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it may be said of most of these that they have resulted, more often than not, from the failure of Government to interpret the implied contract of shareholding as a limited contract, rather than from any act or acts of interference.

On the whole, it has appeared impossible to attribute the vastness of the Vanderbilt fortune to the erratic interferences with railroads which all the State governments have practised. The fact that some very large railroad fortunes are plainly attributable to the action of the Federal Government, in connection with the Pacific railroads, has not seemed to me sufficient reason for concluding that all of the very large railroad fortunes should be attributed to government interference, and the largest of all seemed clearly to form an exception. There was the enormous growth of population, the rapid development of industry, happening to coincide with the presence in the railway world of New York of a man with sufficient sagacity to perceive the conditions, and to take advantage of them for his personal advantage. The consolidation of various local railroads from New York City to Buffalo had to be authorized by the State, it is true; but it has seemed evident that the State Government had no hand in producing the favorable conditions which made the consolidation so immensely profitable, still less in producing the individual man able to turn the conjunction to his private benefit. It is not without considerable surprise, therefore, that, with reflection and a little research, I have happened upon the discovery that governmental interference of a very clear and unmistakable kind is indeed a necessary link in that chain of circumstances out of which the Vanderbilt for

tune has sprung. It is evident that by necessary link is meant a condition whose

absence, had it been absent instead of present, would have negatived the accumulation of this particular fortune in the hands of one man, or, as now, in the hands of a family. Government interference has here acted indirectly, in a totally unforeseen and unforseeable manner, which will nevertheless be easily recognized, now that the thing is done, with a little explanation. Throwing all the other circumstances together, as a group of favorable fortuitous conditions, such as the discovery of America, of steam, etc., etc., it may be confidently asserted, I think, that the cause of the Vanderbilt fortune is the Erie Canal, built by the State of New York, and the Western railroads, built by the Federal Government. Let us examine the state of the case.


The first railroad to be built in New York State was the Mohawk & Hudson, from Albany to Schenectady, I think, at a cost of $100,000 a mile, including terminal facilities. This was in 1826, and in the same year the Erie Canal was completed. this time the State Government had expended over ninety million dollars on canals, a very large part of which had gone for the Erie Canal. The little Mohawk & Hudson road was successful from the start, and paid good dividends; and for this and other reasons numerous plans were set afoot to build other roads. In 1831 some citizens of Rochester and Buffalo applied to the Legislature to charter a railroad to run between Buffalo and Albany. This, it will be observed, was a quarter of a century before Cornelius Vanderbilt took control of the New York Central Railroad. Now the New York Central is a railroad from Albany to Buffalo; and it might be supposed that it was built by those citizens of Buffalo and Rochester, in compliance with the charter obtained by them in 1831. But the trouble with this supposition is, that the citizens of the then villages of Rochester and Buffalo Idid not obtain a charter in 1831 to build their proposed road, and the road therefore was not built, and, strange as it may sound,

has not been built to this day! Their application for the charter was refused by the Legislature. Had the application been granted, it is perfectly obvious that the ownership of the resulting road would have been distributed in the first place principally among the men who proposed to build it. But the charter was refused; and the reason for the refusal was, that the State had just completed the Erie Canal, built with money raised by taxation from the daily earnings of the people, who had been saddled with a great debt besides. Now, it is an extremely curious and interesting fact, deserving of the most careful attention, that the Erie Canal was completed in 1826, the very year in which the first railroad charter was granted in New York, and only one year after the building of Stephenson's railroad between Stockton and Darlington, England. The significance of this fact is unmistakable. The unavoidable inference, it seems to me, is, that if the Erie Canal had not been built by the State, it never would have been made at all. In this connection it is worthy of note that the advantages of rail transportation seemed so evident to the applicants for the charter in 1831, that they proposed to the Legislature to pay to the State a toll on all freight carried by the proposed road equal to the toll that would have been collected had the freight been transported by the canal. Nor is it at all difficult to see why these railroad pioneers came to this conclusion with such confidence. The English railroad, to which they looked as an example of what they wished to accomplish, was built to supplant water communication, - that between Darlington and Stockton.

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were evident enough, and the projectors of the road were quite justified in offering to turn over the canal tolls to the State. They were confident that they could perform the work cheaper, and they were right. They did not care at all about saving money for the people, and would probably have ridiculed the notion of ascribing that motive to them, a motive which it has since become popular for the projectors of paying enterprises to profess. Nevertheless, as I have said, the charter was refused, on the ground that it would be injurious to the interest of the people whose millions had just been invested in the Erie Canal; as though it would not be vastly more injurious for the people to be mulcted of heavy tolls over the canal for years and years after a cheaper means of transportation might have been obtained ! This is the important point to bear in mind.


