The Subway Deal (1905)
McClure's Magazine · March, 1905 · Vol. XXIV, pp. 451-469.
How New York City Built Its New Underground Railroad. Illustrated With Portraits And Diagrams.
By Ray Stannard Baker.
- 1 Preface
- 2 A Confusion of Wonders
- 3 Birth of the Subway Idea
- 4 Street-Car Companies Delay the Enterprise
- 5 Tammany Hall Gets Hold
- 6 How the Contract Was Let
- 7 August Belmont, His Character
- 8 McDonald Begins Work
- 9 Character of the Commissioners
- 10 Bargain of the City with Belmont
- 11 Municipal Control the Real Issue
- 12 Forces That Fought Reform
- 13 Problem of the Corporation Lawyer
- 14 Citizens Demand Changes in the Subway Law
- 15 Giant Proportions of the New Belmont Monopoly
- 16 Silver Loving-Cup for Belmont
- 17 Source/Credits
The story of the travail of a modern city in bringing forth a great public work: how the will of the people, opposed by the street-car monopolies, deflected through the Political Boss, ineffectively enforced by the Rapid Transit Commission, blunted by its own dumbness, finally found expression in a great work; and how, at last, following the common fate of such enterprises, the Subway is nourishing a new private monopoly, more piratical than any of its predecessors. --THE EDITOR.
Here it is, then, the new Subway, laid down and finished, waiting to be judged. We have heard the loud voice of extreme eulogy, we have seen the Subway exposed for many weeks to the trying tests of actual usage, we have had the rebound to extreme fault-finding. Tin-framed advertisements, for instance, have been made to obscure the real significance of a great work!
What, then, is the truth in regard to this Subway? How completely does it fulfill its purpose as a public enterprise?
In visiting the Subway, it is not easy at first to avoid the overwhelming glamour of bigness. The thought of this work: a hole twenty-two miles long through rocks and bogs and sand, here just concealed under a corner swarming with humanity, there burrowing deep in a tunnel; crooking through the very basement of an enormous steel building, with human occupation both above and below, darting out across a splendid bridge, with glimpse of water and distant hills; at places requiring passengers to climb over a hundred feet upward to take the cars, at other places demanding that they go over fifty feet downward; at one end driven deep under the salt water of the harbor to Brooklyn, at the other lost in the farm lands of the Bronx. They show us the electric powerhouse with its unequaled machinery, they point out the covered ways leading here into a great mercantile establishment and there, miles away, into a hotel, "so that ladies shopping on a rainy day need not go out of doors," they ask us to admire the perfect plumbing and water systems of the stations, and was there ever such perfect fire protection? Cars, all of steel and copper; sunlight coming through from the streets above, outside entrances of some architectural pretense, inside waiting-rooms lined with costly tiling, arranged in forms of beauty!
Left: John B. McDonald. The contractor who built the Subway - "a solid, grim man with a thick chest, brawny arms, and an iron jaw; masterful, self-controlled, capable." Right: August Belmont. Banker, American representative of the Rothschilds, Democratic politician, and master of the street-car situation in New York City.
A Confusion of Wonders
This is the first view of the new Subway- a dazzling confusion of wonders, an overwhelming impression of complex bigness- from which we return for sheer relief to the criticism of little things that we can really grasp- like the crowded, over-small car doorways, like the smell of new oil from the car tracks.
Many of us stop at this point, awed and uninquiring. "Is it the biggest on earth?" we Americans are prone to ask of any new thing, and having been assured that it truly is the biggest we go about our business with an uncritical sense of satisfaction. Bigness satisfies our vanity- and obscures our vision.
But gradually, two or three minutes a morning, dwelling on these diverse growing familiar with this bigness, we begin slowly to grasp its meanings.
If the people had not built up in lower Manhattan, they would not have had to build under here in the Subway. The true parent of the Subway is the elevator, or better yet, the grandparent. This is the line of succession: the elevator made possible the skyscraper, the skyscraper led to underground transportation. The Subway itself is, indeed, only a great elevator laid down on its side running from the basement offices, so to speak, to the living-rooms upstairs.
The Subway is not more wonderful than the skyscraper. It came to us not as a heaven-born miracle, but as the next step in the evolution of a Modern City. It was as inevitable as the course of nature; it was not due to the work of any one man or men, however large personalities may seem at the conclusion of the task. A great work like this gives us somehow the impression of having projected itself; it was the city putting out an arm!
Looked at with the simple eye, therefore, we have no cause to fall down before this Bigness. Nor should we especially admire ourselves for having done the work. We could not help it. We were driven to it- and we now brag the brag of the brawny day-laborer, the brag of brute force, so much work done that we were compelled to do!
The question of true moment does not concern the material fact of accomplishment, it has nothing whatever to do with the bigness of the Subway. It is rather a question of how the city prepared for its next step, how fearlessly, how deftly or how weakly; it is pre-eminently a question of character, not of accomplishment.
And so, as we think of it, all these marvels of tiled walls, protected third rails, signaling devices, which have impressed us so strongly at first, begin to assume their proper places, as things of really minor import, the small clever things with which the Great Worker, in the excess of his energy, brightened his task. Not of much real meaning in themselves, they yet confuse us: and sometimes they are employed by designing men for the very purpose of confusion - to keep our minds from traveling straight back to the How of the thing.
Look into the interminable, arid reports and court decisions and critical pamphlets published in regard to this Subway - talk with the men concerned, visit the work itself, not once but many times in every part - and out of the waste of printer's ink, out of the utterly wearisome confusion of detail, one great fact slowly shapes itself; and that is the prodigious indirection of toil necessary to complete such a work as this in America: the cross-purposes everybody's business, nobody's business; waste effort; procrastination. The world's idea of the individual American is one of brisk efficiency: here we find a curious, shambling, timid, uncertain Civic American. This is the personality that grows upon us, as we examine the Subway.
