The New York Rapid Transit Decision of 1900 (Katz)

The New York Rapid Transit Decision of 1900: Economy, Society, Politics

Wallace B. Katz
Survey Number HAER NY-122, pp. 2-144

Historic American Engineering Record
National Park Service
Department of the Interior
Washington, DC. 20240

The records in HAER were created for the U.S. Government and are considered to be in the public domain. It is understood that access to this material rests on the condition that should any of it be used in any form or by any means, the author of such material and the Historic American Engineering Record of the Heritage Conservation and Recreation Service at all times be given proper credit. For information on HAER, visit Built In America: Historic American Buildings Survey and the Historic American Engineering Record, 1933-Present, Library of Congress American Memory Project.

Prologue

Construction of the first subway in New York City, the Interborough Rapid Transit underground railway or IRT, was officially begun on March 24, 1900 and completed, ahead of schedule, in late October, 1904. The assembled dignitaries -- one incumbent and one former mayor, other city officials, the Board of Rapid Transit Commissioners and its Chief Engineer and legal counsels, the subway contractor, and financier behind the IRT company -- who delivered speeches at the ceremony at City Hall marking the opening of the subway on October 27, 1904¹ rarely alluded to the past history of rapid transit of New York. They came to celebrate the fruition of great plans rather than to recall their frustration. Yet all of these men were old enough to remember many earlier subway projects that had failed. And some of them were sufficiently on in years to recall a city which lacked either elevated or underground railways, and in which the only available means of transportation other than foot from one end of a very long island to another was by means of private carriage, stagecoach, omnibus, or horse-car trolley. These same were unlikely to forget that this first subway was a hard won achievement, and that even five years before its opening, it had seemed a plan that might, for want of public funds or private capital, support from politicians, and sustained public interest, remain, as so often in the past, an unrealizable dream. Nor could they fail to remember that there were men seated on the platform beside them who had opposed, delayed, or, at the very least, remained indifferent to the enterprise to which they had devoted so much time, patient effort, skill and, in one notable instance, almost an entire professional career. They perhaps chose not to recall their own failings and mistakes, but years of stalemate and frustration had revealed them nonetheless: indecision, ambivalence about their own proposals, disagreement among themselves about both principles and strategy, the inability, for complex reasons relating to their class prejudices and ideology, to mobilize public support for their cause.

In the end a combination of good luck and great need had assured the triumph of their project. Victory worked to confirm their proud sense of themselves as virtuous men, citizens of large interest and good will who had labored hard and well for the public weal. In the sunny, brisk atmosphere of a late fall afternoon in New York, resplendent in great coats, full-dress morning attire, and top hats, they could thus afford to overlook an unhappy past and speak instead of the greatness of their city and, because of the subway which their vision and energies had helped to effect, its yet greater destiny to come.

[page 4] Belief in the inherent greatness, indeed the imperial stature of their city, was in these men's minds tied to the creation of a comprehensive subway system. For them a rapid transit underground railroad was a panacea providing an easy solution to a variety of political, social, and economic problems that threatened New York's preeminence at home and abroad.

Uppermost in their minds was a political problem. In the nineteenth century New York grew from an oversized seaport town² into a giant industrial and commercial metropolis: the largest city in the United States and the second city in the world.³ In the course of the city's metamorphosis from town to metropolis, the native business elite that had controlled New York's politics since revolutionary times lost ground to new political leaders drawn from the immigrant groups, particularly the Irish, who swelled the city's population in the first half of the century. With Tammany Hall, the historic center of New York's Democracy, as their seat of power, these new leaders gave the city a government that functioned splendidly to serve a broad spectrum of special interests.⁴ Tammany became a byword for bossism, corruption, payroll padding, and favoritism. Perhaps more important, Tammany and a substantial part of the business community were mutually tolerant of each other's foibles. The business leadership acquiesced in and sometimes profited from corruption. Tammany acquiesced in and sometimes profited from a form of laissez-faire capitalism that was indifferent to the larger needs of the public. By the turn of the century, however, New York had become too large and complex a city to afford this state of affairs. The city required efficient and active government and officials whose first concern was not political patronage but rather the provision of urgently needed public works and services. The native business elite attempted to regain control of the city, of a number of great public decisions,⁵ whose management, in the elite's opinion, could not safely be entrusted to Tammany. Of these, the rapid transit subway decision was one of the most important.

The political problem of Tammany corruption related to a social problem. The increase in New York's population, particularly in the period 1860-1900, was largely due to immigration from the poorest, most backward, rural areas of Southern, Central, and Eastern Europe.⁶ The new immigrants customarily settled and tried to remain in the densely populated and overcrowded areas of the lower East Side of Manhattan, where they found work; ghetto camaraderie with both new and older immigrants from their native land; and help of various kinds from Tammany politicians who asked no questions when exchanging favors for votes.⁷ In the view of the patrician elite who led the fight for the subway, the squalid conditions of life in these ghetto slums spawned poverty, crime, and disease; reinforced the newcomers in values, modes of conduct, and traditions that prevented their integration into American life; and, most significant, enabled an inadequate, inefficient, and corrupt system of boss rule to preserve its hold on city politics, thereby precluding the creation of necessary public improvements and services.

[page 5] In lieu of higher wages, which depressed times⁸ and the elite's adamant belief in a high profit incentive for capital rendered inconceivable, and in the absence of a considered policy of zoning, slum clearance, and tenement-house reform,⁹ the patricians envisioned but one solution for both the political problem of bossism and the social problem of immigrant slums. Rapid transit -- mechanized high speed trains running on tracks separate from the street, providing cheap, quick transportation from the Battery to lower Westchester -- would alone foster the dispersion of the immigrant population to the relatively undeveloped northern part of the city. In these more wholesome surroundings the immigrant would undergo a remarkable transformation. Liberated, as it were, from the prison of the ghetto with its bad influences and unhealthy atmosphere, he and his family would slowly become more like other -- that is, native -- New Yorkers; and, more important, would soon realize that the bosses who controlled city politics were not his friends but rather enemies of his own and the public's good.

New York was also beset by serious economic problems in the late nineteenth century, and these, like its political and social problems, demanded resolution, if the city was to sustain its preeminent stature in both the nation and the world. In the early 1800's, because of its natural and splendid Atlantic port, its position as the nation's first major railroad terminus, and its accessibility as a market via inland waterways and then through its first great public "improvement," the Erie Canal,¹⁰ New York had unquestionably reigned supreme as the principal commercial city of the nation. In the last quarter of the century, however, New York was faced with potential rivals for its first-place rank. In the Northeast were Philadelphia, Baltimore, and, to a lesser but still worrisome extent, Boston, all of which, precisely in the effort to equalize their competition vis-a-vis New York, had been favored by federal port and railroad policy.¹¹ And in the Midwest was Chicago, a city which since 1850 had grown with astonishing rapidity.¹² By virtue of its role as a market for the agricultural wealth of its region and as the hub of a newly completed trans-continental railroad system, Chicago posed the greatest threat to New York's commercial supremacy.

But competition with these cities was not in itself the problem that most perturbed prescient New Yorkers of the time. What concerned them was New York's internal economic ills -- overdeveloped for both business and residential purposes in lower Manhattan, and underdevelopment in upper Manhattan, resulting in high taxes, an imbalance in real estate values, downtown traffic congestion that adversely affected retail and wholesale commerce, and a general want of amenity and convenience. Again, there was one simple solution that would deal with such problems. All of them were at least in part the consequence of the lack of adequate rapid transit, and would, accordingly, be substantially if not wholly remedied with the construction of a rapid transit underground railroad.

[page 6] It should come as no surprise, then, that the opening of the first subway in New York represented for its partisans an occasion for self-congratulation and rejoicing. The IRT signified something more than the achievement of a great civic enterprise. Its realization was seen as a victory for good government, social reform, economic stability and growth, and, last but not least, a guarantee of the continued greatness of the Empire City.

Sanguine expectations of the subway such as these were bound to prove illusory, as the report on the impact of the IRT at the end of this study will show. For the urban historian, however, these expectations are no less interesting or important because they were unfounded. Indeed, because the first subway was perceived as an answer to virtually the totality of New York's most insistent needs, its genesis provides a particular case by means of which the historian can understand the totality of the urban life of New York in the late nineteenth century. The IRT, in and of itself, was a considerable achievement -- precisely how considerable, in light of its time and place and from the perspective of the history of technology, subsequent technical studies in this volume will assess. Here, however, in telling the story of the origins of the IRT -- how the demand for a rapid transit underground railway developed and made itself felt, how and why its realization was delayed, opposed, obstructed, and how the subway was finally achieved -- one is concerned with something different in kind from the conventional history of a great "improvement." In charting the origins of the IRT one confronts the history of a metropolis coming to grips both with the manifold problems of its growth in the nineteenth century, and with its political, social, and economic fate in the twentieth century.

Part I, Section I

[page 9] The construction of the IRT was the culmination of a thirty-year struggle for improved mass transportation in New York. The story of its origins is inseparable from the larger context of the history of rapid transit.

The need for rapid transit was sorely felt and strongly expressed in New York as early as 1865. By this date, which marked not only the end of the Civil War but also the completion in London of the first subway in the world,¹ the city had already undergone a transformation that would set the pattern for its development in the next thirty years, and that would also require mass transportation more adequate than ferries, omnibuses, horse-driven railways, and commuter railroads could provide.

Since the beginning of the nineteenth century a great change in number -- the expansion of trade, finance, and industry, and massive immigration from Europe -- had gradually produced in New York an even greater change in form. It was no longer a city in which the homes and businesses of its inhabitants were indiscriminately and compactly huddled around a magnificent natural harbor.² It was a very large if not yet giant city whose character was both enhanced and marred by the effects of rapid and uneven growth. It was a city replete with all the signs and symbols of "advanced" nineteenth-century urban development: a centralized and specialized business district; separate, fashionable, and newly-built residences for the rich and middle classes, rigidly separated according to degree of wealth and social status; prosperous and fast growing suburbs. And it was also a city with problems resulting from and commensurate with its new size and stature: overcrowded and unhealthy slums, adjacent to or stuck within the interstices of the business center, existing in symbiotic relation with its new suburbs to the east and west across the two rivers; mile upon mile of undeveloped or underdeveloped land to the north of Manhattan Island, unpeopled save for the occasional farmer or squatter.

New Yorkers of the time understood that innovations in public transit were responsible for both the virtues and defects of their city's development. Without the existing modes of urban transport, its size in 1865 would have been inconceivable, and its spatial pattern inexplicable. But as most New Yorkers also understood, without considerable improvement in the extant modes of mass transportation -- without, that is, a rapid transit system -- New York after 1865 would suffer from the consequences of its own sudden growth.

In New York, however, the demand for rapid transit did not at first result in subway construction. London's underground railroad, the Metropolitan, stimulated schemes galore for a similar project in New York, none of which were in the least successful. A number of men who made a careful study of the rapid transit question argued repeatedly over the course of thirty years that a subway system would best meet the city's economic and social needs. But subway construction was very expensive. Municipal [page 10] government in the latter half of the nineteenth century was weak and often corrupt, and lacked the power, the will, and the money to build a subway. Moreover, public transit decisions were customarily considered the province of private capital, and since capitalists objected to the cost and doubted the potential profitability of underground railroads, the stopgap solution of elevated railways was the one chosen for New York.

The elevated railways were envisaged as a temporary solution and they provided the city with temporary relief. Within ten years of the completion of the elevated system, these roads were already inadequate to the city's needs, having created more traffic than they could satisfactorily handle. By 1890 the demand for improved rapid transit had become synonymous with agitation for a subway but the large capital investment in both the elevated railways and the newly consolidated surface railway system represented an obstacle that would frustrate and delay subway construction for another decade.

Part I, Section 2

In 1866 the New York State Senate appointed a committee of five members -- Senators Andrews, Low, and Cornell, Mayor Hoffman of New York City, and Alfred Craven, the Engineer of the Croton [Aqueduct] Board -- to meet during the Legislature's recess, and to consider and report back to the Senate on the means and modes by which the City could obtain a transit system to meet its needs.¹

Three points in the resolution establishing this committee are worthy of comment. First, the resolution specified that the committee decide upon "the most advantageous and proper route or routes" which such a transit system should follow. The stipulation that the committee chart possible routes and choose the best one represented a departure from the usual procedure concerning urban transit in New York, where, as in many other American cities,² the choice of routes for mass transportation was customarily left to negotiations between the private interests involved -- the builders of the proposed railway or horsecar line, their competitors, and property owners whose right of way would be affected. Second, in naming the Engineer of the Croton Board, Alfred Craven, to the committee, the Senate not only assured. that it would have benefit of expert advice, but also made implicit reference to an earlier New York tradition of public responsibility for large public projects, such as the Erie Canal on the Croton Aqueduct. Third, the resolution emphasized that the commissioners should consider only proposals "suited to the rapid transportation of passengers from the upper to the lower portion of the city," which was explicitly to recognize that the future growth of New York depended on the creation of a rapid transit system, a system with trains of cars rather than just one, and with tracks that were separated from normal street traffic -- in other words, either an elevated or underground railroad.

[page 11] With Senator George H. Andrews presiding, the Committee met in New York during the last six months of 1866, at first gathering data for its deliberations and advertising for proposals along the lines laid down by the Senate resolution, then hearing testimony from advocates of various elevated and underground railway schemes,³ and then, in two final months, making and preparing its decisions for public reception. On January 31, 1867, it submitted its report to the Legislature.

The Committee's conclusions were in three respects unequivocal. It began by stating its objections to the existing modes of urban transport; it ruled out any extension of railways on the surface of the streets, whether horse-driven or steam-powered, arguing that "if every avenue lengthwise of the island were to be occupied at once by surface rails, the relief afforded thereby would not be adequate to the present requirements, and in three years' time the pressure with all its accompanying annoyances; inconveniences and dangers, would be as great as it is today."⁴ In this, as will be seen, the Committee drew attention to an important point: that every enlargement or improvement of the street railway system, rather than relieving traffic, tended after an initial period of grace to create and in turn be overwhelmed by more of it. The Committee also ruled against a single elevated or underground line through the center of the city, because such a line would serve little purpose if, as it must, it stopped at Central Park.⁵ Most important, however, was its declaration in favor of underground railways as "the only speedy remedy for the present and prospective wants of the city of New York in the matter of safe, rapid, and cheap transportation of persons and property."⁶ The Committee proposed the construction of two underground lines, to run together from the Battery to City Hall Park, and from there branching out separately to the East and to the West Side of the City until the Harlem River.⁷

In other respects the Committee's conclusions were less than clear. Though all five members agreed that underground railways would provide the best solution to the City's transit problems, they were not certain as to the most suitable motive power for New York's subways. London's underground, the Metropolitan Railroad, was steam-powered. But the principal difference between it and what would be required for the proposed subways in New York was that it was a short, open-cut railroad that infrequently ran through tunnels, and the tunnels it did have were far less lengthy than the distance between the Battery and 14th Street, much less the distance from the Battery to the Harlem River. For New York, then, the Committee raised the possibility of a more experimental technology -- pneumatic propulsion -- which an 1864 Select Committee of the House of Lords had expressly vetoed in London.⁸

Again, though the Committee was presented with numerous underground railway proposals, one or two of which it might have chosen to recommend to the Senate, it refrained from doing so. Either the Committee had reservations about the feasibility -- financial or technological -- of all these schemes, which in effect cast doubt on its own recommendations, or, as James Blaine Walker, [page 12] an early historian of rapid transit, has suggested, it chose to let the proponents of rival schemes "fight it out before the legislature,"⁹ which reveals much about the Committee's limited conception of its own powers and responsibilities.

The Committee did nonetheless recommend a specific transit proposal which in the end constituted the one practical consequence of its activity. It suggested to the Senate that Charles Harvey, the investor and promoter of a cable-powered elevated railroad, be permitted to construct a small segment of his road as an experiment. But this recommendation, later implemented by the Senate, was all the more curious, inasmuch as the Committee also concluded that elevated railways "cannot be fully adapted to the transportation of freight, and have never been tested in any practical way so as to warrant an unconditional recommendation of them for transportation of passengers."¹⁰

The best and simplest comment on the work of the Senate Committee of 1866 was made some forty years later, in the "History of State Regulation in New York," prepared by another public body concerned with the question of urban mass transportation -- the Public Service Commission for the First District of New York. Without remarking on either the ambiguity of the 1866 Committee's work or the motives that might have conceivably determined so finally inconclusive a report, the Public Service Commission merely stated what was -- and what for almost thirty years would continue to be-- unfortunately true: "the above report was without practical result."¹¹

Part I, Section 3

Whatever the Committee's reservations about the technical or economic feasibility of an underground railroad, its decision to recommend subway construction was rooted in its understanding of the needs and problems of New York. Its work may have finally been "without practical result, but the "commercial, moral, and hygienic considerations" to which it referred in its conclusions, were invariably mentioned for nearly thirty years thereafter whenever the subject of rapid transit was raised.

New York's needs and problems, like the form of the city itself, did not change qualitatively over the course of the next thirty years. They merely grew larger, developed in a previously established direction; and became more apparent, hence more pressing. Demographic, real estate, and public transit statistics, newspapers and business journals, as well as the arguments set forth by advocates of one or another form of rapid transit, all demonstrate the real and perceived continuity of the city's needs and problems over three decades.

In June, 1894 the Real Estate Record and Builder's Guide, the highly literate organ of New York's real estate and construction interests, celebrated the twenty-fifth anniversary of its publication with one-hundred and forty-three page supplement, entitled "A History of Real Estate, Building, and Architecture in New York City, 1868-1893."¹ As might be expected, [page 13] given the Record and Guide's advocacy of real estate interests, the agreement of this retrospective compendium of facts and figures about New York's development was directed to a single and simple end: to describe how the city had grown and prospered mightily in twenty-five years; and to indicate what would be required so that it would continue along the same lines in the twenty-five years to come.

There were three especially prominent points in this discussion. First, the period immediately following the Civil War marked a turning point in New York's history, for from that time on its destiny was "to be not only the chief city of the North, but the Metropolis of a reunited country. As of old all roads led to Rome, so now in this Western world, all roads lead to New York."² Second, the present city, the Metropolis of 1893, was "in an extraordinarily full sense" the creation of the prior twenty-five years. In a quarter of a century the City had changed a great deal, indeed in terms of its physical appearance had followed a pattern that could first be discerned shortly before or soon after the Civil War, and that had since become progressively more apparent.³ The Record and Guide emphasized a third point, which was that the development of New York "beyond the limits of the Colonial City" had been "strictly controlled by the nature of ... rapid transit facilities," adding, so as to be sure that its readers caught the point, "that the extent of the one has ever marked the boundary of the other."⁴ Of course regular readers of the Record and Guide hardly needed to be reminded of this fact. In twenty five years scarcely a weekly issue passed without some mention of rapid transit, and some dire warning from the editor, C.W. Sweet, of what fate would befall New York without improvement of its rapid transit system. Even as it celebrated its twenty-fifth anniversary, the Record and Guide's message remained the same: the City had grown, changed, and prospered, and would continue to do so; but notwithstanding the advent of elevated railways and the recent introduction of cable-powered streetcars, its rapid transit problem endured forever.

The trouble was that over the course of three decades New York's population had increased and was continuing, to increase absolutely and at a rate far in excess of the City's, capacity to house it adequately. The cause of this lamentable situation was that New York could only develop in one direction -- to the north -- and residential movement in that direction depended unfortunately on improved rapid transit, which was not forthcoming.

The phrase "pressure of population" assumes real meaning, when one considers that by 1875 more than one million New Yorkers were crammed into the southern part of Manhattan Island below 59th Street, and, of that figure, more than half were crowded into the Island's southern tip below 14th Street. And by 1890, with the population up beyond the 1.5 million mark, and increasing at a more rapid rate than in the previous thirty years, the city was still virtually undeveloped to both the East and West above 125th Street.⁵ Even the Upper West Side, both slightly above and below 96th Street, was partially developed.⁶ There were simply too many New Yorkers in too [page 14] small a space, and without rapid transit there was little possibility of a change in this situation. One begins to understand, then, why throughout these three decades New Yorkers looked to rapid transit as the answer to their apparently never-ending problem with sheer number.

The problem of number is of course inexplicable without reference to New York's other great problem, its unique geographical limitations. Some cities, like London,⁷ were unconfined by geographical bounds and could develop in a haphazard fashion, scattered out in all directions. Other cities such as Paris were limited in their development by man-made boundaries -- until the middle of the nineteenth century, by walls⁸ -- but this in itself did not preclude a relatively uniform circular pattern of growth from the_center of the city to the circumference formed by the wall. By contrast, Manhattan Island was a narrow strip of land twelve miles long, and one half to two miles wide, bounded on one side by the East River, on the other side by the Hudson, and with the Atlantic Ocean at its tip. Accordingly, its spatial development and much of its traffic were limited to an obligatory south-north axis.

By 1860 the southern end of the Island, at least as far as 14th Street or Union Square, had been taken over by a specialized central business district, so that residences were pushed. further to the north, a process which continued as the business center grew. Early modes of public transit -- stagecoaches, omnibuses, and horsecars -- had made this pattern possible, but without rapid transit, the northern development of the city had to cease. No one, not even the rich and middle classes who conceivably could afford the pecuniary cost, could or would afford the cost in time and inconvenience involved in traveling long distances at slow speeds in jammed horsecars to and from the business center in the south and residences far to the north.

To some extent before¹⁰ and quite markedly after the Civil War, then, another pattern began to take shape. The very rich spared themselves a long ride by reserving the best areas in Manhattan within reasonably easy reach of the business center. Some of the rich and many of the middle classes -- according to the Record and Guide, all varieties of lower, middle, and upper-middle classes -- availed themselves of the nine ferries across the two rivers and left the city for greener pastures in Brooklyn, Long Island, and the towns of nearby New Jersey. The working poor, cut off from northern movement by the lack of quick cheap transport and by the residential area reserved for the rich, and unable to afford either the price of the ferries or homes in the suburbs, stayed where they already were, in the ever more densely concentrated sections of the lower half of the city, adjacent to or interspersed within the central business district. Meanwhile, vast tracts of land in the northern half of the city above 125th Street,. including the territories of lower Westchester, annexed in 1874, were left, as one writer put it, "to languish and depreciate in value."¹²

[page 15] That the rich had reserved a substantial and choice part of Manhattan, the entire area adjoining Central Park, for their present and future residential development, was a fact perhaps first remarked upon by the Senate Committee of 1866; it not only discerned the new pattern as it was just taking shape, but also recognized the problem which would result from it, offering as well its own unfortunately aborted solution. The Committee perceived that the residential district reserved for the rich, which was virtually all of midtown Manhattan, constituted a barrier to the northern movement of the poor, which could only be overcome by rapid transit in the form of two underground railroad lines.

The Central Park, bounded on the South and North by 59th and 110th Streets, on the East by the Fifth Avenue and on the West by the Eighth Avenue . . . an area more than half a mile broad by more than two and a half miles long, . . . not only excluded from its boundaries all tenements, but all property within the area on either side of it extending nearly to the rivers and for some distance above and below the Park has advanced so enormously in value within the past six years as practically to exclude the laboring classes from residence in a district more than three miles long and extending nearly the whole width of the city. For a large population, then, this area on either side of the Park, unavailable for its greater portion for domiciles for the working classes, requires in effect to be traversed by some method affording rapid means of transit from extreme upper to the lower portions of the city.¹³

Seven years later in 1873, after little substantial improvement of the rapid transit situation, the new pattern foreseen by the Committee was firmly established, and the New York Times, regretfully accepting its negative consequences, predicted that "New York will become a city of the very rich and poor, of those who can afford to stay and these who cannot leave."¹⁴ Two years later the Record and Guide, still hoping that rapid transit could forestall or definitively avert this pattern by equalizing land values, looked forward to a city in which "moderate prices for land all along the line from Fifty-ninth street to Yonkers" would foster "the introduction of a middle class between our millionaires and paupers."¹⁵

By 1877, however, the Record and Guide projected a different vision. Like the Times it saw no choice but to accept the prevailing pattern; unlike the Times it went a step further by rejoicing in it, deciding to make a silk purse of a sow's ear. It prophesied a future city with but two social classes -- rich and poor -- and three distinct "classes of property": one section in the lower third of Manhattan containing industry and wholesale commerce; one district in the middle of the Island given over to the fashionable retail trade; and one part of the city, the upper third, restricted to the elegant homes of the wealthy.¹⁶ And inasmuch as these three distinct [page 16] "classes of property" would "exhaust the available territory of the island proper," the Record and Guide foresaw no other alternative for the working classes but to seek their tenements -- "the inevitable dwellings of the poor" -- wherever they could best be found, "interwoven with and around these distinctive localities, in spots and gaps unsuited for the use of any of them."¹⁷

The Record and Guide, as one might assume of a journal that spoke for the interests of realtors, builders, and property owners, remained largely unconcerned about two problems that evoked dismay in other New Yorkers: the problem of the slums and the problem of suburban exodus. Throughout the late 1870's and 1880's, when the upper East and West Side above 59th Street were in the process of being built up, and when money for development further north was thus unavailable, the Record and Guide rarely discussed the slum problem in the Lower East Side. And on the few occasions when it did refer to tenement house reform its primary purpose was to berate "philanthropists" who wanted to destroy those structures, or prevent new ones from being built.¹⁸ Only when the area around Central Park and some parts of Harlem had been partially developed, and when real estate brokers started to think about the opportunities open to them through development of northern. Manhattan and lower Westchester, did the Record and Guide change its tune. By 1890 it began to consider the problem of tenements, and the necessary connection between rapid transit and the dispersal of the slum population to "cleaner and fresher air" to the north.¹⁹ The Record and Guide was similarly indifferent to the problem of suburban exodus. It welcomes stimulation of the real estate and construction businesses from whatever quarter it might come, and houses built in Brooklyn, Hoboken, or Jersey City were better than no houses built at all. The Record and Guide's position on these two issues, however, provides curious illustration of the extent to which the defense of special interests can both mislead and enlighten. With respect to one issue -- the problem of the slums -- its attitude was callous and short-sighted; with regard to the other issue -- suburban exodus -- it was both astute. and prophetic.

The problem of suburban exodus was far less grave than many New Yorkers thought, and would in time be definitively solved, as the Record and Guide first predicted,²⁰ by the consolidation of Manhattan with its Brooklyn and Long Island suburbs. Consolidation would not take place, however, until 1898, and in the 1860's and 1870's most New Yorkers failed even to imagine, much less promote it. They could not perceive that New York was fast emerging as the nation's first great metropolitan district²¹ and that nearby cities and towns, if still politically autonomous, had already become socially and economically dependent on New York. Nor could they understand what to any contemporary statistician seems easily explained -- their city's declining ratio of population increase. New York's falling and Brooklyn and northern New Jersey's rising rates of growth were in accordance with statistical law: the larger the aggregate of population, the slower the rate of growth; the smaller the aggregate of population, the faster the rate of growth.²² New York's growth from 1820 to 1850 had, of course, defied this law; a rare occurrence owing to the construction of the Erie Canal and its effect on the city's commerce,²³ and an occurrence not to be repeated.

[page 17] But New Yorkers of the late nineteenth century knew nothing of this law, and could hardly be expected to understand that their city's earlier rate of growth was only the exception that proved the rule. What they saw and, even more, what they feared, was a city losing population and tax revenue to its neighbors, a city whose rate of growth was declining while the size of adjacent areas rapidly increased, and a city whose development, in the absence of rapid transit, had been artificially and abruptly halted.

