Minnesota

Chief, however, among all causes of exasperation were the frequent and notorious discriminations in favor of some individuals, industries, and places against others. By the connivance of one or more companies the fuel supply of a city was put into the hands of a single firm or clique. The big shipper generally was conceded a better rate than his small competitors. But it must be said that at terminal points and junctions, where shippers had the choice of two or more lines, they sometimes forced the hungry traffic managers to offer rates by no means agreeable or profitable. When the rate per hundred pounds on merchandise from New York by way of the lakes to St. Paul, including 156 miles of railroad haul, was 35 cents, that from St. Paul to Faribault, 56 miles, was 39 cents. The state constitution contained (and still contains) the provision that all common carriers enjoying right of way for public use shall carry the mineral, agricultural, and other productions of the state “on equal and reasonable terms.” The farmers could not see that a rate on wheat from Owatonna to Winona of 2.6 cents, and one of 6 cents from Rochester, 40 miles on the road nearer Winona, were “equal”; nor could the people of Faribault and vicinity see what justice there was in paying $29.50 freight per carload of lumber from the falls, while residents of Owatonna, 15 miles farther on, should enjoy a rate of $18.

As early as 1866, in his inaugural address to the legislature, Governor Marshall had advised that body to be looking out “for the interests of the people against possible oppression from these corporations, which will soon be a power in the land.” In his message of 1867 he suggested that it was time to attach proper terms and conditions to railroad aid. He did not like the withdrawal of ten million acres of land from the operation of the homestead act.

Governor Austin, in his inaugural address of 1870, went no further than to ask the attention of the legislature to the complaints of railroad extortions and discriminations, and the use of the constitutional powers possessed by it for their abatement. His first annual message, delivered one year later, is a notable document in the literature of railroad regulation. It may be questioned whether there was another state executive in the country ready at that time to nail any such array of theses on the doors of the capitol. His propositions, briefed out of his text, were: 1. All special railroad charters not put into operation within ten days after consummation, to be void. 2. Every railroad corporation doing business within the state to maintain a public office within the state, and keep therein records of the officials, capitalization, assets, and liabilities. 3. No new road to be built parallel to an existing road. 4. All railroads in the state to be public highways free to all persons for transportation at reasonable charges. 5. No railroad company to issue any stocks and bonds except for money, labor, or property actually received and applied to the purposes of the corporation; all fictitious stocks and bonds to be void, and no increase of either, unless in a manner prescribed by law. 6. The state’s right of eminent domain to apply to railroad as to other property. 7. Adequate penalties, extending if deemed necessary to forfeiture of property and franchise, to be provided for unjust discrimination or extortion. 8. Finally, the creation of a national railroad commission for the regulation of commerce by rail and otherwise among the several states.

It is remarkable that the same legislature which passed the 500,000 acre land grab also enacted one of the first and most stringent acts for railroad regulation. It is chapter 24 of the General Laws of 1871. It classified all freight and fixed a maximum rate for each of the five classes, according to distance. It determined a maximum passenger fare of five cents per mile. It declared all railroads in the state to be public highways, and fixed a penalty of $1000 for every denial of the right of any person to travel or ship goods at the prescribed rates. The law finally declared the rates therein established to be “maximum reasonable rates,” and any corporation demanding or receiving more should, on conviction, forfeit its charter.

