughtful observer can regard our present industrial rdgime
as final. With its remittent warfare between capital and labor, it
is obviously a temporary condition. By what is it to be succeeded?
Shall it be the deadly stagnation of socialism, or shall opportunity be
lefx for the development of individualism which has played so prom-
inent a part in the history of the human race? Perhaps, if the great
business of life insurance can be successfully conducted on democratic
lines, the outlines of the answer may become discernible. Possibly
capitalists, as a distinct class, may become as unnecessary as an
hereditary aristocracy.
One may be permitted to indulge the dream that some day
capitalist and labor may be combined in the same person, and that
great industries may be competently managed by officers elected by
the whole body of the workers. There is nothing incredible in the
supposition, which is, on the contrary, in line with the course of
human evolution. Such a condition would allow free play to indiv-
idual ambition, while abolishing strikes and the existing abnormal
contrasts of wealth and social position.
Since reforms are inaugurated by movement of the masses,
and since five millions of the wage-earners and breadwinners in the
United States and ten millions in Great Britain are taking lessons
in economical science from the best of all teachers, Experience, is
it beyond reason to anticipate development of the mutual and co-
operative principle underlying fraternal society management in the
business relations between producers and consumers, the great ma-
jority of whom are the wage-earners and breadwinners of the
country.
To be more definite, let me call attention to the fact that the
insurers and the insured are the same persons in a fraternal Bene-
ficiary society. The officials and managers are strictly and truly
the agents of the members from whom the contributions are col-
lected and to the beneficiaries of whom they are distributed. No
capitalist stands between the contributing members and the de-
pendents of deceased members. Only a central office, with com-
petent agents in charge, is needed for the collection of millions
from the many and the distribution of the same in the payment of
promised benefits. Whv is it not possible to extend this principle
[487]
58 The Annals of the American Academy
of mutual cooperation and entirely eliminate the capitalist and for-
ever be rid of his exploitation of labor with its attendants of fric-
tion and ferment? Will not the masses, some day, learn the gen-
eral application of this principle ?
The fraternal beneficiary system has a profound significance;
it is symptomatic of the times, and what it needs is intelligent direc-
tion with a minimum of State interference. Any institution that
has distributed to widows and orphans, within three decades, the
enormous sum of more than seven hundred millions of dollars,
$63,000,000 of which was paid out in 1903, is certainly entitled to
serious consideration by those who make a study of political and
social science. One hundred and fifty of the existing societies
have promised to pay death benefits amounting to more than
six thousand millions of dollars. The ability to fulfill their
promises means much in more than four million of American
homes. Penury, misery and crime will result from inability^to
carry out their contracts of insurance.
Abb Landis.
Nashville, Tenn.
[488]
THE AMERICAN SYSTEM OF IMPROVING AND ADMIN-
ISTERING COMMERCIAL FACILITIES
In this paper the endeavor will be to collate the legislation of the
Federal and of the State Governments on the subject of commercial
facilities, and to discover, if possible, the general trend of legislative
activity.
The study of harbors, the connecting link between railway and
ocean transportation, becomes of increasing interest and importance
as foreign trade develops. Unless harbors are properly constructed
and efficiently regulated foreign trade is of necessity heavily handi-
capped.
Previous to the adoption of the Constitution the various
States regulated their commerce as so many separate nations, the
Federal Government having a merely nominal suggestive power.
Not only was there no uniformity in their legislation, there was
bitter antagonism, States endeavoring to enact laws to cripple the
commerce of other States. In the actual construction and equipment
of harbor and wharf facilities, individuals were left largely to follow
their own whims and desires. From such a condition of affairs there
has been a steady change, first toward more activity on the part of
the State Governments, and later on the part of the Federal Govern-
ment.
The Constitution gives Congress the power to lay and collect
taxes, duties, imposts and excises which shall be uniform throughout
the United States ; to regulate commerce with foreign nations, among
the several States and with the Indian tribes ; and likewise places the
following restrictions on the States : no State shall without the con-
sent of Congress lay any imposts or duties on imports and exports,
except what may be absolutely necessary for the execution of its
inspection laws ; and no State shall without the consent of Congress
lay any duty of tonnage. But these clauses of the Constitution, like
many others, meant little until interpreted by the Supreme Court,
and judicial decisions, in a series of cases from 1824 to 1884, were
necessary to establish an apparent understanding between the Federal
and State Governments in the regulation of rivers and harbors.
[489]
60 The Annals of the American Academy
Legal Decisions Distinguishing Between Federal and State Authority,
By the Act of March 19, 1787, the Legislature of New York
granted to John Fitch the sole and exclusive right of making and using
every kind of boat or vessel impelled by steam on all creeks, rivers,
bays and waters within the territory and jurisdiction of the State for
a period of fourteen years. John Fitch, it appears, failed to exercise
the extensive powers bestowed upon him, and, by a number of Acts
this right was transferred to Robert R. Livingstone and Robert
Fulton, changed only as to the time limit of the monopoly. By
these Acts the exclusive right was given them to use steam navi-
gation on all the waters of New York for a term of thirty years
from 1808. According to the laws of New York, any steam vessel
without a Livingstone and Fulton license was liable to seizure
and forfeiture if found within the waters of the State. Opposed
to this was a Connecticut law forbidding any vessel with such a license
from entering the State, and, according to a New Jersey law, if
the representatives of Livingstone and Fulton carried into effect by
judicial process the provisions of the New York laws, they exposed
themselves to a State action in New Jersey for all damages and
treble costs.
This law of the State of New York finally came before the
Supreme Court in the year 1824 in the famous Gibbons vs. Ogden case,1
and the decision was the entering wedge in the separation of State
and Federal authority over navigable waterways of the United
States. Because of its repugnance to that clause of the Constitution
giving Congress power to regulate commerce with foreign nations
among the several States and with the Indian tribes, this law was
declared unconstitutional, insofar as it prohibited vessels licensed
according to the laws of the United States from carrying on the
coasting trade, and from navigating the waters of the State of New
York. In other words, no State may exclude vessels of the United
States from her waters.
The next phase of the question was brought to light in the State
of Maryland. In 182 1 the Legislature passed a law that all importers
of foreign articles or commodities of dry goods, wares or merchandise
by bale or package, or wine, rum, brandy, whisky and other distilled
spirituous liquors, etc., and those persons selling the same by whole-
sale bale or package, hogshead, barrel or tierce should, before they
19 Wheaton 1.
[490]
American System of Commercial Facilities 61
were authorized to sell, take out a license for which they were to pay
$50. In 1827 the Supreme Court2 declared this law unconstitutional,
being contrary to the clause, "No State shall, without the con-
sent of Congress, lay any imposts or duties on imports and exports ;"
and also to the clause, "Congress shall have power to regulate
commerce * * *." That is, a tax on importers is a tax on and a
regulation of commerce and, therefore, unconstitutional.
The matter of registration was the next point to come before the
Supreme Court.3 In 1854 the State of Alabama passed a law
requiring the owners of steamboats navigating the waters of the State,
before a boat should leave the port of Mobile, to file a statement in
writing in the office of the Probate Judge of Mobile County, setting
forth: first, the name of the vessel; second, the name of the owner
or owners ; third, his or their place of residence, and, fourth, the inter-
est each has in the vessel. This law also was declared unconstitu-
tional insofar as it applied to a vessel which had taken out a license
and was duly enrolled under the Act of Congress for carrying on the
coasting trade and plied between New Orleans and the cities of
Wetumpka and Montgomery in Alabama. Special State registration
is an unlawful requirement of vessels engaged in coastwise trade.
The case of Foster vs. Davenport4 differed from the above case
in this respect only, that the vessel seized for non-compliance was
engaged in lightering to and from vessels anchored in the lower bay
of Mobile and the wharves of the city, and in towing vessels anchored
there to and from the city, and in some instances towing the same
beyond the outer bar of the bay and into the Gulf to a distance of
several miles, but was duly enrolled and licensed to carry on the coast-
ing trade while engaged in this business. The argument of the Court
being that lightering or towing was but a prolongation of the voyage
of the vessels assisted to their port of destination.
The next case5 dealt with the subject of taxation. In 1866 the
State of Alabama passed a revenue law fixing the rate of taxation for
property generally at one-half of one per cent., but on all the steam-
boats, vessels or other watercraft plying in the navigable waters of
the State, the rate was placed at one dollar per ton of the regulated
tonnage, to be collected if practicable at the port where such vessels
1 Brown vs. Maryland 12, Wheaton 419.
* Sinnot vs. Davenport 22, Howard 227.
* 22 Howard 244.
* Cox vs. Collector 12, Wallace 204.
[49l]
62 The Annals of the American Academy
were registered, otherwise at any other port of landing within the
state where such vessel might be. The vessels in question were
enrolled and licensed for carrying on the coastwise trade, but, as a
matter of fact, plied only on waters within the State. The Supreme
Court decided that although taxes levied, as on property, by a State
upon vessels owned by its citizens and based on the valuation of the
same, are not prohibited by the Constitution, yet taxes cannot be
imposed on them by a State at so much per ton of the registered
tonnage.
Vessels have long been obliged to pay pilotage whether assisted
to and from the harbors by pilots or not, and in 1855 the State Legis-
lature of Louisiana authorized the Master and Wardens of the Port
of New Orleans to collect five dollars from every vessel arriving at
the port, whether called upon to perform any service for the vessel
or not. But in 1867 the Supreme Court6 pronounced the law a regu-
lation of commerce and unconstitutional, since it was a tax levied
on all ships. It was further stated that the fees of the Master and
Wardens differed from that of the pilots, in that the pilot laws of
the States received Federal confirmation in 1789, and also that the
pilot laws rest on contract, i.e., payment for actual service.
The last important case of this series was that of Moran vs.
New Orleans.7 In 1870 the State authorized the city of New Orleans
"to levy, impose and collect a tax upon all persons pursuing any
trade, profession or calling, and to provide for its collection;" and
further added that this law should not be construed to be a tax on
property. Under the authority of this Act the city established the
following license : ' ' Every member of a firm or company, every agent,
person or corporation owning and running towboats to and from the
Gulf of Mexico, $500." Cooper was the owner of two steam pro-
pellers, each measuring over 100 tons, duly enrolled and licensed at
the port of New Orleans under the laws of the United States, to be
employed in the coasting trade. Upon his refusal to pay the license
judgment was obtained by the city and sustained by the Supreme
Court of the State. The Supreme Court of the United States, how-
ever, decided that the license was in reality a charge made under the
authority of the State for the privilege of employing vessels in the
manner authorized by the license of the United States and was, there-
fore, a restriction of commerce and unconstitutional.
•Steamship Co. vs. Portwardens 6, Wall 31.
M12U. S. 69. ,
[492]
American System of Commercial Facilities 63
This chronological review of laws and court findings is necessary,
in order to get some idea of the relation of the Federal and State
Governments in the control of vessels plying to and from our ports.
Vessels may be taxed by the State Governments, but such taxation
must be based on property value and be collected at port of registra-
tion. And no vessel licensed and enrolled under the laws of the
United States for carrying on the coastwise trade may be burdened by
any special registration, license, fee, or tonnage tax by any State.
The Constitution has been interpreted strictly, and the States are
limited in their taxation of commerce to what may be absolutely
necessary for the execution of their inspection laws.
Governmental Control of Pilots and Pilotage.
Pilots are largely under State control. Prior to 1789 most
of the States had adopted pilot laws, and these laws were early
confirmed by Congress8 in these words: "Until further provision
is made by Congress all pilots in bays, inlets, rivers, harbors and ports
shall continue to be regulated by the laws of the States wherein such
pilots may be or with such laws as the States may respectfully enact
for the purpose. " Friction soon arose between such States as Penn-
sylvania and Delaware, both of which have pilots competing for ser-
vice to and from ports on the Delaware River, giving opportunity to
vessels to discriminate between the pilots of the two States. This led
to a law of the United States requiring the master of any vessel
coming into or going out of any port situated upon waters which are
the boundary of two States to accept the first qualified pilot who-
offers his services, whether he be licensed in one State or the other..
The Revised Statutes of the United States (No. 4237) prohibit any
State from making any discrimination in the rate of pilotage or half
pilotage between vessels sailing between ports of one State and ves-
sels sailing between ports of different States. Revised Statutes (No.
4444) make it unlawful for a State or Municipal Government to
require pilots of steam vessels to procure State or other license, in
addition to that issued by the United States, or any other regulation
which will impede pilots in the exercise of their duties. Except for
these general regulations the control of pilots and pilotage is left
to the State and Municipal Governments. Taking Philadelphia
•Revised Statutes 4235.
[493]
64 The Annals of the American Academy
for an illustration, one of the duties of the Board of Wardens is to
license pilots and make rules for their government. There are
eighty-four pilots, half of whom are licensed by the state of Penn-
sylvania and half by the state of Delaware. They serve in turn,
first-class pilots taking vessels with draft of eighteen feet and over,
and the second-class pilots taking vessels of less than eighteen feet
draft. The rate of pilotage is fixed by law, twelve feet draft and less
being $1.87 per half foot; over twelve feet, $2.25 per half foot.
Pilotage is compulsory; a vessel entering the Delaware River must
lie beyond breakwater for twenty-four hours, if need be, waiting
for a pilot, who, when accepted, must be paid according to the
rate decided upon by the State from which the pilot shall have
come.
In New York harbor the number of pilots is limited to one
hundred and thirty. They are incorporated, take steamers by turn,
pool their earnings, and draw a salary of $200 per month when
working full time. Pilotage is not compulsory unless a pilot offers
his services. The rate of pilotage on inward bound vessels drawing
twenty-one feet draft and upwards is $4.88 per foot.
At Baltimore pilotage is compulsory. There are fifty-four
pilots licensed yearly by the State. The rate of pilotage on vessels
of fifteen feet draft and over is $5 per foot.
Improvement and Control of Waterways.
In the first part of the paper we endeavored to discover the rela-
tion between the Federal and State Governments in the general
oversight of vessels and cargoes as they come and go in the harbors
of the United States. Attention will now be directed to the re-
lation between the Federal and the State Governments in the main-
tenance, improvement and control of waterways.8
In a general way it may be said that the Federal Government
has authority over the channels of rivers between the wharf lines, and
that the States have authority over the docks, wharves and other
conveniences for loading and unloading cargoes. This authority
is sometimes exercised directly, as in the State of Washington, where
the State has made Constitutional provision for the protection of the
• For a study of the activity of the Federal Government in improving harbors, see article
by Professor Emory R. Johnson, Annals of the Academy of Political and Social Science, Vol.
ii, page 782-811. Professor Albert Bushnell Hart's "Essays on American Government,"
Chapter ix.
[494]
American System of Commercial Facilities 65
water front; in other States it is delegated to municipalities, and in
others individual initiative is largely left unguided and uncontrolled.
On the other hand, individuals, corporations and State authorities
are not prohibited from improving river channels, but are sub-
jected to the regulation of Congress, the Secretary of War and the
Chief of Engineers of the Army.
Prior to the adoption of the Constitution the States exercised
their sovereignty, improved waterways and levied tolls to meet their
expenditures; after 1789 the lighthouses, beacons, buoys and public
piers were ceded to the United States, and the care of them no longer
devolved on the State Governments, thus removing the principal
occasion for the collection of duties. However, the collection of
tonnage duties did not cease immediately, and Congress passed
frequent enabling acts empowering States to collect duties for needed
improvements. If a State wished to make some river or harbor
improvements she would lay her plans before Congress and if ap-
proved receive authority to collect by means of taxation of commerce
sufficient funds for the completion of the enterprise. For example,
in 1806 Congress passed an enabling Act to empower the Board of
Wardens for the Port of Philadelphia to collect a duty of four cents
per ton on all vessels clearing from the port of Philadelphia for any
port or place whatsoever, to be expended in building piers and other-
wise improving the navigation of the river Delaware.
Removal of Obstructions from Channels.
During the entire first half of the century there appears to have
been no clear understanding as to whose duty it was to supervise
the waterways of the United States and keep them in suitable con-
dition to insure safety and rapidity to commerce. Even as late as
1859 the Legislature of the State of Pennsylvania passed an Act
introduced by the following preamble which plainly indicates the un-
certainty as to where the duty should rest: "Whereas frequent
obstructions to the safe navigation of the river Delaware and the river
Schuylkill within the tidewaters thereof do frequently occur by the
sinking of canal boats, barges and other vessels and there being no
adequate remedy to compel the owner, master or other agent having
charge thereof to raise and remove the same. " The Act authorized
the Master Warden of the Port of Philadelphia immediately upon
information of the sinking of any vessel in the channel of the tide-
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66 The Annals of the American Academy
waters of the Delaware or Schuylkill, within the limits of the port to
notify the owner to raise the same within ten days under penalty, and
upon failure of owner to remove the wreck the Master Warden should
do so, selling the cargo to meet the expenses. In 1864 the Act was
amended by authorizing the Master Warden to recover damages
from the owner. Not until 1880 did Congress take action upon this
subject. 10 In that year the Secretary of War was authorized in case
of the obstruction of any navigable waterway of the United States,
river, lake, harbor or bay, to give proper notice to all persons inter-
ested in the craft or cargo to remove the same, and upon their failure
to do so the Secretary of War should treat the sunken vessel as
abandoned and derelict, removing and selling both vessel and cargo
and depositing the proceeds in the treasury of the United States to
the credit of a fund for the removal of such obstructions. This act
remained unchanged for two years, but in 1882 the powers of the
Secretary of War were enlarged by authorizing him to sell the vessel
and cargo before raising the same. In 1890 he was further author-
ized11 to break up and remove, without any liability for damage to the
owner, any wreck or obstruction that had been allowed to remain
more than two months. In section six of the same Act Congress
forbids the casting from any boat pier or manufacturing establish-
ment any ballast, gravel, cinders, sawdust or other waste into any of
the navigable waters of the United States, and where the casting of
such material into navigable waterways is necessary for the improve-
ment of the same a permit from the Secretary of War must be
obtained.
Construction of Bridges, Dams and Dykes.
The Federal Government, having assumed the duty of keeping
the channels free from obstructions, would naturally take the next
step of defining more accurately the boundaries of waterways. On
March 3, 1899, Congress, in order to further protect the channels of
waterways, passed an Act regulating the construction of bridges,
dams and dykes, making it unlawful to construct or commence the
construction of any bridge, dam, dyke or causeway over or in any
port, roadstead, haven, harbor, canal, navigable river or other
navigable water of the United States until the consent of Congress
10 River and Harbor Act, Section 4.
» River and Harbor Act, Sec. 8.
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American System of Commercial Facilities 67
to the building of such structure shall have been obtained and until
the plans for the same shall have been submitted to and approved
by the Chief of Engineers of the Army and the Secretary of War.
However, such structures may be built under the authority of the
legislature of a State over rivers and other waterways, the navigable
portions of which lie wholly within the limits of a single State, pro-
vided the location and plans thereof are submitted to and approved
by the Chief of Engineers of the Army and the Secretary of War
before construction is commenced. The only difference in the build-
ing of a structure over a river wholly within a single State and one
which forms the boundary between two States is that in the latter case
the consent of Congress must be obtained, which is not necessary
in the former, but in both instances the plans must be approved by
the Chief of Engineers of the Army and Secretary of War. Plans
once approved must not be deviated from in the least, either before
or after completion of structure without being submitted to and
receiving the approval of both the Chief of Engineers and the Secre-
tary of War.
Section ten of the same law extended the Federal authority,
making it unlawful to create any obstruction to the navigable
capacity of any waters of the United States, unless affirmatively
authorized by Congress ; and also making it unlawful to build or com-
mence building any wharf, pier, dolphin, boom, river breakwater
bulkhead, jetty or other structure in any port, roadstead, haven,
harbor, canal, navigable river, or other water of the United States
outside established harbor lines, or where no harbor lines have been
established, without having first received the approval before men-
tioned.
Harbor Lines Established by the Secretary of War.
Section eleven of the same Act authorizes the Secretary of War
to establish harbor lines wherever it is made manifest to him that such
lines are essential to the preservation and protection of any harbor,
and beyond these lines no piers, wharves or bulkheads or other
works may be extended, or deposits made except under such regula-
tions as from time to time may be prescribed by him. He is also
authorized to require any party who is given the right to build a pier
or other structure to excavate, if necessary, in another part of the
harbor sufficient space to compensate for the water displaced by the
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68 The Annals of the American Academy
structure. Prior to this date, wharf lines were located by State or
local boards, and even yet are usually so located, but wherever the
Secretary of War has fixed wharf lines, the local boards have made
their lines correspond.
Section eighteen of the same Act authorizes the Secretary of
War to compel the reconstruction of any bridge, railway or other-
wise, wherever in his judgment it is deemed an obstruction of free
navigation. In giving an order for reconstruction the notice must
be accompanied by a plan of the change recommended by the Chief
of Engineers of the Army. Failure to obey a reconstruction order is
a criminal offense, and each aditional month's delay is a new offense.
The Secretary of War, likewise, has the power when the public wel-
fare requires it to make all needful rules and regulations for the open-
ing of drawbridges and such rules when so made have the force of
law. The speed of vessels, the navigation of canals, the floating of
logs and sack rafts, all come under his supervision.
Relation of State Governments to Wharves and Docks.
The State Governments have exercised their authority over
docks, wharves and harbor lines in numerous ways and with no
attempt at uniformity. In some cases the authority is exercised
by State Boards with large discretionary power; in others by State
Boards closely guided by statutory laws ; and in others still by elec-
tive municipal boards with appointed heads or by departments
under the charge of a commissioner.
The following table12 gives the forms of wharf and dock owner-
ship and control in the principal ports of the United States :
Portland Railroad and Private
Boston13
New York Public, "
Philadelphia
Baltimore Public,
Norfolk "
Newport News "
Savannah
"Massachusetts State Board on Docks and Terminal Facilities, p. 14.
18The South Boston public pier has been constructed since above date.
[498]
American System of Commercial Facilities 69
Charleston Railroad and Private
New Orleans Public, " "
Galveston " "
San Francisco Public
At San Francisco the docks are public, under the control of the
Board of State Harbor Commissioners first appointed in 1863.
This Board is composed of three persons appointed by the Governor,
by and with the consent of the Senate, for a term of four years.
They are given possession and control of the waterfront of the city
and county of San Francisco, with powers to erect structures within
a given line. The Board with the Governor and Mayor may estab-
lish rates for dockage and wharfage, collecting from each equal
sums of which the total shall not exceed a small designated amount.
The Board is empowered to locate and construct wharves wherever
it deems best and to erect all such improvements as may be neces-
sary for the safe landing, loading, unloading and protecting of all
classes of merchandise passing in and out of the city and county of
San Francisco. In the construction of wharves, no dock nor slip
may be less than 136 feet at the narrowest point between the wharves.
The Board has control of the mooring and anchoring of vessels
in the harbor and keeping the waterways unobstructed and also
the authority to extend any of the streets lying along the water-
front of the city and county to a width of 150 feet, the water side
of which may be used as a landing place on which tolls are collected.
The State of Washington incorporated in her Constitution a
clause prohibiting the State from selling or relinquishing any water
areas beyond high-water-mark "but such areas shall be forever
reserved for landings, wharves and streets and other conveniences
of navigation and commerce." A Harbor Line Commission estab-
lished harbor lines in the navigable tide water of the State adjacent
to cities, with a view to providing for docks having a length of 600
feet and avenues fronting thereon of from 100 to 250 feet in width.
By this means the water frontage of all the cities in the State is to
be preserved in a uniform condition, under the control of the State,
for the purpose of improving the State's commerce.
New Orleans has about thirty miles of water frontage on both
sides of the river. The wharves and all riparian rights are owned
and controlled by the city. Leases and licenses have, however,
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70 The Annals of the American Academy
been given frequently to individuals and corporations. For many
years all wharfage charges were collected by the officers of the city
and turned into the city treasury for the maintenance of wharves
and other landings; but in 1891 a lease for a term of ten years was
made of five miles of the water frontage, the lessees being allowed
to collect and retain all charges paid for the use of the property.
This method of control did not prove satisfactory and the commercial
bodies decided that "with the keen competition of other ports
and the general tendency of business to seek ports which offer the
best opportunity for the cheap handling of freight, nothing short of
free wharfage will relieve the situation." In 1896 a law14 was passed
establishing a Board of Commissioners of the Port of New Orleans
with power "to regulate the commerce and traffic of the harbor
in such a manner as may in their judgment be best for its maintenance
and development; to administer the public wharves; to construct
new wharves where necessary; to erect sheds thereon to protect
merchandise in transit; to place and keep the wharves, sheds and
levees in good condition; to maintain sufficient depth of water
and to provide for lighting and policing the wharves and sheds;
to levy charges for defraying expenses in accordance with the sched-
ule in the Act and to repossess themselves of the frontage farmed
out under the ten year lease." The Board of Commissioners con-
sisted of five men, resident in the city of New Orleans and ap-
pointed by the Governor of the State.
By the laws of Maryland the control of the harbor of
Baltimore is vested in the Mayor and the City Councils who have
established a Harbor Board consisting of the Mayor and six citizens,
having control of all matters connected with the harbor and the
expenditure of any funds appropriated therefor. The State owns
two wharves, on which are warehouses wherein any citizen of Mary-
land who raises tobacco may store it indefinitely with no other
charges than a payment of two dollars per hogshead on removal of
the same. At the ends of some of the streets there are a few wharves
and an enclosed dock called the city dock, all owned and controlled
by the city, at which boats with garden truck and small steamboats
are furnished landings. The rest of the ownership is private.
There are six harbor masters who are appointed in the same
manner as other city officers and among their duties is that of the
14Act of the General Assembly of Louisiana, No. 70.
[500]
American System of Commercial Facilities 71
collection of wharfage and dockage rates, paying the proceeds to
the city register.
New York. The docks and wharves of the City of New York
are largely owned by the municipality under a grant in colonial
times, and are under the control of the Commissioner of Docks.
Notwithstanding this grant about half the waterfront is claimed as
private property. From 1870 until 1902 the duty of maintaining
and improving the harbor devolved upon the Board of Docks.
Previous to the organization of the dock department in 1870 there
had been no systematic plan of construction of wharves around the
city, each pier owner building to suit his own fancy or convenience.
During the period of thirty-two years in which the control of the har-
bor was vested in the Board of Docks the total gross revenue from
leased wharves increased from $315,524.54 in 1871 to $2,673,333.30
in 1902 ; the revenue from ferry leases and franchises increased from
$144,640 in 1871 to $303,406.47 in 1902; and the total annual
expenditure audited increased from $486,449.12 in 187 1 to $2,409-
376.49 in 1902. Wharf property valued at $11,692,579.71 was
acquired by the city, and in addition to this a number of piers claimed
by private individuals was restored to the city.
In 1890 a board of United States Engineers established a bulk-
head around the island upon which the department has built several
miles of masonry which is to be continued until the island is com-
pletely surrounded. Wharf construction is now systematically
planned and carried out under the Commissioner of Docks, appointed
by the Mayor. The wharves are leased for terms of years varying
from ten years to those terminable at the pleasure of the Com-
missioner and at rentals of from $50 to $100,000 per year
under one lease. Leases may be renewed for periods of ten years,
but the aggregate number of years cannot exceed fifty. The Com-
missioner of Docks15 has exclusive charge and control, subject in
certain particulars to the Commissioners of the Sinking Fund, of the
wharf property belonging to the corporation of the City of New
York, including wharves, piers, bulkheads and structures thereon
and water adjacent thereto and all slips, basins, docks, waterfronts,
land under water and structures thereon and has exclusive charge
and control of repairing and building, rebuilding, maintaining,
"Laws of New York, 1902, vol. ii, chap. 609.
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72 The Annals of the American Academy
altering, strengthening, leasing and protecting the property. No
wharf, pier, bulkhead or other structure may be erected without
the plans first being approved by the Commissioners of the Sinking
Fund and filed with the Commissioner of Docks. He also is author-
ized to regulate the charges for wharfage, cranage and lockage of
all vessels admitted to the wharves, piers, bulkheads, slips, docks
and basins constructed under the provisions of the law.
Boston. In 1894 a joint commission on improvement of the
docks and wharves of the City of Boston found "That there is not
any public department, State or municipal, having supervision of
the business of the docks and wharves, of their capacity, size or of the
uses made of them." The number of wharves in the city at that
time was over two hundred, all private property, used for private
purposes and information concerning them rested entirely upon
the good-will of the proprietor. Since that time the powers of the
Harbor and Land Commission have been enlarged and as stated
in the laws of Massachusetts, chap. 96, sec. 7, are the general
care and supervision of the harbors and tide waters within the
Commonwealth, of the flats and lands flowed thereby ; of the waters
and banks of the* Connecticut within the Commonwealth and of
all structures therein in order to prevent and remove unauthorized
encroachments and causes of every kind which may injure the river
or interfere with the navigation of such harbors ; injure their
channels or cause a reduction of their tide waters. The Board is
also authorized to take by purchase or otherwise, lands or materials
needed for improvements or repairs; to recommend harbor lines to
the general court which, if established by the court, become the
lines beyond which no pier or other structure may be extended.
In 1897 the Legislature16 authorized the Harbor and Land Commis-
sioners to construct a pier and dock on the Commonwealth Flats
at South Boston at an expenditure not exceeding $400,000.
This pier 1200 feet long and 400 feet wide, creating a surface of
wharf area of eleven acres, has been built and is the one pier owned
by the Commonwealth.
Philadelphia. Contrary to the general rule, the port of Phila-
delphia was more or less carefully organized from its origin.
By the charter of 1701 William Penn constituted the city of Phila-
16Chap. 513, Acts of Massachusetts.
[502]
American System of Commercial Facilities 73
delphia to be a port or harbor for the discharging and unloading of
merchandise from ships upon so many wharves and quays as the
Mayor, Aldermen and Common Council of the city should from time
to time establish.
The wharves of Philadelphia were of two kinds, public, such as
the ends of the streets, which were for the use of the city, and pri-
vate, such as were erected by the owners of the soil. In both cases
the right of the riparian owner extended only to low-water mark,
the privilege of erecting wharves to extend into the stream being
one which the Proprietary or his successor, the State, might grant
or withhold. In 1763 the Provincial Assembly, to encourage
commerce and to render approach to these ports more secure, passed
an Act providing for a lighthouse at the entrance of the bay and
the placing of buoys in the bay and river. In 1773 provision was
made for the appointment of wardens for the port of Philadelphia
and for the regulation of pilots plying in the river and bay and the
price of pilotage. The wardens were to choose one of their number
president, examine pilots and grant certificates; make rules of
pilotage ; appoint the lighthouse keeper and provide for the building
of more piers in which vessels might take shelter. Their accounts
were laid yearly before the Accounts Committee of the Assembly.
Finally in 1803 the groundwork of the present system was.
adopted. The law provided for one warden and six assistant wardens,
four of whom should be inhabitants of the city of Philadelphia, one
of the Northern Liberties and one of the District of Southwark.
The Governor was authorized to appoint a harbor master, removable
at pleasure. The duties of the wardens were to grant licenses to
persons to act as pilots in the bay and river Delaware and to make
rules for their government while employed in that service, to decide
all differences which arose between masters, owners and consignees
of ships or vessels and pilots, except in certain cases; to direct the
moving of ships and vessels in the harbor and the order in which
they should lay, load or unload at the wharves and to make, ordain
and publish such rules and regulations and with such penalties
for the breach thereof in respect of the matters before mentioned
as they should deem fitting and proper.
In 185 1 the Legislature passed a law17 declaring that no previous
law should be construed to authorize the building or extension of
1 Pennsylvania Laws, 1851, p. 862.
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74 The Annals of the American Academy
wharves on the river Delaware in front of the city and county of
Philadelphia or the establishment of wharf lines unless the wharf
lines should first be approved by the Board of Wardens for the Port
of Philadelphia.
At this time the Board consisted of the Master Warden appointed
by the Governor and thirteen port wardens appointed by the Select
and Common Councils and the Commissioners of the Boroughs of
Bridesburg, Richmond, Kensington, the Northern Liberties, South-
wark and Moyamensing.
In 1853 the jurisdiction of the Board was extended over the
entire county and only wharves licensed by them were lawful struc-
tures. The Board was now made to consist of one master appointed
by the Governor and sixteen assistant wardens elected by the Select
and Common Councils. This Act made it the duty of Councils
to fix wharf lines beyond which no wharf or pier may be built; to
keep the navigable water within the city open and free from obstruc-
tions; to regulate pilots and the better disposition of vessels within
the port.
An Act of March 31, 1864, made it the duty of the Board of
Wardens, guided by the plan prepared by the City Surveyor, to fix
the wharf lines of Delaware County beyond which they could not
authorize the construction of any wharf or pier. In the same year
they were given the authority to fix an arbitrary low water mark
beyond which no encroachment nor improvement should be made
without a license from the Board.
In 1870, owing to a decision of the Supreme Court,18 above
mentioned, the Board of Port Wardens was constituted a depart-
ment of the city known as "the Department of Port Wardens,"
all its receipts being paid into the city treasury and its accounts
audited by the City Controller. Previous to this the Master Warden
and Harbor Master had received a fee of seventy-five cents collected
from each vessel coming into the harbor. The fee having been
declared unconstitutional, the payment of the salaries was assumed
by the State government.
The Board of Wardens has supervision of the port of Phila-
delphia under the guidance of the State and the municipal govern-
ments and operates principally through the Master Warden, and the
"Steamship Company vs. Portwardens, 6 Wallace 31.
[504]
American System of Commercial Facilities 75
Harbor Master who has charge of the placing of vessels, the
cleaning of docks and wharves and other similar duties.
Summary.
In the past we have thought of harbors and transportation
terminals as places where commerce was halted, now we are learning
to think of them as integral parts of the great carrying systems,
parts where speed and freedom of movement must be unrestricted,
where discriminations and petty bickerings which result from unre-
strained competition must be eliminated. While our foreign trade
was comparatively small and sea-going vessels, of shallow draft,
the equipment of harbors was of less importance; but with our
immense and rapidly growing foreign trade, and with modern
ocean vessels that draw from twenty-seven to thirty-three feet,
special harbor facilities are indispensable. In 1902, 561 vessels
with a loaded draft of from twenty-seven to thirty-three feet left
New York harbor. In order to provide for such vessels as these,
the Federal Government is deepening and improving our channel
ways and giving increased power and supervision to the Secretary
of War. The State and the municipal governments are centralizing
the responsibilities of their Harbor Commissioners and granting
specific powers, as well as general supervision. The Board
of Docks in New York City has been superseded by the
Commissioner of Docks. The powers of the Boston Harbor and
Land Commissioners have been increased by authority to construct
the South Boston pier. The New Orleans Board of Commissioners
was given authority to repossess themselves of the river front,
farmed out under the ten year lease and to regulate the commerce
and traffic of the harbor "in such manner as may in their judgment
be best;" while the harbor of San Francisco and the shore line of
the State of Washington are under the direct guardianship of the
State Government.
As stated earlier in the paper the Federal Government has con-
trol over the channels of rivers between wharf lines and the State
Governments have control over the docks and wharves. In some
States this authority is exercised through the municipalities as is
the case in Maryland, Pennsylvania and New York, where the ports
are controlled largely by the municipality or by a department of the
municipality, but in Massachusetts, Louisiana, California and Wash-
[505]
j6 The Annals of the American Academy
ington the authority is exercised by State Boards appointed by
the Governors. But in either case the tendency has been the
same, to centralize the authority of the Board and to grant more
complete discretionary powers.
J. Bruce By all.
Philadelphia, Pa.
506]
THE BRITISH SYSTEM OF IMPROVING AND ADMINIS-
TERING PORTS AND TERMINAL FACILITIES
European countries present a wide range of experience in the
management and ownership of ports and harbors. England alone
has many varieties, differing in nearly all cases from those most in
vogue on the Continent. Germany is a country with a highly
organized and successful governmental activity for fostering trade.
The present striking success of these efforts is calling the atten-
tion of other nations to what Germany is doing, but it is true that
England has been for more than a century the prominent figure
in the commercial world, and that, too, without the thorough and
formal organization of Germany. British freedom of trade has
had a deeper meaning than the mere question of tariffs. The
German governments act. The British government has only
guided and controlled the action of individuals.
These different policies are in part explained by the differing
history of the two nations. For nearly ten centuries England has
been united, unconquered and practically unthreatened by a foreign
foe. During the whole of this period she has had more internal
freedom in her political and economic life than any country of
Europe except Holland. For two centuries England and Scotland
have been united with freedom of trade and almost continuous
internal peace. British wars have been fought abroad. During
this same period the continent of Europe has, decade after decade,
been devastated by war from end to end, and the British manu-
facturers and traders have profited by the disturbance and have
been allowed to develop their industries naturally.