It is said that when the Russians were ready to build a railroad between Moscow and St. Petersburg they laid a map before the Czar. With his pencil the Czar traced the route, he gave an order, and the work was begun. It is not so in a republic. The sovereign people here knew years ago that they must have some new means of rapid transit: the best citizens discussed a tunnel as long ago as 1868- thirty-six years- but we procrastinated. We were herded into surface cars; we were crowded indecently, in a way marvelous to Europeans; we paid for seats - fares so large that the companies earned huge dividends - and then we stood up or hung to straps. We grumbled and growled, but we would not really bestir ourselves. We enjoyed talking about our glorious system of self-government, but we would not work at it!
The result of this civic character of ours applied to a public work is that the Subway is at least ten years late in opening; it is so late that it hardly relieves the pressure of travel. We still hang to straps and grumble and curse- impersonally. We are so far behind that even if we keep on building at the present rate it will be a generation before we really catch up with street traffic.
Left: William Barclay Parsons. The engineer who designed the Subway and who is largely responsible for making it a thoroughgoing honest job. Mr.Parsons has recently been appointed a member of the Panama Canal Commission by President Roosevelt. Right: Alexander E. Orr. President of the Rapid Transit Commission. Capitalist, philanthropist, former president of the Chamber of Commerce, a representative of all that is respectable, stable, old in financial and political ideals.
Birth of the Subway Idea
It is unnecessary here to go into the details of the various periods of agitation or of the abortive attempts at building a subway. It can all be summed up almost in a word. Here stood the city, hands full of money, conscious of the cry that rose from the people herded into the street-cars. Here was the plain knowledge of work to be done. Yet the city stood doubting. Those who really had the power to accomplish anything fought the scheme for their own private ends, and as usual the private ends were better served, employed better legal talent, than the public. Again and again the city entreated its creatures, the railroad companies, to furnish relief, to dig a subway. As far back as 1872 a perpetual franchise was presented to Cornelius Vanderbilt on the figurative silver platter. He did not build. A few years later other grants were made by the legislature, all to no purpose, and finally as a sort of substitute the elevated railroads were constructed-an ungraceful, noisy, unsatisfactory means of transit, which an enlightened city will sometime abolish entirely. In the meantime Mayor Abram S. Hewitt, a real public servant, continually advised and demanded a subway - and a subway to be owned by the city. In 1888, Mayor Hewitt endeavored to secure subway legislation, but his bill was defeated by a combination of Tammany Hall and the street-railway lobbies - corrupt politics backed, as usual, by greedy business. The existing street-car companies wanted no competing subway and, above all, no subway owned by the city. At this point began, indeed, the remarkable history of obstruction and delay and corruption by which the street-car companies and capital generally have prevented New York from securing rapid transit relief.
Three years of discomfort and crowded cars followed Mayor Hewitt's subway campaign, and finally, in 1891, the rapid transit legislation so vociferously demanded by the people was actually passed. A commission was appointed, but the law was so juggled and the commissioners so influenced by the street-railway lobbies that when the franchise was offered for the construction of a subway by private capital, no bidders appeared - and the scheme was defeated. William C. Whitney, George Gould, Russell Sage, Ryan, Elkins, and the other street-railway owners would neither do anything themselves, nor would they permit the city to do anything. The new phrase, "stand pat", applies exactly to these men; they were making big profits from crowded cars; they wanted no changes; they had not the slightest concern for the public.
So we come down to the year 1894 - the year of angry public pressure-the year when the people, appealing to the legislature, succeeded in having the law of 1891 so amended as to make the Rapid Transit Commission effective. That year was, in reality, the beginning of the work which culminated in the present Subway.
A remarkable body, this Rapid Transit Commission - one of the most remarkable in the whole history of the country-not less unique than the work which it subsequently performed!
Here was the situation in New York state: a Republican boss Platt in control of the legislature, a Tammany Hall Croker in control of the city, a Hill Democratic machine-governor sitting at Albany. As I have shown, the railroad companies wanted no rapid transit -they were well contented with slow, certain dividend transit. Now, Tammany Hall was tom by conflicting emotions. It was highly profitable - as well as customary - to do the bidding of the street-railway companies. But Tammany Hall leaders saw that the people were determined to have a subway: and the very thought of a $50,000,000 public work must have made their mouths water. Think of the pickings! The people had no desire to see Tammany Hall spending any such sum of their money; and the Republican bosses in this case quite agreed with the people. So Boss Platt dickered with Boss Hill and, counting on the acquiescence of the don't-care-how-it-is-done public, they brought into existence this most remarkable body - the Rapid Transit Commission.
In order that the Subway might not fall into the pilfering hands of Tammany, and that it might clinch the hold of Platt's upstate Republican machine, the act of the legislature named the members of the commission in the law - an almost unprecedented procedure; it gave them office for life, it empowered them to appoint their own successors, it endowed them - a state body - with the power to incur a huge debt on behalf of the city of New York. In other words, they were not responsible to the people whose money they spent. They could not be removed by the governor, nor could the mayor discipline them. And as a sort of clincher, they were not obliged under the law to furnish the public with any account of their doings! Their first report was made January 1, 1902 - eight years after they were appointed.
In short, the state of New York had created a despotic power -a Czar-like autocracy - to govern New York City in so far as this particular work was concerned. In spite of its serious needs, New York City, apparently, could not be trusted to spend $50,000,000 of its own money, for fear either that its political bosses would steal it, or its corporations would so cajole the willing politicians that the Subway would be indefinitely postponed or else the franchises would be frittered away.
But the people of New York were, as usual, not discriminating. It was, "Give us rapid transit: we don't care how." "Build the Subway: we're busy." An American attitude! And when in November, 1894, the proposition to borrow money for subway building was submitted to the people, they carried it by an overwhelming majority. This was the only chance the real people had to speak, and they spoke vigorously! A shout of joy arose:
"Now we shall have rapid transit. Fifteen minutes to Harlem!"
But we find the Rapid Transit commissioners, though clothed with extraordinary powers, though provided with money by the vote of the people, confronted by obstacles which, apparently, they could not overcome. The actual engineering and material problems, the building of the Subway- upon which we are now directed to expend our wonder- were the least of their troubles. No really great new engineering difficulties were involved, nothing that could not easily be accomplished with money and men. The commissioners had plenty of tested models in Europe and even in our own country - in Boston- to work from, and they were served by a highly able staff of engineers. It was not the task itself that delayed, but the difficulty of getting at it!