One writer, arguing in 1870 for rapid transit, observed a great difference between the New York of the first half and the New York of the second half of the century. In 1817 New Yorkers had been willing to take a risk in building the Erie Canal, and because of it they had captured the Western trade and surpassed their nearest rival, Philadelphia. The New Yorkers of the present were too timid to build an underground railway, and thus would soon lose out to Brooklyn, in 1870 the third largest city in the United States.²⁴

The same writer was also worried about the potential development of New Jersey cities, which, as he clearly indicated, were growing at New York's expense because "the time required to travel from Harlem is over two hours, while that from Elizabeth, New Jersey, just twice the distance, is only fifty minutes."²⁵ The Times was similarly perturbed by the growth of Brooklyn and New Jersey. In an editorial of 1874 it pointed to the fact that Brooklyn's population had not only grown more rapidly than New York's; but also, at least during the period 1860-1870, had made an absolute gain slightly in excess of the city's; and Jersey City had nearly trebled and Hoboken more than doubled in population during the same decade.²⁶. "People have found," said the Times, "that a residence within two miles of Fulton Ferry, on the Brooklyn side, and a mile of Williamsburg Ferry is nearer to the lower portions of the City than a residence above Fifty-ninth Street. Jersey City and Hoboken are still nearer, and a traveler can reach any place within 17 miles of Jersey City in the time required to take him to Sixty-second street."²⁷

In a few years, however, the Record and Guide was proven right and the Times proven wrong. The exodus from New York to Brooklyn, Long Island and New Jersey, did not wholly cease, but with the completion in Manhattan²⁸ of the elevated lines by the early 1880's, it did lessen considerably. More people at least than before could and did move north on Manhattan Island. This, together with massive immigration from Europe,²⁹ somewhat augmented the city's rate of growth, though it was never again as great as in the three decades prior to 1850. Other problems subsided or momentarily disappeared as well: the diminution of the middle-class population of the city, and the imbalance of land and real estate values

The "els" were a stop-gap solution to the city's transit needs, but they provided at least temporary relief for some of its problems. No one, not the Record and Guide, nor the Times, nor the other newspapers except [page 18] The Sun, the house organ of the elevated company,³⁰; and least of all the passengers who rode the trains, was completely satisfied with the "els," Everyone complained of the way the elevated structures darkened and obstructed the streets, and, because of the smoke and cinders from their steam-powered engines, the way the trains dirtied the streets. Few were totally pleased by the elevateds' service, its speed, or the routes that the four lines followed. Some, like the Record and Guide, lamented the cheap, flimsy, and impermanent character of the elevated structures themselves.³¹

Yet as early as 1880, the Record and Guide declared itself "not only friendly to the present elevated roads, but to all proposed ones," adding "they are worth not four times, but twenty times their cost to the owners of real estate and the people of this metropolis."³² Hardly any New Yorker would have taken issue with the judgment of the Record and Guide in its Supplement of 1894:

... it was in the years 1879-80 that New York came into full possession of its present rapid transit facilities, and to this fact probably more than to all others put together is due: the activity in real estate and the increase in values that commenced in these years . . . it must also be acknowledged that the utilitarian service which they (the "els") have rendered to the city has been enormous. The marvelous expansion of the metropolis northward within the last fifteen years is directly due to their assistance. In their absence New York as we know it today north of Fifty-ninth Street is inconceivable.³³

The Times, too, in spite of its suspicion of the elevated company's management, joined the bandwagon, and lauded the "els" for the work they were doing in restoring a balanced social composition of the city. An editorial written spoke of a middle-class return to New York, and of new recruits who "bring their neighborhood with them, and fill contiguous dwellings with reputable and congenial occupants."³⁴

Praise for the elevated roads also emanated from another and surprising source: from proponents of underground railway schemes who had hoped and believed that the very success of the "els" would stimulate both the public and, more important, private capital to invest in still better, if more expensive, forms of rapid transit. For this reason subway advocates cited impressive statistics about the "els": how much they had cost; how much profit in relation to original cost they earned; how their passenger traffic had increased and how much more it could be expected to increase; how they had helped augment land and real estate values along their routes; how, by contrast, streets at great distance from their routes had suffered a loss of value; and how, by bringing a greater number of people from greater distances into the center of the city to shop and conduct business they [page 19] had improved the commercial life of New York.³⁵ The main point, of course, was that the "els" had cheated most of the traffic that they handled. This was a true point as well. After an initial loss, passenger traffic on the surface railways had not decreased but increased because of the "els", profiting from the enormous short-distance spillover that the "els" created.³⁶ And if the elevated roads could achieve such success in a short time, then, or so the subway advocates argued, real long-distance and much faster transport -- underground railroads -- could do even better.

However, in one respect, which was never mentioned by those who praised the "els," these roads proved to be a failure. Even in the early 1880's, before bad management and the renaissance of old problems caused widespread public disenchantment with the "els," there was one problem, the slums in the lower East Side, which the elevated trains could neither solve nor alleviate, and for which, presumably, only a subway might provide relief.

Indeed insofar as the "els" generated a larger traffic moving to and from the central business district, which in turn prompted its expansion, their effect on the slums below 14th Street was counter-productive. For as the business center expanded, the area in which the working poor could live in close proximity to their work was further contracted. And with immigration increasing in the 1880's, this meant a slum problem even greater than twenty years before, when the Senate Committee had expressed special concern regarding the "moral considerations" that demanded a quick and adequate solution of the rapid transit problem.

Expansion of the business center would not of course have mattered, had the "els" managed the task which social reformers expected rapid transit to accomplish, the "dispersal" of a substantial portion of the slum population northward, into less crowded and "healthier" areas of the city.³⁷ But this they could not and did not do. As Adna Ferrin Weber, the celebrated author of The Growth of Cities in the Nineteenth Century, indicated in 1899, the removal of the poor to the northern suburbs could not be achieved by cheap and rapid transit alone. It required as well higher wages; shorter working hours, and some method -- Weber suggested "associations for the ownership of suburban homes by workingmen" -- by means of which the poor could afford to buy homes in the suburbs.³⁸

In the 1880's, the hey-day of the "els," none of these conditions prevailed. The "els" themselves were slow, or at least not fast enough to count as rapid transit for unskilled laborers obliged to work ten to twelve hours daily. One critic noted that the 6th Avenue line took twenty-three minutes to travel from the Battery to 23rd Street, and that the 3rd Avenue elevated road took forty-five minutes to go from South Ferry to 129th Street. None of the lines averaged better than twelve miles an hour after making from two to four stops per mile, which scarcely met the popular demand expressed in the slogan "From the Battery to Harlem in 15 minutes."³⁹ The "els" were also [page 20] too expensive. In 1875 fares had originally been set at ten cents between the Battery and 59th Street, and for the East Side lines fifteen cents and the West Side lines seventeen cents for the trip from the Battery to the Harlem River, with half-price "commission fares" during rush hours.⁴⁰ By 1885, a year in which the roads carried over 115 million passengers,⁴¹ fares were reduced to a standard five cents. But even this fare, given the extra cost of transfers to the street railways, was prohibitively costly for the tenement dweller of the lower East Side, who at best earned $16 or $17 and at worst $8 or $9 weekly, not counting periods of unemployment.⁴² Moreover, even had the immigrants of the lower East Side been able to spend time or money to travel on the elevated roads, they could not have afforded the price of either homes or apartments to the north. The very rise in land and real-estate values that the Record and Guide attributed to the creation of the "els," precluded working class settlement in the northern sections of the city.

All of the needs and problems requiring improved rapid transit were discussed in a remarkable pamphlet, written in 1884 by one underground railway proponent who refrained from praising the "els." His name was John Isaacs Davenport, a newspaperman, lawyer, political and social reformer, and as George Rogers Taylor has said, a subway advocate whose conclusions can be trusted.⁴³

Like almost all reformers of his time and social class, Davenport's concern with the problem of the slums, creditable as it was, belied an even greater anxiety, indeed a fear, about the possible effects on the moral, social, and political character of American life of the "social disease" of the slum. As someone who devoted much of his life to the study and control of political corruption,⁴⁴ Davenport perhaps saw in the immigrant slum dweller a potential voter too precisely suited to the needs and interests of Tammany Hall and the Tweed Ring. As the patrician descendant of a prominent Connecticut family, he was perhaps threatened by the lower-class and the foreign rather than native American moral deportment of the immigrant slum dweller. He was quick to see pathological social conditions -- poverty, crime, disease -- while failing to notice that these same slum dwellers resisted the worst effects of social deracination through strong kinship, religious, and political allegiances.⁴⁵ Again, in common with other reformers of his time, Davenport. was perhaps too ready to find nothing of redeeming value in these slums, to miss whatever strength of character or simple vitality may have existed in this world.

All this helps to explain why he and most other patrician reformers were so eager to remove everyone from these slums, to disperse their population to the northern suburbs -- to Arcadia within easy reach of the city, the rus in urbe. Instead of the "dirt and confinement, the dreariness, ugliness, and vice of. the poorer quarters of a great city," the erstwhile slum dweller would find in the suburbs "sunlight, fresh air, the sight of grass and trees," and his children "the opportunity for healthy moral and physical growth."⁴⁶ And this also explains why, while neglecting to consider the question of the wages or working hours of the poor, men like Davenport put so much store by the improvement of rapid transit. For by the late nineteenth century rapid transit [page 21] had become a panacea for the quick and easy abolition of all social evils. It promised a social reformation without class struggle, without sacrifice on the part of the employers or the propertied classes, and one achieved in such a way that men like Davenport would not have to relinquish or even question their sentimental belief in rural virtue, while nonetheless partaking of all the advantages -- wealth, culture, diversity -- of a city whose very existence represented its antithesis.⁴⁷

And yet, in spite of his ideology, Davenport made a very good argument for a rapid transit underground railroad. In part, this was because he filled his pamphlet with a multitude of facts and figures about slum life that one rarely found in the pages of the Record and Guide. He knew all about the beginnings of the tenement-house slum in the early nineteenth century. He described how old single-family dwellings were converted into "tenant houses" for three or more families, and how, once landlords discovered that these converted houses yielded substantial profit in rent, they began to erect new houses designed especially as tenements -- "buildings upon small lots, frequently two buildings, one in front and one in the rear of the lot, without the slightest attention being paid to the most simple and ordinary sanitary measures."⁴⁸ He also knew why these tenements were so quickly packed with~the working-class and immigrant poor.

... there was nowhere the working portion of the community, and the poor, could go, but to the east side of the city. The utter absence of public means of conveyance, and the necessity of being within easy walking distance of their place of work, compelled the masses to reside in the lower wards while the greater value of property in the northern and western sections of the city forced them to the east side which thus became, each year, more densely settled.⁴⁹

He cited statistics drawn from the Citizen's Association Council of Hygiene Report of 1864 and from other sources such as the Metropolitan Board of Health, which showed that the average density of population per acre in New York below the Harlem River was 110, surpassing even Paris and London.⁵⁰ Density in certain wards of the lower East Side -- the fourth, sixth, seventh, tenth, eleventh, thirteenth, fourteenth, and seventeenth, ranging from 233.6 to 432.3 persons per acre⁵¹ -- availed the working class and poor of "very little more ground space than is appropriated to the dead -- a distribution which is not less fatal than it is impartial."⁵² He cited mortality statistics to demonstrate that overcrowding and squalor were responsible for New York's high death rate, which was greater than any other American city's, and higher even that that of the largest cities in Great Britain and France.⁵³ And referring to Dr. Stephen Smith, another social reformer and the first Commissioner of the Metropolitan Board of Health, Davenport concluded that there was only one solution for all these problems. Smith said it was fruitless to [page 22] remove the filth from the tenements; no amount of tenement-house regulation or reform would ever work.⁵⁴ What the situation required was the removal of the slum-dweller from the slum, and this could only be achieved by means of rapid transit.

All of Davenport's facts and figures were directed to the promotion of a subway. His thesis was both simple and true: that in New York public transit facilities always came too late to do any good. By the time they made their appearance -- he had in mind the horsecars in the 1850's, and the "els" in the 1870's and 1880's -- rising land values, a further expansion of the business center, and a new and even more massive stream of immigration rendered these "improvements" useless with respect to the problem of the slums in the lower East Side. In the year he wrote, 1884, a subway was urgently needed, not only because the elevated trains did not provide true rapid transit, but also because a subway, if not built now but later, would be ineffective. Time counted. If not in 1884, then certainly in a few years, speculators would begin to turn their attention from the upper West side and Harlem and hike up the price of land in the northernmost sections of Manhattan and the Bronx. Yet another wave of immigration would inundate the lower East Side. And the central business district, growing ever more crowded and congested, in part because of the traffic generated by the "els" and more efficiently powered streetcars, would further expand

Davenport's argument is persuasive. Rapid transit was doubtless seen as a panacea. But if the opinions of contemporary reformers like Davenport are to be given any weight, then one must consider why each new form of public transit -- and as will be seen, both forms of rapid transit, the subway as well as the elevated trains -- ultimately failed to achieve the ends that reformers and other interested parties expected of them. Davenport's argument provides an answer to this question. Public transit, rapid transit, came too late, long after it was needed, and long after it could or would do the most good. And if Davenport's thesis has some truth, then in answering one question it poses another: Why did it take so long for New York to build a subway, or, in other words, why was the Senate Committee Report of 1868 "without practical result"?

Part I, Section 4

In the period between 1864 and 1902 sixteen separate companies received charters from the State of New York to construct an underground railroad in Manhattan.¹ One of these, the New York City Rapid Transit Company, was organized in 1872 by Commodore Vanderbilt of the New York Central for the express purpose, not of building a subway, but of preventing anyone else from building one.² Another company, first chartered in 1868 as the Beach Pneumatic Transit Company, began its largely paper life³ as a plan for a pneumatically propelled freight railway. It changed its name in 1874 to the Broadway Underground Railway and became a subway plan for the carrying of passengers, then reappeared in 1885, still as a subway plan, under the [page 23] name of the Arcade Railway. Transfigured yet once more in 1897 as the New York Parcel Dispatch Company, a pneumatic railway, it finally passed into oblivion. Another proposed road, the New York City Central Underground Railway, first chartered in 1868, achieved a short-lived renaissance in 1880 as the New York Underground Railway Company. The Metropolitan Railway Company bears the distinction of putting forth in 1864 the first proposal for a subway in New York City's history. The New York District Railway, chartered at the end of 1885; is worthy of note because it was unsuccessfully promoted by two young men who subsequently made good -- William Barclay Parsons, later Chief Engineer of the Rapid Transit Commission that planned New York's first subway, and August Belmont, the financier whose firm, the Interborough Rapid Transit Company, chartered in 1902, finally did build the subway.

Regarding all of these subway schemes, save the last of course, there is something tragi-comical. They suggest a Victorian melodrama of_the sort with which we are all familiar, that is, stories about charlatan promoters and naive investors, tales of great men, Dickens, U.S. Grant, Mark Twain, who go bankrupt after having sunk their money or their name in some failed speculation; moral fables about men with big plans and high hopes who die penniless, alone, and mentally unsound. One is not surprised to discover that upon being retired by his Party from high office in 1884, Chester Alan Arthur, the twenty-first President of the United States, became the figure-head president of the Arcade Railway Company; or that the officials of the New York Central Underground Railway Company first bribed the legislature to obtain their franchise, then hawked their stock in one European capital after another in a futile attempt to secure investors, and finally wound up using their worthless charter in real estate speculations in Harlem and Westchester.⁴

Such stories as these form part of what might be called the folklore of nineteenth-century capitalist society, the great age of entrepreneurs who made it and many more who did not. Nor are these stories irrelevant. The simple fact is that no subway was built or would ever be built in New York without private capital willing to build it.

There are many reasons why nineteenth-century American capitalists were reluctant to undertake the construction of a subway, but all these reasons can finally be reduced to an essential and obvious one: men with a stock of capital sufficiently large to build an underground railway were not convinced that it was or would ever become a profitable enterprise. The question to consider, then, is what led them to believe that a subway wouldn't pay.

It was in London, after all, that capitalism was invented, and it was there, as well, that the first subway in the world, still unfinished, opened for business on 10 January 1863. A little more than a year before this date, the Times of London had noted that many English capitalists, like their American counterparts, had been skeptical about whether such a project [page 24]

... even if it could be accomplished, would pay. A subterranean railway under London was awfully suggestive of dark noisome tunnels, buried many fathoms deep beyond the reach of light or life; passages inhabited by rats, soaked with sewer drippings, and poisoned by the escape of gas mains. It seemed an insult to common sense to suppose that people who could travel as cheaply to the city on the outside of a Paddington bus would ever prefer, as a merely quicker medium, to be driven amid palpable darkness through the foul subsoil of London..."⁵

But despite the difficult task of allaying public anxiety about underground travel and the gloomy predictions of financial failure, a number of English businessmen, several distinguished civil servants,⁶ the Corporation of the City of London,⁷ and a Parliamentary committee had nevertheless decided that to risk chances and a hard-headed business sense were both equal1y important elements of the entrepreneurial ethos. And as things turned out, the gamble paid off at least in the short run. Public fears about underground travel were overcome, and by 1868 the Metropolitan was carrying more than 27.5 million passengers a year, and paying a healthy dividend of from five to seven percent.⁸

In later years, to be sure, the Metropolitan did not do so well. After 1870 its dividend fall off or was only paid at the five percent rate from profits derived from its substantial surplus land holdings.⁹ And its sister road which soon became its rival, the Metropolitan District Railway, was never a profitable venture. This line, which began partial operation in 1868, suffered from having been built through some of the most expensive real estate in the world and was, in consequence, burdened with numerous added and special costs.¹⁰ Both lines, moreover, ran into difficulty by quarreling rather than cooperating with each other. Their rivalry led them to overextend themselves by expanding into areas where local authorities and landowners, anxious to profit from the needs of the companies, made them pay for costly street improvements or imposed special conditions on their construction.

It can be said, then, that London provided a number of positive and negative precedents for the New York capitalist of the late 1860's or early 1870's, who may have been considering investment in a subway. To begin with, the profit ledger of the Metropolitan in its first seven years of operation offered him the encouragement of a sufficiently attractive financial incentive. Second, though, the earnings of the London undergrounds were not in the long run as satisfactory as had first been expected, they did attract a growing number of passengers. Londoners were apparently less bothered by tunnels supposedly filled with "smoke and noxious gases" than American capitalists of a later time liked to think. Passenger traffic did not fall off when dividends did. Though surface horsecar companies, [page 25] because of their small initial capital expense and a reduction in the price of horse feed, showed a better profit than either underground line after 1875, the railways' traffic grew far more rapidly.¹¹ The negative precedent was of course the Metropolitan District, with its high initial cost and low earnings. But the circumstances of its construction and operation were peculiar to it. Its difficulties need not have deterred the New York capitalist, but rather might have served him as an object lesson in what to avoid in launching his own venture.

In the years after New Yorkers had decided against a subway, and when the elevated roads were already built, it was commonly held that London's experience had demonstrated that underground railroads were not attractive to patrons because of their smoky and dank tunnels, and that such roads could not conceivably be financially successful. But this view was a myth propagated by American capitalists. Russell Sage, part owner of the Manhattan Elevated Company, had reasons of his own for believing that "the traveling public would rather ride in the open than in a tunnel thirty feet underground."¹² And men like William Barclay Parsons and August Belmont, who in the 1890's voiced negative opinions on the technical feasibility and financial profitability of a steam-powered underground railway in New York after the Civil War, were doubtless expressing what was by then the conventional capitalist wisdom.¹³

The question, then, gets down to this: was a subway like London's feasible or possible in New York in the late 1860's or early 1870's, before the decision was made to build elevated railroads, and before capital had invested large sums in one form of rapid transit, thereby precluding similar investment in another form. The answer, of course, is that subways were feasible but not possible, a fact that should become apparent once certain features of New York's business and political life are clearly understood.

Too much attention and far too much weight has been accorded the subject of motive power. Since a steam-driven subway was never built in New York, it is not possible to know whether New Yorkers would have adjusted, as Londoners did, to the smoke from locomotives and the smell of the tunnels. A New York subway would presumably have followed London's example in providing an abundance of ventilation shafts, and in using locomotives that burned coke rather than coal, and were equipped with steam-condensing engines, both of which cut down on the amount of smoke or exhaust gas discharged into the tunnel. New York needed a "truck line" underneath a principal street running through the center of town, as opposed to London's circular belt route with many open cuts and short tunnels, and this would have required at least one very long and possibly one or two nearly as long tunnels, which signified a ventilation problem much greater than London's. At the same time, with a well-worked out system of ventilation shafts, and four tracks with express service, the very speed of the express trains might have generated sufficient movement of the air to keep tunnels reasonably comfortable, or so at least several subway advocates claimed.¹⁴

[page 26] The point here is not to argue that steam was an ideal motive power, but only to suggest that it did not, in and of itself, rule out the possibility of an underground railroad in New York in the late 1860's or early 1870's. It is an axiom of the history of capitalist society that technical innovation usually follows closely upon capitalist need or demand,¹⁵ which is enough to suggest that if capital had been willing, the necessary technology would have been forthcoming. And had there been nothing else to dissuade capital from such a venture, the matter of motive power would not have made much difference.

When compared to elevated railways, the cost of subways was an important but not decisive consideration arguing against underground railway construction. The American Society of Civil Engineers Report of 1875, which, as will be seen, had good reason to cite a low estimated figure for the construction of elevated roads, concluded that double-tracked elevated lines would cost between $700,000 and $1,125,000 per mile.¹⁶ This was close to their actual cost, at least as indicated in a report prepared in 1880 by Elnathan Sweet; an engineer for the Railroad Committee of New York State Assembly, in which the capital outlay of the New York Elevated Company road, by that time virtually complete, was said be $8.7 million, and that of the Metropolitan Elevated line $9.6 million. In testimony before the same Committee, Jose Navarro, one of the promoters of the Gilbert road, which later became the Metropolitan, claimed that his elevated road had cost a approximately $700,000 to $800,000 per mile of doublet tracked structure. These figures may be a little high, because W.F. Reeves, the most recent historian of the elevated roads in New York, cites the sum of $2,525,240 for the Metropolitan Elevated Company's double-tracked road from Morris Street to 83rd Street, a distance of 6.12 miles, or a little more than $400,000 per mile.¹⁹

Estimates for a subway ran considerably higher than any of the above figures for the elevated roads. In an 1865 brochure prepared as a promotion for the underground Metropolitan Railway, A. P. Robinson, the engineer of the proposed subway, estimated that the entire cost -- including equipment and cars, not counted in the above figures for the "els" -- of the railroad's approximately five-mile route from the Battery to 59th Street, would be $8,487,006, or almost $1.7 million a mile.²⁰ In 1875 the ASCE report concluded that a subway would cost $2 million a mile to build.²¹ And in 1877, Alan Campbell, Commissioner of Public Works in Mayor Ely's administration, sent the Mayor a report recommending the construction of a subway, in which he cited figures from the proposed but never-constructed Vanderbilt plan for an underground line. The estimated cost for a five mile route -- again, with all equipment and rolling stock included - -was $9.1 million, or roughly $1.8 million a mile.²² Campbell also asserted that such a road could be profitable, that it might earn upwards of $600,000 per year, and pay a yearly dividend of from six to seven percent.²³

[page 27] Given the greater cost of an underground railway compared with that of an elevated road, it can be said that two conditions had to be met before a subway could be constructed. The first condition was substantial and reputable financial backing. A subway was beyond the means and the capacities of the small entrepreneur or even a group of small entrepreneurs. It was a risky project for all but the biggest capitalists, a man or a group of men who could afford the large initial expense of construction and equipment, and who could manage the road despite the likelihood of small returns in the first few years of operation.

Such men existed in New York and elsewhere in the United States after 1865 but the particular character of American economic development at this time worked against investment in subways or, for that matter, in intraurban transit of any kind. Money could and was being made in urban public transit, but it is significant that until the late 1870's and early 1880's, there was very little of what may be described as "big money" invested in urban mass transportation. The streetcar companies were small, numerous, and disorganized. Surface railway consolidation in Boston, Philadelphia, and New York had not yet begun. "Big money" interested in railroads invested in inter-urban rather than intra-urban transportation. The era following the Civil War was the great age of inter-urban railroad construction in the United States, and this took precedence over urban transit development.²⁴

In other words, the view that a subway "wouldn't pay" was in reality a relative rather than an absolute judgment. Given its cost and the risk involved, capitalists in position to build a subway could find much better ways to employ their money. The problem was that in the absence of positive governmental action and public funds for rapid transit construction, mass transportation in New York and elsewhere depended on capitalist initiative. And capitalists, at least in the period of inter-urban railroad development directly after the Civil War, regarded urban public transit as a distinctly second-class investment.

In the early 1870's, for example, Cornelius Vanderbilt was apparently interested in rapid transit, but only insofar as it related to the inter-urban railroad empire of the New York Central. With $3.2 million or half the construction costs supplied by city funds, he did in fact build what Mayor Wickham described as a rapid transit road²⁵ -- his Hudson River "improvement" for the New York Central, which was a mostly open-cut or viaduct railway with short tunnels, running from 4th Avenue above 42nd Street to the Harlem River. In 1872 Vanderbilt also obtained a charter for a subway, the New York City Rapid Transit Railway, which was to run from City Hall Park to "a point between 48th Street and 59th Street." But there is good reason to believe that his purpose in securing this charter had very little to do with any desire to construct a subway. The route of his proposed underground line paralleled the one approved for the New York City Central Underground Railway. Vanderbilt's only aim in applying for this charter was to prevent the construction of the Central Underground, which if built would have served as an inner-city connection for inter-urban railroads that were rivals of the New York Central.²⁶

[page 28] The second condition necessary for subway construction was that the road be located on a route which would insure a high return. In other words, a route that would exploit heavy downtown traffic in order to balance anticipated losses in the relatively undeveloped uptown parts of the city, until such time, of course, that the subway generate uptown settlement and created its own traffic. In 1865 Henry Varnum Poor, the railroad developer,²⁷ and his associates, John Jacob Astor and Abiel Low, were willing and able to build an underground railway, but their decision depended on the possibility of securing a proper route. In the 1890's, when the Rapid Transit Commission was planning New York's first subway, there were two such routes in lower Manhattan: Broadway, and the newly improved Elm Street (now Lafayette Street). In the 1860's, however, only Broadway would have sufficed, and the problem was that Broadway, both then and later, was simply unavailable.

The entire problem of Broadway, and the source of the problem, the rights of Broadway property owners, can only be properly understood in relation to a larger context, which is that of the laws and legal procedures affecting urban railroads in the nineteenth century. In both England and America, the rights of private property owners were of course greatly respected, not only because property in itself was considered essential to the definition of human personality, but also because the defense of property rights served a public function. Those seeking to build a railroad in a nineteenth-century city such as New York or London, represented private interests asking for a considerable public privilege. They asked for the right to construct and operate their railroad through, on, under, or over private property on the public way, and the right in certain cases, to demand, condemn, or buy property that stood in the way of their "improvement." For this reason, government everywhere regulated railroads, required them to be licensed or chartered, and, not unjustly, demanded that they prove that the communal need for their "improvement" was equal in value to the direct and indirect "social costs" it might incur. Another way of acquiring this "proof," and one that was particularly appropriate to the Anglo-Saxon legal system, was to pit private interests against private interests, so as to oblige the prospective railway builder to prove in a court of law that his railroad was undeniably a public necessity, worth the sacrifice of individual convenience or property. Only thus could the rights of one private interest be considered superior to those of another, and only thus could the public interest be clearly established.²⁸

In New York this whole question was even more complex, because all matters pertaining to the chartering and regulation of railroads were not, throughout most of the latter half of the nineteenth century, decided upon in New York City by New Yorkers, but in the state legislature at Albany by representatives from largely rural districts. New York City lacked real autonomy or self-government, "home rule", and more than once in its history rural state legislators, usually Republican when New York was usually Democratic, and usually unconcerned with the city's real needs or desires, had given franchises to street railway operators whose credentials or the routes of whose railroads greatly displeased the citizens of [page 29] the city. By opposing the proposed construction of state-chartered railroads, and by bringing the matter before the courts, then, property owners such as those on Broadway were perceived not only as defending their own rights, but also as striking a blow for home rule.²⁹

In principle this concern shown by Broadway property owners for the public interest was of course commendable; in practice it was often abused. Throughout most of the nineteenth century, and certainly in the late 1860's and early 1870's, Broadway was the principal thoroughfare of New York City. It was the street with the most expensive real estate, both commercial property on lower Broadway below 14th Street, and, at least until the 1880's, residential property on upper Broadway above Union Square. Its landowners and merchants, among whom could be counted some of the richest and most powerful men in the city -- Astors, Goelets, the department-store mogul, A. T. Stewart -- ceaselessly stood watch over the rights and value attached to what was theirs. In effect, as was common in the nineteenth century, they exploited the general reverence for the rights of property and used. their economic and political clout to preclude any "public improvement" on lower Broadway. Broadway property owners preferred to keep their street a high-class thoroughfare for carriages, omnibuses, and stagecoaches. They regarded any less swank form of transit as likely to downgrade the fashionable retail trade of their street, and railway construction of any kind as likely to cause inconvenience and damage, interfere with business, and possibly decrease the value of their property. It was only in the 1880's that they allowed a street railway to invade lower Broadway, and then only because, as the Record and Guide and numerous subway promoters noted,³⁰ real estate values below Union Square were declining, the fashionable retail trade was moving uptown, and the entire area was badly in need of the economic stimulation offered by public transit.

In the late 1860's and early 1870's, when the likelihood of a profitable route might have tipped the balance in favor of a subway, the opposition of property holders on lower Broadway constituted an insuperable obstacle to its construction. By the 1880's, however, when a new scheme for a Broadway subway -- the Arcade Railway -- attracted considerable notice and some reputable backing,³¹ there was little possibility of a subway under Broadway or anywhere else. For by this time the "els" were already built, and their construction represented an investment in rapid transit of sufficient magnitude to deter further capitalist initiative for nearly two decades.

Part I, Section 5

[page 30] In the decade following the Civil War, New York required some form of rapid transit, and if subways were ruled out, then elevated trains were the next best and indeed the only alternative. But private capital's decisions not to build a subway did not imply a corresponding will on its part to construct an elevated railway system. Capital's reluctance to invest in public transit once again impeded and then determined the character of the rapid transit decision of the mid 1870's. Municipal government was mindful of the needs of the city and its citizens, but was limited in its vision and its actions by the need to stimulate capitalist initiative. Public construction of a rapid transit system was at the time considered neither desirable nor possible, and private construction depended on the guarantee of a low cost initial investment and immediate and substantial profit. Accordingly, city officials did their best to smooth the way for the realization of these last conditions, which resulted in an elevated railway system adequate to the needs of capital, but one which, within a very few years after its completion, was inadequate to meet the needs of the urban public it was supposed to serve.