The continental manufacturer has been harassed more by tariffs
than by wars. Germany in 1818 with sixty or more tariff -levying
divisions with independent and varying fiscal policies was an impos-
sible place for import, export or the assembling of raw material.
Dynastic, military and political disturbances strengthened the hand
of centralization and fettered individual liberty and initiative.
The raw materials of the Continent, especially of Germany, were
scattered and must needs await the coming of the railway and the
steamer. Principalities, wars and tyrants dammed up the stream
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78 The Annals of the American Academy
of German progress until that country with its increasing popula-
tion was a disconnected mass of prostrate possibilities needing
only the touch of opportunity to move forward with exceptional
rapidity. That opportunity has come with the latter part of the
19th century at the hands of a government that had tasted the
bitterness of defeat and thad realized and acted upon the idea
that national power was desirable and only to be attained by the
raising of the efficiency of every individual and of every industry.
After the German humiliation at Jena, Prussia began consciously
and deliberately to educate that she might have efficiency and
through efficiency, power. This policy was vindicated in 1870 when
it was said that the German schoolmaster won at Sedan. It
might also be said that he is now winning in the foreign market.
The policy that began by educating the German peasant in 1820
has broken down Germany's internal tariffs, has made the leading
technical and commercial schools of the world, and through
state activity, has produced the Prussian state railway system
with its preferential and export rates; has put the export bounty
on sugar, the bounties on shipbuilding; has sent subsidized steam-
ships to the far Indies and has made Hamburg the most efficient
port in the world.
England has had a more even, a more natural and latterly
a less systematic development of commerce and its necessary facili-
ties. Her raw materials, especially of coal and iron, and her water
power have been abundant and favorably located. Internal freedom
of trade and internal peace have left her people free to develop
industry and trade. Her insular position has removed her from
danger of foreign aggression so that the force of tyranny has declined
and the individuals or the associations of individuals have been free
to act as occasion demanded, and they have met commercial wants
as they arose. Not being hampered like Germany, Britain's wants
have not accumulated until a comprehensive system was demanded.
These wants having been satisfied as they manifested themselves,
we find that instead of a comprehensive system Britain has a com-
plex accretion, the result of slow and gradual growth and chiefly
by individual initiative. Such is the system of operating commercial
facilities, such is the British school system, the British Constitution
and the genius of British civilization.
The British system has its advantages and its drawbacks.
[508]
British System of Commercial Administration 79
It was early in the field, but it is necessarily incomplete, and when
the time arrives for more systematic improvements the private
interests that first met the demand are often conservative resisters
of progress with vested interests demanding protection. This be-
comes more noticeable as the scale of modern commerce increases
and demands facilities of a magnitude that the individual finds it
impossible to supply. The British system is now at many points
beginning to show itself inadequate to meet the demands of 20th
century commerce and the more systematic competition of Germany.
Many symptoms show that the United Kingdom feels the compe-
tition of Germany and the United States and is attempting to meet
it by a more thorough organization. The Chamberlain tariff
agitation is an effort to protect England from her rivals. She has
felt the need of a comprehensive educational system, but the passage
of a satisfactory education act is hampered by conflict with the
very numerous private schools — an outgrown result of private
initiative. In this respect England is far behind Germany. Humili-
ated Germany has spent a century in education and technical training
and equipment. The United Kingdom, the unquestioned and
unthreatened victor of the Napoleonic wars, mistress of the seas,
secure in her isles, has spent that century in strife between the
aristocratic and democratic classes who have fought within the
political arena concerning the right to vote and govern. The
British nation has now reached the point where it must repeat
and is repeating the history of Germany. Great Britain feels her
weakness and strives to improve her weak points. Individual
efficiency must and will be raised by an improved educational sys-
tem. The tariff may or may not be changed, but it will be im-
proved if possible; shipping has been protected and aided by in-
creased subsidies, and the tendency to betterment in the control!
and organization of commercial facilities is suggested by the recent
agitation for bettering the port of London where it is proposed to
make vast improvements and transfer control from several private
bodies to a central authority.
The original repository of power of general control over ports
in Great Britain was the municipality but the fact that the munici-
pality rarely cared to make extensive improvements in its corporate
capacity left the field open to private activity. The size of the
operations necessary for harbor improvements and the uncertainty
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80 The Annals of the American Academy
of profitable return were such that individuals and partnerships were
usually deterred from venturing into this field which was left for
the joint stock company, the corporation. But corporations in
great Britain are creatures of Parliament. So from the earliest
harbor improvements to the present day there has been a constant
succession of acts of Parliament creating bodies, private, semi-public
and public for the improvement, operation and control of docks
and other port facilities.
The first stage in this progress was the dock company, pure
and simple. The rise and fall of the tide on British coasts is so great
that vessels must anchor far from shore or lie on the bottom at low
tide. This made slight difference in the days of light trade and
of that carried by shallops and small sailing vessels. With the
early years of the 19th century came heavier commerce and larger
vessels which needed the shelter of enclosed docks with water con-
stantly at high tide level.
The first half of the 19th century was the era of the dock com-
panies. They were organized in all the leading ports and usually
prospered upon the charges made upon vessels and goods entering
their premises. But this prosperity was not to last. The middle
of the 19th century witnessed three changes in commerce, each
in itself revolutionary. (1) The railway gave the whole of Great
Britain access to the sea. (2) The steamship made equal improve-
ments in the accessibility of foreign lands and products. Further-
more the steamship was shortly made of iron and greatly enlarged.
(3) The coming of the free trade era caused a great increase in
the imports of bulky commodities.
The increased commerce and the larger ships made obsolete
the docks of the old sailing ship days. The improvements necessary
to accommodate the larger type of vessel were so expensive that
the dock companies were with few exceptions unable to comply
with the demands of trade and their decline set in. Except in
favored ports the time had passed when a dock company could
from its dues derive sufficient revenue to pay expensive salaries,
interest charges and dividends on its stock. Henceforth the dock
company had to be reorganized on a non-profit basis or become a
part of some larger system in which it was an integral part.
Numerous reorganizations followed, resulting in many varieties
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British System of Commercial Administration 81
of port arrangements, but all fall under one of three distinct types
which will be taken up in the order named:
I. Public trust, in which the idea of corporate profit is aban-
doned in the interests of public welfare.
II. Municipal ownership and operation as a public utility,
not as a source of revenue.
III. Private ownership and control, usually by a railway
company as a part of an extensive system.
I. The Public Trust.
The public trust is the most typical of all the forms and by
the compromise methods of its organization offers an excellent
example of the British way of doing things. The public trust is
a business corporation, organized like any other corporation, by
Act of Parliament. Membership upon the board of directors is
an honor but without financial reward in any way. In these respects
and in the attitude towards the public the British harbor trust
closely resembles the board of trustees of an American university.
In the distribution of the powers of appointing directors we see
the element of compromise that led to their origin. When the
increased commerce of the free trade era had brought conditions to
a standstill various official and non-official organizations had usually
been exerting more or less power and the common method was
for the Act of Parliament to give these and possibly others repre-
sentation in the board of a new and more comprehensive governing
body, the non-profit, the non-salary-paying corporation, or public
trust.
For the City of Glasgow the Clyde Navigation Trust was con-
stituted by an Act of Parliament in 1858.
It consists of twenty-five members as follows: The Lord Pro-
vost of Glasgow, ex officio, chairman; nine town counselors of
Glasgow ; two nominees of the Chamber of Commerce ; two nominees
of the Merchants House ; two nominees of the Trade House ; nine
persons elected by the shipowners and harbor rate payers. An
Act was introduced in 1901 to reduce the municipal representation in
this board.
Liverpool is unique in having no municipal representatives
whatever upon the board of its harbor trust.
The Thames Conservancy Board has control of the Port of Lon-
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82 The Annals of the American Academy
don, the navigation improvements of the Thames from the deep
sea to and above London and also controls the waters of the Thames
and its entire drainage basin with certain small exceptions. By
the revision of 1894, this board has thirty-eight members appointed
or elected as follows: Appointed by the Admiralty, two; by the
Board of Trade, two; by the Trinity House, two; by the Glouces-
tershire and Wiltshire County Councils, one; by the Oxfordshire
County Council, one; by the Berkshire County Council, one; by
the Buckingham County Council, one ; by the Hertfordshire County
Council, one ; by the Surrey County Council, one ; by the Middlesex
County Council, one; by the London County Council, six; by the
Common Council, six; by the Essex County Council, one; by the
Kent County Council, one; by the Metropolitan Water Companies,
one; by the Oxford City and County Borough, one; by the County
Borough of Reading, one; by the County Borough of West Ham,
one. Elected: By shipowners, three; by owners of sailing barges,
lighters and steam tugs, two ; by dock owners, one ; by wharfingers,
one. The board divides itself into an Upper River Committee
consisting mainly of representatives of the counties bordering on
the Upper River and a Lower River Committee consisting almost
entirely of Lower River representatives.
The Liverpool harbor authority is the Mersey Docks and Harbor
Board, created by Act of 1857. Of the twenty-eight members four
are nominated by the Conservancy Commission of the River Mersey,
i. e., The First Lord of the Admiralty, the President of the Board
of Trade, and the Chancellor of the Duchy of Lancaster. The
remaining twenty-four members of the board are elected by the
persons who have paid not less than ;£io in dock rates during any
year. In practice this results in combinations so that the members
really represent the commercial and mercantile organizations of
the port, as the Steamship Owners' Association, the General Brokers'
Association, the Cotton Association, the Corn Association, etc.,
thus practically duplicating in part the Glasgow method.
The public trust, being the most highly organized of British
harbor types and handling effectively the commerce of her larger
ports merits a presentation of its (a) advantages, (6) its operations
and (c) its historical development.
(a) Its great advantage in management is the directness of
control, the direct connection between the causes at interest and
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British System of Commercial Administration 83
the power to remedy. If the harbor of a particular port were under
the national legislature, Parliament, harbor questions would be
dealt with by a bureaucracy or by new legislation which would
have to struggle for attention against all kinds of national, colonial
and international questions. Even under the care of the municipality
the harbor question would have to be passed upon by people whose
only interest might be in municipal sanitation, transportation,
education or other problems of city life. The harbor trust and
especially that of Liverpool avoids all of these entanglements by
placing the harbor in the hands of a select board representing only
the people who are interested in the port. The interests and the
power of remedy are united and as all rules are and must be general,
favoritism is impossible and the whole population of the city is
benefited by anything which aids and improves the commerce
of the port.
(6) The effectiveness of the harbor trusts is proved by the
success of their work. Since 1858 the Clyde, a narrow and rocky
stream has been made by the expenditure of $35,000,000 into a
safe waterway and ocean steamers now lie in the stream where
it was then fordable. Glasgow has been raised from comparative
insignificance to the rank of a great port.
Liverpool has had an equally satisfactory experience. By
Acts of Parliament of 1857-58 the Mersey Docks and Harbor Board
took over the consolidated authority over the river and port and
all the docks on both sides of the river. These improvements
had been begun in 1709, and later, by private companies which had
got into financial difficulties and sold out to the city of Liverpool
in 1855, three years before the transfer to the board. The financial
security based upon these properties and powers was excellent
and the borrowing powers of the new management were good.
Interest payments at low rates replaced the necessity of paying good
dividends and operating expenses were lightened by a board whose
members served without pay.
Heavy borrowings and extensive harbor improvements and
enlargements were immediately made and there have from first to
last been over two hundred million dollars expended upon the port.
Between 1857 and 1901, the present board made capital expendi-
tures of nineteen and one-third million pounds sterling under its
borrowing powers and two and one-fifth million pounds sterling from
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84 The Annals of the American Academy
revenue . For the decade 1891-1901 the annual expenditure for dredg-
ing was .£125,000. Along with all of these expenditures and heavy
debts the financial condition of the port is satisfactory and
reductions have been made in dues on both ships and goods. At
the same time new docks are being dug and the facilities of the
port are being steadily improved, enlarged and kept abreast of latest
requirements.
In addition to docks the board owns warehouses for the storage
of all kinds of merchandise and especially constructed warehouses
for the storing and ventilating of grain. There are also privately
owned warehouses in the city which compete with these, but there
are no private docks ; docks are a monopoly in control of the board.
The revenues are raised by tonnage dues on ships entering the
harbor, by dues on ships entering the docks and dues at prescribed
rates on the goods carried by the ships, provided it is not trans-
shipment cargo. The finances are managed with the double object
of making the port facilities of Liverpool thoroughly efficient and
as cheap as possible. In the former it is succeeding. The port is
magnificently equipped and complaints are rare. Surplus revenues
lead to reduction in dues.
(c) The historical development, the natural history, of a pub-
lic harbor trust can be best studied in London where for the past
five years the dissatisfaction with the old private companies has been
ripening into activity looking to the establishment of a public trust.
At the present time, London, the commerical metropolis of the
world's greatest commercial nation, still depends upon a port domin-
ated by the old private interests of the type that perished in most
of the other ports of Britain nearly half a century since. True
the control is moribund and must be superseded by a more compre-
hensive authority. The private companies of London have sur-
vived longer than those of Liverpool or Glasgow or Southampton
because they had a great commerce to spur them to great develop-
ments before the free trade era and to give them an impetus that has
carried them on with declining energy to the present time, when
they lie powerless to cope with present demands. The high value
per ton of London commerce has probably enabled it to bear burdens
that would have been unbearable elsewhere. The commerce of
the port has been suffering for some years because of inadequate
facilities, high charges, and delays in handling of freight. These
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British System of Commercial Administration 85
troubles arise partly from conflicts of authority between the various
private bodies active within the port. Of these there are no less
than four:
(a) The Trinity House, controlling pilots and the marking of
channels by buoys.
(6) Thames Conservancy, having charge of the river and channel
and improvements therein.
(c) The Dock Companies, owning the docks and charging for
the use of the same.
(d) The Watermen's Company, having practically a monopoly
of and control over the lighters and river boats.
(a) The Trinity House is derived from an ancient guild or
fraternity of pilots and seamen located at Deptford Strand in Kent.
It began by having certain duties in the Government Navy Yard
at Deptford, but it is now confined to lighting, buoying and pilotage.
This Trinity House is the general lighthouse authority for England
and Wales, and Gibraltar, but its jurisdiction does not extend to many
ports, having been removed by the various port Acts of the 19th
century. It does the buoying, lighting and pilotage in the Thames
and examines London dock masters as well as pilots.
This body is a closed corporation, being composed of "Elder
Brethren' ' and "Younger Brethren." The Elder Brethren have
sole control, rilling their own vacancies by election from the Younger
Brethren and recruiting the Younger Brethren by election from the
outside.
In the hands of this closed corporation of private individuals
the British Government leaves a considerable share of its commercial
authority and the expenditure of some special revenues raised by
light dues on shipping. Such are the methods of individualistic
and unsystematic Britain. Complaints are not numerous, although
there is danger from lack of co-operation between the Trinity House,
the channel marking body, and the Thames Conservancy.
(6) The Thames Conservancy is the channel deepening body.
This board is a creation of the same Parliament (1857) that enacted
the Liverpool and Glasgow Harbor Acts and its activity has been
one of the conditions necessary to the long survival of the private
dock companies of the port. The Conservancy Board has entire
charge of the tidal waters of the Thames, including the deepening
of the channels, the regulation of vessels within the port, the licensing
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86 The Annals of the American Academy
of docks, piers and embankments, etc. , and making necessary by-laws
and regulations for the control of the river.
The revenues are raised by slight tonnage dues upon all vessels
entering and leaving the port.
In addition to the danger from lack of co-operation with the
Trinity House, the Conservancy Board, while affording relief in
1857 when it was created, is now financially unable to provide
further necessary channel improvements and the traffic cannot
stand an increase of tonnage dues.
(c) The dock companies have come to a similar standstill
after an experience of a century. In 1 800 the harbor was insufferably
congested. For two centuries the customs regulations had per-
mitted goods to be landed only on certain "legal quays" and "suf-
ferance wharves." Cargoes were often stored on lighters for weeks
awaiting turn at these favored wharves. In i860 the West India
Dock Company was authorized and was soon followed by two
more. Each was given a monopoly of ships in certain trades for
twenty-one years and the privilege of building and operating bonded
warehouses. The companies derived their revenues from dues on
ships entering the docks, from goods discharged on their quays
and from the rental of warehouses. This injured the owners of
"legal quays," "sufferance wharves," the lighters and others who
had to be compensated by the new companies to the extent of
about a million pounds sterling. The dock companies were also
compelled to admit lighters to the docks to take goods from the
vessels free of charge. This last privilege is called the "free water
clause" and has been a part of all subsequent dock legislation and
the subject of much dispute.
The great profits of the early dock companies were from their
warehouses, the want of which had been the compelling motive to
the building of docks. Consequently the rates on shipping were
put low. The expiration of the monopolies and the refusal of
Parliament to renew them was followed by a rush to build docks.
Bonded warehouses were also built outside of the dock premises
and the competition of the new docks and new warehouses was greatly
increased by the coming of free trade and the consequent decline
in the bonded warehouse business. Parliament, however, refused
in 1855 to pass the bill to repeal the free water clause as the com-
panies were still doing a profitable business, but from this time
[5i6]
British System of Commercial Administration 87
forward their prosperity declined. Severe rate wars ensued, their
finances were impaired and as the result of several consolidations,
there were but two strong competing companies in 1880. In the
struggle for trade each increased its debt, built fine new docks
and cut rates until they came to an agreement in 1888 and were
consolidated in 1900, but with hopeless finances, dividends having
been nominal or entirely absent for several successive years. The
capital involved was about eight million pounds in bonds and eleven
million in capital stock. While unsatisfactory to the stockholders,
the dock company is also unsatisfactory to the patrons and to the
community at large. The free water clause gives the lighters entrance
to the dock and mechanical improvements have made the lighter
a large and efficient craft depending upon steam power, and used
so much "that the docks in London themselves are in great measure
only stations at which goods arrive from the sea to be immediately
placed upon barges to be conveyed to wharves or piers at other
parts of the river or to shipping lying therein."1 It is estimated that
over 75 per cent, of the freight is so handled,2 and to the great detri-
ment of the dock company's revenues.
The impossibility of sorting import goods on the deck of the
ship preparatory to putting them over to the lighters has led to
the larger steamship lines making arrangements to do this sorting
on the quays and then transfer goods to lighters without paying dock
dues. These constructive "overside conditions " have led to great con-
fusion and delay. While a large ship lies alongside a quay the lighters
cannot reach the quay and sometimes the ship is immediately replaced
by another when it goes away so that two or even three cargoes
may be piled in confusion upon one quay while the owners of the
goods are losing time and paying demurrage on lighters that cannot
get at the goods they have been engaged to carry. It is sometimes
cheaper to pay warehouse dues and railroad freight than to wait
and take cargo off the quay into the importer's own lighter.
This condition is unsatisfactory to the dock companies because
they lose revenue and to the importer, the lighter owner and
private warehousemen because they are delayed and thereby lose
money. None of the suffering parties can apply a remedy.
The efforts of the dock companies to secure legal permission
1 Report on the Port of London, 1902, p. 30.
»ZWtf„ p. 78.
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88 The Annals of the American Academy
to tax the lighters has been successfully opposed by the wharf,
lighter and outside warehouse interests and the London Chamber
of Commerce.
(d) The situation in the port of London is further complicated
by the Watermen's Company, the modern form of a 16th century
guild, whose members obtained their membership through apprentice-
ship and had the monopoly of running boats upon the Thames
in London limits. In its inception it was a regulation of rowboats
in the interests of personal safety. By Act of 1894 the time of service
before receiving license to run a boat on the Thames was reduced
to two years, but it includes the river steamers as well as the freight
boat, nearly 12,000 craft in all. The strike of 1900 showed that
the Watermen's monopoly may be oppressive in a port where the
lighter is such a vital factor in the daily work of handling freight.
Under the combined guidance of the four governing bodies and
the conflicting private interests, the port of London has, by the
year 1904, reached a condition of standstill where further progress
is impossible. The Thames Conservancy cannot deepen the channel,
the dock companies cannot build new docks or deepen old ones
and the Trinity House and the Watermen's Company conflict with
both. The deadlock will, in all probability, be broken by the
action of Parliament, based upon the advice of a Royal Commission,
which, after two years of investigation, has recommended a public
trust, which shall take over the property of the dock companies
and the privileges and authorities of the Trinity House, the Water-
men's Company and the Thames Conservancy insofar as they
pertain to the Thames and the port of London. This new and
unified authority if established as recommended would immedi-
diately expend for channel and dock improvements seven million
pounds, of which four and one-half million will be borrowed and
two and one-half million pounds donated by the London County
Council. The National Exchequer has no share in this stupendous
transaction, which will represent nearly as much money as the pro-
jected Panama Canal. The revenues will be derived from tonnage
dues on ships entering the port, dock dues on ships using docks,
freight dues on all goods landed in the port and from license fees
on lighters.
The composition of the board of directors of this new port author-
ity as proposed by the Royal Commissioners is as follows :
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British System of Commercial Administration
89
"On the assumption that the London County Council and the
City Corporation accept the financial responsibilities . . . men-
tioned above ... the nominated members should be appointed
by the following bodies:
(a) By the London County Council 1 1 members
(6) By the City Corporation 3
(c) By the Admiralty 1
(d) By the Board of Trade 1
(e) By the Trinity House 1
(/) By the Kent County Council 1
(g) By the Essex County Council 1
{h) By the London Chamber of Commerce . 2
(*) By the Governors of the Bank of Eng-
land from among persons belonging to
the mercantile community of London 5 "
The elected members should be elected by different groups of
voters, viz:
(/) By the oversea (or ocean) trading ship-
owners 5 members
(k) By the short-sea trading shipowners ... 2 "
(/) By the wharfingers and owners of private
warehouses on the river 3 "
(m) By owners of lighters, barges and river
craft, including river passenger
steamers 2 "
(n) By railway companies connecting with
the docks 2 "
The electing persons, firms or companies, should be given a
number of votes varying according to the amounts paid in dues upon
goods, or upon shipping as the case may be."
If this measure can survive the unexpected opposition of the
London County Council, the port of London will have completed
its evolution and reached the condition of the greater British ports.
This detailed account of the conditions leading up to this end
may be taken as an example, rather complex because of its size,
but none the less a typical example, of the difficulties through which
British ports have been passing in the effort to accommodate them-
selves to the growing demands of modern commerce.
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90 The Annals of the American Academy
II. Municipal Ports.
In the early days of the breakdown of the private dock com-
panies, the municipalities frequently undertook the management
of their harbors. Usually this effort proved unsatisfactory and
Bristol is now the only one of the large ports that is conducted directly
and entirely by the Municipal Council, several others, including
Liverpool, having sought Parliamentary approval for public trusts
after an unsatisfactory municipal venture. Two minor ports,
Preston and Boston, have municipal ports and the Manchester city
government has taken an active part in the affairs of the port of
Manchester
The Bristol docks were begun by a private company in
1803. Continuous financial difficulties led to sale to the city in
1848. In 1877 and 1881 two private companies opened rival docks
further down the River Severn at Avonmouth and Portishead.
Desperate competition ensued between the new docks and the
municipal docks of Bristol with the result that the city, in self-defense
bought out the two private companies in 1884 at less than cost
and has since operated their plant as a part of the municipal system.
The direct management is in charge of a committee of Councils,
who employ a general manager who is responsible for the conduct
of the property. The result is satisfactory. The arrangement of
docks, quays, railway tracks, freight sheds, freight handling machin-
ery serves to make Bristol an efficient port for the handling of freight
and one of the leading importing ports for the kingdom. The
people are satisfied with their port.
In the words of the Bristol Docks Committee: "The policy of
taking over the whole of the docks by the citizens has proved an
exceedingly wise one, the foreign trade, population and wealth of
the city having enormously increased and the works having been
maintained in a high state of efficiency, generally out of surplus
revenue earned by the docks!
"The principle aimed at is not so much to make a profit as to
increase the volume of traffic by keeping the tariff of charges low
and providing from time to time (largely out of revenue), such further
sheds, cranes, quays, railways, telephones, etc., and other facilities
as the ever-changing type of traffic and vessels in which it is con-
ducted seem to call for." They further proceed to contrast their
management with that of private companies as follows: "Private
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British System of Commercial Administration 91
owners, seeking only to work the docks for dividends, naturally
maintain a high scale of charges which is against the traders' interest.
They also hesitate to expend further capital until they are actually
forced to do so either by a threatened loss of traffic, or an inability
to accommodate the ordinary vessel plying at the time in the different
trades."
In comparing their port with those controlled by private com-
panies the Bristol authorities lay much stress upon the fact that
the rates are absolutely the same to all parties and that there are no
rebates whatever. The municipality has the great financial advantage
of being able to borrow its cash capital at about 2 per cent., and,
with no dividends to pay, the rates of service can be low.
At Preston and Boston, the only other fully municipal ports
the experience has not been so satisfactory. In both cases the towns
had no harbors and the payment of high railway freights drove the
people to dock building to control the freight rates. In this they
were highly successful. The dues from the ports have not, however,
as yet been sufficient to meet interest charges and the deficit is made
up from the city taxes, but the burden is cheerfully borne. The
business interests of both communities are agreed that the reduc-
tion of transportation costs, the cheapening of necessities and raw
material, has stimulated trade and industry to such a degree that,
upon the whole, the costly docks have paid.
Manchester, while not possessing a strictly municipal port
has shared in an experience somewhat akin to that of Preston and
Boston. In 1882 the people of Manchester resolved to free them-
selves from the necessity of conducting all import and export business
through Liverpool where the port charges had to be added to a
railway rate that was considered too high. The relief was to come
through the Manchester ship canal undertaken by a private com-
pany who set out to make Manchester accessible to ocean vessels
and receive their reward in tolls. Unforeseen difficulties doubled
the cost of the undertaking, the city had to come to the assistance
of the company with a first and second loan, contributing about
five of the fourteen million pounds sterling. Upon the granting of
the first loan the city received representation in the company and
with the second loan the representation became control.
The revenues of the canal have been disappointing. The city
has had to meet the interest on its stock by taxes and the private
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92 The Annals of the American Academy
stockholders have had little return on their investment. It is
generally considered that the commerce of the place has greatly
improved. The coming of ocean ships to the heart of the city
has been a great aid and the opening of the canal in 1894 was immedi-
ately followed by sweeping reductions in railway freight rates. It
was estimated in the first two and a half years after opening the direct
saving in tolls and freight rates for the district amounted to ten million
dollars. It should be remembered, however, that this saving was
to the community at large and did not take the form of returns
on the capital invested.
777. Private Ports.
The most important class of private ports is that dominated by
the railroad companies. The coming of railways coincided with
and helped to produce a great boom in all branches of commerce
necessitating the reorganization of port administration and equip-
ment. All ports that were of first importance at the time of the
coming of the railroad, except London, were thus reorganized under
public or semi-public control. No private enterprise could cope
with the situation in a port with a large and well-established trade.
At the same time there were many small, often local, ports with
commerce too insignificant to warrant the building of first-class docks
and harbors under the then existing conditions, and had such been
desirable, they could not have been built by the weak communities
that would have used the improvements. Such ports, however,
offered the rapidly extending railways an opportunity to secure
their coveted terminal facilities and port connections by building
the same in places where land was cheap and possibilities. of port
development seemed propitious. So it was that the railway com-
panies became the creators of ports or the improvers of ports, in
places where the population and commerce did not warrant any
other method.
Southampton is probably the most conspicuous port in the class
and the list includes Cardiff, Hull, Harwich, Grimsby and many
minor ports throughout the kingdom.
The history of Grimsby is a good example of the progress and
development of a railway port. It is particularly good because
it shows how a railway may create both a port and a city. In 1801
this port was first improved by the opening of a dock by a private
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British System of Commercial Administration 93
company. Later it was sold to the Manchester, Sheffield & Lincoln-
shire Railway. This line, running east and west through the indus-
trial districts of Central England, desired an outlet to the North Sea
and between 1846 and 1852 they built a new dock, the Royal Dock,
capable of admitting the largest war vessels. From that time to
the present this railway company and its successor, the Great Central
Railway Company, have improved and extended the docks which
are the port of Grimsby and now have a water area of 103} acres
with great extensions in view. The convenience and efficiency of
these docks are of the very best.
It may fairly be said that the railway with its harbor has made
the town. Five years before the railroad dock was begun, the town
had less than 4000 population, sixty years later, fifteen times as
many. Similar increase occurred in shipments of coal and fish and
in imports of timber and the entrances and clearances in the foreign
trade have grown nearly tenfold and now exceed those of Galveston,
Texas.
This railway company has not been content to act purely as a
harbor maker, waiting for others to create trade. The harbor, like
so much new trackage, was built to secure traffic. In 1864 Parlia-
mentary permission was obtained to run steamers to numerous
continental ports between Antwerp, Stockholm and St. Petersburg,
a large steamship company was bought out and direct service by
the company began in 1865. This service has been frequently
improved and extended. In 1891 daily sailings to Hamburg were
inaugurated. In 1889 a further Parliamentary grant authorized
connections to be established with practically all ports in Scandinavia
and the Continent east of Ghent.
While the railway company uses its docks as the terminus for
its own steamship lines there is no monopoly and it is a harbor in
the true sense and open upon payment of dues to ships of all com-
panies and nations alike. The company built it as a terminus, but
it is managed toward the public like any other public or private
dock company, as for example, the London docks or the Liverpool
docks. As at all British ports the dues charged are under parlia-
mentary limitations.
The experience of this railway company with the fishing industry
is a typical and successful example of the relation of the docks to the
prosperity of the railway. By catering in all possible ways to the
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94 The Annals of the American Academy
North Sea Fisheries and the requirements of the fishing boats,3 the
company has been able to increase its tonnage dues at the docks
through the entrance of fishing boats and then to secure in the
fish shipments a lucrative freight business for the railway. Inci-
dentally, population has thronged to Grimsby to carry on this
work and the railway profits by the freight traffic of the city.
The history of Southampton and other railway ports might
be rehearsed at length, but few new principles would appear. It
would be but a repetition of the Grimsby experience with variation
in details.
The tendency in British port ownership seems to be toward
private ownership and in the form of railway termini. The docks
of London will probably be transferred to a public trust and
there may be occasional repetitions of this movement and occasional
examples of municipalization; but the great ports are firmly fixed
and the greater number of changes within the past thirty years
have been toward the building of railway ports in the smaller cities.
The British railways are consolidated into a few strong companies
and the building of a dock as a part and feeder of a great system is
a natural step in its development. There is a tendency in commerce
at the present time toward the building up of numerous smaller
ports both for the foreign and the domestic trade. Few of these
places will reach importance without the railways provide the
facilities. They are of the size that the railways have taken hold
of in the past and the railway will usually feel the need of docks
and build them before the municipality or a public trust would
think of undertaking it. Such, at least has been the case in the
recent past and there appears to be no reason to anticipate a change
in the near future.
J. RussEix Smith.
University of Pennsylvania, Philadelphia.
8 Special fish docks were built, enterable at all times of the tide, with graving docks, floating
dry docks, hydraulic coal hoists to put coal directly into fishing steamers and an artificial
ice plant alongside the quay.
[524]
RELATION OF THE GOVERNMENT IN GERMANY TO THE
PROMOTION OF COMMERCE1
Prior to the unification ot the Empire in 1871, Germany repre-
sented an agricultural nation with few manufactures, with scarcely
any merchant marine and with comparatively little foreign trade.
Nearly two-thirds of the population was rural. Her industrial
capital was small and business in general was conducted with extreme
care and caution. Within the short space of a few decades, however,
the situation has been strikingly reversed, and her interests, instead
of being mainly agricultural, have become overwhelmingly those of
a manufacturing and commercial nation. Her population, already
equal to over 650 for every thousand acres of food-producing land,
still shows the surprising increase of eight per cent, during the
half decade from 1895 to 1900. No less than fifty-seven per cent,
of her fifty-six million people in 1900 were engaged in industry
and commerce as distinguished from agricultural pursuits; while
during the generation from 1871 to 1900 her urban population in-
creased fifteen and three-fourths millions as opposed to an increase
of only fifteen and one-third millions for the entire country. In
other words, Germany has reached an economic position which
is essentially that of the United Kingdom, of a country no longer
self-contained, but whose industries depend to an increasing
degree upon raw materials from abroad and one-third of whose popu-
lation is fed with foreign food. To protect herself against the vicis-
situdes of the future, Germany must necessarily become more and
more an exporting and maritime nation.
Such being the problem which demands solution, it is easy to
understand why the several governments, State and Imperial, have
utilized every means at their disposal to stimulate trade and navi-
gation. Indeed, government aid in Germany has been extended
so as to embrace every phase of commercial activity. In the first
1Among the chief authorities relied upon in this sketch are the British Diplomatic and
Consular Reports; The American Consular Reports; the Reports of the Commissioner oi
Navigation from 1899 to 1903; "Hamburg's Handel und Schiffahrt;" Lotz s "Verkehrsent-
wickelung in Deutschland 1800-1900;" H. R. Meyer's series of articles on German canals and
railways in the Railway Age for 1903; and Alfred von Weber-Ebenhoft s articles "Waterways
in Europe" in the International Quarterly for 1904. Special mention must be made of Dr.
Wiedenfeld's "Die nordwesteuropaischen Welthafen." Information has been freely drawn
from this work. It proved to be extremely valuable on account of its general and exhaustive
treatment of the subiect.
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96 The Annals of the American Academy
place, German manufacturers enjoy a foreign market which has been
vastly enlarged since 1891 through favorable treaty arrangements.
Large sums are expended annually in fostering industrial and com-
mercial education to an extent seldom met with in other countries
and with results which have called forth warning notes from British
and American Consuls in all parts of the world. The shipbuilding
industry is favored not only with preferential railway rates and
an exemption from the payment of customs duties on shipbuilding
material, but also with a monopoly in the construction of national
war vessels and subsidized mail steamers. Furthermore, the Im-
perial Government has embarked upon a policy of subsidizing the
merchant marine. Over 7,000,000 marks are paid annually in the
form of mail subsidies to those lines which are engaged in the Asiatic,
Pacific and African service. While this sum is paid, nominally,
for carrying the mails, there can be no doubt that an equally impor-
tant reason is the desire to strengthen the navy, to free German
commerce from the agency of foreign nations and to extend German
trade and influence to those parts of the earth where her position
is weakest and where private initiative, if left to itself, might prove
inadequate.
All these methods of assisting commerce, however, constitute
only a part, and perhaps the smallest part, of the general system
of government aid. In her search for a short cut to commercial
power, Germany, like all the great nations, has emphasized the
importance of cheap and easy transportation in the winning of
distant markets. Neither money nor labor has been spared in an
endeavor to facilitate transportation to the innermost parts of
the empire and to unite the highly ramified system of artificial
and natural waterways of the interior with the larger commercial
life of the ocean. It is to a discussion of this last phase of German
commerce that the present paper is principally directed. In this
connection it will be attempted to state briefly the essential facts
with reference, first, to the control and improvement of the harbors ;
and, secondly, to the relation which exists between these harbors
and the interior through the network of rivers, canals and rail-
ways.
/. The Management of Harbors.
Although the Imperial Government of Germany exercises a
large measure of control over the merchant marine and over naviga-
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Promotion of Commerce in Germany 97
tion on interstate waterways, it possesses, broadly speaking, no
authority to construct or manage harbors, this function being
intrusted solely to the care of the several States.
In Hamburg and Bremen the harbors are operated as State
property, the work of construction being placed in the hands of
a special department for this purpose and the general supervision
and care of the harbor being exercised in Hamburg by a Depart-
ment of Trade and Commerce and in Bremen by a Department for
Harbors and Railways. Over both these departments stands the
Senate of the State, which exercises the ultimate executive power.
All expenditures for purposes of construction and operation are
borne by the two city-republics themselves, and are defrayed from
general taxation. The receipts, on the other hand, are merged
with the general income of the State, there being no necessary
connection between the expenditures for harbors and the receipts
derived therefrom.
In the case of both these world-ports, the State either owns
or controls the larger portion of the warehouse system. Bremen,
for example, in return for a stipulated percentage of the net earnings,
furnishes the ground and constructs the buildings, but does not
interfere with the management or business activity of the system,
except as regards the regulation of the warehouse dues. Ham-
burg, on the other hand, does not in the main assume the duty of
constructing the buildings, but merely leases the ground for a certain
percentage of the net earnings to a Free Harbor Warehouse Asso-
ciation. This association, while obliged to construct all neces-
sary buildings and bear all financial losses, is, nevertheless, subject
to a large measure of State control. To the Senate belongs the:
right of regulating the warehouse dues and of determining the
nature of the buildings to be constructed. Likewise all acts which
involve an increase in the capital stock or indebtedness of the asso-
ciation, or a change in its rules must be sanctioned by the Senate.