It is in this history of delay that we shall find the real meaning of this subway problem - the real questions, indeed, of every great public work in this country.
In the first place, beginning at the beginning, the law itself, through which the Rapid Transit Commission drew the breath of life, was a curious piece of business. As it came out of the legislature it was fair to look upon, innocent enough in its intent, but really warped and deflected by its passage through the lobby. When private corporations perceive that they can no longer prevent the passage of popular reform legislation, they submit with apparent willingness, but somehow, somewhere, they sneak in provisionary clauses which are designed to defeat the real intent of the law. When the rapid transit bill was under consideration the street-railroad lobby was on hand, working craftily, deeply, silently, so that after the law went into effect the commissioners, newly created, found themselves hobbled at the very set off- and a hurdle race to run! Under the guise of safeguarding the city's interests, absolutely impossible conditions as to bonds and forfeits were imposed by the law. For instance, a bidder for the contract to build and operate the new Subway was called upon, under the act, to deposit $1,000,000 in cash, and to furnish a bond which was later fixed at $15,000,000! During the six years after the commission came into existence, its members went before the legislature many times to secure amendments to the law.
Street-Car Companies Delay the Enterprise
Not only were the commissioners thus hobbled at the start, but they seemed troubled in their own minds as to how far or how fast they should run. Bear in mind that these commissioners were good men, really foremost citizens, of undoubted personal honesty, but they were themselves of the conservative, money-controlling class and, although they were empowered to go on and contract for the building of a subway with the funds of the city, still, they were by nature and training uncertain how far this new thing, "municipal ownership," could be carried. And while they hesitated, the street-railway companies diligently set up more hurdles! It was amusing, if it had not been so serious for the citizens of New York, to see how these good men were blocked by the street-railway owners - and by one of the hoariest tricks in business. The moment the commissioners made any real effort to begin work, the Manhattan Railway Company, which controlled the elevated roads, would come forward with a proposition for the extension or improvement of its lines: there would be talk, talk, talk - and delay - exactly what the companies wanted. When this "deal" fell through the Metropolitan Railroad Company, which controlled the surface street-car lines, would step up and the same solemn farce would be re-enacted. Neither of these companies wanted any competitive subway: what they wanted was delay -and dividends - and they got both.
As an example of the kind of negotiations which delayed the building of the Subway I quote this extract from the commissioners' own report for 1900-1901:
Following close upon the announcement of the fact that the Rapid Transit Board would continue its efforts to secure the construction of a rapid transit railroad for and at the expense of the City, came an application from the Manhattan Railway Company that the Board would authorize it to build elevated railroads over a number of additional streets.
This application was vague and indefinite in some respects, and, in still others, it sought for privileges which the Board had no power to grant. A communication was accordingly sent to the Railway Company on August 6, 1896, pointing out these defects, and suggesting that an amended application be filed. No reply was returned to this communication, nor did the board receive any further intimation that the Manhattan Railway Company desired to extend its lines until, after the lapse of eighteen months, it had become evident that the Rapid Transit Railroad was likely to be constructed by the city.
Here was a straight delay of eighteen months, and every time the Rapid Transit commissioners really made a motion to do anything there were the same significant, "vague and indefinite" applications from the street-car companies.
There were other causes for delay traceable directly or indirectly to the street-railway companies. The commission, for instance, was attacked legally, and its existence had to be defended and confirmed in the Supreme Court. Property owners also objected; they all wanted the Subway, but they wanted it in front of the other man's property. The storekeepers of lower Broadway were especially bitter, spurred on, there is evidence, by the street-car companies, until finally the Rapid Transit Commission was compelled to change its plans and lay out a subway through Elm Street and Fourth Avenue.
Another difficulty which confronted the commission reminds us of the story of the miser who, to protect his treasure from robbers, surrounded himself with so many bolts, bars, alarms, and safeguards, that he could not finally get at the treasure himself. So it was in New York City. We had surrounded ourselves with so many laws to prevent our servants- the politicians whom we ourselves select- from stealing us poor, that when we really wished to spend money on a new work, we could not get at our treasure.
So the Rapid Transit Commission found itself confronted by an inelastic "debt limit." That is, although the Rapid Transit Commission was empowered by vote of the people to spend $50,000,000 of the city's money, the limit of indebtedness was so fixed by another law that for a time they could not go forward with the work.
Well, all these obstacles were finally swept aside: it took three years' time, during which the people of New York were helplessly subjected to indecent crowding. In 1897 the commissioners were ready to let a contract for building a subway. The people again shouted their hurrahs: Relief at last! Now the Subway would be built. But the delay so cunningly engineered by the able street-car companies, had finally tolled the commissioners along to the beginning of the year 1898- highly unfavorable in two respects for the projection of any sort of public enterprise.
Tammany Hall Gets Hold
In the first place, the country was just emerging from the depths of business depression- a money panic: in the second place, on January 1, 1898, Tammany Hall returned to power with Van Wyck, the "worst mayor of New York," as Croker's figurehead. This was exactly what the street-car monopolies wanted. They could control Tammany. Moreover, Tammany naturally fought the Rapid Transit Commission as the creation of the Republican up-state machine. Van Wyck, ex-officio member of the commission, would not even attend its meetings; Coler, the comptroller, made difficulties, some of them real enough, about the debt limit; and Whalen, corporation counsel, who was required by law to pass on the legality of the contract, held up that document for eighteen months. Tammany Hall wanted to get its grip on this rich contract - and the street-car monopolies were naturally eager to assist Croker's ambition. For instance, in Whalen's criticism of the contract he made these suggestions, looking to some measure of profitable supervision by Tammany:
That the city itself, acting through its law department, should have sole charge of all proceedings for the condemnation of lands.
That the city should be represented on the work by a supervising engineer.
Tammany Hall, indeed, splendidly served the purposes of the street-car monopolies, by getting a delay of eighteen months. In this act - to be perfectly fair - Tammany had some good excuses, if not reasons, to offer.
