[CTRL] [2b] Bonds of Enterprise

[Kris Millegan]

 -Caveat Lector-

an excerpt from:
Bonds of Enterprise
John Lauritz Larson
President and Fellows of Harvard College�1984
Harvard University Press
ISBN 0-87584-155-4
257 pages � First Edition -- Out-of-print
In-print from:
McGraw-Hill Companies
ISBN: 0071032797
--[2b]--

JOY'S SYSTEM UNRAVELS

Despite steady progress throughout the West, all was not well within the
Burlington "family" of roads. By 1870 Joy's program of "defensive" expansion
had taken on a distinctly aggressive appearance. Joy's system of roads
included the CB&Q, the B&MR, the Hannibal & St. Joseph, and a number of short
lines along the Missouri River. His branches in Illinois were beginning to
invade the territory of the Chicago & North Western and Rock Island
railroads. C&NW President John F. Tracy thus proposed an Iowa pool to divide
the traffic of the Union Pacific and avert rate war with the fast-growing
Burlington. Joy agreed to the pool, but he continued "stealing"
transcontinental traffic at less-than-paying rates by means of his Missouri
railroads. Charles Perkins retaliated with a cheap Iowa rate to St. Louis,
which was absurdly roundabout, until Brooks commanded him to give all
business "to the shortest route." Then Forbes intervened, ordering all St.
Louis traffic to Hannibal and all Chicago traffic to the Burlington, which
was fair to "family" but still cheated the pool. Joy continued to run Chicago
business over his southern line�until Perkins stopped paying his bill to the
CB&Q The young Iowa manager demanded either a strict short-route principle or
free competition. Joy finally backed down and closed the Hannibal route to
Chicago.[34]

Joy was in a tight spot. By the summer of 1871 his personal financial
interest lay in Missouri, not in Iowa, and thus not in the pool. Forced to
keep peace in Iowa, Joy suffered losses on his southern roads, whose owners
began to turn on him. Cutthroat rates, rising costs, and widespread
construction were straining the budgets of all the companies, yet Joy was as
often as not the instigator of these burdens. Finally, in a surprise raid,
Wall Street speculator Jay Gould captured the Hannibal. By November Joy and
five other Burlington men had been removed from the Hannibal board. Then the
Council Bluffs road missed the first of a series of interest payments that
would end Joy's management there as well. The situation was getting out of
control.[35]

Brooks refused to believe that his lifelong partner was responsible, but John
N. Denison saw through the problem. Joy had become "dictatorial" in his
management of the overlarge empire. He still had the "unqualified faith" of
the Boston men, but "it stings them to the quick," Denison wrote, "to have
you call them into question." He begged Joy not to let "irritating words
break up agreeable and profitable relations." Charles Perkins thought the
conflict was "irrepressible." You "cannot ride two horses in opposite
directions at the same time without producing some soreness," he explained.
"And this is practically what Mr. Joy is attempting to do." By the end of
1872 the loss of the Hannibal, together with the consolidation of the B&MR
with the CB&Q, effectively returned Joy to a single mount. But his "soreness"
was not relieved.[36]

While struggling with his southwestern network, Joy had also involved the
CB&Q in a series of branches leading northwest from the main line into Iowa
and Minnesota. His customary instrument for branch line expansion was a
traffic contract under which the CB&Q controlled the stock of the branch and
used a portion of the profits from interchange with the new line to purchase
its bonds. To complete this particular design, Joy needed control of three
Iowa companies, known together as the River Roads. Their stock, however, was
already pledged to construction companies. In April 1871 Joy persuaded
Brooks, Denison, John A. Burnham, Nathaniel Thayer, and Sidney Bartlett�all
CB&Q directors�to join him in buying those construction companies. The
affairs of both the railroad and construction firms were then left in the
hands of J. K. Graves, a local capitalist in Dubuque, Iowa.[37]

The following August, Charles Perkins warned Forbes not to put his money, or "
anybody elses," into the River Roads without careful examination. Perkins's
fear was strategic. These lines ran through the heart of Chicago & North
Western territory: Building there seemed to Perkins like "couching another
man's wife."[38] Still ignorant of Joy's deep involvement, neither Perkins
nor Forbes suspected how financially treacherous the deal was. The
construction contracts for the River Roads did not even require the
contractors to finish the lines once they had spent all the money and
received all the stock. J. K. Graves, as president of each, drew money from
the railroads through the construction companies as fast as it came in,
paying interest to Joy and his fellow creditors. In turn, the CB&Q directors
recommended River Road bonds to their constituents with the same assurances
they gave to B&MR and other inside issues.

By the summer of 1872 almost $6 million had passed through Graves's hands,
plus a quarter million in advances of cash and equipment from the CB&Q A few
months later the construction companies exhausted their funds and stopped
work on the unfinished lines. With no earnings and no more securities to
sell, the River Roads would surely default on their coupons. On April 19,
1873, the CB&Q directors voted to quietly pick up the tab for River Road
interest, taking 8 percent notes from Graves's railroad companies. At this
and each prior meeting in which aid was extended to the River Roads, John
Murray Forbes, John C. Green, and J.N.A. Griswold had been absent. If the
market had held, they too might have overlooked these arrangements. But the
railroad boom was finally collapsing, and the panic brought this unfortunate
episode to light.[39]

Forbes's instincts were already giving him pause by the New Year, 1873. So
far as he knew his properties were sound: CB&Q stock commanded a high premium
in the market. But market price meant nothing if the boom ended, and the
intrinsic value of his railroads was unavoidably slipping. In the six years
since 1867 total investments in the CB&Q alone had more than doubled.
Earnings per mile of road fell from $17,000 in 1868 to $10,400 in 1872, as
the system exceeded twice its postwar size. Operating expenses continued to
rise as the composition of traffic shifted to include more through freight at
marginal prices. In 1867, local business at rates nearing four cents per
ton-mile comprised one-half the freight tonnage and 82 percent of freight
earnings on the CB&Q. Four years later the local share had dropped to
one-fourth of total volume, although it yielded two-thirds of freight
earnings. As through rates continued to fall, this disproportionate burden on
local shippers engendered public hostility. By 1871 Illinois had already
enacted restrictive rate legislation, and other legislatures were discussing
the subject.[40]

Aware of the danger in these developments, Forbes paused in June 1873 to
analyze the condition of his western roads for a worried stockholder. He
blamed too much prosperity for the years of reckless expansion. "With roads
building and threatening in all directions," he explained, "Joy, a good
lawyer and bright man, not much of a merchant, but honest and bold, had to
lead a company which trusted him implicitly." Backed up by "unlimited credit,
& an easy money market, and the prestige of success," Joy bought or built
numerous branches for profit and defense. All were not "wise nor all
economically built, but looking at it in the large," Forbes thought the road
was better off now than had it "lain still."

