Microsoft Word - Justice to the Corporations 1908.doc Justice to the Corporations The Atlantic Monthly | January 1908 "Let us begin anew, knowing that the corporations are to-day obeying the laws, and...

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Microsoft Word - Justice to the Corporations 1908.doc Justice to the Corporations The Atlantic Monthly | January 1908 "Let us begin anew, knowing that the corporations are to-day obeying the laws, and knowing also that the standards of honesty, honor, and fair dealing between man and man have been carefully studied and are higher than in the last century" BY HENRY LEE HIGGINSON . . . . . Lately our great public has been reflecting on the evil deeds of corporations and has been seeing them punished, and even threatened with destruction, until people have forgotten the great benefits which the corporations have brought to the country. Yet in our modern world men will combine in every way to accomplish their desired ends, whether to reach a fuller, larger service, or to win more happiness or power; in short, they combine to obtain what is otherwise impossible without combination, and the best form of combination for business is a corporation. Combination is but one phase of the advance of civilization, and must bring in its train benefits or hardships to some men and jealousy to many men. Following the natural impulse of mankind, there springs up the wish to punish some one, either for losses borne or for riches gained by successful men; and corporations, becoming an entity in the eyes of the world, are attacked; therefore we hear much of past sins and are told that justice must be meted out to these corporations or, preferably, to the wicked corporation managers, for only the managers or officers can be blamed. But corporations are simply bodies of men and women who, busy with their own affairs, combine their capital and intrust to directors or officers the conduct of their business. The shareholders of these corporations have not sinned, yet they must suffer because, as we are told, juries will not punish the officers and, therefore, they punish the corporations. The logic is bad; one cannot punish the son because the father has done wrong. These corporations have wrought great material benefits to every country which has used them, and every country which has not developed the system of corporations has been left far behind in material progress; for as a result of combining capital in corporations there follows work for the willing hungry men and women whose numbers increase fast and who flock to the workshops of these corporations. It would be a problem to feed and clothe this growing multitude of human beings if it were not for the corporations, and the pessimist meets this problem by a prayer for terrible plagues or bloody, useless wars as means for destroying the human race. It is idle to reply that the corporation managers have done their great deeds from selfish motives, for the same is true of every living creature at every hour. We all ask both for enlightened selfishness and for thought and care of others; but, in order to win our bread, we must think and work for ourselves as well as for others. Yet it is true that in no age has organized altruism been so common as to-day, and it is a necessary consequence of good work that it perforce helps others. We are all bound together by the laws of nature, and help each other whether we will or not. The idea that "I can live by myself and need nothing from my fellow-men" is untenable and barbaric. Who have built all the mills, the dams, the railroads, the tramways, the gas and electric works, and who have dug the mines? The corporations, made and managed by enterprising, able, thoughtful, patient men. Have they failed or succeeded? They have done both in many, many cases. Would men undertake such tasks if warned at the outstart that they could reap but a portion of their success, and must bear the whole of their loss or their failure? Surely not. The nations which show the greatest energy, invention, resource, and patience, have won the great economic prizes, and we Americans have settled and developed our splendid country by virtue of these qualities. Who then is to judge what portion of gain is to come to the pioneers, and how did these judges learn their chosen high task, namely, to judge rightly?—for judgment is a great gift, which results from much knowledge, reflection, and high conduct. To every man forty years old, remembering accurately his youth, the developments of the nineteenth century seem incredible. A group of men undertook to build a railroad into the wilderness where no house had ever stood, and settlers followed and built houses, barns, and presently towns and cities. These railroad pioneers struggled, failed, tried again, failed again, but in the mean time the homes for thousands were made. Crops, cattle, horses, schoolhouses, churches, and towns followed, and, lo, a new state was born! If, in the struggle for existence, bargains and railroad rates were made which seemed a hardship to the farmers, is it not fair to ask whence came these iron roadways and how the farmers would have marketed their crops without them? And, moreover, is there a railroad in our broad land that has not been forced to wade through dire distress, if not bankruptcy—bankruptcy often repeated several times? The Union Pacific Railroad is a fair sample. The United States Government offered a large land grant in order to get a line connecting the East with the Pacific Coast, and, by adding a handsome subsidy in money and land, induced some bold—and we used to think foolish—men to build that railroad. It cost the leader of the group insolvency, and cost his associates great anxiety and loss. The burden crushed many partners in the enterprise, and the company was only saved in 1884 through the indorsement of its notes by all the directors. Eventually it was set on its feet through the assumption of great risks by the directors, great labor by its officers, and by the gradual growth of the country. The Boston & Lowell Railroad was built early and the rails were laid on stone ties, as more steady and lasting than wood. Every tie had to be taken out because they were too rigid, and the shareholders bought this experience and bore this loss. For years our Massachusetts roads struggled to maintain themselves and to pay to the shareholders a decent rate on the money invested. The Rutland Railroad has been but a sink for money poured in again and again during fifty years, in the vain hope of a return, and in a degree this is true of all the Vermont railroads. One short piece of railroad in Iowa was in the hands of a friend in 1858 who, writing about it at that time, spoke slightingly of it. The shares cost $100 (full paid) in 1857 and made no return until 1880. Yet now it is a link in the main line of the Chicago, Burlington & Quincy Railroad. The original stockholder, reckoning interest on his money, found the shares costing him $400 a share, and to this day he has never received a decent return on his money. No doubt he sold his shares long before 1880 because he needed the money. The Northern Pacific Railroad was a case of failure and success. About 1870 Jay Cooke undertook to build that line in an unknown region where snow came early and stayed late. Men laughed at him but he persisted, issued his bonds, and in 1873 came down with a crash. Presently, as years went on, Villard proposed the scheme to Morgan and was met with approval. The work was taken up with great determination, the public lent its money freely, and in 1883-84 another failure came. But a railroad once built must run. Little by little, the country filled up with busy immigrants, the railroad officers persevered, the owners were patient, and the result is before us—a fine, modern railroad through a splendid country populated by a busy people who are efficiently served by this railroad; but forty years have been needed to achieve this result, and it might be well to count the hearts broken and the fortunes lost in the struggle. What is the usual comment of experienced men about the investment of capital in these new companies? "Wait until that railroad has had the childish diseases—mumps, scarlet fever, measles, and the like, and be grateful if you don't get a case of cancer." What is true of the railroads is true of the factories, oil-wells, and mines. In almost every case our cotton mills have been forced to reduce their capital (always full paid at the outstart) because of losses by bad debts, mistakes of judgment, changes of tariff, and the need of new machinery. Woolen mills have had much harder luck from the difficulty of meeting the unsuspected problems, and yet their product has clothed many of us at half the cost of the goods. The same is true of the iron mills near Boston, which were once of so much importance and have now disappeared—their owners impoverished or ruined. Innumerable iron mines have been opened with skill and managed with ability; the miners have been paid and the owners have been ruined. The wrecks of cattle companies in our western states are laughing-stocks because a laugh is the sole return which the owners have ever had; yet the cowboys were paid their wages and the country ate the beef. If the truth were known, very many successful corporations have been built on the ruins of others, and, because the successors have reaped the harvest sown by the original men, they have prospered, but the return on the first and second capital taken together is not large. The Bell Telephone Company struggled for years to get a footing. Luckily it was taken in hand by some young and energetic men of means who, after risking their first money, found that it was insolvent; then