It is usually the case, indeed, that the political boss and the lobbyist see some way of twisting a genuine sentiment to serve their purpose. After the rapid transit law was passed the fixing of the bond at a prohibitive figure emphasized the people's desire for security in spending public money; when Van Wyck and Whalen fought the Rapid Transit Commission they voiced the belief of many thoughtful citizens that an up-state board should not have the power to control the treasury of New York City. In the same way Tammany now pleaded the debt limit -which was, indeed, technically too low - though a really public-spirited administration could have overcome this difficulty. Moreover, the new City of Greater New York was just then in progress of organization and some of the outside boroughs, not directly to be benefited by a subway, objected to taxation - and so forth and so forth - the endless excuses to be found by persons who want excuses.
Left in this dilemma, the Rapid Transit Commission was practically helpless. Having been led along by the railroad monopolies to the rough, dark road of panic times and Tammany, there was now a deliberate attempt of the railroad people to hold up and sandbag the commissioners. The Metropolitan Street Railway Company asked for a perpetual franchise outright - a practical gift of the streets to a private company. Having reduced the commissioners to hopelessness, Mayor Van Wyck consented to attend their meetings and the first important thing he did (March 29, 1899), was to introduce a resolution asking the legislature to "grant to the board the power to contract for the construction and operation of the Rapid Transit Railway by private capital." (Page 65, Official Report, 1901.)
Following this guileless-looking resolution, one of the worst bills ever devised was introduced in the legislature with the full approval of the Rapid Transit Commission. This bill (chiefly through the notorious "Section 32") would have enabled the commission to give away by private contract without competition to the Metropolitan Railway Company a perpetual franchise for a subway, allowing that company to charge a ten-cent fare on express trains! The Metropolitan Company was not named in the bill, but was so described that there could be no mistake. It was as clear an attempt to sell out the city to a private corporation as was ever made. Attorney Boardman, the representative alike of Boss Platt and of the Rapid Transit Commission, was there to favor the bill, the Tammany machine, the real champion of the street-car companies, of course supported it, and the scheme was so skillfully and silently engineered in the legislature that no one awakened to the iniquity of the bill until near the close of the session. Then suddenly the people awoke: there were tremendous mass-meetings of the labor unions and citizens in New York City. John Ford, a state senator from New York, fought the bill in the legislature, and the whole matter came up before Governor Roosevelt. Acting with characteristic energy, Roosevelt summoned the Rapid Transit Commission, and embarrassing explanations were made, with the result that the iniquitous measure was defeated.
In regard to this incident the report of the Rapid Transit Commission says ingenuously that the bill "served to show the strength of the popular sentiment in favor of reserving the ownership of the railway by the people."
Failing thus in the attempt to gobble the subway franchises without compensation, the street-railway companies, assisted by Tammany, returned to their old and profitable tactics of delay and obstruction - of which the commissioners seemed easy victims.
How the Contract Was Let
But finally in 1900, six years after the Rapid Transit commissioners were appointed, they really got to the point of asking for bids. By this time the street-railroad companies had grown so certain of their influence and of their own astuteness in delay (until the plum should fall of its own ripeness into their open jaws), that they failed to use due vigilance.
And the unexpected happened! There were two bidders! One of them was John B. McDonald, a bold Irishman, an experienced contractor, a Tammany Hall man. He had just been building the Jerome Park Reservoir, said to be a failing venture, and he had little or no money of his own. Apparently he bid for the new Subway as a sort of gigantic gamble: not much to lose, everything to gain., He had no money to build it - not even money enough to put up for the bonds, but he had something much more valuable: a close acquaintance with Croker and Tammany. There is evidence, in the first place, that the Tammany leaders had began to perceive that the public would punish them for much longer delay, and in the second place its leaders saw a way of getting something for themselves (if they couldn't get everything) out of the big contract, Croker and other Tammany leaders, for instance, were interested in several large firms of contractors, and there was a chance to secure profitable sub-contracts under McDonald - a consummation which actually followed. Moreover, it was good to have a strong hand in the employment for four years Of 5,000 or 10,000 citizen voters from the East Side. It is significant that after McDonald placed his bid Tammany opposition disappeared. Tammany, indeed, really built the Subway: Tammany men made profits on the contracts: Tammany leaders gained thousands of votes by employing voting workers.
And McDonald won: a sort of foreordained winning!
It must have been a glorious study in astonishment, that success. With the Rapid Transit Commission it was the astonishment of hopeful weakness; the public was astonished that anything at all should finally happen; the street-car companies were vastly astonished - and contemptuous! Who was this McDonald, that he should enter their field? And they knew he had no money anyway! These two monopolies between them were sure that they were the only people who could bid, and they were just a little too sure of the loyalty of Tammany Hall! And was this confidence surprising? Behind them stood all the various related interests of Wall Street - the family, so to speak, of capital. The Elevated Railway Company was backed by all the vast Gould interests and connections and by the Russell Sage connections, the surface lines were owned by the so-called Whitney-Ryan-Elkins "crowd" - many of the same interests being connected with the notorious gas trust, and that led straight into the Standard Oil camp with its tremendous resources of capital and banks. Who was to prevail against these related interests? What could the city do? But if the railway monopolies were surprised, Tammany Hall was not; it is never astonished; it always knows beforehand. If McDonald was surprised at his own success he did not show it. McDonald is one of the taciturn sort - a solid, grim man with a thick chest, brawny arms, and an iron jaw; masterful, self-controlled, capable. McDonald wore a poker face - said nothing. There is evidence that McDonald, now that he had the contract, tried on his part to negotiate with the street-car monopolies, the natural allies of Tammany; there is evidence that they bade him good-morning with finality. They were so confident, those street-car companies.
August Belmont, His Character
But they did not quite know McDonald. He and Andrew Freedman, ex-baseball manager and expert political-financial manipulator, of Tammany persuasion, put their heads together and a few days later it was announced that August Belmont was backing the contractor with unlimited money - and that the Subway would really be built. Astonishment again! Belmont was what is known as a "rank outsider." He was not "in" street-railways, and he was not supposed to know much about city transit. Although a banker of large interests, the American representative indeed, of the Rothschilds, he was regarded as a son of his father - the second generation which "goes in" for pictures and horses and politics, which sits on its money. A little, dapper man, Belmont, with a flower in his buttonhole: a good Democrat, too! One quality alone had caused Wall Street to withhold a final judgment on Belmont - a suggestive ability of keeping his own council. In reality Belmont knew a great deal about the rapid transit problem: his father had been a Rapid Transit commissioner, and he himself had given the subject no little study. About the time McDonald appeared, Belmont had been squeezed out of one or two large financial interests by the big men of Wall Street, and he not only had idle money, but he felt aggrieved over his treatment.