Forbes knew that the CB&Q was overextended, but thought there was nothing
"fatal in the mistakes so far." The firm had $7 million worth of branch line
commitments plus its own debt to service. Then there was some moral, if not
legal, obligation to cover "the worst blunder of Joy's administration"�the
River Roads bonds. These debts could be refunded, Forbes believed, and the "sp
enders" brought under control. If the "loose era" of railroad building was
finally ended, then "good economical management in the future" would return
the CB&Q to its old prosperous condition. Confident that recent mistakes were
legitimate business errors and nothing more, Forbes invited the stockholders'
investigations: "The more you criticize the better I shall like it, but you
had better fire at the Executive officers, and if they don't satisfy you, you
have your recourse through the Press, to which now Railroad officers, under a
cloud, are sensitive."[41]

Still trusting Joy in spite of Perkins's many warnings, Forbes shifted blame
for the recent mismanagement of the CB&Q to its new president, James M.
Walker. To get the jump on irate stockholders, Forbes privately asked John C.
Green to demand an inside investigation. "I do think the time has come," he
argued, "for us to know something more about the property if [of] which we
are the managers than any of us here at the East do know." Because of
Walker's intimacy with Nathaniel Thayer, with whom Forbes's relations were no
longer "cordial," an old critic like Green could best fire the first shot.
Gradually Forbes discovered more evidence of neglect and conflict of interest
in the Joy-Walker regime. By October 1873 the financial panic had struck; the
River Roads were bankrupt, and Forbes was deeply embarrassed by his apparent
responsibility. With his trusted old colleague John N. A. Griswold in tow,
Forbes set out in November to meet Brooks in Burlington and see for himself
what was wrong in the West.[42]

Forbes expected to find James M. Walker at the bottom of "irregular" deals
with the River Roads. He was shocked to find that Joy, Brooks, and other
directors of the CB&Q were leading stockholders in J. K. Graves's dubious
construction companies. He confronted Graves with the evidence. The interview
revealed the astounding practice of paying money to officers and directors
without so much as a treasurer's record. Forbes learned this much when
Graves, sensing his mistake, refused to say more. Stunned by what he had
heard, Forbes dashed off a letter to Sidney Bartlett, attorney and director
for the CB&Q. Describing the situation as the "most  remarkable condition of
things which I have ever found upon any living railroad," he asked Bartlett
if Graves and his directors might not be personally liable to innocent
bondholders. Then, ordering Graves to send a full accounting to the eastern
directors, Forbes steamed back to Boston.[43]

Still ignorant of the extent of involvement among his Boston colleagues,
Forbes went home expecting sympathy and a speedy resolution of the River
Roads scandal. Instead he found cool resistance. The only directors as
ignorant as Forbes were John C. Green and J.N.A. Griswold. Unable to command
a majority, these two urged Forbes to avoid public exposure. Brooks and
Bartlett privately censured Graves; but the latter, with Joy's support,
denied any wrongdoing. Forbes and Perkins, said James F. Joy, "were no
friends of mine." With genuine horror Forbes faced the New Year knowing that
public disclosure would show his own company corrupted, his pious disclaimers
hollow. While he pondered this misery, the gathering storm of the "farmers'
revolt" broke out on the Burlington's Iowa line. The year 1874 brought the
toughest contest over public control of railroad rates that Forbes had ever
seen.[44]

THE ORIGINS OF PROTEST

Cutthroat competition and uncontrolled railway expansion had produced exactly
the results Forbes had worked all his life to avoid. Yet western people saw
the "loose era" of railroad construction in the opposite light. Tradition
taught them that too little competition, not too much, was the great evil.
Their experience during the Civil War only reinforced that principle. Postwar
prosperity was unevenly distributed. If interregional freight rates had
fallen dramatically, the vast majority of producers and merchants continued
to pay high local rates at noncompeting points. From their perspective only
monopolistic middlemen enjoyed cheap transportation. Railroad owners like
Forbes might complain about costs, but as company revenues soared the public
refused to believe that the margin of profit was falling. Citing dramatic
examples of profiteering, like the Credit Mobiller of the Union Pacific,
people easily condemned large capitalists for fattening their purses at the
expense of the commonwealth. In September 1873 the failure of Jay Cooke & Co.
and the subsequent collapse of American finance seemed to verify that the
swindlers and stock jobbers had struck once more.

At the core of this unrest was enough real injury to western business that
the charges of hardship could not be denied. What was not so evident was the
degree to which injured merchants represented their own interests or those of
the commonwealth. As early as 1860 the mayor and aldermen of Burlington,
Iowa, for example, had petitioned the legislature to set maximum rates for
freight and passengers in the interest of "Iowa commerce."[45] During the
Civil War there were new demands for canals to the Great Lakes to compete
with Chicago railroads. After 1865 meetings of river town merchants
repeatedly memorialized Congress and the state legislature for water
competition and railroad rate regulation. Dubuque, Davenport, Clinton,
Muscatine, and Keokuk joined Burlington in a campaign for statutory rates
that would reestablish their role as the marketing centers for Iowa produce.
These towns demanded, not pro rata equity, but legal maximum tariffs fixed at
or below prevailing Chicago rates.