The same legislature (1871) provided for the appointment by the governor of a state railroad commissioner to observe the behavior of the corporations under the new law. The first incumbent was General Alonzo J. Edgerton, who had given proof of ability by gallant military service and successful practice as an attorney. The three reports of this official are a pitiful record of the unequal struggle of the legislatures with their informally confederate creatures, the railroad corporations. To the regulative act of 1871 the corporations gave not the slightest heed, partly on the ground of their rights as quasi-persons, partly because in their territorial charters they had been authorized to make “reasonable charges” for services, and the legislature had not reserved the right to determine what charges were reasonable. If some of the roads somewhat abated their rates, it was not because of the legal mandate. Gross discriminations continued to be practiced. The evasion of taxes by the companies by various devices added to public exasperation. The commissioner was gratified to have exacted an increase of railroad taxes from $56,505.54 in 1871 to $106,876.35 in the year after, and regretted his inability to reach $250,000 more illegally withheld. One company, the Minnesota Central, sold its entire railroad property to the Milwaukee interest, retaining its unsold lands, and claimed to survive as a railroad company entitled to hold its lands free of taxation. For lack of authority to make personal inspections of company accounts and property the commissioner could not verify their reluctant reports, which, because not made on a prescribed uniform plan, were of slight practical service. In his report for 1873 he reminded the legislature that the companies, which had by the beginning of that year constructed 1900 miles of road, had received from the nation, state, and municipalities, grants and gifts to the value of $51,000,000, being about $27,000 per mile of completed road. The average necessary cost of construction and equipment, according to an expert computation, would have been a trifle over $23,000 to the mile. In that year the bonded debt of the roads amounted to $54,500,000. The aggregate of capital stock, $20,000,000, raised the “capitalization” of the roads to $74,500,000; nearly $48,000 per mile. Only nominal amounts of stock-proceeds had gone into construction and equipment, and there were wide margins between the face value of the bonds sold and the actual expenditures. In some instances, says the commissioner, not more than forty per cent. went into construction. In these years in which building was going on so swimmingly, operation was far from encouraging. The managers had been more concerned to increase mileage than to build substantially. Heavy grades, sharp curves, and slight construction were the result. The iron rails weighed for the most part but fifty pounds to the yard. Equipment corresponded, of course, with track and rail. The amount of business obtained at the fares and rates exacted was disappointingly small. After the grain crop was moved the amount of paying freight was meagre and backloading trifling in amount. Operating expenses rose to eighty per cent. of the gross earnings. The balance of earnings and expenses for the year 1873 was but $1,400,000 for all the Minnesota roads, a sum which must have seemed pitifully small in the eyes of the men whose money had built them. The reader need hardly be told that the Minnesota railroad corporations went down in the crash which came upon the country in 1873. Three defaulted in their interest, two borrowed money to pay it, two went into receivers’ hands, and others attempted assessments on their stockholders. In the next four years but eighty-seven miles of new road were built.

When the roads refused to conform to the law of 1871 it became the duty of the attorney-general to bring suit for forfeiture of charters, the prescribed penalty for disobedience. John D. Blake and others sued the Winona and St. Peter Railroad Company in the district court of Olmstead County, alleging that said corporation had exacted for a certain service one dollar and ninety-nine cents, whereas the statute had determined the sum of fifty-seven cents to be the reasonable maximum charge. This court held, with the defending company, that the legislature had no power under the constitution to fix and determine railroad rates. The state intervened and the case was appealed to the Supreme Court of Minnesota, which reversed the decision of the court below, thus sustaining the validity of the act of 1871. The case was then carried to the Supreme Court of the United States and was numbered among the well-known “granger cases,” held under consideration for four years and disposed of according to the principles laid down by that court in the case of Munn vs. Illinois. In the “Blake case,” decided in October, 1876, it was held that the legislature of Minnesota was within its constitutional powers in regulating and fixing railroad rates and charges and prescribing penalties for violations of her laws in that behalf.

In this interval the prostrated and nearly bankrupt corporations were in no condition to conduct themselves offensively. In 1874 a state board of three railroad commissioners was created. Mr. Edgerton was retained as a member, with Ex-Governor Marshall as one of his colleagues. Under their powers they made and published a complete schedule of reasonable maximum fares and rates according to distances, and reported at the close of the year a general and substantial compliance on the part of the companies. Their representatives showed such good nature and made such fair showing of their meagre profits that the commissioners found good reason to allow them all they could reasonably claim. This led to the suggestion that the commissioners had been deluded or corrupted by the smart and able railroad men. The next legislature (1875) accordingly replaced them with a single commissioner to be chosen by the electors, with such meagre powers as to justify a guess that some ingenious railroad attorney drafted the bill. Ex-Governor Marshall held the office for six years, discharging the duties with admirable discretion.