Taciturn McDonald, silent Belmont: they came together and a company was formed. McDonald contributed his contract, his daring and his experience, his great and much needed influence with Tammany Hall, and Belmont furnished the money - and, if reports are true, McDonald still has his daring and experience, and Belmont has taken practically all the profits, leaving McDonald, at the close of the work, a negligible quantity, so negligible that he was all but overlooked when the program for the dedication of the Subway was made out, and was finally forced to resign before the work was completed. Which shows how much better it is to have money than to have boldness, initiative, capability, influence - without money.
We like to imagine that the old dog-in-the-manger street-car monopolies were really defeated and disgusted by this strange development, and there are evidences that they were. While they waited with wide-open jaws, this Irishman, McDonald, had picked the plum. We know that Russell Sage sold out his stock, and that when Whitney died it was found, to every one's astonishment, that he had fled from the Metropolitan. Indeed, when Belmont organized his new Interborough Company he found it easy to get control of the entire elevated railway system under a lease, thus removing the greatest competitor of the Subway, and laying the foundations of a more powerful street-railway monopoly than New York has ever known. A very large figure in Wall Street to-day, this hitherto unappreciated Belmont, a sort of new King!
McDonald Begins Work
Work was begun by McDonald in March, 1900, and completed on time in 1904. If there were room here I should like to detail some of the remarkable features of the actual work, planned by William Barclay Parsons, the engineer of the Rapid Transit Commission, and worked out by McDonald and his sub-contractors. But the facts of this physical upheaval have been in evidence - to utter wearisomeness - for four years, are now in evidence on the new extension in lower Broadway; and the other thing, the greater How of the work, has been obscured. But it is well in passing to stop and admire the Subway as a material production. Most American works, with which the public has anything to do are marked with more or less official corruption, are scamped in material - where it won't show - are excessively costly, but this Subway, in an engineering sense, has apparently been a thoroughgoing, honest job, well done, with some attention to real beauty, with some effort to protect and satisfy the public. The engineers of the commission, men of the highest standing in their profession, following the contractors step by step, have kept the work clean, as clean as a private enterprise, and better than a private enterprise in its aspects of beauty and convenience. That surely should mean a white mark for the American: he is not equaled in the world when it comes to the execution of a great material work, he is a brilliant engineer, great in inventive and constructive imagination, a matchless builder! No obstacle turns him aside, he is orderly, patient, resourceful, with incredible energy and speed, and on the day that the contract expires, he says: "Here is your work, finished," and without fuss or feathers he turns to the next job.
Due weight must be given to these noteworthy excellencies of the work. It was a private enterprise watched and guarded by public inspection. It was honest, and that is a tremendous gain, something to be grateful for.
But this very efficiency and honesty in material construction throws into vivid contrast the stumbling inadequacy of the American as a civic administrator. All the reports and pamphlets connected with the Subway glow with the worship of the practical details of finance and engineering, but they seem largely unconscious of the real social welfare of the city, the real service of the public. The viewpoint of the commission itself - a civic body appointed to protect the rights of the public, is not far different from that of McDonald and Belmont: it is a business-engineering view, not a broad, public, civic view. The acts of the commission from the first have been marked not by a bold, free, clear advocacy of what is best for the people, but by the halting, timid, compromising air of men imbued with the old ideals of the utter sacredness of "business interests" as compared with the "public welfare." Indeed, we find the commissioners repeatedly going over, and weakly yielding to the demands of the street-car monopolies - as in 1899 - and only stiffening up under the angry protestations of the people.
A great point has been made recently by the commissioners of the fact that the city now owns the Subway. As a matter of fact these very commissioners and the Chamber of Commerce behind them did their best at the time the rapid transit law was passed to prevent real municipal ownership, to prevent a referendum vote on the subject by the people. In its report (1894), the Chamber of Commerce says of the referendum: "This provision of the law is very much to be regretted." Even Mayor Hewitt fought the plan to submit the question of municipal ownership to the people of New York. He said in a hearing before the legislature (April 5, 1894): "The referendum proposed in this bill is in direct violation of American institutions." It is probable that if it had not been for the activity and earnestness of organized labor, represented by the Central Federated Union of New York, assisted by many public-spirited citizens, by great petitions, by persistent agitation, the Subway to-day would not even be nominally a public enterprise. Yet we find the commissioners and the Chamber of Commerce now taking to themselves the entire credit for the public ownership of the Subway!
Character of the Commissioners
It is not pleasant to criticize men like these Rapid Transit commissioners, who have acted so consistently with personal honesty, when even personal honesty in public service is so difficult to obtain. And in any criticism which we make it must always be borne in mind that we ourselves are responsible for this commission.
But take the type members of this Rapid Transit Commission: fine, high-minded, soft-hearted old gentlemen. They have worked nobly, none better; their honesty is without blemish. They were put in as the representatives of the Chamber of Commerce - all that was respectable, stable, old. Theirs were the courtly ideas of respectability - the wealth of a man, the clubs he belonged to, the prominence of his family, his philanthropies, his church affiliation. But what have all these things got to do, except incidentally, with building a subway costing $50,000,000 and building it in opposition to alert, grim-jawed young men who stop at nothing - nothing - in getting what they want, and the public be damned! These young men are in business strictly for themselves, for cash; they employ the best lawyers in America, they control the political machines, they get up early in the morning and go to bed late - and we, the people, to protect our interests, set against them a board of fine old gentlemen! Then. we wonder why our Subway is fifteen years late, why we hang to straps, why we pay five-cent fares, and why we have all this silly dispute over tin-framed advertisements that mar the beauty of a $50,000,000 public work! Why, we couldn't have selected any men that would have suited the street-car monopolies better than these gentlemen. No really bad men would have been half as serviceable!