Interior communities rightly saw these demands as special pleading: "The time
has passed," argued one state senator, "when the river towns can hold the
enviable position of commercial agents for all the counties lying back of
them." In 1870 most interior interests still agreed that the railroad had
"brought a better market to every man's door than the river towns could
possibly have afforded." Schemes to protect these local centers were
undoubtedly selfish, but they sounded an important warning against the loss
of local marketing power. Burlington, for example, was already in serious
trouble by 1869. Less than half the city's commodity exports still passed
through the hands of Burlington dealers. Over 90 percent of southern Iowa
livestock moved directly into the Union Stock Yards over the Chicago
railroads. Burlington's merchants still handled much of the iron and coal and
manufactures coming in from Chicago, but almost three-quarters of the lumber
and salt business rolled through town in bulk. A short three years later, in
1872, nearly 80 percent of all CB&Q shipments to and from Iowa passed through
the Burlington market without pause. The following year, the consolidation of
the B&MR with the CB&Q reduced the city's commerce to strictly local
proportions.[46]

The cause of Burlington's problem was rate discrimination. Short-haul rates
to Burlington were nearly twice as high as the long rates to Chicago; in 1873
the differential reached a high of two-and-one-half times the through tariff.
One hundred pounds of first class freight could be shipped the twenty-eight
miles from Mount Pleasant to Burlington for twenty-five cents (18� per
ton-mile), or it could go through 248 miles to Chicago for eighty-five cents
(7� per ton-mile). Long-awaited improvements, like the bridge over the
Mississippi in 1868 and the completion of the B&MR in 1869, simply
accelerated Burlington's decline. Interior cities like Ottumwa, which had
lured competing lines during the decade of railroad promotions, received the
lowest rates. Burlington's loyalty to the B&MR was proving the ruin of its
commerce. Thus, in late 1872, the announcement of impending consolidation
with the CB&Q sent shockwaves of concern through the community.[47]

A year later Burlington had had enough. An angry committee of citizens
accused the company of "absorbing everything and contributing nothing" to the
Iowa town. CB&Q President James M. Walker insisted that his policies were
"dictated solely on account of economical reasons." Strict economy of
operations alone would reduce charges, he argued, so these measures were
ultimately in Burlington's interest. Burlington was not impressed. Local
stockholders pushed a hostile resolution through the annual meeting in
February 1874 charging violation of contract by the CB&Q. The community was
outraged: One citizen renamed the company "Cursed, Bursted & Quarrelsome."
Even the supportive Burlington Hawk-Eye warned the railroad that Burlington
was the "natural and geographic" center of their territory. Sooner or later
the owners would "regret the loss of her help and good feeling, which will
then be gone to rival railroads."[48]

These harmful effects of consolidation and integration in the railroad
network were not long restricted to river towns like Burlington. After 1870
farm prices began falling faster than interior freight rates, and the
hardships of local discrimination spread to noncompeting "way points" across
the state. More and more voters identified with the complaints of the river
town merchants against the railroads. Iowa's Republican leadership, having
opposed rate regulation since before 1860, now endorsed antidiscrimination
measures in the face of diminishing trade. By 1872 the General Assembly was
overwhelmingly in favor of some form of regulation, but the deadlock between
river town supporters of maximum rates and more moderate proponents of an
advisory commission prevented action that year. The economic impetus for
railroad regulation had reached full proportions well before the panic of
1873, but the motive was not well focused. It remained for a second source of
western temper to unite the victims of injustice in a campaign against
"railroad abuses.[49]

Clearly private interests had blended into a public cause, and the Patrons of
Husbandry�the Grange�became the reluctant vehicle for a massive regional
protest against railroad and industrial power. Oliver Hudson Kelly, founder
of the Grange, intended an agrarian fraternity dedicated to education, social
intercourse, and the improvement of the farmer's life. But the Grange touched
a raw nerve in thousands of frustrated producers in the upper Mississippi
Valley. The bitter western critique of economic policies in the Civil War had
returned in the early 1870s and found its clearest articulation in this new
farmers' movement. Blending traditional moral and political economy with the
modern concepts of combination and cooperation, the program set forth in
Grange conventions across the region gave a momentary coherence to the
desperate complaints of western men.[50]

In Iowa, the Grange reflected exactly those values of political economy that
had carried James W. Grimes and the infant Republican party to power two
decades before. Progressive local development within the context of the
"natural order" was supposed to be the goal of the people and their
government. During the Civil War Iowa's State Agricultural Society had
denounced every attempt to "violate and set at nought the laws of trade and
exchange ... which God impressed on this continent when He created it." By
the end of the war Grimes himself came to criticize government aid to
monopolistic railroads. The "true" objective of Republican government, he
declared, was to insure that every man was "the owner of his own soil, the
owner of his own tools, the owner of his own labor, and his own
machinery."[51] Another spokesman accepted the railroads as the "revealers"
of American greatness; but as the "entire relationships of the country" were
"revolutionized" by the "annihilation" of space and time, Iowans feared being
kept "merely as an agricultural population." With a cry of betrayal, the Iowa
farmers were called to organize:

We are furnished with the theoretical elements of agriculture, and the
dignity of our calling has so bewildered our ideas that we have allowed huge
monopolies and fat corporations to form around us un-noticed, and now they go
strutting about carrying State Legislatures [sic] around in their breeches
pocket, with their extortionate rates and unjust discriminating power between
places and individuals, while hundreds of honest practical farmers in the
State of Iowa stand today on the verge of financial ruin.[52]

The response in Iowa was electric. The number of local granges increased from
forty in early 1871 to three hundred one year later and eighteen hundred by
November 1873. The order peaked ten months later just one unit short of two
thousand. The Grange program of cooperative buying and selling was an
important attraction, but antimonopoly and antirailroad rhetoric was the
symbolic and emotional core of the appeal. The voices of popular protest were
blended in January 1873, when the State Agricultural Society, the state's
Republican governor, and a massive convention of Iowa Grangers all proclaimed
their outrage in identical terms.