The Senate Committee of 1866, it will be remembered, had recommended to the Legislature that Charles Harvey be allowed to construct a small section of his cable-powered elevated railway as an experiment. The Legislature approved this suggestion; the experimental half-mile segment was built on Greenwich Street from the Battery to Cortlandt Street; a subsequent Committee appointed by the Legislature approved further construction; and by 1870 Harvey's road was a single track cable-powered line running from the Battery to 30th Street. The cable-powered road, however, was never popular, there were some accidents, and in 1871 the original company, the Westside and Yonkers Patent Railway; went bankrupt and was dissolved. The new company which was formed, the New York Elevated Railroad, requested the right to convert the road to steam power.¹ The progress of this company, in turn, was stalled by the panic of 1873. The same fate also befell a second elevated road, Rufus Gilbert's Elevated Company, chartered in 1872, which was to run along 6th Avenue to 59th Street on compressed air power.²

The ostensible failure of these two lines, the depression, the opposition of property owners, the incessant lobbying in Albany of streetcar companies who feared competition from rapid transit, and New York's great and immediate need for some kind of rapid transit, spurred several prominent New Yorkers and interested groups like real estate brokers to consider another alternative to private capital -- municipal construction. To men like iron-master Abram Hewitt, social reformer Simeon Church; and former Mayor Opdyke, all of whom spoke before a meeting of the newly formed Rapid Transit Association in February, 1873, it seemed as if the City would have to step in and lend a hand or face the fact that New York would never have rapid transit. Accordingly, they prepared a bill for the Legislature, sponsored by Mayor Opdyke, which called for the creation of a rapid transit commission with authority to select routes and devise plans for a four track rapid transit road.³

[page 31] These men were aware that there was ample precedent for such positive governmental action. In New York itself and in America generally, there was the experience of building the Erie Canal and the canals in other states inspired by its example.⁴ In London there was the Metropolitan Railway, which owed its existence to an Act of Parliament and to the Corporation of the City of London, which had subscribed for half of its shares. In Paris in the 1850's and 1860's the Prefect of Police and the General Counsel of the Seine had organized all the omnibus lines into one company, the General Omnibus Company, had asserted their authority to lay down routes and timetables, even when these caused the Company to lose money, and had also created a consolidated street railway network for both Paris and its suburbs.⁵ Again, in New York itself there was an even more recent precedent than the Erie Canal: the agreement between Commodore Vanderbilt and City by which each would pay half the cost of his New York Central "improvement."

Despite these precedents, however, municipal construction of rapid transit or the pledge of city funds or credit to a private firm for the same purpose, was not in the cards for New York in the 1870's. The city gift of $3.2 million dollars to Cornelius Vanderbilt was a special matter, the exception that proved the rule. He owned the property and was also a man who could be trusted to improve it to everyone's satisfaction.⁶ The European precedents would someday exert an influence, but it was too soon as yet for New Yorkers to accept the European principle of "municipal socialism."⁷ The Erie Canal was a precedent too far off in the past; New York had changed a great deal since 1817. In the early 1870's the remembrance of the notorious Tweed gang, which had only been thrown out of office a few years before, and the possibility that Tammany might soon recapture City Hall, was sufficient to convince many citizens that the notion of municipal construction was, if not laughable, at least naive. Nor were Republican rural legislators in Albany likely to look with favor on the plunder that might potentially fall into the hands of their Democratic on Tammany rivals, should the City own and operate rapid transit lines.

In addition, there was considerable ambivalence, even among those most eager for rapid transit, to the principle of municipal construction. In 1871 Simeon Church managed to convince a meeting of the West Side Association, a group of realtors and property owners who looked to rapid transit for the development of their section of the city, to vote for a resolution in favor of municipal construction. But the same group rescinded this resolution at their next week's meeting.⁸ At another meeting of property owners in 1873, a resolution was passed which called for public construction, but in terms which make clear that this alternative represented a bitter pill, and one to which most New York businessmen, themselves understandably partial to private enterprise, resorted only out of desperation.

[page 32] Resolved: That having heard explained several schemes for rapid transit in New York as private enterprises, this meeting expresses the hope that the Legislature will pass all the bills having that object in view which promise any success; but having no confidence whatever in the success of any private scheme, and no hope that rapid transit will ever be secured by private means, we earnestly urge upon the Legislature to pass the bill for the construction of a road as a City work as the only safe, sure, and economical measure of relief.⁹

With such feeble support behind it, with many who desired rapid transit nevertheless unwilling to make use of public funds, and with powerful interests opposed to it, the Opdyke bill, as might be expected, failed in the Legislature. Its failure, however, was not without significance for the future: later proposals for public support of rapid transit would take great care to separate the issue of municipal ownership from that of construction and operation.¹⁰

Once the use of municipal funds had been ruled out, subsequent developments appear to have followed a prepared script. It was decided not to initiate new rapid transit enterprises, but rather to encourage and smooth the way for those that already existed. This shut the door definitively on subway construction, and also signified that the city and its citizens would accept whatever the existing elevated lines -- the New York and Gilbert companies -- were willing to provide. In effect, it was no decision at all, but an acquiescence in a decision that had already been made by private capital, and which government, spurred on by now unified public support, real estate interests,¹¹ prominent businessmen, and, most important of all, the principal stockholders in the two elevated companies,¹² now hurried to confirm and further.

The first step in this process was the 1874-5 Report of the American Society of Civil Engineers, whose expert conclusions cannot be understood apart from the above context. The aim of this blue-ribbon panel of engineers¹³ was to unite public support behind the established private agencies of rapid transit construction. Their report stated that the major problem of the past had been that "lawmakers have been unwilling to grant charters until they knew on what plans the roads were to be built, and capital has refused to make in advance the necessary surveys and investigations, upon which alone adequate plans could be based."¹⁴ This was a problem effortlessly obviated, of course, by the existence of two already franchised elevated companies, one partially built along 9th Avenue, and the other with full-scale plans for a road on 6th Avenue. The ASCE report also suggested, rather redundantly, that franchises be given to companies "who now control the existing lines of transportation in the territory,"¹⁵ and that further and more strenuous effort be made to secure rapid transit by private means before recourse to public construction was attempted. After having considered [page 33] seventy-five projects for different types of rapid transit construction, they arrived at several expert judgments on the relative merits of elevated as opposed to underground rapid transit, all of which come as no surprise. They concluded that elevated railroads would be less expensive to build than subways, that the latter would take longer time in construction than the former, and that underground roads, besides resulting in unhealthy and smoke-ridden tunnels, would also disturb sewerage, water, and gas pipes, as well as business and street traffic.¹⁶

The way thus paved by scientific expertise, Mayor Wickham took the next step. In a special message to the Board of Aldermen on 28 January 1875, he called for the establishment of a committee from among the aldermen to consider the rapid transit situation, noting that "it may ... be now safely assumed that the discussions of the subject have produced a concurrence of opinions on these cardinal points," one of which was "that the work should be constructed, if practicable, by private capital, and not by the city," and "that capitalists should be encouraged to undertake the enterprise by permission to select routes along which business is likely to be profitable."¹⁷ In accordance with the Mayor's recommendations, a special committee of the Aldermen met to draft a bill to be sent to Albany. The majority of the committee first decided for construction by private capital, but with resort to public ownership within six months if this proved impractical. A few weeks later, however, "after more maturely considering the subject," they reversed themselves and took the view "that private enterprise should be granted a longer time in which to decided whether to undertake the enterprise, and that the proposed bill be so amended as to omit all provisions providing for an alternative public construction and operation."¹⁸ Nine of the aldermen resolutely held fast to the notion of municipal construction, but they were voted down by twelve others, and the bill went to Albany without a trace of this principle intact.

This bill, known as the Husted Act, was signed by Governor Tilden on June 19, 1875. It authorized the Mayor to appoint a five-man Rapid Transit Commission (RTC) with the power to lay down rules and conceive plans for rapid transit construction and operation. The Commission was accorded the power to create, if it so desired, new private corporations and to supervise both their organization and their subsequent construction of rapid transit roads. Provision was also made for the RTC to recognize the existence and supervise extension of the lines of the established elevated companies. If it selected routes which were identical to those held by existing lines, it could incorporate these lines anew as companies specially formed under the Husted Act. Both of these last two provisions, as will be seen, had a remarkable affect on the fortunes of the two established elevated roads.

Mayor Wickham's choice of commissioners was indicative of the close rapport existing between government and business in the late nineteenth century. He chose five prominent businessmen¹⁹ for the RTC, all of whom were involved in either the financial on manufacturing end of the iron and [page 34] railroad industries, and who thus had more than a passing knowledge as well as more than a passing interest in elevated railroad construction. They promptly set to work in order to accomplish the task for which they had been selected. Though presented with more than forty plans for various types of railroads, they quickly chose elevated steam roads as the "most practicable" form of rapid transit: "...considering the circumstances of the present situation,²⁰ and advised by engineers, and by capitalists as well, ... [we] reached the conclusion that elevated steam railways to be actually constructed in this city, but are the best for the purpose in view."²¹ The purpose in view also determined the routes they picked, which corresponded to the routes on 6th and 9th Avenues previously accorded the New York and Gilbert Elevated Companies. The old charters of these firms were thereby reconfirmed by the RTC²², which also gave them permission to construct and expand their lines on the West Side, and to build new lines on the East Side along 2nd and 3rd Avenues, all of which were to extend to the Harlem River.²³ In the event that these two companies failed to build or did not build their roads according to schedule, the RTC, availing itself of the provisions of the Husted Act, also formed a new corporation, the Manhattan Elevated Company, organized with an initial capital stock of $2 million, which, by happy coincidence, was quickly subscribed for in equal parts by the major shareholders of the two railroads with prior franchises.²⁴

There can be no doubt that the Rapid Transit Commission of 1875 splendidly executed its mandate, which was in reality to foster and confirm the routes and plans already decided upon by private enterprise. That there was never any question of it doing anything else, is demonstrated first by the fare structure -- ten cents below, fifteen or more cents above 59th Street -- that it set up, and which, while doubtless helpful to capital, precluded working class travel on the elevated roads; and second, by the fact that the new corporation it established, the Manhattan Company, was formed wholly as a paper company, and had no property, built no roads, and was intended merely as a company for the existing lines constructed by the two other companies.²⁴

One would hardly describe the activity of the RTC of 1875, then, as having promoted a positive role for government in urban mass transportation; indeed, it did exactly the reverse, confirming, at least until 1894, the customary dependence upon private enterprise for public transit. At the same time; the Commission did exactly what it set out to do, which was to select the cheapest, most easily built, most available, least bothersome, and most technologically feasible form of rapid transit, and by governmental action to stimulate private capital to provide such a system for the citizens of New York.

And stimulate private capital it surely did. In the early days of elevated roads, before the Commission met, investors were few and capital insufficient. After 1875 the elevated roads attracted a whole new breed of capitalist: men like Jose Navarro, who actually built the Gilbert road through the medium of his New York Loan and Improvement Company; Cyrus Field, [page 35] the man responsible for the Atlantic cable, who took over the New York Elevated road in 1877; and, finally, two of the very greatest of the "robber barons," Jay Gould and Russell Sage, whose manipulations of the stock and fortunes of the Manhattan Company comprise too lengthy and complicated a story to tell here,²⁵ but who, by 1884,^26> had established monopolistic control over the only form of rapid transit existing in the world's second largest city.

Part I, Section 6

One need not search long or hard to discover what aroused Jay Gould and Russell Sage's interest in the elevated roads in the early 1880's. Nor is there any mystery surrounding the entrance in the mid 1880's into the street railway business of such men as William C. Whitney and Thomas Fortune Ryan. From a city with a population of a little more than a million persons in 1875, New York, not counting its suburbs in Brooklyn and Long Island, had grown by 1890 into a city of nearly a million and a half. A city of such size, with so dynamic an economy, made ample use of the public transit that it had, or, in the near future, was likely to get.

In 1876, one year after the RTC's decisions, the total passenger traffic of all surface and elevated railways in New York was 167 million, and would grow even larger -- to 408 million -- by 1890. In 1876 the "els," only partially completed, had served but two million passengers; in 1886, with four roads complete to the Harlem River, they served 115 million passengers. And the street railways, profiting from the short-distance traffic of the "els", were in similarly healthy shape: in 1886 they carried 210.5 million passengers.¹

Public transit, in other words, could rely on ever-increasing market for its services, and, properly managed, could be made to "pay," and handsomely at that. Even so eminent a figure in the financial world as J. P. Morgan did not hesitate, in 1891, to join the board of Gould and Sage's Manhattan Elevated Company, which as Morgan noted, had gained respectability in the business world by virtue of its achieving a six percent annual dividend, then considered mandatory for a "paying" concern. But the very reason -- money -- which had led men like Gould, Sage, Whitney, and Ryan to seek and eventually obtain control of the mass transportation facilities of New York, also determined their resistance to any improvement in that system, and represented, therefore, a major obstacle to the construction of another and more innovative mode of public transportation that New York badly needed: a rapid transit underground railroad.

There were several reasons why the existing modes of public transit and the men who controlled them stood in the way of the building of a subway. To begin with, the management of the elevated roads and the surface railways feared competition from a subway, which, if it were correctly routed and had both local and express tracks, might detract both from the long haul traffic of the "els" and the short distance traffic of the streetcars. The elevated roads, moreover, did not want competition because they neither desired nor, as will be seen, could afford to meet this threat by expansion or improvement of their lines. They preferred to stand still, to make a large profit on their existing roads by running them badly and at minimal expense.

[page 36] The surface railway monopoly cannot be accused of the same tactics. Indeed Whitney, Ryan and their Philadelphia mentors -- Peter A.B. Widener, William Kemble, and William Elkins -- who provided financial support and surface traction know-how, had invested vast sums in transforming a hodge-podge of competing horsecar lines into a consolidated system of cable-powered and, by the late 1890's, electrified street trolleys. Having devoted so much time, energy, and money to this effort, they were ready, at approximately the same time as New Yorkers began seriously to consider the construction of a subway, to cease the expansion of their own business, and to sit back contentedly and enjoy the fruits of their labor. The manner in which their own business had developed should have and perhaps did suggest to them that they be the ones to build a subway; along with their neatly organized system of consolidated lines and free transfers, a subway would have been all they needed to create a unified system with virtually monopolistic power over New York's public transit. But this, aside from the fact that they both wanted and needed time to accumulate profit before risking further expansion, would have brought them into overt competition with the management of the elevated roads, which, from the very beginning of their business enterprise they had quite self-consciously chosen to avoid.³ And they had another reason, as well, for hesitating to undertake a subway venture. Their company, like the elevated company, could not afford it.

From its inception, even before Jay Gould and Russell Sage took control of it, the Manhattan Elevated Company was an enterprise built on "watered" stock -- that is, capitalization on the basis of anticipated earnings rather than actual assets. Its initial capitalization of $2 million in 1875 was all water, since the company at that time existed only on paper, owned no property, and was not engaged in building any elevated roads; the $2 million represented what it might become in the event that the two other roads -- the New York and Metropolitan companies -- failed to build. By 1879, when the Manhattan, because of quarrels over routing,⁴ leased the other two roads, its capitalization had increased to $l3 million, again all water, but useful for several purposes: first, to pay the lessors a dividend of ten percent on their similarly watered stock; second, to pay the interest on the lessors' construction bonds; third, to provide for operating expenses unrelated to earning power; and fourth, and most important, divide a profit, how much is not known, among all those concerned. Including the capital stock of the two leased roads and their construction bonds, the Manhattan's capitalization in 1880, as stated in Elnathan Sweet's report to the Railroad Committee of the State Assembly was $43 million, of which about $25 million was water.⁵ This large sum did not preclude the Manhattan from failing to meet its obligations to both its shareholders and the lessor roads in its early years of operation. Earnings in the early 1880's increased slowly, and Gould and Sage, in attempting to gain control of the elevated roads, used the technique of stock manipulation to realize their objective.⁶ By 1888 the Manhattan's [page 37] capitalization was $51 million, $26 million stock and $25 million bonds, by 1894, $66 million, or $30 million stock and almost $36 million in bonds, and by 1899, $88 million, or $48 million stock. and $40 million bonds, with a market value of approximately $100 million.⁷

Given the considerable earning power of the company by the early 1890's -- it carried 221.5 million passengers in 1893⁸ -- a capitalization of such proportions should presumably have allowed the company sufficient reserve to pay a good dividend, meet all its obligations with respect to construction bonds, taxes, etc., while still improving and extending its lines. However, this presumption would fail to take into account the fact that the Manhattan was paying dividends on watered stock that had risen in value several times over what it was bought for, and that it was also obliged to dispense some $13 million in property abutment and damage payments,⁹ with four hundred such suits still pending as late as 1898. The RTC of 1875 had smoothed the way for private capital in every respect but this one, and it cost the Manhattan dearly. The only way the company could maintain its customary dividend of six percent was to reduce operating costs to a minimum and refrain from any but the most necessary improvements or extensions of its lines.

This Jay Gould and his son George, who took over the company's management after his father's death in 1892, resolutely strove to do. But his policy had to backfire; minimal operating expense meant bad service, and bad service resulted in decreased passenger traffic. As the Times, no friend of the Gould's, was quick to note, "a great transportation company in a city where the growth of passenger transportation is at the rate of 20,000,000 per year, shows a dwindling business, which it is making no effort to increase."¹⁰ By 1896 the road was losing passenger trips at an average rate of 12 million a year, was only able to manage a four percent dividend, and was thus obliged to reduce service further yet: a vicious cycle. These figures help to explain why the Manhattan hesitated to change the motive power of its trains from steam to electricity, beginning this transformation only in 1899 and completing it in 1903, at least six years after the new technology had thoroughly proven its feasibility and economy. They also explain why it was preposterous for anyone, least of all the Rapid Transit Commissions of 1891 and 1894, to assume that the Manhattan would agree to costly expansions of its lines or build additional tracks on all its lines for express trains. Such improvements would have required a nearly total reconstruction of the road -- new elevated structures, new trains, perhaps a whole new series of abutment suits as well, and this the Manhattan simply could not afford.

Though the surface railway monopoly, the Metropolitan, was a vary different kind of business enterprise than the Manhattan, it had financial problems of its own, most of which stemmed from its success in contrast to the Manhattan, which did nothing to improve its system after it absorbed the Bronx elevated lines of the Suburban Rapid Transit Company in 1891,¹² the Metropolitan was an expanding, active business. In endeavoring to consolidate nearly seventy-five percent of the city's surface railways between 1886 and 1895, Whitney, Ryan, and their Philadelphia allies bought or leased a variety of companies. All of these had watered stock, so when bought they fetched high prices, and [page 38] when leased they demanded and received extravagant rentals in perpetuity, and large dividend payments for their shareholders. These companies were also bought or leased in a wholly unimproved and sometimes defunct condition, and all of them were horsecar lines, which obliged the syndicate to replace worn-out equipment, and, especially for the more important lines on principal thoroughfares, to switch from horse power to newer technologies -- first to cable power and then to electricity.

The result of all this activity was an almost entirely new, improved, well-managed,¹³ and highly functional surface railway system for the City of New York. The lines were rearranged so as to complement rather than to compete with each other; new equipment, larger cars, cable and electric traction, provided better service, more comfortable travel, and, as far as it was possible for surface railways, much faster transportation. Consolidation and, after the initial expense, the reduced costs of the new technologies, meant decreased operating expenses, a gain which was in turn passed on to the consumer in the form of lower fares and the institution of a transfer system. Passenger traffic increased steadily, attaining a total of 185 million in 1896.¹⁴ The Metropolitan was a huge success, what Whitney's reverent biographer describes as an "empire on wheels."¹⁵

An empire perhaps, but one that was very expensive to build and maintain. Widener, Elkins, and Kemble had a great deal of money from their older and already successful Philadelphia traction enterprise, but not enough to manage the financing of this sort of operation. The syndicate therefore paid for a substantial part of its purchases, leases, new equipment, and technological improvements with watered stock of its own. Writing in 1902, after the Metropolitan had absorbed its last competitor, the Third Avenue Railway, Milo Maltbie,¹⁶ of the reform journal Municipal Affairs, judged that the combined real property value of the now complete monopoly was $60 million, but that the market value of its stock was $221 million and its par value $165 million -- in other words, $105 million in water on the best estimate.¹⁷ In addition to the obvious problem of dividends paid out on heavily watered stock, there was also the burden of costs for leases, and the overestimation of assets without accounting for depreciation, a problem especially grievous for a firm that had inherited so much out-of-date equipment. Nor was this all: the system of free transfers, as useful as it was in attracting passengers, failed to work; with a five cents fare reduced two and one-half cents because of the transfers, the company lost money.¹⁸ The empire, as even the same reverent biographer was forced to acknowledge, was "top heavy and leaned upon too many weak reeds and poor earners to acquire added value simply because of being purchased or leased."¹⁹

As early as 1899, then, the year that the Metropolitan made a surprising offer to the Rapid Transit Commission to construct a subway, the syndicate was already in trouble. Whether the offer was genuine, or whether the Metropolitan merely made it to delay the Commission's work and forestall competition, is a question that will be discussed at length in the following [page 39] chapter. Here all that need be said is that the terms of the offer reflected a gross error of judgment with respect to public opinion, and this was a curious misperception for someone usually so astute as William C. Whitney.²⁰ And the fact of the matter was that even had these terms been accepted, the Metropolitan was too busy -- in 1899 it was battling to take over the Third Avenue Railway -- and too entangled in a financial web of its own devising, to undertake such a large and innovative venture as subway construction

But if the Metropolitan could not or would not build a subway, and if the Manhattan were similarly unwilling or incapable of substantially improving the one existing mode of rapid transit, who then would or could? Here an earlier point may profitably be underscored. One key to understanding the entire story of the subway, from the early schemes of the 1860's to the beginning of actual construction in 1900, is to see that the man who might conceivably take on such an enterprise would have to be highly reputable and capable of drawing upon vast resources of capital. Given the public transit situation as it existed in the 1890's, such a man required another quality as well: he would have to be a railroad or traction magnate, someone with experience and expertise acquired in running, organizing, and fighting the financial wars involved in the creation of a large railroad or traction network. For even with the pledge of public funds for construction, the job was a big one and the subway, when built, had to be coordinated with other modes of public transit so as to be successfully and profitably run for fifty or seventy-five years under private management.

And here the two extant transit monopolies, by the very fact of their existence, were sufficient to discourage all but the most hardy -- or, as the case may be, foolhardy -- entrepreneur. These two heavily watered companies represented a very large capital investment in public transportation. Conservative businessmen doubtless recognized that if a subway were built by someone outside the sphere of the two existing transit monopolies, competition of a counter-productive sort might result. Despite the belief of later Progressive reformers in the benefits of competition, a competitive battle between three companies providing similar services was not regarded by most capitalists as likely to further the goal of an efficient and comprehensive system of public and rapid transit. Perhaps even more important; the financial stability of the public transit industry might suffer and large investments be endangered, should competition materially affect the market status of the two existing transit monopolies. This meant that any willing to build a subway would not only have to possess the skill and experience to deal with competition and opposition from the Manhattan and Metropolitan, but would also have to create a new monopoly, larger and more powerful than the first two, and capable of incorporating them within a newly organized and consolidated system of urban mass transportation.

Until New York's first subway was a fait accompli, this appeared to be and was in fact a formidable enterprise, one for which only a very few capitalists were eligible. By the early 1890's the inadequacy of the "els" and the surface [page 40] railways argued convincingly for a subway as the one remaining answer to New York's rapid transit problem. But the implementation of the rapid transit subway decision depended, as before, on capitalist initiative, which, because of the two existing transit monopolies, would remain a surprisingly scarce commodity in the largest and wealthiest city in the United States.

Part II, Section 1

[page 54] By the late 1880's and the early 1890's a subway for New York was an idea whose time had come. The surface and elevated railways had created more traffic than they could handle, and neither existing mode of mass transportation was able to provide rapid transit service to promote development of upper Manhattan and the Bronx. Real estate interests and many businessmen,, some politicians, civic associations, labor unions, and a large majority of ordinary citizens were agreed that a subway was the only satisfactory means to meet the city's rapid transit needs. There was only one remaining question, the very large one of how to finance the projected underground road.

An answer to this question was supplied by a new force at work in European and American politics in the last decade of the nineteenth century; the movement for municipal reform. The reform movement was synonymous with an enlarged role for government. Thoughtful men were beginning to understand that great modern cities such as New York required complex and costly public works and services, which capital neither would nor could supply, and which only honest, efficient, and active government could be trusted to provide. Many American reformers hoped to emulate the example of European cities, where government, now run by able and enlightened businessmen and professional experts,¹ had raised the quality and increased the quantity of public "improvements." Writers like Richard Ely and Albert Shaw² propagated the ideas and practices of European municipal reform movements, hoping to influence American businessmen to move in a similar direction. One such idea which directly affected New York's rapid transit decision was English economist Alfred Marshall's³ method of financing public works by having the municipality pay for and own them, while the actual task of construction and operation was entrusted by lease to a private firm.

Marshall's idea had been successfully tried in Great Britain,⁴ and some New Yorkers were quick to see its advantages for financing a subway. In 1888 Mayor Abram Hewitt proposed a rapid transit plan in accordance with Marshall's method, but both business and political leaders opposed it. And beginning in the late 1880's and continuing into the early 1890's, C W Sweet, the erudite editor of the Record and Guide, emphasized this idea in his constant endeavor to cajole New York's businessmen and politicians to build a subway that would help develop the northern reaches of Manhattan and the Bronx. Sweet sometimes expressed his views by means of slogans such as "WHY NOT TRY THE GOVERNMENT?" and "OBJECT-LESSONS IN MUNICIPAL SOCIALISM," but this goal had nothing whatsoever to do with the doctrines of Karl Marx. What he wanted was a subway, and he saw that the best and indeed the only way to get it was through public funding. "Municipal ownership" was not a theory, but an expedient method of providing the modern metropolis with a rapid transit system commensurate with its needs.

[page 55] The only 'principle' that one can safely apply to determine what a municipality should or should not do is expediency. It is that that governs the Record and Guide in advocating any improvements... Socialistic, anarchistic, and political ideas on the matter can all be subjected to the test of expediency, and accepted or rejected, as the case may be, according to how successfully they emerge from that test.⁵

Many of New York's business leaders were eager for a subway as Sweet, but they were reluctant to have the city government involved in its construction. Reformers like Sweet believed that enlarged and more important municipal responsibilities such as rapid transit construction would work against "ignorant, incompetent, and unscrupulous politicians."⁶ But most businessmen, looking to the past and Boss Tweed rather than a future transformed by reformist initiative, feared that if city officials controlled the rapid transit decision, the corrupt politicians of Tammany Hall, New York's "regular" Democratic party machine, would exploit subway construction for their own purposes. Businessmen were also hesitant to accept ideas and practices that at least to them smacked of socialism; They wanted to preserve the dominance of private enterprise in American life and its customary role in providing public transit in American cities such as New York.

In the early 1890's, then, yet another attempt was made to stimulate private capital's interest in subway construction. But as in the past, no substantial capitalist could be found to undertake the project! The opposition of the two transit monopolies, and the large capital investment they represented, deterred many substantial railroad men and financiers who might have shown an interest in the venture. Moreover, many capitalists still believed that a subway "wouldn't pay," and that, given the costs involved, it was not worth the risk. Subway construction in New York was thus repeatedly impeded and delayed because of a lack of capitalistic initiative.

By 1894 business leaders were obliged to acknowledge the validity of C. W. Sweet's "test of expediency." With great reluctance they accepted the principle of "municipal ownership," and the Chamber of Commerce of the State of New York, the most respected and powerful business organization in the city, took direction of the rapid transit decision. It sponsored a bill by means of which the city would support subway construction with its own low-interest bonds, with a private firm responsible for construction and operation of the new subway.

The Chamber of Commerce bill of 1894 represented neither a radical departure from past practice nor a victory for the principle of governmental control over public works. The bill was geared to private enterprise, and perhaps far more than C.W. Sweet or other reformers would have liked, it was an expedient measure specifically designed to overcome the opposition of capital and to attract to the subway project the kind of substantial capitalist who had not been forthcoming without a government subsidy. The Chamber of Commerce plan, as Progressive critics would later argue,⁷ promised "municipal ownership" in name only.

[page 56] Nor did the Chamber of Commerce bill represent a victory for reform. The businessmen who initiated and implemented the rapid transit decision may only be described as reformers in a very special sense. Their principal desire was to reform City Rail, to eject corrupt Tammany politicians from city government, and replace the "regular" machine with men "they could trust" -- in other words, with themselves or men of similar views and social position. But they cannot and should not be confounded with another group of urban reformers, known in American historiography as the Progressives, even though the two groups were occasionally on the same side.⁸

The men in charge of the rapid transit subway decision were for the most part honest, practical, wealthy, patrician businessmen who saw that it was both necessary and expedient for them to be concerned with great municipal issues. They were not "do-gooders"; they had little sympathy for the poor, the immigrant, or the working classes occupying a social station far beneath them. And the motives behind their entry into politics were neither disinterested nor untainted by personal ambition.⁹ Unlike the Progressives, they were not critics of the unregulated and often corrupt capitalism of the late nineteenth century. Their own experience as capitalists was large and they never questioned the wisdom of this system or the truth of its invariable "laws." Their conduct of the rapid transit decision was consistent in almost every respect with conservative and honest business practice of the nineteenth century, and "business as usual" was one of the charges that would later be made against them. Above all, they were little moved and less interested in public opinion, except insofar as it could or did affect the success of their public enterprises. They believed that substantial economic interest, social status, education, intelligence, and broad experience of practical affairs justified their claim to rule, and made popular participation both unnecessary and unwise. These attitudes and beliefs would be reflected in their activity on behalf of a rapid transit subway, and the difficult process by which that decision was implemented, as well as its final product -- the IRT -- would reveal both the virtues and defects of their point of view.