Finally, the State is represented in the directorate of the association
and possesses the power to suspend any act of that body until the
Senate may have passed on its expediency.
What has been said concerning Hamburg and Bremen holds in
a general way for the other German harbors. As a rule, their
construction and management is intrusted to the care of local boards
or commissions subject to the general supervision of the State:
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98 The Annals of the American Academy
in Luebeck to a Board of Public Works and the police authority,
in Rostock to a Board of Public Works, and in Wismar to a Harbor
Department. In Prussia the management and improvement of
harbors is conducted either under the supervision of the Board of
Public Works for each respective city or by permanent commissions,
which are local in character, but which must receive the sanction of
the State as regards harbor improvements and other important
changes. To be specific, all harbor matters in Stettin are man-
aged by a Board of Public Works; in Kiel, by a Harbor Commis-
sion ; in Flensburg by a Harbor and Bridge Commission ; in Swine-
muende, by a Royal Commission of Navigation officiating as a local
authority; and in Koenigsberg by a Royal Harbor Police Com-
mission. The operating expenses, as a rule, are borne by the local
communities and are defrayed from the harbor receipts.
77. Improvement of Harbor Channels.
During the last twenty-five years nearly all the leading sea-
ports of Northwest Europe have exerted themselves to the utmost
in an endeavor to adapt their facilities to the growing conditions
of international trade. Indeed, practically all the leading ports,
with the exception of London, have remained close rivals in this
respect during the whole of this period. This strenuous compe-
tition may be attributed, first, to the rapidly increasing size and
draught of ocean steamers, and, secondly, to the struggle between
these ports for the Eastern trade and the consequent desire to
accommodate ships of the Suez standard. The less anyone of these
harbors is dependent upon the influence of tide, the greater is the
advantage of that port. Hence any effort on the part of one harbor
to deepen its channel or to improve its facilities for landing, loading
and unloading, has resulted in a corresponding effort on the part
of the other ports.
As regards the channel leading from the sea to the landing place,
the German-Dutch-Belgian ports cannot be said to have been
favored by nature. Whatever position these harbors now hold has
been the result of vast labor and expenditure and the improve-
ments have by no means been completed. Hamburg, until about
1850, possessed a channel measuring only from 4.0 to 4.3 meters
in depth at high tide. At an enormous expenditure this depth
has been increased to 8.3 meters, while arrangements have been
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Promotion of Commerce in Germany 99
made for a further increase of 1.7 meters. Bremen has also labored
under unusual difficulties since its original channel measured only
2.5 meters in depth. After an outlay of some 50,000,000 marks,
however, this city has secured a channel which can accommodate
ocean-going vessels with a draught of 6 meters.
The three Dutch-Belgian ports have each abandoned their
original channel during the nineteenth century, and with the help
of the State have constructed for themselves an entirely new open-
ing to the sea. Amsterdam has received fully 37,000,000 marks
from the State during the last thirty years for the improvement
of the North Sea Canal and has increased its depth to 9 meters,
so that all ships, except the very largest, can obtain an easy access
to the port. Rotterdam, assisted liberally by the National Govern-
ment, has secured the construction of a new channel at a cost of
approximately 61,700,000 marks. For Antwerp the State has also
expended large sums toward deepening and straightening the channel,
and, according to plans now being arranged, it is intended to increase
the present depth of 6 meters at low tide and 10.4 meters at high
tide to 8 and 12.4 meters, respectively. In the case of every one
of these ports large sums have thus been expended to secure a suit-
able waterway. With the exception of Bremen, each port has
also plans arranged for or under prosecution, which, when com-
pleted, will enable it to receive vessels with a draught at least equal
to the Suez standard.
///. Improvement of Harbor Facilities.
The rivalry between the leading ports of Europe concerning
the improvement of their channels also exists in the provision of
basins, wharves, warehouses and other necessary equipment. Enor-
mous sums have been paid by most of the ports in rendering easier
and swifter the process of loading and unloading. Particularly
is this true of Hamburg, nearly all of whose harbor facilities have
been constructed during the last twenty years. Even as late as
1866 all sea-going vessels were obliged to anchor in the open stream,
and the whole process of loading and unloading had to be conducted
by means of lighters. About that time, however, Hamburg began
the construction of a series of improvements with the result that
to-day her system of docks and piers is reputed to be the best in
existence and her ship lines, according to Dr. Wiedenfeld, enjoy an
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ioo The Annals of the American Academy
ease of communication with the shore far superior to that furnished
by the English ports.
Besides possessing probably the best system of warehouses
in the world, Hamburg has made admirable connection with the
railways and interior waterways. Separate harbor basins have
been constructed for the numerous canal and river boats where
they may remain to await the arrival of steamers. The steamer
basins have been constructed with a view to making a swift transfer
of freight to and from vessels the prime consideration, any gain
in this respect meaning of course a corresponding gain in the length
of available piers. The wharves, besides being exceedingly spacious
and built of durable material, are amply supplied with hydraulic
machinery. At the present time the basins cover an area of 336.4
acres, while the total length of quays approximates 8.5 miles. Ex-
tensions are now being made, however, which will increase the area
of the basins to 612.56 acres and the length of the quays to 12 miles.
When this project is completed Hamburg will have spent some
180,000,000 marks since 1880 for its harbor facilities — of which sum
the Imperial Government contributed 40,000,000 marks at the time
of Hamburg's accession to ttye Customs Union — and this enormous
outlay does not include the large sums expended in deepening and
otherwise improving the channel, or in constructing the excellent
system of warehouses. It only requires the further deepening
of the channel, for which arrangements have already been made,
and the completion of the extensions referred to above, to make
Hamburg's harbor satisfy the highest requirements of modern
efficiency.
What has been said of Hamburg is true of Bremen and the
Dutch-Belgian ports, though on a smaller scale. In the provision
of appliances for loading and unloading freight these harbors are
practically on a par, and meet the latest requirements. In all,
too, the construction of the harbor was so arranged that the new
warehouses would be situated at once near the water and in the
immediate vicinity of the large mercantile offices.
Limiting our discussion to the sums expended, it appears
that subsequent to 1885 Bremen has paid in round numbers 93,-
800,000 marks for its harbor facilities, exclusive of the 50,000,000
marks devoted to the deepening of the channel. Of this sum the
Imperial Government contributed 12,000,000 marks when Bremen
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Promotion of Commerce in Germany 101
joined the Customs Union in 1888 and 1,800,000 marks towards
the construction of the Kaiserdock at Bremerhafen. Exclusive
of the expenditures for the improvement of the channel, Amster-
dam has spent 42,500,000 marks for its harbor facilities; Rotterdam
about 30,000,000 marks; 'while Antwerp since 1879 has paid approxi-
mately 130,000,000 francs, of which sum the State contributed
considerable more than one-half. Large sums have also been
expended in Stettin, Danzig, Kiel, Emden and other smaller ports
on the North Sea. Stettin after an outlay of some 40,000,000
marks has secured a harbor which is not only beginning to share
in the American trade, but which at the expense of Copenhagen
and Gothenburg, is rapidly acquiring more and more of the Russian
and Scandinavian trade. Altogether, it has been estimated that
the several governments of Germany have devoted about $1 25,000,000
since 1888 towards the improvement of harbors, and that of this
sum about six-tenths has been used for the channel and other facili-
ties of Hamburg alone. This single port, it has been said, "has
spent more money than any other two harbors in the world together
during the last score of years to perfect its technical facilities."2
IV. Commercial Growth of Harbors.
Along with the large expenditures for harbor improvements
there has followed an increased power to handle traffic and a tre-
mendous growth in the importance of these harbors from the stand-
point of international trade. This becomes especially clear if one
compares the net registered tonnage of vessels entering and leaving
the various ports. Thus the total net registered tonnage of vessels
engaged in foreign trade has been compiled as follows for the eight
leading harbors of Northern Europe :
TOTAL FOREIGN TRADE IN THE YEAR. 3
1000 Net Registered Tons.
1870 1880 1890 1900
London 7,116 10,577 ■ 13,481 16,701
Liverpool .6,773 9,659 10,941 11,668
Hamburg 3,200 5,529 10,417 16,088
Bremen 1,325 2,345 3,482 5,032
Antwerp.. 2,282 5,982 9,022 13,366
Rotterdam 2,096 3,368 5,754 1 1 ,733
Amsterdam 714 1,463 2,068 2,972
Havre 2,321 3,912 4,419 4,406
A glance at the above table will show that the tonnage of Ham-
*Wolf vonSchierbrand: "Germany: The Welding of a World Power," p. 201.
8Wiedenfeld's "Die nordwesteuropaeischen Welthaefen, p. 361.
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102 The Annals of the American Academy
burg in 1900 (16,088,000) is but slightly less than the tonnage
of London (16,701,000); while Antwerp and Rotterdam each
has a tonnage which about equals that of Liverpool. It appears,
furthermore, that the tonnage of the three ports of Hamburg,
Rotterdam and Antwerp has increased during the last thirty years
by 443 per cent, as opposed to an increase of only 135 per cent,
for London, only 72 per cent, for Liverpool, and 90 per cent, for
Havre. Indeed, during the single decade from 1890 to 1900 the
total net registered tonnage for the first three cities increased over
63 per cent., whereas for London, Liverpool and Havre the increase
but slightly exceeded 13 per cent. For the year 1902 the total
imports and exports of Hamburg were approximately $1,707,664,000
and for Antwerp $660,060,000, as opposed to $528,741,000 for Bremen,
$1,260,290,000 for London and $1,138,700,000 for Liverpool. It
is interesting also to note that the combined trade in tons of the four
ports of Koenigsberg, Danzig, Luebeck and Stettin has increased
by approximately 50 per cent, during the decade from 1890 to 1900,
or at a rate not very much below that of Hamburg and Bremen.
V. Construction of Canals and Canalization of Rivers.
The extraordinary growth which we have just noted in the
sea navigation of Hamburg, Bremen and the Dutch-Belgian ports
can only be explained by their good connection with the German
interior. It is the relation to a large and productive interior, more
than any other factor, which determines the international importance
of harbors, and Hamburg, be it said in this connection, is more
favorably situated than any other city of the Old World. Its
influence extends not only over most of Germany and Austro-
Hungary, but, as regards certain commodities, even into Russia
and Switzerland. Besides being the terminal of seven systems
of railways, this port receives the traffic drained by an extensive
network of inland waterways which carries its influence into central
Europe. The Elbe and Moldau rivers, navigable for a distance
of 582 miles, secure for Hamburg the trade of the region around
the important centers of Magdeburg, Dresden and Prague. The
Saale, Havel and Spree rivers drain the commerce of Thuringia
and Berlin; while the Oder-Spree and the Finow canals make
tributary to this port a large portion of the trade from Silesia, the
whole Upper, Middle and Lower Oder, as well as the Warthe. In
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Promotion of Commerce in Germany 103
large measure this extensive system of waterways is navigable
for ships of 400 tons, and, in the main, does not require the payment
of tolls.
Bremen, as contrasted with Hamburg, is at a disadvantage
when we consider inland navigation, its influence being confined
chiefly to the relatively unimportant Weser. The Dutch-Belgian
ports, however, derive traffic from the rivers and canals of nearly
the whole of Northwest Europe. Besides controlling the trade of
the numerous waterways of Holland and Belgium, they share in
common the commerce of the Rhine. This river is navigable as far
as Mannheim (a distance of 560 km.) for ships of 1500 tons, and
to Strassburg (700 km.) for ships of 800 tons. Through its princi-
pal tributaries — the Meuse, the Mosel and the Main — it also draws
to these ports much of the trade drained by the numerous canals
of France and Western Germany. The Meuse, for example, has
been rendered navigable through canalization for ships of 300 tons
for a distance of 600 kilometers. Through canals this liver has
also been connected with the Rhine, the Seine and the S£one-Rhone,
thus making tributary, especially to Rotterdam, much of the trade
from all of Northern and Eastern France. The Mosel, navigable
to Nancy for 200 ton ships, is likewise united with the system of
French canals. The Main has been canalized so as to be navigable
for ships of 1500 tons as far as Frankfort, for 120 ton ships as far
as Bamberg, and from there has been connected with the Danube
through the Ludwig canal. Proceeding still further up the Rhine,
we find that Strassburg has been united with the whole of Alsace
and with the S&one and Rhone by means of canals which can accom-
modate ships of at least 200 tons.
This extended account of existing waterways is given with
a view of showing the extent to which the State has assisted com-
merce by constructing canals and canalizing rivers. The importance
of such aid cannot well be overemphasized. Transportation by
water has decided advantages over transportation by rail inso-
far that cheap and bulky commodities can be carried much more
cheaply over long distances, and, secondly, because tolls on those
artificial waterways of Germany which belong to the State are
levied strictly in accordance with the cost of maintenance and
replacement.
These two advantages of water transportation — cheap con-
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104 The Annals of the American Academy
veyance for bulky commodities and a tariff policy varying with
the cost of maintenance — are of fundamental importance in Ger-
many where the railways constitute a State monopoly used largely
as a revenue producing agency of the government, and where the
leading manufacturing centers and the principal sources of fuel
and raw material are situated remotely from the coast. This be-
comes especially apparent when it is remembered that the receipts
per ton-mile concerning the traffic on the rivers in Germany varies
between 0.176 ct. and 0.519 ct., and upon the canals from 0.346
ct. to 0.692 ct.,4 whereas for the railways the average earning per
ton-mile in 1899 was about 1.42 cents. Roughly speaking, there-
fore, the rates on the rivers and canals may be said to be about
one-third as high as those charged on the railways. Moreover,
there is the important consideration that subsequent to 1875 the
average receipts per ton-mile on the waterways decreased about
50 per cent, as opposed to a decrease of only 15 per cent, on the
railways.5
Along with these low and declining freight rates has gone
a marvelous increase in traffic. During the twenty years from
1877 to 1897 the number of canal and river boats increased 28
per cent. ; the carrying capacity of these boats, however, increased
during the same period to 3,400,000 tons or 143 per cent.; while
the actual traffic increased 159 per cent. Practically all the recent
canal projects of the country have in view the accommodation
of 600 ton ships west of the Oder and 400 tons ships east of that
river. In 1900 the canals and rivers carried approximately 24
per cent, of the total traffic of the country, the average haul being
320 kilometers or twice that on the railways.
It is from the standpoint of the import and export trade of
the leading ports, however, that the importance of interior water-
ways has shown itself most prominently. By weight about one-
half of the export trade to the Dutch ports from the region along
the Rhine and about three-fourths of the import trade moves by
river. Indeed, during the decade ending in 1900 the trade of Rotter-
dam by way of the Rhine has nearly trebled and at present exceeds
the railway traffic of the city by almost two times. Likewise,
of the extensive trade between Hamburg and the region tributary
*H. R. Meyer: Railway Age, July 17, 1903. pp. 62.
*Ibid.
[534]
Promotion of Commerce in Germany 105
to the Elbe and Oder rivers and the Oder-Spree canal, over four-
fifths by weight and nearly three-fifths by value is carried by water.
These figures illustrate the tremendous importance of inland
navigation in developing industry and in enlarging the export trade.
Yet in the effort to extend water-routes to every part of the Empire
Germany has been only one of a number of European countries,
which are all striving to accomplish the same end. Some notion
of this activity may be gained from the statement that since 1830
Belgium has spent in the neighborhood of five hundred million
francs on its inland waterways. France, according to its programme
of 1879, nas already devoted thirteen hundred million francs toward
the improvement of its rivers, canals and harbors; while Austria
and Russia are likewise executing extensive improvements along
this line.
In Germany, moreover, projects are under consideration, which,
if carried out, will add greatly to the 5495 kilometers of artificial water-
ways existing in that country. The Prussian Canal Bill communi-
cated to the Landtag in January, 1901, proposed an expenditure
of nearly four hundred million marks. Besides providing for the
opening of the whole region of Silesia by means of canals, and the
canalization of a number of important rivers, this bill empowered
the government to construct a Rhine-Weser-Elbe-canal, an Oder-
Vistula canal and a large waterway between Berlin and Stettin.
The Elbe and Oder being already connected, this bill contemplates
a union of the five great rivers of Germany which flow into the
North and Baltic seas. Among numerous other projects may be
mentioned the proposed enlargement of the Danube-Main canal,
and the plan of Austria to unite the Danube with the Elbe-Moldau
and the Oder. If these plans are realized, it will mean not only
a union of the five great rivers of Northern Germany with their
numerous tributaries and branch canals, and a continuous waterway
from end to end of the German Empire, but through the Rhine
will also mean a union of these waterways with the Seine, the Saone
and the Rhone. Moreover, the Danube will be connected through
separate canals with the Rhine, the Elbe and the Oder, thus consti-
tuting an uninterrupted water-route from the North Sea to the
Black Sea. The principal obstacle to the realization of these larger
plans is the opposition of the Agrarian Party. But Germany is
rapidly outgrowing its agricultural conditions, and there is every
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106 The Annals of the American Academy
reason to believe that an important form of State aid to commerce
in the future, as in the past, will be the construction of canals and
the canalization of rivers.
VI. Influence of Preferential Railway Rates.
In the foregoing pages the discussion has been concerning the
improvement of harbors and interior waterways. It now remains
to discuss briefly the manner in which the State has endeavored
to facilitate transportation by rail.
Owing to the central position of Germany in Europe, her ports
and railways must necessarily compete with those of the surrounding
nations. To meet this competition and to assist in developing
home industry and the export trade, the railway management of
Prussia has from time to time introduced numerous so-called prefer-
ential railway tariffs. In the main, these tariffs have also been
adopted by the other German States, the various railway manage-
ments presenting in this respect a united policy in the interests of
the whole nation. Compared with the rates of other leading
European nations, these preferential tariffs are conspicuously low,
and are applicable at present to no less than 63 per cent, of the total
railway ton-mileage of the country.8
A detailed examination of these preferential rates shows that
they operate to the advantage of the German North Sea harbors
as opposed to the Dutch-Belgian ports, the Russian Black Sea
harbors and the Austro-Hungarian ports on the Adriatic. Even
at the expense of its own seaports, Prussia has granted preferential
rates to Hamburg and Bremen in order to assist them in their compe-
tition with the harbors of Northwest and Southwest Europe. Thus,
for example, to divert traffic away from the Dutch-Belgian ports
preferential rates are granted in the trade between the German
coast and the Rhine-Westphalian region on tobacco, cotton, fish,
coffee, rice and a variety of other commodities, the rate being as
low for the distance from Essen to Bremen as for the distance from
Essen to Amsterdam.7 Likewise, to counteract the influence of
the harbors on the Adriatic and Black Seas, preferential rates are
6For a complete statement of all the preferential railway rates in force on the Prussian
State lines in 1897, see the list prepared by Mr. W. S. H. Gastrell (British Accounts and Papers
for 1898, vol. xcii, p. 54). For the most important additions to Mr. Gastrell's list of 1S97,
see the list prepared by Mr. Robert Collier (British Diplomatic and Consular Reports, No.
574, Miscellaneous Series, Feb., 1902. A Report on Prussian Railways).
7Wiedenfeld: "Die nordwesteuropaeischen Welthaefen," p. 322.
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Promotion of Commerce in Germany 107
accorded to cotton, tobacco, coffee, rice, hides, iron ore, petroleum
and a large variety of articles which are forwarded via Germany
to Austro-Hungary, Russia or Roumania.8
Other instances may be mentioned to show that where the
interests of German industry or international trade make it desirable,
the German railway managements have not refrained from granting
preferential tariffs without regard to the nationality of the port.
To illustrate, the Dutch-Belgian ports, though deriving a large
share of their trade from the interior waterways of Germany, are also
dependent for another large portion upon the railways of Germany.
It is true that much of their trade is diverted to the North German
coast ; but on the other hand, they enjoy the benefits of special rates
in the exportation of such commodities as coal, grain, iron and other
minerals and the importation to Southern Germany and Switzerland
of products like coffee, tea, cocoa, pepper and rice.9
One other important feature of the German system of rail-
way rates remains to be noticed, namely, the so-called Levant
and East African Traffic Tariffs. According to these tariffs, intro-
duced respectively in 1890 and 1895, largely reduced rates are
granted by the State railways to goods exported from the interior
of the country to a large number of places in the Levant and East
Africa, as well as to stations on the Oriental and East African railways.
Aside from a reduction in the usual rates, these traffic tariffs also
offer the advantage of sending goods on through bills of lading from
the place of departure to the foreign point of destination. Summar-
ized according to different classes of goods the reduction in freight
afforded by this arrangement is as follows: "For the goods of
Special Tariffs II and III only 1.5 to 1.7 pf. is charged instead of
3.5 and 2.2 to 2.6 pf., for the goods of Special Tariff I only 2.0 to 3.0 pf .
instead of 4.5 pf., for all other goods in car-load lots only 3.0 to 3.4
pf., for piece goods only 3.5 to 4.5 pf. instead of 6 to 11 pf. per
km".10 In general the rates are about one-half as high as the ordinary
rates and appear to be unusually low as compared with the tariffs
of other European nations. The British Select Committee in its
report on foreign ship subsidies for 1902 shows that the cost of
transportation on the German railways, as concerns the Levant
and East African tariffs, is only one-third to one-fifth as high for
•Wiedenfeld: "Die nordwesteuropaeischen Welthaefen," p. 322.
•Ibid.
™Ibid.t p. 323.
[537]
108 The Annals of the American Academy
a large number of commodities as the British rate and concludes
that "these reduced rates have been and are fixed in accordance
with the experience gained in Germany as regards the working cost
per train-mile over long distances and that the primary object is
the building up, promoting or increasing of German export trade
to the countries in question and the enabling it to complete successfully
with the trade of other foreign States to those countries/ '
Summary of Results of Germany's Policy.
From the foregoing review it must appear that State aid to
commerce in Germany has been both liberal and general. It has
manifested itself prominently in industrial and commercial educa-
tion, in the development of the shipbuilding industry and the mer-
chant marine, in the improvement of harbor channels and harbor
facilities and in the construction of canals and the promotion of trans-
portation by rail. Much of this assistance has been given by the
States as distinguished from the Imperial Government. In the
main, however, the several States have acted in harmony, and, as
was seen in the case of Prussia, have not unduly emphasized local
interests to the detriment of other parts of the Empire. Their funds
have been expended judiciously and in a manner not at all prejudicial
to national progress.
Viewed from the standpoint of material results, the paternal
attitude of the Government towards commerce has been productive
of wonderful results. Since 1872 the import and export trade of
the country has increased by 72 per cent, and 100 per cent., respec-
tively, and the exports of ^233, 890,000 in 1902 compare very favor-
ably with the British exports of ,£277,552,000 for that year. More-
over, Germany has become a daring investor and promoter. Official
estimates place her foreign investments at about five billion dollars,
or a sum equal to half the foreign investments of Great Britain.
The growth of her shipping has also been phenomenal. During the
twenty years ending in 1900 Germany has increased the steam ton-
nage of her merchant marine elevenfold; while the total tonnage
has increased nearly fivefold. From fourth place which she held
in this respect in 1880, she has risen to second and has increased
her portion of the world's entire merchant fleet since that date
from 6.6 to nearly 10 per cent. Her shipbuilding industry has
sprung into existence almost wholly since 187 1 and has developed
[538]
Promotion of Commerce in Germany 109
so as not only to provide for the greater share of her own rapidly
increasing demand for ships, but also to fill orders for other countries.
In a word, the progress of Germany has taken place along all lines,
in manufacturing, trade, shipping and shipbuilding. However
important other factors may have been in bringing about this general
advance, there can be no doubt that Germany furnishes an excellent
example of the salutary influence which the State may exert in foster-
ing those phases of commercial activity upon which the domestic
prosperity and international prestige of a nation is principally
dependent.
Solomon Hubbner.
[539]
THE PRESENT PROBLEMS IN THE ECONOMIC INTER-
PRETATION OF HISTORY1
To the man of theory and often to the man of practice the
study of history seems a useless occupation. Both have an interest
in the present and demand solution for present problems. Has
history anything to offer these men and can its methods be applied
to the investigation of present conditions? At first sight the theorist
gains little from its perusal. He finds the attention of historians
limited to events of little present importance; wars occupy more
space than the avocations of peace and personal affairs are discussed
to the neglect of social tendencies and principles.
If a reader overlooks the prolix statements of non-essentials
to which some historians are prone and seeks principles to guide
present action what does he find but the familiar assertion, "His-
tory repeats itself?" Driven back from history, the searcher for
present guidance once more resorts to theory in the hope that some
light may be struck that shows the road he is blindly seeking. But
all in vain.
Is there no link between these two disconnected methods of
research? Must the past be interpreted by a method that yields
no valuable results and the present by a method that discards
all reference to the past?
This opposition and these defects continued for a long time before
any remedy was suggested. Historians sneered at the theorist
and the economist had an openly expressed contempt for those
who did not use his methods. It is only of late that a new method
of research has arisen, giving to history a wider meaning and offer-
ing to the economist a test for his theories.
Progress in this direction has, however, been slow. The his-
torical appetite for facts is in a measure satisfied by the study of the
economic conditions of earlier times. It acted as a limitation on
theorizing to know that the conditions economists emphasized
as parts of a perpetual economy were of recent origin and have
application to but a small section of humanity. The doctrines of
1An Address delivered at the International Congress of Arts and Science, St. Louis, Sept-
ember 1904.
[540]
Economic Interpretation of History 1 1 r
free competition, personal liberty, free trade, individual bargaining
and like tenets of the current economic philosophy thus lost their
position, of supremacy and sunk into the company of the minor
doctrines that are plainly limited by time and space.
The resulting changes in mental attitude are in a large measure
due to the efforts of the historical economists who taught the limi-
tations to which all economic doctrines are subjected. Yet in spite
of a breadth of view and great command of facts they did not destroy
the old school but merely compelled its adherents to make more
modest statements. This failure was due to the lack of a method
of historical interpretation in harmony with the facts they were
using and the conditions they were investigating.
Economic history and the economic interpretation of history
are different concepts and have been forced upon public attention
by two different groups of thinkers. Economic history is a question
of facts — of the discovery and utilization of those facts of yesterday
of which the economist of to-day avails himself. The economic
interpretation of history is a study of these data and of the method
of utilizing them. It enables us to reason about past events in the
same way we reason about present events and to find common
principles that will apply to both. Economic dogmatism concen-
trates attention on the dominant features of a given age or nation.
Economic interpretation eliminates dogmatism by comparing the
dominant features of many ages and clearly presents their points
of difference and similarity. In this way a new theory arises with
a broader basis and more closely in touch not only with history but
also with the sciences from which the economic premises come.
There are, however, two diverging lines of thought, each of
which is called an economic interpretation of history. One group
of men ask what light can history throw on present events? Their
interest is in the present and they use history as a method of inter-
preting it. The other group ask: What light can our knowledge
of present events and conditions throw on those of past ages? The
first group assumes a knowledge of the past superior to that of the
present and hopes to use this knowledge to clear away the difficulties
of interpreting contemporary events. The second group contends
that our knowledge of present economic conditions is greater than
that of past ages and hence that it can help us to supplement our
meager knowledge of the past.
[541]
ii2 The Annals of the American Academy
If we wish to be accurate in the use of terms this first viewpoint
should not be called an economic interpretation of history, but an
historical interpretation of the present. That which is interpreted
is not history but current events, while the method used is not eco-
nomic but historical. It is only the second viewpoint that attempts
to interpret history and does it by an economic method.
It will add to the clearness of the contrast if the term "history"
be eliminated. History in both cases is used in a popular way and
as a result its interpreters fall into a needless conflict with those
historians who want the facts of the past rather than their present
significance.
It would be clearer to speak of the social interpretation of
current events instead of the historical interpretation. Those who
employ this method are interested in social affairs and use social
methods of investigation and social principles oftener than historical
methods and principles. It is still more clear to speak of the tra-
ditional interpretation of current events. The facts presented and
the ideals emphasized are those which, wrought over into popular
tradition, have become motives prompting intuitive response.
The popular historian seizes the telling events of the world's history
and by recounting them vividly tends to make people act to-day
as their forefathers acted in the epoch-making struggles through
which the race has gone. "Act to-day as your fathers acted in
their day." This advice may seem the hand of history, but it is the
voice of tradition. The economic interpretation of history starts
with an analysis of present conditions and opens the way to a theory
of social causation. In contrast with this method the historical
interpretation of present events accepts the traditional view of the
past and uses social prediction as a means of exerting social influence.
The prophet strives to be a social leader. Economic interpretation
as a method thus stands in contrast with social prediction. There
is no real opposition between economics and history or between eco-
nomics and sociology. It is only in the field of prediction that opposi-
tion appears. The scientific historian avoids the conflict by refus-
ing to predict, but as the historian becomes modest, the social
enthusiast becomes bolder, and, using the same methods as the
predicting historian, he falls into similar errors.
Should social investigation begin with a study of the past and
predict events from it as a base, or should a study of the present be
[542]
Economic Interpretation of History 113
first made and its results be used to interpret the past? Of the past
we have social tradition; of the present we have economic knowl-
edge: Which is the more reliable as the basis of deduction?
Were not the knowledge of the past defective its study might
give a starting point equally valuable with economic interpretation
that starts from the firm foundation of present fact. The first
canon of social prediction is, "History repeats itself." A series of
repeated effects occurring under similar social institutions gives
ground for the judgment that these institutions will always produce
like effects.
In contrast with this, economic interpretation starts with the
assumption that like economic causes produce like social results.
Prediction can be made from one race or civilization to others only as
the economic conditions back of them are the same. It is not like
race, like institutions, like tradition or like consciousness of kind
but like economic conditions that give a sound basis for prediction.
Social prediction is of necessity based on data drawn from different
races, institutions and civilizations. This evidence has little value
unless a similarity of economic conditions exists as the antecedent
of race, institution or civilization. An economic interpretation of
past events must therefore precede valid prediction.
There are two channels in which thought runs and two bases
on which it rests. The physical environment of a man is made
up of objects upon which welfare depends. The force that per-
petuates and increases this contact is desire. No object is a part
of the conscious environment of men until they desire it or the
means of avoiding it. Thought based on desire or arising out of its in-
fluence is plainly economic. But thought has another element not
derived from the immediate objects of interest: This is tradition.
Past conditions and events do not persist. The events and condi-
tions of to-day cease with to-day, but new ones appear to-morrow.
Economic conditions are thus short-lived, but the habits and thoughts
that yesterday's conditions evoked live on and modify the present.
The newer biology makes the distinction between natural and
acquired characters and affirms that the latter are not inherited.
All acquired knowledge must pass from generation to generation by
the repeated impressment of habits and thought upon the individuals
of succeeding generations. This knowledge depending on constant
repetition for its continuance, is tradition and imitation is its great
[543]
U4 The Annals of the American Academy
vitalizing force. Economic thought is the social expression of desire
as tradition is the social expression of imitation. These two forces
control current events and the differing interpretations of the past
and the present depend upon the relative emphasis given them.
Professor Giddings has shown that the stimuli arousing activity-
are of two orders.2 The original stimuli come from the immediate
environment; the secondary stimuli are the products of past social
life kept alive in the present. These products of past social life
have, however, only one way of being continued and that is through
the constant repetition that creates tradition. The original stimuli
also are of no importance unless they awake response and this
response is desire.
Changing the viewpoint from stimuli to that of response to
stimuli, makes desire and tradition the sole forces that determine
present action. In this contrast tradition includes all of the pro-
ducts of past responses that have been continued through imitation
reinforced by repetition. These traditions blend and as they blend
they become the basis of history, institutions and ideals. Desire
operating under favorable conditions creates mobility of men and
goods. This mobility concentrates men in productive regions
who bring with them the traditions of the localities they leave.
The mixing of population forces a blending of traditions. Opposing
elements are suppressed while similarities are emphasized and
around them the old traditions cluster in new forms. These blended
traditions are elevated into morality, broadened into ideals and pro-
jected as standards of future action.
Each new mingling of population due to an increase of resources
makes a breach between economic conditions and inherited social
traditions. Before an equilibrium is re-established a transformation
of tradition takes place, giving higher ideals and better institutions.
The breach between economic thought and social idealism is thus
steadily widened and the opposition between them is more pro-
nounced. In its lower forms tradition is the result of conflict and
reflects the opposition arising when men contest for the meager results
of isolated localities. It is usually expressed in race feelings and
hatreds. In its higher forms, however, tradition is an expression
of likeness. A consciousness of opposition and fear is replaced by
a consciousness of kind.
2A Theory of Social Causation, a paper read before the American Economic Association
at the New Orleans meeting.
[544]
Economic Interpretation of History 115
Each element in a composite population has its own traditions
which blend with other traditions only when the common points are
emphasized and the antagonisms are suppressed. The oft-repeated
stories of the old life are retold so as to interest larger audiences.
To each group of hearers the newly-told story can have a meaning
only when it incorporates some of the tradition with which it is
familiar. Writers and orators instinctively suppress points of dis-
cord and blend and elevate what appeals to all. Tradition is thereby
transformed into idealism and becomes a standard far above that
realized by individual men.
Government in England, for example, is plainly a group of
traditions. Transferred to America it becomes political institutions,
transferred again to cosmopolitan France it appears as political
ideals, while in centralized Germany it is further transformed into
social democracy. Each step has resulted from the discarding of
local antagonisms and the emphasis of generalized truth.
Because of the simple conditions under which the Republican
party arose it could concentrate its attention on three evils, Rum,
Romanism and Rebellion, but in recent years to meet the conditions
of a more composite population it has been forced to elevate its
standards and to generalize its principles until it appeals to the
classes, sections and races it formerly antagonized. The narrow
tradition of the primitive American is thus transformed into a
broad liberalism and the American Government becomes capable
of handling race problems that our forefathers left untouched.
A labor leader who undertakes to organize unskilled laborers
finds a race consciousness built up on race antagonism. When
his thought is translated into the language of his hearers, words
are used which express the hatreds surviving as race traditions.
The employer is associated with the foreign misrule and the pent-up
feelings which in their old homes went out against their race oppres-
sors, are turned upon him. A class consciousness is thus developed
that submerges the race antagonisms of earlier epochs and prepares
the way for a broader citizenship. Race responses are replaced
by class responses and these by social co-operative responses, which
in turn are elevated into a democratic cosmopolitanism. Every
transformation of tradition gives to its standards a greater coercive
force. The result is idealism which by covering the future as a
social projection gains a universality akin to religion.
[545]
n6 The Annals of the American Academy
Social mobility arises from the pressure of increasing desire;
social stability from the growth of tradition. Social projection
is the union of the two to be realized only in the distant future.
With these forces at work there can be a steady transformation of
tradition from a crude form of ancestor worship to an attractive
social Utopia where all ideals become realities.
I give below some of the stages through which thought passes
during this transformation. In a rough way they indicate the line
of progress though no claim is made to strict accuracy :
Imitation, Biography,
Tradition, History,
Ancestor worship, Romanticism,
Hero worship, Literary lore,
Primitive poetry, Individualism,
Precedents, Idealism,
Codes, Social democracy,
Morality, Social projection.
Social democracy fixes the attention on the present and hence
tends to emphasize the distribution of wealth. Social projection
pictures an improving future and concentrates interest more on the
accumulation of the wealth and the bettering of industrial pro-
cesses than on its distribution and consumption.
I hope it has now been made clear that the traditional interpre-
tation, the historical interpretation, the social interpretation and
the idealistic interpretation of current events are practically the
same. They differ from one another only in the degree that the
idealistic transformation of thought has taken place. They all
strive to influence the present and to improve human conduct through
the study of past examples. The blending of traditions accomplishes
this result and hence tradition and history pass over into idealism
by easy stages. Economic practice becomes tradition and tradition
is restated until it is transformed into institutions, ideals and social
principles. All this helps to make good conduct, but it is not a
safe basis for prediction.
We cannot accept this traditional interpretation because tra-
dition has been transformed by its growth. Still less can we accept
an "economic" interpretation of current events, because other
[546]
Economic Interpretation of History 1 1 7
than economic causes have helped to shape the present. The "all
economic" or material interpretation of the present is defective
because it neglects the effect of heredity and tradition on human
conduct. The traditional or idealistic interpretation is likewise
defective because it neglects the changes in economic conditions that
make present sequences in events different from those of the past.
Through the economic interpretation of the past the similarities
and differences in present and past conditions are brought to light
and the limitations to social prediction become manifest.
Nor is economic interpretation the method of economists as
opposed to that of historians and of sociologists. Economists are
bound as tightly as other thinkers by the chains of tradition. The
rapid development of the Ricardian tradition is evidence of this.