On the morning of January 8, 1873, Agricultural Society President John Scott
warned his audience of the perils that now threatened the "natural" primacy
of the farmer. By "combinations which easily grow out of their occupancy of
the great centers of population," he argued, the urban interests�merchants,
carriers, and laboring mechanics�had suppressed competition to insure their
profits. But the farmer, in his "so called market," was "but the sport of
bulls that toss and bears that squeeze," while everything he bought "from the
cradle to the coffin" came to him "priced by a board of trade."[53]

Scott's address proved to be but an introduction for a stunning oration that
evening by Governor Cyrus Clay Carpenter. The governor was a short, solid,
stubborn-looking man with thick, cropped hair and beard, perfect in
appearance for his role as reformer. Convinced that rebellion was brewing,
this surveyor and land-trader-turned-politician was determined to "take the
lead ... on this question of transportation." His speech, carefully studied,
exquisitely phrased, opened with this dramatic blast:

If ... today, there is a shadow resting upon the prosperity of the Great
West, which it is no exaggeration to compare with the fleshless fingers, the
rattling joints, the eyeless sockets, and the grinning teeth of a skeleton,
it is found in the cost of exchanging commodities over long lines of communica
tion, by expensive agencies, and at exorbitant charges for transportation. Thi
s is the skeleton in every Western farmer's corncrib.[54]

Carpenter argued that the farmer had become a lowly tenant with no voice in
determining the share of his crop to be taken in "rent." Wasting no time
debating the existence of railroad abuses, the governor considered the
avenues of redress. He urged more feeding of livestock, compressing exports
to ten times their value per pound of freight. Diversification of crops and
the development of home markets were obvious aids, but he cautioned against
too much reliance on the latter. Iowa was naturally agricultural: Iowans must
bring "their industrial habits, their social theories, and their political
policies into accord with the evident designs of the Creator of all things."
Government regulation was the key. Carpenter ordinarily rejected government
"interference" with individual freedom and enterprise, but the new transport
system bore such an "intimate relationship to the very existence of organized
society," that it now presented a "towering" monopoly. The government "which
proves unequal to its control," he reasoned, "abdicates a power for which it
will be held responsible at the bar of an enlightened and aroused public
opinion."[55]

What, then, was the course of action? Carpenter denounced efforts to
stimulate more competition among existing railways; such efforts resulted in
"a greater oppression" by larger, unreachable combinations. "What the people
want is stability, certainty." Rate ceilings must be established.
Discrimination against individuals and locations must be stopped. Federally
owned and operated trunk lines should set standards of service and tariffs
that private interstate lines would have to meet. Carpenter denied the
assertions of men like Forbes that public enterprise would fail. Pointing to
the number of railroad failures since the panic of 1837, he insisted that
private capitalists with decades of experience had no better record than the
experimental public works of the 1830s. Finally, Carpenter predicted that
radical reductions in freight rates would so boost the volume of business
that the railroads would increase their revenues.[56]


The governor had addressed nearly every aspect of the railroad question with
clarity and intelligence. His plan was comprehensive, yet believable; his
tone, determined. Even James S. Clarkson, editor of the Iowa State Register, r
ailroad favorite and boss of the state Republican party, put his seal of
approval on Carpenter's words. Three weeks later the Iowa State Grange held
its convention in Des Moines, with a turnout that astounded editor Clarkson.
Nearly one thousand delegates convened in the capital city despite the heavy
snows of an Iowa winter. Astonished themselves at the growth of their order,
the Grangers found little to add to Governor Carpenter's address. They
petitioned their legislature and begged Congress to restore the farmers'
"God-given rights." The presence in Des Moines of a thousand angry Grangers
did stir the special session of the General Assembly to take up the railroad
question, but reform was still a year off.[57]


THE GRANGER MOVEMENT

By 1873 the midwestern agitation for rate law reform had received national
attention, and the protest was destined to intensify. Illinois and Minnesota
had already enacted rate regulations, and the legislatures of Wisconsin and
Iowa repeatedly debated the issue. CB&Q General Manager Robert Harris readily
conceded that "wild and unreasonable and unnecessary [rate] cuttings and
discriminations" were "at the bottom of all this noise." Had railway managers
taken a sincere interest in an equitable solution, one might have emerged. In
most of the cases of injustice brought before the bar of politics, it was the
arbitrary nature of the rate, not its magnitude, that hurt the most. Even
Governor Carpenter's plan rested on the assumption that "stability" and
"certainty" were what the people wanted. The railroads were no less desirous
of stable rates, but the image of farmer-legislators dictating policy to
private corporations so offended men like John Murray Forbes and Charles E.
Perkins that they made little effort to reconcile. Dogmatic views of
political economy and prejudicial assumptions about regional character only
sharpened the confrontation that began in railway economics.[58]

John Murray Forbes blamed the Grangers' rebellion on the persistent failure
of western men to comprehend the postwar world. He sought desperately to
educate what he patronizingly called the "slow agricultural mind." The
farmers "don't mean to do wrong," he conceded, but they failed to understand
the cause of differential rates. With "time and patience and with such timely
concessions as steel rails and close management will warrant," Forbes thought
he could show the farmer that "good economical management aided by such
competition as he can get up will give him his best and only chance of
getting his local transportation cheapened."[59]

Forbes saw the Grangers in the light of the unfinished revolution that was
begun during the Civil War, and he was fully confident that the emerging
systems of industry and commerce would eventually benefit these misguided
farmers. Therefore he counseled patience, and he urged the locals to
instigate harmless competition. Charles Perkins agreed with Forbes that it
was time to start "educating the popular mind" on the question of railroad
regulation, and he admitted that the railroads had a credibility problem. "It
wont [sic] do," he argued, "to try to prove that all RRd men are saints."
Still, the principles of corporate freedom had to be defended by the roads to
keep the farmers from "going on the wrong track." It was E. L. Godkin of The
Nation, a New York weekly that John Murray Forbes had financed just after the
war, who finally put into words the larger issue presented by the Grangers'
complaints: "The locomotive is coming in contact with the framework of our
institutions. In this country of simple government, the most powerful
centralizing force which civilization has yet produced has, within the next
score years, yet to assume its relations to that political machinery which is
to control and regulate it."[60] For Godkin the question was rhetorical: Like
Forbes he assumed that the framework of political nationalism and corporate
economy already taking shape in the United States was the true and proper
response to the locomotive's challenge. For western men, however, that was
the whole question.