Six members of the commission are of this old-gentleman type: the two others are politicians, one, Mayor McClellan, who has been, so far, a negative if not an obstructive influence in serving the people's interests. The other is Comptroller Grout, the member who has, perhaps, expressed the highest ideal of real public service of any of the eight: but who, with the curious contradictions which characterize most of his public acts, has failed to accomplish anything essential.
Here is the meat of the whole matter: We are striving in this country for two qualities in our public servants: honesty and efficiency. In most of them we secure neither, and it is rare indeed that we attain both.
Efficiency is easier to secure than honesty, therefore we set a higher value upon honesty, therefore we cherish the ideal of the respectable businessman in politics. In the Rapid Transit Commission we secured business honesty - and monumental inadequacy! We chose these good men, and set them against the impossibly alert young fellows of Wall Street, with their unlimited money, with their control of the political machines, with the best legal brain at their disposal - and expect such commissioners to get the best results! It was inefficient honesty grappling with efficient dishonesty. When we, the public, propose to fight Wall Street and come away with anything left, we have got to employ real brains, and real energy inspired by the best civic ideals of the twentieth century -and then pay our servants.
But we are told - eagerly by the commission, eagerly by Mr. Belmont and his associates: "This Subway.is yours. It belongs to the people." They tell us that at the very moment that our commission is trying to put out certain tin-framed advertisements which we don't want - and meeting the smiling defiance of Belmont! These advertisements, which I have mentioned so often, are mighty instructive. They are the key which unlocks the whole problem.
Bargain of the City with Belmont
Let us see on what terms the Subway is ours - a public possession. Let us put down, like boys trading marbles, what we give in one pile and what we get in another.
We freely give the use of the streets, a possession of uncounted value, we provide all the money for building, we exempt the company from all taxation, we permit it to charge an unchangeable five-cent fare, no matter how cheaply the road can be operated, and then we throw in (like the famous Dutch farmer who, when he sold the tail, threw in the entire hide), a contract which shuts us off from any real control of the Subway for fifty years - and probably seventy-five years.
On their part, what do Mr. Belmont and his associates give in trade for this splendid possession?
First, they pay the interest on the money which we supplied, about three and one-quarter per cent, and they pay one per cent sinking fund - or much less than what they would have had to pay had they borrowed the money in the open market and undertaken the work as a private enterprise. That is all they pay - everything. The question of equipment may be disregarded, because the city must purchase the equipment at the end of the contract term. As to the damage cases of adjacent property owners which most corporations have to pay - why, the city, in its goodness, also engages to satisfy all of them.
The city will not get, all told, as much as if the property were subject to ordinary taxation and no other payment whatever made to the city treasury. By the old perpetual franchise system, it was not impossible for the city to exercise some control over the street-car companies, but Belmont has a contract by which, in effect, the city has actually conveyed its right to govern. Of course, the Subway is nominally owned by the city - nominally - at the end of seventy-five years. Upon this point we have the evidence of a remarkable letter of Edward M. Grout, now Comptroller of New York, and an ex-officio member of the commission. This letter was written to Andrew H. Green and part of it follows:
I know it is the fashion to speak of this subway as an instance of municipal ownership. It may be such three generations hence. To-day it is merely a lending of municipal credit with exemption from taxation for the benefit of individuals . . . When the voters of the former city of New York voted for municipal construction of a rapid transit road, how many of them contemplated the result which now exists?
At the end of fifty or seventy-five years, when our great-grandchildren get control of the Subway, the Belmont corporation, protected by a cast-iron contract that gives them an unregulatable five-cent fare, will have paid untold millions in profits. In Boston, the city not only built the subway, but kept control of it. And Boston found a subway easy to build and to lease on these terms.
But the commissioners claim that under the circumstances which existed at the time the contract was signed - a combination of Van Wyck and post-panic times - they made the best terms possible to get a subway.
It is certainly a fact that capital was timid at that time regarding the enterprise, that it was concerning itself in the organization of great industrial trusts, that it looked askance upon the municipal ownership phase of the enterprise - and the commissioners may have had to make these onerous terms or get no subway. Let us assume this to be a fact, nor lay the previous delay up against them. We should have expected then, very much better terms for any new subways or extensions that might be built after the success of the first great venture was assured. What do we find? When the contract for the Brooklyn extension was let (in 1902) the Belmont syndicate got it, practically on the same terms. The only real improvement was a shorter franchise term - thirty-five years instead of fifty. It is true that the Belmont syndicate agreed to do a $11,000,000 job with the use of only $3,000,000 Of the city's credit; but on the same principle they could have afforded to do this $11,000,000 work for $1 - to get control of the new extension. They simply borrowed from the banks instead of from the city, and the only thing the city gained by this much heralded transaction was an additional borrowing capacity of $8,000,000. In its essential features of control, the new contract was no better than the old.
Municipal Control the Real Issue
And this problem of control is the only real question, for no one cares who owns the street-railways so long as the city is truthfully the controlling master. Some thinkers suggest "municipal operation" only because they believe that the city can-not really control its street railroads when they are owned by private individuals: the political corruption fund is too enormous. New York to-day, indeed, instead of controlling its street-car systems and other public utilities may truthfully be said to be controlled by them. Witness the contract just signed (December, 1904), by the city with the gas trust!
Do not for a moment imagine that there have not been men of public spirit in New York City who have perceived the real significance of these subway enterprises, and have watched with alarm the looming development of the new Belmont monopoly. Many such citizens have expressed their be liefs through organizations like the Citizens' Union, the Municipal Art Society, the Central Federated Union (labor) and others, and they have had the generous support of most of the newspapers of New York City. But, as usual in municipal reform, the burden of work has fallen upon the shoulders of a very few men, who have had against them the powerful, thoroughly organized forces of wealth, backed by the corrupt political machines.
In several legislatures these watchful citizens have appeared with reform measures, the aim of all of which has been, not to crush the Belmont syndicate, not even to interfere with the profits which it is earning on the Subway already constructed, but to secure to the city the proper control of its creatures, the street-car companies.
