Chapter XV. The Way Out

While our State fight against the railroads was in progress the Cleveland local tax-board or board of equalization as it was generally called, composed of my appointees, was enjoined by the court of common pleas, July 22, 1901, from increasing the returns of the personal property of public service corporations in Cleveland. We fought the injunction and it was dissolved July 30. On the same day the board added nearly twenty million dollars to the tax duplicates of the street railway, the gas and electric lighting companies!

These corporations appealed to the board of revision to prohibit the increased valuation. The appeal was made in November, 1901, and on January 4, 1902, the board of revision sustained the increase.

Three days later the case was appealed to the Republican State board of tax remission, the petition claiming among other things lack of power on the part of local boards to impose the additional assessment in question. This power had never been questioned when it was exerted in extorting additional taxes from the uninformed and helpless – but here was a different case.

On February 1, the State board of tax remission composed of the State treasurer, the State auditor and the attorney general remitted the entire increase.

“I suppose you will want to know why we did this.” said Attorney-General Sheets to the newspaper men. “We based our decision on the fact that the Cleveland board applied the principles of the Nichols law to determining the value of the property of these corporations. (This law was enacted to apply to the property of express, telegraph, and telephone companies in Ohio. It provided that for tax purposes their value shall be determined by the selling value of their stocks and bonds.) If the board had simply made an error in judgment as to the value of the property we would have had no jurisdiction.”

“In other words,” said the Cleveland Plain Dealer, commenting on it, “if the Cleveland board had gone out and looked at the physical property of the corporations concerned and then guessed at its value, this board could not have remitted a cent, though the guess had been that a total of twenty million dollars should be added. It was because the board based its action, according to the Nichols law, on the market value of the stocks and bonds of these concerns that the State board overruled it.”

Continuing, the Plain Dealer said: “The fact that the value of the stocks and bonds was confirmed by the Cleveland board by a careful appraisement of the physical property and the cost of reproduction in each case was not sufficient departure from the fixed rule laid down in the Nichols law to suit said board. That law was enacted to apply to the property of express, telegraph, and telephone companies in Ohio. It provided that for tax purposes their value shall be determined by the selling value of their stocks and bonds.”

Of course, a decision against the public service corporations would have meant a shutting off of campaign contributions – and that was the real reason why the tax was found illegal.

Privilege was beginning to take notice.

On May 12, 1902, the Republican legislature destroyed the board of equalization, creating in its stead a board of review with unquestioned power to do just what our tax board had attempted.

This board of review is appointed by the State treasurer, State auditor, secretary of State and the attorney general. Although the work is entirely local, and the expenses of the board and the compensation of its members are paid from local funds, the members are not in the remotest way responsible to the city for their actions.

The agitation against State appointment of these boards has been so persistent and the sentiment in favor of home rule is now so pronounced that it is a matter of a short time only until the legislature will be forced to provide for their local appointment or election.

This is, of course, as it should be. A municipality should have right under its eyes the men who are doing this important work. They should be available at all times so that they can be quickly called to account. In fact the mayor, through deputies, might well be the taxing official and the paramount question in each election should be, not “Mr. Mayor, did you see that our money was properly expended?” or “Mr. Candidate-for-Mayor, will you see that our money is properly expended?” but “Have you seen to it, or will you see to it that the money is properly paid in?” With the recall as part of every municipal charter there would be no danger in placing all this power in the hands of one man for on his shoulders would rest all the responsibility, and he could be easily removed if he abused the one or shirked the other.

The most pressing of all civic problems is that of municipal home rule by the people themselves, and it is more pressing in the United States than elsewhere. Our old questions of State sovereignty were set at rest by the logic of the Civil War. In national affairs the central government is now supreme. The only power States can any longer hope to preserve is power over their internal affairs –the exclusive right of home rule in matters of State concern. The readjustment of the relations of the nation with the State is suggestive and prophetic of a similar readjustment of the relations of States with their cities. Along with the decline in the political power once asserted by the States has arisen a necessity, if popular liberty is to be preserved, for an extension to municipalities of the same principle of home rule to which the States themselves man still law claim.

