2.11 National Progressivism

The more progressives focused on economic and social matters, the more they sought to increase their influence in national politics. Certain problems demanded national solutions. A patchwork of state regulations, for example, was not enough to curtail the power of the trusts, protect workers, or monitor the quality of consumer goods. Moreover, state and federal courts were often hostile to progressive goals, striking down as unconstitutional reform laws regulating working hours or setting minimum wages. With the beginning of a national movement, progressives could force the passage of laws less vulnerable to judicial veto or elect a president who could overhaul the federal judiciary through the appointment and confirmation of progressive-minded judges.

Targeting the Trusts

In one of the defining books of the Progressive Era, The Promise of American Life, Herbert Croly argued that because “the corrupt politician has usurped too much of the power which should be exercised by the people,” the “millionaire and the trust have appropriated too many of the economic opportunities formerly enjoyed by the people.” Croly and other reformers believed that wealth inequality eroded democracy and reformers had to win back for the people the power usurped by the moneyed trusts. But what exactly were these “trusts,” and why did it suddenly seem so important to reform them?¹

In the late nineteenth and early twentieth centuries, a trust was a monopoly or cartel associated with the large corporations of the Gilded and Progressive Eras who entered into agreements—legal or otherwise—or consolidations to exercise exclusive control over a specific product or industry under the control of a single entity. Certain types of monopolies, specifically for intellectual property like copyrights, patents, trademarks, and trade secrets, are protected under the Constitution “to promote the progress of science and useful arts,” but for powerful entities to control entire national markets was something wholly new, and, for many Americans, wholly unsettling.

The rapid industrialization, technological advancement, and urban growth of the 1870s and 1880s triggered major changes in the way businesses structured themselves. The Second Industrial Revolution, made possible by available natural resources, growth in the labor supply through immigration, increasing capital, new legal economic entities, novel production strategies, and a growing national market, was commonly asserted to be the natural product of the federal government’s laissez faire, or “hands off,” economic policy. An unregulated business climate, the argument went, allowed for the growth of major trusts, most notably Andrew Carnegie’s Carnegie Steel (later consolidated with other producers as U.S. Steel) and John D. Rockefeller’s Standard Oil Company. Each displayed the vertical and horizontal integration strategies common to the new trusts: Carnegie first used vertical integration by controlling every phase of business (raw materials, transportation, manufacturing, distribution), and Rockefeller adhered to horizontal integration by buying out competing refineries. Once dominant in a market, critics alleged, the trusts could artificially inflate prices, bully rivals, and bribe politicians.

Between 1897 and 1904, over four thousand companies were consolidated down into 257 corporate firms. As one historian wrote, “By 1904 a total of 318 trusts held 40% of US manufacturing assets and boasted a capitalization of $7 billion, seven times bigger than the US national debt.”² With the twentieth century came the age of monopoly. Mergers and the aggressive business policies of wealthy men such as Carnegie and Rockefeller earned them the epithet robber barons. Their cutthroat stifling of economic competition, mistreatment of workers, and corruption of politics sparked an opposition that pushed for regulations to rein in the power of monopolies. The great corporations became a major target of reformers.

Big business, whether in meatpacking, railroads, telegraph lines, oil, or steel, posed new problems for the American legal system. Before the Civil War, most businesses operated in a single state. They might ship goods across state lines or to other countries, but they typically had offices and factories in just one state. Individual states naturally regulated industry and commerce. But extensive railroad routes crossed several state lines and new mass-producing corporations operated across the nation, raising questions about where the authority to regulate such practices rested. During the 1870s, many states passed laws to check the growing power of vast new corporations. In the Midwest, farmers formed a network of organizations that were part political pressure group, part social club, and part mutual aid society. Together they pushed for so-called Granger laws that regulated railroads and other new companies. Railroads and others opposed these regulations because they restrained profits and because of the difficulty of meeting the standards of each state’s separate regulatory laws. In 1877, the U.S. Supreme Court upheld these laws in a series of rulings, finding in cases such as Munn v. Illinois and Stone v. Wisconsin that railroads and other companies of such size necessarily affected the public interest and could thus be regulated by individual states. In Munn, the court declared, “Property does become clothed with a public interest when used in a manner to make it of public consequence, and affect the community at large. When, therefore, one devoted his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created.”³

Later rulings, however, conceded that only the federal government could constitutionally regulate interstate commerce and the new national businesses operating it. And as more and more power and capital and market share flowed to the great corporations, the onus of regulation passed to the federal government. In 1887, Congress passed the Interstate Commerce Act, which established the Interstate Commerce Commission to stop discriminatory and predatory pricing practices. The Sherman Anti-Trust Act of 1890 aimed to limit anticompetitive practices, such as those institutionalized in cartels and monopolistic corporations. It stated that a “trust . . . or conspiracy, in restraint of trade or commerce . . . is declared to be illegal” and that those who “monopolize . . . any part of the trade or commerce . . . shall be deemed guilty.”⁴ The Sherman Anti-Trust Act declared that not all monopolies were illegal, only those that “unreasonably” stifled free trade. The courts seized on the law’s vague language, however, and the act was turned against itself, manipulated and used, for instance, to limit the growing power of labor unions. Only in 1914, with the Clayton Anti-Trust Act, did Congress attempt to close loopholes in previous legislation.