Forces That Fought Reform
But let us see what forces these public-spirited citizens had to combat in the legislature. In the first place here stood the Belmont syndicate, with its influence through Andrew Freedman and McDonald with Tammany Hall, with its grip through related interests upon the Boss Platt Republican machine. Here also stood the Rapid Transit Commission, a public body, supposedly working tooth and nail for the real interests of the people, but in reality timid, old, uncertain - a dull tool - inclined toward the Belmont interests. It is wonderfully significant, wonderfully American that this Rapid Transit Commission should have been represented legally and in the legislature by the law firm of Tracy, Boardman & Platt (now Boardman, Platt & Soley). The Platt mentioned is the son of Boss Platt, and the firm has for years been recognized as the peculiar instrument of the Republican machine in New York state: a giant in the lobby. But besides representing this public body, the Rapid Transit Commission, Boardman, Platt & Soley were also the attorneys of some of the most piratical corporations in the country - corporations whose interests might clash at any time with those of the public as represented by the Rapid Transit Commission. For instance, the firm represented the gas trust - the so- called "Rockefeller crowd," the worst of the lot, and the Pennsylvania Railroad. Out of these curious connections arose two most significant incidents.
Problem of the Corporation Lawyer
First, the Rapid Transit Commission was negotiating with the Pennsylvania Railroad Company for its great tunnel under Manhattan Island. Attorney Boardman, of the Rapid Transit Commission, dealt with Attorney Boardman, of the Pennsylvania Railway Company. It maybe inferred that the negotiations were entirely satisfactory! In strong contrast with such curious legal ethics we find Edward M. Shepard, for a time one of the attorneys of the Rapid Transit Commission, promptly resigning his office when the Pennsylvania Railway offered him a larger retainer. The action of both of these attorneys is significant of the methods of great corporations generally. Shepard, whose legal ethics forbade him to serve two opposing clients at the same time, they hired away from the commission by paying him a huge retainer, leaving the public supported only by Boardman, who could be better used where he was. Nothing, surely, could show how completely a rich corporation can cajole a public commission!
But there is a second case, still more interesting. One of the things which the Citizens' Union and other public bodies wished especially to secure was the addition along the Subway of pipe galleries: that is, small tunnels in which could be carried all gas and water pipes, electric mains and the like. These could have been built easily and cheaply, for in building the tunnel all these various pipes had to be reset. Such galleries would have saved immense sums of money in the future both to the city and to private corporations, because workmen could have made necessary repairs without digging up the pavements. And think of the gain in cleanliness and comfort in a city like New York from undisturbed streets! Everyone admitted the great value of a pipe gallery system; the Rapid Transit commissioners themselves were in favor of it. One interest only opposed it, but it outweighed all the others: the gas trust - which means, in reality, most of the great concentrated money interests of Wall Street, especially the "Rockefeller crowd." , The gas trust feared that a pipe gallery might mean an opening for a rival company to obtain a franchise and lay pipes and electric wires, which would interfere with its monopoly and high prices. So when the measure was before the legislature we find Attorney Boardman, presumably casting off for a moment his mantle as lawyer for the Rapid Transit Commission, and taking up his mantle as lawyer for the gas trust, arguing against pipe galleries - and, having the enormous power of the dominant Republican machine behind him, supplemented by the Tammany machine (also controlled by the gas trust), easily defeating the will of the people.
Citizens Demand Changes in the Subway Law
It may be imagined, then, what obstacles the citizens' committees had to meet in trying to force reforms through the legislature. They asked for, nothing extreme nor revolutionary - not even for municipal operation of street-car lines - only for such plain provisions as would give the people some degree of control of its public utilities. Here are some of the things they fought for.
1. The law under which the Rapid Transit Commission operates compels the letting of contracts for the construction and operation of subways at the same time and to the same person. The result of this is that only enormously wealthy street-car corporations can bid at all: in short, it reduces the bidders practically to three - the Belmont syndicate, the Metropolitan Street Car Company and possibly the Brooklyn Rapid Transit Company, the last two of which are so involved in financial tangles that they are no match for Belmont. This provision is a direct means for strengthening and extending the Belmont monopoly. If the contracts were separated, the absurd requirement eliminated which compels every bidder to deposit $1,000,000, and the Rapid Transit Commission allowed to let the work by sections, there would, be a hundred bidders for the construction to every one that could bid under the present law. This would furnish wholesome competition and enable the public, when a new subway was built, to force really favorable term, with Belmont's monopoly -in some such way as the citizens of Boston have done with their street-car companies. Upon this very point we have the written advice of Comptroller Grout, a present member of the Rapid Transit Commission (in his Green letter):
The construction and operation of a tunnel railway should never be let in one contract, but always separately, and with power in the city either to construct or to operate without contract. The present contract was, we are informed, instantly sublet in sections, with a profit, said to be eight millions, which will go far toward equipping what will surely be one of the most profitable railways in the world. There were but two real and responsible bidders. . . . Had the contract been for construction alone, divided into sections, the bidders would have been many and the city would have saved the millions. There would scarcely have been difficulty, after construction, in leasing the railway on profitable terms for less than the fifty years period with twenty-five years renewal, for many, many cities have found it possible to lease their railways on good terms for twenty-five year periods. . . .
2. The citizens recommended the construction of pipe galleries.
3. The citizens sought to enlarge the powers of the commissioners by permitting them to operate future subways as well as to build them - provided no private company would pay a reasonable rental. This would have given the people a whip-hand over the monopoly.
4. The citizens recommended short-term contracts for operation and proper taxation. By a curious provision, not hard of understanding to those who know the ways of the lobby, the present law provides that contracts shall be let for not less than thirty-five years, so that the Rapid Transit Commission, even if it had the chance, could not make a better bargain for the city.
Every one of these recommendations involved only the common practice of many other municipalities in Europe and America which operate subways; every one was reasonable; every one was backed by the demand of the people as expressed in great public meetings and through the newspapers; and every one of them was promptly defeated.
But that was not the worst. The Citizens' Union and the affiliated bodies not only failed to get relief legislation, but they had all they could do to prevent the passage of legislation which would place the people still more completely in the grip of the monopoly. Witness the Bostwick bill, a measure introduced with the consent and approval of the Rapid Transit Commission, which would have so tied the commission's hands that practically no other bid for future extensions of the Subway than that of Belmont could have been accepted. The Belmont syndicate was so accurately described in the bill that its name might as well have been inserted. This bill was fathered by Mayor Low, of the reform administration, then ex-officio member of the Rapid Transit Commission, but the cry raised by the people had such an angry tone that the measure was, happily, withdrawn.