The midwestern railroad protest quickly broadened into a contest of regions
and cultural values that added more heat than light to the questions.
Grangers linked the farmers' problems to corruption among businessmen and
politicians in the Grant administration in Washington. Stung by the charge,
easterners blamed western demagogues for all the special pleading in Congress
that was demoralizing public life. Charging "spoliation as flagrant as any
ever proposed by Karl Marx," editor Godkin once stamped the Grangers with the
mark of communism. More often he simply belittled western complaints with a
patronizing detachment. If farmers lived a thousand miles from the eastern
cities, for example, that was the natural consequence of moving west. Godkin
even condemned the farmers for losing their "rugged" virtues: Clinging to the
railroads, the "modern frontiersmen" demanded all the conveniences of church,
school, newspapers, and magazines; his wife and daughters "must have a piano
and silk dresses ... and their minds, instead of being intent on the homely
joys of the forest and the prairie, are vexed by the social and religious
discussions of the East." It must have seemed unfair to many a western reader
to be criticized by cosmopolitans for wanting those elements of culture by
which the East defined its own superiority.[61]


The western press replied in kind; with each exchange the chasm widened. Iowa
spokesmen roared their denunciations of Credit Mobilier scandals,
congressional corruption, and the nest of thieves on Wall Street. By
association with rich and powerful speculators all railroad men were turned
into scoundrels. Charles Perkins struggled vainly to produce a comprehensive,
balanced discussion of the railroad question which "everbody would read"; but
such a short course in complicated economics was not forthcoming. Out of the
East came more invective, culminating in the insufferable charge that without
" 'railroad speculators,' there would not be any West at all."[62]

Gross insensitivity to regional culture simply hardened the Grangers'
animosity toward the new commercial systems. The Chicago Farmer's Convention
in October 1873 called on its brethren to withdraw wherever possible from
interdependent markets, avoid debt, buy home manufactures, oppose tariff
protection, and organize farmers everywhere. The bitterness in Granger
rhetoric was unmistakable. One correspondent in the Iowa Homestead complained
sadly that the farmer considered himself "but a beast of burden." With the
"whole load upon his back he has neither profit nor honor. Those who ride
despise him." Shifting from the language of economy to political liberty,
Iowa Grange Master A. B. Smedley rallied his brothers to the defense of "free
Republican" institutions: "If that eternal vigilance which has been called
the price of liberty is not exercised, if this aggressive power is not boldly
met and restrained by wise and reasonable legislation, all the industrial
interests of our country must languish."[63]

At the threshold of organized mass political action the Grange took sudden
pause. The founder of the order had strictly enjoined the granges from
official involvement in partisan politics. The Grange program was admittedly
"full of pure politics," but it was "partisan NEVER." The farmers' movement
was not to be used as a "cat's paw to drag political chestnuts out of the
fire either for parties or for individuals." The rule was well made, if
poorly followed. Local Iowa granges launched an antimonopoly third party
movement in April 1873 that was quickly captured by cynical leaders of Iowa's
old Democracy. Holding its nominating convention at the height of the August
harvest, the new Anti-Monopoly party offered a slate of old Iowa Democrats
and drew up a platform that was little more than the antebellum program of
the party of Jackson. Ending in betrayal, the Grangers' partisan efforts did
nevertheless force the Grand Old Party to take a vigorous antirailroad stand.
A very close election returned chastened Republicans to power.[64]

The reelection of Governor Carpenter probably saved the issue of railroad
reform. Forced to break with his railroad friends, party boss James S.
Clarkson agreed to redeem the pledge on railroad regulation. Carpenter
introduced a plan combining the maximum rate bill of the river town merchants
with a classification of roads by earnings that protected small or weak
lines. Ironically, by the time the assembly settled down to work in February
1874, the Iowa State Grange had endorsed an advisory commission with
antidiscrimination guidelines as the most reasonable and effective remedy for
the farmers' complaints. The experienced voices of commercial interest had
little trouble steering the river town plan, with Carpenter's classification,
through a legislature overwhelmingly controlled by farmers. Less dramatic
than an ironclad tariff, the Grange proposal was quickly tarnished by
association with railroad men like CB&Q President James M. Walker, who
earlier had sponsored such a bill as a substitute for maximum tariffs.
Furthermore, President Walker proudly announced record earnings for the CB&Q
just at the height of the Iowa debates. Charles Perkins bitterly thanked the
directors for conferring "a favor upon the long suffering public which it
will not [soon?] forget!"[65]

The Iowa tariff bill passed on March 8, 1874, and was signed by the governor
on March 23. Essentially protective of the river town merchants, the new law
indirectly promised stable rates and relief from discrimination in the
interior as well. Having finally struck at the railroads, Iowa's mood turned
sober. Carpenter himself had grave doubts that the benefits would meet
popular expectations. The Iowa Grange insisted that the wrong bill had been
passed, but they hoped for the best. All that was left was to wait and see.
Editor James S. Clarkson put it best: "Our Iowa people are now nearing the
real railroad crossing, and Gov. Carpenter, even before he hears the bell
ring, may as well be looking out for the cars."[66]


By 1874, Illinois, Iowa, Wisconsin, and Minnesota had each passed restrictive
railroad legislation. The term "Granger Laws" was fixed almost immediately,
but these measures were neither radical nor agrarian. The important rights
claimed by western legislators were entirely customary. American judicial
tradition and the common law consistently upheld such local regulations of
franchises and carriers. The farmers alone would have settled for equitable
rates, had not the western merchants exploited their anger to secure
favorable adjustments in the rate structure itself. Yet even this flagrant
protection of local markets fell within the framework of traditional American
political economy.[67]

Cultural differences help explain the interpretation of the Granger Laws in
the centers of eastern commerce. In part, John Murray Forbes saw the movement
as a personal affront. His style of business was paternalistic, and his
patient efforts to develop the Iowa country had been repaid with hostility.
Furthermore, because Forbes and his class of entrepreneurs assumed that the
new corporate order was already triumphant, they could not understand these
resurgent defenders of local autonomy. When western tempers flared, eastern
capitalists attributed the anger to agrarian reaction or alien
communism�thereby concealing their own assault on local democracy and
traditional American values.[68]