Nor is the new thought exclusively the work of economists. Von
Ihering's ''Evolution of the Aryan" stands the tests of economic
interpretation better than does the work of Karl Marx. The theory
of exploitation is the transformation of a class tradition into a
form of idealism. This is of social importance, but not an economic
law.
I give below some of the canons of economic interpretation so
that the validity of social creeds may be more easily measured.
Economic interpretation tests these as science tests the miraculous
in nature.
i. Like economic causes produce like social effects.
2. Progress depends on the increase of resources.
3. An economic interpretation of past events must precede
an historical interpretation of present events.
4. Economic interpretation must precede social prediction.
5. Social causes have economic antecedents.
6. A study of economic epochs should precede a study of nations
and races.
7. Traditions blend which in their union strengthen and ele-
vate each other.
8. The greatness of men is due not to their moments of
inspiration, but to the conflicting disciplines to which they have
been subjected.
Much of the present confusion of thought would be obviated
if it were kept in mind that progress depends on an increase of
resources. In the study of an epoch or nation it must first be deter-
[547]
n8 The Annals of the American Academy
mined whether resources are decaying or improving. The decline
of Rome was inevitable as soon as Italian resources fell off. Rome
could extend its rule by conquest and make individuals and even
armies wealthy by plunder, but this burden on the conquered races
helped their decline, which in turn further weakened the Roman
State.
It was the long, steady pressure of decaying resources that
crushed Rome as it has crushed other nations similarly situated.
Immorality and extravagance hurt to-day, but they have little
permanent influence if the creation of wealth has gone on unimpeded.
Each age brings up new men under the discipline of work and their
descendants give tone to the succeeding age. Should they drop
out through wrong-doing, their places are filled by a new generation
of workers as new blades of grass come in the place of those cut.
Give rain and we have grass; give work and we have men.
We need not go beyond the domain of geography to seek the
error in the social and historical lore that is made the basis of current
prediction. The region occupied by the Western civilizations of
the Old World is divided into twro parts by the Alps and the chains
of mountains that extend eastward. Asia Minor, North Africa and
the south slope of Europe are thus one geographical unit. The
north of Europe forms a similar geographic unit. The Gulf Stream
gives up its moisture to the Northern Plain. The westerly winds
in the central basin are dry, bringing little moisture from the ocean
beyond. Droughts are common and the source of great misery.
The vast northern plain suffers from an excess of rain and from
a lack of sun. Its crops, like the cereals can stand plenty of rain,
while root crops prevail in the central basin where heat and sun are
abundant though rain is deficient. I need not go into details to show
that these two regions stand in marked contrast and that scarcely
a physical feature which is important in the one prevails in the
other. If economic forces count, these two regions should produce
radically different civilizations, institutions and social traditions.
The German differed essentially from the Roman when the two
civilizations came in contact. But as the Southern civilization
proved superior the traditions, institutions and culture of the South
were impressed on the North and so thoroughly has this work been
done that the imposed institutions and social traditions now seem
a second nature. We have so completely exchanged ancestors
[548]
Economic Interpretation of History 119
that we think in the terms of the Roman, Greek and Semite rather
than in terms of the German. We accept as precedents the traditions
developed to meet the conditions of the dry, hot South and forget
to test them by a comparison of the two environments. Roman
precedents are good in North Europe only in so far as their physical
characteristics are the same.
Viewed in this way it will be seen how completely predictions
based on the conditions of the South fail when applied to the North.
The history of the Southern regions shows a succession of races and
nations each having a period of prosperity followed by a period of
decay and a final disappearance. That nations have a period of
youth, manhood and decay — that the history of each individual
life is repeated in the history of nations — is a view based on the eco-
nomic conditions of Southern Europe and Western Asia.
But is this law of the rise and decay of nations a general law
or a peculiarity of the region where Southern civilization arose?
It is plainly a local law. I have only to show that the slight rain-
fall of these regions has geologic causes in order to demonstrate that
the decline of nations was due neither to social conditions nor failings,
but was the inevitable result of changed climatic conditions.
Progress is due to the increase of resources ; decline in civiliza-
tion follows a failure of resources. A tragic end awaits a nation
cramped by a reduction of the food supply. There are many ways
of proving this, but I shall take a bold one that demands some
imagination. The land masses of this Central Basin seem in early
historic epochs or in those that immediately precede them to have
risen to higher levels, converting many depressions occupied by
lakes and seas into sandy wastes. Lower the level of the Sahara
by 500 feet and it would become an inland sea. When this region
was covered with water the southwest winds were moist and carried
abundant rains to the eastern plateaus. Arabia and Persia could
then have lakes where now there is only blowing sand. The high
lands would have a verdant foliage and be fit centers for growing
nations.
When civilized men gained a foothold in this region the eleva-
tion of land may have been completed and the decline in rainfall
begun. The uplands would so become fine grazing land and the
lowlands would be centers of agricultural activity. Careless tillage
and the destruction of trees would increase the natural denudation
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120 The Annals of the American Academy
of the uplands and render them less habitable. This would force
an unrest in the upland population, a movement to lower levels
and a struggle for their possession. This contest once begun, would
be a perpetual process. Each downward movement of population
would develop a new civilization enduring until another unrest
in the highlands brought a new horde of barbarians to destroy it
and in turn to develop a new one. Region after region was thus
denuded and civilization after civilization fell before the steady-
pressure of the upland races forced out of their habitat by the increas-
ing dryness. A decreasing rainfall and an increasing denudation of
land forces nations to move rapidly through the various stages of
progress and in the end crushes them through the lack of resource.
There is, therefore, a long series of these short-lived nations,
each repeating the other's history, because back of them were the
same processes of growth and decay. The tradition of these
sequences is the basis of the maxim that history repeats itself, while
the struggles to resist invasion by developing the hero idea gave
rise to the modern notions of character. But the law is neither
an historical nor a social law ; it is merely the pressure of geologic
changes on the civilization of a given region. Outside of the great
central basin the law fails of verification because the climatic con-
ditions are altered.
In marked contrast with these climatic conditions are those of
the great Northern Plain of Europe. A rank vegetation keeps up
the fertility and usually replaces what is lost. Each generation
sees North Europe more productive and capable of supporting a
larger population. Growth and stability will thus be a character-
istic of the Northern nations so long as the Gulf Stream flows. They
have a perpetually improving economy giving a firm basis for endur-
ing social institutions.
No nation of North Europe goes down as the Southern nations
went down one after the other. A reconstruction of national bound-
aries often takes place ; but with each reconstruction comes a period
of renewed growth and prosperity. France has been the only
apparent exception. Instability in government followed its great
social revolution and gave to traditional views a new life. But
order and stability have again been restored and the steady progress
of France compares favorably with other nations.
If this be true the traditional view of the course of history
[550]
Economic Interpretation of History 121
needs correction and the mass of Southern traditions imposed on
Northern nations by the new civilization that Christianity brought,
must each be tested by means ot a comparison between the con-
ditions under which it arose with the conditions that now prevail.
The narrowness and defects of Southern traditions will then be ex-
posed and the ground cleared for a new view of history based on the
conditions and experience of North Europe.
• The realization of this great break in economic conditions due
to the transference of civilization from the South to the North of
Europe and the consciousness that many of our cherished traditions
are abnormal, help us to a fruitful study of present conditions.
A new break of similar magnitude has been made by the transference
of civilization to America.
The civilizations of North Europe are enduring because then-
basis in climatic conditions is secure; but while enduring they are
narrow and cramped because their food resources are so limited.
A wet, cold climate is good for grass and the cereals and therefore
bread and meat become the standard of life. The pressure of popu-
lation raised their price and kept the common people poor and
dependent. Under these conditions a civilization could continue,
but not without great abnormalities due to high prices. All these
restraints were escaped in America and for the first time a natural
level of food prices permits a normal development of civilization.
Not only has America a better food supply than Europe, but the
barriers to commerce have been so far broken down as to make the
food supply of the whole world available at our great centers.
A new civilization is now possible to which those of the past
can offer few analogies. Individual struggle has practically ceased.
A sufficiency of food comes to the unskilled laborer and the increase
of population even when augmented by a million immigrants a
year does not increase the pressure. We have higher standards
to-day with 80,000,000 people than we had two generations ago
with 40,000,000 people and we could support 300,000,000 with as
great ease and with as little individual struggle. Surely this is
a break of a magnitude that the world has never before seen and
should be followed not only by a great uplift in social standards,
but also by changes in traditions, institutions and ideals that will
separate our civilization from its predecessors and give it not only
perpetuity but breadth.
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122 The Annals of the American Academy
The facts on which this judgment rests are so familiar that they
will, I fear, make dry reading. Our resources and growth have been
often pictured, but men do not realize what they mean. They think
of our traditions, institutions and ideals, transferred in the main
from other civilizations, as unchangeable possessions and fail to see
the growth and transformation through which all things social go.
I must repeat these familiar facts, however, to make my point
as to the present importance of the economic interpretation of
history.
The Great Central Plain of North America is a vast storehouse
of food. We have the wheat that Europe has, but we have it more
abundantly. We have more extensive grazing regions and with
corn for fodder have superior facilities for raising cattle. Pork
never took its proper place in the diet of the world until the great
cornfields of the West came into existence. Of all these stable
articles of ancestral diet vast quantities more might be raised without
putting undue pressure on the soil. Our warm summers and clear
climate make root crops even more productive than the cereals.
To think of the changes in diet that the cheapening of sugar has
made is to realize in a measure what an increase of population will
follow the full utilization of available root crops. We have com-
bined the resources on which the civilization of North Europe
depends and those which made the ancient civilizations of the
South. The emigrants from South Europe find here a possible diet
like that of their home countries and in its use they evoke qualities
in our soil that lay dormant as long as the Northern races were fed
from it.
In addition to these home possibilities the nearness and accessi-
bility of the semi-tropical regions, of the West Indies and Central
America make many new foodstuffs available and in quantities
practically unlimited. Measured in food, these regions can support
as great a population as can the United States ; and cost is less than
that of the home supply. We need only a fruit and a vegetable-loving
population to utilize these new food materials, and it is at hand in the
emigrants from Southern and Central Europe who already have
habits and traditions favorable to a vegetable diet. Surely, then,
their influence will cause a break in Anglo-American traditions and
a nearer approach of the American diet to the possibilities of Ameri-
can conditions.
[552]
Economic Interpretation of History 123
This food supply could not be made available nor could the
absorption and assimilation of Southern races take place without
the recent cheapening of the cost of transportation. Even delicate
fruits can be carried halfway round the world at a reasonable cost
and with ice and cold storage they can be evenly distributed through-
out the year. The new diet can, therefore, have a freshness and
variety superior to any before available.
Coincident with this improvement in food and transportation
have come social betterments that have lengthened life and made
people more healthy. Great scourges like the medieval plagues
are no longer possible and fevers are so well under control that
they have ceased to be grievous afflictions. A normal length of
life is for the first time possible to the working population and when
traditions of hygiene and right Irving have developed among them,
suffering from ill health will be a negligible quantity.
To attain all these advantages a rapid increase of capital is neces-
sary ; and fortunately the growth of the saving instinct has kept pace
with other improvements. A slight change in the rate of interest
calls forth capital enough for our great enterprises. There is as
little limit to its growth as there is to our other resources. When
it is freely used by healthy, well-fed men civilization enters
a stage distinct from any of its past forms.
Food, health, capital and mobility of men and goods are the
four essentials to progress. All of them are now abundantly sup-
plied and capable of indefinite increase. Must not this be the basis
of a great social transformation, changing our institutions, habits
and traditions until they establish a social adjustment as complete
as the present economic situation permits? If there was a break in
traditions, institutions and ideals when civilization moved from
Southern to Northern Europe a still greater crisis is before us when
American civilization matches American possibilities. History
repeats itself when economic conditions remain static, but the crude
application of its maxims aggravate evils when economic transforma-
tions are in progress.
The picture I have drawn of economic changes will not be
complete without a third illustration of the limits of social prediction.
Progress having hitherto been on race lines, tradition emphasizes
the idea of race supremacy. Sharp distinctions have been drawn
between nations and their habitats ; and one's own kindred are as-
[553]
124 The Annals of the American Academy
sumed to be right, while strangers and enemies are wrong. The
mountaineer is pronounced superior to the plainsman, the country-
man to the urban dweller and the men of cold regions to those of
hot climates. Buckle's contrast between the emotional East and
the intellectual West is a western tradition without geographic
truth. Just as baseless is the dictum that political stability is impos-
sible south of the frost line.
It is also claimed that civilization must be Teuton or Anglo-
American in racial quality, and that its environment is a narrow
strip of the temperate zone in North Europe and America. But in
fact the barriers to the expansion of civilization on which these tra-
ditions rest have been swept aside. More than ever civilization
is economic and far more extensive than before are the geographic
bases of material prosperity. The essentials of progress, security,
food, health, capital and mobility of men, of goods and of thought
are now found in many regions outside the wheat belt of the north
temperate zone and other races than the Germanic possess the
combination of essentials and benefit by it. The expansion of
civilization to new places and races has begun and will not end until
the level of Southern and Eastern life has been raised to that of the
North and West. Cuba and Porto Rico have to-day better con-
ditions than Virginia had two centuries ago and in Japan is a happier
combination of essentials than could have been found in Elizabethan
England. Surely if England and Virginia could make men under
their conditions, Japan and Cuba can likewise attain the level of
our present civilization.
Great as is the good that flows from the bettering of economic
conditions, a still greater springs from race assimilation and the
blending of traditions that succeeds economic contacts. Society
is perpetuated through its traditions rather than through its heredity.
Mobility of goods is less necessary to a general advance than is mobil-
ity of thought. By contact we shall raise our own ideals and gain
as much as the Eastern and Southern races will. Religion, morality,
political institutions, public law and literature will all be revivified,
lifted and freshly idealized.
The intellectual and national awakening of the races of Southern
and Eastern Europe and of Japan shows the presence of a leaven
that will transform their static traditions into dynamic forces more
vivid than those of the Anglo-American. And the moral awakening
[554]
Economic Interpretation of History 125
in England and America which demands fair play and justice for
men of other races and lands is an index of a broadening and elevating
influence that will delocalize Anglo-American traditions and make
us truly cosmopolitan. Such interruptions and transformations
of tradition narrow the realm of social predictions as strictly as do
the modifications of economic conditions.
The present crisis demands a knowledge of the transformation
in tradition when breaches occur between it and the economic situa-
tions in which it arose. But we cannot safely go into an unknown
future with a mere knowledge of present economic conditions. Nor
can we safely follow the traditions of the past formulated as the
basis of historical and social prediction. We must study the past
through the present and the present through the past. This is
economic interpretation and it is a vital present need.
Simon N. Patten.
University of Pennsylvania, Philadelphia.
[555]
COMMUNICATION
THE POLICE SYSTEM OF LONDON
The police system of London is probably the most satisfactory feature
in its government. A foreigner who is asked for his impression of our city
usually commences with an encomium on the London policeman. The typical
policeman is a well set-up fellow, of no great intelligence, but with a good deal
of common sense; he is invaluable in regulating the stream, or rather the torrent,
of traffic down our busy streets; he is useful when one wants to find one's way
about and I have known his advice asked and accepted even on such points
as the best theater to go to or the nearest dentist.
A closer study of London policemen will reveal a slight point of difference;
it is in the cuff on the sleeve of their uniforms and you learn that the red and white
cuff is the mark of the city policeman, while the blue and white cuff is the badge
of a member of the Metropolitan Police Force. You have come across another
example of the dual system which pervades London Government; that which
centers round "the City," the historic London and that which concerns itself
with the far greater area of the rest of the metropolis. We must consider each
separately.
The Metropolitan Police Force was created in 1829 by public statute. The
Metropolitan Police District established thereby embraces the whole of what is
now the County of London and any part of any parish or place within 15 miles
of Charing Cross which the Crown with the advice of the Privy Council may be
pleased to include. An Order in Council issued in 1840 included parishes in
Middlesex, Surrey, Kent, Essex and Hertfordshire. The size of the area is
688 square miles. Besides this district, the jurisdiction of the body we are
considering extends to the Royal palaces, His Majesty's Dockyards and stations
and the River Thames. The government of the police force throughout the rest
of the country is in local hands In the Metropolis, however, it is removed
from all local control and is administreed through the Home Office. The chief
official is the Commissioner of Police of the Metropolis, who is appointed by
the Crown by warrant under the Sign Manual. He possesses very extensive
powers under the provisions of the different Police Acts. From time to time
he makes and issues police orders and regulations which are subject to the ap-
proval of the Secretary of State. He may suspend or dismiss any member of
the force. He is empowered to make regulations as to dogs not under control —
such for instance as the famous "Muzzling Order" of Sir Charles Warren. He
has also a large number of miscellaneous duties to perform, such as that of
licensing chimney-sweepers, pedlars and hackney and stage carriages and their
drivers. Though he is appointed a Justice of the Peace for Middlesex, Surrey,
Hertfordshire, Essex, Kent, Berkshire and Buckinghamshire, he is not per-
mitted to sit in quarter or general sessions except for purposes immediately
connected with his office. He may not sit in the House of Commons during his
[556]
Communication 1 2 7
term of office or for six months after its expiration, and, though he may vote
at an election, he must not exercise his influence in favor of a candidate for a
constituency in any county in which he is authorized to act. He receives a
salary of £2000 a year and is assisted by three Assistant Commissioners
appointed in the same way and subject to the same disqualifications. There is
a further officer known as the Receiver who acts as Trustee and Treasurer.
He receives all payments and pays all outgoings; he enters into contracts and
holds property. For this purpose he is a corporation sole with perpetual succes-
sion. The Head office of the Metropolitan Police is in Scotland Yard.
Constables are enrolled by the Commissioners under the authority and to a
number approved by the Home Secretary. Besides their ordinary common-
law powers, they have numerous special duties and to possess the right of exe-
cuting in any part of England without endorsement, a warrant issued by a
metropolitan police magistrate. On certain terms, additional constables may
be appointed at the cost of the individuals who want them. Constables are
exempt from serving on juries or in the militia. They are conveyed at a reduced
rate by the railway companies. Until 1887 they had no vote at Parliamentary
elections. In that year, however, they were given the franchise. Moreover,
a constable who is prevented by his duty from voting at his own polling station
is entitled to do so at any other, on a production of a certificate from the chief
constable.
The City Police is regulated by a number of Private Acts commencing
with one passed in the year 1839. Its jurisdiction is limited to the City of Lon-
don, which, though only of an area of 671 acres, forms the heart of the whole
metropolis. The City Police, like the Metropolitan Police Force, is under the
command of a Commissioner; but he is appointed by the Common Council of
the city subject to the approval of the Crown. He can be removed for mis-
conduct by the Crown or by the Court of Aldermen. He sees to the organiza-
tion of the force, the appointment and dismissal of constables and the regula-
tion of traffic. In these matters, however, he acts subject to the regulations
of the Court of Aldermen and the Home Secretary. There is also a Police
Committee of the Common Council, the most important duties of which are the
fixing of the numbers of the force, the providing of police stations and the appor-
tionment of police rates to the different wards.
The Metropolitan Police and the City Police are thus quite distinct entities..
Yet it has been enacted that with a view to combination in times of emergency,,
the Metropolitan Police may be authorized by a Secretary of State at the request
of the Lord Mayor to act in the city under their own officers, and vice versa.
We have now to consider the number and cost of the police force in the
two areas. Fortunately for our purpose the financial report of the Metropolitan
Police and the annual report of the Police Committee of the City Corporation
have been issued quite recently.
The Metropolitan Police Force numbers 16,000 men. Their distribution
and pay on January 1, 1904 were as follows:
[557]
128 The A nnals of the A merican A cademy
Chief Constables 5 £600 to £800
Superintendents 30 320 to 495
Inspectors 513 132 to 394
Sergeants 2,101 94 to 158
Constables 13,868 66 to 92
Total 16,517
The population of this area is between six and seven millions. Taking
it at 6,500,000, we find that there is approximately 1 policeman to every 400
inhabitants. One-fourteenth of this number, however, are on leave every day
in accordance with the regulation granting one day's leave of absence in a fort-
night to every man. The total ordinary expenditure for last year was £2,200,000,
which on the same basis of population makes the cost just under £6 8d. per head.
In reality, however, the rate-payers contribute barely half of that amount. The
police rate is limited by a Statute of the year 1868 to 9d. in the £, and of this
5d. is borne by the rates and 4d. is contributed by the Government out of the
Local Taxation Account. Thus for the year ending March 31, 1904, £800,000
came from the rates and almost exactly £1,000,000 from the Government.
The balance was made up from miscellaneous sources, such as fines at the Metro-
politan Police Courts, which yielded £50,000 and licenses for the proprietors,
drivers and conductors of public carriages, which amounted to £40,000.
The authorized strength for the city police for public service, as stated in
the last report, was 1002 of all ranks. Fifty-six more were employed on private
service. The immense disproportion between the day and the night population
of the city may be realized from the fact that, whilst there is one policeman for
every 333 of the day inhabitants (as compared with 1 in about 400 in the Metro-
politan District), there is 1 policeman for every 27 of the night population.
On the latter basis the average cost per inhabitant was £4 4s. lOd. The total
cost of the force for last year was £174,000 of which £122,000 was contributed
from rates on the different wards and £40,263 from the resources of the corpora-
tion. The value of the property reported as stolen during the year was £20,000,
of which 27 per cent, was subsequently recovered. Seventy-nine candidates
for admission into the force were examined during the year. Sixty-four of these
were accepted and 15 were rejected.
The entire cost of the police force throughout the whole of London is thus
£2,374,000 and the total number of men is nearly 18,000. Although for seven-
teen years policemen have been able to vote at elections, it cannot be said that
as a body they have any political influence. Nor do questions relating to police
management form any plank in election platforms. Londoners as a whole
are well satisfied with the existing system. The London County Council have
been suspected at times of harboring the design of acquiring the control of the
police. Such a step, however, would meet with an immense amount of opposi-
tion in the Metropolis and it is most unlikely that, at least for many years to come,
a Government will be found to ask Parliament to sanction it. On the other
hand the separate administration of the Metropolitan and City Police is generally
[558]
Communication
129
felt to be anomalous and inconvenient- and \n *\,\* • .
reform may be introduced at no distant date " " * ^^ that *
Herbert m. Adler,
Inner Temple, London, Barrisler-at-Law.
[559]
BOOK DEPARTMENT
NOTES
Dissertations on Leading Philosophical Topics, by Alexander Bain,
IX. D., Emeritus Professor of Logic, University of Aberdeen, is a collection of
fifteen essays,1 mainly philosophical and psychological, all but two of which
have been reprinted, practically unchanged from Mind, where they appeared
through a series of years. One of the remaining two articles, on "The Scope of
Anthropology and its Relation to the Science of Mind," was a paper read to
the British Association, in 1885; the other, "On the Pressure of Examinations,"
is a defense of examinations in schools, being a criticism of a protest against the
examination evil, by Mr. Auberon Herbert, in 1888.
The Office of the Justice of the Peace in England: its Origin and
Development," 2 by Charles Austin Beard, Ph.D., a dissertation begun under
the direction of Prof. York Powell of Oxford, and completed under Professor
Osgood of Columbia University, is a study in the history of English local govern-
ment. It deals with the origin of the office of the Justice of the Peace and its
establishment and its development during the Tudor Period, ending with the
accession of James I. There are chapters dealing with the relation of the Privy
Council to the Justice of the Peace, the Constitution of the office and the pro-
cedure of the Justice Court.
William Penn,3 by A. C. Buell, is an interesting book that reviews the
career of the founder of Pennsylvania from the standpoint of one who has little
patience with and no sympathy for Quakerism, and yet who has the highest
respect and greatest admiration for Penn himself. Mr. Buell's thesis seems
to be that Penn was great in spite of his being a Quaker, a view somewhat novel
at least to most students and writers. While there is some basis for criticism
of the Quaker settlers of Pennsylvania, his vigorous denunciation of them as a
"fanatical rabble" (p. 264), "witless zealots" (p. 225), etc., is neither merited
nor justified.
The book is a study of Penn as an agent and promoter of secular civilization
rather than as a religious character. The treatment of Penn himself is dispas-
sionate and scholarly, the author regarding him as an "overpowering states-
man" though not enough of a practical politician to avoid making an occasional
mistake. The Code which Penn drew up for the West Jersey Colony is pro-
nounced "the greatest code in popular government that has fallen from the
pen of mortal man." One feature deserving especial commendation is the
1Pp.vi, 227. Price, $2.50. London, New York and Bombay: Longmans, Green & Co.
1903.
2Pp. 184. Price, $1.50. Studies in History, Economics and Public Law, Vol. xx, No. 1.
New York: The Columbia University Press, 1904.
3Pp. vi, 368. Price, $2.25. New York: D. Appleton & Co., 1904.
[560]
Notes 1nl
insertion of the full text of Penn's valuable description of the Indians as he
saw them in 1682-83.
Some slight errors exist, namely, "1751" for "1651" (p. 6), "initiation"
for "imitation" (p. 28), the date of the "walking purchase" should be 1737
instead of 1733 (p. 348), a reference to the "Established Quaker Church" (p.
286), and calling Joshua Carpenter a Quaker (p. 349).
The book is interestingly written and it is well worth reading for it justifies
itself by its sympathetic and yet non-partisan consideration of the motives and
actions of its "great" and "good" subject.4
France and the United States, by Jules Cambon,5 consists mainly of
speeches delivered by the author while he was ambassador of France to the
United States. The addresses are preceded by two essays, the first of which
is a sympathetic appreciation of Pierre Loti's " Iceland Fisherman." The second,
on " Diplomacy and the Development of International Law," has value because
it defines diplomacy from a contemporary diplomat's point of view.
As a diplomat and a patriotic Frenchman he seeks by all possible
friendly devices to link together France and the United States. So, whether
he speaks to patriotic societies in New Orleans or Washington, to university
faculty and students in Chicago or New York, his theme is fundamentally the
same. He would show to America France as she is; recall past acts of friend-
ship between the two countries, etc.6
The friends of the late Prof. Carlo Conigliani have recently published
a collection of his economic and financial essays which furnish abundant proof
of the versatility of their young author.7 Not many of them, however, are of
interest to the American reader not specially drawn to the study of Italian con-
ditions. Most of them have already been published in Italian periodicals.
Among those of a theoretical character are the essays on " Profit," on Loria's
"System of Economics and the Scientific Laws of Finance." There are also
essays on "American Building Associations," "Gladstone" and "English Finances
and Monetary Doctrines in Mediaeval France."
PiERRE DE Coubertin, well known in this country as a clever historical
writer, issues each year an interesting summary of the preceding year's events,
under the title "Chronique de France."8 These summaries, first published in
1900, are not mere catalogues of events, however. In fact, the event usually
forms merely the background, the starting-point for a philosophical disquisition
on French character, on the economic, social and political condition of the nation.
Nearly every aspect of the life of the people is discussed from the author's stand-
point. There are sections on the literary movement of the year, the progress
♦Contributed by Paul F. Peck, Ph.D. xt
sFrance and the United States: Essays and Addresses. Pp. 90. Price, $1.00. New
York: D. Appleton & Company, 1903.
•Contributed by Helen Scott Davison, Bryn Mawr College. ,
7Saggi di Economia politico e di Scienza delle Finanze, by Carlo A. Conigliani. Pp. 743.
Price, 8 lire. Torino: Fratelli Bocca, editori, 1903. ,
*La Chronique de France. Publiee sous la direction de Pierre de Coubertin. 2me Annee,
1901 and 3eme Ann£e, 1902. Pp. 266 and 272, respectively.
[561]
132 The Annals of the American Academy
of French colonial enterprises, the development of French science, etc., all in
compact, incisive and attractive form.
Deserving of high praise is Dr. Samuel B. Crandall's "Treaties: their
Making and Enforcement." 8 Although not such an elaborate treatise as But-
ler's recent work on the " Treaty Making Power" it contains valuable informa-
tion not found in the latter work and the material is far better digested and
arranged. Part I treats of the historical origin and development of the treaty
making provision of the Federal Constitution, the methods of negotiation and
ratification in the light of precedents, the part played by the House of Represen-
tatives in the making of treaties, the various forms of international agreements
and the execution of treaties. Part II is devoted to a discussion of the making
and enforcement of treaties in foreign countries, particular attention being given
to Great Britain and France. Particularly interesting is Part III, which treats
of the operation of treaties, the time of going into effect, rules of interpretation,
termination, etc. The value of Mr. Crandall's work has been recognized by
the Department of State and an edition of his monograph has been purchased
for the use of the American legations abroad.
Within the Pale, by Michael Davitt,10 the well-known Irish agitator, is
a story of the Russian Jew, ending with the Kishineff Massacres in the spring of
1903. Mr. Davitt reviews the history of the race and religious questions in
Russia from the viewpoint of a personal observer and describes vividly the
atrocities at Kishineff. The twofold purpose of Mr. Davitt's book is to "arouse
public feeling against a murder-making legend and to put forward a plea for the
objects of the Zionist movement."
If any one may be said to have written the history of England, it was
Green. That service has never been performed for America, but Mr. Henry
W. Elson11 has given us a work which makes us hope that it may yet be written.
His aim is "to present an accurate narrative of the origin and growth of our
country and its institutions in such a form as to interest the general reader."
This single volume contains about as many words as President Wilson's recently
published five-volume history, but it is hardly the equal of that work in some
other respects. The style is often attractive and nearly always tolerable.
Since the author has made very little use of source material, nothing striking,
either in matter or treatment is to be expected. The story of discovery and
colonization is told in much the same old way. Had Professor Osgood's notable
work on the "American Colonies" appeared earlier, Mr. Elson might have
profited by following more closely the treatment which evidently he had found
only in outline in magazine articles. This is particularly true with regard to
the distinction between the different kinds of colonies.
It is gratifying to find that Mr. Elson has not followed many of his prede-
8Pp. 255. Price, $1.50. Studies in History, Economics and Public Law. Vol. xxi, No. 1.
New York: Columbia University Press, 1904.
"Pp. xiv, 300. Price, $1.20. New York: A. S. Barnes & Co., 1903.
"History of the United States of America. Pp. xxxii, 811, xl. New York: The Mac-
millan Company, 1904.
[562]
Notes ,33
cessors in assuming that the next thing of any real consequence after the landing
of Columbus was the sailing of the Mayflower. The Susan Constant is men-
tioned by name and a reasonable amount of space is devoted to the first per-
manent English settlement. But any one familiar with the story of the Regulators
must feel that they deserve more than three lines. The Civil War was a great
event, but one may be pardoned for doubting if it deserves one-sixth of all the
space given to our history. However, the matter of proportion is a difficult
one to settle and it is likely that a committee of experts would find it no easy
task to agree upon this question.
Where there is so much to praise it may seem invidious to find fault, yet
this is just what the book needs. With the necessary correction it may become
an almost ideal one-volume history. At this late day one is surprised to find
a serious historian giving credence to the old Pocahontas myth and to the more
fully exploded one of the sword reputed to have been sent by Frederick the
Great to Washington. Poor old King George has had enough to bear without
being made to answer a petition from the Colonists by thundering out a procla-
mation of rebellion. The thunder preceded the receipt of the petition. The
well-known names of Breckinridge, J. E. B. Stuart and others are misspelled.
Mistakes in well-known dates throw doubt upon the author's accuracy where
he has departed from commonly accepted figures without giving any authority
therefor. The date of the Bland-Allison Act is given as 1875, though it is
referred to elsewhere as passed in 1878, which is the correct date. According to
Stanwood the highest vote received by Blaine in the Republican Convention
of 1892 was 182, against Mr. Elson's 132. In view of recent activity against
the trusts the Sherman Anti-trust Law would seem to deserve a fuller explana-
tion.12
Modern Socialism,13 edited by R. C. K. Ensor, is a valuable collection^of
writings of modern European Socialists. There are chapters by Sydney and
Beatrice Webb, Millerand, Kautsky, von Vollmar, John Burns and others, while
the topics discussed embrace a wide range. The programmes of the Socialistic
parties of the different countries are given. Curiously enough no American
writer is represented and scarcely any reference is made by the editor to America
outside of a brief paragraph, in which he expresses the opinion that Socialism
may come to us "in a flood." The articles are well chosen and the book will
be of service to students, particularly in showing the political significance of the
movement in Europe.
IT will be news to many people to learn that England is troubled with
the immigration problem. Such is, however, the case. In his volume on "The
Alien Immigrant,"14 Major W. Evans-Gordon, M.P. (lately a member of the
Royal Commission on Alien Immigration) is a first hand study of the Jewish
immigrant. The body of the book describes a visit to the Russian centers.
"Contributed by David Y. Thomas, Ph.D. •
f "Pp. xxxvii, 388. Price, $1.50. London: Harper & Bros. Imported by Charles bcnb-
ner's Sons, New York. , . . _ .
>«Pp. xii, 323. Price. $1.50. London: William Hememann. Imported by Charles
Scribner's Sons, New York.
[563]
134 The Annals of the American Academy
The recommendations of the Royal Commission are given and the American
experience is recited. The author believes in a restricted immigration under
the oversight of some responsible department.
West Virginia University Documents Relating to Reconstruction,
edited by Prof. W. L. Fleming,15 is a series of reprints illustrating the peculiar
social, political and economical conditions that prevailed in the Southern States
after the Civil War. Four numbers have appeared. They are ' ' The Consti-
tution and Ritual of the Knights of the White Camelia," the "Revised and
Amended Prescript of the Ku-Klux-Klan," "Union League Documents" and
"Public Frauds in South Carolina," etc.
Especially Opportune is a revised and enlarged edition of William Dudley
Foulke's "Slav or Saxon,"16 first published in 1887. It is Mr. Foulke's thesis
that a great struggle between Slav and Saxon for the supremacy of the world
has already begun. The recent and abundant evidence of Muscovite ambition
since the publication of the second edition in 1899 Mr. Foulke thinks confirms
the prophecy made in the original edition of his book. Intriguing Russian
diplomacy and broken promises in regard to Manchuria and Korea which led
to the war with Japan, Russia's perfidy towards Finland in destroying the
liberties of her people and the exile of the most distinguished Finnish citizens,
the outrages against Jews, and the arbitrary confiscation of Armenian church
property are some of the additional counts in the indictment against Russia.
The United States, Mr. Foulke insists, should unite with England and Japan in
the demand that Chinese markets shall be open to all nations on equal terms
and that "not another foot of Chinese territory shall ever be ceded to Russia."
A treaty guaranteeing the territorial integrity of China, he declares, would be
of inestimable value to mankind. Concerning the present struggle he expresses
the opinion that if Russia is victorious Japan will cease to exist as a nation
and will be "russified" after the manner of Finland, and that the Russian
despotism, language, literature and religion will be imposed upon the conquered
race.
The "Metric Fallacy," byHalsey and Dale,17 treats of the present status
of the metric system in various countries. The fallacy, according to the authors,
consists in the belief that countries in which the metric system may be legally
used are using that system to the exclusion of others. As a statement of the
existing chaos in weights and measures the book is admirable, though many of
the objections to the metric system are equally applicable to any system intended
to diminish the present confusion. The advantages of the metric system are
very lightly touched upon even if they are appreciated by the authors, whose
caustic treatment does not add weight to their argument.18
15Price, 15 cents each. Published by the Author, West Virginia University, Morgantown,
W. Va.
"Pp. 210. Price, $1.00. New York: G. P. Putnam's Sons, 1904.
17Pp. 231. Price, $1.00. New York: D. Van Nostrand Company, 1904.
"Contributed by F. H. Safford, Ph.D.
[564]
Notes ,35
The Charity Organization Society of New York City is to be congratu-
lated upon the social service it has rendered by publishing as the first annual
report of its Committee on the Prevention of Tuberculosis, "A Handbook on the
Prevention of Tuberculosis." The handbook is a volume of some 400 pages,
which reviews the work of the committee and contains in addition special
articles by such experts on various phases of the subject as Dr. Hermann M.
Biggs, Dr. S. A. Knopf, Dr. A. Jacobi, Miss Lilian Brandt, two sets of plans
for a municipal sanitarium, lists of institutions treating tuberculous patients,
bibliography, etc. The volume will be of great value to all who have to deal
not merely with specific cases of the disease but to those interested in housing
reform and preventive work in various cities.
In his book on Governor Tryon of North Carolina, Mr. Marshall DeLancey
Haywood19 declares that ever since he learned to rely upon documentary evi-
dence rather than the individual opinions of writers he has been convinced
that history has dealt too harshly with the memory of the Revolutionary Gov-
ernor of that colony. He regards it as entirely natural that Tryon did not turn
at the outbreak of the Revolution against the monarch who had twice confided
to him the government of important provinces — North Carolina and New York.
