- Historic Sites
A Foot In The Door
Grain elevators had false bottoms; freight rates had no ceilings. The farmers raised the roof, and government regulation crossed industry’s threshold
February 1964 | Volume 15, Issue 2
Unfortunately, the harvest was a bitter one. Once established, the railroads treated their clientele with disdain. Company officials were overbearing, charged exorbitant rates, and discriminated in favor of large shippers, who received special discounts. Precisely because the railroads were essential, they could act arrogantly; in any given area a single line usually enjoyed a monopoly and thus could charge as much as the traffic would bear. The railroads, of course, defended their rates as moderate, sufficient only to make good on I he immense speculative risks they had undertaken. The farmers were unimpressed. To them the dominant fact was that freight costs ate up a frightful percentage of their income. Sometimes they were even reduced to burning their corn as fuel rather than shipping it to market at a loss.
Their profound discontent soon led them to organize. Oddly, what became the major vehicle for agrarian protest had its start as a fraternal order’ intended to end the farmers’ isolation from social and educational opportunities. In 1867 an idealistic: government clerk in Washington, Oliver Hudson Kelley, singlehandedly founded the National Grange of the Patrons of Husbandry. At first his organization existed more on paper than in reality, but Kelley was an indefatigable worker —and also a shrewd observer. He broadened the Grange’s appeal by making its primary objectives cooperative purchasing and the control of monopolies. These tactics paid off, and the Grange spread like prairie wildfire It soon blanketed the entire nation, reaching its peak in 1874 when representatives of some 800,000 farmers convened in St. Louis to proclaim “the art of agriculture” as “the parent and precursor of all arts, and its products the foundation of all wealth.”
Although “the Grange” became a synonym for all the agrarian movements of the seventies, there were other highly vocal farmers’ associations which antedated the Patrons of Husbandry, and which intervened in politics throughout the Midwest. All shared the same goals: elimination of the middleman’s profits, lowered interest charges, and, most insistently, railroad rate regulation. “We were all grangers.’ a farmer later recalled. “I never belonged to the order but I was a granger just the same.”
In Illinois the farmers scored one of their first successes when they joined with Chicago’s merchants in getting the state’s constitutional convention to authorize railroad and warehouse regulation. Like the Board of Trade, Illinois farmers had just cause for wanting to see the elevators controlled. Typically, a farmer might ship 1,000 bushels of wheat to Chicago, but receive, a warehouse receipt for only 950. After paying costly storage charges, he might be told that his grain was “heating” and that, to avoid a complete disaster, he should sell his receipt to the warehouseman at a loss of 10 cents per bushel. Later, the hapless farmer would learn that his grain, perfectly sound, had been sold al a nice profit. But beyond their joint desires to clean up a dirty business, both farmers and merchants were interested in comprehensive regulation. The Board of Trade wanted to make normal business relationships possible; the farmers wanted a stringent limitation on the rates charged by railroads and warehouses.
Acting in response to these pressures, the 1871 legislature passed laws forbidding railroad discriminations and prescribing maximum freight and passenger rates. The warehousemen’s fraudulent practices were outlawed, storage rates were limited, and a Board of Railroad and Warehouse Commissioners was created to enforce the regulations.
Enforcement, however, was not easy. The warehousemen proclaimed the law unconstitutional and ignored it. Munn & Scott refused to take out the required license and kept the state-appointed registrar of grain out of their elevators. The state then sued the firm; but the trial proceedings were delayed because of the mass destruction of records by Chicago’s Great Fire of 1871. In July, 1872, the state won a judgment of $100; Munn & Scott promptly appealed to the Illinois Supreme Court:
Meanwhile, however, through a series of related events, the downfall of Munn & Scott was beginning. Despite the state regulation (which at first had no. practical impact), the Board of Trade continued to seek inspection of the warehouses during 1871 and 1872. Some elevators co-operated with Board inspectors in measuring their grain, but Munn & Scott remained defiant. Finally, in 1872, the firm consented to admit inspectors. It requested, however, that its elevators be inspected last in order to give it time to consolidate its grains and to avoid any implication of particular mistrust of Munn & Scott. The Board agreed, and the firm put the time to good use—flooring over the tops of several bins in one large elevator and covering the false bottoms with grain so as to give the illusion of full bins. The inspectors were fooled until an employee divulged the secret, and it was learned that Munn & Scott grain receipts totaling 300,000 bushels were not backed by grain.