Caught in the middle, reflecting the ambiguity of the moment, was the Grange.
By 1874 the movement had acquired its final, awkward position as an
instrument of protest in modernizing America. In its celebration of the soil,
moral economy, and divine social order, the Grange was romantic, backward
looking, and nostalgic. At the same time the Patrons' program of cooperation,
combination, and class solidarity showed a realistic willingness to "fight
fire with fire." Only a deep resistance to the alien principle of combination
in the end stood between Granger rhetoric and effective Grange action.
Brought up as independent producers�free enterprise capitalists�few Iowa
farmers could embrace either the organic unity of a former age or the class
solidarity of a modern trade union. Allowing for all the confusion, it was
the very liberalism of the farmers' demands that forced their eastern critics
to sketch them in caricature.[69]

Beneath the agrarian rhetoric of the midwestern Grange there lay two demands
to be met before the farmers would join in the new national economy. First,
they wanted their fair share of the profits. They would not go back, as E. L.
Godkin advised, to simpler ways just to enrich urban America. Secondly, even
if they abandoned the "original conditions" of James Grimes's early
Republicanism, farmers and merchants alike refused to be governed by
undemocratic combinations of capital. The arrogance of railroads like the
CB&Q which openly ignored the new Iowa tariffs, was a "direct insult to the
sovereignty of the state." Such behavior was "without precedent."[70] On this
point the Iowans would press their case to the United States Supreme Court.
In 1877 the high court upheld their sovereign rights�at least for the moment.
The main point vindicated, the people were then free to repeal the obnoxious
law and start anew. In the Middle West, the passage of the Granger Laws
marked the end of traditional economic order and the beginning of a struggle
for recognition within the new industrial systems.

pps. 111-143

-----

CHAPTER FIVE NOTES

1. JMF to Quincy A. Gilmore, May 21, 1865; JMF to William Pitt Fessenden,
April 13, 1868; in Letters of J.M.F., suppl., 3: 17, 113.

2. James W. Grimes, Speech in the U.S. Senate, May 8, 1866, in Salter, Grimes,
 pp. 292-93.

3. JMF to William Pitt Fessenden, May 23, 1868, in Letters and Recollections
of J.M.F., 2: 165.

4. For economic issues see Robert P. Sharkey, Money, Class, and Party (Baltimo
re: Johns Hopkins Press, 1959); Irwin Unger, The Greenback Era (Princeton:
Princeton University Press, 1964); and Walter T. K. Nugent, Money and
American Society 1865-1877 (New York: The Free Press, 1968); for politics see
Richard Jensen, The Winning of the Midwest (Chicago: University of Chicago
Press, 197 1); and Paul Kleppner, The Cross of Culture (New York: The Free
Press, 1970).

5. See chapter 3, note 12. For a careful analysis of this intellectual
reversal in its economic and legal contexts see Morton J. Horowitz, The
Transformation of American Law, 1780-1860 (Cambridge, Mass.: Harvard
University Press, 1977); and James Willard Hurst, Law and the Conditions of
Freedom (Madison: University of Wisconsin Press, 1956).

6. John N. Denison to Henry Coffin, Jan. 31, 1862, in Box 5D4.1,
CB&Q-Newberry. For the first appearance of such dislocations, see Lee Benson,
Merchants, Farmers, and Railroads.- Railroad Regulation and New York
Politics, 1850-1887 (Cambridge, Mass.: Harvard University Press, 1955).

7. See Belcher, Rivalry, pp. 23-24; Taylor, Transportation Revolution, p. 389;
 and John G. Clark, The Grain Trade in the Old Northwest (Urbana: University
of Illinois Press, 1966), pp. 264-65, 269, 272.

8. See Clark, Grain Trade, pp. 270-78.

9. Miller, Railroads, p. 9 and chap. I generally; John F. Stover, History of
the Illinois Central Railroad (New York: Macmillan, 1975), pp. 71-79;
Belcher, Rivalry, pp. 102-3, 150, 17 1; Albert Fishlow, American Railroads
and the Transformation of the Ante-Bellum Economy (Cambridge, Mass.: Harvard
University Press, 1965), pp. 275-98. Miller points out that the diversion of
established trade was not significant, but that almost all of the new commerce
 in the fast-growing valley was carried through Chicago.

10. According to Miller, Railroads, p. 12, the process of "refinement and
rationalization almost always meant loss of local control." See Belcher, Rival
ry, chaps. 8 and 9 for restrictions on the wartime river trade.

11. For a brilliant treatment of the rate-making process and its historical
development see Miller, Railroads, pp. 16-41.

12. Ibid.

13. Quoted in Overton, Burlington West, p. 112. See also Charles E. Perkins
to JMF, May 5, May 16, May 3 1, and July 1, 1859, in C.E.P. Transcripts, Set
C, CB&Q-Newberry; Richard C. Overton, "Charles Elliott Perkins," Business
History Review 31 (1957): 292-309.

14. Charles E. Perkins to JMF, Aug. 11, 1862, in C.E.P. Transcripts, Set C,
CB&Q-Newberry; Perkins to JMF, Oct. 11, 1862, in C-05, Letterbook A,
CB&Q-Newberry.

15. See for example Charles E. Perkins to JMF, May 8, 1865, in C-05,
Letterbook D, CB&Q-Newberry, where Perkins tells of "redeeming" a "dead town"
for the Land Association.

16. See John N. Denison to Charles E. Perkins, May 15, 1865, in General
Material, 2, CB&Q-Newberry. Perkins to JMF, June 17, June 20, Aug. 27, and
Nov. 10, 1865; Perkins to James F. Joy, Dec. 16 and Dec. 21, 1865; in C-05,
Letterbook D, CB&Q-Newberry. The contract for aid from the CB&Q was recorded
on June 20, 1865, in B&MR Records, CB&Q-Newberry.

