Part 23

In its origin the public will was destructive no doubt, that was the inarticulate disgust born of the long endurance of inadequate service, all the miseries of that contemptuous exploitation of the people so familiar in all the cities of America. To this, on the customary revelations of a corrupt domination of the political machinery of the city by the street railway company, there was added a moral rage--the one element needed to provide the spark for the mine. At first this rage against the company was such that any action taken by officials was popular so long as it injured or harassed or was somehow inimical to the company. And in consequence there was developed a kind of local jingoism or chauvinism; whenever popularity slackened or it was felt necessary to remind the electorate back in the ward of the sleepless vigilance of their representative in the council, a councilman had only to introduce some resolution that would be against the company’s interest. It was unfortunate, and had its evil phase, as any suggestion of intellectual dishonesty must ever have, and it made serious dealing with the subject extremely difficult and hazardous. It was difficult to recognize any of the company’s rights; and it was always at the risk of misunderstanding, and with the certainty of misrepresentation that this was done. But of course it was necessary to do this, in the course of the long and complicated transaction, that constant and inflexible opposition of the public with the private interest which now assumed the aspect of a noisy and furious war, and now the softer phases of diplomatic negotiations. Of course there were always those in town who knew exactly what was to be done; they could settle the vexatious problem with a facile gesture, between the whiffs of a cigarette on the back platform of a street car, or in an after dinner speech between the puffs of a cigar. The one was apt to advise that the “traction company be brought to time at once,” the other that an “equitable” settlement be “arranged” by conservative business men. Meanwhile the problem obviously consisted in the necessity of recognizing the private right in the proprietors and of securing the public right to the people, and to do this it was necessary to search out, and isolate, like some malignant organism, the injustice that somewhere lurked in this complex and irritating association.

In my first campaign we proposed to grant no renewal of franchises at a rate of fare higher than three cents. Jones had advised it, and I had been committed to it long before. It was Tom Johnson’s old slogan, and it was popular. I used to explain to the crowds my own conviction that the problem never would be settled until we had municipal ownership, but there was in Toledo in those days very little sentiment for municipal ownership, and my conviction met with no applause, and was received only with mild toleration. In the second campaign, there was more indorsement; in the third there was a certain enthusiasm for the principle, in the fourth it seemed to be almost unanimous, and now the principle has become one of the cardinal articles of faith. I do not wish it to appear that I had converted all these people to my view; I had not tried to do that, and doubtless could not have done so had I tried, but the conviction came by the very necessities of the situation.

LIX

Those men who ventured early into the street-car business were pioneers; they assumed large risks, and they rendered a public service. They had the courage to undertake experiments; they had faith that the town would grow and become in time a city. And they staked all on the chance. They had little difficulty, if they had any at all, in securing franchises from the city to use the streets, for the people of the city were glad to have the convenience of transportation. Indeed many of the lines were community enterprises, organized by the men of a given neighborhood for the sake of the transportation merely, and not with any notion of personal profit.

Franchise ordinances then were loosely drawn; men had no conception of what changes the future was to bring about, they lacked the imagination to prefigure it, the faith to believe it, and so the street-car promoters who came along a little later were the heirs of advantages which otherwise they would not have obtained. Under these advantages, these privileges, they or their immediate grantees were enabled to take over for their own use and profit the enormous social values that were being created in cities, not by them, but by all those families who moved in, and toiled, and wrought and built the modern city.

This was the first phase of the street-car business, its experimental stage, commensurate with the rapid, disordered growth of the city in the middle and western states of America. Few indeed of the pioneers in the business became wealthy; many no doubt lost their money, though they tried in vain to vary or improve their fortunes through the changes that were rapidly developing the mighty problem of transporting the crowded populations of our cities. There were, for instance, the days when mules were substituted for horses, and sacrificed rapidly and ruthlessly on the principle that it was cheaper to replace them than to care for them, a system about as bad in its consuming cruelty as that adopted by some factories with reference to their human employees. Then, in a few of the larger cities, there were the cable cars, but the second phase came with the adoption of electricity as a motive power, and the coincident development, almost a miracle, of the towns of middle and western America into real cities.