Municipalities must cease to be answerable to their States, except in matters of State concern, and become answerable in matter of home concern only to their own people. Every city should make its own laws, design its own organization, govern itself by the ballots of its own people. Absolutely untrammeled by outside dictation or interference, except with reference to matters of outside concern. More and more as the years go by are our cities going to reach out and demand such control of their own affairs from their States.

In that way the city will rapidly rise; she will learn more about self-government. And the voice of her people will be heard, direct, demanding of her officers the things the people want; and the officers will hear, and do – or lose their jobs.

I have shown that in our people’s fight in Cleveland and Ohio we did not waste time on superficial issues, but made our attacks directly on Privilege’s most valued power – its control of taxing machinery. I have shown how Privilege used local, county and State officers, city councils, the State legislature and the courts to frustrate our efforts. Is it not strange that witnessing the power of Privilege through the control of these agencies the people do not awake to the fact that with these agencies in their hands they would be supreme?

Since we have dealt so largely with the question of steam railroads let us consider the source of their power and the remedy for the abuse of that power.

The original idea behind the railroad was entirely different from the idea which attaches to it in common thought to-day, and to the departure from this original idea we may trace the evils now complained of. It was at first simply the idea of providing a roadway or passageway – a highway for vehicles moved by steam, just as there were then roads or highways for vehicles moved by horses. It did not provide for exclusive use, but for general use, subject to a charge or toll, just as charges were made on some horse roads. But, seeing the advantage of exclusive use, the companies building these steam highways, by means of heavy or discriminating tolls or other methods, prevented general use, stopped competition and made themselves the sole users. The rail or steam roads in the United States, instead of becoming what they were intended to be as the term applied to them, “public highways,” indicates, became private highways.

And what had been the tendency of these private highways? When railroad building began in the United States some seventy years ago, each road was separately organized with its own officers and distinct interests. But separate interests melted into common interests, and many small companies formed into single large companies, and one set of officers effected economies that grew out of concentration of management and combination of effort. This centralizing movement has proceeded so fast that we can anticipate the end of this perfectly natural tendency if indeed we have not already reached it. We must see the appearance of the one directing mind, the kingpin, the dictator, the supreme monarch in the railroad world. Compare the powers of such a man with the powers of the President of the United States. Who would command more men? Who receive the larger revenues? Who have the larger pay-roll? Who have the greater control of the pockets of the people. In short, whose favors would be the more courted? One might distribute honors by the appointment of foreign ministers, judges, etc., at small pay, but which would appoint the most men at fifty-thousand-dollar salaries? Which would have the dominant power – the man representing the people, or the man representing privilege? The one voted for by men? or the one voted for by shares of stock? Can interstate commerce commissions prevent it? Why, railroad owners themselves cannot prevent it, for it is in the natural order under present conditions. If government control failed before railroads were consolidated, what can it do after consolidation is perfected? If discriminating rates have worked evils on trade in the past, what must be their effect in the future? If railroads have hitherto controlled legislation, what will they do when all their power is vested in one man?

We see the evils of this form of special privilege. Now what about the remedy? Socialism would seek the cure in government ownership. The philosophy of the natural order, which would promote competition and place as little power as possible in the hands of the government would seek the remedy in throwing the steam highway open to general use. No wonder the Socialists point to railroad centralization under present conditions as the greatest standing indictment of competition, a colossal example of its utter failure and say that competition having broken down the only alternative is government ownership and operation. The Socialist, regarding competition as the source of the evil, demands it destruction. We who hold that the evils arise from a denial of competition demand the abolition of law-made advantage, of governmental favor.

Is not the simple, easy, practicable remedy to be found in going back to the original conception underlying the railway to make a really “public” highway for private transportation companies or individuals to use? In making the highway public property, should we not destroy the essence of monopoly power in the railroad with the States owning the roadbeds and the cities owning the terminals, and no favor shown to any transportation company, but free play being given to competition, would not the public get the maximum of service at the minimum of cost? What harm could come from discriminating rates to shippers where any number of transportation companies were competing for traffic over the same highway? Would not this establishment of the condition of freedom to individual enterprise do more than the most severe State or interstate regulations in fixing rates? Indeed, this is the only plan which will establish competition from all points to all points. It would mean just plain freedom, and what could be better for all men and for all legitimate and normal businesses than freedom?