17. Minutes of Directors Meeting, April 27, 1866, in B&MR Records, CB&Q-Newber
ry. Charles E. Perkins to James F. Joy, Nov. 2, 1866; Perkins to JMF, Jan. 9,
Feb. 8, and Mar. 18, 1867; in C-05, Letterbook E, CB&Q-Newberry; CB&Q Annual
Report, 1867, pp. 53, 56-57.

18. Charles E. Perkins to L. D. Carpenter, Jan. 27, 1866, in C-05, Letterbook
D, CB&Q-Newberry; Perkins to John F. Tracy, Feb. 6, 1866, in C-05, Letterbook
E, CB&Q-Newberry; Perkins to JMF, Aug. 30 and Sept. 10, 1867, in C-05,
Letterbook F, CB&Q-Newberry.

19. Charles E. Perkins to JMF, Sept. 4, Sept, 11, and Sept. 15, 1867, in
C-05, Letterbook F, CB&Q-Newberry.

20. Charles E. Perkins to JMF, Jan. 17 and July 13, 1868; Perkins to

Henry Strong, Jan. 31, 1868; Perkins to John W. Brooks, Feb. 21, 1868; in
C-05, Letterbook F, CB&Q-Newberry.

21. See Charles E. Perkins to JMF, Feb. 24 through Aug. 24, 1868, in C-05,
Letterbook F, CB&Q-Newberry. See also Johnson and Supple, Boston Capitalists,
p. 224.

22. Charles E. Perkins to JMF, Aug. 24, 1868, in C-05, Letterbook F,
CB&Q-Newberry.

23. See Charles E. Perkins to JMF, Aug. 9 and Nov. 2, 1868, in C-05,
Letterbook F, CB&Q-Newberry; Perkins to JMF, Jan. 31, 1869, in C.E.P.
Transcripts, Set C, CB&Q-Newberry. See also Overton, Burlington Route, pp.
95-96; C.B.& Q, Annual Report, 1869, p. 13.

24. Julius Grodinsky, The Iowa Pook A Study in Railroad Competition,
1870-1884 (Chicago: University of Chicago Press, 1950), pp. 9-11 and chap. 1
generally. See also Julius Grodinsky, Transcontinental Railway Strategy,
1869-1893 (Philadelphia: University of Pennsylvania Press, 1962), chap. 2;
Daniel Hodas, The Business Career of Moses Taylor (New York: New York
University Press, 1976), chap. 13. Statistics are from CB&Q Annual Reports, co
mpiled for Richard C. Overton and quoted here with his permission.

25. John W. Brooks to Charles Brydges, May 28 and July 30, 1863, in Cochran, R
ailroad Leaders, p. 276; B&MR, Annual Report, 1865, pp. 4-5.

26. See CB&Q, Annual Report, 1866 and Annual Report, 1867.

27. JMF to James F. Joy, Nov. 21, 1866, in Cochran, Railroad Leaders, p. 333.
See Minutes of Directors Meeting, Dec. 13, 1866, in B&MR Records, CB&Q-Newberr
y; Johnson and Supple, Boston Capitalists, pp. 226-28.

28. Grimes quoted in John N. Denison to James F. Joy, Jan. 9, 1867, in Box
5D4.1, CB&Q-Newberry. See also Denison to Nathaniel Thayer, Dec. 31, 1866,
for a lengthy review of the Bellevue problem and the Nebraska strategy.

29. John N. Denison to "Boston" [C.B.& Q Office], Jan. 14, 1867; Denison to
James W. Grimes, Jan. 30, 1867; in Box 5D4. 1, CB &Q-Newberry.

30. CB&Q, Annual Report, 1867, p. 13.

31. JMF to John W. Brooks, July 5, 1867; John N. Denison to James F. Joy,
Sept. 4 and Sept. 10, 1867; in Box 5D4.1, CB&Q-Newberry.

32. John N. Denison to James F. Joy, Sept. 4, 1867, in Box 5D4.1,
CB&Q-Newberry; C.B.& Q. Circulars, Sept. 18, 1867 and Feb. 20, 1868, quoted
in Johnson and Supple, Boston Capitalists, pp. 231-232; see also Minutes of
Directors Meeting, Dec. 18, 1867, in B&MR Records, CB&Q-Newberry.

33. CB&Q Annual Report, 1869, p. 20.

34. See Grodinsky, Iowa Pool, pp. 15-27; John W. Brooks to Charles E.
Perkins, May 26, 1870, in Cochran, Railroad Leaders, p. 278.

35. C.B.& Q, Annual Report, 1870, pp. 11-15, 19-20; Annual Report, 1871, pp.
10- 11; see Johnson and Supple, Boston Capitalists, pp. 233-37.

36. John N. Denison to James F. Joy, June 10, 1871, quoted in Grodinsky, Iowa
Pool, pp. 12-13; Charles E. Perkins to JMF, Oct. 25, 1871, in C.E.P.
Transcripts, Set C, CB&Q-Newberry.

37. The full story of the River Roads can be followed in Overton, Burlington
Route, pp. 120- 39. For an example of the branch-line contracts Joy
preferred, see James F. Joy to John Newhall, Mar. 27, 1871, in Cochran, Railro
ad Leaders, p. 368.

38. Charles E. Perkins to JMF, Aug. 8, 1871, in C.E.P. Transcripts, Set C,
CB&Q-Newberry.

39. See Overton, Burlington Route, pp. 130-32. CB&Q President James M.
Walker's letters for 1871-72 comprise an excellent source for the details of
Joy's effort to salvage the River Roads undetected (see Box 3W3.1,
CB&Q-Newberry).

40. Statistics are from CB&Q Annual Reports, compiled for Richard C. Overton
and quoted here with his permission. Consolidation of the CB&Q and B&MR in
1872 resulted in eight months' adjustment in bookkeeping between the two
companies, which makes a continuous series of earnings difficult to
construct. Profit margins were shrinking, but the CB&Q remained strong
compared to other Chicago roads. (Raw figures drawn from CB&Q Annual Reports.)