The Canal was a Government performance. Private capital had not been attracted into building the Erie Canal. Yet, with this competitor already in existence, either through the ignorance or venality of the Legislature, private capital stood ready at almost a moment's notice to parallel the entire route of the Canal with a railroad! Such is the wisdom of legislators. fact that railroads have so generally supplanted canals, wherever the two have come into competition, coupled with the fact that New York capitalists stood ready, in 1831, when, at best, the capacity of railroads was still problematical, to enter at once into competition with the Canal, makes the inference irresistible that, but for Government interference, the Canal never would have been built.

What was the result? Instead of chartering this through road from Buffalo to Albany, and leaving the stockholders to share the vicissitudes of fortune which might befall them, the Legislatures of New York proceeded to charter in succession a number of short local roads, some of which were placed under absolute prohibition of

carrying freight between points served by the Canal. Thus, in 1832, one road was chartered, completed in 1837; in 1833, another road was chartered, completed in 1836; another in 1834, completed in 1843; another in 1836, completed in 1842; three others chartered in the same year were completed in 1839, 1842, and 1843; in the next year a road was chartered that was not completed till 1853. Then came a lull until 1851, when a road was chartered that was never completed, which was also the fate of another chartered in 1853; while one chartered in 1852 was completed after the consolidation. At least one (and, my impression is, several) of these roads was inhibited from competing with the Erie Canal in carrying freight. They all belonged to different companies, were therefore managed incoherently and expensively. Finally the crash came. Crash in the stock of the railroads? Let the Vanderbilt fortune answer. The crash that came was in the State Legislature, when, in 1853, the road chartered in 1837 was completed, and the last charter for the roads now forming the New York Central property had been granted. Then, this Legislature, whose unwise, and, probably also, corrupt, predecessor of twenty-two years before had refused to permit the building of one road between Albany and Buffalo, proceeded to reverse that policy, and passed the act permitting the consolidation of all these local roads.

Now, when we inquire into the origin of the Vanderbilt fortune, the consideration of which I have no manner of doubt has turned the scale in the shallow mind of more than one person hesitating whether to lend his attention to the fiery orators of socialism, I think we should not be at a loss what view to take. It is not the Legislature of 1853 which is responsible for this vast accumulation: the consolidation of those railroads was inevitable; but the Legislature of 1831, which tried to protect the Erie Canal, and the previous Legislatures, which built the Canal by taxation, are necessary

links in the chain of causation which finally gave to one man a greater income in one day than the majority have in ten years.

The case is plain as day at high noon. The conditions are not at all the same as they would have been had the Erie Canal never been built by the State-built with the inspired wisdom of legislators, just on the eve of the discovery and introduction of a superior mode of transportation. Had the original application for the charter of a road from Albany to Buffalo been granted, as it would have been but for the Canal, it is perfectly evident that the fate of the enterprise would have been entirely different, and the name of Vanderbilt might never have been heard in connection with a railroad. But by refusing to permit the construction of the one road at the right time, the stock of the many roads which were afterwards bui t was artificially depressed. That is to say, that the prevailing industrial conditions already favorable in 1831 became such that the earning capacity of a continuous railroad from the lakes to the Hudson would have been very much greater than was the aggregate earning capacity of the uncombined roads. So it is entirely proper to say that the stock of the several roads was artificially depressed. The depression was cumulative. Year by year the value of the stock of these roads ought to have been going up, up, steadily, but gradually.

This is what would have taken place had the roads been united, had they, in short, been one from the beginning. In that case, the increase of population, the development of industry, and the opening up of the West would have acted gradually on the value of the railroad. But all these forces were artificially prevented from producing their legitimate effect throughout twentytwo years, during which the population of the country had more than doubled, and the population affected by these roads vastly more than doubled, for it was precisely that section of the country that grew most rapidly at that time. So great was the development, that, in spite of the artificially

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produced depression in their values, the stock of nearly all these roads was selling above par, and nearly all were paying good dividends. But their aggregate value in 1853 was nothing like what the value would have been in the same year, had the roads been operated from the start under natural conditions. The prevailing artificial condition may be represented by a figure. The earning capacity of the local railroads between Buffalo and Albany, and therefore, the market value of their stock, was depressed as by a weight, just as when a steel spring is compressed by the superposition of weights. Moreover, as I have said, the effect was cumulative. To continue the illustration, the steel spring - the earning capacity of a railroad from Buffalo to Albany increased year by year in strength. Yet, by the picayune policy of chartering local roads instead of one trunk line, the tendency of the spring to expand was artificially resisted. The value of local roads increased, no doubt, but a large part of the increase in the value of the property was prevented from showing itself in the market value of the stock. Suddenly, the weight is removed; one might almost say that the spring had become too powerful; the advantages of consolidation had become too obvious. The restraint yields, after twenty-two years, and, before one knows what is happening, Vanderbilt is found in possession of the stock whose value has so long been artificially depressed; for all the world as though the New York Legislature of 1831 had consciously and deliberately planned the little scheme for his benefit, waiting for him to accumulate a snug fortune in steamships, to be easily converted into railroad stock. The natural condition would have been for those citizens of Rochester and Buffalo to have obtained their charter in 1831 without restrictions of payi: toll to the Erie Canal. If this through road, reaping all the advantages of consolidated management and unrestricted operation, had been built then, it is perfectly evident that the majority of the stock of