This proposal is in perfect harmony with the natural order and in absolute accord with the rule of public practice on almost every other kind of public highway that we have had or now have. The underlying principle is to make the pathway a publicly owned and controlled way, open to all on equal terms, whether absolutely free or subject to toll. And the end to strive for in the railroad problem is to open such roadways to equal use by all who desire to use them as exists on public country roads or streets, on rivers, canals, lakes and the very ocean. And just as there are police regulations for the use of streets, sheriff regulations for the use of the country roads, and other regulations pertaining to the navigation and condition of vessels on the rivers, canals, or other bodies of water open to public use, so on steam highways there would be necessary regulations, as for instance, in the dispatching and signaling of trains. But the fixing of rates could be safely left to individual competition as on the other highways.

In making the change from private to public ownership of railroads the tax power should be used rigorously so as to put railroad property on a level with other taxable property. The power to fix rates should be used so as to reduce profits to a fair return on the actual investment of capital, excluding fictitious capitalization based on franchise or special privilege values. This would leave all the value that does and of right ought to belong to the railroad companies. Then attempts should be made to buy all their property, exclusive of rolling stock, which latter they would however be free to use in a competitive business with others over the then public highway, which they had hitherto treated as their exclusive and private highway. An alternative would be for the government to build steam highways and open them to general competition.

This but returns to the original conception of the railway, and indeed to almost every other form of highway, such as country roads, streets, turnpikes, canals, rivers, lakes and the ocean, in which the public owns the way and on which the business of transportation is left to private enterprise, subject of course to control and direction of public officials.

And just as toll-bridges are giving way to free bridges, and toll-gates disappearing from turnpikes and canals, so, in pursuit of economy, the minimizing of the numbers of government officials and the removal of temptations to fraud, should the steam highways be open to use without charge, the expense of maintenance being made a public burden, as is the tendency to treat all other public highways.

But if I were ambitious to rule a country absolutely, I should not try to get control of its railroads even under the present system when, as we have seen, one-man power can be carried to such great lengths. I should devote myself with singleness and tenacity of purpose to becoming its landlord. The ownership of railroads gives power as, and only as, it is really ownership of land; the power of street car companies is based on the same thing, privileges in the ownership of streets which is land; the power of the Standard Oil Company rest upon the right of way for its pipe lines, and that right of way is land. A man who controlled all the land of a country would be the ruler of that country no matter who made its laws or wrote its songs.

If this is true why does it not indicate to the people their own source of power? If a tyrant can rule them by gaining control of the land of their country, why cannot they destroy tyranny by themselves resuming and retaining control of their land?

But we must have a method whereby this can be accomplished and the method, I believe, is in the single tax as Henry George’s philosophy is commonly called in this country. The single tax proposes the abolition of all forms of taxation except the tax upon land values. It would eliminate taxes upon industry, personal property, buildings and all improvements. It would tax land values, including the value of all franchises and public utilities operated for private profit. It is the community which creates land values and franchise values, therefore these values belong to the community and the community should take them in taxation.

To abolish taxes on industry would be to reduce friction in making things and trading things. It would stimulate business and be a blow to tyranny, both economic and political. The effect of a tax upon land values would be to force all needed land into immediate use, and circumstances would be created under which anybody could get profitable work who wanted it. This would be because the demand for labor would always exceed the supply. Any man competent to do business could find profitable business to do because the effective demand for goods would always exceed the output. There could be no oppressive organization of capital, because capital would have no privileges. There could be no coercive labor unions because every worker would be his own all-sufficient union. And there would be no tyrannical government because all the people would be economically free, a condition that makes tyranny, either economic or political, impossible.

These are the principles which must be put into practice if our cities and our States are to be freed from the domination of Privilege.