FINAL REMARKS

Character of Associates

It is to be regretted that the oil, land, and timber litigation of recent years has once more presented the Southern Pacific in the light of a corporation more heedful of its own financial interests than of the requirements of public policy or of a high ethical code. In all fairness to the company, it should be said that this controversy does not truly represent its attitude at the present time. Stanford and Huntington are dead, and their properties are in other hands. The great railroad system which they left, controlled by leaders who are responsive to new policies, is in general no longer a profit-making device in the hands of a small group of men, but instead is a powerful machine for the promotion of industry and commerce on the Pacific Coast.

Our narrative will now close with a few words of summary and conclusion.

The purpose of the writer in presenting the story of the Southern Pacific has been to throw light upon the problems encountered by the most important railroad upon the Pacific Coast, and to characterize and interpret the policies adopted by that railroad and by the men who governed it.

The writer’s view with regard to the so-called Southern Pacific associates, Stanford, Huntington, Mark Hopkins, and Crocker, is that they were rough, vigorous, and grasping men, tenacious of rights to property once acquired, kind-hearted within the circle of their families and intimate friends, but narrow in vision, uneducated, and inexpert in the details of railroad operation, and uninformed in all that related to questions of public policy. Huntington alone, while rough and selfish as the others, showed important constructive capacity in the railroad field. The strength of the associates lay in their courage and persistence, in their loyalty to each other in business matters, in their readiness to attract and to support able men whose views did not differ too greatly from their own, and in a native shrewdness which, in Huntington at least, reached to a superlative degree.

Achievements of Group

The reputation of the Huntington group rests upon the fact that within fifty years they built up an organization operating 11,152 miles of lines and earning an operating revenue in a single year of no less than $282,000,000. A statement like this is quickly made. The significance of it comes home, however, only to those who understand the difficulties of successful management of great corporations and who appreciate the multitude of decisions as to policy which must have been, on the whole, soundly made, at least from the point of view of the corporation itself, in order to achieve such a success.

Doubtless most of the details of the Southern Pacific management were necessarily handled by subordinates. It is unlikely, for instance, that the associates had much to do with the construction of railroad rates in the West, with the negotiation of special contracts with California shippers, or with agreements with the Pacific Mail. The contribution of the owners was here the appointment of competent men at liberal salaries to attend to matters which they did not understand or for other reasons were not able to handle themselves. The credit for general direction and support of the policies adopted, however, belongs to the associates even in these matters, when credit is due, just as responsibility for errors properly falls upon them.

Principles of Operation

There are three principles relating to the operation of these railroad properties which the author feels that he can attribute with some confidence to Huntington and his friends. The first of these was that the Southern Pacific enterprise should remain under the associates’ control and free from eastern entanglements. The second was that railroad monopoly in California was essential to a satisfactory railroad profit, and that the utmost possible profit should be exacted when monopoly power had been attained; and the third was that regulation by public bodies was in all respects objectionable, although public grants were considered to be legitimate sources of revenue.

Looked at in a comprehensive way, the history of the Southern Pacific may be said to have centered in the application of these principles to the solution of a series of problems, of which the final disposition of the Southern Pacific oil and timber lands was the last. These problems, to name them consecutively, included the construction of the original Central Pacific and Southern Pacific railroads; the establishment of these companies as going concerns with opportunity for prosperity and power; and the adoption by the associates of policies with respect to government regulation, with respect to rates, and with respect to relations with competing lines. They included also the negotiation of a plan of settlement with the federal government under which the financial assistance tendered to the companies in their younger days was repaid, and the railroad stood forth free of unusual responsibility and devoid of special privilege. At a later date the merger of the Southern Pacific with the Union Pacific represented an additional adventure, although one which was never part of Huntington’s plan; and still another episode, the oil and timber litigation just described, was concerned with a forced liquidation of interests of which Huntington had known and approved.

Two Eras in Company’s History

Grouped in a somewhat different way, but with the same essential point of view, the history of the Southern Pacific may be divided into two parts, the one ending and the other beginning in or about the year 1883. Before 1883, the Huntington group was primarily interested in construction from Sacramento to Ogden in order to obtain the benefit of the federal subsidy, and in construction in southern California, New Mexico, and Arizona, in order to prevent the building of an independent competing line. In this period, also, steps were taken to crush the competition of certain local enterprises in California. After 1883, or more accurately, after 1879, the attention of the associates was concentrated upon the establishment of their credit, the resistance to the threatened regulation by the state of their properties in California, and upon the competition of the newly created transcontinental railroad lines and the water routes from the Pacific to the Atlantic Coast. The second of these dangers led them into local politics, and the third resulted not only in a variety of agreements with competitors, but also caused the Southern Pacific to modify its rate structures and to subsidize potential competitors upon the sea. Still later came the necessity of repaying the loans which the Central Pacific had received from the federal government at the time of the construction of its road and the new relations with the Union Pacific under the Harriman rÉgime. The oil and timber litigation, though falling within the second period, represented the closing up of grants received in the first.

In solving all the problems presented in the course of the Southern Pacific’s career, the associates followed consistently the three fundamental principles laid down in a preceding paragraph whenever the principles were applicable and the circumstances permitted of a deliberate choice. The only striking variation from them occurred when the Union Pacific was allowed to obtain a controlling interest in Southern Pacific stock—a transaction which occurred after Huntington’s death and one for which the associates were not responsible.

The Charge against Associates

The weakness in the position of the Huntington group lay in the fact that their insistence upon monopolistic control of railroads in the state of California and their resistance to government regulation, ran counter to public policies of a most fundamental kind. A further ground for incisive criticism is properly found in the methods which the associates adopted in their business and political campaigns. It is not sufficient to declare that Huntington and Stanford merely imitated practices which they found about them. There is reason to believe that the Southern Pacific associates lowered the standard of business ethics of their time. The reader who has examined the data submitted in preceding pages will need no specification of this charge. In finance, in politics, in questions of rates, and in their relations with public bodies, the associates were indifferent to standards of private and public conduct, which alone can bring trust and confidence into business relations. The great material achievements of the Huntington group were marred by the moral and spiritual defects of its members.

Public’s Present Favorable Attitude

This narrative closes without consideration of the part which the Southern Pacific played in the war of 1914-1918, and without detailed analysis of the present position of the company or of its prospects for the future. As a matter of fact, the tendency today is for individual systems to be assimilated into the national railroad net through governmental regulation of rates, of wages, and of many details of operation, so that elaborate discussion of the affairs of single companies has lost much of the interest which it once possessed. The future of the Southern Pacific will depend more on the outcome of national policies with respect to the support and control of railroads in all parts of the country, than it will on the success of the strategy of any group of railroad men.

For good or bad the pioneer days are over. Public opinion in California is now well disposed toward the Southern Pacific in marked contrast to the attitude of earlier days. Probably the change is in part due to the efficiency of the technical staff of the company and to the excellence of its service as compared with other roads. Probably also the recent enforced separation of the Union Pacific and the Southern Pacific has on the whole strengthened the latter by relieving it of the unpopularity which would have followed long-continued outside control, while the completeness of public authority over rates through state and federal commissions has removed still another cause of discontent. In spite of past errors the Southern Pacific now looks forward to a long and prosperous career and to a popularity properly the result of the loyal and efficient service of a great body of official employees.