With electricity as a motive power, and the consequent cheapening of operation, the street-car business entered upon its second phase, and it ushered in at once the era of speculation in franchises and social values, watered stocks and bonds. The era of exploitation came upon us, and out of these privileges, out of other privileges to conduct other public utilities, i. e., privileges to absorb social values, enormous fortunes were made, with all the evils that come with a vulgar, newly-rich plutocracy. To keep, and extend, and renew these privileges, they must have their lawyers, and their newspapers to mislead and debauch the public mind; they must go into politics, organize and control the machines of both parties, bribe councilmen and legislators and jurors, and even have judges on the bench subservient to their will, so that the laws of the state and the grants of the municipality might be construed in their favor. The sordid, tragic tale of their domination of municipal politics is now universally known, and in the tale may be read the causes of most of our municipal misrule. It happened in Toledo as it happened everywhere, such is the inexorability of the general law, and the popular reaction was the same.

And so we came upon a new, the third stage, since I have set out to be scientific in analysis of tractions, and the very name by which these big enterprises have latterly been called, that is, public service corporations, suggests the meaning and indicates the significance of that era. Two facts, or principles, had become perfectly apparent; first, that transportation, the primal necessity of a modern city, is a natural monopoly, and must be treated as such. Second, that if these public utility corporations are to continue to hold these monopolies, they must become public service corporations indeed, that is, they must serve the public. No more, then, the old corporation contempt of the people, at least outwardly expressed, but a softer voice in addressing them, and a new respect, perhaps grown sincere. Their old lobbyists disappeared from the council chamber and the city hall--for eight years they were not seen there. The companies had been primarily profit making institutions and only incidentally for public service, they were operated for the private benefit of their owners in contempt of public right; the service was secondary.

We may say that this third era is the era of regulation, or, as it is more apt to be, attempted regulation, by the city, in which the principle of the public interest as paramount to the private interest is to be the basis on which a private company shall be permitted to operate. This era will endure long enough to demonstrate itself a failure, the general mind will continue to learn, to inform itself, democracy will develop new functions, and we shall enter on the fourth, and perhaps the final stage, that of municipal ownership.

LX

We came upon the scene just when the discussion was emerging from the second into the third of those phases into which I have divided the development of the problem. The franchises granted almost a generation before were about to expire, and new arrangements between the city and the traction company, the Big Con, as the newspaper argot would have it. Chicago had already, or almost, gone through her settlement; and though the settlement was pretty bad, it nevertheless recognized the principle that the value of a street railway franchise is a public, social, or communal value, produced by the community, and therefore belonged to the community. In Toledo the company had but about $5,000,000 of actual investment, while it had a capitalization in stocks and bonds of nearly $30,000,000, and the difference of $25,000,000 was the community value which the magnates had been exploiting for their own benefit. We simply proposed that this value should be returned to the people. We proposed, then, that the rate of fare to be charged by the company should be large enough and only large enough to pay a reasonable return on the actual investment and to provide good service, a service that was to be dictated, regulated and controlled by the city. This principle had been established, or at least admitted in the Chicago settlement, and the same thing had been done, though on a sounder and more scientific basis in Cleveland, where Tom Johnson’s long and gallant and intelligent contest already in effect had been won. Over in Detroit the same principles had been deduced, though the discussion there was so prolonged, as proved ultimately to be the case in Toledo, that the people demanded municipal ownership, without passing through the intervening experimental stage of regulation and control.

There is of course nothing sacrosanct in three-cent fares. The movement of the people, which at the same time, in the old Russian phrase of Kropotkin, was a movement toward the people, had become an agitation for this rate. It had been begun years before by Mayor Pingree in Detroit, and was taken up in Cleveland by Tom Johnson, whose whole career in a romantic manner, at once embodied and illustrated the history of the street railway problem in the American city. The adoption of the phrase as a shibboleth or slogan of the progressive forces was simply and easily explained, for in the mind of Johnson and in the minds of those who were like him or were influenced by him, the difference between the prevailing fare of five cents and the proposed fare of three cents somehow measured the franchise value, or that social value which belonged to the people. Tom Johnson, indeed, used often to say that he favored a three-cent fare simply because it was two cents nearer nothing, thereby revealing a glimpse of his dream of a social order in which the municipality would provide transportation just as it provides sidewalks, sewers, bridges, etc., all of which are paid for at the treasury in taxes. It was believed and held by all of us, that this franchise value should be reclaimed or retained by the people in this direct and simple manner of lowering the fare.