"In New York his years of toil in the upbuilding of that province have been to
a large extent lost sight of, while the minutest details of his hostility are cher-
ished and exaggerated . . . Tryon committed no act during the entire Revo-
lution which did not have its counterpart in the warfare carried on by Americans."
The book is well written, and prepared with an evident desire to tell the truth,
the whole truth and nothing but the truth.
A Century of Expansion, by Willis Fletcher Johnson, A.M., L.H.D.,20 is
a popular presentation of an interesting phase of American history. The author
directs attention in the Preface to the fact that the history of American expan-
sion is "something far more than a record of geographical extension, or even
of wars and treaties. It involves the history, in large measure, of constitutional
development and interpretation, of domestic institutions, of foreign relations
and of our whole national life." The opening chapters are devoted to the
English Conquest of the Ohio Valley in the French and Indian War, the acqui-
sition of the Northwest Territory through the expedition of George Rogers
Clark and of a part of the Mississippi Valley in the negotiations at the conclusion
of the Revolutionary War.
The author makes several mistakes in matters of detail. His statement
that after the French and Indian War England left the territory south of the
Ohio to the Colonies (p. 13) ignores entirely the royal proclamation of October
7, 1763, in which the charter rights of the original colonies were disregarded, the
governors of the Atlantic colonies being expressly forbidden to make any grants
of land beyond the heads or sources of the rivers which flow into the Atlantic
Ocean (cf. Winsor's "Mississippi Basin," pp. 428-31; also Winsor's "Westward
"Governor William Tryon and his Administration in the Province of North Carolina,
1765-1771. By Marshall Delancey Haywood. Pp. 223. Raleigh: (Uzzell), 1903.
20Pp. xi, 316. Price, $1.50. New York: The Macmillan Company, 1903.
[565]
136 The Annals of the American Academy
Movement," ch. iv). Two slight inaccuracies occur in the brief reference to the
expedition of James Willing (p. 45). This expedition did not stop in Natchez,
but continued to New Orleans, capturing an English merchant vessel as far down
the river as Manchac. Contrary to the author's view, Natchez did not at that
time belong to Spain, as the conquest by Galvez did not occur until nineteen
months after this expedition started from Pittsburg. In fact, this expedition
was not directed against the Spanish at all, but was intended to procure oaths
of neutrality from the inhabitants of British West Florida, who were living along
the Mississippi River. It is surprising to note the fact that the author gives
full credence to the Marcus Whitman legend (pp. 187-89). He makes the start-
ling contention that the United States should not have "accepted any com-
promise whatever" in the "54.40" contest (p. 190).
The most serious defect in the book is the inadequate treatment, or the
entire omission, of important phases of some of the subjects discussed.
Under this head should be placed the account of the peace negotiations in
1783 and the movements which culminated in the annexation of Texas. His
discussion of the constitutional right of the United States to acquire new terri-
tory (pp. 105-6) is not convincing. His position with reference to the comity
of nations and international equity is unfortunate (pp. 306-7).
The book is written in an attractive style and will instruct as well as enter-
tain.21
To the series of the Bibliotheque d' Economie Sociale mentioned in the
Annals for March, 1904, M. Henri Joly has contributed a volume on "L'Enfance
Coupable."22 In this he continues his studies outlined in a former volume on
"Corruption de nos Institutions" for M. Joly finds that the increase of juvenile
crime is due in large measure to the break up of some social institutions, as the
family, apprenticeship which leads to begging on part of children and to the
increase of morally abandoned children. Certain customs of courts and insti-
tutions are sharply criticised. The book deserves a reading by those dealing
with dependent and delinquent children.
American Pauperism and the Abolition of Poverty, by Isador Ladoff,28
is largely made up of an ill-adjusted mass of material from reports of institutions,
State Boards of Charities, Government bureaus, etc., with comments by the
author. The book is written as a critique of capitalistic society. The tables
given are probably true and there is no doubt that the social conscience needs
quickening. It may be questioned whether all such things will be avoided
under a socialistic regime as the author believes.
The Government and the Civil Institutions of New York State, by
Robert Lansing and Gary M. Jones,24 is a little book devoted (1) to a review of the
growth of the province of New York as shown by the provisions of the various
"Contributed by Franklin L. Riley, Ph.D., University of Mississippi.
"Pp. 222. Price, 2 fr. Paris: Lecoffre, 1904.
2*Pp. 230. Price, 50 cents. Chicago: C. H. Kerr & Co., 1904.
2*Pp. 204. New York: Silver, Burdette & Co., 1903.
[566]
Notes i^j
Constitutions, and (2) to a critical and analytical study of the present State
Constitution. There is a chapter on political parties and elections and a brief
resume" of the rights and duties of citizens. The book is intended to supplement
a treatise on Federal Government and institutions to be used as a text-book in
the schools.
To write a SERIES of essays which shall criticise strongly various social
evils of a proud people and which at the same time shall explain the spirit and
interpret the life of that people to strangers somewhat suspicious of what comes
from that land is no easy task. In his volume on "The Present South" Mr.
Edgar Gardner Murphy25 has done just this with remarkable success. Mr.
Murphy, formerly a pastor in Montgomery, Alabama, now executive secretary of
the Southern Educational Board, is an inheritor of the old traditions of the
South. He would be the last to claim that he spoke for the Southerners —
he speaks as one. Yet this little volume is one of the most important books
which the South has produced in many a year. It is not certain that
all Southerners will endorse it unreservedly, but it is a powerful and digni-
fied utterance of a typical, educated man of the South upon home problems.
Mr. Murphy discusses from various points of view the development of dem-
ocracy in the South out of the old aristocratic regime. As a result there is
some repetition which in nowise detracts from the interest of the book. Three
great problems are treated : education, child labor, the negro. There is no attempt
to minimize the evils in the present situation, but their genesis is traced and
measures of meeting them discussed.26
Manuel de Morale ET Notions de Sociologie, par Gaston Richard,27 con-
tains a clear analysis of the province of morals and sociological principles. The
author says in the first part of his book that morals has for its object, theoreti-
cally, the whole of the relations between knowledge and action; practically,
the relation between personal conduct and the conditions of social order from
which the personal conduct is inseparable. The author regards ethics or morals
as a science. In the second part of his book, ' ' Notions Elementaires de Sociologie,"
he defines the position of sociology to be "between the pure descriptive studies;
history, ethnology, paleontology and the abstract and analytic studies of which
political economy is considered a type. It is less concrete than the former and
less abstract than the latter."
A history of sociology is given and some discussion as to the two methods:
the deductive and abstract and the inductive and concrete. An analysis is
made of the value of statistics and other collected data. In conclusion he dis-
cusses the question of progress, showing the optimistic and pessimistic view.
The author is inclined to the optimistic view.
"Pp. xii, 334. Price, $1.50. New York: Macmillan Company, 1904.
"Contributed by Carl Kelsey.
27Pp. 103. Librairie Ch. Delagrave, Paris.
[567]
138 The Annals of the American Academy
Mr. Wolf von Schierbrand's "America, Asia and the Pacific,"28 is a fore-
cast of the part which the Pacific Ocean and the lands contiguous thereto are to
play in the future history of the world. It is the Pacific and its shores, islands
and vast inland regions, the author says, which are to become the chief theater
of events in the world's history. They are to become what the Atlantic and
the countries bordering thereon were in the eighteenth and nineteenth centuries.
For the mastery of the Pacific a long and gigantic struggle embracing all the
leading nations of the globe is soon to ensue. The equipment of the various
contestants, their points of strength and weakness are examined and the con-
clusions advanced that the United States is the best equipped nation for the
coming struggle. If the people of the United States will only make wise use
of their opportunities this nation will play in the Pacific the dominant note in
the concert of the great powers. Of our rivals for the mastery Germany is the
most dangerous and France the least. So Japanese competition need not be
taken into account while Russia will emerge from the present war too weakened
to cope with us in the struggle. The talk of "yellow peril," Mr. von Schierbrand
says, was started by Russia, is unworthy of consideration and should be relegated
to the limbo of oblivion. The part to be played by the Isthmian Canal in the
extension of our trade with South America and our commercial opportunities
in China are the subjects of stirring chapters. The Dutch East Indies are likely,
the author believes, to be lost to Holland and the chances are they will fall into
the hands of the United States.
Full of wholesome philosophy and interesting suggestions is Prof. N.
S. Shaler's little book, "The Citizen,"29 the aim of which is to "set forth the rela-
tion which the individual bears to the government that controls his conduct
as a citizen." Professor Shaler addresses himself primarily to young men and
women whom he says are commonly but erroneously supposed to be incapable of
understanding "large matters relating to the management of public affairs."
With this frame of mind the author undertakes to describe in sixteen essays the
elemental facts which young people should know concerning the relation of the
citizen to the society and government of which they are a part. Some of the
many topics discussed are the beginnings of government, the nature of liberty,
the limits of freedom, the practice of citizenship, party allegiance, the citizen
and the law, the origin and distribution of wealth, education, health, immigra-
tion, suffrage, the negro question, imperialism, municipal government, etc.
In the discussion of these topics little evidence of partisanship can be found.
The author's view of the negro question is sensible and in accord with the Booker
Washington idea of industrial education. Strongly in favor of an educational
qualification for suffrage he yet protests against the dislike of the negro as a
race, condemns severely mob violence and lynch law and in a plea for freedom
of opinion takes occasion to criticise somewhat caustically those who after the
late war with Spain refused to tolerate opposition to the Government's imperial-
istic policy.
"Pp. ix, 334. New York: Henry Holt & Co., 1904.
"Pp. 346. Price, $1.40. New York: A. S. Barnes & Co., 1904.
[568]
Notes
139
Professor Shaler's little book is well adapted for use in the schools on
account of the excellent collateral reading which it furnishes for a course in the
study of Civics.
The Messages and Proclamations of the Governors of Iowa, compiled
and edited by Prof. B. F. Shambaugh, of the University of Iowa, published by
the State Historical Society, is a five-volume series of 400 to 500 pages each
carefully compiled from the Territorial and State documents and arranged
chronologically. The value of such a service as Professor Shambaugh has rendered,
especially to the future student of history, will best be appreciated when we
attempt to realize the value of a similar service, had it been performed, in the
older States. The completeness of such a work requires the insertion of many
particulars which are not of general interest, yet these same particulars serve to
fill out the details of the impression which the student of our commonwealth
development will be glad to get. The work commends the painstaking editor-
ship of Professor Shambaugh.
Social Progress, a year book and encyclopedia of economic, industrial,
social and religious statistics30 is edited by Josiah Strong, President of the Ameri-
can Institute of Social Service, although the work was largely done by W. P. D.
Bliss, the editor of "The Encyclopedia of Social Reforms." The idea of such a
year book is good and much useful information is included. There are numerous
mistakes incidental to such a work, the bibliographies are defective and the
amount of space devoted to certain topics might be criticised.
In view of the increasing recognition of the value of manual training and
because of the influence which Hampton Institute has had upon the future of
the negro a biography of the man who founded this school is most welcome.
Samuel Chapman Armstrong31 was a rare man and his life story as told by
his daughter is one of fascinating interest. Among those who had to do with
educational measures for the negro Armstrong stands as one of the sanest and
most far-sighted. He planned Hampton and he trained Booker Washington.
The important and constantly increasing part which military government
has played in the history of the United States in time of peace despite our tra-
ditional prejudices against militarism is interestingly told by Dr. David Yancey
Thomas, in his "History of Military Government in Newly Acquired Territory
of the United States."32 Dr. Thomas has left for others the history of military
government during and following the Civil War and has confined his study
to the government of the various territorial domains acquired from foreign
nations from the time of their occupation by the military forces of the United
States until they were accorded territorial Civil Government or, as in the case
30p. 273. Price, $1.00. New York: Baker & Taylor Company, 1904.
3iA Biographical Study. By Edith Armstrong Talbot. Pp. vi, 301. Price, $1.50. New-
York : Doubleday, Page & Co., 1904. t. .
32Pp. 334. Price, $2.00. Columbia Studies in History, Economics and Public Law.
Vol. xx, No. 2. New York: 1904.
[569]
140 The Annals of the American Academy
of California, State Government. During this transition stage these territories
were governed under the direction of the President as military executive and
according to a method not expressly sanctioned by the Constitution. This
Mr. Thomas correctly describes as military government. As to Louisiana,
Florida, New Mexico and California Mr. Thomas' account involves practically
a political history of those Territories during the territorial period. The history
of Alaska, Hawaii, Porto Rico, the Philippines, Samoa and the Panama Canal
zone are treated with far less detail, rather too much so as compared with the
treatment of the domestic Territories, it seems to the reviewer. No one can
read Mr. Thomas' monograph and escape the conviction that the American
doctrine of the supremacy of the civil over the military power must be accepted
in a restricted sense and that there are unmistakable signs of a growing ten-
dency to depart from old traditions.
Vandervelde 's little book on "Industrial Evolution," reviewed in the
Annals some months ago, has been translated into German32 and into English.
Although Vandervelde is a university professor by profession, he has for some
years been practically the leader of the Socialistic movement in Belgium. His
views are in the main those of the German scientific Socialists of the school of
Marx; but his wonderfully clear and forcible style and manner of presentation
are all his own. The translation into German is the work of Dr. Suedekum,
member of the German Reichstag.
REVIEWS.
The Police Power. Public Power and Constitutional Rights. By Ernst
FrEund, Professor of Jurisprudence and Public Law in the University
of Chicago. Pp. xcii, 819. Price, $6.00. Chicago: Callaghan & Co. 1904.
Those who have known Professor Freund have recognized in him a scholar
of unusual promise in the fields of public law and jurisprudence. His mono-
graph on "Empire and Sovereignty, " reviewed in a recent number of the Annals,
showed that he possesses originality of thought as well as scholarship. The
treatise which he has now given us on the police power is truly a magnum opus.
Other works on the police power have appeared in the past, notably the treatises
of Russell, Prentice and Tiedman, but they have either lacked the elements
of scientific treatment and arrangement or comprehensiveness of treatment.
We have in Professor Freund' s treatise the work of a public lawyer trained in
American and Continental schools of jurisprudence and consequently his work
is marked by a breadth of view which does not characterize the older treatises.
Professor Freund restricts his conception of the police power to that group of
activities designed to promote the public welfare through restraints upon the
use of liberty and property and therefore excludes from his work much of what
has sometimes been included under the police power. He points out that the
mass of the decisions on the subject reveal the police power not as a fixed quantity
but as the expression of social, economic and political conditions and that as
**Die Entwickelung zum Socialismus. By Emile Vandervelde. Translated into German,
by Dr. Albert Suedekum. Pp.231. Berlin: (Verlag der Socialistischen Monatshefte) 1903
[570]
Public Power ond Constitutional Rights 141
these conditions vary the police power must continue to be elastic; that is,
capable of development. The most remarkable feature of the police power in
the United States is that it is practically a growth of the last quarter of a cen-
tury. Comparatively few — almost none in fact — of the thousands of statutes
and decisions to which Professor Freund makes reference have their origin
previous to the Civil War. During the brief period since then there has appeared
an enormous volume of legislation and judicial interpretation relating to the
public health, safety, morals and the various social and economic interests of
society. That activity will increase with the congestion of population in the urban
centers and the increasing complexity of modern civilization there can be little
doubt. An interesting revelation of Professor Freund's work is the fact that a
large and increasing amount of Federal activity now falls within the domain
of the police power, in spite of the belief of the framers of the Constitution that
they had left to the individual States the care and regulation of the various
social and economic interests of their inhabitants. This activity is both positive
and negative. The former rinds its source mainly in the power of Congress
over interstate commerce and includes such legislation as that relating to shipping,
navigation, combinations in restraint of trade, the suppression of traffic in
lottery tickets, and legislation relating to liquor, oleomargarine, adulterated
foods and other objectionable businesses of an interstate character. In view
of all this, Professor Freund correctly affirms that it is impossible to deny that
the Federal Government exercises a considerable police power of its own (p. 63),
and asserts that it must also be regarded as firmly established that the power
over commerce while primarily intended to be exercised in behalf of economic
interests may be employed for the protection of the public safety, comfort and
morals. That is to say, the power of Congress to "regulate" commerce as inter-
preted by the recent decisions of the Supreme Court means vastly more than
merely to "prescribe rules" as Marshall understood it. More important than
the positive police legislation of Congress is the negative power of control exer-
cised by the Supreme Court over the police activities of the States, in virtue of
the fourteenth amendment. Professor Freund points out that the prohibi-
tions upon the police powers of the States, established by this amendment and
interpreted by the Supreme Court in the Slaughter House Cases to apply only
to discriminating legislation against the negro race are no longer so restricted
in their application, but apply with equal force to all persons and even to
corporations. It is significant that there is hardly any important police legis-
lation which has not been questioned in the Supreme Court as violating the
fourteenth amendment and the Court has uniformly entertained jurisdiction
and examined the merits of all such cases. Indeed, reference to the recent deci-
sions shows that a large percentage of the cases now decided by that tribunal
have their origin in the police legislation of the States.
In arrangement Professor Freund's treatise is logical and scientific. Its
value to the student is enhanced by an elaborate table of contents covering twenty-
three pages, a table of not less than five thousand cases cited, copious foot-
notes and a comprehensive index of sixty-two pages.
James Wilford Garner.
University of Illinois.
[57']
142 The Annals of the American Academy
Korea. By Angus Hamilton. Pp. xliv, 313. Maps and Illustrations. New-
York: Charles Scribner's Sons. 1904.
Mr. Hamilton's book on Korea gives much information about that country.
The author shows intimate knowledge of the country and people, describes their
customs, pageants, cities and scenery and tells the reader the things he is most
likely to wish to know. The style is good, and the book seems to have been
carefully written. The foreign trade is keenly analyzed and the political rivalry
of Russia and Japan is sketched up to the outbreak of the war.
The country is beautiful to look upon and its beauty is appreciated by the
people who are described as well built and showing mixture of Caucasian and
Mongolian blood. Plodding like his ox, the native lives by agriculture and
household industry in the house of the farmer. Reforms have been made in
the government, but "justice is still hedged about with bribery" and "immunity
from the demands of the yamen is only found in a condition of extreme poverty."
Political efficiency is reflected by the navy, containing twenty-three admirals
and having one iron built coal lighter, until quite lately the property of a Japanese
steamship company. "Korea is the helpless, hopeless sport of Japanese caprice
and Russian lust." The book contains a surprising account of the progress
of isolated Korea. The land of morning calm has been "stimulated by associa-
tion with the Japanese. The contact has been wholly beneficial." The change
is almost as noticeable as in Japan and is evidenced by the growth of Chemulpo
since its opening as a treaty port. In the twenty years that have elapsed it
has risen from a fishing village to a prosperous port, having 20,000 people, a
prosperous trade, a liberal supply of telephone and telegraph and a railway to the
capital which is using electric lights and street cars.
J. Russell Smith.
University of Pennsylvania.
A History of Matrimonial Institutions. By George Elliott Howard. Three
volumes of 1465 pages. Price, $10.00. Chicago: University Press. 1904.
One of the most valuable contributions to sociological literature that has
appeared in a long time is "A History of Matrimonial Institutions," by Prof .
George Elliott Howard of the University of Chicago. The work is valuable
not merely because of the importance of the subject, but by reason of the thor-
oughness of treatment of which each page gives evidence. It is a remarkable
piece of work and will immediately take rank as a standard authority. The
author has stated his conclusions clearly and forcibly, supporting them by
abundant evidence, giving at the same time place to all opposing testimony.
Each chapter is prefaced by a bibliographical note, often pages in length, while
footnotes with detailed references abound on nearly every page. At the last
of the work is a classified bibliographical index nearly one hundred and fifty pages
in length which wall be of great service.
The study opens (Part I, 250 pages) with an excellent resume* of the various
theories of primitive matrimonial institutions. I do not know where else to
find such a lucid and masterly exposition. No distinctly new material is here
presented and Professor Howard agrees in general with Westermarck. "At the
[572]
A History of Matrimonial Institutions
*43
dawn of human history individual marriage prevails though the union is not
always lasting. In later stages of advancement, under the influence of property,
social organization, social distinctions and the motives to which they gave rise,
various forms of polyandry and polygyny, make their appearance, though
monogamy as the type is never superseded." He thus definitely rejects the "doc-
trine of universal stages of evolution through which all mankind has run."
Much evidence is presented to show that in all the ages of transition from status
to contract, the woman has had a far larger freedom of choice and better pro-
tection than is generally supposed.
The rest of the study is chiefly devoted to the institutions of the English
speaking race in England and America, though many pages are given to Conti-
nental antecedents. Part II, Matrimonial Institutions in England occupies
340 pages. Here the reader passes from descriptions of early Teutonic condi-
tions down to present conditions. The attitude of the Christian Church towards
marriage and divorce is carefully traced and the service rendered by the Church
in securing publicity is gratefully acknowledged. Yet it is shown that even the
Reformation did not alter the English conception that marriage is civil, not
sacerdotal, in character and its control has been kept in the hands of the State
in spite of many periods of confusion and in spite of the evident desires of the
Church. Thus in England we see the early growth of that attitude towards
marriage which found such striking and seemingly rootless expression in early New
England legislation.
Part III, Matrimonial Institutions in the United States, contains the
author's most important contribution. Here is presented a mass of generally
inaccessible material never before collected. This is a distinct service for which
every student of social institutions will be grateful. It is doubtless needless to
add that many quaint and curious customs are described and attention is called
to many important, but little known, facts. The conditions in New England,
the Middle Colonies and the Southern Colonies are separately outlined. Two
important chapters trace the progress of legislation on marriage and divorce
from 1776 to 1903 and a digest of existing laws in all States is given.
That there is much in this legislation which is not pleasant reading and
much that needs amendment today is frankly stated. Yet the author does not
sympathize with the extreme views often held as to American marriage laws.
On the contrary there is much to be learned from the experiments of different
States. Professor Howard always keeps clearly in mind the fact that he is
discussing social institutions over which organized society has full control.
In spite of all divergencies we have developed an American type of marriage,
i. e., a civil license, an optional civil or religious celebration (save in Maryland
and West Virginia where the religious ceremony is required, and civil record of
the ceremony. There are some evils which are fully discussed. At present
the greatest obstacle to social control is the recognition of common law mar-
riages. This results from the fact that the ' ' vicious mediaeval distinction between
validity and legality is maintained." Such a union ' ' is thoroughly bad, involving
social evils of the most dangerous character." As one result many of our laws
are unclear and indefinite and need overhauling.
Throughout the study divorce is constantly considered. Here, too, the
[573]
144 The Annals of the American Academy
author keeps on solid ground for, no matter what the troubles may be, "divorce
is a remedy and not the disease." Prohibition of divorce then would bring no
relief. "It is a very low moral sentiment which tolerates modern wife-purchase
or husband-purchase for bread, title, or social position — here is a real menace
to society." The remedy for this is education not statutes. "In the future
educational programme sex questions must hold an honorable place . . . Domes-
tic animals are literally better bred than human beings . . . Here the State has
a function to perform. In the future much more than now, let us hope, the
marriage of persons mentally delinquent or tainted by hereditary disease or crime
will be legally restrained . . . Marriage will in truth be holy if it rests on the
free troth-plight of equals whose love is deep enough to embrace a rational
regard for the rights of posterity . . . The family will, indeed, survive; but
it will be a family of a higher type. Its evolution is not yet complete."
No social student, preacher, legislator, can afford to neglect this important
work.
University of Pennsylvania. Carl Kelsey.
The Letters and Speeches of Oliver Cromwell, with elucidations by Thomas
Carlyle, edited by S. C. Lomas, with an introduction by C. H. Firth. 3 vols.
London: Methuen & Co. 1904.
This excellent edition bears on its title page three names which need no
introduction. Next to Napoleon, Cromwell has been the popular theme of the
historian of the last decade, while Carlyle has had almost as great a vogue. Mr.
Firth has only recently been appointed as Regius Professor of History at Oxford,
and certainly no one is so well qualified to write on Cromwell.
It was one of Carlyle's early projects to write a book upon Cromwell's times,
but he could never get sufficiently into the subject. In his sixth lecture on
"Heroes and Hero-Worship," however, he first presented his view of the great
Puritan leader, giving him his due place in history. Until then, as Carlyle him-
self wrote, ' ' One Puritan, and almost he alone, our poor Cromwell, seems to hang
yet on the gibbet and find no hearty apologist anywhere." In 1845 he made a
second step towards the fulfillment of his original purpose in the publication of
the "Letters and Speeches," and "few historical works have attained more
immediate success;" three editions were called for in five years.
From the historical standpoint Carlyle's work is extremely fragmentary and
incomplete. It is a commentary in Carlyle's characteristic manner on the letters
and speeches of Cromwell, and as might be expected the editing is much too sub-
jective in character to be reliable. Painstaking in certain respects, Carlyle was
much too arbitrary an editor; besides supplying missing words, breaking up long
sentences and freely punctuating, he "modernized the speeches too much, allowed
himself too great license in the way of emendation, " and, as is well known, freely
interpolated his own comments into the text. This is particularly true of the
speeches, in the editing of which Carlyle was completely carried away by his
imagination. The letters he left more nearly as he found them, though even
here the arbitrary changes are numerous. They did not appeal so strongly to his
imagination and his lack of critical acumen occasionally misled him into intro-
"[574]
The United States and Porto Rico 145
during letters manifestly spurious, as for example, the eighteenth century
forgery of a letter by Cromwell to Thurloe, (No. 200), and the famous "Squire
Papers."
In the present edition Carlyle's work is subjected to a critical revision, but
the spirit of the revision by Mrs. Lomas is sympathetic rather than icono-
clastic. The text is carefully compared with the original manuscripts and cor-
rected where necessary. This in itself makes the new edition of great value
to the historian and student, for in the original work there are introduced not only
the errors resulting from Carlyle's peculiar methods as an editor, but also those
that arise from the fact that he very frequently did not have the original manu-
scripts, they being either inaccessible or not known in his day. Additional
notes by the present editor are given in square brackets and are confined mainly
to matters of fact. The letters are revised and the correct text given; in the
speeches, on the other hand, Carlyle's text is retained, except where it is mani-
festly wrong. This deference to Carlyle in the editing of the speeches Mrs. Lomas
explains by the fact that they represent not what Cromwell actually said, but
what he is reported to have said, and it would be impossible to get Cromwell's
exact words. The only general change made in the speeches is the restoration
of the seventeenth century phraseology of the originals which Carlyle modernized
throughout.
The edition contains some one hundred and forty-five letters not included by
Carlyle, besides speeches and other documents. The most important of these
new letters are those to Robert Hammond, found by the late Dr. Gardiner,
while the twenty additional speeches are those of the Army Councils of 1647,
discovered by Mr. Firth. The excellent work of Mrs. Lomas has been ably
seconded by the bookmaker's art and the edition is as attractive in form as it {is
interesting and scholarly in matter. The index appears in the third volume and
is unusually well done. W. E. Lingeujach.
University of Pennsylvania.
The United States and Porto Rico. By L. S. RowE, Ph.D. Pp. xiv, 271.
Price, $1.30. Longmans, Green & Co. 1904.
It is a surprising circumstance that in the four years which have elapsed
since the unanticipated events of the war with Spain forced the United States
upon a quasi-colonial career, there has been scant and inadequate recital of the
course of events during that period. We have been largely dependent upon
the excessive detail of government reports on the one hand and upon the super-
ficial dicta of journalistic narrative on the other hand for acquaintance with
the essential features of the politico-economic reorganization effected by the
American administration in Porto Rico, Cuba and the Philippines, respectively.
This has meant loss both to the student and to the publicist. The entire
history of colonial administration probably presents no more instructive lesson
than the succession of military, provisional and civil government in Porto Rico.
It is of vital importance at the present moment to determine the relative efficiency
of Spanish, American and Cuban administration in Cuba. Manifestly we are
in no position to pass upon the propriety of a large measure of independence
[575]
146 The Annals of the American Academy
for the Philippine archipelago until the success or failure of the degree of autonomy
now actually enjoyed there in municipal and provincial affairs has been accurately
appraised.
It is a matter of congratulation that Professor Rowe, whose experience, as
a member of both the Federal and the insular Porto Rican Code Commissions,
renders him exceptionally qualified to speak, has undertaken to discuss the prob-
lems arising out of our contact with Spanish- American civilization in Porto Rico.
In an attractive little volume of some two hundred and sixty pages he has de-
scribed with clearness and interpreted with ability some of the remarkable
episodes of that experience. The student-reader will put aside the volume
with profound regret that the author has not been persuaded to give us a com-
prehensive history instead of a narrative sketch. Such a niore ambitious plan
would have relieved the difficulties arising from the attempt to consider within
limited compass, both the actual experience of Porto Rico in its civic reorganiza-
tion and the larger problems presented to the United States by the political
developments of the War with Spain and their judicial interpretation.
Certain of Professor Rowe's chapters, as for example those upon "The
Insular Decisions," "The People of Porto Rico," "Financial Reorganization"
are adequate summaries of more or less familiar incidents. But in other places,
as in tracing the history of the native political parties of the Island, in discussing
the propriety of an insular civil service system, in commenting upon the experi-
ence of the jury system in the Island, he has placed before us in inviting form
valuable and heretofore inaccessible information.
Finally, it is not improper to note, as a tribute to the modesty of the author
even though a defect of the volume, the omission of any reference to the im-
portant part which Professor Rowe himself played, as a member of two suc-
cessive code Commissions, in the reorganization which he has so intelligently
described. Jacob H. Hollander.
Johns Hopkins University.
The Slav Invasion and the Mine Workers: A Study in Immigration. By Frank
Julian Warne, Ph.D. Pp. 211. Price, $1.00. Philadelphia: J. B.
Lippincott Company. 1904.
It is only justice to the author of this study to state that it is beyond ques-
tion the most interesting and suggestive investigation of the problem of immigra-
tion which has yet been published in the United States. There have been other
studies in this field, but they have been mainly confined to a description of the
invading nationalities and to speculation as to the best means of assimilating
them into the American people. Dr. Warne, however, addresses himself to
the real problem of immigration, which is the competition of the immigrant
with the native born American.
The labor struggles in the anthracite field which terminated in a note-
worthy victory for organized labor have been generally misunderstood. In
the investigations which preceded the award of the arbitration tribunal, the
representatives of the operators claimed, and supported their claims by a large
amount of evidence, that the earnings of the miners in the anthracite fields
[576]
The Slav Invasion and the Mine Workers i^y
compared very favorably with the earnings in other occupations. They de-
nounced the theory of the mine workers to better their condition as entirely
unjustified by conditions and represented merely the tyranny of brute force.
This view of the case has been quite generally accepted by the press. The
mine workers succeeded and enjoy the fruits of their success, but there is a
deep-seated conviction, especially among the members of the so-called capitalistic
class, that they did not deserve to succeed and that the right in the controversy
was with the operators. Without specifically attacking this popular belief,
Dr. Warne in his discussion of the causes which led up to the strikes of 1900
and 1902 thoroughly demolishes what must be confessed in the light of this
discussion to be baseless fallacy. He begins with a brief, though succinct account
of the early struggles between the operators and the miners in the anthracite
fields, showing how 'the formation of the labor unions during the period of high
prices which followed the war forced the operators into violent antagonism,
owing to the constant demand for higher wages, and finally resulted when the
railroads entered the mining field in disintegration of these early labor organiza-
tions. Their downfall, as Dr. Warne shows, was brought about in part also by
the lawlessness and violence of the Molly Maguires. For twenty-six years
thereafter, until 1897, the anthracite labor was unorganized.
Labor conditions in the anthracite field, which had been satisfactory during
this early period, beginning in the early seventies and following the decline
in the price of coal and the increased competition among the coal companies grew
steadily worse, the miners' pay being based on the price of coal, which steadily
declined. At the same time, mining, owing to the exhaustion of the more easily
worked deposits, became more difficult and expensive. If the original occu-
pants of the anthracite fields had been left in possession of their employment,
these hard conditions might have been met by an advance in wages, but about
1880, came the advance guard of the Slav invasion, which during the twenty
years that followed brought into the anthracite region a vast army of workers
from the southeast of Europe and which effectually prevented any improvement
in the standard of living of the English-speaking miner. In 1880, the total
number of English-speaking people in the three anthracite fields was 102,421,
the total number of Slavs was 1925. Twenty years later the English-speaking
population remained about stationary, at 100,269, while the Slavs had increased
to 89,328. In other words, in 1880, the English-speaking races composed
nearly 94 per cent, of the total foreign born population in the eight hard coal
counties. By 1900 they had decreased to less than 52 per cent., while the
Slav races had increased from 2 per cent, in 1880 to over 46 per cent, in 1900.
The standard of living of these immigrants was extremely low. Dr. Warne
shows that most of the immigrants are unmarried, that they are satisfied to
live "in almost any kind of a place, to wear almost anything that would clothe
their nakedness and to eat any kind of food that would keep body and soul
together."
The wages on which the American could not support a decent existence
represented riches to the Slav and the inevitable result was a gradual expulsion
of the English-speaking miners from the Schuylkill and Lehigh districts.
In the northern field, however, Dr. Warne shows that the advance of the
[577]
148 The Annals of the American Academy
Slav was fiercely resisted. In this section the mine workers generally owned
their homes and their standard of living was high. They saw in the coming of
the Slav either their expulsion or their descent to a Slav standard of living.
Their resistance to these alien competitors took two forms. First, in 1889-97,
they obtained from the Pennsylvania Legislature laws which required a con-
siderable period of apprenticeship before a laborer could become a miner, making
it necessary that an examination before a miners' examining board first be
passed. To pass this examination, the Slav must learn English, and as few
of them did this, the best paid occupation in the mines was kept to a large extent
in the hands of the English-speaking miners. This, however, was only a half-
way measure and in 1897, when the organizers of the United Mine Workers of
America first entered the region, they received a hearty welcome from the English-
speaking miners in the northern field and their work of organization was made
surprisingly easy. The leaders of the English-speaking miners saw in this great
organization which had just won a notable victory in the soft-coal fields the
opportunity of raising the wages of the Slav mine worker to a level. This would
at the same time increase their own earnings and lessen the danger that increas-
ing Slav competition would depress their standard of living. In other words, the
English-speaking miner determined since he could not exclude the Slav to raise
his wages and improve his condition. Dr. Warne shows how this task was
accomplished by the United Mine Workers in the two strikes of 1900 and 1902.
The initiative in these contests came from the English-speaking miners in the
northern field. It is well-known and these companies have frequently com-
plained of the fact, that the employees of the Reading and Lehigh Valley were
well satisfied with their condition ; that they had no grievances against their
employers, and that it was only with much difficulty in 1900 they were made
to strike. Dr. Warne correctly interprets these great labor struggles as deter-
mined attempts of a superior race to lift up a mass of foreigners to their own
plane. If the attempt was unsuccessful their own economic ruin was inevitable
We note in final comment on this remarkable study that the author under-
stands and clearly explains a function of trade-unionism, to which little attention
has been given. Trade-unionism, in Dr. Warne' s opinion, constitutes the only
bond which will unite men of different races, religions and languages, in a com-
mon cause. The fellowship of the trades-union, with its ideal of brotherhood,
has been largely effective, in the author's opinion, in the anthracite field to
break down the barriers of race prejudice and race antagonism, which so seriously
interfere with the assimilation of divers nationalities into a homogeneous people.
It is not only in the anthracite region that this race problem is encountered;
in every section of the country where immigration has gone the separation of
nationalities constitutes a potent danger. If trade-unionism, as Dr. Warne
claims, and it cannot be disputed that he thoroughly understands the organiza-
tion and aims of the labor unions, can break down these barriers of separation,
and co-operate with the common school, which is ceaselessly at work upon the
younger generation, to convert the alien immigrant into an American citizen,
all the manifold sins of omission and commission which can be laid at the
door of organized labor can be forgiven.
University of Pennsylvania. Edward Sherwood Meade.
[578]
Working With the Hands
49
Working With the Hands. By Booker T. Washington. Pp. ix, 246. Price,
$1.50. New York: Doubleday, Page & Co., 1904.
A few years ago Booker T. Washington told the story of his early life in
his book, "Up From Slavery." The present volume is a continuation of the earlier
one. In "Working With the Hands" Dr. Washington describes the growth of
the great institution at Tuskegee. It is a story whose significance is not yet
appreciated by the American people for the influence of Hampton and Tuskegee
is reacting powerfully upon our educational ideals. From time to time many
persons have heard Dr. Washington tell a little about his work. All these will
welcome a more complete statement of what has been accomplished. Many
others who have not heard Dr. Washington will rejoice at an opportunity to
visit the school under his guidance. In the book we are taken from department
to department, our visit being made more real by the numerous photographic
illustrations, until we get a pretty complete conception of the scope of the insti-
tution.