Part II, Section 2

At the top of the stairs leading to the Great Hall of the Chamber of Commerce of the State of New York, there is a life-size white marble statue of Abram S. Hewitt. This statue, commissioned posthumously, and a gold medal presented to the former Congressman and Mayor near the end of his life,¹ are the two tangible symbols of the Chamber's debt to the man known as "the father of the subway." The Chamber honored Hewitt for having been the first to propose the plan by which the subway was eventually constructed -- a subway funded and owned by the city, but built, leased; and operated by a private firm. The Chamber also honored Hewitt for an even more important if less specific accomplishment. He represented for its members the model of the public man, the very prototype of the patrician businessman turned politician [page 57] and reformer. One way of understanding the Chamber's political motives and activity is to understand this, for which he fortunately supplied the key. In reply to a letter from a clergyman requesting that he define his philosophy of public service, Hewitt succinctly stated the purpose governing his politics: "...the key to the work which I have tried to do in public life" is that "Order is Heaven's first law."²

Abram Hewitt's love of order perhaps derived from the fact that he was not born a patrician but made himself into one; he was a self-made man of strict self-discipline and enormous self-righteousness. He overcame a background of relative poverty to become an honor student at Columbia College, a successful iron-master, the friend and son-in-law of Peter Cooper, and member of the House of Representatives from 1874 to 1886, and Mayor of New York from 1887 to 1889. He was a distinguished and innovative businessman, who helped Peter Cooper and Cyrus Field lay the Atlantic cable, who introduced both the Bessemer and Siemens-Martin open-hearth process into the American iron and steel industry, and who, with Edward Cooper and Charles Hewitt, first perfected the manufacture of wrought-iron structural beams.³ He brought the same passion for order combined with a talent for practical innovation to public life. He fought for order against corruption in city politics as one of the leaders of the Committee of Seventy or County Democracy faction, which helped to overthrow the Tweed Ring. In 1876-1877 he led the Democratic Party in the House of Representatives in the attempt to settle the disputed Presidential election of 1876. As an enlightened industrialist, he sought to order the chaotic, strife-ridden relations between capital and labor through innovations such as arbitration and profit-sharing.⁴ And as Mayor of New York, he sought to impose order on a city where social and ethnic heterogeneity bred division, and where graft, inefficiency, and inadequate public services bred anarchy.

His rapid transit proposal was part of this design. Along with many New Yorkers in the late 1880's, Mayor Hewitt was well aware that the elevated trains had failed to solve the city's rapid transit problem, and that the lack of adequate mass transportation was retarding the city's northern development, adversely affecting its tax base, and exacerbating traffic congestion and overcrowding below 14th Street. He knew, too, that the elevated roads would not improve their service or extend their lines of their own accord, and that other capitalists were similarly unwilling to risk subway construction on their own. He devised a plan, then, which he believed would assure the orderly development of the city, by satisfying its needs while also, or so he at least thought, providing ample profit incentive to capital.

His plan was nothing if not expedient in precisely the sense that C. W. Sweet argued for in the Record and Guide. Hewitt was a zealous partisan of private enterprise,⁵ but he was not an inflexible ideologue. If private capital would not or could not build a rapid transit system, he was willing to consider other means by which it could be achieved. And if the city could get a better deal -- lower fares, less expensive construction, and a [page 58] higher percentage of the gross return -- by paying for the road and leasing it to a private operator, he was perfectly ready to momentarily put aside the principles of economic liberalism. Thus far and no further was Abram Hewitt a "municipal socialist."

The special conditions of New York politics -- the spectre of Tammany Hall -- in his view precluded full-scale "municipal socialism" on the European model. In private letters to friends Hewitt might compare his plans for urban reform with "what was done in Birmingham, Manchester, and other English cities,"⁶ but as regards the construction and operation of a rapid transit system, he was afraid to entrust city officials with so costly and vast an enterprise.

Moreover, Hewitt's aim was to attract rather than deter reputable capital from investing in a rapid transit system. As a hard-headed businessman, himself, he believed that a profit-minded capitalist, aided in the construction of a rapid transit railroad by municipal funds and credit, would show greater capacity and have better reason than city officials for running the road economically and efficiently. His plan joined the virtues of public to private enterprise, while avoiding the defects of either one: municipal funds for construction would eliminate private capital's need to resort to "watered" stock;⁷ private operation would guard against inefficiency and corruption by public servants.

It was also what some might describe as a "pure piece of legislation,"⁸ a plan that satisfied everyone's needs without taking into account the requirements of any special interest. As will be seen, this last quality was enough to assure that at least some New Yorkers -- Tammany politicians, the managers of the elevated roads, property owners -- would regard this very expedient and practical proposal as highly "impractical," and more than enough to guarantee its political failure.

Unmindful of the political problems involved, or perhaps unwilling to consider them,⁹ Hewitt drafted a message including a detailed presentation of the plan, which he delivered to the Tammany-controlled Common Council on 29 January 1888. He called for a rapid transit railroad that would measure up to the implication of its name, which meant "the ability to take passengers at the highest rate of speed... namely, forty to fifty miles an hour."¹⁰ There were only two kinds of roads that could provide this rate of speed, undergrounds or elevateds on sturdy stone viaducts, and Hewitt's preference was clearly for the former. As regards the heart of the plan, its financing, the City would borrow money by floating bonds for the cost of construction at a rate of three percent. It would then give over the building of the road to the New York Central Railroad, which would also lease and operate the line for thirty-five years, at an annual rental of five percent of the cost of construction. This was an amount sufficient [page 59] to pay the interest of three percent on the City bonds, and also to provide at least two percent yearly for a sinking fund¹¹ that would eventually retire the bonds before the expiration of the lease. In this way, once the lease was up, the road would revert to the city free and clear.¹²

The surprising but quite understandable element of Hewitt's plan was the provision that the New York Central -- Cornelius Vanderbilt's road -- build, lease, and operate the new underground railway. The Mayor's declared purpose for choosing the New York Central was that company's control of access to Manhattan by rail, and also the fact that the City had earlier invested three million dollars in providing the Central with depressed tracks above 42nd Street. Hewitt's aim was to graft the new subway, part open-cut and part tunnel, running from the Battery to 42nd Street, onto the local lines of the Central. His undeclared motive was equally understandable. The New York Central was the only capable company presumably interested in building and operating such a road. Once again, even with public funds, the very nature of the enterprise required a reputable capitalist with large resources, and with the ability to exploit the new road to the maximum advantage. Both logic and necessity dictated Hewitt's choice of the Central; in effect there was no other choice.

The trouble was that the Mayor failed to consult¹³ with the officials of that railroad about the terms of the lease and the rules governing construction and operation. Chauncey Depew, President of the Central, quickly made it clear that his company had little interest in constructing a subway, and especially not in accordance with the terms outlined in the Mayor's message.¹⁴ As Hewitt himself would later imply,¹⁵ Depew's refusal ended any real possibility for the success of his plan.

The Mayor nonetheless stubbornly persisted in putting his plan before the public and the Legislature. He had Henry Beekman, a City's Corporation Counsel, draft a bill which was sent Albany, and he wrote influential businessmen asking for their support.¹⁶ In his speech to the Common Council Hewitt had pitched his argument where he as a businessman thought it would do the most good, to other businessmen concerned with the city's tax base and northward development.

The time has come . . . when the growth of the city is seriously retarded by want of proper means of access to and from the upper and lower portions of the city. Unless additional facilities are provided, the population which ought to increase at the upper end of the city will be driven to Long Island and New Jersey. Our rate of taxation depends upon the growth of the unoccupied portions of the city, particularly north of the Harlem River. This year $55,000,000 is added to the assessed values of real estate. The result is that the rate of taxation will not be materially increased, although the appropriations are nearly $4,000,000 greater than the year before. This increase in value [page 60] cannot go on unless the upper part of the island is provided with increased facilities of transport... It therefore concerns the citizens as a whole to see that these increased facilities are provided, and it will be proper for the city itself to make the provisions, because of the increase in the value of property which these facilities will create.¹⁷

Some business groups and some of Hewitt's political allies in the County Democracy responded with strong approval of the Mayor's plan. The Real Estate, Cotton, and Produce Exchanges¹⁸ voted resolutions in its favor, and the Chamber of Commerce, which had helped draft the bill sent to the Legislature, lauded Hewitt for his non-partisan-ship while echoing his message's prophecy of an imperial future for New York:¹⁹ "the elimination of passion from politics happily conduces to a union of men of all parties in measure of municipal concern . . Under the intelligent initiative of his honor, the mayor, the imperial destiny of this, the Metropolis of the Western Hemisphere, is secure."²⁰

Simon Sterne, a prominent lawyer interested in railroad regulation and reform, and an old friend and political ally of Hewitt's from the days when he, Stern, served as Secretary of the anti-Tweed Committee of Seventy, made perhaps the best case for the Mayor's plan. In a long letter to the Record and Guide, he spoke of the money the city was losing by granting perpetual franchises to corrupt and inefficient corporations like the Manhattan Company, and also pointed to the success of public projects like the Erie Canal, the Croton dam, and the Brooklyn Bridge.^21> "We are on the threshold," Sterne wrote, "of an economic development of very considerable influence and consequence, which will modify the opinions and theories which in the past generation have exalted private enterprise and invited it into spheres beyond its proper field and limited the public machinery to narrower functions than is consistent with public interests."²²

However, Sterne's words, like the Mayor's, fell mostly on deaf ears. Some of the businessmen to whom Hewitt appealed desired rapid transit as much as he, but they disagreed with him as to the best way of obtaining it. One critic questioned the constitutionality of public ownership.²³ The Mayor's good friend, and another County Democracy ally, Orlando B. Potter,²⁴ who owned a great deal of real estate in New York, chided him for too quickly losing faith in the capacity of private enterprise to undertake rapid transit improvement.²⁵ Other businessmen lost interest when the New York Central rejected Hewitt's offer, and still others chastise him for having made the offer to this "giant monopoly" in the first place.²⁶ Even the Record and Guide, which, as might be expected, strongly favored the Mayor's proposal, nevertheless argued that he had perhaps insufficiently considered the possibility of the Manhattan Company extending its line and adding new tracks for [page 61] express service. This was of course a departure from principle, but without Vanderbilt, and with the expectation that an underground road might take as long as ten years to build,²⁷ the Record and Guide, like many proponents of rapid transit, sought more immediate relief.²⁸ Technology presented still another problem: Hewitt's proposal called for steam power at a time when other technologies -- cable-power, compressed air, and particularly electricity -- were on the point of being proven feasible.²⁹

Aside from this variety of issues, and notwithstanding the disagreements even among those advocating improved rapid transit, the principal reason for the failure of Hewitt's bill was that it had absolutely no political weight behind it. The Mayor's own faction, the County Democracy, was losing strength in both the State and the City. He had been elected Mayor in 1886 with Tammany support, which he had doubtless accepted out of ambition, but which he claimed to have accepted only because it was his duty to defeat "that socialist Henry George."³⁰ Once in office, however, he had thwarted Tammany at every turn,³¹ and he could expect no help for his rapid transit plan from that quarter, or from the Board of Alderman which it controlled. Nor did he have any ties with Boss Platt's Republican machine in Albany, and this, plus the Manhattan Elevated Company's bipartisan collusion with both sources of political corruption, assured that Hewitt's plan would scarcely even receive a hearing in the Legislature.

There was, of course, one source of support -- the people -- that the Mayor might have tapped, but quite characteristically did not. Years later, in a letter of 1895 to tenement-house reformer Richard Watson Gilder, Hewitt would claim that his rapid transit plan was inspired by a desire to help the poor in the overcrowded slums of the Lower East Side. "So in regard to rapid transit," he would write, "my main idea was to get these people into purer air, with better surroundings at a low cost. My trouble was that I did not take the public into my confidence, mainly because I did not wish to pose as a benefactor or a philanthropist. I regarded it as my duty to improve the conditions of urban life."³²

Hewitt's sincerity in the above regard need not be doubted, though he was hardly what one might describe as a compassionate man, and he was never well-known as a social reformer. But there is a much more important point to make, which is that neither he nor, somewhat later, the members of the Chamber of Commerce, ever considered turning directly to the public for aid in implementing their subway plans. Both he and they hoped and expected to attract a reputable and wealthy capitalist, who failed -- or, in the case of the Chamber's effort, very nearly failed -- to come forth. Both his and their obsessive fear of Tammany precluded their developing appropriate lines of political patronage. And neither he nor they made any attempt, indeed they discouraged every attempt, to cultivate or mobilize popular support. This helps to explain why it would take twelve more years before the plan for which the Chamber eventually honored Abram Hewitt would become a reality.

Part II, Section 3

[page 62] Abram Hewitt lost two battles in 1888; his rapid transit bill was defeated, and ha failed to be re-elected Mayor of New York. He at first declined to stand for a second term, but finally ran¹ on an Independent ticket against the Tammany candidate, Hugh Grant,² who soundly defeated him.

Patrician reformers then and afterwards would claim that the Tammany hiatus between Hewitt's mayoralty and the victory of Reform candidate, William Strong, in 1894, stalled action on behalf of an underground road and put an end, at least for a time, to the possibility of a publicly funded rapid transit system. The Record and Guide, no friend of Tammany's, but an impartial critic of Hewitt's conduct as Mayor, thought otherwise. It described Hewitt as the best of his kind, "probably the ablest chief magistrate this city ever had," but added that sometimes, his kind was not what was wanted: ". . . he was too brilliant a man for the position. He was cranky, erratic, and, in many respects, impracticable. He was at fault on such . . . subjects as rapid transit." Compared with his erudite predecessor, the_new Tammany-sponsored Mayor could not_ be expected "to write as brilliant letters and messages," but he could be expected "to help along more efficiently than Mr. Hewitt needed public improvements."³

Tammany control of City Hall presented no insuperable obstacle to the realization of C. W. Sweet's goal, which was more and better rapid transit. Sweet of course acknowledged Tammany as a problem, but he believed that the Tiger had grown tamer, or was at least better trained than in the days of the Tweed Ring: "fraudulent speculation" and "deliberate stealing" were rare; and "Richard Croker and his assistants have evidently been doing their best to reconcile the interests of Tammany with those of the city."⁴ "The new mayor," argued the Record and Guide, "will take care of Tammany Hall as a matter of course, but his first duty is to the people of New York City. We want more rapid transit -- some better means of getting up and down town by vehicular traffic, both on the east and west sides."⁵

The Record and Guide was once again proven right. Hugh Grant did his best for rapid transit. And though what he was able to do fell short of the desired goal of subway construction, one indirect result of his activity was that influential segments of the public began to swing toward the idea of an underground road funded by the city. Tammany did not lead but rather followed the course of public opinion, and since public opinion feared governmental and favored private enterprise, Hugh Grant tried to provide capital with its best and last real opportunity to build a subway on its own. Once this effort had failed, through no fault of his or Tammany's, the way was open to municipal ownership, and thus Abram Hewitt, who in 1888 had lost the first battle, was able in 1894 to win the war.

[page 63] It was not Tammany but the business community, the transit monopolies, and Broadway property owners who slowed the progress of the rapid transit decision. Business leaders wanted rapid transit, but they could not agree among themselves what form it should take, or whether it should be a private or a public venture. The transit monopolies -- the Manhattan Company and the Metropolitan Railway -- did their best to add to and profit from this confusion, and were generally negative in their response to any suggestion of private underground railway construction, much less a subway owned by the municipality. The Broadway property owners kept in the background, maintaining a discrete but effective silence; the mere mention of a Broadway route -- the only conceivably profitable one -- was sufficient to raise the spectre of their opposition, thereby discouraging any capitalist who might come forth to do the job.

Some idea of the division among business leaders on the rapid transit question can be derived from two series of interviews conducted in March 1889 and again in May 1890 by the Record and Guide. The first straw poll was taken in regard to the Manhattan Company's proposal to annex part of Battery Park, the southern terminus of the line, for a switching yard and loop that would permit their trains to accelerate the return trip north. A few prominent businessmen were adamantly against the Manhattan proposition, on the grounds that it would mar the Park, and, more important, that it would not materially affect the speed or service of the elevated trains, despite the Company's assertions to the contrary. These opponents of the proposal spoke of "a more permanent solution of the rapid transit question," and usually mentioned underground road, particularly the Arcade railway plan for a road directly under Broadway.⁶ Many businessmen were willing to allow the Manhattan to have whatever it asked for, in the hope and expectation that this would provide the city with some measure of immediate relief. But even this group recognized that sooner or later the existing elevated roads would have to be supplemented or altogether replaced by an underground line or a viaduct railway.⁷

Others thought that extension of the existing elevated lines would suffice for the future rapid transit needs of the city. For example, Alexander E. Orr, President of the Produce Exchange and later President of the Chamber of Commerce and Chairman of the Rapid Transit Commission of 1894, was wholly in favor of the Manhattan's request. Considering the important role that Orr would subsequently play in promoting and implementing municipal ownership of an underground road, his remarks are worthy of note. "I think Mr. Gould's ideas," he said,

. . . are exceedingly valuable to the people of this city. Individually, as a citizen, I would willingly grant the Manhattan Road any extra facilities which they may think necessary to the development of their lines for the convenience of the public. The officers of that road were courageous enough to build and extend [page 64] their system to accommodate the upper parts of the city where it did not pay them to run, and they should be the first to be given an opportunity to see what they can do for the people. I think the present system of elevated roads can be made to meet the requirements of the next five or ten years. As to a future plan, I don't favor an underground plan, nor do I think a road through the blocks will do. Such a road would have to charge too high a fare to obtain remuneration on the immense cost of buying the right of way and constructing the railroad of solid masonry.⁸

The question posed in the second straw poll was whether private capital or the city itself should undertake rapid transit construction. Some businessmen raised no objections to either municipal ownership or construction. Others favored public ownership, but followed Mayor Hewitt's plan to give over construction and operation to a private company.⁹ Most businessmen were against the city owning or building the road. A few opposed municipal involvement on the purely ideological grounds that such a proposal presaged "paternalistic government."¹⁰ The majority was fearful of allowing Tammany to obtain control of so costly and profitable an enterprise. Typical of these responses were the remarks of V.K. Stevenson, identified as a "large property owner":

... in view of the short duration of each Mayor's term in office, the vicissitudes and changes in politics, and also of the fact -- which I am heartily in favor of -- that our adopted citizens having the right to vote, many of them not speaking our language fluently, are imposed upon by designing men, who slip into office at intervals, which is radically disadvantageous to good city government, and also in view of the fact that the more financial undertakings and obligations the city assumes, the more chance for fraud and financial entanglements, adverse to the interests of taxpayers. I think that for the city to undertake the building of a rapid transit railway would be ridiculous.¹¹

These responses of course reflect one of these brief periods in the last two decades of the nineteenth century when the Manhattan Company and its elevated roads seemed to offer if not the best at least the only hope for improved rapid transit; the attitude of most businessmen was to regard the Manhattan as a last resort chosen out of desperation. Yet it is difficult not to notice the fact that many business leaders were more than ready to overlook the faults of the Manhattan, but were preoccupied with the potential danger that might ensue from Tammany, should the city own or build a rapid transit road.

[page 65] It is no simple matter to discern the reasons for this excessive fear of Tammany. Past experience alone cannot explain it, though the Tweed Ring and other lesser scandals surely helped to foster this attitude in patrician businessmen. Politics also played its part. As Abram Hewitt's County Democracy and A. E. Orr's reform political faction in Brooklyn demonstrate, patrician businessmen often had political as well as ethical motives for opposing Tammany; when Tammany was "in", they were "out."¹²

Yet something more than either memory of Boss Tweed or mere political factionalism was involved. The obsession with Tammany was a kind of smokescreen which permitted patrician business leaders to shrink from facing facts they had no wish to confront, and from placing blame where it really belonged -- on the system of unregulated capitalism to which most of them adhered. It was easier and far more comforting to condemn Tammany, than to question one's own assumption or one's own business associates. It was less difficult to reject municipal ownership or construction because of possible Tammany corruption, than to acknowledge that the solution to the problems of the city and its people required the acceptance of new principles and a1so new rules for business organization and performance. Men like C. W. Sweet and Simon Sterne harbored no illusions regarding Tammany, but in their desire to find practical and expedient solutions to the city's problems, they modified their attitude to "bossism." It was not necessary to forget "the great frauds and malversations of the period 1868-1871," in order to see that a rapid transit railroad, like the Erie Canal, was more than worth its small cost in corruption.¹³ This was a lesson which most patrician businessmen were unwilling to learn, and their failures in this regard would have its effect in shaping the final outcome of the rapid transit decision.

For Tammany Mayor Hugh Grant, however, there was no choice but to further that decision in whatever way he could. Faced with division and confusion among business leaders, he sought some way to reach firm conclusions and an acceptable solution of the rapid transit problem. He attempted to alter the Rapid Transit Act of 1875, appointing a new Commission with enlarged powers, a staff of experts, and a longer term of office.¹⁴ Suspicion of a rivalry with Tammany, however, was not confined to patrician businessmen. The Republican machine in control of the Legislature feared that Tammany might profit politically from the creation of a new rapid transit system, and Grant's bill was therefore stalled for two years in Albany.

In the interim the Mayor appointed a group of businessmen to yet another Commission under the old law.¹⁵ This Commission, composed of August Belmont (Sr.), William Steinway, Charles S. Smith, John H. Starin, and Orlando B. Potter,¹⁶ was as distinguished and patrician a group of businessmen as could be found. But as their report concluded, they had little power to do anything toward rapid transit improvement. The principal problem was that no suitable routes were available. As the Times put it, "... it was found that the statutes had been so manipulated -- that no railroad could be [page 66] constructed under or over any existing elevated railroad structure, or across, over, or under, or through Broadway, Fifth Avenue, Forty-second street, the Boulevard, West End Avenue, or any of the streets bounding Morningside or Riverside Parks (except Tenth Avenue and One Hundred and Tenth Streets)."¹⁷

This Commission and the one which followed it in the latter part of 1890, composed of Steinway and Starin of the first board, and with the addition of Samuel Spencer, Eugene Bushe, and John H. Inman,¹⁸ did, however, serve a purpose. Boss Platt and the Republicans in Albany were impressed and somewhat placated by the bipartisan distinction of Grant's nominees, and this, in conjunction with widespread popular and interest-group agitation¹⁹ for the passage of the Mayor's bill, resulted in the Legislature's approval in the Spring of 1891. The new Act disposed of the six month time limit in the old law, and established the Commission for an indefinite duration. This provided the new body, unlike prior boards, with a sufficient period in which to consider alternatives to the existing modes of transit. The new law, like the old, accorded the Commission the power to chart routes, decide on motive power, devise plans for construction and operation, obtain the consent of property owners or, failing this, of the Supreme Court, and establish the terms on which the franchise was to be auctioned. The Board was also empowered to grant additional franchises to existing railroad companies.²⁰

With the aid of these two experts, the RTC set to work and quickly concluded, even before the passage of the Mayor's bill, that an underground four-track railway would provide the only viable solution to New York's mass transit problem. It took somewhat longer to decide on the matter of the most suitable route, the type of construction, and the most feasible motive power. By May 1891 the Board was prepared to write its report to the Mayor and Common Council. The obvious route was chosen -- for being the most profitable one -- through Broadway from South Ferry to 59th Street, then through the Boulevard (upper Broadway) to 169th Street, and finally through Eleventh Avenue and over the Spuyten Duyvil creek to the northern limits of the city. A branch route on the East Side, beginning at 14th Street and going up Fourth, Park, and Madison Avenues to the Bronx was also proposed. Given the possibility of a shallow, intermediate-level, or very deep tunnel, the Commission opted for the first alternative, calling for construction of a shallow or "Arcade" tunnel²³ directly below Broadway in the downtown area, which would then become a viaduct railway at selected points in the less populated northern sections of the city. Deep tunnels were rejected because they are more costly to construct, and, perhaps even more important, steep stairs or long waits for elevators might discourage downtown area short-trip passengers upon whom the initial success of the subway would depend.²⁴ There was some disagreement between the two engineers as to whether the road should have four tracks all on one level, or whether the express tracks should be located below the local tracks. The Commission preferred the former alternative, again to encourage short-run traffic. As regards motive power, the decision was for some form "secured without [page 67] combustion in the tunnel," which, as the RTC indicated, ruled out steam and probably meant electricity. Inasmuch as electric power had not yet been proven feasible at the required speed of forty miles an hour,²⁵ the question was left for further consideration. The cost of the enterprise was estimated at $50,000,000.

In reaching its conclusions the RTC was faced with a dilemma which was the result of two contradictory purposes. It saw itself as under the obligation "to lay the foundation for . . . a broad and comprehensive system of rapid transit" that "would meet the needs of the city at present and be capable of expansion in the future."²⁶ Unlike the RTC of 1875, it refused to choose only that which it knew would be most attractive to capitalists. It met its obligation by proposing a rapid transit system as comprehensive as and almost identical to the one put forth by the Senate Committee of 1866. At the same time it did want, indeed its most important task was, to tempt a capitalist or capitalists with sufficient means to buy the franchise and build the subway. All of its engineering decisions -- an underground road rather than an even more expensive viaduct railway,²⁷ shallow tunnels, non-combustive motive power, four tracks on one level -- as well as its choice of a lower Broadway route, were designed to fulfill this second duty. And, despite criticism from newspapers and reformers,²⁸ its offer of the franchise for a term of 999 years was made with precisely the same aim in mind; the two purposes, however, were mutually exclusive. The needs of the city and the requirements of private capital did not and could not be made to coincide. When the franchise was offered for sale in December 1892, there were no reputable bidders.²⁹

Several reasons explain this rather pathetic failure after so much good will and hard work. In the early 1890's subways seemed more than ever a costly and not necessarily profitable innovation. In the 1860's the first steam-powered subway in London had offered New York a precedent which, comparatively, was far more promising than the first electric subway, the City and South London Railway, completed in 1890, which was not only unprofitable but also too slow to meet New York's needs³⁰ The RTC of 1891 also added to the franchise certain restrictions which may have discouraged prospective bidders. It determined the fare uniformly at five cents; it mandated completion within five years or forfeiture of a three million dollar security bond; and it requested the full amount of the bid thirty days after the auction. Never to be discounted, of course, was the matter of necessary permissions from Broadway property owners, more than half of whom had not even responded by the time that the franchise was offered for sale.³¹

Leaving aside this last problem, which would not be resolved until a route other than Broadway was chosen, everything else might have easily been overcome, were it not that a comprehensive underground system was very costly, and that so much money was already invested in existing modes of transit. In addition, the two transit monopolies -- the Manhattan and the Metropolitan -- were actively engaged in dissuading investors from the subway venture.

[page 68] Early students of the subject like Robert Brooks, Clarence McNeil,³² and James Blaine Walker too readily accepted the view of a "reform" rapid transit expert like William Barclay Parsons, who claimed that the RTC of 1891 was a "Tammany Commission."³³ All the evidence, however, belies Parsons assertion. His remark is interesting only because of what it neglects to say -- that is, if Tammany did have anything to do with the RTC's failure, its role was far less significant, and it was at the very worse merely the humble servant of those parties with a real interest in the matter, the two transit monopolies.

The Record and Guide was not as reluctant as Parsons to call a spade a spade. It not only identified these parties, but also left no doubt as to the immense power -- the web of financial and political connection -- which they enjoyed.

Between the Manhattan' Elevated Railway Company and the Metropolitan Traction Company there is a perfect unity of sentiment regarding the projected underground road. It is needless to say that it is not a friendly sentiment. From no person identified with either the Manhattan, owner of all the elevated roads, or the Metropolitan, owner of nearly all the important surface lines, has a friendly word ever been heard or can a friendly sentiment be expected toward the underground railroad enterprise. This is only natural and was to have been expected. But without a knowledge of the personnel of these companies there can be no adequate conception of the ramifications of this adverse sentiment. In the Board of Directors of the Manhattan . . are George J. Gould, now the President..., J. Pierpont Morgan of Drexel, Morgan, & Co.; Sidney Dillon, Robert M. Gallaway, President of the Merchant's National Bank; Edwin Gould, Russell Sage, Samuel Sloan, Simon Wormser, Chester W. Chapin, and George Bliss. In the Metropolitan . . ., owner of the Broadway and Seventh Avenue, Sixth Avenue, Ninth Avenue, Belt Line, Avenue D, Houston, West Street and Pavonia Ferry, Bleecker Street and Fulton Ferry, Chambers Street, Cross-town and other surface lines, are William C. Whitney, ex-Secretary of the Navy; Col. Daniel S. Lamont, former private secretary to President Cleveland; John O. Crimmins, Thomas F. Ryan, Thomas J. O'Donohue, and Wm. L. Elkins and Peter A. B. Widener, of Philadelphia... In addition to the influential array of directors of the two companies above mentioned, there are also several hundreds of stockholders in both corporations, embracing a very large proportion of the investing class of the city's population, who are all the more potential in directing and supporting the policies and purposes of those corporations because they are not publicly identified with them.³⁴

[page 69] Considerations such as these point to the real if indirect accomplishment of the RTC of 1891. It demonstrated that private capital would not and, in the light of the powerful opposition of the transit monopolies, could not, construct an underground rapid transit system. For two more years the Commission continued in vain to dicker with the Manhattan Company for extensions of its lines and improvement of its service. Acting under the restrictions of its legal mandate, it had no other choice.

