Rates, Romance, and Regulated Monopoly in Frank Norris's The Octopus

For a novel as grandly conceived as the opening volume in the "Epic of the Wheat," the plot of Frank Norris's The Octopus (1901) turns on what seems like a rather prosaic issue: a dispute over freight rates. The clash over rates between the ranchers of the San Joaquin Valley and the Pacific and Southwestern Railroad—modeled after the Southern Pacific Railroad, notorious for its high freight rates—first erupts at the train station in Guadalajara when Harran and Magnus Derrick, two of the biggest ranchers of the San Joaquin Valley, encounter S. Behrman, the regional agent of the railroad, while they are inspecting a shipment of plows. The previous day the ranchers had learned that their legal battle to prevent the railroad from raising its freight rates on grain has failed, a decision by the California Railroad Commission that they suspect Behrman to be behind. Yet when they confront him over the issue, he is glibly evasive. Echoing legal arguments used at the time in rate cases, he insists that low rates amount to a "confiscation of property," that the railroad only wants "a fair interest on the investment" (68). But Harran and Magnus refuse to be mollified. Exasperated by Behrman's repeated talk about "fair interest," Harran raises a question that was central to the rate problem—and, as I will argue here, central to The Octopus—when he blurts out: "Well, what's your standard? Come, let's hear it. Who is to say what's a fair rate? The railroad has its own notions of fairness sometimes" (69).

The scene sets the stage for the conflicts to come in The Octopus. The question of what a fair rate is recurs throughout the novel, not only in the ongoing dispute over freight rates, but also in the fight over property value that explodes when the railroad regrades the land occupied by the ranchers from $2.50 per acre to $27.00, prompting them to create a league to protect their interests against the railroad.¹ Trivial as the rate issue may seem, readers at the time of Norris's writing would easily have recognized the importance of freight rates. As Olivier Zunz writes in his history of corporate America, "[r]ate setting was the economic issue of the day that captured the attention not only of railroad men and their customers but also of politicians of all stripes, state legislatures, and courts" (53). Besides the devastating "rate wars" waged by corporations using predatory pricing to destroy competition, clashes over rates revolved primarily around discriminatory ratemaking by railroads that favored long-haul and high-volume traffic over local trade.² Such preferential rate schemes shaped the market landscape, promoting national and global markets over regional ones, and strengthened the market power of large businesses over small ones. Rate disputes garnered so much public interest because they were at the center of the "trust problem." In The History of the Standard Oil Company (1904), Ida Tarbell documented how the market dominance of Standard Oil had come about through secret deals with railroads that granted it rebates on shipments, and she argued that the oil trust was a direct result of "the unholy system of freight discrimination" (18). Because "[t]he rebate had made the trust," she concluded that "until the transportation question matter is settled, and settled right, the monopolistic trust will be with us, a leech in our pockets, a barrier to our free efforts" (128, 227). Since a monopoly is defined by the exclusive control over prices, freight rates played a key role in the legal battles to restrain corporations to the extent that "rate discrimination was the paramount force behind societal agitation for nineteenth-century regulation" (Berk 76). While the Granger movement was the first to push successfully for state regulation of freight rates, the Interstate Commerce Act of 1887 established the first federal regulatory agency in the United States, the Interstate Commerce Committee (ICC), with the explicit aim of ending rate discrimination. Together with the Sherman Antitrust Act passed three years later, these laws established the regulatory...