-Caveat Lector- from: History of the Union Pacific � A Financial and Economic Survey Nelson Trottman Augustus M Kelly NY 1966 LCCN 66-22637 First Published 1923 -----
Extent of Harriman Influence These events indicate the way in which the control of railroads was tending toward centralization. By 1907 Harriman controlled the Union Pacific, and through it the miscellaneous railroad and steamship lines owned by the Southern Pacific Company; he controlled indirectly a half-interest in the San Pedro, Los Angeles and Salt Lake Railroad, and a half-interest in the Northwestern Pacific Railroad; through the Union Pacific he dominated the management of the Illinois Central and the St. Joseph and Grand Island, and controlled "community of interest" holdings in other companies, including such large railroad systems as the New York Central, the Alton, and the Baltimore and Ohio. The only rail competitor of the Union Pacific-Southern Pacific system, the Santa Fe, was operated in complete harmony with the Union Pacific and Southern Pacific roads, and the Union Pacific enjoyed a "community of interest" representation in the Santa Fe management. The Southern Pacific Company, in addition to its own steamship lines, controlled the Pacific Mail Steamship Company; the Union Pacific, through the Oregon Railroad and Navigation Company, owned and still owns both the Portland and Asiatic Steamship Company, and the San Francisco and Portland Steamship Company. The Southern Pacific owned and still owns the Los Angeles street railway and interurban system, and the street railway system of Ogden, while the Union Pacific and Southern Pacific companies also possessed large interests in coal, oil, land, town-site, and other companies. The Interstate Commerce Commission in 1907, referring to the extension of the Harriman-Union Pacific stock interests, said: These are conspicuous illustrations of the development of the theory of "community of interest" and "harmony of management" which Harriman suggested when he demanded representation upon the Santa Fe board . . . . . If the policy of purchasing and controlling stocks in competing lines is permitted to continue, it must mean suppression of competition. [82] It is not necessary to favor a return to the conditions of cut-throat competition, which prevailed between rival lines before the close of the last century, to recognize the truth of the above statement of the Interstate Commerce Commission. Whatever may be the economic advantages or disadvantages of competition among railroads, the necessary result of the Harriman policy was to restrict, if not to eliminate, whatever competition already existed. The Interstate Commerce Commission said: To gather under one head all existing transcontinental lines, or as many as possible, and to exclude the incoming of all competitors became manifestly the Harriman policy, which was inaugurated in 1901 by the issuance of $100,000,000 of convertible bonds by the Union Pacific. [83] This statement is supported by Harriman's frank admission that it was only the law that prevented the concentration of every transcontinental line in his hands. He declared that he was in favor of still more consolidation. [84] While Harriman was on the witness stand during an investigation of the Harriman roads which the Interstate Commerce Commission made in 1907, one of the commissioners, Mr. Lane, called Harriman's attention to the growth and concentration of his vast transportation interests and how they began with the Union Pacific, and then extended to Portland and by water from there to the Orient; to San Francisco and from there to the Orient; from San Francisco to New Orleans, and from New Orleans to New York by water; how he held a certain control over the Illinois Central and the Alton; and possessed, through the Union Pacific, large holdings in the Baltimore and Ohio, and in the New York Central; then Commissioner Lane asked of him, "Where is that thing going to stop?" "I would go on with it," answered Harriman, "if I thought we could realize something more than we have got from these investments, I would go on and buy some more things." Commissioner Lane then mentioned the Santa Fe. "If you will let us," said Harriman, "I will go and take the Santa Fe tomorrow." The following is an extract from Harriman's testimony: [85] Q. You would take it tomorrow? A. Why certainly I would; I would not have any hesitation; it is a pretty good property. Q. Then it is only the restriction of the law that keeps you from taking it? A. I would go on as long as I lived. Q. Then after you had gotten through with the Santa Fe and had taken it, you would also take the Northern Pacific and Great Northern if you could get them? A. If you would let me. Q. And your power, which you have, would gradually increase, as you took one road after another, so that you might spread not only over the Pacific coast, but spread out over the Atlantic coast? A. Yes, but hasn't your organization increased its power? Q. It undoubtedly has. That is what I am coming to. Do you think the law itself should intervene there and restrict you in your power to use money raised for railroad purposes and raised on railroad securities to the actual improvement of that railroad, or should you be allowed to use it for the acquisition of other railroads? A. I think we should be allowed to use it for the acquisition of other railroads, under proper regulation. A map of western rail and water lines shows that so far as California and the states of the southwest are concerned, the Harriman system constituted a partial monopoly of western transportation. That this was the case was indirectly admitted by Traffic Director Stubbs, in his testimony before the Interstate Commerce Commission. Speaking of the California situation, Stubbs declared: "They (the California merchants) are more or less dependent upon the Southern Pacific as they are not upon any other carrier, not even the Santa Fe.� [86] That the Southern Pacific had almost a monopoly of the business of California was openly declared by Judge Robert S. Lovett, the general counsel of the Harriman lines, in an argument before the Interstate Commerce Commission;" in fact, Lovett defended the Union Pacific-Southern Pacific combination by pointing out that the geographical position of the Southern Pacific was such that it already controlled three of the four all-rail approaches to California, so that the competitive situation was not affected by the Union Pacific-Southern Pacific combination. 82. I.C.C. Rep. 346. 83. 12 I. C. C. Rep. 322. 84. Evidence before I. C. C., Proc. Spec. Ex., PP. 764, 765, testimony of E. H. Harriman. 85. Evidence before I. C. C., Proc. Spec. Ex., pp. 802, 803. 86. Proc. Spec. 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