the New York Central Railroad would never have been owned by Cornelius Vanderbilt in 1853. If the suggestion occurs to any one that some other man - say, one of those citizens of Rochester or of Buffalo-might have owned this stock and become the possessor of the colossal fortune, if this suggestion occurs to any one, I hope he will reflect that this has nothing whatever to do with the question, which is, not the hypothetical origin of a hypothetical fortune, but the real origin of the Vanderbilt fortune.

One cause of this real fortune is the Erie Canal, stupidly conceived and stupidly built by the Legislature of New York-by taxation. In other words, all other circumstances might have been as they are and have been the discovery of America (to go no further back), the discovery of steam, etc., etc., and the sagacity of Vanderbilt still the Vanderbilt fortune would not have been but for the stupidity of the New York Legislature. Of course, stupidity is here a relative term; a comment suggested rather by what may be seen from our point of view than from the point of view of early New York Legislatures. That is to say, the comment applies more justly to the present Legislature of New York than to its predecessor of 1831 and still earlier days. For the present Legislature does not see, and if it did see, would not be guided by, the experience of the near past as to the tendency of governmental interference with trade. The effect in the case of the New York Central Railroad was to produce a set of conditions under which a vast fortune became aggregated in the hands of one family, which, but for this interference, would not have been aggregated in the hands of this family, and might have been distributed among a thousand families.

So much for the Erie Canal. Another cause of the Vanderbilt fortune is the construction by the Federal Government of Western railroads. It needs no amplification to show that, great as is the fortune represented by the New York Central alone, it is not so great as that represented

by the whole group of roads called the "Vanderbilt system." The value of this entire property, including the Central, evidently depends very largely upon the freights to and from the West, especially the Northwest, including, under this description, Michigan, Wisconsin, Minnesota, Iowa, Kansas, and all the intervening States and Territories to the Pacific Coast. It is more than twenty-five years since the Federal Government commenced the construction of railroads throughout this territory by guaranteeing the bonded debt and making enormous grants of land to corporations composed, generally, of two or three persons. At any rate, twenty-five years would carry us back to 1865, and Vanderbilt became president of the New York Central & Hudson River Railroad in 1866, I believe. This, you observe, is a coincidence, — but one of the terms of the coincidence is the action of the Government. The object, and it may truly be said, the accomplishment of our wise Congress, was to stimulate the opening of the West, to accelerate the movement of population in that direction,


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"to develop the resources of the country," as they call it. Of course, if they happened to "develop" the Vanderbilt bank account, they are not to be blamed, for their intention was merely to serve the people"! Now the Vanderbilts are an eminently respectable, and, I think, praiseworthy family; nevertheless, it must be admitted that they are not the people. So I call attention to the fact that the first Vanderbilt to become president of the New York Central took that office in 1866. That is a coincidence; let it go for what it is worth, and no more; but also for no less.

It is more probable than not that most of the important railroads built in the West by the general Government would have been built by this time even without the Government. So the Vanderbilt system was bound, when the time came, to reap the great advantages of exchange of freights and travel between the East and

Northwest. But I am not aware of any general necessity or special providence why the Vanderbilt family should be in possession of the Vanderbilt system, when that time came. It is notorious, as a matter of fact, that in 1882 or 1883 the control of the New York Central was sold by the second Vanderbilt president of the road. Suppose that, instead of nearly all the important routes in the Northwest having been completed in 1876, they were just being surveyed then, and were only now in course of completion. Then it is obvious that when the second Vanderbilt died, a few years ago, he would not have left a fortune of one hundred and fifty millions or more to his heirs. And this is the point under consideration. Not what some other fortune might have been, not what the Vanderbilt fortune might have become at some future time, but what it has already become, or rather, why it has become what it is. And the considerations suggested in the foregoing seem to show satisfactorily that governmental interference, first of the New York Legislature, then of the Federal Congress, is a necessary link in the chain of causation which has produced this particular fortune.

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