But even before the franchise was unsuccessfully offered at auction, other parties were busy promoting alternatives to private capital. A "reform" newspaper like the Times and a business group such as the Real Estate Exchange and its spokesman, the Record and Guide,³⁵ were of course eager for a new rapid transit system, and had long before come out in favor of municipal ownership and/or construction. Other businessmen hesitated to accept this principle, but they did take a first step toward it by proposing the loan of city credit to a private corporation.

As early as March 1891 banker Jacob Schiff told the RTC that he seriously doubted that private capital could be found "for building a road that would probably cost some five millions of dollars a mile, and upon a return of five cents for each passenger." At that time he urged the city to construct the road on its own, supervised by a group "of businessmen of universally acknowledged integrity and capability," and then, as Abram Hewitt had suggested and as the citizens of Cincinnati had done with their Cincinnati-Southern Railroad,³⁶ to lease the railway to a private operator. With city credit secured at three percent rather the private credit obtained at ten or twelve percent after stock "watering,"³⁷ the projected underground road, even with a uniform five cent fare, would offer ample profit incentive to both the "financial community" and a private lessee.³⁸

Once again, however, Schiff's peers in the "financial community" expressed grave reservations about municipal ownership or construction. They raised two kinds of objections -- financial and political. On the financial side, they argued that even with city funds for construction, a private operator would not be willing to put down money for a subway scheme that would permit the city to own the underground road outright within thirty-five years. The road might not be an initial success, the fare was too low, and the cost of rolling stock, equipment, and the interest on city bonds plus provision for a sinking fund, would eat away whatever small profit might be made. The failure of Abram Hewitt's plan in 1886, they said, sufficed to demonstrate that private capital was not attracted by the offer of public funds, and that Vanderbilt, Depew, and others had seen no chance of profit from the scheme. They also believed that it would be risky for the city to invest its money initially in an enterprise that might fail, and then find itself left with an unfinished road and a huge debt. Moreover, on the off-chance that the road should be successful, it would in the long run be better if a private company were to build it. Private capital would have greater reason to exploit success than the city, and a private firm would quickly expand and [page 70] develop the system.³⁹ Of course all of these reservations boil down to an essential one, which was simply expressed by William Barclay Parsons, the rapid transit consultant for many of these same businessmen: "I am opposed to all socialistic tendencies. It seems to me that the function of government is to govern, and not to manufacture gas, operate railways, or do other things which are the functions of a private corporation."⁴⁰

The business community's greatest fear, however, had to do with politics, with the likelihood that municipal ownership would somehow involve Tammany, which in its view simply could not be trusted with such a venture. Alexander Orr, for example, acknowledged that he had supported the plan for municipal ownership that Mayor Abram Hewitt had sponsored, but that he would not support a similar plan proposed at a time when New York was governed by Tammany. "I should hold the same opinion still," he said, "...provided we had men at the helm of our municipal affairs that we could trust, but as this is not now the case, nor is there any prospect that we soon shall have, I could not and I would not put myself on record to recommend that the city should build this much needed system of rapid transit... to be controlled by the power which controls the municipal government of the City of New York."⁴¹

In 1894 R. T. Wilson, a prominent banker, came before the Chamber of Commerce with a plan which seemed to give private capital precisely what it wanted: city funds without interference from corrupt city government, and a private corporation to construct, operate, and most important, own the road. Wilson asked the Chamber to sponsor a bill by which the city would loan his private syndicate up to two-thirds the cost of construction not exceeding $30 million, with his syndicate putting up the first third and taking the risk of beginning to build before the city spent a cent. Almost all the members of the Chamber were enthusiastic about the plan, even Jacob. Schiff, who mentioned "very dangerous reasons" that were better not discussed -- that is, Tammany -- in order to explain having disavowed his 1891 proposal for municipal ownership.⁴² And almost everyone agreed that Wilson's plan provided ample incentive for a private operator, future investment opportunity for other capitalists, little risk for the city, and, best of all, the promise of a privately owned and operated railway that Tammany could not touch.

Almost everyone, that is, except old Abram Hewitt. The former mayor and aged leader of the County Democracy was a very complex man, and he had in mind a complex strategy that he did not fully reveal in his impassioned orations before the Chamber.

In speaking to that body he referred to the examples of Union Pacific Railroad and the Brooklyn Bridge, to show that partnerships between government and private corporations were often abused and frequently turned out badly.⁴³ He also reminded the Chamber that such a use of city money, as Wilson's plan suggested, was prohibited by the State's constitution, and that any attempt to [page 71] repeal this prohibition or amend it in the interest of this special case, would both be wrong and would lead to interminable delay.⁴⁴

To his credit, the old Mayor believed that the city should eventually own the projected underground road outright. He had had his fill of the Manhattan Elevated Company and the Metropolitan Traction Company, upon whom he sometimes laid the blame for the defeat of his 1888 plan.⁴⁵ As he told George Foster Peabody, he thought the State should constitutionally disallow franchises granted for more than fifty years.⁴⁶ With respect to R. T. Wilson's plan, he wrote Morris Jessup that "the city might just as well retain the ownership of the property and have its ultimate control, as to give it away to Mr. Wilson and his friends."⁴⁷

Hewitt did not rely solely, however, on moral or legal arguments. He knew that the problem was to find a way to induce capital to go along with municipal ownership, and he managed this by means of a strategy that combined the carrot with the stick.

The carrot was something new. It is often said_that Hewitt's plan in 1894 was identical, save for inclusion of the New York Central, to the proposal he set forth as Mayor in 1888. But there was an important difference between the two plans. His 1888 bill called for a five percent yearly payment on the cost of construction, so as to pay for the three percent interest on city bonds and provide two percent for a sinking fund which would pay off the city's capital investment before the expiration of the operators thirty-five year lease. In 1894 Hewitt proposed a four percent yearly payment on the cost of construction, which may not seem like a great deal, but which in fact was quite significant. With a four percent yearly payment, three percent for the interest on city bonds and only one percent for the sinking fund, bonds would be retired at a later date, and the lease would be longer. This in itself, at a time when no one knew for sure. if the subway would be initially successful, offered some incentive to a private operator, who would have more time to garner profit from a railroad which might at first pay poorly. In addition, a four percent rate of interest on the cost would give the lessee who built the road an almost certain guarantee of immediate profit on construction, from which he could afford to pay for the cost of equipment and rolling stock. He would therefore require virtually no capital to commence the enterprise, and if the venture proved successful, what he earned over the course of fifty years of operation would be taxes at a rate -- four percent -- much below what he could have expected had he built the road on his own.⁴⁸

The stick that Hewitt brandished was the competitive threat of subway construction in line with his plan. He believed that the very possibility that some substantial capitalist might accept his deal, would induce companies like the Manhattan or Metropolitan either to compete for the lease themselves, or, failing this, to do something in the way of improving or extending their [page 72] lines in order to forestall competition from a new subway company. Hewitt was convinced that if the city played its cards correctly, the threat of competition would stimulate activity from some quarter, and if not from a new source of capital, then from the established transit monopolies. "I can understand," he told the Chamber,

... that the Metropolitan Traction Company, which has the cable route on Broadway and roads on other streets, would find it very much to their interest to control the rapid transit movement, because of their admirable situation for local distribution from the points where the rapid transit system would necessarily stop its trains... I take it that the Manhattan Railway Company would be very unwilling to see the franchise pass from under their control, when they knew it was to be constructed. And so far from not having competition, I fancy the difficulty will be with the number of competitors that will appear, not only from this city but from elsewhere, to bid for the construction and the control of this great work.⁴⁹

In the spring of 1894, Hewitt was not merely assuming but was in fact certain that there would be at least one bidder and perhaps considerable competition, and this was the best, the last, and the surprise card which he dealt to his dubious colleagues in the Chamber of Commerce. They ware reluctant to turn away R. T. Wilson, for his, after all, was the first substantial offer made by private capital after years of fruitless schemes. To persuade his fellows at the Chamber of the soundness of his proposal, Hewitt needed an offer better than Wilson's, and one which was specifically tied to his plan. In speaking to the Chamber he alluded to "one leading railway company, not the New York Central," which was ready to bid on the contract should his scheme be adopted. Privately, in a letter to his friend Morris Jessup, he revealed that this offer came from an eminently responsible source -- Austin Corbin, President of the Long Island Railroad.⁵⁰ This was enough to do the trick. The Chamber rejected R. T. Wilson's plan, approved Hewitt's substitute proposal, and became the sponsor of a bill providing for municipal ownership.

At this point something happened for which the business elite of the Chamber were not prepared, and which anticipated future events. In their deliberations they had not considered public opinion, nor did they seek popular support. But much to their chagrin, they nevertheless found themselves saddled with it in the form of a piece of legislation, the Butts-Lexow bill, which was similar to their own insofar as it called for public ownership, but which made this principle dependent upon approval by a popular referendum in the coming November election.⁵¹ The Butts-Lexow bill was sponsored by the Central Federated Labor Union and its eighty-three member unions, who hoped subway construction would generate employment in the midst of the national depression that began in 1893. It represented an attempt by labor to have a voice in matters directly affecting it, and was a rare but significant expression of popular sentiment for rapid transit.

[page 73] Hewitt and several other business leaders went to Albany, both to lobby for their own bill, and also with the express purpose of defeating the Butts-Lexow legislation. They achieved the latter aim by making it seem as if a clause in the labor bill prohibiting future construction of elevated roads, in fact guaranteed a transit monopoly for the Manhattan Company. In addition, Hewitt described the labor unions' bill as "anarchical," and implicitly compared it with recent tragic events such as Coxey's Army.

Now we come to the question of the referendum. In three states in this country we have seen within a fortnight insurrections of the most destructive character. Our friends of the labor union don't see that this referendum question is leading to anarchy. The men who are back of this movement had no idea of preserving or protecting, but of destroying property and vested rights. . . Now, so far as the Chamber of Commerce is concerned, we would prefer to go without rapid transit for a generation rather than to have this insidious question of referendum injected into the bill.⁵³

Despite Hewitt's threat, however, the Chamber could not withdraw support from its own bill, and the labor unions steadfastly refused to accept the business elite's bill unless it was amended to include a popular referendum. Thus modified, the Rapid Transit Act of 1894 was passed by the Legislature, and signed into law by Governor Flower on May 22, l894.⁵⁴

The labor union amendment gave Hewitt and the Chamber of Commerce an Act which was not precisely what they wanted, and, as things turned out, not what they needed. Its first effect was to discourage Austin Corbin and his syndicate, who chose not to engage either their energies or their money in a subway scheme which would have to be postponed until the referendum in November, and which would then depend upon the vagaries of the popular will.⁵⁵ Hewitt was bewildered, disconsolate,⁵⁶ and not a little embarrassed at his failure to deliver a deal that had in all probability been the principal motive for the Chamber's acceptance of his proposal over Wilson's. And with the exception of Seth Low, President of Columbia College, who was unreservedly in favor of public ownership,⁵⁷ the other conservative businessmen of the Chamber of Commerce specifically named in the Act as Rapid Transit Commissioners -- Alexander Orr, William Steinway, John H. Starin, John Claflin⁵⁸ -- were left to implement a law embodying a principle which none of them had at first supported, and which, to say the least, they regarded with ambivalence.

Still, there was some consolation in the fact that the Chamber of Commerce was now clearly in a position to oversee activity in behalf of a rapid transit underground railroad. The labor union amendment had perhaps delayed things, but there would doubtless be other capitalists with intentions similar to Austin Corbin's. And the referendum vote in November -- 132,647 in favor of, 42,916 against, municipal ownership⁵⁹ was useful as confirmation of [page 74] the mandate of the Commission, which would be exercised with as little regard for popular opinion and as free from popular interference as possible. Nor would or could there be, or so the new Commissioners thought, any interference from city officials. The Mayor and the Comptroller were of course ex officio members of the Board, but only six votes were needed to carry any motion, and the Chamber of Commerce representation on the RTC outnumbered city authorities by six to two. So long as the Chamber of Commerce was in charge of the situation, there need be no conflict between the demands of public and private enterprise. The principle of public ownership would be applied sanely, flexibly, and in a manner that recognized both the needs of the city and the legitimate interests of private capital. The nefarious interests of Tammany would be avoided. There would be no opportunity for its district leaders and ward-heelers to line their pockets.

The November election had at any rate eliminated this last problem, at least for a time. Patrician reformers, among whom many of the members of the Chamber and RTC figures prominently, and the Republican organization of Boss Platt had united on a Fusion candidate for Mayor, who was one of the Chamber's own, in fact a Vice-President of that body, Colonel William L. Strong. And in what Samuel McSeveney has described as the "midterm upheaval of the 1890's, in which Republicans exploited the depression to overcome a quarter of a century of political stalemate,⁶⁰ Strong had won the Mayoralty and sent Boss Croker packing. The new RTC thus began its work in the most auspicious circumstances, with a city administration composed of men whom it could trust. Things looked good; the large caption on the front page of the Record and Guide in October 1894 read: "RAPID TRANSIT AT LAST."⁶¹

Appearances were deceiving. Tammany would be back, and with a very long memory regarding the men and institutions that that had encouraged its momentary exile. In the interim the RTC would get itself into sufficient hot water with Broadway property owners and the courts to have no need of Tammany in order to feel itself beset by evil forces. Its difficulties would discourage any capitalist of substance from coming forth, and it would be compelled to deal or at least talk endlessly with the old monopolies -- the Manhattan and the Metropolitan. Upon Tammany's return there would be new problems, some real -- the city debt limit -- and some contrived to suit Boss Croker's pleasure. For the patrician gentlemen of the RTC, Croker's Tiger would once again bare its claws. The Commission's independence of Tammany was an affront to his self-respect. And the eminently respectable members of the Commission were themselves too conservative, too hidebound in their anti-labor, anti-immigrant, anti-"socialistic" prejudices,⁶² to conceive, much less initiate, a union of reform and machine that would later provide what John Buenker describes as "bread and butter" urban liberalism -- the heyday of urban reform under such men as Joe Tumulty and Woodrow Wilson, Charles Murphy, Ed Flynn, Al Smith, and Robert Wagner, Sr.⁶³

In the end the public and the labor unions would once again surprise the Chamber and the RTC, and foil their plans, but this time very much for their own good and for the good of the rapid transit subway decision. But by that time -- six years hence -- the new RTC would have become known as the old RTC, and the Commissioners themselves would fit the description of Mayor George B. McClellan: "". . . they (the RTC) were a group of very worthy old [page 75] gentlemen of large business experience but extreme old age, who nevertheless seldom died and never resigned."⁶⁴

Part II, Section 4

At the end of 1901 the Rapid Transit Commission established by the Act of 1894 prepared for the Mayor of New York "a detailed and authentic account" of the long process which culminated in the construction of the IRT. The report was written by Edward Shepard, the Brooklyn reform leader and counsel to the Commission; who then sent it on to the members of the Board for their final recommendations and approval. George Rives,¹ another prominent lawyer appointed to the Commission in 1896, was delighted with the report, and sent Shepard a note in which he clearly caught the tone and meaning that the latter intended it should have: "The history of the present Commission," Rives wrote, "is really a most gratifying reconstruction of a successful struggle against stupidity, cupidity, and indifference, and it seems to me to reflect the greatest credit upon all who have been on the winning side."²

As with all such accounts, "truth" depends upon who is doing the telling and who is doing the reading. Suffice it to say that the RTC's version of the story leaves a great deal unsaid, and that the "authentic" history is far more complex than Shepard's or Rives' view of good guys versus bad guys would lead one to believe.

The six years between 1894, when the RTC set to work, and 1900, when the contract for construction of the IRT subway was signed, witnessed a rerun of all the difficulties that had stood in the way of a subway in both the distant past and in the period since Mayor Hewitt's plan of 1888. The promise of city funds for construction did not eliminate the old problem of the subway's excessive cost. The Commission's first plan was for a subway system that was beyond the means of the city, and also in excess of the cost limit of $50 million imposed by the Act of 1894.³ Its second plan met the cost restrictions of the Act, but was not implemented because of a new money problem, the question of the city debt limit subsequent to the consolidation of Greater New York. As before, the RTC also had difficulty in finding a substantial and reputable capitalist willing to undertake construction and operation of the subway. Some still believed that a subway "wouldn't pay," but just as important as this was the fact that the two great transit monopolies -- the Manhattan Elevated Company and the Metropolitan Traction Company -- which controlled the elevated and most of the surface trolley lines, continued to do their best to discourage any new entrepreneur from invading their territory. Again, Broadway property owners also played their part in delaying and, as it was thought for a time, nearly precluding the subway decision.

All of this points to an important fact which the Commission's account of its own achievement understandably never mentioned. That is, the subway decision had always been and, almost until the end, remained a decision in which only New York's elites were involved. The problem with this was that [page 76] the elites -- the transit monopolies, Broadway property owners, the business community generally, patrician reformers, and Tammany -- were divided and sometimes indecisive, and could not agree among themselves on a common policy to resolve the transit problems and meet the transit needs of New York.

The two elite groups most importantly involved in the decision, the patrician reformers of the Chamber of Commerce and RTC, and the Tammany men who ran the city government, might together have successfully tackled the many obstacles and other elites who stood in the way of subway construction. But in the last years of the nineteenth century these two groups were virtually at war with each other. The inflexibility of both groups, their refusal to forget past grievances, their incapacity to recognize each other's legitimate interests, their mutual suspicion, made it impossible for them to establish lines of communication and patronage which alone would have allowed for the successful conclusion of the subway decision. On its side, Tammany would have nothing to do with the RTC; and the RTC, though expressing willingness to deal with city officials, would only do so as long as direction of the rapid transit decision remained firmly in its hands or in the hands of other men "whom it could trust." Both groups sometimes seemed to consider their struggle with each other almost as seriously or perhaps more seriously than their responsibility to the public fear of Tammany had long prevented the business and reform elite from accepting the principal of public ownership; the battle with Tammany held up the attainment of the subway even when this principle was reluctantly accepted.

Had the decision been left to the elite groups alone, the IRT subway might never have been begun, or would at least have taken even longer to achieve than it did. Happily for New York, by the late 1890's a new party was ready to make its voice heard in the rapid transit subway decision. At the turn of the century poor, immigrant, and working-class New Yorkers, like similar groups in other American cities, were beginning to understand the political world in which they lived, and were learning how to use both reformers and machine politicians to serve their own purposes.⁴ The significance of the subway decision is that it was one of the first major decisions in New York that in the end was really made not by one or another of the elites, but by the public itself. One need not be a sentimental populist to see that it was its great need and its overwhelming demand for the subway, which finally compelled the divided elites to settle their differences and do what had to be done for the city and its people. The decision for the IRT subway was not, as Rives, Shepard, the RTC, and financier August Belmont believed, a singular triumph for patrician reformers and businessmen, but rather one of those rare historical instances in which the public won a great victory. A laborer by the name of E. J. Hawks, whom the Times described as "a broad-shouldered working man," put the matter both succinctly and well when he spoke before the Commission in 1896, at an especially low point in its fortunes: "You want someone behind you all the tine," he said, "someone to push you along and give you nerve."⁵

* * *

[page 77] The new RTC convened for the first time on June 8, 1894. Its first task was to prepare itself quickly for the November referendum, which it easily accomplished by re-adopting the underground railroad plans and routes of the Commission of 1891; but with the proviso that a complete review of the latter body's work would follow upon a favorable popular vote. To facilitate this review de novo, it sent its Chief Engineer, none other than William Barclay Parsons, to Europe, directing him to make a complete and comparative study of those British and Continental rapid transit systems that might bear directly on New York's situation.

Parsons returned to New York early in October 1894 with a carefully written and well-documented report, which was largely responsible for the Commission getting off to a good start. From the outset the Chief Engineer's role in the Commission was not limited to the background position of a strictly technical advisor. As was consistent with his own vision of the engineer's comprehensive responsibilities,⁷ Parsons had a hand in all the RTC's major decisions, and was often its able and articulate spokesman. On this occasion, as was customary with "reform" experts like himself,⁸ he saw to it that all of New York's newspapers and many of its important journals published articles or printed long excerpts from his report. This resulted in the Commission receiving considerable publicity of a positive sort, which doubtless affected the referendum vote. The Times, Tribune, World Commercial and Financial Chronicle, and Record and Guide were all impressed by the thoroughness of the report and its easily comprehensible conclusions, which the Times neatly distilled in the following formula: "electricity, and as near the surface as practicable."⁹

The favorable reception accorded Parsons' report indicates that the problems which the Commission would confront in implementing the rapid transit decision, had nothing whatsoever to do with technological matters. There was nothing startling or, by this time, particularly innovative about Parsons' conclusions. Though Frank Sprague, the great pioneer in electric traction, had not yet perfected his multiple-unit system of control for individually powered cars, an invention which would dispense with heavy locomotives and allow for greater speeds on both elevated and underground railways,¹⁰ electricity was nonetheless a safe bet for the projected underground road, and had already been tried successfully in the City and South London subway, and on elevated lines in Chicago and Liverpool.¹¹ Similarly, Parsons' preference for shallow tunnels had been well established by the RTC of 1891 and his report merely confined and provided European illustrations to support its conclusions

Things took a different and far more controversial turn, however, when in December 1894, Parsons presented a second report to the Commission, in which he touched upon the question of the route and cost of the proposed subway. Briefly stated, he argued that a route constructed under lower Broadway might "exceed the stipulated cost of $50,000,000 by at least $15,000,000," and that, consequently, another route under Elm Street [page 78] (now Lafayette Street), which was then being "improved," should be chosen.¹² Cost was not, however, Parsons' sole consideration. He was also worried about possible hindrance from Broadway property owners, whose objections he summarily anticipated:

Broadway is, at present, the only thoroughfare in the lower part of the city. It is lined with expensive buildings and its traffic at all times is very heavy. These conditions will inflict an increased cost on the construction of a railway, and the crowding of the work of building the latter in an already congested street must interfere with its regular business.¹³

Parsons report acted as a catalyst which brought divisions within the Commission itself out into the open. Starin and Inman, who had served on the previous RTC, were all for retaining its proposed route; Low was exceedingly high-minded and wanted only what was "best for the city"; Orr and the other members of the Board took no public position.¹⁴ But since everyone desired to remain within the cost restrictions of the Act, and since no agreement between the Commissioners themselves seemed possible, it was decided to refer the matter to a special Board of Engineering Experts, composed of Abram Hewitt, Octave Chanut of the ASCE panel of 1874-5, rapid transit expert Thomas Curtis Clarke,¹⁵, engineer Charles Sooysmith, a close friend of Parsons,¹⁶ and Professor William Burn of the Columbia University School of Engineering. This was the RTC's first great mistake.

The Board of Engineering Experts did not close the can of worms opened by Parsons' report. Rather, it created new divisions and disagreements, and led to a publicly aired controversy which, as Abram Hewitt would correctly observe, "disturbed confidence" in the Commission and "very much impaired" its usefulness.¹⁷ More important yet, the dispute over routes played directly into the hands of Broadway property owners, who were provided with ready-made and "expert" arguments to serve their purpose. And an apparently gratuitous recommendation of the Board of Experts for extensions of the elevated roads questioned the very purpose for which the RTC had been established -- publicly funded construction of an underground railroad.

The Board of Experts agreed with Parsons' preference for Elm Street over Broadway on account of the latter route's cost and inconvenience. In a letter to Benjamin Henning, Hewitt revealed another reason for his Board's position: He did not believe that a Broadway route could "be such as to invite investment of capital," and he doubted that the RTC would find any bidder daring enough to risk dealing with Broadway property owners.¹⁸ It was understood that an Elm Street route would involve considerable delay because "improvement" of the street was not yet complete, and there would be new litigation and objections raised by property owners there as well.¹⁹ But Hewitt and the Board of Experts thought that Elm Street was in the long run a safer bet for the proposed subway than lower Broadway, and that while the Commission waited [page 79] for the legal difficulties involving Elm Street to be cleared up, it could use its mandate and the threat of underground construction to force the Manhattan Railway Company to extend its lines and add a third track for express trains.

On this last point The Board of Experts was clearly influenced by Hewitt, whose "strategy" it adopted. The old Mayor was of course not opposed to the idea of a municipally funded subway, but in first proposing the plan, he never intended that the principle of public ownership of the underground road itself should stand in the way of improvements in existing modes of transit. Indeed, his hope and expectation was that the principle of public ownership would give rapid transit advocates a trump card in dealing with private capital generally and with the established transit monopolies in particular. In 1895, with a depression. in full swing and with the problem of routes as intractable as ever, he saw little chance for underground construction. The only alternative was to use the threat of underground construction to force concessions from the Manhattan Company. In order to do this, however, the Commission would have to interpret its mandate flexibly, which the letter of the Act of l894 allowed but which the spirit of the referendum vote did not.

The Act of 1894 empowered the Commission to negotiate with existing transit agencies, and Hewitt wanted it to use this power to secure immediate rapid transit relief. In reply to an article in the Times which had pointed out that the Commission could not force the Manhattan Company to add express tracks and extend its lines, Hewitt obliged the paper to publish a letter, first sent to the RTC, which it had "feebly attempted to suppress."²⁰

In reference to your statement that the Rapid Transit Commission has no authority or power to compel the Manhattan Company to make the required improvements, I venture to suggest that it is scarcely necessary to discuss the point until after the negotiation with the Manhattan Company shall have been concluded and failed to produce results. T have every reason to believe that the Manhattan Company will meet the Commission half way in any intelligent effort to afford immediate relief to the congestion of travel. But if it shall turn out to be otherwise, I am assured by competent legal authority that while the Commission has... no power to enforce compliance with its wishes, the public authorities of this State have the power to compel a corporation chartered to furnish rapid transit to comply with its obligations whenever the requisite authority shall have been conferred upon it by the Rapid Transit Commission. Certainly no corporation will be permitted in this State and in this age to block the wheels of progress, and there are very few managers of railway enterprises, who are so stupid as not to desire to meet the public's requirements as far as the means at their command will permit.²¹

[page 80] There was, of course, a great deal that Hewitt did not know about the "means at the command" of the Manhattan Company. But his point was that the Commission had nothing to lose and everything to gain by negotiating with the management of the elevated roads, and, at the very least, should all else prove futile, calling its bluff.

Some members of the Commission, particularly Seth Low, thought differently. In agreeing to serve on the RTC, the President of Columbia College had expressed his belief in public ownership, on the grounds that "under no other condition is a system likely to be devised and built with a large look ahead in the interest of the city, for private capital is almost certain to select the system which will be most immediately profitable, and it may easily be that such a system may not be best for the city."²² Low now took the position that the RTC had been established and the people of New York had voted to confirm its powers for the sole purpose of building a publicly funded subway. Whether the RTC was successful or whether it failed to accomplish this task, in either case its duty was to make the attempt as quickly as possible, at which time its mandate would expire an4 its work, for better or worse, would be done. Accordingly, Low pressed the Commission to reject the recommendations of the Board of Experts, to drop consideration of the Elm Street route because of the potential delay involved, and to vote on a resolution confirming the route under lower Broadway "already adopted."²³

In the 1902 Commission report to the Mayor, who by an ironic coincidence was none other than Seth Low, there is no reference to this dispute and scant mention of the role of the Board of Engineering Experts. Yet it was this dispute which led to the Commission's first great crisis, which prompted Seth Low's resignation from the RTC in June 1896, and which nearly destroyed the Commission itself, and with it any prospect of a subway in the near future.

In February 1895 the Commission accepted Low's resolution and opted for routes and a plan of construction almost identical to those selected by the RTC of 1891, except that the new routes did not reach the northern limits of the city on the West Side nor go as far into the Bronx on the East Side.²⁴ By state law consent from land-holders owning at least one-half the value of abutting property was once again required, and this, as might be expected, was not forthcoming from real-estate interests along lower Broadway.²⁵ In September 1895 the Commission was thus obliged to appeal to the Supreme Court to secure the consent withheld by the property owners. After first refusing to hear the case, and after being directed to do so by the Court of Appeals, the Supreme Court appointed three commissioners, Frederic Coudert, William Gelshenee, and George Sherman, to assess the project's suitability and determine whether it should be constructed. After long and conflicting testimony from Parsons and other experts, some of whom were hired by Broadway landholders and some of whom clearly served the interests of the transit monopolies,²⁶ the Court's Commissioners decided in March 1896 in favor of the RTC.