The title, " Working With the Hands," is well chosen. Dr. Washington has
not only helped to make the school what it is, but to a large degree has given it
his spirit and many of his former students are to-day starting similar movements
in their communities. Dr. Washington is often represented as being opposed
to what is unhappily termed "higher education." This is false. No one can
read this book without seeing that Dr. Washington gives at Tuskegee not a mere
smattering of Greek and Latin but seeks to equip a man for his life work by
teaching him something which will be of immediate service. The needs of the
future will be met best by meeting those of the present.
Dr. Washington is building — not finishing — is laying the foundation not
the superstructure. How well he is succeeding the reader may judge. None
will ever regret the time he spends in reading the story and among those who
enjoy it the most will be the white men of the South who wish to know more
of what Dr. Washington really does at Tuskegee.
Carl Kelsey.
University of Pennsylvania.
[579]
BOOKS RECEIVED FROM AUGUST 1 TO OCTOBER 1, 1904.
Anderson, F. M., The Constitutions and Other Select Documents Illustrative of France. 1789-
1901. Minneapolis: H. W. Wilson Co. $2.00.
Boutmy, E., The English People. Putnams.
Brousseau, K., L'Education des N£gres aux Etats-Unis. Paris: Felix Alcan. 7.50 fr.
Dexter, E. G., A History of Education in the United States. Macmillan. $2.00.
Fetter, F. A., The Principles of Economics. Century Company.
Foulke, W. D., Slav or Saxon. 3d Ed. Putnams. $1.00.
Hall, W. E., A Treatise on International Law. 5th Ed. Oxford: Clarendon Press.
Harris, N. D., History of Negro Servitude in Illinois. McClurg. $1.50.
Haurion, M., Gaston, J., and Rabany, C, L'Ann6e Administrative (1903). Paris: Giard &
Briere. 10 fr.
Hawkins, R. C, Our Political Degradation. New York: Grafton Press.
Headlam, G. W., Edited by, DeTocqueville's L'Ancien Regime. Oxford: Clarendon Press.
6s. or $1.50.
Helps, A., The Spanish Conquest in America. Volume 4. New York and London: John
Lane. $1.50 (3s. 6d.)
Hosmer, J. K\, Gass's Journal of the Lewis and Clark Expedition. McClurg. $3.50.
Johnson, S. V., A Short History of Oregon. McClurg.
Lavisse, E., Histoire de France. Volume 6, No. 1. Paris: Hachette & Cie.
McKinley, W., The Tariff. Putnams. $1.75.
deMolinari, G., The Society of To-Morrow. Putnams. $1.50.
Reich, E., Success Among Nations. Harpers. $2.00.
Russell, R., First Conditions of Human Prosperity. Longmans. $1.00.
Scherer, J. A. B., Japan To-day. Second Ed. Lippincott. $1.50.
Smith, C. S., Working with the People. New York: A. Wessels Co.
Tapp, S. C, The Story of Anglo-Saxon Institutions. Putnams.
Tompkins, D. D., Public Papers of the Governor of New York, 1807-1817. Vols. 2 and 3#
Albany: J. B. Lyon Co.
Unwin, G., Industrial Organization in the Sixteenth and Seventeenth Centuries. Oxford:
Clarendon Press. 7s. 6d.
Van Dyne, F., Citizenship of the United States. Rochester, N. Y.: Lawyer's Co-operative
Publishing Co. $4.50.
Wilcox, D. F., The American City. Macmillan. $1.25.
Woodruff, C. R., Ed. by Proceedings of Chicago Conference for Good City Government and
the Tenth Annual Meeting of the National Municipal League, held April, 1904, at Chicago.
Philadelphia: National Municipal League.
[580]
NOTES
I. MUNICIPAL GOVERNMENT
Chicago.— Police Administration.1 The General Act for Incorporation of
Cities and Villages, passed by the State Legislature in 1872, under which in lieu
of a charter the city of Chicago is still working, gives to City Councils the express
power "to regulate the police of the city and pass and enforce all necessary police
ordinances." This makes the police department of Chicago a purely municipal
institution without any control or interference on the part of the State authori-
ties. The executive control over the department is vested in the General
Superintendent of Police, appointed by the Mayor with the consent of the City
Council for a period of two years. The city is divided into five police divisions,
fifteen districts and forty-four precincts. Each division is commanded by an
inspector of police, each district by a captain and each precinct by a lieu-
tenant. All members of the force with the exception of the General Superin-
tendent, but including the Assistant General Superintendent, are selected
under the provisions of the Civil Service Law. This Act was passed by the
State Legislature in 1895 and is being strictly enforced not only as to the police
department, but, in fact, as to every other department of the city adminis-
tration. Every applicant, after having satisfactorily passed an examination,
must enter the force as second-class patrolman, the lowest rank. The examina-
tion is of a twofold character, testing the physical qualifications, which are given
a weight of two, and the mental qualifications given the weight of one. The test
for the mental qualifications consists of an examination in spelling (weight 0.1);
penmanship (0.1); arithmetic (0.1); duties (0.6); and city information (0.1).
Promotion in the police department is by competitive examination, to which only
officers of the next lower rank are admitted. The disciplining of the force also
rests with the Civil Service Commission, one member of which acts as Police Trial
Commissioner; his findings are reviewed and approved by the entire commission.
So firmly is the Civil Service established and enforced in the police department
that during recent years not even an attempt was made to circumvent its pro-
visions. Some cases in which this was done in former years were taken to the
State Supreme Court and each one was decided by that body in favor of the
Civil Service Law. Today it is generally accepted as inviolable and nothing is
feared more by the members of the force than to be taken before the Trial Com-
missioner, for swift punishment is sure to come for any violation of the police
rules. The strict enforcement ol the Civil Service Law had the further effect
completely to do away with the use of the police force for political purposes. Its
members belong to all political parties, and no man is asked to help to advance
the political fortunes of the administration in power. How colorless politically
the Chicago police force is might best be shown by the fact that while the present
Assistant General Superintendent and two of the five inspectors openly profess to
be Republicans; the administration is Democratic. It may safely be said that
the only use to which the Chicago police force is put in elections and primaries,
is to preserve order and to protect the integrity of the ballot box.
Communication of Hugo S. Grosser, Esq., Chicago 111.
[581]
152 The Annals of the American Academy
Numerically the police force is entirely inadequate for the needs of Chicago.
Its total membership is but three thousand two hundred and five, of which four
hundred and thirty-two are clerks and other employees and two thousand seven
hundred and seventy -three, officers of all ranks. Of these 2442 are patrolmen;
not less than 747 of these patrolmen are detailed for duty at street crossings,
bridges, depots, public offices, on wagons and ambulances, etc.; 338 are "plain
clothes men, " and 45 act as desk-sergeants, leaving not more than 1312 for actual
patrol duty. The area of the city is 122,008 acres. This gives an average area
of 44 acres to each member of the force, or an average area of not less than 93
acres to each patrolman available for patrol duty. Chicago has 2806 miles of
streets and 1381 miles of alleys, which places an average of not less than 3.2 miles
of streets and alleys under supervision of each patrolman available.
The total cost of the police department for 1903 was $3,569,477.77, or $1.90
per capita on the basis of the United States Census estimate for 1903, giving
Chicago a population of 1,873,880. This is less than in any other large city, but
for some time to come Chicago must try to get along with this small amount,
not by its own volition, but forced by dire necessity caused by the proverbial
poverty of the municipality. Small and insufficient as it is, Chicago's police
force can boast of a splendid record of efficiency, showing an average of 28.12
arrests for each member of the force. About 16.4 per cent, of the arrests were on
charges of felonies; 11.9 per cent, for misdemeanors; 51.5 per cent, for drunken-
ness and disorderly conduct, and 20.2 per cent, for other violations of city ordi-
nances. The total number of arrests for 1903 was 77,986. But the efficiency of
the force is not shown by the number of arrests alone. Of all the property reported
stolen in 1903, valued at $434,881.75, more than one-half, valued at $233,559.92,
was recovered. Over 10,000 injured and sick persons were assisted by the police;
2964 lost children were restored to their parents, and crime and lawlessness, for
some time quite rampant in Chicago, was fearlessly suppressed, so that the city
today is comparatively free from crime. Taking into consideration the manifold
duties of the police, the frequent labor troubles requiring police supervision, and
the insufficient number of officers, the department is doing astonishingly well.
The officers are displaying a great deal of endurance and courage. In addition
to their regular nine hours of patrol duty they attend police courts, justice
courts, coroners' inquests, grand jury sessions and criminal courts, and are besides
subject to call for any special duty required. Three officers were killed and 249
were injured while in discharge of their duty during the past year.
The police authorities are sparing no efforts to still further increase the
efficiency of the force. The drones and derelicts are being weeded out as fast as
possible. Special instruction is being given by competent men in first aid to
injured persons, in gathering and preparing evidence for prosecution in the
criminal courts, and in physical development. A new system of police records is
being devised that will aid in promoting the discipline and in improving the entire
service, but after all, to be adequately policed the city of Chicago needs an increase
of its force of at least one thousand patrolmen.
Cleveland. — Police Administration.2 Executive control over the police sys-
2Communication of F. E. Stevens, Esq., Cleveland, Ohio.
[582]
Municipal Government 153
tern is divided. The Board of Public Safety executes contracts relating to sup-
plies for the department, provides for the erection and maintenance of police
stations and conducts examinations for the appointment and promotion of officers.
The Mayor appoints police officers from a list of eligibles submitted by the Board
of Public Safety after competitive examination. He is styled the "executive
head of the police department," but the stationing, transfer and discipline of the
force are entirely under the supervision of the Chief of Police.
The Mayor appoints the Board of Public Safety subject to the approval of
a two-thirds vote of the City Council. Upon failure to secure the confirmatory
two-thirds vote of the Council, the Board is appointed by the Governor. Two-
thirds of the Council in this city approved the Mayor's choice. The statutes give
the City Council the option of providing for either two or four members of this
Board. The Council chose the smaller number. All appointments and promo-
tions depend upon competitive examinations. The Examining Board consists of
the City Solicitor and of the two members of the Board of Public Safety or
persons delegated by them from the department. Tests of physical qualifications
are made by surgeons connected with the department. Civil Service provisions
are in full force. Members of the police force take but little part in politics.
At present their political affiliations seem to have nothing to do with either appoint-
ment or promotion. Recent years have witnessed a very considerable improve-
ment in this regard. The State authorities have no control over the service
unless opportunity for control is afforded by the provision that the Governor
shall appoint members of the Board of Public Safety in case the Mayor cannot
secure for his appointees the approval of two-thirds of the City Council. This
contingency has not yet arisen in this city.
The force numbers at present 456 members. There is an average of thirteen
patrolmen to each square mile of territory. Making due allowance, however, for
patrolmen on night duty, for those deputized for service at police stations and for
general officers, the area under the supervision of each member of the force
averages about one-fifth of a square mile. The appropriations for salaries and
maintenance for the year ending December 31, 1904, amount to $700,000, an
average per capita cost of $1.66.
There is no movement on foot for special improvement of the service. With-
in the past two years the department has been reorganized in the interests of
greater efficiency, about 150 patrolmen have been added to the force, and, under
the discipline of a young, aggressive and ambitious chief, the morale and tone of
the force have been greatly improved.
Buffalo. — Police Administration.3 The Buffalo police force is governed by a
local commission consisting of the Mayor ex officio, and two other Commissioners
appointed by him, both of whom, however, may not be of the same political
party. No control whatever is exercised by the State authorities.
The entire force is under Civil Service rules, and all promotions as well as
original appointments, are made by competitive examinations. A change in
the rules has lately been made, which, if it takes effect, will exempt all grades
above that of Captain from competitive and subject them to qualifying examina-
3Communication of A. C. Richardson, Esq., Buffalo N. Y.
[583]
154 The Annals of the American Academy
tions only. Under the State Civil Service Law, however, this change cannot
take effect until approved by the State Civil Service Commission, which has
deferred action upon it for the present. The change is strongly opposed by many
members of the Buffalo Civil Service Reform Association. It seems quite safe
to say that at present the force is entirely" out of politics." The writer was
assured at headquarters that every member of the force votes exactly as he
pleases, and that anyone who engaged in politics would promptly "lose his
head." At one of the stations he learned also that men on duty on election
day were especially cautioned not even to engage in conversation on political
subjects.
The force consists at present of 784 persons, of whom 566 are patrolmen,
39 sergeants, 21 patrol-wagon drivers, 13 janitresses, 4 matrons, and the rest
officials and clerks of various designations and duties. Forty-one of the patrol-
men are mounted, for service in the large precincts where much of the territory
is unoccupied or thinly settled. There is also a "bicycle squad" of eighteen,
detailed from different precincts, who serve in this way from April to November
and are then returned to regular patrol duty. The harbor is patroled by a small
yacht, which traveled over 13,000 miles on this service last year, and besides other
services towed over 2000 logs and stumps from the harbor to the lake, where they
either went to the bottom or were carried down the Niagara River, in either case
ceasing to be dangerous to navigation.
The patrol box system of Buffalo is said to be the best in the world. Every
patrolman has to report from each box situated on his beat at regular intervals;
and this makes it possible to communicate from headquarters with every man on
post if necessary, in a very short time. When an officer makes an arrest he takes
his prisoner to the nearest patrol box, and signals both to his station and to head-
quarters; whereupon the nearest patrol wagon, of which there are seven located
at different stations, is sent to convey the prisoner to the station, so that the officer
need not leave his post for this purpose. An ambulance may be summoned in
the same way if necessary. Each box is also provided with a telephone.
The areas of the precincts range from 0.72 to 10.07 square miles; the total
length of streets in each precinct varies from 16 to 90 miles. As nearly as can be
calculated, the average amount of territory supervised by one patrolman on foot
is about 0.175 square mile at night, and 0.29 square mile by day; a mounted officer
probably covers from six to ten times as much.
The total appropriation for the police force for the fiscal year ending June 30
1904, is $797,590, which makes the cost per capita about $1.92. The force is
thought to be, on the whole, very efficient. It certainly rises to a great emer-
gency in a most creditable manner.
By way of improvement the Superintendent asked last year for fifty more
patrolmen and also for a new yacht, as the old one is no longer fit for service:
but neither request was granted bv the Common Council
Cincinnati. — Police Administration.* In the city of Cincinnati the Mayor of
the city is the executive head of the police department; the whole department is
under the control of a Bi-Partisan Board, composed of four members, known
^Communication of Max B. May, Esq., Cincinnati, Ohio.
t584]
Municipal Government
155
as a Board of Public Safety. This Board is vested with all powers and duties
connected with and incident to the appointment and government of the
police and fire department of the city. The Chief of Police is the executive head
of the department, under the direction of the Mayor; the Chief has the exclusive
control over the stationing and transfer of policemen, and other officers and em-
ployees in the department, subject, of course, to the general rules and regulations
of the Board of Public Safety. In the city of Cincinnati the Civil Service pro-
visos m reference to the selection of the police force are in the main strictly
enforced. The police force of the city is not in any way a political factor. The
police, of course, are in charge on election days, and are the official messengers of
the Board of Elections, but within recent years there has been no complaint made
on account of political activity of the force.
The number of the police force of the city of Cincinnati is 532, composed of
one Chief of Police, 3 inspectors, 20 lieutenants, 32 sergeants, 10 corporals, 385
patrolmen, 25 station-house keepers, 20 drivers. The total area police is .41 ^
square miles. The total cost of the force is $571,268.36, of which $535,218.23
is salary account, and $36,050.13 is maintenance account. The cost per square
mile is about $16,322, and cost per capita $1.75.
The service has given satisfaction, the outlying districts being cared for by
mounted police and bicycle squads. The patrol wagon system has been in use
for very many years and has given much satisfaction.
Pittsburgh, Pa. — Police Administration. 6 The police and fire systems of
Pittsburgh have been for many years a source of considerable pride to the people
of that city. In the midst of a desert of official incompetency and dishonesty,
they stood out like oases of green joy to the citizen who was eagerly looking for
something to commend in the municipal administration. Now and then, it is
true, scandals have arisen as to the purchase of land for police stations, the favor-
ing of special designs of fire engines or of particular materials for building pur-
poses, and such other affairs of these bureaus as have furnished opportunity for
the application of modern political business methods. Considering the polit-
ical conditions which have prevailed here for many years, it may be said that
the police and fire systems of Pittsburgh are surprisingly good and efficient.
Under its charter as a city of the second class, the control of the police sys-
tem is entirely executive. The Director of Public Safety, whose department
includes the Bureau of Police, is appointed by and is directly responsible to the
Mayor. The entire police force, including the Superintendent of Police, is
appointed by the Director of Public Safety, who may make his selection from the
list of candidates approved by the Police Examining Board. This Board is an
important part of the system of Civil Service created by the Acts of Assembly
of March 7, 1901, and of June 20, 1901, for the appointment and regulation of the
uniformed employees of the Bureaus of Police and Fire of the Department of
Public Safety. The Board consists of the Mayor, the Presidents of Select and
Common Councils, and the Superintendents of the Bureaus of Police and Fire.
Quarterly examinations are held by examiners appointed by the Board, a quorum
of which must also be present. These examinations are open to any citizen be-
sCommunication of Edwin Z. Smith, Esq., Pittsburg, Pa.
[585]
156 The Annals of the American Academy
tween the age of twenty-one and thirty-five, who has resided in the State for one
year, has never been convicted of crime, and can speak and read understand-
ing^ the English language. The examinations are both mental and physical,
the former being directed more to the amount of intelligence than of educa-
tion, and the latter being the same as that required of applicants for enlistment
in the United States Army. From the list of successful applicants vacancies
on the force are filled by the Director, he having a choice of one of three candi-
dates in their order upon the certified list.
Under these acts no member of the police force may be dismissed for political
reasons, but specific charges of disability, incompetency or misconduct must be
preferred against him, upon which, after due notice, he is tried by a court com-
posed of his equals or superiors in rank. If found guilty, the court assesses the
penalty; either fine, suspension or dismissal, and the Director, with the approval
of the Mayor, carries out the sentence. This court is held weekly, passes on an
average of eight to ten cases at each sitting, and is very effective in the main-
tenance of discipline. The provisions of the Civil Service acts are enforced with
some strictness, and only exceptionally strong political influence is allowed to
affect their application in any particular case. The police force of Pittsburgh
numbers approximately 500, an average of one for each 700 of the population
of 350,000; and its cost to the city for the year of 1904 will be $634,500, a per
capita charge of $1.81 upon each inhabitant. Owing to the peculiar topography
of Pittsburgh and the irregular distribution of its inhabitants, it is hardly possible
to estimate the average area of supervision by the patrolmen. In the congested
and lawless districts the number required is naturally much larger than in the
more sparsely populated suburbs. In the principal suburb of the city, that of
the East End, a small force of mounted patrolmen is used with economy and good
result. The pay of a patrolman is $3 a day, of a sergeant, $3.25 a day, of a
lieutenant, $110 per month, and of a captain $125 per month. This fair
remuneration, added to the assurance of reward for long and faithful service
afforded by the Police Pension Fund, has of late years attracted a fairly good
class of applicants for appointment to the force, and younger and more intelligent
men are now being recruited.
Under the administration of this fund, which is provided for by ordinances
of Councils under authority of a special Act of Assembly, employees of the police
force are retired on half pay at the expiration of twenty-five years of active ser-
vice. The fund now amounts to $100,000, and is supported by the city by
an annual appropriation by Council of $30 per man. Unquestionably the
provisions of this fund have been of great influence in improving and maintaining
the standard of character and morale of the force. In case of death, from any
cause, the legal representatives of the decedent receive $1000, from the Pension
Fund. There is also a so-called Defense Fund made up by voluntary assessment
by the police themselves, for the protection of its beneficiaries against suits for
damages for alleged injuries in the performance of official duty. The city pays
policemen their wages during disability incurred in service, but not for time lost
on account of illness.
As to the manner in which practical politics affects the police system, it must
be confessed that, notwithstanding the fairly conscientious enforcement of the
[586]
Municipal Government 157
Civil Service rules, a political pull is of considerable assistance towards obtaining
a position on the force, but once the appointment secured political influence
would scarcely secure the discharge of a competent man without other cause.
Here, as in other large cities, improper use has been, without doubt, frequently
made of the police force at primaries, political conventions and elections. It is
quite possible, on such occasions, for the police to carry out instructions as to the
suppression of disorder in such a way as to exclude a hostile disorderly element to
the advantage of an equally disorderly and sometimes unlawful favored element.
In such cases as these, however, it is a matter of difficulty to prove the actual
offense; and, at any rate, the American political conscience is singularly and
deplorably callous in the consideration of most offenses against the election laws
and the freedom of the ballot, especially when perpetrated at primaries or
political conventions.
Milwaukee. — Police Administration. 6 In 1885 the fire and police departments
of Milwaukee were placed on a Civil Service Reform basis, and the change from
old methods has been more than S£ tisf actory . The appointments and promo-
tions in the police force are made under the rules of the Fire and Police Commis-
sion, and the Chief of Police is appointed directly by that commission. The
members of the Fire and Police Commission are appointed by the Mayor. Civil
Service provisions prevail in the most approved sense of the term, and are en-
forced absolutely with marked results in the character and quality of the service.
The divorce of the department from politics is complete.
The State exercises no control over the police force in any sense. The force
consists of one Chief, one inspector, one captain, six lieutenants, sixteen sergeants,
sixteen detectives and three hundred and six patrolmen. The area under police
supervision is 22.53 square miles, or 14,419 acres, so that each officer has an average
beat of 41£ acres. The greatest number of men on duty during the night
is 177 patrolmen, with an average beat of 81£ acres. The greatest number
during the day time is 68 patrolmen with an average beat of 212 acres. The total
cost of maintaining the department during the year 1903 was $360,483. An ex-
tremely conservative estimate of the population is 220,000, making the per
capita expense $1.64.
There has been no movement at any time for a change or an improvement
of the service. Those, however, who are familiar with police conditions through-
out the country are convinced that Milwaukee has a much smaller force numer-
ically, than any city with the same population and area. In this connection it is
an interesting fact that the percentage of crime in proportion to the population,
including petty offenses, is far less than in any city of the same class. This is
partly due to the character of the population, but very largely to the efficiency of
the Chief of Police, and the advantages which the merit system affords him in the
management of the force.
Washington, D. C. — Police Administration.1 The police department is under
the immediate control of the Commissioners of the District of Columbia, who are
appointed by the President of the United States. Under the present form of
"Communication of John A. Butler, Esq., Milwaukee, Wis , . m
^Communication of George S. Wilson, Secretary Board of Chanties, Washington, D. C.
' [587]
158 The Annals of the American Academy
government by commission in the District of Columbia, there are no elective
offices, the entire local government being under the control of the Commissioners.
The selection of members of the police force is in strict accordance with
Civil Service provisions. A strict physical and mental examination is passed,
and personal or political influence has no weight in the selection of candidates.
The police force is not involved in politics in any manner. Owing to the peculiar
form of government in the District of Columbia, the question as to the control
of the State authorities does not apply, as there is no distinction between State
and city, the government of the District of Columbia being a unity, and the
District itself being little more than the city of Washington and suburbs. The
police force of the city, according to the official report, for the year 1903, con-
sisted of 641 men, and the total area of the District of Columbia is 44,320 acres,
allowing, approximately, one man for each 69 acres of territory. In considering
these figures, it should be borne in mind that the figures are for the District of
Columbia as a whole, and not for the city of Washington only. The suburban
area in the District is much larger than would ordinarily be included within the
city limits of a city of the size of Washington.
The total cost to the city for the year 1903 was approximately $800,000. The
population of the city for the same year was about 280,000, which would make
a cost, per capita, of approximately $2.86.
The police department of Washington is, without doubt, one of the most
efficient in the United States. The head of the department, designated as
"Major and Superintendent, " is a most capable and conscientious official. His
position was obtained by merit, and undoubtedly he will be retained as long as
he is willing to remain in his present position. The charges of corruption and
graft, so commonly heard in other cities, in connection with the police depart-
ment, are unknown in Washington. It has never been seriously intimated, in
any responsible quarter, that the police department would tolerate any form of
law-breaking because of corrupt influence. A consistent policy of administra-
tion is pursued, and is not affected, in the least, by change of administration.
The unique conditions existing as to governmental control in the District of
Columbia, make it possible to eliminate political influence in local affairs; and in
no direction is the advantage of these conditions more noticeable than in the
administration of the police department.
Kansas City. — Police Administration.8 The police department of Kansas
City is regulated by the provisions of a State statute applying to the police in all
cities having a population of not less than 100,000 and not more than 300,000.
This statute establishes a Board of Police Commissioners consisting of three per-
sons. The Mayor of the city is ex officio a member of the Commission and is Presi-
dent of the Police Board. The other two members are appointed by the Governor
and confirmed by the Senate, and hold their offices for a term of three years, and
until their successors have been elected and qualified. The Board of Police Com-
missioners have charge of the police department. The law provides that no per-
son shall be appointed a member of the force who is not proven to be of good moral
character. He must be able to read and write the English language and be pos-
8Communication of Henry L. McCune, Esq., Kansas City, Mo.
[588]
Municipal Government 159
sessed of ordinary strength and courage. The Board is required from time to
time to hold examinations for determining the qualifications and fitness of all
applicants for appointment to positions on the force, such examinations to be held
in pursuance of rules and regulations prescribed by the Board. The law pro-
vides for an eligible list and for promotion from lower to higher grades. The first
employment of policemen and police officers is for a probationary term, during
which time the Board may in its discretion discharge a man. Following
the probationary term, policemen and police officers may be appointed
for an additional term of three years. Thereafter, they are subject to removal
only for cause upon complaint made and after a hearing by the Board, at which
they are entitled to be present and represented by counsel. The Board may,
however, at any time discharge policemen or officers when, in the opinion of the
Board, the police force is larger than the interests of the public demand, or when
in its opinion there are insufficient funds to pay the expenses of maintaining the
force as organized. This provision has afforded a convenient method of evading
the Civil Service regulations. The Chief of Police may suspend policemen or
police officers (except the Secretaiy of the Board and police surgeon) against
whom charges have been made, until a trial can be had before the Board. Mem-
bers of the force who have performed faithful service are preferred in making
new appointments. Officers who have been crippled or grown old in the service
may be assigned by the Board to special duty, or other proper provision be made
for them. The statute also makes provision for a police relief association and
authorizes the Board to make rules providing for the relief and compensation of
members of the police force injured in the discharge of their duty, and for the
families of officers or men killed in the discharge of such duty.
A number of the foregoing Civil Service provisions have not been enforced,
by the Commissioners. No examinations, other than physical, are held, and there
is no eligible list from which appointments are made.
The political influence of the Police Commissioners can be understood when,
it is known that they not only have the exclusive power to appoint, promote and.
remove members of the force, but are also vested with the authority to license-
saloons, and revoke such licenses. They are thus able not only to control the:
vote of the police and saloon, but they are also in a position to call upon the
brewers, wholesale liquor dealers and public service corporations for liberal
contributions to campaign funds.
There are 305 men in the employ of the police department, including officers,
detectives and the Secretary of the Board of Police Commissioners. There are
205 patrolmen, being a little less than one to each 1000 of the population. As
only one-half of the force is on duty at one time, the average area under the super-
vision of each patrolman is about 160 acres. The total cost of the department
last year was $310,000, or about $1.45 per capita of the population. The Police
Commissioners are asking this year for $366,000.
Changes and improvements in the service are being proposed by the Board
of Police Commissioners, and also by different civic organizations. The Board
has announced that 30 new patrolmen will be added to the force at once. A
police signal system has been purchased during the past year at a cost of $77,000;
$5000 will be expended this year in improving this system Other improvements
[589]
160 The Annals of the American Academy
proposed include one new station house, an emergency hospital, and other
equipment. On the part of the civic and commercial organizations, there is a
strong sentiment in favor of securing a change in the law so that the Commis-
sioners now appointed by the Governor may be chosen by the city itself. It
is also proposed that the power to license dramshops be taken out of the hands of
the Police Board. An attempt to secure legislation along these lines will be
attempted at the next meeting of the Legislature.
At the next general election, the people will vote upon a proposed amend-
ment to the Constitution authorizing the Legislature to provide by law for the
pensioning of members of the police department who may become disabled or
superannuated and for the relief of the widows and minor children of deceased
members of the force.
Grand Rapids. — Police Administration.* The police department is joined
with the fire department under the control of a Board of Police and Fire Com-
missioners, which consists of five citizens appointed by the Mayor without con-
firmation by the Council. The appointments are for five years, one member
retiring each year. The Mayor is not a member of the Board and has no author-
ity to remove the Commissioners during their term of office. As the Mayor is
elected for two years, he has to be elected a second time before he can change
the majority membership of the Board. The charter, while giving the Mayor
the usual authority to enforce all laws and ordinances, hands over to the Board
the direct supervision of the police force, and the Mayor would have to exert
an unusual amount of backbone to dominate the police administration, if the
Board was unfriendly to his policy.
At the present time there is little or no complaint of political interference
with the police department. The Board has absolute authority to appoint and
remove police officers, but in practice appointments have generally been made for
merit. The average length of service of active members now on the force has been
about nine years. The Superintendent of Police is, according to the custom here,
a civilian. The present Superintendent has been in office for eleven years. There
is no State control of the police force in any form.
The total area of the city is 17.5 square miles and the number of patrolmen
is 73. Some parts of the city are not covered by the regular beats. The Common
Council has appropriated funds this year for ten additional patrolmen, as some
of the outlying districts have been badly in need of better protection of late. The
annual expense of the department is about $85,000, or approximately 90 cents
per capita of the population. The service is generally good. The principal
complaint here, as in most places, is in regard to the attitude of the police towards
the saloons, gambling and vice. The enforcement of the law along these lines
is not stringent, and is somewhat spasmodic. It all depends on the attitude of
the Police Commissioners and the Mayor. There is no reason to believe that any
extensive corruption exists in the force, but it is known that the "sporting"
elements have, or try to have, one or more representatives on the Board to take
care of their interests. The Board, as now constituted, has a majority of high-
class citizens. Though there is some complaint about the division of respon-
9Communication of Delos F. "Wilcox, Esq., Secretary Civic Club, Grand Rapids, Mich.
[590]
Municipal Government 161
sibility in the department, there is no expectation of any radical changes in
organization in the near future.
Seattle.— Police Administration.10 The City Charter of Seattle places the
power to appoint and remove the Chief of Police in the hands of the Mayor sub-
ject to the provision that such appointee shall pass a Civil Service examination.
The Civil Service Commission is composed of three members not more than two
of whom shall belong to the same political party. The members of this Board
hold office for three years, one being appointed each year by the Mayor, who has
the discretionary power to remove them; but in case of the removal of a Civil
Service Commissioner by the Mayor the vacancy is filled by the City Council.
All subordinate police officers are appointed by the Chief of Police under
civil service rules. The police system is entirely under municipal control,
although there seems to be nothing in the State Constitution as interpreted by the
Supreme Court to prevent the Legislature from making provision by general
legislation for effective State supervision of the police service in cities of the first
class.
The City Charter of Seattle provides that the police force shall not exceed
one officer to each one thousand of population. On this basis Seattle would now
be entitled to a police force of at least 130 men. At the present time, however,
the city has only 74 patrolmen. These are supposed to furnish police protection
throughout the 28.3 square miles of territory included within the limits of the
city. Practically, however, police supervision is limited to the business district.
The expense of the police department for the year 1903 was $101,001.04.
There is doubtless some ground for the charges of corruption and inefficiency;
but, considering the small size of the police force and the difficulties that must be
contended with in a city such as Seattle, the system may be regarded as fairly
efficient. The police here are not an active factor in municipal politics.
Duluth, Minn. — Police Administration.11 The control and supervision of the
police department of the city of Duluth is vested in the Mayor of the city. The
executive head of the department is the Chief of Police. All officials of the de-
partment are appointed by the Mayor and are subject to removal at his pleasure,
the Chief of Police absolutely, the other members in compliance with the civil
service rules of the city. The entire force, except the Chief, is by charter pro-
vision under the classified Civil Service of the city. All appointments are made
from a list of eligibles furnished by the Board of Civil Service Commissioners ;
and, in case of removals, the Mayor is required, within twenty-four hours there-
after, to file in his office, open to public inspection, a statement of the cause. No
control is exercised by the State authorities over the municipal police.
In Duluth all interference by the police in politics, except as the members
thereof "may quietly exercise the right of suffrage as other citizens," is expressly
forbidden by regulation. The question of the discipline or efficiency of the force
may be and has at times in the past been an issue in Mayoralty elections
in so far as the appointment of a chief may influence such conditions; but
the pernicious personal activity of the individual member is now a practically
"Communication of Prof. J. Allen Smith, University of Washington, Seattle, Wash.
"Communication of W. G. Joerns, Esq., Duluth, Minn.
[591]
1 62 The Annals of the American Academy
unknown quantity. The general personnel, since the adoption of the new "home
rule" charter in 1900, is under the protection as well as restriction of Civil Ser-
vice regulations, and we have here recently witnessed a partisan change in the
Mayoralty with the somewhat unique accompaniment of the undisturbed con-
tinuance in office ol a faithful and efficient Chief, who is presumably of adverse
political persuasion to the new administration.
The total appropriation for police purposes for 1904 was $55,602.28, and this
must remain the extent of the expenditure of the department, under charter
provision, until the next annual tax levy and appropriation.
The city limits of Duluth encompass 69 square miles of territory and the
different sections of the city lie widely scattered over this large area. The city
has approximately 70,000 inhabitants, is one of the busiest of lake ports and the
center of an important lumbering and mining district. Under the appropriation
stated, the department is able to maintain an effective force (including Chief and
office and station men) of 57 and no more. This number, it has been urgently
represented by the Chief, is insufficient properly to cover a territory so widely
scattered and peculiarly subject to conditions demanding careful police sur-
veillance, and he has asked the Budget Committee for provision in next year's
levy for 12 additional men. Notwithstanding the apparent handicap,the ser-
vice has been exceptionally efficient and satisfactory.
There is at the present time no special movement for change or improvement
in the service. Within the last three or four years, however, under competent
direction, the force has made admirable progress in appearance and discipline.
Drills for efficiency, revolver and rifle practice, etc., have been inaugurated and
are regularly and rigidly kept up. More latterly the Bertillon system of measure-
ment has been formally adopted and a so-called, thoroughly systematized "rogues
gallery" established. The department is also in close touch with the National
Bureau of Detection at Washington; and, in the detection and prevention of crime
and arrest of criminals, has not only done most effective work on its own account,
but has also been of substantial assistance to similar departments in other sections.
[592]
II. DEPARTMENT OF PHILANTHROPY, CHARITIES AND
SOCIAL PROBLEMS
Report of the British Inter-Department Committee of Physical Deterioration —
This Committee was appointed by the Duke of Devonshire, Lord President of
the Council, in September, 1903, to make a preliminary inquiry into the allega-
tions concerning the deterioration of certain classes of the population as shown
by the large percentage of rejections for physical causes of recruits for the Army.
The Terms of Revenue were subsequently enlarged, to determine the steps
that should be taken to furnish the Government with periodical data for an
accurate comparative estimate of the health and physique of the people; to
indicate the causes of physical deterioration in certain classes and to point out
the means by which it can be most effectually diminished. The Committee was
composed of eight experts, connected with various departments of the govern-
ment and has performed its duty with the usual British thoroughness and care.
At the outset of the enquiry, the Director-General of the Army Medical Staff
said that the question was not that there was evidence of progressive physical
deterioration of the race, but the fact that from 40 to 60 per cent, of the men
who present themselves for enlistment are found to be physically unfit for mili-
tary service. To this Professor Cunningham of the British Association for the
Advancement of Science rejoins that the evidence which is obtained for recruit-
ing statistics is unreliable, "because the class from which the recruits are derived
varies from time to time with the conditions of the labor market. When trade
is good and employment is plentiful it is only from the lowest stratum of the
people that the Army receives its supply of men; when, on the other hand,
trade is bad, a better class of recruit is available. Consequently the records
of the recruiting department of the Army do not deal with a homogeneous sample
of the people taken from one distinct class."
The Army witnesses admitted that the real lesson of the recruiting figures
was the failure of the Army to attract a good type of recruit. Most of the
men who want to enlist are street loafers — what Charles Booth calls "hereditary
casuals;" who hate regular work and crave excitement. The Committee says
that this also tends to explain the drain from desertion among those who find
themselves disappointed in the hopes of an easy existence. "A close comparison
between Admiralty and War Office statistics is hardly possible, as in the first
place Naval regulations for medical examinations are more stringent, especially
as regards eyesight and teeth, while on the other hand the great bulk of recruits
for the Naval Service are probably drawn from a higher social level."