As an example of the liberality, not to say criminal recklessness, with which railroad operators in the decade following the Civil War made use of other people’s money, it will be well to follow the fortunes of one of the great land grant companies. The Minnesota and Pacific Railroad Company was one of the four corporations created by special act in 1857 to receive the colossal land grant made in that year to aid railroad building in Minnesota. This company was obligated to build from Stillwater via St. Anthony to Breckenridge, and from St. Anthony to St. Vincent, a hamlet on the Red River near the crossing of the Canadian boundary. Along with the rest it defaulted, and in the summer of 1860 its property and franchises were sold to the state upon foreclosure. An effort to recover these by conforming to conditions imposed by the legislature as already stated, proved abortive. In 1862, however, the franchises, rights of way, the land grant, and other property thus forfeited were bestowed upon a new corporation styled the St. Paul and Pacific Railroad Company, which built ten miles of road that year and opened business between St. Paul and St. Anthony. The year after, seventeen and one half miles of track were added, and trains run to Anoka. This rate of progress did not satisfy the corporation nor the expectant people. Circumstances not now well known opened the way for borrowing money in Holland. To give the great enterprise a less tremendous aspect, it was resolved to separate it, so that the portions of road lying in districts already settling up might be immediately “financed,” while those running to distant regions known only to hunters and Indian traders might be left to the future. Accordingly in 1864, under legislative authority, a new and separate corporation was formed by the interests controlling the existing company, under the name and style of “The First Division of the St. Paul and Pacific Railroad Company.” To this new company was transferred the “main line” from St. Paul to Breckenridge and the “branch” from St. Anthony to St. Cloud. The early building of these lines within the bounds of civilization would not, it was believed, appear a romantic undertaking to investors. The scheme had its intended effect. Money poured in galore. When the “branch” was finished to St. Cloud in 1866 (76 miles), $7,000,000 of bonds had been sold. That amount of cash would have built 350 miles of road, as roads were then built in level regions. Five years later (1871) the “main line” reached the Red River at Breckenridge (217 miles), and the bond issue had been swelled to $13,500,000. The two lines might have been built for much less than half as many dollars. Upon the completion of the main line and branch it was believed to be feasible and judicious to go on with the construction of the remaining mileage retained by the original St. Paul and Pacific Company. This consisted of the so-called “extensions”: the “St. Vincent Extension,” from St. Cloud to the Canada line on the Red River, and the trifling “Brainerd Extension,” from St. Cloud to Crow Wing. To build these a loan of $15,000,000 was obtained in Holland. The bonds were placed at seventy-five cents on the dollar, and twenty-one per cent. of the proceeds were retained to meet three years’ interest. These discounts left a little short of $9,000,000 in available cash. This amount would have built and equipped both the extensions (about 470 miles) according to the building standards of the time. In November, 1872, the money was all gone and there had been built 140 miles of road, 100 miles having no connection with the existing portions of the system. Collections of rails, ties, and bridge material, not actually paid for, remained on hand, a useless asset. In his message to the legislature of 1873 Governor Austin characterized the finance of the companies by implication as injudicious and dishonest, and vaguely suggested that the just claims of the foreigners should be consulted. The lawmakers, however, were disposed to allow the foreign investors, who had placed their funds according to their own judgment, to use their own wits to recover their losses. It is difficult to see what relief the legislature could lawfully have rendered.

That body had no sooner adjourned than in May (1873) the companies defaulted on their interest. Two corporations, parent and child, owned 433 miles of railroad of light construction and equipment, on which rested $28,000,000 of bonded debt running at seven per cent., and the net earnings for the previous year had been $112,745.57. In August the United States District Court for Minnesota put the mother corporation into the hands of a receiver, but left the stockholders and bondholders of the “First Division” company to wrestle with the business under their legal and stipulated powers. The legislature had in separate acts authorized the bondholders of that company to vote for directors, who might be foreigners, any or all, and provided that meetings of directors might be held abroad. The fact that the Northern Pacific Railroad “interest” had held the major number of shares in both of the Minnesota companies does not modify the foregoing account, but points to the quarter in which to seek for the residence of responsibility, in part at least, for a series of operations hard to account for on presumptions of honesty and common sense. The reader may be curious to follow further, on a subsequent page, the story of the St. Paul and Pacific.