There was never any notion, of course, of interfering in any way with the existing rights of the company; it was to have all that to which it was entitled under its old franchises or contracts. But it was proposed that when we came to draw a new contract, the political relations of the city and the company were to be considered as of paramount importance, using the word “political,” of course in its old authentic sense, and not as expressing in any wise the sinister thing it has come to connote in the popular mind. We were determined to meet not only the conditions of the present, but to do what our forerunners in office had never done, that is, to protect the interests of the people of the future. I suppose this sounds very much like the trite generalities of the politician, but we sincerely tried to express the theory with definiteness and particularity. We sought not only a reduction of the fare and a regulation of the service in the public interest, but we wished to provide for that future day when, as a result of the certain growth of the city, the sure improvement in transportation facilities, and the inevitable development of the democratic function, the municipality is to undertake these enterprises as a proper public function.

It was these principles we tried to bear in mind in those long negotiations which we held all during the months of one spring and summer over that big table in the council chamber. We were nervous when we entered upon this work, nervous as are those who enter the finals in some tournament of sport; we did not know much about the subject, and we were confronted by the street railway magnates and their clever lawyers. But we could learn as we went along, and we always had to our assistance Newton Baker over in Cleveland, and Peter Witt, and Carl Nau, whom we had employed as the city’s accountant when the time came at last when we could examine the company’s books; they had all gone through the long civil war in Cleveland, as had Professor Edward W. Bemis, whom we afterwards engaged in his quality of expert adviser on valuations.

Perhaps at first we laid too great stress on three-cent fares, though I do not know how we could have done otherwise. Dr. Delos F. Wilcox, who has written an excellent work on the whole subject, had advised us indeed that a disproportionate amount of energy and effort had already been expended--not by us, only, but by all those in other cities who were in similar struggles--in the direction of low fares. He pointed out, I remember, that five cents in that day was worth little more than three cents or three and a half cents had been a decade before, according to the scale of prices then current; he thought that in terms of general prices the public had already secured three-cent fares without knowing it. It was a question of some subtlety and some intricacy, to be left to economists; we could not feel that our battle had been won so easily, and we did not undertake to console the people with the recondite theory. We had before us, in vision, and sometimes in their corporeal reality, the weary and exasperated strap-hangers, and the human sardines on the rear platform with their valid complaints; they all wanted low fares, good service, and seats. An old street-car man once said that to provide seats for everybody is an impossibility, and to prove this assertion he humorously classified humanity into three groups: “workers, clerkers and shirkers.” Each morning, he said, the workers go down at seven, the clerkers at eight, and the shirkers at nine, and that therefore it is easy to provide them all with seats in the morning hours; but that as all three classes wish to go home at the same hour in the evening, it is then physically impossible to provide them all with seats.

But whether or not too great stress was three-cent fares we learned during those months of wearisome and futile negotiations, that the theory was not scientific. The people were entitled to their money’s worth in service, the company to adequate pay for the service it rendered, and as the basis of the whole transaction was a public necessity, the city had the right to control the service, to dictate what it should be. The old theory was that the people existed for the street-car company; the new principle was quite the reverse; the street-car company was but a temporary instrument of social service, and the social right was paramount to all others.

The company therefore was entitled to a fare sufficient to enable it to provide the service thus demanded, and to do this it must charge enough to pay its operating expenses, taxes, and interest, enough to meet the cost of improvements and depreciation, and to pay a reasonable return on its investment. It was not entitled to any speculative return. There was no longer on the company’s part that risk its predecessors in interest, the pioneers or promoters or whatever they were, had been compelled to take; its investment was no longer precarious; nothing, indeed, could be more certain than the stability of street railway investments. Their securities, based upon a public necessity, supported by the diurnal comings and goings of all those thousands and hundreds of thousands of people, had become in a certain very real sense, a fixed burden upon the people of the city, a burden as fixed and inevitable as taxes. In the hands of private owners such securities, under a franchise ordinance properly drawn, partake largely of the character of municipal bonds, which indeed they resemble in fundamentals and ends. The issue of securities was therefore to be as jealously guarded as an issue of municipal bonds, and overcapitalization, the prolific source of so much evil, was to be prevented. The enterprise had become as stable as any human institution can be, and with the limited risk there was to be applied the familiar principle of limited profit. The principle was recognized in Cleveland, where the return fixed as reasonable was 6 per cent., which is but little more than municipal bonds pay. And when this principle is established, municipal ownership almost automatically follows; investors used to large speculative profits, are ready to sell out to the municipality; thus, by indirection, democracy comes into her own.