[page 81] However in May 1896 the Appellate Division of the Supreme Court rejected the report of its own Commissioners. Coudart, Gelshenene and Sherman were neither rapid transit experts nor engineers. They had not undertaken an independent study, but had relied on the research of Parsons and the RTC, plus what they might learn from the conflicting testimony offered them in public hearings. They were consequently unwilling and unable to give the Court a precise figure regarding the cost of the projected underground railway. In the view of the Court this uncertainty argued against the RTC's routes and plans, and rendered the entire project invalid. The justices also raised objections that would come up again: first, and most important, that the subway's cost would exceed and exhaust the city's debt limit of ten percent on the assessed value of property; and that the projected routes failed to meet the needs of the city, since they did not extend to its northern limits on either the East or West sides.²⁷ As the RTC and everyone else was quick to see, with this judgment the Supreme Court rendered worthless two years of the Commission's work: "...it seemed plain that the Court would not consent to any route under Broadway, or to the construction of an underground route on any other route unless it extended substantially from one end of the City to the other and it was conclusively shown that the total cost would be much less than $50,000,000."²⁸

The Supreme Court's decision threw the Commission into a quandary. Seth Low's position on the Board was no longer tenable. As was consistent with his view of the Commission's mandate, and as required by his advocacy of a policy which had led it to disaster, he resigned on June 2, 1896. Other members of the Board considered resigning or disbanding the Commission, John Inman thought that the RTC's usefulness had been exhausted, Edward Shepard said that an underground road would never be built, because the court wanted an inexpensive road and at the same time one which extended to the northern limits of the city. Parsons, who considered the subway his "life's work,"²⁹ was despondent. Orr alone held on to the hope that the Commission might continue its work by pursuing a policy similar to that proposed by the Board of Experts -- a subway under Elm Street and/or an extension of the elevated roads.³⁰

At this point the Commission was perhaps saved from itself by the force of public opinion. Letters of support came pouring in from labor unions, reformers, and leading businessmen. Lyman Abbott of Outlook and Albert Shaw of The Review of Reviews defended the RTC. Religious leaders such as Felix Adler and prominent Jewish businessmen like Oscar Strauss and Jacob Schiff, interested as Jewish philanthropists in the importance of rapid transit in alleviating the problem of overcrowding in the lower East Side, urged the Commission not to abandon its work.³⁰ In June 1896 a delegation of working men paid a visit to a meeting of the RTC, where they showed no hesitation in giving Alexander Orr, its President, the benefit of their popular wisdom. Despite Orr's remark that the RTC was "law abiding," they told him that "the working people were surprised to see the Commission [page 82] 'knocked out' in one round by five judges," and also that "the law cannot be bigger than the will of the People... The Constitution is not better than the will of the People. There is no law through which you cannot drive a coach and four..."³²

Whether or not the Commission was buoyed by this particular expression of the popular will, it was confirmed by public support and did go on with its work, attempting to serve the public in its own fashion. There was a great difference, of course, between the will of the people and the motives and legal restrictions which limited the activity of the RTC. The public wanted a subway regardless of cost. It also wanted a subway built by the city, but was indifferent as to who leased it or under what terms it was leased after it was built. The Record and Guide interviewed a prominent builder who was willing to see the city spend $100 million if necessary to construct an underground railway, after which, he said, it could lease the road for a dollar and still pay the interest on its bonds from increased tax valuation in areas which the new rapid transit system would help develop.³³ And a labor union spokesman reminded the Commission that the people had confirmed it but for one purpose -- the municipal construction of a subway. This same spokesman, Charles Stoves, failed even to mention the problem of finding a lessee, and the plain implication of his remarks was that if none could be found, the city should go ahead and do the job by itself.³⁴

The RTC was by contrast restricted in its action by the cost ceiling of $50 million in the Act of 1894, and by its own insistence -- embodied in the Act -- that whoever constructed the subway should also operate it, a provision which considerably narrowed the field of potential bidders for the contract. Uppermost in Alexander Orr's mind, for example, was the problem of finding "a lessee whose responsibility is beyond peradventure, and who will save will save the city from all chance of failure."³⁵ To put this another way, it may be said that the RTC was limited by its own perception of economic and political possibility. Its excessive fear of Tammany, and its equally excessive respect for conservative business practice, prevented it from imagining, much less undertaking, any bold initiatives.

In the two years since its institution, the RTC had done everything it could to attract the substantial capitalist that it required if the subway, once built, would be run responsibly and efficiently by private enterprise and free from Tammany control. It had opted for a Broadway route, assuming that this route would offer greater profit incentive to the prospective operator. It had also managed to have the Legislature amend the Act of 1894 so that, at a cost to the city of an additional $5 million, the city rather than the operator would concern itself with payments to abutting property holders.³⁶ Private capital, however, had not been tempted. No one of any means had appeared before the Commission ready to undertake both construction and operation of the road. Difficulties with Broadway property owners, followed by the recent interference from the courts, of course deterred interested parties. Reluctance on the part of a potential bidder [page 83] to enter into competition with the established transit monopolies was doubtless also a factor. And if, as the Supreme Court believed, the Broadway route was too expensive for the city, it was likewise too expensive for a prospective bidder. The greater the cost of construction, the higher the annual fee paid by the operator, which perhaps explains why, even before the Supreme Court had overruled the Broadway route, there were no substantial bidders for the contract.

Two contracting firms, Ryan and McDonald of Baltimore and Drake and Stratton of New York, had come before the Commission, but had been immediately disqualified because neither was in position to operate the subway after construction. When John McDonald, contractor for the Baltimore Belt Railroad tunnel and the man who would eventually build the IRT, was questioned by the Board in February 1895, "his answers seemed to give much satisfaction until he said that his parties, although willing to build the road for less than fifty million, did not care to have anything to do with operation."³⁷

Given its own special requirements, and after the blow dealt it by the Supreme Court, there was no other alternative for the RTC but to acknowledge the failure of its earlier policy, and belatedly accept the recommendations of Abram Hewitt and the Board of Engineering Experts. With Seth Low gone, it was now free to pursue the old Mayor's "strategy" wherever it might lead, and it is hardly coincidental that he was its first choice to succeed Low on the Board.³⁸ For a year and a half Hewitt had been a thorn in the Commission's side. He had released a controversial letter to the Times, and he had testified against the RTC before the Supreme Court commissioners.³⁹ Yet now all was forgiven and forgotten, and he was wooed like a reluctant maiden, a role that he appeared to relish. He refused Low's seat, pleading ill health and preoccupation with his declining business affairs and his work at Cooper Union.⁰ Upon John Inman's death early in November 1896, he was once again approached to accept a seat on the Commission, and once again refused. When William Steinway died at the end of November 1896, he gave careful thought to yet another offer, but finally decided against it, recommending Charles Stewart Smith,⁴¹ his old friend and past President of the Chamber of Commerce. Smith was quickly appointed, even though reformers like Albert Shaw, R. Fulton Cutting, and Felix Adler, and a prominent businessman like Jacob Schiff, preferred another candidate, Charles Stover, the rapid transit expert of the trade unions.⁴² In other words, though Hewitt chose not to serve, he nevertheless led, and it was his "strategy" that now determined the policy of the Commission.

The first move in the game was to chart a new route for the projected subway, the cost and extent of which would satisfy the Appellate Division of the Supreme Court. To accomplish this, the RTC sacrificed the public's need and desire for a comprehensive rapid transit system along the lines laid down by the Senate Committee of 1866 and the Commission of 1891. From [page 84] the point of view of hindsight, this was a grave error which would take New York almost twenty years to rectify.⁴³ From the Commission's vantage point in 1896 it was a simple and correct decision necessitated by existing circumstances. The Courts had rejected, the city debt limit could not bear, and private capital would not bid for a more ambitious subway project. It would take time and more active public effort, broader acceptance of the new philosophy of public responsibility for public works, and clear evidence of the profitability of underground travel, to change these circumstances.

In 1896, then, the route selected was a "trunk line," starting at City Hall and running under Elm Street and Fourth Avenue to 42nd Street, where it crossed to the West Side and ran under Broadway and the Boulevard to Kingsbridge, and with an East Side branch beginning at the Boulevard and 103rd Street and crossing east and running under Lenox Avenue, and then across the Harlem River to Bronx Park.⁴⁴ The cost of the projected road, which extended in zig-zag fashion nearly to the city limits on both the West and East sides, was estimated at between $30 and $35 million.⁴⁵

Since property holders on Elm Street of course refused to give their consent to this new route, the Appellate Division of the Supreme Court was, as expected, again asked to approve the RTC's plan. In July 1897 the Court appointed three new commissioners, Arthur Williams, John Sabine Smith, and George Young. This time the Court's commissioners made a careful and independent study. They traveled to Boston to inspect its tiny new subway, and while hesitating to compare this small undertaking with the enormous venture proposed for New York, they were impressed with its dry and well-ventilated tunnels, with its salutary effect on traffic congestion in downtown Boston, and its fair profit return.⁴⁶ In November 1897 they approved both the routes and the cost estimate that the RTC had submitted. In setting forth their decision, Williams, Smith, and Young recognized the necessity for improved rapid transit in a city where increased traffic at an annual rate of twenty-million passengers had long overwhelmed the capacity of existing modes of mass transportation.⁴⁷ In December 1897 the Supreme Court assented to this judgment by accepting the report of its commissioners, and by approving the plans and routes of the Commission.

The Court made one further attempt, however, to interfere with the RTC's work. The conservative and cautious justices argued that the contract for so vast and costly an enterprise should be secured by a sum greater than $l,000,000 bond, and the line on the contractor's equipment stipulated in the Act of 1894.⁴⁸ The Court accordingly fixed a bond of $15 million, to run the entire duration of the contract. Two months later, at the request of the RTC, it modified its action by requiring one million in security for full term, and fourteen million during construction.⁴⁹ At the end of 1899 the Court would reduce this construction bond further still, to five million, but this relief came far too late to save the Commission from the trials of the next two years.

[page 85] The Supreme Court's fifteen million dollar bond virtually destroyed Abram Hewitt's and the Commission's "strategy." Hewitt's game plan depended on two conditions: the real possibility of attracting a number of responsible bidders for subway construction and operation, and/or the threat of the same to oblige the Manhattan Company to provide more immediate relief, either in the interest of forestalling competition from a subway for a few years more, or merely to make itself competitive should a subway be built. The effectiveness of this strategy, however, was severely weakened by the $15 million bond; which acted to deter any new source of capital that might have ventured $1,000,000 plus the cost of equipment, but which would not venture, with double sureties,⁵⁰ what the Times estimated as $39 million in initial capital investment for an undertaking that many still considered risky and which, in addition, was likely to incur the hostility of the two existing transit monopolies.

This situation allowed the two transit monopolies to control the situation, to hold the trump card which, according to Hewitt's plan, was to have been the sole property of the RTC. The large bond assured the Manhattan Company that it was unlikely to encounter competition from an independent source, and that the only other company willing and capable of bidding for the subway contract would be the Metropolitan surface railway, which, like itself, was less interested in the deal that it might make with the RTC, than in the deal it could prevent the RTC making with some third party.

To be sure, the RTC tried to worm out of the box that it found itself in. It sounded out Chauncey Depew and Cornelius Vanderbilt of the New York Central, and Charles Clark of the New Haven and Hartford,⁵¹ but these conversations proved fruitless. This left the Commission with a strategy that had backfired, and with only the two transit monopolies in control of the game.

The Manhattan was perfectly willing to extend its lines and to increase its express service, but at its own pace and in line with its notions of where and when such improvements would be most profitable. As the Times pointed out,⁵² merely electrifying its existing lines would cost almost more than it could afford while still paying a decent dividend, and a thorough-going renovation of its system such as the Commission wanted, was out of the question in the near future.

The Metropolitan would make two offers: one in January 1898, right after the Supreme Court had fixed the $15 million bond for the duration of the contract, and before it had modified this security to $14 million for the term of construction; and again in March 1899, when the Commission and the city had problems with the debt limit. The second offer, about which more will be said below, signified the demise of the principle of public ownership; and was one turn of the screw too many for the public, if not the Commission, [page 86] to bear. The Metropolitan's first offer provides a good example of the kind of tactics employed by the transit monopolies. In making this offer, William C. Whitney, Thomas F. Ryan, and John D. Crimmins were at pains to emphasize that the $15 million bond was for their company "a matter of secondary importance," so long as "the enterprise is or can be made profitable."⁵³. The Times showed perspicacity in seeing this as an attempt by the surface railway

. . . to strengthen the decision of the Appellate Court to exact the bond despite any argument which counsel for the Rapid Transit Commission may submit for a modification of the terms. If the Court's order to that effect is entered under present conditions, the Metropolitan people will control the situation absolutely. If it is definitely announced that no one else can give the required bond, and after such an order is entered, that company may, if so disposed, kill the project by declaring "the enterprise cannot be made profitable."⁵⁴

In addition, the RTC's negotiations with the Manhattan and the Metropolitan were made all the more difficult and unprofitable because of the new political and fiscal context in which, as of January 1, 1898, they had to be conducted. The preceding November the Tammany candidate, Robert Van Wyck, had won a large victory over the Reform party's Seth Low, who had not received -- as had William Strong in 1894 -- Republican support.⁵⁵ This was an unexpected defeat for the "Mugwumps" -- County Democrats and Independent Republicans alike, and patrician reformers all -- many of whom either sat on the RTC on were associated with its sponsor, the Chamber of Commerce. The new Tammany Mayor's inauguration was simultaneous with another event with unfortunate consequences for the Commission -- the consolidation of Greater New York, joining Manhattan to its suburbs in Brooklyn, Long Island, and Staten Island.⁵⁶ Consolidation ended the old problem of suburban exodus. But in annexing more than ninety previously separate governmental units, the new metropolis was also obliged to assume their debts. This led to great uncertainty about the condition of the city's debt limit of ten percent on the assessed value of property. Until new estimates of the city's enlarged tax base were made, the realization of a municipally constructed subway was indefinitely postponed.⁵⁷

Historians of the subway decision tend to connect the question of the debt limit to Tammany's return to power, choosing to see it as an issue that machine politicians trumped up and exploited in order to hinder the Commission's work.⁵⁸ But this is a false connection deriving from the same source as the view which describes the RTC of 1891 as a "Tammany Commission," and which holds Tammany responsible for the multitudinous problems of the RTC of 1894. [page 87] In resisting the temptation to make Tammany a scapegoat, one does not, of course, imply that it was blameless. But it would be equally mistaken to accept uncritically the point of view of some patrician reformers and some members of the RTC, who saw themselves as champions of decency and the public good, and Tammany politicians as wholly corrupt and indifferent to anything but petty graft, payroll padding, and favoritism.

Despite the public image of non-partisan-ship that the patrician reformers cultivated, they were not "above politics." Indeed, they constituted a political faction, or a number of factions, opposed to Tammany, and in the 1880's, 1890's, and early 1900's, they were often successful in their attempts to remove machine politicians from office.⁵⁹ Even when out of office, through civic organizations, control of or influence with newspapers and journals, and as part of the city's business, professional, and cultural establishment, they exercised a great deal of power, and had their say and some effect on a large variety of municipal decisions. Men like Abram Hewitt, Alexander Orr, Edward Shepard, Seth Low, George Peabody, John Inman, John Starin, Charles Stewart Smith, and many others associated both with "reform" and the Chamber of Commerce, were real political leaders. They had their own well-oiled machines; they were highly conscious of political patronage; and in some cases were personally ambitious for political office.⁶⁰

These patrician reformers were men of greater integrity than the machine politicians, and at least some of them were more concerned with the solution of large substantive public issues than with matters relating to political patronage. The one, however, was not possible without the other: as one troubled associate wrote to Edward Shepard, "Realizing that the leader of a machine always become a 'boss,' I again say I admire your pluck, while I deplore your methods."⁶¹ By contrast, there is no question that a man such as Richard Croker accorded a very high priority to political patronage. But in the last two decades of the nineteenth century even Tammany bosses concerned with private favors to party regulars and individual voters, could not afford to ignore questions of public policy affecting the larger electorate. The old view that "regular" party politicians were indifferent to substantive issues can no longer be sustained. Their survival depended on their taking an interest in policy, and in an era in which reform was fast becoming a watchword, even such an organization as Tammany had to accept it as a reality.⁶²

The division between the patrician reformers and Tammany, then, had less to do with "good" versus "corrupt" government, than with power and political patronage, with the question of who would direct and control decisions on important public issues. The problem was that both groups reacted negatively to the authority of the other. The reformers were hostile and suspicious of decisions controlled by Tammany; machine politicians often opposed certain decisions merely because reform leaders were in charge of the their implementation.

[page 88] The rapid transit subway decision is a case in point. It will be remembered that the Chamber of Commerce sponsored Act of 1894 was specifically designed not to exclude city officials from participation in the rapid transit decision, but to insure that they had little control over it. When Tammany returned to power in 1898, it was therefore determined to rid itself of a Commission over which it had scant authority and from which it could not expect political patronage. Mayor Van Wyck directed his cabinet officers to have nothing to do with the RTC,⁶³ and Boss Croker was particularly candid in expressing his views and purposes.

As to what the Rapid Transit Board will do, I have but slight notion. I am not in the board's confidence. Moreover, I have but little respect for it. In all the years of its existence it has done nothing but talk, talk, talk. Five bluejays could have done as much. The people have repudiated it at the polls; it has done nothing but talk and waste time and money. The sooner it gets out the better for the public and the better for its own self-respect.⁶⁴

In March 1898 Croker made his one and only positive move to depose the Commission. He and state Republican boss Thomas Platt agreed on a bill, sponsored by Senator Ellsworth, abolishing the existing RTC and replacing it with a "bipartisan" board composed of an equal number of "regular" party Democrats and Republicans.⁶⁵

Public reaction to this bill, however, was overwhelmingly unfavorable. Abram Hewitt and the Chamber of Commerce did a good job of raising the moribund spectre of Tweedism, convincing the public that Tammany had only one motive in sponsoring the bill, which was the desire "to lay the hand of spoliation upon the public funds," and "secure the control of every dollar of the public property which can come under their supervision."⁶⁶ Hewitt, who presided over a citizen's Committee of Fifty organized to fight the bill in Albany, spoke of the members of the present Commission as "men who have no superiors in this community or in any other... men who have no personal motives to serve, who have nothing but a desire to do their duty to the community," while describing the RTC of 1891 as a "Tammany Commission" which had done nothing for rapid transit in its three years in office.⁶⁷ And John Harsen Rhoades, in a speech before the Chamber of Commerce that was published verbatim in the reform-oriented Times, said that

Tammany Hall did all it could to defeat rapid transit when it was in power, and now, when its efforts seem to fail, it seeks to remove an honest Commission in order that it may thus either bury rapid transit for years to come or put it under the control of an obedient Commission. Let the community understand that the powers conferred by law upon the Board are unprecedented in their extent, and, if lodged in the hands of dishonest or incapable men, the possibilities of fraud and blackmail and injury to the City would be a constant menace.⁶⁸

[page 89] Many reformers also thought Tammany deliberately made an issue of the debt limit in order to delay subway construction. The RTC report of 1902, written by Edward Shepard, emphasized the fact that Corporation Counsel John Whalen had held up approval of the contract for the subway for eighteen months from April 1898 to September 1899, with the result that "construction of the railroad was thereby brought to a standstill."⁶⁹ Whalen excused his action by saying that he saw no reason to approve the contract, since uncertainty about the debt limit prevented rapid transit construction and rendered the contract illegal. Shepard refused of course to believe this, and wrote Alexander Orr early in May 1899, suggesting that the RTC make a great public fuss and go to the Legislature about the long delay.

On the very same day -- May 19, 1899⁷⁰ -- that the RTC sent a letter to the Mayor inquiring about the delay, Orr replied in a surprising manner to Shepard's letter. Coming as it did from so partisan a source, and at this particular time in the Commission's history, Orr's letter provides telling evidence to show that Tammany did not invent the problem of the debt limit, and that its fiscal conservatism was shared by eminently respectable businessmen such as the President of the RTC. "I do not believe," Orr told Shepard,

... that at any time since the present Administration took office, that they have been in a position to act in the line of rapid transit construction... there has not been a day since they took office, that they could have authorized the issue of a single bond for rapid transit purposes, nor would there have been a single buyer for such a bond had they issued them.

Orr also warned Shepard "not to create more antagonism than there is between the RTC and Tammany officials," because he believed that Bird Coler,⁷¹ the Comptroller, was on the Commission's side, and that Mayor Van Wyck was "at least half won over." And he excused the delay of Corporation Counsel Whalen by saying that "I have not felt like blaming the Corporation Counsel severely for retaining the contract, for he knew as well as we did that we could not act, and as far as I know, we did not for a year past insist on his acting on the contract."⁷²

Had Tammany merely trumped up the debt-limit issue, or, more precisely, had it dared to exploit a fiscal problem which the capable businessmen of the RTC could easily show to be false, it stood to lose a great deal, particularly since Mayor Van Wyck had been elected on a platform calling for municipal rapid transit construction. The question of the debt limit was in fact real, at least from the standpoint of the overly prudential fiscal practice of the time.

[page 90] In January 1898 Comptroller Coler estimated that the city was $13.5 million in excess of its debt limit of ten percent of assessed value of property. The annual revenue from the city's sinking funds was about $12 million yearly, but even this, if Coler's figures were right, was not enough to build schools, and other necessary public works such as two bridges over the East River connecting Brooklyn and Queens to Manhattan, and still issue bonds for underground railway construction. Since there was some question as to the validity of the debts incurred by the annexed territories for which the greater city was now responsible, and since the assessed value of property in these territories had been calculated at a different rate from New York's, it took a considerable time for the entire matter to move through the courts, and to refigure on a uniform rate the actual status of the debt for which the city was liable. By the spring of 1899, however, this re-evaluation was complete, and it was shown that the city had $42 million above the debt limit against which bonds could be issued. And when Comptroller Coler relieved this situation even further by approving the RTC's alternative of building the $35 million subway in segments costing $10 million yearly, any fiscal obstacle to subway construction was removed.⁷³

But again, as with the Supreme Court's $15 million security, resolution of the debt limit question came too late, or at least long after the Commission had voluntarily offered to sell its soul to the devil -- that is, had entered into negotiations with both the Manhattan and Metropolitan, which, if successful, would have definitively closed the door on a publicly funded subway.

After the failure of the Ellsworth Bill, Tammany's role was passive; it aided the transit monopolies by standing by while the Manhattan and the Metropolitan actively pursued their interests. Boss Croker was of course not displeased to see his enemies on the Commission⁷⁵ victimized by the two companies, especially since George Gould and William C. Whitney were reportedly large donors to "regular" organization campaign funds.⁷⁵ But the policy of the transit monopolies served Croker's purpose only insofar as it discredited the Commission. Tammany had nothing to gain and much to lose from a policy which sought to delay underground construction indefinitely or to provide improved rapid transit on terms wholly suited to the needs of the monopolies rather than those of the city.

The Manhattan had been actively engaged in blocking the Commission's work since December 1895, when a suit challenging the constitutionality of the Act of 1894 was brought against the Commission by the New York Sun, the one newspaper in the city that always defended the policies of the elevated railway. The Sun claimed that the Act of 1894 provided a loan of municipal funds to a private corporation for a private purpose. After a year and a half of legal battle, the courts upheld the Act and the Commission by defining underground rapid transit as a "city purpose" worthy of public. funding.⁷⁶

[page 91] At about the same time, the Manhattan was busy negotiating with the RTC for extensions, privileges, and surface feeder lines that the Commission had no power to authorize. In June 1896 the company interrupted an RTC busily at work planning the Elm Street route. It requested permission to build extensions of its elevated lines uptown and in the Bronx, to connect these with new surface lines, and to do all of this without compensation to the city and with a Commission guarantee against immunity from claims for damages. The Commission neither could nor would approve this request. It was not empowered to grant extensions free of rent, nor make guarantees against damages, nor assign franchises for surface lines.⁷⁷ The offer was premature, and the situation not ripe for extortion.

Early in 1898, however, after the Supreme Court bond decision and the debt limit question had indefinitely stalled subway construction, the Manhattan was clearly in a better position. The Commission would have gladly accepted any reasonable offer, but the Manhattan did not make such an offer. It asked for connecting lines downtown and extensions uptown on the East and West sides, but was imprecise both with respect to the time it would complete its improvements and its compensation to the city. The RTC, following Hewitt's strategy, called th& Manhattan's bluff by proposing seven franchises at rentals of one percent to five percent, subject to readjustment every twenty-five years. The Manhattan need not have accepted all of these franchises, and might have bargained about compensation. It had the tacit support of City Hall, the public was eager for any relief, and the Commission would have been grateful for any show of conciliation. But George Gould would only promise to accept one of the franchises along West Street, and at one-half percent compensation rather than the five percent the RTC had requested. Gould had achieved his principal aim which was to delay and impede underground construction. The Manhattan was just then beginning to consider electrification of its lines, which, when completed, would suffice to make the Manhattan competitive at least with the surface railways,⁷⁸ and Gould doubtless believed that extensions of his road could be postponed until such time as the RTC had no other alternative than to accept his extortionate terms. After frustrating negotiations which lasted for more than three quarters of a year, the Commission was obliged to admit that in its present circumstances the Hewitt strategy hardly constituted a threat to the Manhattan Company. It therefore ended negotiations with Gould, remarking "that no useful purpose will be served by further delay."⁷⁹

At the end of 1898 the Commission had just about exhausted the resources of its strategy, and was nearly ready to close up shop. William Barclay Parsons left for Hong Kong in order to pursue another large scheme, this time for a Chinese railway,⁸⁰ and wrote Edward Shepard asking that "should the Rapid Transit Commission dissolve" and his subway contract drawings be "ordered to be turned over to the city authorities... try if possible to arrange that the plans can be 'forgotten.'"⁸¹ A few months later, however, [page 92] he was encouraged by a reply from Shepard, indicating that rapid transit matters were improving. The Commission's hopes were raised by a new and surprising offer from the Metropolitan Company, which proposed to build the subway with its own capital.

The Metropolitan's initiative was hardly surprising. Since its first offer in January 1898; the company had been patiently waiting on the sidelines, ready to enter the game whenever the Manhattan was ruled out. The Commission, however, was hardly a worthy opponent. It had little time left for games, and for several reasons was quite willing to accept any terms that the Metropolitan might propose. It knew that the debt limit question was not likely to be quickly resolved, and some of its members feared that Tammany would use the issue to stall subway construction until the Commission resigned or was replaced. To save itself both from discredit and extinction, the Commission needed to build a subway, and if municipal construction was eliminated, private construction was the last and not the least desirable resort.

Men like Parsons, Shepard, and Rives had only reluctantly accepted the principle of public ownership, because, as Parsons said, "the need of a rapid transit line is so great, that every personal consideration should give way in order to attain this end." But their personal preference was for construction by private capital, both because they were opposed to "all socialistic tendencies," and also because Tammany's presence argued for "a short step from municipal ownership to municipal operation."⁸²

There was, moreover, good reason to believe that the Metropolitan could "carry out the work better for all interests than any other concern." Its control of the city's most important surface lines, its system of transfers, and its financial, organizational and technical expertise in traction matters, allowed it to promise quick completion of the first segment of the underground road and good connections at a reduced fare with its surface railways.⁸³

Negotiations between the RTC and lawyers for the Metropolitan began in January 1899. At the end of March a public proposal was made, specifying the Metropolitan's terms. The surface railway company agreed to build the underground road with private capital and pay the city an annual rental of five percent on the cost of construction, providing that it was granted a perpetual franchise. In addition, it was to be exempt from taxation until the road paid its cost plus five percent, and could reduce the rental fee at any time that the gross receipts failed to pay five percent on the cost of construction beyond operating expenses and taxes. The fare was to be five cents for local service, ten cents for express service, and an additional three cents for transfers to the company's surface lines. As will be seen, perhaps the most important clause in the proposed agreement was the one which allowed the Metropolitan to place electric, telephone, and telegraph conduits in and adjacent to its tunnel.⁸⁴

[page 93] The Commission's eager acceptance of the Metropolitan's proposal signified its willingness to abandon the conditions of the Act by which it was constituted. Orr now described municipal construction as "a distant possibility," and spoke with understanding of the Metropolitan's demand for exemption from taxation and a perpetual franchise. "It strikes me as reasonable," he said, "that those who put up the money to build the road, and who take whatever risks there may be, should first get back interests on their outlay. I am rather inclined to think that we shall have to grant perpetual franchise in order to induce capitalists to undertake the building of a rapid transit road with their own money."⁸⁵ As Orr knew only too well, however, the deal was neither legal nor in line with prevailing state or city policy. The Act of 1894 called for public ownership; the Charter of Greater New York restricted sale of franchises to a limited period; a projected state law -- the Special Franchise Tax Act -- then moving through the Legislature, provided that franchises, like real property, be subject to taxation; and the Act, city custom, and popular expectation since 1886 mandated a uniform five-cent fare. All of this required that the Commission go before the Legislature and request special plenary powers in direct contradiction to its own mandate and, as it turned out, contrary to the will of the people.