The panic of 1873 was a typical example. An era of great prosperity had induced a fever of speculation which had spread through all social strata. Not railroads only but ships, mills, factories, mines, fisheries, farms had been built or bought with small sums of ready cash and large sums in mortgage notes. A huge cloud of debt rested over the land. Transactions were so rapid and enormous that bankers loaned out their swelling deposits with a reckless eagerness. One fine morning some conservative institution refused a new discount or declined to renew a customer’s paper. That customer could not pay his creditors, and those could not pay theirs. By nightfall alarm had spread wherever the telegraph lines extended. The next day there were no bank deposits of cash, and credit transactions ceased. Securities offered on the market by hard pressed debtors began to drop, and presently all forms of property depreciated. In the general distrust which ensued, all kinds of industries and business languished, and months passed before even the more modest of credit operations were adventured. Years passed before the full tide of prosperity was again in flow. In a country still new, where capital was small and opportunities for credit operations great, the havoc wrought was extreme. Liquidation and recovery were correspondingly tardy. In Minnesota the panic was accompanied by two disasters which added much to the general discouragement.

The morning of January 7, 1873, opened clear and bright over the south half of Minnesota, with no signs of foul weather in the sky. The country people had left their homes on their usual errands to mill, to post-office, to town, to distant wood lots or fields, without thought of danger. Soon after midday those who were still on the road were overtaken by one of those terrible winter storms known to old voyageurs as “blizzards.” The most learned authority in America on English usage has recently made the statement that the word “blizzard” is not more than twenty-five years old. It was in common use in Minnesota in the fifties. In a true blizzard the air is so completely filled with a fine granular snow as to cause absolute darkness. It is, as on this occasion, frequently accompanied by a furious wind. The temperature may or may not be excessively low. The voyageur did not attempt to travel when a blizzard overtook him, but got behind and beneath such shelter as he could find or make, and waited for it to blow over. These inexperienced Minnesota settlers pressed on, wandered from the unfenced roads, and if they found shelter it was by good fortune. Many perished in the terrible gusts which swept the prairie. The weather did not clear till the third day. The first accounts estimated the number of lives lost at many hundreds, but when the state statistician collated the local reports sent in he was happy to find that not more than seventy persons had perished. A much greater number, of course, were frost-bitten and maimed. There were cases in which farmers had been either injured or destroyed while attempting to reach their houses from their barns and fields. There has been no blizzard of any notable severity in Minnesota since this of 1873.

In June of the same year a southwest wind brought over the western border, south of Big Stone Lake, swarms of the Rocky Mountain locust (Melanoplus spretus), which soon spread themselves over large parts of fourteen southwestern counties as well as a considerable area of northwestern Iowa. Because not learned enough in entomology to distinguish, the people supposed these locusts to be grasshoppers, and soon adopted the abbreviated form “hoppers.” The growing crops were presently devoured. Settlers who had made their first plantings were impoverished and had to accept the generous aid of neighbors. The area visited was small compared with that of the state and its settled portions, and it was not conceived that grasshoppers could survive a Minnesota winter. The legislature of 1874 made an appropriation of $5000 to relieve cases of complete destitution, and another of $25,000 to be advanced to the farmers for the purchase of seed.

In July of this year (1874), to the astonishment of all, innumerable multitudes of “hoppers” suddenly appeared as if rising out of the ground; and they did so rise. In the previous fall the female locusts had deposited in cylindrical wells about an inch deep and one fourth of an inch in diameter, hollowed out on high ground, clusters of eggs inclosed in protecting envelopes and covered with soil. The midsummer heat hatched these eggs, and the brood at once fell on the growing crops. In a few days not a spear was left over large areas, and the hoppers had grown wings. Taking wing as if by a common inspiration, they flew over into Blue Earth, Sibley, Nicollet, and Renville counties, where they repeated the devastation of the previous season. But the counties thus abandoned were again in many places infested by fresh swarms from the southwest. In all twenty-eight counties were visited in 1874. Upon an appeal from the governor a subscription was opened for the relief of stricken settlers. General Sibley, at his request, undertook the disbursement, and later accounted for $19,000. The legislature of the following winter set aside $45,000 for immediate relief and $75,000 for seed, the latter sum to be repaid along with taxes. The devastations of 1875 did not extend more widely and were somewhat less damaging, but they added not a little to the discouragement and gloom resulting from the panic.