41. Copy of a letter, JMF to a stockholder [possibly Edward M. Cheney], [c.
June 16, 1873], in Box 8C6.5, CB&Q-Newberry.

42. JMF to John C. Green, June 16 and June 24, 1873, in Box 8C6.5,
CB&Q-Newberry; JMF to John W. Brooks, Oct. 29, 1873, in Box 3W3.5,
CB&Q-Newberry.

43. JMF to Sidney Bartlett, Nov. 12, 1873, in Reminiscences of J.M.F., 3:
128-33; see also pp. 98-100, 127. See also Overton, Burlington Route, pp.
133-35.

44. Quoted in Overton, Burlington Route, p. 135

45. Burlington Weekly Hawk-Eye, Jan. 13, Jan. 20, and Jan. 27, 1866; see
Miller, Railroads, pp. 100-109.

46. Proceedings of the Fourth Annual Meeting of the Iowa State Grange (Des
Moines: Iowa Homestead Steam Press, 1873).

47. Fourth ... Iowa State Grange, 1873, p. 33; Burlington Daily Hawk-Eye, Oct.
 9, 16, 17, and 24, 1872.

48. James M. Walker to E. D. Rand, et al., Dec. 31, 1873, in Box 3W3.1,
CB&Q-Newberry; Minutes of Annual Stockholders Meeting, Feb. 25, 1874, in B&MR
Records, CB&Q-Newberry; Burlington Daily Hawk-Eye, Jan. 8, 1874.

49. See farm price series quoted in Mildred Throne, "The Grange in Iowa,
1868-1875," I.J.H. 47 (1949): 291; see also Miller, Railroads, pp. 104-11.

50. See Oliver Hudson Kelly, Origin and Progress of the Order of the Patrons
of Husbandry . . . (Philadelphia: J. A. Wagonseller, 1875); Solon J. Buck, The
 Granger Movement (Cambridge, Mass.: Harvard University Press, 1933); and D.
Sven Nordin, Rich Harvest- A History of the Grange, 1867-1900 (Jackson:
University of Mississippi Press, 1974). The best single account on Iowa is
Throne, "Grange."

51. Iowa State Agricultural Society, Report, 1862 (Des Moines, 1863), pp.
126-27; James W. Grimes, Speech in the Senate, 1866, quoted in Fred B.
Lewellen, "Political Ideas of James W. Grimes," I.J.H.P. 42 (1944): 350.

52. Iowa Agricultural, Report, 1869, p. 77; Iowa Homestead, Mar. 15, 1872.

53. Iowa Agricultural, Report, 1872, pp. 168-76. (Published after the Jan.,
1873, meeting.)

54. Iowa Agricultural, Report, 1872, pp. 194-95; Mildred Throne, Cyrus Clay
Carpenter and Iowa Politics, 1854-1898 (Iowa City: State Historical Society
of Iowa, 1974), p. 159.

55. Iowa Agricultural, Report, 1872, pp. 194-201.

56. Ibid., pp. 201-13.

57. Throne, Carpenter, p. 160; Jonathon Periam, The Groundswell A History of
the Origins, Aims, and Progress of the Farmers' Movement (Cincinnati: E.
Hannaford & Co., 1874), p. 264; Des Moines Iowa State Daily Register, Jan. 28
and Jan. 3 1, 1873; Fourth ... Iowa State Grange, 1873, pp. 23-24, 29.

58. Robert Harris to T. J. Carter, Mar. 24, 1873, quoted in Miller, Railroads,
 p. 22; see also Miller, chap. 4, on Illinois legislation.

59. JMF to a stockholder, [c. June 16, 1873], in Box 8C6.5, CB&Q-Newberry.

60. Charles E. Perkins to John W. Brooks, Mar. 2, 1873, in C.E.P.
Transcripts, Set A, CB&Q-Newberry; The Nation, April 10, 1873, p. 249-50.

61. The Nation, June 12, 1873, pp. 397-98; June 19, 1873, p. 407; July 17,
1873, pp. 36-37; July 31, 1873, pp. 68-69.

62. Charles E. Perkins to JMF, Sept. 9, 1873, in General Material, 2, CB&Q-New
berry; The Nation, Oct. 2, 1873, p. 220. See the Des Moines Iowa State Daily
Register, Sept. 27, 1873, for reprinted editorial clips from around the
country.

63. Edward Winslow Martin, History of the Grange Movement or, The Farmer's
War Against Monopolies ... (Philadelphia: National Publishing Co., 1873), p.
509; "A Letter to Farmers from Jones Co.," Iowa Homestead, Dec. 12, 1873; Four
th ... Iowa State Grange, 1873, p. 28.

64. Quoted in Nordin, Rich Harvest, p. 182. Mildred Throne, "The AntiMonopoly
Party in Iowa, 1873-1874," I.J.H. 52 (1954): 289-326, narrates the rise and
fall of this political party. The Des Moines Anti-Monopoly platform is
reprinted in Martin, Grange Movement, p. 513; see also Des Moines Iowa State
Daily Register, Aug. 24, 1873, for James S. Clarkson's commentary

65. Charles E. Perkins to J.N.A. Griswold, Mar. 7, 1874, in C-01, P4.1,
CB&Q-Newberry; see James M. Walker to John N. Denison, Feb. 28, 1874, in Box
3W3.1 CB&Q-Newberry. Throne, Carpenter, pp. 177-83; Miller, Railroads, pp.
114-16; and the Des Moines and Burlington newspapers for Jan. through Mar.,
1874, provide additional detail on the legislative process.

66. Des Moines Iowa State Daily Register, May 8, 1874, quoted in Throne, Carpe
nter, p. 181.

67. See Miller, Railroads, pp. 29, 161-71.

68. See Horowitz, American Law, p. 255; Hurst, Law and the Conditions, chap.
3.

69. See for example the "Declaration of Purposes," drawn up at the National
Grange Meeting, St. Louis, Feb. 11, 1874, reprinted in Martin, Grange
Movement, pp. 535-39.

70. Fifth ... Iowa State Grange, 1874, pp. 34-35.
-----
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
All My Relations.
Omnia Bona Bonis,
Adieu, Adios, Aloha.
Amen.
Roads End

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