It was easy enough to fix most of the elements of this return; the accountants could do that, in their intricate discussions of car-miles and curves and straight lines of depreciation and points of saturation in traffic, and all that, but the tremendous difficulty was to determine just what the investment was and what was a reasonable return on that investment.

It is this pass to which all such negotiations, conducted in sincerity, come at last; it is this on which the whole question hinges, it is this that might as well be done first as last, namely, to evaluate the property of the company. It is necessary not only to get at the investment and the return thereon, but to ascertain what the city must pay when it comes to take over the street railway system.

But we did not do it at first, and we did not do it at last. At first it was impossible to get it into the councilmanic head that it was at all necessary, especially since it cost money to retain the “experts,” as they are called, to do the work. They were prone to that old vice of the human mind which leads it to imagine that when it has stated the end to be achieved it has at the same time stated the means of achieving it,--like the advice to the bashful man “to assume an easy and graceful attitude, especially in the presence of ladies”--and when council was finally convinced and had provided the funds for the experts, we could not agree as to who should be employed. That is, the human equation was apparent. There was unhappily nobody but men to make evaluations, and all the engineers who were competent were employed by street railway companies, and expected or hoped to continue to be employed by street railway companies, and they had evolved so many fantastic notions of “intangible” value that they could account for almost any excess in artificial capitalization, and make the grossest exhibition of corporate greed in watering stocks appear like veritable self denial in frugality and economy. We selected Professor Bemis to represent the city, because he was one of the few of the “experts” committed to the people’s cause; he had advised Tom Johnson throughout his long war. But the company never could be brought to select anybody, or to agree upon the third arbiter--even to accept the Judge of the United States Circuit Court when, against the advice of the whole administrative circle, I proposed him.

Again and again in our prolonged negotiations we returned, as in a vicious circle, to this point; again and again we reached this impasse.

LXI

Meanwhile, the franchises were expiring, and the time drew on when the company would have no rights left in the streets. And here was the opportunity for the mind that had the power, or the defect, of isolating propositions, of regarding them as absolute, of ignoring the intricate relativity of life. “Put the company off the streets,” was the cry; “make it stop running its cars; bring it to its knees.” However, we could not bring the company to its knees without bringing the riders to their feet; we could not put the company off the streets, without at the same time and by the same process, putting the people on the streets; when the cars stopped running the people began walking. The public convenience was paramount.

Then Mr. Cornell Schreiber, the City Solicitor, hit upon a plan. He drew an ordinance providing that the company could use the streets wherein its rights had expired, only on the condition that it carry passengers at a three-cent fare, and the ordinance was at once passed by the council. It was of doubtful legality, but it had its effect in a world of human beings. Before it was effective even, people were tendering three cents as fare; and in the face of the difficulty of dealing with a whole populace in this mood, the company agreed to put in force a temporary rate of three cents during the rush hours of the morning and evening, and it lowered fares in the other hours and made further concessions. And there we let the matter rest.

And, since the education of the general mind never stops, the people were learning. Their patience was time and again exhausted by the unavoidable length of the franchise dispute, for the problem was to them, as to most Americans, new, the legal questions in which the whole subject was prolific had not been settled, there was the interruption of business and convenience and pleasure attending long continued negotiations, and perhaps more than all that irritation of the public temper which proceeds from all communal disputes. The company’s representatives counted on all this to tire the people out; and since the controversy assumed a political complexion, and there was as always the difficulty of sustaining the mass will, they had hopes that by delay the people in weariness would surrender. The time came when the sentiment in favor of municipal ownership was so strong that the Independents adopted the view I had expressed and declared it to be their purpose to grant no renewals of franchises at all, but to let the company operate on sufferance until the city itself could take over the lines.