Public reaction to the Commission's actions and its formal "Memorial to the Legislature on Construction by Private Capital," was instantaneous, unfavorable, and rather remarkable. Suddenly the rapid transit question was transformed from a decision made by the city's elites into one made by the public and simply ratified by its representatives. The Times reported mass meetings throughout the city for weeks after the Metropolitan proposal was made public.⁸⁷ Almost every civic association, immigrant or ethnic organization, and labor union expressed their opposition to private subway construction. Tammany Boss Croker, the Metropolitan syndicate, and the RTC were all lumped together and denounced. "This is not a question of politics," said Thomas Scanlon of the Central Federated Union, "... good citizens of every political opinion are against the outrageous surrender by the Rapid Transit Commission. They cannot understand what Tammany Hall, the dominant and responsible political organization, means. They cannot believe it serious when so soon it attempts what is virtually a breach of faith with the masses from whom it gets its votes."⁸⁸

Not surprisingly, this public outcry created a breach within the ranks of Tammany itself. Boss Croker and his puppet, Mayor Van Wyck, supported the Metropolitan deal.⁸⁹ But the Tammany machine was not the monolith that patrician reformers believed it to be, and a considerable number of "regular" party politicians, mindful of the electorate which had voted them into office, either immediately sided with or soon thereafter ratified the popular will. The Democratic leader of the Senate, several New York City members of the Assembly Committee on Cities, Comptroller Bird Coler, and Louis Haffen, the Tammany Bronx borough president, all made strong public statements opposing the RTC's memorial.⁹⁰

[page 94] Popular opinion, however, had little effect on the Commission's position, until one of the public's bolder and more forthright representatives took matters into his own hands. On April 18, Governor Theodore Roosevelt solidly declared against giving the Commission power to bestow either a free franchise or a franchise in perpetuity. The Governor invited the Commission to travel to Albany for serious private discussions, the substance of which he, rather gleefully, made public directly afterwards. The RTC insisted that "a fifty year franchise was nonsense, and that nobody would dream of bidding," and that the "city authorities didn't want to construct the road." The hero of San. Juan Hill responded that delay was a lesser evil than a perpetual franchise, and that the Commission need not worry itself about city officials.

I said that I would not be scared by any bogie of home rule, and that I would cheerfully sign a bill that would compel the city authorities to furnish the means to build the road under the supervision of the present or some other competent Commission.⁹¹

A year and one half later Theodore Roosevelt would tell Henry Cabot Lodge that it was the New York traction magnates -- "the big corporation men of the William C. Whitney, Thomas Ryan, Anthony N. Brady stripe" -- who had been responsible for his leaving the Governor's office and being kicked upstairs to the Vice-Presidency.⁹² If true, there is no doubt that his interference in the rapid transit decision, as well as his support for the Special Franchise Tax Act, helped to earn him the enmity of these men.

Whitney and Ryan of the Metropolitan and Brady, the promoter behind the Brooklyn Rapid Transit Company, which held a monopoly of elevated and street car lines in that borough, were probably less bothered by the Metropolitan's having lost its opportunity to build a subway, than by the fact that with the loss of the subway, all three men also had to relinquish their plans for monopolistic control of New York's utility industry. Whitney, Ryan, Brady, and the two ubiquitous Philadelphians, Elkins and Widener, were involved in utilities, such as electric, light, and gas, as well as in street railways. In 1898 all of these men had formed a mammoth holding company, the New York Gas and Electric Light, Heat, and Power Company.⁹³ As they would admit after the defeat of the Metropolitan proposal for private subway construction, their principal interest was not the subway itself, which they "at no time . . regarded . . . as a big money making scheme," but rather "the other revenues from the tunnel," namely the conduits for gas, electricity, telephone, and telegraph.⁹⁴ And it was these same conduits, and not the expectation of vast profits from the subway, that led the usually astute William C. Whitney to misjudge badly both the inclination and power of public opinion regarding the rapid transit question.

With the Metropolitan out of the picture, with Tammany split, with the problem of the debt limit resolved, and with the public's demands loudly and clearly expressed, there was nothing else that the courts, Boss Croker, or [page 95] the RTC itself could do to prevent or further delay offering the subway contract to bidders. In September 1899, Corporation Counsel Whalen approved the contract. In October city officials joined the Commission in petitioning the Supreme Court to reduce its construction bond to $5 million.⁹⁵ The Commission set January 15, 1900 as the date when bids for the contract would be accepted.

The time had come for the rapid transit decision to become a reality. Thanks to the public, two important steps in that direction had already been taken. The transit monopolies had lost their game to preclude municipal construction, and the power of public sentiment had at last united two essential parties to any successful conclusion of the story -- Tammany and the businessmen reformers of the RTC. Together, these two elites would find a third party -- someone with good standing in both camps and a substantial, reputable capitalist to boot -- who would bring the IRT, New York's first subway, into being.

Part II, Section 5

In January 1900 everything that had once stood in the way of subway construction had been overcome. Technology was no longer a problem: Frank Sprague had perfected his multiple-unit control system for electric motive power, and tunnel construction was long beyond the innovative stage. Subways in Boston, London, Paris and Budapest, had demonstrated that underground travel could be as comfortable and attractive as surface or elevated railways.¹ The new subway would still be expensive. But with corollary expenses such as real estate² and abutter's rights³ paid for by the city, and with the municipality offering $35 million in public funds for an underground railway whose construction cost was estimated at $26 or $27 million⁴, the prospective contractor stood to make a profit on construction that would offset the expense of equipment and rolling stock. The route chosen for the new road was not ideal, but it did eliminate the long-standing obstacle of opposition from powerful property holders along Broadway. Public reaction against offers carrying extortionate terms and delaying tactics had finally thwarted the transit monopolies' attempts to prevent subway construction; their only remaining opportunity was to bid for the subway themselves. Public need and the clear expression of the popular will had enforced a truce between New York's two belligerent political elites. Patrician reformers and Tammany machine politicians were now united to serve if not to rule. The imagination and expectations of the public were obviously aroused by the prospect of underground travel, a fact which confirmed the Commission's belief that the new subway would be both a popular and profitable venture for any capitalist sufficiently clever and bold to undertake its construction.

But even with these obstacles out of the way, and with the path thus smoothed by the public and government, the subway contract itself was not as attractive to the turn of the century American capitalists as, from [page 96] hindsight, one might assume. The project was much less risky than it once had been, but there was still uncertainty about initial profitability, and, just as important, unease with respect to a contract that restricted the freedom of private capital in order to meet the needs of the public.

Few now doubted that the subway would eventually be profitable. The new underground road would encourage and at the same time benefit from what everyone saw as the inevitable growth of America's principal city. But would the new subway's initial earnings assure at least a six or seven percent return⁵ in excess of operating expenses and the annual rental of interest on city bonds plus one percent for the sinking fund? Would heavy short-haul traffic downtown, where the subway would have to compete with the newly electrified elevated railways and surface trolleys, offset what was expected to be an initially sparse long-haul traffic in undeveloped uptown areas?⁶ And would the uniform five-cent fare, stipulated by the Rapid Transit Acts of 1891 and 1894, be enough to cover these contingencies?

Risks and uncertainty of this kind were of course to be expected; entrepreneurial capitalism and a certain amount of risk were synonymous. At the same time, the system of unregulated nineteenth-century capitalism also provided the entrepreneur with the freedom to safeguard himself against such risks. He could slow down or postpone construction, use merely standard rather than superior materials in construction, reduce service, delay innovation and improvement, raise additional capital and dividends and profit by resort to 'watered' stock. All or some of these measures had been frequently employed in the construction and operation of the city's surface and elevated railways.

None of these safeguards were available to the prospective contractor and lessee of the new subway. He was not only asked to undertake a large and still unproven venture, but was also required to enter into a new relation with government. The contract was consistent with previous public transit policy regulation by fixed grant. As later criticism would show;⁷ there was no provision for an ongoing system of regulation and inspection of service with appropriate and specific penalties short of confiscation. The contract was nevertheless far more detailed, and restricted the lessee's actions more substantially, than earlier and similar fixed charters.

The contract contained one hundred and eighty pages of rules and regulations governing the time, modes, and materials of construction, and the policy to be followed in the road's operation. The subway was to follow the Commission's plans of 1896 for a twenty-one mile "trunk line" route, mostly through tunnel but partly by viaduct, starting at City Hall and running under Elm Street and Fourth Avenue to 42nd Street, where it crossed to the West Side and ran under Broadway and the Boulevard to Kingsbridge, and with an East Side branch beginning at the Boulevard and 103rd Street and crossing east and running under Lenox Avenue, and, and then across the Harlem River to Bronx Park.

[page 97] The contractor was to commence work on the subway within thirty days of the execution of the contract, and proceed with construction in four stages, all of which were to be completed within four and one-half years. He was liable for delays, and if he went beyond the time limit for completion of the entire project, he was subject to forfeiture of two percent of the unpaid balance for each month in excess of the time allotted.⁸ In case of default in construction, the contractor stood to lose all of the $5 million construction bond. In building the subway, he was required to rearrange all subsurface structures, repair all streets, and support all buildings affected by construction. He was liable for all damages incurred in the course of construction, and was required to provide a security bond of $1,000,000 during construction to protect the city. He was also to furnish the equipment of the railroad, including rolling stock, boilers, engines, power houses, real estate for the power houses, tools, machinery for generating and lines for distributing electricity, signaling systems and ventilation devices, all of which had to be "of the very best known character."⁹ In the event of failure to construct or operate, the city would have first lien on the equipment, and at the expiration of the lease, it would buy the equipment at a price determined by "the condition, wear, and tear of the property."¹⁰

The provisions governing operation were equally stringent. The lessee was required to deposit a security bond of $1,000,000 for the full term of the lease -- fifty years, with a renewal option of twenty-five years. The minimal annual rental was fixed at a sum equal to the annual interest on the city's construction bonds, plus one percent for a sinking fund.¹¹ The lessee was responsible for running local trains at no less than fourteen miles an hour, and express trains at no less than thirty miles an hour, and was also required to comply with specific rules regarding the number of trains to be run at different intervals for different periods of the day and night. The stations were to be well constructed and decorated with the best materials, and provided with clean and comfortable waiting rooms, washrooms, and toilets. All equipment and stations were to be maintained in good condition and stations and cars were to be heated, lighted, and adequately ventilated.¹²

For the time, and in light of the potential risks that were thought to be involved, the contract assured a standard of construction and operation far stricter and higher than was customary for public transit owned and run solely by private enterprise. The city was extraordinarily well served by these standards, and in addition was well protected by the financial arrangements of the contract, which stipulated a sum of $7 million dollars in security, $6 million of which was to be held by the municipal government until construction was completed, and $5 million of which, was to be guaranteed by double sureties.¹³ In return for these large bonds and for relieving the city of risk in both construction and operation, the lessee of the road was accorded all its potential profits. At the time, however, these were unknown and the terms of the contract as to security bonds and standards of construction and operation appeared unduly onerous. This attitude would alter dramatically [page 98] even before construction of the first subway was complete, when it became clear that the road would be profitable, and that real estate development to the north would anticipate rather than merely follow upon its realization. But as the twelve years before 1900 had demonstrated, up until this time the arrangement was not particularly attractive to late nineteenth-century businessmen. Few capitalists were willing or able to bid on the project.

Indeed, on January 15, 1900, the date set by the Commission for receiving bids, no substantial capitalist could be found among the bidders. Only two men presented themselves, and while both were respectable, able, and experienced building contractors, neither fit the Commission's bill. The Rapid Transit Act of 1894 stipulated that the contract was for both construction and operation. By implication the prospective bidder was envisaged as a capitalist of great means and banking connection, with expertise in the financing, organization, and management of large railroad enterprises.

John B. McDonald and Andrew Onderdonk did not meet these requirements. They were hard working construction men of average means, who could be trusted to build the road efficiently and well, but not to run it. McDonald was no stranger to the Commission. He had appeared before it in 1895, with an offer to construct its first route, and had been turned away quite summarily when it was discovered that he had no substantial backing, and that he planned to construct but not to operate the road. He was, it was true, a man of considerable reputation in his field. William Barclay Parsons had spoken highly of his work on the tunnel for the Baltimore Belt Railway,¹⁴ and before Baltimore he had worked on the Boston, Hoosac Tunnel and Western Railroad, on the extension of the Delaware, Lackawanna and Western Railroad from Binghamton to Buffalo, on the construction of the Potomac Valley Railroad, and he bad built a large portion of the West Shore Railroad.¹⁵ In 1895 he returned to New York, where, thanks to Tammany connections,¹⁶ he secured the contract for construction of the Jerome Park Reservoir. Despite his extensive experience in railroad construction, in 1900 as in 1895 his position was very clear. He hoped to build New York's underground railway, but had no desire to run it. "I am a contractor," he told the RTC, "not a railroad man, and I guess I had better stick to my business."¹⁷

Like McDonald, Andrew Onderdonk spent most of his professional life building railroads. He had constructed a section of the Canadian Pacific Railway through British Columbia, had built the railroad tunnel under Lake Michigan at Chicago, and in 1900 was in New York working on a ship channel in the city's harbor.¹⁸

Both men were sufficiently prestigious in their field to deserve the Commission's attention, but neither one should have had the slightest chance to win a contract that was intended for a Morgan, a Vanderbilt, a Whitney, or someone else of their stature in the world of railroad finance and management. Yet the RTC considered these two bids with the utmost seriousness, and on January 16 awarded the contract to McDonald.

[page 99] Something was clearly afoot behind the scenes. The press was right in believing that the two contractors were acting as surrogates for larger interests, but most newspapers speculated wildly and often incorrectly as to the identity of McDonald's and Onderdonk's silent backers. The Times and several other newspapers at first thought that Onderdonk represented "Vanderbilt interests," and that McDonald, who was Corporation Counsel John Whalen's cousin, represented Tammany and the "Whitney syndicate."¹⁹ The Herald was alone in guessing, probably correctly, that the real candidate of the Whitney-Metropolitan syndicate was Onderdonk.²⁰ A letter from Whitney to the RTC²¹ after McDonald was awarded the contract, tends to confirm this assumption, as does the Metropolitan's almost certain influence in persuading several surety companies to aid Onderdonk's candidacy indirectly by refusing to guarantee McDonald's security bonds.²² Once having given the contract to McDonald, however, the Commission stuck with him, doubtless on the strength of his backer's name and fortune. The identity of McDonald's silent partner was kept a carefully guarded secret for more than two weeks after the contract had been awarded. The press was totally in the dark, and everyone was caught by surprise when, on January 28, 1900, August Belmont II revealed himself as the man behind McDonald.²³

On the one hand, the events of the last two weeks of January 1900 prior to this announcement were and remain clouded in mystery, which accounts for the surprise of both the public and the press. On the other hand, one wonders why no one ever thought of Belmont, for he was so precisely suited to the needs of the RTC and the task of subway construction and operation, that it may be said of him as Voltaire's God, that had he not existed it would have been necessary to invent him.

What may be described as the standard account of the events of January 1900 was set forth by Belmont himself, and by two participants in these events, Andrew Freedman, who supposedly acted as a go-between for McDonald and Belmont, and by John T. Hettrick, a newspaperman who worked for Belmont.²⁴ As was clear from his interest in subway construction as early as 1895, McDonald wanted to build the road, and knew from his previous experience that he could manage the job. Having received assurances from several surety companies that they would guarantee his bonds, he approached Andrew Freedman, a Tammany associate who was a business partner of Richard Croker, a former manager of the New York Giants baseball team, and also Vice-President and Managing Director of the United States Fidelity and Guaranty Company of Maryland.²⁵ McDonald asked Freedman to help him find $150,000, which was needed as a deposit for the RTC on the day when bids would be made. Freedman liked the scheme, pledged $45,000 on his own, and found four other friends, John Pierce, Howard Carroll, C.W. Morse, and H.G. Runkle, who promised to raise the rest of the money. At 11 A.M. on January 15, however, this loosely organized syndicate still lacked $50,000 of the required $150,000, and McDonald had to be at the Commission's offices at noon sharp with cash in hand. Faced with this emergency, Freedman thought of his friend, August Belmont, who, despite his exalted social and financial status, was a solid organization [page 100] Democrat with many Tammany connections.²⁶ Freedman explained McDonald's proposal and his plight to Belmont, who immediately "arranged for the cash,... without reading the contract, and without any further talk."²⁷ Subsequently, when the surety companies who had promised McDonald their backing, reneged on their commitment, Belmont organized a construction company, and used his own and his brother Perry's fortune as a source of supply for some of the money that was required as security. By this time, of course, the RTC was in on the secret, since it, together with Belmont, petitioned the Supreme Court to rescind its order that the $5 million construction bond be guaranteed by double sureties.²⁸ It seems that once Belmont had gambled on McDonald's bid, he was ready to take on any and all powerful interests, including the Whitney syndicate, which threatened its success. "From that moment," said Andrew Freedman, "his life and soul was in the enterprise."²⁹

This is a wonderful story, one that deserves to be part of the folklore of American Capitalism, but it lacks plausibility. First, it is difficult to understand how McDonald could have appeared before the Commission without backing from someone in position to operate the subway once he had built it. It tests one's credulity to be asked to believe that the Board would accept an offer in 1900 that it had rejected in 1895. And it is also curious that a financier of Belmont's shrewdness and circumspection should give Andrew Freedman $50,000 on short notice, and "without reading the contract or further talk."

Additional information about August Belmont adds somewhat to the story's plausibility. It can at least be said that Belmont was especially well prepared to make so quick a decision involving great risk of money, effort, and reputation. This was not his first experience with subway schemes, and he was well-acquainted with all the parties to this particular scheme. In the late 1880's he and William Barclay Parsons had promoted the New York District Railway Company, and according to Belmont's grandson it was not Freedman but Parsons who was responsible for the financier's decision to commit himself to the creation of New York's first subway.³⁰ Belmont and Parsons were close friends, and the former was often drawn into the latter's adventurous schemes. Their relation before, during, and after the construction of the subway was that of two business partners, with Parsons as the partner who initiated the plans for great projects, and Belmont as the partner whose money and financial acumen brought the project to realization. Parsons was the inspiration for Belmont's participation in the New York District Railway scheme, in the Chinese Railway,³¹ and, later, in the construction of the Cape Cod Canal,³² and it is not implausible to assume that it was Parsons who also interested him in the subway.

Or perhaps it was John McDonald himself who brought Belmont into the venture. Perry Belmont would claim the credit for introducing the contractor to his brother,³³ after having become acquainted with McDonald through Tammany, and fired up about "his plans for the construction of a subway on Manhattan Island." Knowing McDonald as he did, it is a little easier to see why Belmont would advance Freedman $50,000 on the spot, so that the contractor could make his bid. At the same time, once it is clear that the two men were well-acquainted with each other, one is tempted to ask why either Freedman or McDonald would have waited until the very last [page 101] moment to go to Belmont, or why Belmont, on his part, did not suggest his interest in subway construction to McDonald.³⁴

Of course Belmont did not require either Parsons or McDonald to interest him in railroad or urban transit enterprises. His father, the first August Belmont, had founded the Louisville and Nashville Railroad, and since his father's death in 1890 he had managed this prosperous and expanding road. The Louisville and Nashville not only enhanced the family's fortunes, but also allowed Belmont entry into the charmed circle of great railroad financiers; he had business and social ties with such men as E.H. Harriman of the Union Pacific, Stuyvesant Fish of the Illinois Central, and H.H. Porter of the Rock Island railroad system.³⁵ Together with several other financiers and big railroad men, he was also part of the syndicate that had assumed control of the Long Island Railroad after Austin Corbin's death in 1896, and on his own he had bought into and expanded several surface railways in Queens. Only a year before he entered into the subway venture, he was occupied with urban rapid transit in Brooklyn, where, together with General James Jourdan and Walter Oakman, both of whom would later serve as directors of the IRT, he bought the Brooklyn and Brighton Beach and Kings County Elevated Railroad systems.³⁷ Within a few months, these two roads were merged into the vast surface and elevated railway monopoly of the Brooklyn Rapid Transit Company, controlled by Anthony Brady and former Governor Anson Flower, and Belmont was rewarded with a huge profit and a seat on the Board of the Directors of the B.R.T.³⁸

He came out of Brooklyn with a great deal of money -- $2,000,000 was the sum cited in the Times³⁹ -- but with no transit empire of his own. In the sporting world of New York's elite, Belmont was an avid competitor on par with such men as J.P. Morgan and William C. Whitney. But he was not as yet the equal of these same men in the business world. Morgan, Vanderbilt, Harriman, and Fish were the great names in inter-urban railways; the Pratts, Brady, Whitney, Ryan, Gould, and Sage controlled New York's transit industry. It is not presuming too much to suppose that August Belmont saw in the subway an opportunity not only to make a great deal of money, but also to create for himself a transit empire equal to and perhaps surpassing the empires of those men who were his natural peers and competitors. He had the means, the financial skill, the management experience, and, with his Democratic and Tammany connections, even the political clout to undertake the project. Andrew Freedman doubtless knew all of this when he visited Belmont on January 15. Again, however, one wonders why a man in Belmont's position should have waited until an offer came from Freedman or McDonald, when he might just as easily have taken the initiative and made an offer of his own.

Mention of Belmont's connection with Tammany raises yet another question. His father had been a life-long Democrat, Tammany man, and Chairman of the Democratic National Committee during the Civil War.⁴⁰ Despite their patrician status, both Perry and August Belmont remained good Tammany men and actively [page 102] involved in the business of the New York City Democracy at a time when other patricians became "mugwumps" and reformers. Perry served on the Tammany Finance Committee alongside John McDonald and Andrew Freedman, the friend, constant companion, and business partner of Boss Croker. August Belmont knew Croker and, like William C. Whitney, fanned the Tammany politician's vanity by according him full social status as a fellow sportsman, horse-breeder, and racing enthusiast.⁴¹

After the subway was built, the Progressive journalist Ray Stannard Baker would characterize the contract as "the subway deal" and claim that Tammany knew beforehand, indeed had seen to Belmont's participation. Everyone connected with the events of January 1900 -- the RTC, Belmont, McDonald, Bird Coler, Andrew Freedman, Parsons -- of course denied Tammany's involvement.⁴² But they protested rather too much. And as the Times noted, all of McDonald's associates in the syndicate formed to raise the $150,000 deposit were well-known Tammany leaders.⁴³ Having finally committed itself to subway construction and having entered into momentary alliance with the RTC for this purpose, Tammany was doubtless concerned that a suitable candidate be chosen to construct and operate the.road. The Times said that McDonald had won Tammany's approval at a secret meeting held ten days before he made his bid.⁴⁴ But McDonald alone would get nowhere with the Commission, and it is difficult to see why Tammany would take the trouble to pick McDonald, while neglecting to line up a potential operator who could stand behind him. Tammany may have had Whitney and the Metropolitan in mind for this role, and of course Whitney and Boss Croker were very good friends. But after the public clamor over the Metropolitan's offer of private construction in return for a perpetual franchise, the surface railway monopoly was not necessarily the best choice. Belmont was better. He was rich, politically "regular," a man who repeatedly did not indulge in the financial chicanery common among his peers,⁴⁵ and, most important, despite his Tammany connections, he was a prominent and active member of the Chamber of Commerce, and therefore perfectly acceptable to the patrician reformers of the RTC.

On its side, the Commission seems to have made up its mind about McDonald's bid with uncustomary rapidity. On the afternoon of the 15th, directly after the bids were submitted, one of the Commissioners responded to a question about the two bids by implying that the RTC was inclined to favor McDonald's.⁴⁷ On the evening of the 15th, McDonald told the Times that he "expected to get the contract," and was already busy laying plans for the beginning of construction.⁴⁸ Both these statements were made fully two days before the RTC officially announced that McDonald was the successful bidder.

The Board gave two reasons for having selected McDonald over Onderdonk. The former's bid had been $35,000,000 with no percentage of gross receipts in excess of $5,000,000. Onderdonk had requested more than this -- $39,000,000 -- for construction, but had promised the city five percent of the first $1,000,000 in revenues in excess of $5,000,000 each year, and two and one-half [page 103] percent more on each additional $1,000,000 of gross receipts up to a maximum of fifteen percent.⁴⁹ The Commission was rather quick to say that "these offers of additional compensation to the city never pan out,"⁵⁰ and to decide that McDonald's lower bid would leave something in the kitty for expansion of the subway in the near future.

In the absence of other evidence, all that can be said of the RTC's decision is that the entire procedure seems to have been preordained, and that Onderdonk never had much of a chance of receiving the contract. On his own, McDonald should have been no more favored than Onderdonk, and if things were as they appeared, neither builder should have been awarded the contract. Yet in a letter of January 16 to Alexander Orr, William C. Whitney described the two bidders as "responsible and capable parties" who would "necessarily complete the work,"⁵¹ a characterization which may merely have referred to their reputation in their trade, but more probably alluded to their silent backers, Whitney for Onderdonk and, as Whitney probably surmised, someone equally important for McDonald. For only with someone like Belmont behind him from the first, and with Tammany and the RTC in on the arrangements, could McDonald confidently say that he "expected to get the contract."⁵²

Belmont, McDonald, and Freedman maintained their story concerning the origins of their partnership during the next twenty years, through civil suits and governmental investigations.⁵³ It was not a very plausible story, but it was certainly very useful. It preserved secrecy that was essential at the beginning of the venture. It protected all the parties concerned, both in 1900 and much later. And after the procedures for awarding "Contract One" came under heavy criticism from Progressives as the "subway deal," it allowed the participants to this deal to deny what was both plausible and very likely true, that Belmont, Tammany, and the RTC had prearranged the entire matter.

Secrecy was very important before the bids were made. Had Belmont let it be known that he was behind McDonald, he risked the ire as well as the interference of Whitney and the Metropolitan interests, not to mention opposition on the part of the Manhattan Company. His air, and the aim of Tammany and the RTC, was to inhibit rather than to call forth competition. Surprise was essential, and it was far better to have everyone believe that, as in 1892, there would be no substantial bidders for the contract, than to stimulate competition by letting everyone know that someone as savvy and well-heeled as August Belmont was interested in the subway project.

The possibility of an adverse public reaction to a prearranged deal between the RTC and Belmont also made secrecy advisable. Part of the reason for the failure of Abram Hewitt's plan in 1888 was that he had openly stated his intention to have Vanderbilt and the New York Central construct and run the railroad, and public sentiment against any "deal" was likely to be stronger in 1900 than it had been in Hewitt's time. The auction of the contract had to be conducted with the appearance of utmost impartiality and fairness, lest [page 104] the Commission, which had so spotless a reputation for integrity and honesty, be assailed with the same kind of charge that some of its members or partisans frequently made against Tammany. Nor would it have been particularly good for the Commission's reputation, had it become known that it had not only participated in a deal between Belmont and McDonald, but that it had done so in collusion with Tammany. And later, when Progressive critics were looking for evidence of a deal that they were sure had been made, this same story served to rebut their charges.

What lends credence to the Progressive assumption of a prearranged deal is the fact that after six years of difficulty, frustration, and near failure, the Commission desperately needed to succeed. The vociferous public demand for a subway also forced Tammany to act decisively and to aid the Commission in every way possible. Tammany had promised the people that subway construction would begin before the end of Van Wyck's term as mayor,⁵⁴ and the public reaction to the Metropolitan's offer of 1899 made it clear that this was one promise that the machine could not afford to forget.

But if, as seems plausible, a deal was prearranged between Belmont, McDonald, and the RTC, it was neither illegal nor extraordinary, given the business practices of the time. It was merely inconsistent with the high moral tone, that quality of being above-the-board and beyond suspicion, that men like Belmont and the members of the Commission strove to maintain, and was also the sort of deal that the public, in its "reformist" frame of mind, might regard with disfavor. Nor, considering his unique capacities for the job, did Belmont expect any benefit from the deal other than what any capitalist of his time had reason to expect, and what both the RTC and Tammany wanted him to have -- large profits, and, in return for his courage in being the first to risk the subway venture, a fair opportunity to create a rapid transit monopoly.

Belmont would come close to achieving these aims, but there would be many unanticipated difficulties along the way. He was confronted with the first such problem at the very beginning of the enterprise. His decision to back McDonald may have been less spontaneous than his or Freedman's story would lead one to believe, but what is undoubtedly true is that he never expected that he would have to support McDonald's bid with a large amount of his own and his brother's money.