At the coming session of the legislature (1904-5), another attempt will be made by the citizens at securing control legislation, along the lines already laid down. The passage of these measures is absolutely essential to the welfare of the people of New York, and with proper enlightenment and proper agitation perhaps the legislature can be frightened into passing remedial laws, and perhaps the Rapid Transit Commission can then be so stiffened in the knees that it will really make a good bargain for the people. There is time yet to defeat the Belmont monopoly - if the people's action is vigorous and prompt.
For this is a great and continuing problem. Within the next few years hundreds of millions of dollars must be expended in rapid transit enterprises: there is no more room for surface-car lines: the elevated roads were always an abomination. The city must, therefore, resort to extensive subways, running in every direction to Brooklyn, to Staten Island, to the Bronx: how essential is the proper control of all this vast business!
Giant Proportions of the New Belmont Monopoly
The people do not realize what this Belmont monopoly has already come to be. It is not only the greatest combination of street-car interests New York ever had, but it promises to be the most piratical. The aim of Belmont - and the European Rothschilds behind him - is complete monopoly. Already he controls the Subway and all the elevated railroads in Manhattan, he owns the surface-car lines in Long Island City, and he has just acquired the old perpetual franchise of the Steinway Tunnel Company, which enables him to build another tunnel to Brooklyn; and he is on the way to obtain other important rights. Through his associates, also, he is interested in the new Hudson River tunnel which recently obtained a franchise up Sixth Avenue, thereby giving him a grasp of the passage traffic of Jersey City.
And now he is trying to get hold of the financially distressed Metropolitan Railway Company, which controls the surface-car lines of Manhattan. When he gets that he can rest with smiling content, having captured the city.
It is to be noted, also, that large profits are accruing to Belmont from advertising privileges in the Subway, and that there are also provisions in the contract for a freight and express service and even a parlor car service in the Subway - of which gifts to Belmont we shall probably hear a great deal more in the future.
All these transactions have their solemnly humorous side. To the simple mind it appears that the Belmont syndicate has made a very good bargain. No outsider probably knows definitely, but it is commonly reported that McDonald and Belmont made a profit of $6,000,000 to $8,000,000 on the actual building of the Subway. And we have the authority of no less a person than Edward M. Shepard, for a time one of the attorneys of the Rapid Transit Commission, and closely in touch with its affairs, that over a year before the Subway was even finished the "value of the future profits from the operating part of this contract . . . is estimated at $30,000,000 and for aught we know may, in the come to be worth upwards of $50,000,000." (Article in Municipal Affairs, Winter, 1903). In other words, the estimated future profits of the Belmont syndicate, long before the first train was run, equaled nearly the entire cost of the Subway. Out of all this the city will get not one cent - though the city has no right now to begrudge Belmont his earnings on the original enterprise. He ventured and he won.
Mr. Shepard's figures as to profits are borne out by the present quotations of the stock of the Belmont company although, as usual in such enterprises, Belmont is already so confusing his operations - jumbling the earnings of the elevated roads with those of the Subway - that it is all but impossible for an outsider to learn anything about real values or real profits.
Silver Loving-Cup for Belmont
A banquet was given at Sherry's on the night after the opening of the Subway, attended by prominent financiers, by the mayor, by the Rapid Transit commissioners and others, to thank and praise Mr. Belmont for his daring and his boldness. I quote from the New York Herald:
At the conclusion of the mayor's speech two men came into the room bearing the massive silver loving-cup for the guest of the evening. This cup stood more than two feet high, was more than a foot in diameter, and its three handles, composed of twined oak and laurel leaves, were several inches thick. Around the base ran a wreath of oak and laurel leaves, in bas-relief. On one side was an inscription reading thus:
"Presented to August Belmont by the directors of the Interborough Rapid Transit Company in appreciation of his services as president in the construction of the rapid transit subway, October 27, 1904."The letters forming the monogram "A. B." were in raised letters of dull gold on another part of the surface, and the third was simply a polished shield of silver.
It is easy to understand why the directors of Belmont's company present him with a silver cup - has he not doubled their cash in four years ? - but why the Rapid Transit Commission and the public should rejoice in such a bargain it is difficult to see!
Here is the plain truth: if the history of the Subway shows anything at all, it shows that capital all the way through has not only been greedy, not only pursued a dog-in-the-manger policy, but it has been wholly unoriginal, non-progressive. Capital wants no changes; capital "stands pat." Nothing could show more clearly the utter failure of private monopolies in furnishing the public - promptly - with new conveniences. The public suggested the Subway, the public through its engineers made the plans and proved the feasibility of the enterprise, the public forced the building of the Subway through a threat of municipal construction (the worst bogy of capital), and finally furnished all the money for the work - and then, deliberately, gave Mr. Belmont all the property and afterwards tied itself up for fifty years by a contract which prevents city control! Oh, the financiers might well present a cup to Mr. Belmont! Surely he is unmatched, unequaled in all this country! Talk about financial genius! Is not this its supreme manifestation?
And one word more about Mr. Belmont. In his speech at the dedication exercises there was a certain delightfully satirical note of satisfaction with this method of building subways, coupled with a warning, not unhumorously ingenuous, of the dangers of municipal ownership. Mr. Belmont said:
That the enterprise in its results has been conspicuously successful, should be the subject of cordial congratulations by all citizens. . . .
At a time when there are so many ill-digested and ill-considered plans under discussion, having for their object not only municipal ownership, but municipal operation of transportation lines, the State of New York has reached the true solution of this problem - that municipal participation is justified to the extent of furnishing credit for the construction of such a work, but should stop short of the operation of the property when constructed. To private interests should be committed the risks and the burden as well as the profit of constructing, equipping and operating the road, the latter not being within the governmental functions or other legitimate province of a municipality.
Copyright 1905, by The S. S. M. McClure Co. All rights reserved. Portraits copyright 1904, by Pach.