The Republican party was so completely in the ascendant in the seventies in Minnesota that the only political events of importance were those which occurred in its ranks. United States Senator Daniel S. Norton died July 13, 1870, and it fell to the legislature assembling in the January following to elect his successor. It took but a single ballot in the Republican caucus to decide who should be Senator Ramsey’s colleague. William Windom had given such satisfaction by his five consecutive terms as representative in Congress from the first district that, Mr. Donnelly being out of the road, there was none to dispute his claim to the promotion. Mr. Windom’s large acquaintance, his long legislative experience, his sound common sense and Quaker simplicity of manner at once gave him a standing at the other end of the capitol not easily accorded to new senators.

President Grant in his message of 1872 advised the Congress to authorize a committee to investigate the various enterprises for the more direct and cheaper transportation of the products of the West and South to the seaboard. The Senate responded by the appointment of a select committee on transportation routes to the seaboard, with ample powers for investigation. Senator Windom, as chairman of this committee, devoted many months to the analysis and interpretation of the great mass of information and counsel submitted, and to the preparation of the report in two octavo volumes, printed in the spring of 1874. Among the novel conclusions of this committee (and some of them are after the lapse of a generation not familiar to all) were: (1) that the power of Congress to regulate commerce among the several states includes the power to aid and facilitate it by the improvement or creation of channels and ways of transportation; Congress has the same right to build railroads as canals: hence, (2) the ownership or control of one or more double-track freight railways; (3) the improvement of our great natural water ways and their connection by canals; (4) particularly the improvement of four great channels at national expense. These were the Mississippi River itself, a route from the upper Mississippi by way of the great lakes, a route from the same river by way of the Ohio and Kanawha, and, last, a route from the Mississippi via the Tennessee; all to be pieced out either by canals or freight roads. At the present writing Congress is just warming up to attack the first of these four great enterprises.

As might be supposed, the committee incidentally suggested complete publicity of all interstate railroad classifications and rates, the prohibition of combinations with parallel or competing lines, the receipt for and delivery of grain by quantity, the making it unlawful for railroad officers to be interested in car or freight line companies, and the absolute cessation of stock watering. The proposition of a bureau of commerce to supervise all interstate railroad operations bore fruit twelve years later in the interstate commerce commission. Senator Hoar declared this report to be “the most valuable state paper of modern times.”

The Minnesota Republicans from the beginning had been divided. Opposed to the old “Ramsey dynasty,” which had controlled the distribution of government appointments, there was at all times an array of patriotic gentlemen quite willing to enter the public service, believing themselves as deserving of party rewards as those on whom Fortune had smiled. The Civil War liberated from military service many ardent young Republicans desirous and capable of sharing in public affairs. Among these was a St. Paul attorney, Cushman Kellogg Davis, a native of Wisconsin, who had been graduated from the University of Michigan. He had done good service as a line officer in a Wisconsin regiment and as a staff officer under General Gorman. His ability and diligence as a lawyer soon gained him prominence at the bar, and his personal qualities attached to him a circle of influential friends. He was not greedy for minor offices, but served in the legislature in 1867 and was appointed, a year after, United States district attorney, at the instance of Senator Ramsey. A lecture on “Modern Feudalism” first delivered in 1870, in which he portrayed the growing dominance of corporations, gave proof of powers of insight and analysis above the ordinary. When the Republican state convention met in St. Paul on July 16, 1873, the old dynasty had no other expectation than that the nomination for governor would fall on its worthy favorite, the Hon. William D. Washburn. Few expected that Mr. Davis, whose loudest support had come from an independent St. Paul newspaper, would receive more than a complimentary vote. On the informal ballot he did not, nor on the first formal ballot. Three more ballots followed, on the last of which the favorite of the “young Republicans” was nominated by a vote of 155 to 152, 154 being necessary to a choice. As Mr. Davis’s nomination came by a slender majority, so also was his election secured by a majority of about one fourth of the nominal Republican strength. His friends had made no secret that the governorship was desired by them merely as a stepping-stone to a national senatorship. The old dynasty evidently did not expend much money or labor on that election.