Aggression against the trusts—and the progressive vogue for “trust busting”—took on new meaning under the presidency of Theodore Roosevelt, a reform-minded Republican who ascended to the presidency after the death of William McKinley in 1901. Roosevelt’s youthful energy and confrontational politics captivated the nation.”⁵ Roosevelt was by no means antibusiness. Instead, he envisioned his presidency as a mediator between opposing forces, such as between labor unions and corporate executives. Despite his own wealthy background, Roosevelt pushed for antitrust legislation and regulations, arguing that the courts could not be relied on to break up the trusts. Roosevelt also used his own moral judgment to determine which monopolies he would pursue. Roosevelt believed that there were good and bad trusts, necessary monopolies and corrupt ones. Although his reputation as a trust buster was wildly exaggerated, he was the first major national politician to go after the trusts. “The great corporations which we have grown to speak of rather loosely as trusts,” he said, “are the creatures of the State, and the State not only has the right to control them, but it is in duty bound to control them wherever the need of such control is shown.”⁶

His first target was the Northern Securities Company, a “holding” trust in which several wealthy bankers, most famously J. P. Morgan, used to hold controlling shares in all the major railroad companies in the American Northwest. Holding trusts had emerged as a way to circumvent the Sherman Anti-Trust Act: by controlling the majority of shares, rather than the principal, Morgan and his collaborators tried to claim that it was not a monopoly. Roosevelt’s administration sued and won in court, and in 1904 the Northern Securities Company was ordered to disband into separate competitive companies. Two years later, in 1906, Roosevelt signed the Hepburn Act, allowing the Interstate Commerce Commission to regulate best practices and set reasonable rates for the railroads.

Roosevelt was more interested in regulating corporations than breaking them apart. Besides, the courts were slow and unpredictable. However, his successor after 1908, William Howard Taft, firmly believed in court-oriented trust busting and during his four years in office more than doubled the number of monopoly breakups that occurred during Roosevelt’s seven years in office. Taft notably went after Carnegie’s U.S. Steel, the world’s first billion-dollar corporation formed from the consolidation of nearly every major American steel producer.

Trust busting and the handling of monopolies dominated the election of 1912. When the Republican Party spurned Roosevelt’s return to politics and re-nominated the incumbent Taft, Roosevelt left and formed his own coalition, the Progressive or “Bull Moose” Party. Whereas Taft took an all-encompassing view on the illegality of monopolies, Roosevelt adopted a New Nationalism program, which once again emphasized the regulation of already existing corporations or the expansion of federal power over the economy. In contrast, Woodrow Wilson, the Democratic Party nominee, emphasized in his New Freedom agenda neither trust busting nor federal regulation but rather small-business incentives so that individual companies could increase their competitive chances. Yet once he won the election, Wilson edged nearer to Roosevelt’s position, signing the Clayton Anti-Trust Act of 1914. The Clayton Anti-Trust Act substantially enhanced the Sherman Act, specifically regulating mergers and price discrimination and protecting labor’s access to collective bargaining and related strategies of picketing, boycotting, and protesting. Congress further created the Federal Trade Commission to enforce the Clayton Act, ensuring at least some measure of implementation.⁷

While the three presidents—Roosevelt, Taft, and Wilson—pushed the development and enforcement of antitrust law, their commitments were uneven, and trust busting itself manifested the political pressure put on politicians by the workers, farmers, and progressive writers who so strongly drew attention to the ramifications of trusts and corporate capital on the lives of everyday Americans.

Notes

1. Herbert Croly, The Promise of American Life (New York: Macmillan, 1911), 145.
2. Kevin P. Phillips, Wealth and Democracy: A Political History of the American Rich (New York: Broadway Books, 2003), 307.
3. Munn v. Illinois, 94 U.S. 113 (1877).
4. Interstate Commerce Act of 1887.
5. The writer Henry Adams said that he “showed the singular primitive quality that belongs to ultimate matter—the quality that medieval theology assigned to God—he was pure act.” Henry Adams, The Education of Henry Adams (New York: Houghton Mifflin, 1918), 413.
6. Theodore Roosevelt, Addresses and Presidential Messages of Theodore Roosevelt, 1902–1904, 15.
7. The historiography on American progressive politics is vast. See, for instance, Michael McGerr, A Fierce Discontent: The Rise and Fall of the Progressive Movement in America, 1870–1920 (New York: Free Press, 2003).