McDonald had been led to believe that several bonding companies would provide the money for the required securities, and all that Belmont would have to do was put up the money for the cash deposit, and working capital for construction. As things turned out, however, two of the surety companies -- the Fidelity and Deposit Company and the American Surety Company -- went back on their word, and refused to advance McDonald the money unless "cash or its equivalent representing the full amount of their bond was practically set apart for them," and unless they were paid one percent annually -- $50,000 -- for the full term of the $5 million construction bond.⁵⁵

[page 105] Faced with this difficulty, Belmont at first agreed to provide only the $1,000,000 bond required by the city as a deposit against damages; this agreement, dated January 20, 1900,⁵⁶ was the first formal one between the two men, and also the first of several by which Belmont bound McDonald hand and foot. The remaining $6 million -- for the construction and continuing bond -- still had to be secured from other sources such as the surety companies. After a few more days of negotiation, this proved impossible, because Andrew Freedman's company, the United States Fidelity and Guaranty Company, was still ready to honor its promise to McDonald.⁵⁷

The two companies that reneged on their commitment to the contractor were not acting solely on their own initiative. They were under the influence of William C. Whitney and the Metropolitan Railway. It was no secret that several men associated with Whitney and his syndicate sat on the Boards of these firms, and Whitney's biographer has said that the promises made to McDonald were in fact never intended to be kept.⁵⁸ This was Whitney's way of safeguarding himself in the event that McDonald, rather than his candidate, Onderdonk, was awarded the contract. Whitney did not of course know about Belmont, and he assumed that once the bonding companies withdrew their support from McDonald, the RTC would quickly award the contract by default to Onderdonk. "The Metropolitan Company," he wrote to Orr on January 16, "will... I promise you... do all in its power to aid the work, no matter which bid you accept."⁵⁹

August Belmont and the RTC, however, were not so quickly or easily defeated. Under the terms of the advertisement for bids, the successful bidder was allowed ten additional days to deposit the $5 million construction bond. Taking advantage of this provision and additional time in excess of the terms of the advertisement,⁶⁰ a privilege which the RTC would hardly have granted to McDonald alone, Belmont organized a construction company with an initial capitalization of $6 million, the Rapid Transit Subway Construction Company.⁶¹

A man of his stature in the financial world experienced little difficulty in finding important men, representing equally large and powerful interests, to subscribe to the sixty thousand shares of stock. The list of incorporators, directors, and stockholders constituted a union of New York's real estate, railroad, and financial interests, all of whom were connected in some way with the various business enterprises of August Belmont and Company: associates of E.H. Harriman and J.P. Morgan; Cornelius Vanderbilt; Baldwin of the Long Island Railroad; Walter G. Oakman of the Long Island, Brooklyn Rapid Transit Company, and the Guaranty Trust; Charles J. Barney, real estate baron and President of the Knickerbocker Trust; Gardiner M. Lane of the Boston banking firm of Lee, Higginson, and Company; George Young, of the United States Mortgage and Trust Company; McDonald; and Andrew Freedman.⁶² The four incorporators -- Belmont, the President, Barney, McDonald, and William Read subscribed for one hundred shares each; Freedman took 1500, and the others varying amounts which did not reveal their precise contribution to or interest in the concern. The complete issue of stock, excluding [page106] director's qualifying shares of ten each, was immediately turned over to three voting directors, presumably August Belmont's employees, who held the stock until it was purchased by the Interborough Rapid Transit Company, Belmont's operating firm, in 1902.⁶³

Formation of the construction company allowed Belmont to do three very important things. He bypassed the recalcitrant bonding companies under Whitney's influence; he made John McDonald into a salaried employee, and, by doing so, he established a construction company which, because its reason for existing was to provide bonds for one of its own employees, achieved the remarkable feat of bonding itself.

By means of the Construction Company and with the help of the RTC, Belmont quickly disposed of the problem of the surety companies. The RTC asked the Supreme Court to remove the provision for double surety from the $5 million construction bond, and also to reduce the amount assumed by each surety from $500,000 to $250,000.⁶⁴ The Construction Company then took on $4 million of the construction bond and, as aforementioned, made the $1,000,000 security deposit, which was in reality Belmont's own money. The rest of the construction bond -- $1,000,000 -- was provided by four surety companies -- Freedman's United States Fidelity and Guaranty Company, The American Surety Company, The City Trust, Safe Deposit and Surety Company of Philadelphia, and the National Surety Company.⁶⁵ By giving over to the city his interest in the subcontractor's bonds a total of $3,769,250 in bonds, McDonald in effect raised the continuing bond of $1,000,000 by himself, with Perry Belmont providing double indemnity.⁶⁶

In return for its help in allowing him to begin construction, McDonald became the Construction Company's -- that is, Belmont's -- employee. By an agreement of February 21, 1900, between him and the Rapid Transit Subway Construction Company, he was required to hand over to the company all payments from the city to him. All subcontracting arrangements were to be handled by the company, or by him only with its approval. In case of his illness or death, his contract with the city was automatically transferred to the company, which was to retain said document in the offices of August Belmont and Company. Seventy-five percent of the profits from construction were to be surrendered to the company, with the remaining twenty-five percent going to McDonald, except that supervisory expenses -- paid to August Belmont and Company -- and McDonald's annual salary of $25,000 were first deducted. If the company assumed the lease of the completed road, or sold it, one quarter of the value of the lease issued in stock in the event of company operation, or one quarter of the cash or stocks received from sale of the lease, was to go to McDonald, who was then to pay one fifth of his quarter to Belmont, who would in turn repay one quarter of his fifth to McDonald, and another quarter to Freedman.⁶⁷

After relinquishing any and all authority which his contract with the RTC accorded him, and after surrendering a considerable share of his financial interest in the subway to August Belmont, John McDonald was at last permitted [page 107] to begin construction of New York's first subway. "Contract One" was signed on the same day as the contractor's agreement with the Construction Company, and formally executed three days later on February 24.⁶⁸ One month later, Mayor Van Wyck officially initiated construction in front of City Hall.

Most of the profits from construction, then, were to go to the company rather than McDonald, and these turned out to be quite as substantial as had been expected. Leaving aside disbursements for real estate and terminals, the city paid out almost $34.5 million for originally stipulated construction related to "Contract One," and nearly $4.3 million for extra work. The Construction Company disbursed an aggregate sum of $23,822,915 to subcontractors, to which an indefinite amount must be added, depending on how great a percentage is allowed for supervisory and administrative expenses. Since profit on extra work was limited to ten percent, an estimate of the Construction Company's profit must fall within the range of $7 to $9 million, with the average therefore close to the $8 million that was anticipated.⁶⁹ As critics of "Contract One" would later point out, all or most of the sum was money that could have been retained by the city, had it chosen to subcontract the work by itself and, as was done earlier in Boston, lease the completed subway to a private operator.⁷⁰

Belmont, however, already had in mind several important uses for this money. The RTC's original idea was that the lessee's profit on construction should be used to pay for the cost of equipment, thus freeing him from the task of raising capital before the railroad was in operation and earning profits. But long before the "Contract One" subway was completed, Belmont had exhausted its actual and potential construction profits in additional ventures -- extension of the first subway below City Hall and into Brooklyn, absorption of the Manhattan Elevated lines, purchase of numerous surface railways in Queen -- which would, he hoped, result in his securing rapid transit monopoly in Manhattan and the Bronx, and the start of a similar transit empire in Brooklyn and Queens. To realize his larger plans, however, he needed a more adequate -- that is, a more highly capitalized -- vehicle than the Construction Company, and also a corporation which would allow him to operate the "Contract One" subway once it was finished. And here he was faced with a second unanticipated problem.

At the outset it was not Belmont's intention to become involved in construction. Whatever arrangements he may have made with McDonald either before or after January 15, 1900, his real aim was not to construct but to operate the subway. The problem with the surety companies had compelled him to form a construction company, and in assuming this responsibility, he also assumed control over the entire process of construction.

As he and his lawyers soon discovered, however, the very existence of the construction company created difficulties with regard to operation. His assumption was that the incorporators of the construction company could simply do double duty as the incorporators of the operating company, taking the lease for operation from McDonald. But this could not be done; because [page 108] according to the Rapid Transit Act the contract could not be transferred in part -- merely the operating lease -- but only in its entirety, and, if the same parties as those involved in the construction company were to take over McDonald's entire contract, they would cease to be able to act as the contractor's bonding agents. Moreover, as the contractor for the subway already in construction, McDonald had technically been granted a franchise for the operation of a railway in New York. The operating company which Belmont planned to form to assume the lease would not possess a similar charter. Unless the law were altered, the only company that could take over the entire contract from McDonald and run the road, was a railroad corporation previously chartered for operation in the city.⁷¹

Neither the RTC nor Belmont were successful in their attempts to change the law. Both the legislature and the governor refused to consider it, again probably because of the influence and opposition of the Metropolitan Company, which as before hoped either to delay subway construction or to profit from the difficulties it created for Belmont by somehow capturing the work for itself.⁷²

For the second time, Belmont proved himself capable of beating the Whitney-Ryan syndicate at its own game. If, as appeared likely, there was no possibility of modifying the law to suit his needs, the other alternative open to him was to find an already incorporated and franchised railway, which would be legally empowered to assume McDonald's contract and run the subway. Since the transit monopolies controlled most of the city's railways, this was no easy matter, and even if he could find such a railway, were it known that he was interested in purchasing it, the existing shareholders would doubtless request an astronomical price. With no intention to flatter and with the implication of deviousness Ray Stannard Baker would later describe the banker as "the silent Belmont."⁷³ On this occasion, however, his "silence" served him well. Belmont found two little railways in the Bronx -- the City Island and Pelham Park railway companies -- which the transit monopolies had ignored, and which, if the business were handled correctly, could be bought for a song. By purchasing shares in these unprofitable and practically defunct railways through intermediaries, and by keeping the matter secret even from many of the directors and shareholders of the construction company, by December 1901 Belmont managed to acquire ninety-five percent of the stock of the two companies for the paltry sum of $272,000.⁷⁴ With these certificates in hand, he was now in position to turn the tables on the Metropolitan and indulge in a little arm twisting of his own. He visited his personal friend and fellow sportsman William C. Whitney,⁷⁵; informed him of his coup in acquiring the two franchises, and left with Whitney's promise, promptly honored, that the Legislature would easily pass legislation modifying the Rapid Transit Act in 1902.

Unfortunately for Belmont, this would not be the last of the Metropolitan's efforts to foil his larger plans, but his success in purchasing the City Island and Pelham Park railways did at least end its attempts to impede or prevent his direction of the first subway. More important, purchase of the City Island and Pelham Park was the key that enabled him to pursue and in part successfully [page 109] achieve his larger plans. It allowed him to form an operating company over which he had complete control, and to eliminate any interest in "Contract One" still remaining to McDonald and the original syndicate of January 1900.

In May 1902, directly after the Legislature passed the necessary modifications of the Rapid Transit Act, Belmont officially organized the operating company, the Interborough Rapid Transit Company or IRT, with an initial capitalization of $25,000,000 divided into 250,000 shares, which was augmented in August 1902 to $35,000,000 in 350,000 shares. The stock was distributed as follows:

1. 96,000 shares or $9.6 million in exchange for the stock of the Rapid Transit Subway Construction Company, representing a partially paid-in capital of $3.6 million plus a three-quarter or $6 million share of the anticipated $8 million construction profits from "Contract One." The total book value of construction company stock was $6 million, with sixty percent of the subscriptions paid in. This stock was exchanged for IRT stock at 160 percent of par, or for each 100 shares of construction company stock, stockholders were issued 160 shares of IRT stock.
2. 25,000 shares or $2.5 million, giving the IRT complete control over "Contract One" and the lease to run the subway, issued to the members of the original syndicate of January 1900 as follows: Andrew Freedman - 6,012; Perry Belmont - 952; August Belmont - 4,405; C.W. Morse - 1,905; H.G. Runkle - 952; John Pierce - 1,905; John B. McDonald - 6,965; Howard Carroll - 952; Cornelius Vanderbilt - 952.
3. 15,000 shares or $1.5 million to August Belmont, as compensation for cash outlay to purchase City Island and Pelham Park Railways ($272,000) and for the efforts of his firm in securing the lease for the IRT of "Contract One" and for organizing the IRT including exchange of stock with the Rapid Transit Subway Construction Company, and the securing of cash subscriptions to IRT stock.
4. 22,000 shares at $110 a share or $2.42 million to August Belmont and Company.
5. 2,000 shares or $200,000 to August Belmont and Company, but bought by the firm for the Board of Directors of the IRT in order to establish director's qualifying shares.
6. 190,000 shares or $19,000,000 sold at par, mainly to stockholders of the Rapid Transit Subway Construction Company.⁷⁸

This allocation of stock and certain features of the IRT's organization require further comment. First, the exchange of IRT for construction company stock at 160 percent of par looks worse than it actually was. Since the [page 110] directors and shareholders of the construction company were virtually identical with those participating in the new organization, the operating company did not suffer but profited from absorption of the prior company, to the tune of $3.6 million in paid-in capital, and its anticipated and probably actual three-quarter or $6 million share of $8 million construction profit. Despite later criticism of this exchange,⁷⁹ it was fair and equitable, since the probable cash return to the IRT was precisely the value of the stock. The same may be said of the 25,000 shares paid to McDonald and his original syndicate. In order to operate the road, it was absolutely necessary for the IRT to buy McDonald's interest in the "Contract One" lease. The 1902 modification of the Rapid Transit Act allowed the IRT to run the road without using the City Island and Pelham Park franchises, but it did not remove the provision that it assume responsibility for the entire contract. By the terms of the earlier agreement of February 21, 1900 between McDonald and the construction company, he and his syndicate were to retain one-fourth of the operating profits, and the construction company three-fourths. But the legal problems regarding operation had nullified this agreement, and as the principal to "Contract One," McDonald was entitled to the full benefits of its operation. Twenty-five thousand shares to the men who had initiated the project was small payment for a lease that gave the IRT legal existence, and which allowed it complete control of all profits from construction and operation.

The 15,000 shares issued to Belmont represented a sum far in excess of the actual purchase price of the City Island and Pelham Park railways, but it was not an immoderate price, given the business standards of the day, for his services in making the IRT possible and in organizing the company. This, at any rate, was the decision of the courts after years of litigation initiated by minority stockholders in the IRT.⁸⁰ The procedure by which the IRT was established gave Belmont's banking house the power to buy any corporation that it deemed necessary or useful to the formation of the company, and to sell this corporation or corporations to the IRT "without accountability in respect thereof... for such price as they deem reasonable and proper."⁸¹ Belmont was therefore in complete control, without accountability to directors or stockholders, of the cash value of the three companies bought in order to form the IRT -- the Construction Company, the City Island, and the Pelham Park, worth roughly $3.9 million. Had he desired to exploit this advantage, he could have charged the full $3.9 million rather than $1.5 million for his services in bringing the IRT into being. This clearly confirms the later decision of the courts.

Belmont was also justified in claiming in October 1904, at the time of the subway's official inauguration, that the initial capitalization of the IRT did not include any "watered" stock.⁸² The $35 million capital value left the new corporation with $25.2 million in cash, excluding normal broker's fees for Belmont's firm, and with some $8 million in anticipated profits from construction, or an aggregate sum of slightly more than $33 million. Equipment for the "Contract One" subway and for its extension from City Hall under lower Manhattan and across to Brooklyn, the "Contract Two" subway, [page 111] cost the IRT over $26.5 million, a figure much higher than had originally been estimated.⁸³ And since the company bid only $3 million for the second or extended subway, which cost at least three times that figure to construct, by the time the "Contract Two" subway was completed, the initial capitalization of the IRT was in fact almost precisely equivalent to the actual costs incurred by the company.

In planning the first subway, the Rapid Transit Commission had to forego underground construction from City Hall to the Battery under lower Broadway. In January 1901, with roughly $8 million available for additional construction, the Board took steps to rectify this omission, and also to extend the first subway under the East River to connect Manhattan's business district with the business center of the now consolidated borough of Brooklyn. The new line was to be two-track road, running from City Hall down Broadway to the Battery, under the East River to Joralemon Street, following Joralemon to Fulton Street, then under Fulton to Flatbush Avenue, and under Flatbush Avenue to Atlantic Avenue, where it could leave passengers near the Brooklyn terminal of the Long Island Railroad.⁸⁴ Though it was estimated that this second road would cost $9 million to build, and though the RTC did not have these funds in full, it rightly expected that this time around there would be competition, and that the bids would be much lower than before. The route, which connected two great business districts and the city's two most populous boroughs, was bound to be both popular and profitable. In addition, the Brooklyn Rapid Transit Company, which monopolized surface and elevated transit in that borough, would be obliged to bid, if only to keep outsiders from invading its territory. The Board knew, too, that Belmont would bid, and bid low, so as to retain control of underground rapid transit for himself and his construction company.

It may be said, indeed it was said,⁸⁵ that the RTC made its plans with Belmont in mind, and that Belmont, cognizant of this, tailored his bid to its needs. He wanted a monopoly and was both willing and able to make a low bid. He was counting on using either construction profits from "Contract One" or on capitalization of the IRT to build the road, and he was sure that future profits were well worth the small risk involved. The RTC had nothing against monopolies, and was looking for a good bargain. Both parties got what they wanted.

In response to ever growing public sentiment in favor of limited franchises, the RTC shortened the lease for "Contract Two" to the extent that this was allowed by the Rapid Transit Act -- to thirty-five instead of fifty years. Also out of respect for public opinion, it held extended hearings regarding the contract, and provided the Brooklyn Rapid Transit Company with every opportunity save one to enter into honest and fair competition with Belmont.

It could not, nor did it want to force him to share the line with the B.R.T, and he, acting out of his own quite understandable motives, could not be persuaded by the Brooklyn company's gentlemanly offers of cooperation. The Brooklyn firm could not count on profits from construction of the first [page 112] subway, and thus could not afford to bid as low as Belmont. It asked $8 million; and he asked $3 million.⁸⁶ Without Belmont's cooperation, the Brooklyn company suffered from the disadvantage that its offer threatened to upset the Commission's plans for a unified subway system with a single five-cent fare. If the B.R.T. won the contract, New Yorkers would have to pay five cents to ride Belmont's subway from the Bronx to City Hall, and another five cents from the City Hall to the Battery or Brooklyn.⁸⁷ Given these conditions, there really was no choice, and Belmont, as planned was awarded the contract on September 11, 1902.

By the late fall of 1902, then, Belmont was a happy man. With the IRT in place, with "Contract Two" in his pocket, there was only one further step he needed to take to have the real makings of a rapid transit empire. He had only one worry, which was that the completed subway might encounter competition from the newly electrified Manhattan elevated lines. After ten years of bad, slow service, lowered profits, and decreasing passenger traffic, the Manhattan had slowly electrified its road and by 1902 was experiencing a surprising comeback. In this year its traffic augmented by thirteen percent, and its operating expenses showed a far less substantial increase in comparison to revenue than for any year of the previous decade.⁸⁸ Its management was talking more seriously than ever before about a third track for all the lines, in addition to the existing third track on Ninth Avenue.

The management of the "els," however, had good reason to feel as worried about Belmont as he felt about them. Electricity, it was true, was beginning to help them hold their own against the surface railways, and third tracks would provide their road with express service everywhere. But, a third track railway in narrow streets, running express service at limited intervals, could not compete with a four track underground with constant express service at much faster speeds than the "els" could manage. Moreover, the increase of the elevated lines' passenger traffic came after subway construction had begun but before the subway was in operation; it was difficult to foresee if the growth of the city would allow both the "els" and the subway to coexist and prosper. At any rate, the recently improved conditions of the elevated road was an argument for making hay while the sun shined: the present was the best time for the management of the Manhattan to strike a deal with Belmont, which is exactly what they set about doing.

After fairly hasty negotiations, the IRT agreed to absorb the entire Manhattan road, with all its lines and equipment, for the duration of the 999 year franchise dating from 1875. Because of the Manhattan's good financial showing in recent years and its technical improvements, the terms were favorable, as its management had hoped, and more or less expected. Moreover, Belmont was hot in pursuit of empire and, fresh from triumph with "Contract Two," perhaps not overly cautious. In absorbing the elevated railroad. he undertook obligations which would not offset large short-term profits, but which would constitute a considerable burden for the IRT in the long run. The [page 113] dividend of the Manhattan's shareholders was guaranteed at not less than six percent annually or more than seven percent on the capital stock of $48 million in January 1906, and seven percent yearly thereafter. The IRT also agreed to pay the interest on the Manhattan's bonded debt of $39,545,000, with the elevated road responsible as before for the principal.⁸⁹ The lease was signed on January 1, 1903, and took effect in April of the same year.

With this lease and with the beginning of the operation of the IRT one and one-half years later, August Belmont, its President, achieved his aim. He became the undisputed master of rapid transit in New York.

Epilogue

[page 114] On the night of the day that New York's first subway was officially inaugurated, October 27, 1904, August Belmont was feted by the Board of Directors of the IRT and by the members of the Rapid Transit Commission at a ceremonial dinner in his honor, held at Sherry's Restaurant, the elegant dining establishment of New York's elite. As might be expected, the occasion was a happy one for the participants, who spoke freely, more fully, and with less modesty of their accomplishments in these private surroundings than they had at the public ceremony earlier in the day. Mutual admiration was the spirit of the moment, except that August Belmont, in particular, was the object of everyone's extravagant praise. At the end of the evening he was presented with a silver loving cup, as a token of his fellow director's appreciation for his "courageous" efforts in bringing both the subway and the IRT company to fruition.

In the world beyond the confines of this elite gathering, however, not everyone was as happy with the RTC's direction of the rapid transit decision or Belmont's business arrangements for the new subway company as the celebrants at Sherry's. Even the self-congratulatory addresses of these men were occasionally marred by defensive comments which took note of an influential and vocal group of critics. For by the time that the IRT opened for business, Progressive reformers and "muckrakers" had already begun to criticize both the first and second subway contracts, and to level harsh accusations against August Belmont and his mentors and allies on the RTC.¹

There was a good deal of truth in the Progressives' criticism. They were probably right when they made charges about prearranged "deals," and when they spoke of huge present and future profits being made by private individuals that should have found their way into the city's treasury. They were also right in perceiving that Belmont aimed at monopoly, that the existing Rapid Transit Act, with its insistence on a single contract for both competition from other and smaller sources of capital, and that the RTC was only too willing to cooperate with him. And they were right again in claiming that the rapid transit decision lacked boldness and imagination, and that the men responsible for it were incapable of achieving much beyond what politics and business "as usual" could accomplish.²

The men at Sherry's responded to such charges with uneasy wit and goodly amount of self-justification. Banker Jacob Schiff drew a hearty round of laughter³ when he described the typical Progressive critic as a "demagogue" who "comes into the land and... complains because this great franchise has been given away, because the men in control enjoy it without paying tribute to him."⁴

But he and Alexander Orr also made a more serious attempt to refute Progressive accusations. Schiff argued that Belmont and the RTC had done the best they could in the existing circumstances, and that Progressive [page 115] reformers failed to appreciate the political, economic, and legal obstacles that before 1900 had stood in the way of subway construction. He did not specifically remind the reformers of interference from the courts of Tammany hostility toward the RTC, and of powerful interests like the Broadway property holders and the Manhattan and Metropolitan railways, which sought to impede and perhaps preclude the building of New York's first subway. He alluded to all of these, however, by speaking of "the slow and tedious development of underground transit," and the "difficulties which had to be overcome" before the subway could be realized.⁵

Alexander Orr also pointed out that "in charging the Rapid Transit Commission with having given a great asset belonging to the city to a favored few," the Progressives "had forgotten evidently" the IRT had not exactly been besieged by willing and able bidders.

... instead of our having given a great asset to a favored few, I looked upon it -- and I believe that each member of the Rapid Transit Commission so looked upon it -- that instead of our favoring the gentlemen who undertook this great enterprise, they certainly favored and made successful the efforts of the Rapid Transit Commission. Had it not been for their action our Commission would have failed just as several commissions failed before; and I shall always feel gratitude to these gentlemen who stepped in at exactly the right moment and filled the breach.⁶

Put another way, Orr's point was that in the circumstances existing in 1900 only a man such as Belmont was capable of carrying through the enterprise, and it was far better to have the beginnings of a" comprehensive subway system built by a private capitalist pursuing his own monopolistic aims, than to have no subway at all.

The truth is that both parties were right, except that each judged the achievement of the IRT from a different perspective and neither the one nor the other fully understood that what was really at issue was the inadequacy of nineteenth-century institutions to meet the needs and expectations of a twentieth-century city. The rapid transit subway decision was one which tested the capacities of nineteenth-century capitalism and nineteenth-century urban politics to provide urgently required, large, and costly public services for the modern city of the twentieth century. Given the limitations which these institutions had shown in the past, at least so far as the provision of public transit was concerned; the rapid transit decision and the organization of the IRT were great achievements. At the same time they necessarily fell short of what the twentieth-century city needed, and, perhaps more important, what the twentieth century public expected.

[page 116] The IRT did represent the very best that the old system in both business and politics could attain. The cautious and conservative patricians of the RTC were honest, and, for their time and class, public-spirited men.⁷ But they hardly possessed the will, imagination, or ability which would have allowed them to overcome their often snobbish distaste for the "regular" organization politicians of Tammany Hall. Nor did they see it was precisely at this moment that Tammany was beginning to change, becoming less corrupt and far more responsive than it once had been to the larger needs and demands of the public.

Again, for his time and place, a more fair-minded or enlightened capitalist than August Belmont could not be found.⁸ Compared to other transit magnates -- men like Whitney, Ryan, Brady, or Gould -- he was honest, generous, scrupulous about financial matters,⁹ and, as his grandson, August Belmont IV, would later say, concerned about rendering the public a service "while still making a buck for himself."¹⁰ Until he made or was forced to make mistakes, as when he merged the IRT with the Metropolitan Railway in 1905, thereby assuming its burdens and becoming entangled in its policy of financial manipulation, he ran a clean and highly efficient company. He was telling the truth when he said at Sherry's that the IRT stock was not "watered," and "that every dollar put into the company is now represented by property or construction about to be furnished -- that is, the extension to Brooklyn, which is, practically being built with the money of the company."¹² And his friend and colleague William Barclay Parsons was likewise truthful when he described Belmont as a generous man who never rejected a necessary improvement for the subway, even when there was no provision in the contract for recompensation from the city.¹³ From the vantage point of those raised in and accustomed to the old system, Belmont was, as the Commission believed, very much the right man for the job. But this, of course, was precisely what the Progressive reformers had against him. He was perhaps the best as well as the last of his kind, but, he was, nevertheless, a transit magnate.

From the point of view of the public and the Progressive reformers who gave articulate expression to the public's needs and expectations, the IRT came too late and provided too little. At Sherry's Morris Jessup, then President of the Chamber of Commerce, expressed the belief that the new subway would allow

...the poorer classes, the working men of this city, the opportunity of leaving their work in the busy centres of activity and getting quickly out into the bright sunshine and the air which will benefit their lives and their health. The purer we can make the homes of the people of this city, the better will be the city.¹⁴

But the IRT, as will be shown in a subsequent report, would have little effect on the congested condition of the poor in the lower East Side. Progressive reformers shared Jessup's doubtless sanguine expectation that subways would [page 117] solve the problem of the slums by dispersing the poor to the better atmosphere of the northern suburbs. But unlike Jessup they at least recognized that nothing less than a comprehensive subway system would achieve this end.

For the Progressives the IRT was not a solution but part of the problem. It was only a "trunk line," built long after it could do much good in relieving traffic or slum congestion, and the conditions of its construction and operation were such as to relinquish profits that should have belonged to the city, and decisions that should have been matters of public concern, to a private corporation. The reformers held the RTC responsible. Its "business as usual" direction of the rapid transit decision had retarded construction of even this inadequate underground road. And its collusion with Belmont allowed him to garner the lion's share of profits from the new subway, when these same profits, if returned to the city, could have been used to hasten more comprehensive subway construction.

"Municipal ownership" clearly meant one thing to the Progressives, and something else again to the patrician businessmen of the RTC. The principle of municipal ownership embodied in the Rapid Transit Act of 1894 was conceived by its framers as an expedient which would help to stimulate private capital's interest in subway construction. Though it signified a small step toward governmental participation in the creation and control of public works, it was meant to aid rather than restrict, much less supplant, private enterprise. As understood by Progressive reformers, however, municipal ownership was much more than an expedient, and was no longer geared to the interests of private capital. It was perceived as a method of securing for the city reasonable rates and a large share of profits from the operation of public utilities, and also as a means of achieving public control over public services. It signified a new and important role for government..

Set against these standards, the IRT was necessarily considered a failure. "Contract One's" long fifty-year lease, and the renewal option of an additional twenty-five years, was characterized by one Progressive journalist, Ray Stannard Baker, as "a contract by which, in effect, the city has actually conveyed its right to govern."¹⁵ Reformer and City Comptroller Edward Grout expressed a similar view in a letter published in the Times.

I know it is the fashion to speak of this subway as an instance of municipal ownership. It may be such three generations hence. Today it is merely a lending of municipal credit with exemption from taxation for the benefit of individuals. Municipal ownership means something more than naked ownership. It means ownership for the benefit of the city, not for the benefit of a private corporation... When the voters of New York voted for municipal construction of a rapid transit road, how many of them contemplated the result which now exists?¹⁶

[page 118] The decision for the IRT, then, marked an ironic turning point in American and New York City history. The IRT was the first subway in New York, and the beginning of a subway system that must still be seen not only as one of the great public "improvements" of the twentieth century, but also as an indispensable element in the life of America's largest, and, as some still believe, greatest city. Yet the story of the IRT has really very little to do with the twentieth century and in one important sense its creation signified an end rather than a beginning. Its achievement was the culmination of a long struggle for adequate rapid transit -- underground transit -- in nineteenth-century New York. It was the work of men whose world was defined and accordingly circumscribed by the practices, ideas, beliefs, expectations, and circumstances of the nineteenth-century. But in the very process of deciding upon and bringing the new subway into being, these men aroused public expectations that neither they nor the system they represented could satisfy. Their success was ironically the cause of their undoing. In time, and with the advent of a new era which historians have called "The Age of Reform," these same expectations would result in a far more important role and ever more substantial responsibilities for government. The story of the IRT is thus one small but significant chapter in a larger history which records the slow transformation of American urban society, and which marks the gradual shift from the old liberalism to the new.

Notes