The British Association for the Advancement of Science appointed a com-
mittee at its last Congress to organize Anthropometric Investigation, in which
connection Professor Cunningham says:
"In spite of the marked variations which are seen in the physique of the
different classes of the people of Great Britain, anthropologists believe, with
good reason, that there is a mean physical standard, which is the inheritance
of the people as a whole and that no matter how far certain sections of the people
[593]
164 The Annals of the American Academy
may deviate from this by deterioration (produced by the causes referred to) the
tendency of the race as a whole will always be to maintain the inherited mean.
In other words, those inferior bodily characters which are the result of poverty
(and not vice, such as syphilis and alcoholism) and which are therefore acquired
during the lifetime of the individual, are not transmissible from one generation
to another. To restore, therefore, the classes in which this inferiority exists to
the mean standard of national physique, all that is required is to improve the
conditions of living and in one or two generations the ground that has been lost
will be recovered."
Professor Cunningham brought forward an elaborate scheme for what
would practically be a physical census of the United Kingdom, which was backed
up by the British Association and by the Royal College of Physicians and Sur-
geons. The Committee evidently felt that this was too large an undertaking,
but suggested a modification of it, a survey being mainly centered upon the youth
of the country, in co-operation with all the forces of government, general and
local, and with the large manufactories, hospitals, chambers of agriculture, trade
unions and benefit societies, universities and public schools and insurance agencies.
The tests used by local authorities should by standardized.
In substantiation of its belief that physical deterioration is not general,
the Committee presents the following summary of the conclusions of Dr. Eichholz,
Inspector of Schools:
(1) "I draw a clear distinction between physical degeneracy on the one
hand and inherited retrogressive deterioration on the other.
(2) "With regard to physical degeneracy, the children frequenting the
poorer schools of London and the large towns betray a most serious condition
of affairs, calling for ameliorative and arrestive measures, the most impressive
features being the apathy of parents as regards the school, the lack of parental
care of children, the poor physique, powers of endurance and educational attain-
ments of the children attending school.
(3) "Nevertheless, even in the poorer districts there exist schools of a
type above the lowest, which show a marked upward and improving tendency,
physically and educationally — though the rate of improvement would be capable
of considerable acceleration under suitable measures.
(4) "In the better districts of the towns there exist public elementary
schools frequented by children not merely equal but often superior in physique
and attainments to rural children. And these schools seem to be at least as
numerous as schools of the lowest type.
(5) "While there are, unfortunately, very abundant signs of physical
defect traceable to neglect, poverty and ignorance, it is not possible to obtain
any satisfactory or conclusive evidence of hereditary physical deterioration —
that is to say, deterioration of a gradual retrogressive permanent nature, affect-
ing one generation more acutely than the previous. There is little, if anything,
in fact, to justify the conclusion that neglect, poverty and parental ignorance,
serious as their results are, possess any marked hereditary effect, or that heredity
plays any significant part in establishing the physical degeneracy of the poorer
population.
(6) "In every case of alleged progressive hereditary deterioration among
[594]
Philanthropy, Charities and Social Problems 165
the children frequenting an elementary school, it is found that the neighbor-
hood has suffered by the migration of the better artisan class, or by the influx
of worse population from elsewhere.
(7) "Other than the well-known specifically hereditary diseases which
affect poor and well-to-do alike, there appears to be very little real evidence on
the pre-natal side to account for the widespread physical degeneracy among
the poorer population. There is, accordingly, every reason to anticipate, rapid
amelioration of physique so soon as improvement occurs in external conditions,
particularly as regards food, clothing, overcrowding, cleanliness, drunkenness
and the spread of practical knowledge of home management.
(8) "In fact, all evidence points to active, rapid improvement, bodily
and mental, in the worst districts, so soon as they are exposed to better circum-
stances, even the weaker children recovering at a later age from the evil effects
of infant life.
(9) "Compulsory school attendance, the more rigorous scheduling of
children of school age and the abolition of school fees in elementary schools,
have swept into the schools an annually increasing proportion of children during
the last thirty years. These circumstances are largely responsible for focussing
public notice on the severer cases of physical impairment — just as, at a previous
stage in educational development, they established the need for special training
of the more defined types of physical deficiency— the blind, the deaf, the feeble-
minded and the crippled.
(10) "The apparent deterioration in Army recruiting material seems to
be associated with the demand for youthful labor in unskilled occupations,
which pay well, and absorb adolescent population more and more completely
year by year. Moreover, owing to the peculiar circumstances of apprentice-
ship which are coming to prevail in this country, clever boys are often unable
to take up skilled work on leaving school. This circumstance puts additional
pressure on the field of unskilled labor and coupled with the high rates of wages
for unskilled labor, tends to force out of competition the aimless wastrel popu-
lation at the bottom of the intellectual scale and this, unfortunately, becomes
more and more the material available for Army recruiting purposes.
(11) "Close attention seems to be needed in respect of the physical condi-
tion of young girls who take up industrial employment between the ages of four-
teen and eighteen. The conditions under which they work, rest and feed doubt-
less account for the rapid falling off in physique which so frequently accompanies
the transition from school to work."
After a resume^ of the machinery which exists for improving housing condi-
tions, for sanitation, for medical service, factory and labor regulation, etc., the
Committee says:
"On the other hand, in large classes of the community there has not been
developed a desire for improvement commensurate with the opportunities
offered to them. Laziness, want of thrift, ignorance of household management
and particularly the choice and preparation of food, filth, indifference to parental
obligations, drunkenness, largely infect adults of both sexes and press with terrible
severity upon their children. The very growth of the family resources, upon
which statisticians congratulate themselves, accompanied as it frequently is
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1 66 The Annals of the American Academy
by great unwisdom in their application to raising the standard of comfort, is
often productive of the most disastrous consequences. 'The people perish for
lack of knowledge,' or, as it is elsewhere put, 'lunacy increases with the rise of
wages and the greater spending power of the operative class; while a falling
wage-rate is associated with a decrease of drunkenness, crime, and lunacy.'
Local authorities, moreover, especially in the rural districts, are often reluctant
to use their powers and in these circumstances progress, unless stimulated by
a healthy public conscience in matters of hygiene, is slower than might
be wished."
The evidence presented by the Committee in regard to overcrowding and
unsanitary development reads like a chapter from the report of the New York
Tenement House Commission. Evidently there is a vast missionary field still
untouched in many — if not most — of the manufacturing cities of England and
Scotland. Edinburgh, Sheffield, Newcastle, Dundee, Manchester, to take a
few cities at random, are all given dishonorable mention in the report of the
Committee, which recommends that the local authority should treat an un-
healthy or overcrowded house as a nuisance and dispossess the tenants. "The
permanent difficulties that attach to the problem reside in the character of the
people themselves, their feebleness and indifference, their reluctance to move
and their incapability of moving." The Committee also considers tentatively
the expedients which have been suggested for disposing of habitual vagrants.
The Committee are not prepared to indicate the exact lines upon which
these ought to be modeled; "a large latitude should probably be left to each
locality in healing its own sores, but as a last resource compulsory detention in
labor colonies would have to be resorted to and the children of those made sub-
ject to this experiment lodged in public nurseries, until their parents were im-
proved up to the point at which they could resume charge."
The attention of the Committee was prominently called to the effect on
public health of the pollution of the atmosphere. A Manchester witness said:
"The condition of the air by its direct effect on lungs and skin is the cause of
much disease and physical deterioration. By cutting off much of the scant sup-
ply of sunlight which is all that Manchester at best would be allowed by its
gloomy climate to receive, it injures health. The filthiness of the air makes
those inhabitants of all parts of Manchester who value cleanliness most unwill-
ing to ventilate their dwellings. By killing nearly all vegetation and by its
other effects, the foulness of the air contributes much to that general gloominess
of the town which led Mr. Justice Day to say in explanation of the prevalence
of drunkenness in the town, that to get drunk 'is the shortest way out of Man-
chester.' "
The chief causes of this pollution are alleged to be the non-enforcement of
the law for the prevention of smoke from factories, the imposition of inadequate
penalties, the neglect to limit works which produce noxious vapors to special
areas where they can be closely supervised and so do the least possible amount
of harm ; and lastly, the absence of any provision in the law compelling the occu-
pants of dwellings to produce the least possible quantity of smoke.
On the point of prosecutions, it was stated that "there are people in Man-
chester who systematically pollute the air and pay the fine, finding it much
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Philanthropy, Charities and Social Problems 167
cheaper to do so than to put up new plant. The trial of such cases before benches
of magistrates composed of manufacturers or their friends creates an atmosphere
of sympathy for the accused and it was alleged that magistrates who had sought
to give effect to the law encountered the indifference and sometimes the posi-
tive opposition of their colleagues."
The Committee also offers some general testimony in regard to the effect
of alcoholism, which is well summarized thus:
"Next to the urbanization of people and intimately associated with it,
as the outcome of many of the conditions it creates the question of ' drink '
occupies a prominent place among the causes of degeneration. The close con-
nection between a craving for drink and bad housing, bad feeding, a polluted
and depressing atmosphere, long hours of work in overheated and often ill-
ventilated rooms, only relieved by the excitement of town life, is too self-evident
to need demonstration, nor unfortunately is the extent of the evil more open
to dispute."
The statement is made that drinking habits among women of the working
classes are certainly growing, factory labor being mentioned as a predisposing
cause. Reference is also made, in this connection, to the want of easily acces-
sible and attractive means of recreation, which make the public-house the
only certain center of social relaxation. On the other hand, testimony is offered
as to the deterioration due to constant tea drinking! We quote from the report:
"Another fruitful and one of the must unsuspected causes of deterioration
lies in the long ingrained habit of tea drinking at breakfast and other times in
the factories and foundries of the city. Tea drinking, if it really were so, might
not be harmful, but unfortunately the mixture drunk can hardly be called tea
at all. More frequently than not boiling water is poured on too large an amount
of poor tea leaves and is left to stand until the tea has become almost a stew
and this dark and nasty mixture is drunk, sometimes three and four times a day,
by hundreds of young lads, setting up frequently various forms of varicocele
and is responsible for several kindred evils (excessive costiveness, etc.) We
are informed by the late Chief Recruiting Officer in Manchester some time ago
that a very large proportion of young men rejected for the Army had been
refused on account of ailments brought about by this practice."
Over thirty pages of the report deal with the conditions attending the
life of the juvenile population. In connection with the waste that goes on under
the name of Infant Mortality, the Committee says:
"Among the most highly organized nations, where the tendency to a decrease
in the birth-rate becomes more or less noticeable, the means by which infant
mortality can be averted, present a social problem of the first importance.
Unfortunately in the volume of vital statistics, from which so many consolatory
reflections are drawn, infant mortality remains a dark page.
"Three facts stand out prominently as the result of this investigation:
First, that infantile mortality in this country has not decreased materially
during the last twenty-five years, notwithstanding that the general death-rate
has fallen considerably; secondly, that the mortality among illegitimate children
is enormously greater than among children born in wedlock; thirdly, that about
one-half the mortality occurs in the first three months of life."
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1 68 The Annals of the American Academy
Much evidence is furnished to confirm these conclusions. The infant
death-rate in a number of English and Scotch manufacturing cities was shown
to average from 200 to 236 per 1000 births. In Dundee, Sheffield and many
Lancashire towns it is a common thing to find a woman who has had a dozen
children and has lost all but one or two of them. The report comments on the
difficulty of getting complete figures as to infant mortality, owing to the absence
in Great Britain of any registration of still-births!
"Every witness who was questioned on the subject agreed in deploring the
present neglect and the Committee are emphatically of opinion that still-births
should be registered, as apart from the advantages a system of registration would
have in making it easier to bring home instances of malpractice, a knowledge
of the facts as to the frequency of still-births would be of great value towards
elucidating the causes of infant mortality by throwing light on the ante-natal
conditions prejudicial to the survival of the foetus."
The subject of infant insurance was also considered. "As to the propriety
of interfering with this practice different opinions were expressed, though it
was the general view that it contributed to parental negligence. On the whole
it was thought that if restricted so as to cover the actual expenses of burial, its
principal abuses would disappear. The evidence of Sir Lambert Ormsby,
President of the Royal College of Surgeons in Ireland, upon Irish practice in
this regard, pointed to the prevalence of a very low view on the part of many
medical men in respect to their obligations towards the security of infant life
under the conditions touching insurance in that country.
"The Committee do not think that upon the evidence they are in a position
to make any definite recommendation on this point, but they consider that the
operation of the practice should be carefully watched."
So far as the Committee are in a position to judge, "the influence of heredity
in the form of the transmission of any direct taint is not a considerable factor
in the production of degenerates."
In connection with the employment of mothers late in pregnancy and too
soon after childbirth, a very general agreement was expressed that the factory
employment of mothers had a bad effect on the offspring, both direct and indirect,
but opinions differ as to the extent of the evil and the practical steps that could
be taken to remedy it. It is to be found in the most acute form in the pottery
districts and in textile mills. Speaking from an extensive experience in the
potteries, Miss Garnett declared that "married women's labor was really the
root of all the mischief; the children are born very weakly, they are improperly
fed and placed in the charge of incapable people. She admitted the impossibility
of interference by any general prohibition, but thought the period during which
women are not permitted to return to work after their confinement should be
extended.
"The existing law requires that no occupier of a factory shall knowingly
allow a woman to be employed within four weeks after she has given birth to
a child. Thus no legal offense arises unless the occupier, with a full knowledge
of the facts, is yet responsible for the employment, a situation which, in the
ordinary conditions attending factory labor, it is almost impossible to prove.
It is needless to say that in these circumstances prosecutions are infrequent or
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Philanthropy, Charities and Social Problems 169
abortive, and though there may be a pretty uniform observation of the law,
cases in which it is broken are numerous in some districts, amounting it is thought
to general evasion."
One point was explained by several witnesses, that "great harm is done
and suffering occasioned to the women by their remaining at work too long
before confinement as well as by their returning too soon after it."
Miss Anderson the chief factory inspector notes "the general neglect of
voluntary agencies for helping mothers before and after confinement, to take
care of infant life, even where such agencies exist. In Lancashire, where, it is
said, insurances of all kinds abound, no form of provident society exists to which
women could contribute while still able to earn wages, nor has any attempt
been made to organize a maternity fund, towards which both employer and
employed might contribute. The existence of such a fund at Muelhausen is said
to have resulted in the reduction of infant mortality by half. The Committee
would strongly urge the adoption of such methods of voluntary assistance and
think it not improbable that endowments may be found in many places which
could be utilized as the nucleus for a considerable amount of charitable effort
in this direction."
The Committee has gone at some length into the matter of infant dietary.
"A decrease at the present time in breast feeding is generally admitted to
be the case in all classes of society, at any rate in the urban districts. With the
poor, it seems fair to say that their failure in this respect is due to inability
rather than unwillingness, especially in view of the fact that as long as it can
be properly continued breast feeding is much the most economical way of nour-
ishing an infant. It is, however, no doubt, the case that women are often unwill-
ing to nurse their own children because it interferes with their going to work."
In connection with the importance of being able to obtain a sufficient
supply of good cow's milk "the Committee are confronted with a great deal of
evidence to the effect that it is next to impossible to ensure such a supply, at
any rate to the poorer classes. It is not a little curious that, while people in
the rural districts have a growing difficulty in obtaining milk because it pays
better to send it into the towns, the great mass of the dwellers in towns are in
no better case than formerly. There is in fact a great lack of organization in
the distribution of this prime necessity, a great want of knowledge as to its
value and very inadequate means for its preservation from the most obvious
sources of pollution."
The report also deals with parental ignorance and neglect and calls atten-
tion to the frequent cases of children being smothered by careless or drunken
parents, by "overlaying," the cases generally occurring between Friday night
and Monday morning.
Much evil arises from the chronic sleeplessness fostered by the conditions
of life so largely prevalent. The lack of sleep from which town children suffer
was mentioned by several witnesses as a cause of degeneration. Children in
the slums are habitually up till late at night.
A large body of evidence was tendered as to the organization and operations
of the Manchester and Salford Ladies' Public Health Society and the Com-
mittee had the advantage of examining on the subject Mrs. Worthington, one
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170 The Annals of the American Academy
of its principal members, and Mrs. Bostock, one of the Health Visitors it employs.
"The society, which has been in existence for over twenty-five years, has for
its object the discovery of all those conditions that are adverse to public health
and especially the bringing within the knowledge of the mothers among the
poor such information as will enable them to do their duty by their children. The
poorer parts of both towns are divided into districts, each under the super-
vision of one or more of the ladies who constitute the Society, and, subject to
their directions, a number of Health Visitors, who are in part paid by the corpora-
tion, undertake the duty of visiting every house in which the birth of a child is
reported, with the object of educating mothers in the best methods of bringing
up young children. By these means, Mrs. Worthington stated that a good deal
of influence has been brought to bear upon them to adopt regular hours and
not be quite so miscellaneous in their feeding operations, and it is said that
they now have acquired some settled notion of what is the best type of food
to give children. Incidentally and very largely the labors of the Health Visitors
in this connection bring to their knowledge all sorts of insanitary conditions,
arising from overcrowding, stopped drains and structural defects, which they
proceed to report to the municipality on a form provided for the purpose. As
the result, an inspector is at once sent and the evil is put right before very long.
In a recent report of the Society's work, it is said that the Health Visitors have
made 30,364 inspections of houses and have reported 1500 cases of insanitary
conditions and the Medical Officer of Manchester testifies that the effect is
marked in the poorer districts of the city and that "an improvement on former
conditions can now be generally discovered." The report goes on to quote
from one of the Superintendents that the poor "look upon the Health Visitor
as their best friend and there are few homes where she is not made welcome."
Apropos of the need of Medical Inspection of School Children the report
says:
"In a country without compulsory military service the period of school
life offers the State its only opportunity for taking stock of the physique of the
whole population and securing to its profit the conditions most favorable to
healthy development. While the schools on the whole seem to be in a good
state, Mrs. Greenwood drew a sad picture of the dirt and darkness in some of
of the Sheffield schools, and Dr. Kelly, Bishop of Ross, taxed the National Board
with indifference to the warming of schools, from which children suffered acutely.
It appears that whatever fuel is used in schools in Ireland has to be procured
by voluntary contributions or brought there by the children themselves and it
is not an uncommon thing for children to take a sod or two of turf to school on
a winter's morning. Dr. Kelly goes on:
"I might set it down as one of the causes of the poor physical development
in Ireland that the school children are unfairly, in fact I might say cruelly, treated
in the schools themselves. I see how many of these little children go to school
all the winter barefooted and in some instances they go to school where there
is no fire. The country children have to travel a couple of miles to school; a
great many of them have no cloak or shawl, or anything to cover them. Ireland
is rather a rainy country and they go wet into the school and sit down there
shivering all day."
[600]
Philanthropy, Charities and Social Problems 1 7 1
The Committee think that a system under which the infliction of such suffer-
ing on poor children is possible requires amendment.
The importance of physical exercise and organized games is dwelt upon
and Boston, U. S. A., was taken as an example of the best practice in this respect.
The teaching of cooking and household management is also emphasized. It is
evident from the statements and recommendations made by the Committee, that
Great Britain is a generation behind the practice of the United States in this
matter of special teaching for "retarded children," and in provision of juvenile
Courts and the Probation System.
One of the most interesting discussions which took place in the Committee
was over proposals in regard to ensuring adequate nourishment of school children.
As one witness said:
"We have got to the point where we must face the question whether the
logical culmination of free education is not free meals in some form or other,
it being cruelty to force a child to go to learn what it has not strength to learn."
But he agreed that the parents should be made to pay if possible. "The
opinion of Mr. S. C. Loch is worth/ of consideration, as being presumably the
official view of the Charity Organization Society. He found fault with the
existing systems of voluntary feeding, as ' purely a movement against destitu-
tion without regard to education;' he stated his belief that no child should
ever be fed without thorough investigation into the circumstances of its family,
and no free meal given except in special cases and then only as secretly as possible ;
but he admitted the necessity in special cases. The feeding should not be at
the school, though it does not appear from his evidence where it ought to be.
He instanced the difficulty in former days, before the Free Education Act of
1891, of getting educational fees out of parents, and argued there would be similar
difficulty in getting feeding fees. Both Mr. Loch and Mr. Shirley Murphy
thought that in cases of real destitution the Poor Law Administration should
always be brought into play and not kept out by any system of free feeding.
The Committee speaks of the "somewhat dangerous doctrine that free
meals are the necessary concomitant of free education. Education is a great
social need, which individual citizens are, as a rule, not able to provide for their
children on a sufficient scale, but food, like clothing and lodging, is a personal
necessity, which in a well-ordered society it is not inherently impossible for
parents to provide; and the effort to supplement their deficiencies and to cor-
rect the effects of their neglect, should aim, in the first instance, at the restora-
tion of self-respect and the enforcement of parental duty."
The report also notices special subjects, which bear on the general purpose
of this inquiry, such as syphilis, insanity, defective eyesight, deafness and dental
deterioration.
In its elaborate and somewhat indefinite summary of recommendations,
it is suggested that a permanent anthropometric survey should be organized;
that a Register of Sickness — not confined to infectious diseases — should be
established; that the time has come for dealing drastically with overcrowding;
that the State should "take charge of the lives of those who are incapable of
independent existence up to the standard of decency which it imposes;" that
the medical inspection of factories and employees be extended; that the inspec-
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172 The Annals of the American Academy
tion of workshops, as distinguished from factories, should be strengthened ;
that teachers should expatiate on the "moral wickedness of drinking" (sic);
and that the sale of tobacco and cigarettes to children be prohibited. There
are fifty-three specific recommendations in this report, of which many are thor-
oughly practical and nearly all are sensible ; a few are, however, either chimerical
or of doubtful value. The report is a volume of 137 pages of octavo and is amply
furnished with statistical data. It is impossible to do more than suggest its
importance in this necessarily brief summary. It can be purchased through
any English bookseller for one shilling and two pence.
E. E. W.
The Committee on Lectures and Libraries of the Board of Education of the
City of New York has recently published its report on the cost of free lectures
to the people which were held during the winter of 1903-1904. Dr. Henry
M. Leipziger, the Supervisor of Lectures, is full of splendid enthusiasm and
has carried this important educational work forward with great executive ability
and absolute sanity of judgment. The lecture courses are systematically organ-
ized with the definite purpose of stimulating study, co-operating with the public
library and museum, encouraging discussion and bringing the best methods
of the best teachers to bear upon the great problem of the diffusion of culture
among all citizens. He reports that the success of the sixteenth season of
public lectures has proven the value of this system of education for adults.
The number of lecture centers was increased (from 128 in 1903) to 143. Four
thousand six hundred and sixty-five lectures were given by four hundred and
fifty-three lecturers and the total attendance as shown by the statistics in later
pages of this report, reached one million one hundred and thirty-four thousand.
The increase in the number of lecture centers was made in response to requests
for their establishment and the attendance is gratifying when the unusual severity
of the winter, the fact that the lectures closed earlier than usual, and that there
were other drawbacks to the gathering of large assemblies, are considered.
Observations on Free Coffee and Sandwich Distribution in a New York
Mission.1 — "You might not believe it, my friend, but there are probably a thou-
sand men on or near the Bowery tonight who haven't the price of a meal or a
lodging. That's why we give out a thousand rolls and a thousand cups of coffee
every morning at one o'clock from the first of January to the first of April. Drop
in some night and I'll show you what the men are like and how it is done. "
Being interested in verifying the truth of the introductory statement, I
decided a few nights later to accept the invitation, but not exactly as given, as
I have learned that there are far more interesting and far more instructive ways
of "seeing what the men are like" than by just looking on.
We started out at about midnight, my chum and I, fellow-tramps for the
time being, if such we might be called — our objective point, the Bowery Mission.
I wore two pairs of summer trousers, a much bedraggled striped and torn jersey —
a relic of college days — an old coat and a discarded summer raincoat, slouch hat
and dirty shoes. Ruffled hair, beard of two days' growth, face and hands smeared
as much as the most fastidious loafer could wish for, together with the usual
1 Contributed by Frank Everett Wing.
[602]
Philanthropy, Charities and Social Problems 173
complement of pipe and tobacco, added the finishing touches to my disguise.
It was one of the coldest of winter nights. We were obliged to walk at a
rapid pace in order to keep warm, and as we turned the corner of Fourth Street
on to the Bowery, an unusually cold blast of wind warned us that the worst was
yet to come. It required but a few minutes of this to cause us to realize, par-
tially at least, the terrors cold winter has for the great army of the poorly clad
that nightly walks our city streets. Now and then a belated pedestrian squinted
out at us from the recesses of his upturned coat collar. More often we were not
permitted so much as a glance as we half loitered on our way. It being too cold
for pleasure seekers and roisterers, few people were to be seen, save now and then
a lone crusader, who showed by his appearance and the direction in which he was
going that his mecca was the same as ours.
Soon we were near enough to see the long dark line of bent-over shivering
forms, already there ahead of us, waiting for the doors to open and the feeding to
begin. On warmer nights I have seen by actual count fully eight hundred men
in line. In the middle of this windy winter's night, with hands in their pockets,
dancing from one foot to another to keep warm, with a song or a joke here, with
a remark about the cold there, with impatience exhibited everywhere, this long
line of humanity was waiting for what ? A cup of hot coffee and a dry, unbuttered
roll. This was the crowd we were about to join.
Many times, when looking at such a sight as this, I have thought how great
must be the need to induce a man to belittle himself so much as to be willing to
fall into a beggar's line for a loaf of bread. It has seemed that it would be
extremely hard for a man to do this, even as an experiment, without the incentive
of hunger to make it easier. I will confess that there was some such feeling in
my mind then as I approached. Strange to say, however, when once a part of
it, there was not the least touch of shame at being there. This shows how easy
it is to get in line and to go with the crowd.
Soon a movement in front told that the game was on. Following the crowd
we groped our way, or rather, were jostled by those behind, down the stairs into
the basement.
From the attendants at the door each received a large roll and a cup of
coffee as he passed by and was then directed further on toward the rear of the
room. After the manner of most of those about me, I hastened to wash down
my first roll in silence in order to take my place at the end of the line outside so as
not to miss a second ration. This was easily managed; for, while the crowd was
large, there was provision for more than twice as many.
With my second supply on hand, I had an opportunity to test the complete-
ness of my disguise. Partly with the idea of getting into a place where I could
eat quietly by myself, and partly to be able to study the rest at a distance, I
stepped half thoughtlessly into an empty corner. I was not permitted to enjoy
this privilege long, however, for a gruff voice sang out, "Come there, you! Get
out of that corner. That ain't no loafing place for such as you."
Looking up, I saw it was my friend of a few nights before, the doorkeeper,
addressing me. He did not recognize me in my new role and I did not take the
trouble to enlighten him, but made haste to obey the by no means uncertain
command.
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174 The Annals of the American Academy
Let us glance at the personnel of the group in the center of which I found
myself. Poorly clothed? Yes, many of them, but by no means all. Physically
unfit to work? Very few. Truly and hopelessly homeless? Not many more.
Of society; coarser and lower tenth? All, undoubtedly. I am sure I am not
overstating the facts when I affirm that fully three-fourths of the men here were
being given food that they ought to have paid for. Many appeared to be work-
ingmen, many more appeared to be men who occasionally work but who were
out of a job; others were clearly able to work if they wanted to. Some had
evidently come in after a night's dissipation at one of the near-by saloons. They
showed that they had been drinking. Some had money in their pockets; one
man had a loaf of bread that he had received at twelve o'clock in Fleischman's
"bread line." With possibly a few exceptions, all could have earned food and
lodging if they had cared to go to the woodyard for an honest half-day's work.
They would prefer, however, to wait around half the night, and to get something
for nothing in the end, than to do this.
It was now nearly two o'clock. Save for a few stragglers hanging about the
door, the crowd had all disappeared. As it was part of our plan to learn where
the men spent the night, we had picked out three of the worst looking characters
with this end in view. They bore all the external markings of the vagrant,
both in dress and in physical appearance. We followed them at as close a dis-
tance as we could without creating suspicion. Once they stopped on a street
corner, apparently to argue as to where they should go. Then they walked on
again. Finally they halted in front of the. door of one of the darkest and dingiest
of the Bowery Lodging Houses. Not a sign of life could be seen from the street ;
all was apparently dark inside. After some indecision one of the men stepped
to the door and gave a signal, but received no answer. Another signal was tried.
After a little waiting, the door opened and the men disappeared inside.
When we were near enough, we read the words "Alligator Hotel" over the
doorway. As we waited, others came along and after giving what seemed to be
the same sort of signal, they, too, were admitted.
At this juncture a policeman appeared. We asked him the nature of the
place inside.
"I don't know; never have been in there, " said he. "A lodging house, res-
taurant, and 'gin-mill,' probably, of the cheapest sort."
"Do you think it safe for anyone to go inside?"
"Oh, yes, undoubtedly, if you can get in," said he. "Go ahead and try it,
if you want to. I'll wait out here on the sidewalk."
This was precisely what I did want to do. So, leaving my companion with
the policeman a little distance up the street, I stepped to the door and rang the
bell once. No answer. I rang again, this time twice, whereupon the door
quietly opened and I found myself standing in the dark hallway. While \\ alking
through this long, narrow, unlighted passageway, I could hear voices in the dis-
tance and could see glints of light coming through the cracks and keyhole of a
door at the end. Relying on my disguise for protection, I opened the door and
entered the room beyond. Here I found a large dimly-lighted back room, a bar
extending along one side, with doors entering the darkened restaurant in front.
The floor was strewn with sawdust, and a large round, old-fashioned stove stood
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Philanthropy, Charities and Social Problems 175
in the center of the room. Standing around the stove and sitting at the tables
were perhaps a hundred men, some talking, some smoking, some drinking, some
dozing, some asleep— all of the lowest crust of humanity, forlorn, homeless, and
one would almost be tempted to say hopeless.
My entrance was unnoticed, save by a waiter who happened to be passing
as I opened the door. I ordered a cigar, put it in my pocket, and joined the group
of men near the stove. Soon I gave one man some tobacco with which to make
a cigarette and another filled his pipe at my expense. This act seemingly re-
moved all social barriers and I was readily admitted to equal fellowship with the
rest. Even here the men had money to spend for drinks. In fact, nothing else
could be bought at this hour. I saw requests for soup and sandwiches refused,
but big schooners of soapy-looking beer were being served, as well as something
that passed for whiskey at five cents a glass.
My friend of the cigarette was the most communicative, and I soon found
myself in his good graces. He had a somewhat superior air from which I inferred
that he condescended to enter such a place as this only under conditions of extreme
necessity. Later I found this to be the case. He said he was trying to get through
the winter by shoveling coal. He had had hard luck this week and had not
earned enough to live on. He worked for twenty-five cents a load and relied on
the people for whom he worked to supply him with a dinner or a tip now and then.
"But it's mighty hard pulling this winter, my friend. This ain't the first
time I have been obliged to come in here."
"Why don't you go to the Municipal Lodging House?" I suggested.
"Municipal Lodging House? Not much for this chap! He knows better
than to go to that place and be 'chucked' to the 'Island.' If your head's level,
you won't go there more than once. Do you know what they do with a feller?
Why, whenever help runs short on the ' Island' they make a raid on the ' Dump. '
That's what we call the Municipal Lodging House. They did it the other night
and got ten men shipped over to work for 'em the next day. Stay clear of that
place is my advice to you."
"I've just been down to the Bowery Mission," he continued. "That's a
'cinch' place to get something to eat."
"So've I been there too, old man," I replied, feeling that I had at last struck
common ground. "I got round twice."
"H'm, that's nothing; I went 'round four times. I've got this much left
for breakfast, " said he, as he pulled a couple of rolls out of his pocket. " Do you
want to know how I did it?"
"Yes, I rather think I would like to know."
"Well, you see, you have to work fast. I ate my first roll and drank my
coffee, but after that I didn't stop for coffee. I just took my roll and skipped
out to get in line again as quick as I could. When the line ain't too big, you can
do this. Then I came up here, and I've got to hang around all night, because
I haven't the price of a bed."
"How do you do it? I'm a bit green at this business, " was my next inquiry.
"Oh, it's easy enough. You just stay where you are. If you get a chance
to sit down, take it. If not, you'll have to stand up or He on the floor. No one
will bother you till half -past five to-morrow morning, when the porter will come
[605]
176 The Annals of the American Academy
and wake you up. Then you can buy a cup of coffee for two cents, and nothing
more will be said. That's all you have to do. That's what all these fellows are
going to do. That's what I suppose I've got to do to-night."
What other secrets may have been disclosed, I cannot tell; for at this point
in the conversation my friend, who had been waiting outside with the policeman,
entered and signaled for me to join him. I had already learned many things
that I wanted to know — enough for one night, at least. So, with a manufactured
excuse, I left my new acquaintance to his prospects of a bunk on the floor, while
I went on to a cleaner and a more comfortable bed.
Had I yielded to the impulse to give him the price of a lodging on the spot,
I might have disclosed my identity, which I was not yet ready to do. More than
all this, I would have been guilty myself of the same offense that I am charging
so many societies of committing against this vagrant class.
[606]
INDEX OF NAMES
Abbreviations.— In the Index the following Abbreviations have been used: pap., prin-
cipal paper by the person named; com., communication by the person named; 6, review of
«., note by the person named; r., review by
book of which the person named is the author
the person named.
Acton, Lord, 275
Adams, A. S., 345
Adams, John, 170
Addams, Jane, 415
Adelaide, Mme., 370
Adler, H. M., 556-559, com.
Alexander I., 391
Alexander, C. B„ 244, et sea.
Alexiff , 481
Allen, W. H., 381-382, r.
Allen, Z., 473
Ames, H. V., 376-377, n.
Amherst, General, 376
Anderson, F. M., 580
Anderson, L. A., 431-445, pap.
Anderson, Miss, 599
Andrews, E. B., 378-379, b.
Armstrong, S. C, 569
Arnold, Benedict, 375, 376
Ashbridge, S. H., 358
Austin, O. P., 364, b.
Bain, A., 560, b.
Barnecoat, C. A., 220.
Barrows, S. J., 226, 230, 231
Barton, Premier, 216, 220
Bayot, A., 393
Beach, C. P., Jr., 388
Beaconsfield, Lord, 392
Beard, C. A., 391-392, r., 393, 560, b.
Bebel, 344
Bechaux, A., 393
Beck, J. M., 87-110, pap., 283
Bender, H. H., 414
Bergen, 144
Berkowitz, Henry, 422
Betts, W. C, 463-474, pap.
Biggs, H. M., 565
Bismarck, Prince, 383, 384
Blainejf. G., 385, 563
Bliss, W. P. D., 569
Blondel, G., 393
Bolen, G. L., 379-380, b.
Booth, C, 593
Bostock, Mrs. 600
Bourguin, M., 393
Boutmy, E., 580
Bouvier, John, 81
Brackett, J. R., 412, 415
Bradford, Judge, 145
Bradley, G. B., 109
Brandt, Lilian, 565
Braun, M., 174
de Bray, A. J., 393
Breckinridge, J. C, 563
Brentano, L., 341
Brewer, D. J., 139, 140
Brinkerhoff , Roeliff , 415
Brockway, 416
Brooks, Phillips, 179
Brousseau, K., 580
Brown, B. F. 437, 438
Bruckman, E. G., 262, 263
Brumbaugh, M. G., 371-372, n.
Buchanan, James, 100
Buckle, H. T., 554
Buell, A. C, 560-561, 6.
Burke, Edmund, 101
Burns, J., 563
Burr, Aaron, 375
Butler, B. F., 385
Butler, C. H., 562
Butler, J. A., 407, 408, 587
Byall, J. B., 489-506, pap.
Byers, J. P., 419
Byles, J. B., 364, b.
Caesar, 171
Caffery, D., 230
Cairns, J. E., 391
Calhoun, J. C, 100
Calvet-Rogniat, P., 248, et seq.
Cambon, J., 561, b.
Campbell, 415
Campbell, Helen, 346
Campbell, Justice, 395
Carlisle, J. G., 224
Carlyle, Thomas, 482, 574
Carpenter, J., 561
Carter, A. W., 424
Chamberlain, Joseph, 215, 220
Chamberlin, G. E., 413
Channing, W. E., 295
Charles V., 386
Charles VIII., 386
Chase, S. P., 385
Chauvin, Jeanne, 344
Chavee, F., 393
Claghorn, K. H., 185-205, pap., 282
Claiborne, J. F. H., 374
Clark, E. E., 285-295,
Clark, G. R., 565
Clarke, D., 262. 263
Clarke, Wm., 370, 580
Cleveland, F. A., 43-66, pa\
Cleveland, Grover, 225, 385
Clough, D. M., 128
Cockerell, T. D. A., 408
Collier, P., 536
Columbus, Christopher, 563
Commons, J. R., 363
Conigliani, C, 561, b.
Conkling, R., 385
Conner, J. E., 364, «.
Conway, Thomas, Jr., 354-360, com.
Cooper, 492
Cortelyou, G. B., 1-12, pap., 279, 280.
de Coubertin, P., 393, 561-562, b.
Cox, I. J., 364, n.
Crandall, S. B., 370, «., 562, b.
Croly, J. Cm 421
Cromwell, Oliver, 574
Crooker, J. H., 364, b.
Crothers, Rev. Dr., 415
Cunningham, W., 593. 594
Curtis, F., 393
Cutting, F. L., 436
Dale, T. N„ 393, 564, b.
Davies, Anna F., 283
Davison, Helen S., 561, n.
Davitt, M., 562, b.
pap.
277, 369
[607]
Index of Names
Dawson, W. H., 373
Day, Justice, 596
Deakin, Premier, 219
Dean, A. F., 452
Dearborn, H., 376
Delafield, R., 262, 263
Denman, Wm., 400
Devas, C. S., 364
Devine, E. T., 412, 422
Devonshire, Duke of, 593
Dexter, E. G., 580
Dilke, 220
Dill, J. B., 283, 284
Dinwiddie, Emily W., 423
Dionne, 378
Doherty, H. L., 393
Dollot, Rene, 370
Dopp, K. E., 393
Dresser, D. LeR., 244, et seq.
Duane, James, 80
DuBois, W. E. B., 393
Duguid, Charles, 365, b., 393
Eckels, J. H., 20
Edmunds, G. F., 146, 384
Egner, Hermann, 365, b.
Eichholz, Dr., 594
Ellwood, C. A., 365, b.
Elson, H. W., 393, 562-563, b.
Engel, August, 367-368, b.
Ensor, R. C. K., 393, 563, b.
Eugenie, Empress 383
Evans-Gordon, W., 563-564, b.
Farnam, H. W., 338,341
Ferrero, G.. 380-381, b.
Fetter, F. A., 580
Ficklin.J. R.,370,n.
Field, R. H.,79,81
Firth, C. H., 574
Fish, S., 262, 263
Fitch, J., 490
Fleming, W. L., 372-373, «., 564, b.
Flower, B. O., 366, b.
Focht, B. K.,355
Foerderer, R. H., 356, 357, 358
Folks, Homer, 415
Foraker, J. B.,146
Ford, G. S., 366-367, b.
de Forest, R. W., 381, 415, 422
Foulke.W. D.,564,6.,580
Fouse, L. G., 67-83, pap.
Fox, C. J., 368, 369
Fox, H.F.,415
Francis I., 385, 386
Frederick the Great, 563
Frederick William III., 366
Freund, E., 393, 570-571, b.
Friedrich, Arthur, 367-368, b.
Fuller, Margaret, 345
Fuller, M.W., 135
Fulton, R., 490
Galvez, 566
Gambetta, L. M., 383
Gardiner, Dr., 575
Garner, J. W., 123-147, pap.
384-385, r., 570-571, r.
Garnett, Miss, 598
Gass, 580
Gaston, J., 580
Gastrell, W. S. H., 536
Gates, Professor, 425
Gates, J. W., 262, 263
George III., 563
George, J. Z., 146
George, Senator, 374
Gibson, H. R., 230
378-379, r.
Giddings, F. H., 281, 347, 544
Gilman N. P., 393
Gladstone, W. E., 561
Gompers, Samuel, 313, 320, 323
Gorgas, 427
Gould, Edwin, 262, 263
Gould, G.J., 262, 263
Grant, U.S., 378, 384
Green, J. R., 562
Green, W. W., 244, et seq.
Greene, J. L., 483
Greenwood, Mrs., 600
Grenell, Judson, 323, 324
Gresham.W. Q.,224
Grosser, H. S., 581
Grover, 126, et seq.
Hadley, A. T., 368, b.
Hall, P. P., 167-184, pap., 229, 231
Hall, W.E., 580
Halsey, F. A., 393, 564, b.
Hamilton, Alexander, 80, 108, 109, 375
Hamilton, Angus, 393, 572, b.
Hamilton, J. H., 332
Hammond, B. E., 368, &., 393
Hammond, J. L. LeB., 368-369, b.
Hammond, R., 575
Hanotaux, Gabriel, 382-384, b.
Hardenberg, Count, 367
Harisse, 378
Harlan, J. M., 96, 103, 135
Harriman, E. H., 127, etseq.
Harris, N. D., 580
Harrison. C. C, 277, 278, 279
Hart, A. B., 494
Hart, H.H., 227, 228
Haskins, C. W., 369-370, b., 393
Hassall, 391
Hatch, L. C, 393
Haurion, M.,580
Hawes, 228
Hawkins, R. C, 580
Hay, John, 279
Hayes, R. B., 415
Hayman, Kate G., 416
Haywood, M. DeL., 565, b.
Headlam.G. W.,580
Heaton, J. H.,220
Helps, A., 580
Henderson, C. R., 415, 420
Hennepin, Louis, 377-378, b.
Henri II., 386
Henry, 376
Herbert, A., 560
d' Herricourt, Mme., 345
Hill, E. P., 413
Hill, J. J., 126, et seq.
Hitchcock, Ripley, 370, b.
Hoar, G. F., 146, 384-385, b.
Hobson,J.A.,348,349
Hollander, J. H., 575-576, r.
Holmes, O. W., 135, 140, 141, 279
Hosmer, J. K.,580
Howard, G. E., 393, 572-573, b.
Howard, T. E., 491
Howland, A. C, 377-378, n.
Huebner, S., 525-539, pap.
mint, Mrs. G. S., 416
Hurd, Miss, 352, 353
Huston, Judge, 79
Hyde, H. B., 445
von Ihering, 547
Jackson, Andrew, 100
Jacobi, A., 565
James I., 560
Jay, John, 80
[6o8]
Index of Names
Fefferson, Thomas, 92, 109
fellinek, G., 393
Tenks.J. E.,387
[oergens, Max, 367-368, b.
roerns, W. G., 398, 591
Johnson, 346
[ohnson, Albert, 354
Johnson, Alexander, 412, 419
Tohnson, E. R., 387-389, r., 494
Johnson, J. G., 126, et seg., 144
Johnson, S. V., 580
Johnson, T. L., 354
Johnson, W. F., 393, 565-566, b.
roly, H.,566,b.
Jonas, S., 367-368, b.
Jones, G. M., 566-567, b.
Jones, T. J., 393
Kautsky, K., 563
Keene.G. F.,415
Keller, W., 233
Kelley, Florence, 415
Kelly, Dr., 600
Kelsey, C, 411, 567, «., 572-574, r., 579, r.
Kilburn, F. D., 25, 26, 27-42, pap., 277
Kingsley, D. P., 433
Knopf. S. A., 565
Knox, P. C, 389
Koren, J., 199
Krech.A. K.,258,259,262
Kuczynski, R. R., 182
Ladoff, I., 393, 566, b.
Lamar, L. Q. C, 385
Landis, Abb 475-488, pap.
Langdell, C. C, 125
deLannoy, Fl., 370, b., 393
Lansing, R., 566-567, b.
La Salle, R. C, 370, 377, 378
Lavisse, E., 385-387, b., 393, 580
Lea, H. C, 275
Lecky.W. E.H.,368
LeClercq, 378
Lee, Joseph, 415
Lefevre, A., 370-371, b.
Leflore, G., 374
Leipziger, H. M., 602
Lemonnier, H., 385-387, b.
Leopold, King, 370
Lewis, C. T., 111-122, pap., 283, 284, 415
Lewis, M., 370, 580
Lewis, R. E., 371-372, b.
Li€geois, C, 393
Lilly, N.S., 364
Lincoln, Abraham, 279, 375
Lindsay, S. M., 280
Lindsey, B. B.,415
Lingelbach, W. E., 366-367, n., 574-575, r.
Livingston, J. D., 262, 264
Livingstone, R. R., 490
Loch.S. C. 601
Lodge, H. C, 171
Lomas, S. C, 574-575, b.
Loria, A., 561
Loti, P., 561
Lotz,W.,525
Louis XII., 386
Low, Seth, 423
Luckey, G. W. A., 372, b., 393
Lusk, H. H., 220
Luther, Martin, 275
Macarthur, W., 316-330, pap.
Mack, J. M., 356, 357, 358
MacMahon, M.,383
Madison, James, 80
Marconi, William, 103
Marks, M. M., 423
Marshall, John, 91, 98, 102, 108, 571
Marshall, Professor, 390
Martineau, Harriet, 345, 350
Marx, K., 393, 547,570
Mason, O., 348, 351
May, M. B.,584
Mayer, 255
vonMayr, G.,393
McConnell, S. P., 262, 263
McCook, J. J. , 243, etseq.
McCrady, General, 376
McCrea, R. C, 390-391, r.
McCune, H. L., 396, 588
McDermott, E. R.,393
McKinley, William, 2, 279, 580
McLean, F. H., 415
McNichol, J. P.,358
Meade, E. §., 576-578, r.
Meigs, R. J., 376
Membre, Father, 378
Meyer, H. R., 525, 534
Meyers, 420, 421
Millerand, 563
Milligan, J. L.,415
Millis, H. A., 379-380, r., 402
Miltoun, F.,393
Mitchell, John, 306, 313, 353
Mithouard,A.,411
deMolinari, G., 373, 580
von Moltke, H. K. B., 383
Montague, G. H., 387-389, b.
Montague, Lady, 345
Moody, J., 387-389, b., 393
Morgan, J. P., 126, etseq., 251, et seq.
Muller, D. H., 393
Munro, D. C, 385-387, r.
Munro, W. B., 375-376, n.
Murphv, E. G., 394, 567, b.
Murphy, M., 356
Murphy, M. F., 294
Murphy, S., 601
Myers, P. V. N., 372-373, b.
Napoleon, 383, 574
Napoleon III., 383
Newton, Isaac, 386
Nibecker, F. H., 415, 416, 423
Nicolay, 279
Nixon, L., 243, et seq.
North, F., 369
Norton, E., 159-165, pap., 282
Odell, B. B., Jr., 414
Oliphant, 260
Oppenheim, 255
Ormsby, Sir Lambert, 598
Osgood, H. L., 394, 560, 562
Ostrander, J. D.,258
Oviatt, F. C, 446-462, pap.
Owen, D., 394
Paine, R. T., 415, 417
Paine, Thomas, 80
Palmer, F. H. E., 373, b.
Paltsits, V. H., 378
Pam,M., 252, et seq.
Parker, G., 220
Parkes, H., 213, 214
Parsons, Frank, 207-220, pap., 361-
Parsons, 358, 359
Patten, S. N., 390, 540-555, pap.
Peacock, A. R., 262, 263
Peck, P. F., 560-561, n.
Peckham, R. W., 135
Peirce, P. S.,394
Pelloutier, F.,373,6.
Penn, William, 560
Pennell, Sheriff, 416
[609]
Index of Names
dePeralta, M. M., 394
Perkins, G. W., 264, 265
Pierce, W. S., 143, 145
Pierson, W. W., 406, 409
Pinkus, N., 339, 342
Pitt, William, 369
Plato, 346
Platter, J., 394
Plehn, C. C, 440
Post, L. F., 394
Powell, Y., 560
Pownall, 376
Pratt, S. S., 365
Prentice, S. O., 570
Prothero,G.W.,394
Rabany, C, 580
Randolph, Peyton, 108
Raper, C. L., 374, b.
Reed, W., 427
Reeves, W. P., 220
Reich, E„ 580
Remington, 378
Richard, G., 567, b.
Richardson, A. C, 583
Ridgely, W. B., 15-26, pap., 276
Riis, Jacob, 234
Riley, F. L., 374, 565-566, n.
Riviere, L., 394
Roberts, F. H. H., 395
Roberts, Peter, 181, 195
Robinson, C, 394
Rolland, Mme., 345
Roosevelt, Theodore, 110
Rosengarten, J. G., 283
Rowe, L. S., 277, 394, 575-576, b.
Rowland, D., 374
Rubinow, I. M., 331-342, pap.
Russell, 368
Russell, Alfred, 570
Russell, Alys, 352
Russell, R., 580
Sabin, 378
Safford, F. H., 564, «.
Sammis, L. W., 241-270, pap., 277
Samuelson, J.E.,419
Sanborn, F. B., 415, et seq
Sand, George, 345
Sargent, F. P., 151-158, pap., 280, 423
Scherer, J. A. B.,580
Scherger, G. L., 374-375, b.
von Schierbrand, W., 394, 551, 568, b.
Schouler, J., 375, b.
Schreyer,V.,248,256
Schuemacher, Karl, 365, b.
Schultz-Delitch, 341
Schurz, Carl, 385
Schwab, C. M., 251, et seq.
Scott, S. P., 394
Seager.H.R., 390-391, b.
Seeley, Professor. .368
de Seilhac, L., 375,6.
Seward, F. K., 258, 264
Shakespeare, William, 386
Shaler, N. S., 394, 568-569, b.
Shambaugh, B. F., 394, 569, b.
Shea, J. D. G., 377, 378
Shepherd, W. R., 380-381, r.
Sherman, J. S., 93, 385
Shirley, 376
Simkhovitch, Mrs. Vladimir, 415
Simpson, W. T., 247
Skrine, F. H., 391-392, b.
Smith, Adam, 297
Smith, C. S., 580
Smith, E. Z., 585
Smith, J. A., 397, 591
Smith, J. H., 375-376, b.
Smith, J. R., 507-524, pap., 572, r.
Smith, S. G., 419
Smith, W. R., 374, n., 376-377 b.
Smith, Zilpha D., 412.
Spalding, W. F., 416.
Spencer, Anna G., 412, 415
Spencer, Herbert, 343
Speranza, G. C, 201
Stael, Mme., 345
Stanton, Elizabeth C, 345
Stanwood, Edward, 563
Steele, Justice, 395
Stevens, F. E., 582
Stone, W. A., 354
Storrs, L. C, 416
Stow, W. L., 262, 263
Strachan,W.,394
Straker, F., 394
Strasser, A., 317
Strong, L, 394, 569, b.
Strong, J. N.,413.
Strong, R. P., 426
Stuart, J. E. B., 563
Suedekum, A., 570
Sumner, Charles. 385
Sutherland, W. A., 425
Tacitus, 171
Talbot, Edith A., 394. 569, b.
Talleyrand, Prince, 370
Tapp,S.C.,580
Tarver, J. C, 382
Taylor, G., 415
Terlinden, Ch., 394
Tetzel, 275
Thiers, L. A., 383
Thomas, D. Y., 375, n., 394, 562-563,
569-570, b.
Thomas, W. S., 372, n.
Thompson, J. W., 382-384, r.
Thorndike, E.
Thurloe, 575
Thwaites, R. G.,377
Tiedman, C. G., 570
Tolles, B., 264
Tompkins, D. D., 580
deToqueville, A., 580
Tozer, H.,220
Treitschke, 366
Trenor, J. J. D., 221-236, pap.
Trevelyan, 368
Tryon, William, 565
Turst, Henri, 411
Unwin, G.,580
Upchurch,J.J.,477
Vanderlip, F. A., 274
Vandervelde, E., 570, b.
Van Dyne, F., 580
Van Roey, E., 394
VanSant.S. R., 125
Veditz, C. W. A., 365,
375, n.
Veiller, Lawrence, 381
Verhoeven, L. G.,394
Vermaut, R.,394
Victoria, Queen, 366
Vidal, Georges, 394
Vogelstein, Theodor, 367-368, b.
von Vollmar, 563
Walford, 437
Walker, F. A., 173, 181
Wallace, H. B., 491, 492, 504
Walling, W. E., 296-315, pap.
Walpole, Horace, 344
L.,394
367-368, n., 373, n.
[6io]
Index of Names
Wanamaker, John, 357, 359
Ward, A. W., 394
Warfield, Guy, 292
Warne, F. J., 181, 283, 576-578, b.
Warner, 199, 200
Warren, C, 225, 556
Washington, B. T., 394, 568, 569, 579, b.
Washington, George, 4, 78, 80, 170, 171, 375,
563
Webb, Beatrice, 351, 352, 378, b., 563
Webb, Sidney, 351, 352, 378, b., 563
von Weber-Ebenhoft, A., 525
Webster, Daniel, 100, 385
Webster, Noah, 80
Westermarck, 572
Wetmore, C. W., 262, 263
Wharton, Joseph, 274
Wheaton, H., 81, 490, 491
White, A. D., 383
White, E. D., 135, 140
Wiedenfeld, Dr., 525, et seq.
Wilcox, D. P., 580, 590
William III., 366
Williams, J. S., 374
Williams, Talcott, 423
Willing, J., 566
Wilson, A. J., 394
Wilson, G. S., 587
Wilson, Henry, 385
Wilson, W., 562
Wilson, W. P., 2
Wines, E. C, 415
Wines, F. H., 415, etscq
Wing, F. E., 602
Winsor, 378, 565
Wolf, C, 356
Wolfe, James, 376
Wolstoncraft, Mary, 345
Wood, Leonard, 427
Woodruff, C. R., 580
Worthington, Mrs., 599, 600
Wright, Carroll D., 348, 350, 351
Young, 126, et seq.
Young, J. W., 243, et seq.
Yudelson, Sophie, 343-353, pap.
INDEX OF SUBJECTS
[Titles of papers are printed in small capitals]
Arbitration. Arbitration op Industrial
Disputes, 285-295. Machinery of arbitra-
tion, 285-286; benefits, 287-289; underlying
principles, 290; attitude of labor organiza-
tions, 291-295
Australasia. Methods of Dealing with
Immigration. See Immigration
Banks. Financial Reports op National
Banks as a Means op Public Control,
43-66. Powers of control by National Bank
Act, 45-46; purposes of control, 46-47;
means of control, 47-49; functions of Comp-
troller, 49; public protection against im-
pairment of capital resources, 49-50; value
of report, 51-52; definition of capital re-
sources, 52-53; classification of balance
sheet, 53-57; uses of such analysis, 57-58;
point of control not_ covered by National
Bank Act, 58-63; judgment of bankers
regarding present capitalization, 63-64;
inadequacy of reserve requirements, 64-65 ;
present condition attributed to Bank Act,
65-66
Government Control op Banks and Trust
Companies, 15-26. National Bank Act,
17-19", bank circulation, 19; causes of bank
failures, 20; examinations made by Comp-
troller of Currency, 20-21; number and
capitalization of national banks, 22; neces-
sity for regulating trust companies, 23-26
Biography. "Samuel Chapman Armstrong,"
by Edith A. Talbot, note, 569
"Autobiography of Seventy Years," by
G. F. Hoar, review, 384
"The Letters and Speeches of Oliver
Cromwell," edited by S. C. Lomas,
review, 574
"Charles James Fox," by J. L. LeB.
Hammond, note, 368
"William Penn," by A. C. Buell, note, 560
"Governor William Tryon," by M. DeL.
Haywood, note, 565
Boston. Percentage of Voters, 406
Buffalo. Police Administration, 583
California. Home Rule Charters, 400
Charities. National Conference of Charities
and Correction, Thirty-first Annual Session,
414
New York Fiscal Supervisor of State
Charities, 414
Report of Oregon State Conference of
Charities and Corrections, 413
Philanthropy, Charities and Social Prob-
lems, 412-423; 593-606
Poor Relief in Indiana, 412
"Public Relief and Private Charity in
England," by C. A. Ellwood, note, 365
Charter. California, 400
Denver, 395
Minnesota, 398
Missouri, 396
San Francisco, 402
Washington, 397
Chicago. Police Administration, 581
Cincinnati. Police Administration, 584
"Citizen," by N. S. Shaler, note, 568
Civil Service. Report of Executive Commit-
tee of Civil Service Reform Association of
Pennsylvania, 410
Civil Service in San Francisco, 405
Cleveland. Police Administration, 582
Colonies and Dependencies, 424-430
Colorado Springs. Liquor Question, 408
Commerce. American System of Improv-
ing and Administering Commercial
Facilities, 489-506. Legal decisions dis-
tinguishing between Federal and State
authority, 490-494; improvement and con-
trol of waterways, 494-495; removal of
obstructions from channels, 495-496: con-
struction of bridges, dams and dikes, 496-
497; harbor lines established by Secretary
of War, 497-498; relation of State govern-
ments to wharves and docks, 498-505;
summary, 505-506
The British System of Improving and
Administering Ports and Terminal
Facilities, 507-524. General descrip-
tion, 507-510; the public trust, 511;
Glasgow and Liverpool, 511-513; his-
tory of port of London, 514-519;
municipal and private ports, 520-524
Relation of the Government in Ger-
many to the Promotion of Com-
merce, 525-539. German system in
general, 525-526; management of
[6n]
Index of Subjects
harbors, 526-528; improvement of
harbor channels, 528-529; of harbor
facilities, 529-531; commercial growth
of harbors, 531-532; construction of
canals, 532-536; influence of preferen-
tial railway rates, 536-538; summary
of results of Germany's policy, 538-539
"Brennende Agrar-, Zoll-, und Handels-
fragen," by H. Egner and K. Schue-
macher, note, 365
" Handelspolitische Interessen der deut-
schen Ostseestaedte, 1890-1900," by S.
Jonas, note, 367
"Die Industrie der Rheinprovinz, 1888-
1900," by T. Vogelstein, note, 367
"Schlesien's Industrie unter dem Ein-
flusse der Caprivi'schen Handelspolitik,
1889-1900," by A. Friedrich, note, 367
Crime, Juvenile. "L'Enfance Coupable," by
H. Joly, note, 566
Democracy. "The Relations between Free-
dom and Responsibility in the Evolution of
Democratic Government," by A. T. Hadley,
note, 368
Denver. Home Rule for Cities, 395
Disease. "A Handbook on the Prevention of
Tuberculosis," note, 565
How Yellow Fever may be Introduced
into Philippines, 426
District of Columbia. Report of Commis-
sioners of, 409
Duluth. Police Administration, 591
Economics. "Introduction to Economics,"
by H. R. Seager, review, 390
Education. "Business Education and Ac-
countancy," by C. W. Haskins, note, 369
Committee on Lectures and Libraries of
the Board of Education of the City of
New York, 602
"The Educational Conquest in the Far
East," by R. E. Lewis, note, 371
Filipino Students in United States, 425
"The Professional Training of Secondary
Teachers in the United States,' by G.
W. A. Luckey, note, 372
"Working with the Hands," by B. T.
Washington, review, 579
Ethnology. "Germains et Slaves," by A.
i-- Lefevre, note, 370
Finance. Hawaii, 424
"Saggi di Economia politica e di Scienza
delle Finanze," by C. A. Conigliani,
note, 561
"The Stock Exchange," by C. Duguid,
note, 365
Forests and Forest Reserves in Philippines,
430
Friar Lands. Disposition of, in Philippines,
428
Government. "'The Government and the
Civil Institutions of New York State," by
R. Lansing and G. M. Jones, note, 566
"The Office of the Justice of the Peace
in England," by C. A. Beard, note, 560
"History of Military Government in
Newly Acquired Territory of the
United States," by D. Y. Thomas,
note, 569
Notes on Municipal Government, 395-
411; 581-592
"North Carolina: A Study in English
Colonial Government," by C. L. Raper,
note, 374
Grand Rapids. Police Administration, 590
Hawaii. Finances, 424
History. "America, Asia and the Pacific,"
by W. von Schierbrand, note, 568
"Arnold's March from Cambridge to
Quebec," by J. H. Smith, note, 375
"Les Origines Diplomatiques de l'lnde-
pendance Beige," by Fl. de Lannoy,
note, 370
"Eighty Years of Union," by J. Schouler,
note, 375
"How England Averted a Revolution by
Force," by B. O. Flower, note, 366
"A Century of Expansion," by W. F.
Johnson, note, 565
"France and the United States," by J.
Cambon, note, 561
"La Chronique de France," by P. de
Coubertin, note, 561
"Contemporary France," by G. Hano-
taux, review, 382
"Histoire de France," Vol. v, Parts 1
and 2, by E. Lavisse, review, 385
"Hanover and Prussia," by G. S. Ford,
note, 366
"Hennepin's A New Discovery in
America, ".edited by R. G. Thwaites,
note, 377
The Present Problems in the Eco-
nomic Interpretation of History,
540-555. Historical methods criti-
cised, 540; two different conceptions
of "economic interpretation" of his-
tory, 541; "economic interpretation"
analyzed, 543; canons of "economic
interpretation, ' 547; relation of eco-
nomic doctrines to natural resources,
548; resources of Northern Europe
and Mediterranean countries com-
pared, 550; civilizations of South
Europe and tropical countries made
permanent, 554-555
"The Messages and the Proclamations of
the Governors of Iowa," edited by B. F.
Shambaugh, note, 569
"The Louisiana Purchase and the Ex-
ploration, Early History and Building
of the West," by R. Hitchcock, note,
370
"The Middle Ages," by P. V. N. Myers,
note, 372
"Publications of _ the Mississippi His-
torical Society," Vol. vii, edited by
F. L. Riley, note, 374
"The Expansion of Russia," by F. H.
Skrine, review, 391
"South Carolina as a Royal Province,"
by W. R. Smith, note, 376
"Steps in the Expansion of our Terri-
tory," by O. P. Austin, note, 364
"The United States in Our Own Time,"
by E. B. Andrews, review, 378
"History of the United States of Amer-
ica," by H. W. Elson, note, 562
"West Virginia University Documents
Relating to Reconstruction," edited
by W. L. Fleming, note, 564.
History, Economic. "Die Westfaelische Ge-
meinde Eversberg," by A. Engel, note,
367
Home Rule. Denver, 395
California, 400
Minnesota, 398
Missouri, 396
Washington, 397
Immigration. "The Alien Immigrant," by
W. Evans-Gordon, note, 563
Australasian Methods of Dealing
with Immigration, 207-220. Con-
vict colonies, 209; colonization by com-
panies, 210; exclusion of Asiatics,
211-215; provisions against low-grade
[6 1 2]
Index of Subjects
immigrants in general, 215-218; in-
effectiveness of laws, 219-220
Diffusion of Immigration, 159-165
Immigration in its Relation to Pau-
perism, 185-205. Foreign-born alms-
house paupers, 187; analysis of immi-
grants during 1903, 188; Italian immi-
gration, 189-193; Slavs, 194-195; Jew,
196-197; conclusions, 199-205
Problems of Immigration, 151-158.
Statistics of Nationalities, 1820-1903,
154; character of present immigrants,
155-156; what the United States should
do, 156-158
Proposals Affecting Immigration,
221-236. Proposals for consular in-
spection, 224-225 ; for educational tests,
225-227; the immigrant and crime,
227-231; and pauperism, 231-234; and
the slum, 234-235; relief of congestion,
235-236
Selection of Immigration, 167-184.
Increase of and change in character
of immigration, 171-173; restrictive
legislation reviewed, 174; present
effects of such restrictions, 175; origin
of immigrants, 176; their concentra-
tion in America, 176-177; effects of
this, 176-181; remedies discussed, 181-
( 184
"The Slav Invasion and the Mine
Workers," by F. J. Warne, review, 576
Insurance. Fire Insurance, Expenses,
Profits, Problems, 446-462. Reserve
requirements, 446; facility for insuring, 447;
expenses and premiums, 448; taxes, 450;
preventive measures, 450; rating of prop-
erties, 452; charge of excessive profits
replied to, 454; New York companies con-
sidered in detail, 458-460; general conclu-
sions, 461-462
True Basis of Fire Insurance, 463-
474. Profits of old-line insurance com-
panies, 464-467; expenses growing
heavier, 468; fire preventive measures
neglected, 469; insurance charges non-
competitive, 471; merits of mutual
insurance, 472-474
Insurance Investments, 431-445.
General principles, 431; laws of Iowa,
432; rapid growth of insurance invest-
ments, 433; classes of securities, 434;
safety of various securities, 436; earn-
ing power, 437; taxation, 439; stocks
and bonds compared, 441; profits,
442-445
Life Insurance by Fraternal Orders,
475-488. Insurance . system of Man-
chester Unity, 475^76; Royal Com-
mission of 1870-1875, 477; Ancient
order of United Workmen, 477 ; reports
of Massachusetts and New York insur-
ance departments, 478 ; ' ' uniform rate
and "reserve," 479-480; accomplish-
ments of fraternal insurance organiza-
tions, 481-483; comparison of fraternal
and old-line insurance, 484-486; fra-
ternal insurance and social adjustment,
487-488
Compulsory State Insurance of
- Workingmen, 331-342. Necessity for
insurance, 331-332; success of State
insurance, 333; arguments for compul-
sory State insurance, 334-338; reply
to criticisms of compulsory insurance,
339-342
State Regulation of Insurance, 67-
83. Origin of State regulation, 69-70;
history of, 70 72; abuse of power of,
72 75; benefits and advantage, 75-76;
luxation abuse, 70 78; Slate regula-
tion of insurance under national super-
vision, 7S Hi ; is insurance commerce.
81-83
Indiana. Poor Relief in ,412
Industry. Arbitration op Industrial Dis-
putes. See Arbitrat ion .
"Die Entwickelung zum Socialismus," by
E. Vandervelde, note, 570
Relation of Trust Companies to
Industrial Combinations. See Trust
Companies
Labor. "Getting a Living," by G. L. Bolen,
review, 379
"Histoire des Bourses du Travail," by
F. Pelloutier, note, 373
"Syndicats ouvriers, Federations, Bour-
ses du Travail," by L. de Seilhac, note,
375
Woman's Place in Industry and
Labor Organizations. See Woman
Liberty. "Evolution of Modern Liberty," by
G. L. Scherger, note, 374
Liquor Question. "The History of Liquor
Licensing in England," by S. and B. Webb,
note, 378
Colorado Springs, 408
Milwaukee, 407
Wisconsin, 407
London. Police System of, 556-559
"Metric Fallacy," by Halsey and Dale, note
564
"Militarism," by G. Ferrero, review, 380
Milwaukee. Liquor Question, 407
Police Administration, 587
Minnesota. ' ' Home Rule " Charters in, 398
Missouri. Home Rule for Cities, 396
Northern Securities Case, 123-147. Con-
ception and organization, 125-130; Securi-
ties Company in court, 130-135; opinion of
court, 135-141; problem of readjustment,
141-145; conclusions, 145-147
Oregon. Report of State conference of Char-
ities and Corrections, 413
Paris. Prostitution, 411
Pennsylvania. Report of Executive Com-
mittee of Civil Service Reform Association,
410
Philadelphia. Street Railways in, since 1900,
354-360
Philanthropy. Charities and Social Prob-
lems, 412-423; 593-606
"American Pauperism and the Abolition
of Poverty," by I. Ladoff, note, 566
Observations on Free Coffee and Sand-
wich Distribution in a New York Mis-
sion, 602
Philippines. Filipino Students in the United
States, 425
How Yellow Fever mav be Introduced
into, 426
Trade in, 427
Disposition of Friar Lands, 428
"Official Gazette," 429
Forests and Forest Reserves, 430
Philosophy. "Dissertations on Leading
Philosophical Topics," by A. Bain, note, 560
Physical Deterioration. Report of British
Inter-Department Committee of, 593
Pittsburgh. Police Administration, 585
Police Administration in. Buffalo, 583 ,
Chicago, 581
Cincinnati, 584
Cleveland, 582
Duluth, 591
Grand Rapids, 590
[613]
Index of Subjects
Kansas City, Mo., 588
Milwaukee, 587
Pittsburgh, 585
Seattle. 591
Washington, D. C, 587
"Police Power," by E. Freund, review, 570.
Police System of London, 556-559, com.
Political Economy. "Sophisms of Free Trade
and Popular Political Economy Examined,"
by J. B. Byles, note, 364
Politics. "Outlines of Comparative Politics,"
by B. E. Hammond, note, 368
Porto Rico. "The United States and Porto
Rico," by L. S. Rowe, review, 575
Proceedings of Academy, Eighth Annual
Meeting, 273-284
Prostitution. Paris, 411
Public Ownership and Low Rates, 361-363
Railways. Street Railways in Philadephia
since 1900, 354-360
Religion. "Religious Freedom in American
Education," by J. H. Crooker, note, 364
San Francisco. Charter, 402; Civil Service,
403; bond issue, 405
Saxon. "Slav or Saxon," by W. D. Foulke,
564
Seattle. Police Administration, 591
"Slav or Saxon," by W. D. Foulke, note, 564
Socialism. "Modern Socialism," by R. C. K.
Ensor, note, 563
Social Problems. Philanthropy, Charities and ,
412-423; 593-606
"The Present South," by E. G. Murphy,
note, 567
"Social Progress," edited by J. Strong, note,
569
Social Service. Training for, 412
Sociology. "Manuel de Morale et Notions
de Sociologie," by G. Richard, note, 567
"A History of Matrimonial Institutions,"
3 vols., by G. E. Howard, review, 572
"Tenement House Problem," edited by
R. W. deForest and L. Veiller, review,
381
"Town and Country Life in Austro-Hungary,"
by F. H. E. Palmer, note, 373
Trade. Some Agencies for the Extension
op our Domestic and Foreign Trade, 1-12.
Tribute to work of Academy, 1-2; "com-
mercialism" of age, 3; initiative of individ-
ual merchant, 4; agencies of Federal govern-
ment, 5-8; activities of new Department
of Commerce, 8-12
"Sophisms of Free Trade and Popular
Political Economy Examined," by J.
B. Byles, note, 364
In Philippines, 427
Treaties. 'Treaties: Their Making and
Enforcement," by S. B. Crandall, note, 562
Trusts. Control and Supervision of Trust
Companies, 27-42. Nature of Trust com-
panies, 29; their charters, 30; New York Act
of 1887 regulating, 31; Act of 1892, 33;
statistics of, 34-36; present and needed
laws regulating, 37-42
The Federal Power over Trusts, 87-
110. Causes of formation of, 89-91;
McCulloch vs. Maryland, 91 ; Interstate
Commerce Act of 1887, 93; Anti-Trust
Act of 1890, 94; E. C. Knight case, 95;
United States vs. Addyston Pipe and
Steel Company, 97; power of Federal
government over trusts, 98; graded
excise taxes, 99; Federal control over
mails, 100; commerce defined, 102-104:
Northern Securities case, 106; Federal
incorporation, 108-110
"Finanzielle Trustgesellschaften," by M.
Joergens, note, 367
Government Control of Banks and
Trust Companies. See Banks
The Relation of Trust Companies to
Industrial Combinations, as Illus-
trated by the United States Ship-
building Company, 239-270. Origin
of United States Shipbuilding Com-
pany, 242; Trust Company of the
Republic, established, 244; relations of
Shipbuilding Company and Trust Com-
pany of the Republic, 246-250; Bethle-
hem Steel Company and Shipbuilding
Company, 251-253; difficulty of floating
Shipbuilding Company; 254-265; mis-
misfortunes of Trust Company of the
Republic, 267-268; lessons drawn from
history of Shipbuilding Company,
269-270
The Scope and Limits of Congres-
sional Legislation against the
Trusts, 111-122. Causes of trusts,
113; hostility toward explained, 114;
necessity for government regulation,
116; principles and obstacles, 119-122
"The Truth About the Trusts," by J.
Moody, review, 387
"Trusts of To-day," by G. H. Montague
review, 387
Unionism. The New'Unionism — The Prob-
lem of the Unskilled Worker, 296-315.
Unions formerly composed of skilled
workers, 296-297; great increase in number
of unskilled workers. 298-301; effect on
wages, 302-303 ; new unskilled occupations,
304; incorporation of unskilled men into
unions, 305-307; effects on ideals of union,
308-313 ; adjustments of unions and capital-
ists, 312-315
Political Action and Trade Unionism,
316-330. Programs of conventions of
American Federation of Labor, 316-
320; legislative demands of American
Federation of Labor, 321-322; labor
unions should not enter politics,
323-325; harmful effects of political
action, 326-330
Washington, D. C. Police Administration,
587
Washington. Home Rule for Cities, 397
Wisconsin. Liquor Question, 407
Woman. Woman's Place in Industry and
Labor Organizations, 343-353. Woman's
status in past, 343-345; conditions favoring
rise in woman's status, 345-347; industrial
activity of women, 348-350; women's
wages, 350-351: women in labor organiza-
tions, 351-353
Women's Organizations, 419
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