THE DEVELOPMENT OF CAPITALISM
The years immediately following the War with Spain were marked by
extraordinary prosperity in business. The country recovered from the
collapse of the nineties and entered with full swing into another era of
inflation and promotion. The Dingley tariff law, enacted July 24, 1897,
had incidentally aided in the process by raising the protection
principle to its highest point since the Civil War, but the causes of
the upward movement lay deeper. The Spanish War, of course, stimulated
trade, for destruction on such a large scale always creates a heavy
demand for commodities and capital--a demand which was partially met, as
usual, by huge drafts on the future in the form of an increased national
debt. But the real cause lay in the nature of the economic processes
which had produced the periodical cycles of inflation and collapse
during the nineteenth century. Having recovered from a collapse previous
to the War, inflation and capitalization on a gigantic scale set in and
did not run their course until a debacle in 1907.
The formation of trusts and the consolidation of older combinations in
this period were commensurate in scale with the gigantic financial power
created by capitalist accumulations. The period of the later seventies
and eighties, as has been shown, was a period of hot competition
followed by pools, combinations, and trusts. The era which followed the
Spanish War differed in degree rather than in kind, but it was marked by
financial operations on a scale which would have staggered earlier
promoters. Perhaps it would be best to say that the older school merely
found its real strength at the close of the century, for the new
financing was done by the Vanderbilt, Astor, Gould, Morgan, and
Rockefeller interests, the basis of which had been laid earlier. There
was, in fact, no break in the process, save that which was made by the
contraction of the early nineties. But the operations of the new era
were truly grand in their conception and execution.
A few examples will serve to illustrate the process. In 1900, the
National Sugar Refining Company of New Jersey was formed with a capital
of $90,000,000, and "from its inception it adopted the policy of issuing
no public statements to its stockholders regarding earnings or financial
conditions. The only statement ... is simply an annual balance sheet,
showing the assets and liabilities of the corporation in a greatly
condensed form." In 1904, the total capital of parent and affiliated
concerns was approximately $145,000,000. The Copper Trust was
incorporated under New Jersey laws in 1899, and in 1904 its par value
capital was $175,000,000. In 1899, the Smelters' Trust with an
authorized capital of about $65,000,000 was formed. In the same year the
Standard Oil Company, as the successor to the Trust, was organized with
$102,233,700 capital.
The process of consolidation may best be shown by turning from
generalities to a brief study of the United States Steel Corporation, a
great portion of whose business was laid bare in 1911-12 by a Federal
investigation. It appears that until about 1898 there was a large number
of steel concerns actively engaged in a competition which was modified
at times by pools and price agreements; and that each of them was
vigorously reaching out, not only for more trade, but for control over
the chief source of strength--supply of ore. Finally, in the closing
days of the nineties, this competition and stress for control became so
great that the steel men and the associated financial interests began to
fear that the increased facilities for production would result in
flooding the market and in ruining a number of concerns. The rough steel
manufacturers began to push into the field of finished products, and the
wire, nail, plate, and tube concerns were crowding into the rough steel
manufacturing. All were scrambling for ore beds. In this "struggle of
the giants" the leading steel makers saw nothing but disaster, and they
set to work to consolidate a dozen or more companies. Their labors were
crowned with success on April 1, 1901, when the new corporation with a
capital of a little more than $1,400,000,000 began business.
In the consolidation of the several concerns an increase of more than
$400,000,000 was made in the total capital; and a stock commission of
the cash value of $62,500,000 was given to the Morgan underwriting
syndicate for financing the enterprise. It is, of course, impossible to
discover now the physical value of the properties consolidated, many of
which were already heavily "watered." Of the Carnegie concern, a Federal
report says, "The evidence on the whole tends to show that bonds were
issued substantially up to the full amount of the physical assets
acquired and that the stock was issued merely against good will and
other intangible considerations." How much of the total capital was
"water" is impossible to determine, but the Bureau of Corporations
estimates "that more than $150,000,000 of the stock of the Steel
Corporation (this including more than $41,000,000 of preferred stock and
$109,000,000 of common stock) was issued, either directly or indirectly
(through exchange) for mere promotion or underwriting services. This
total, moreover, as noted does not include anything for the American
Sheet Steel Company ... nor is anything added in the case of the Shelby
Steel Tube Company. It should be repeated that this enormous total of
over $150,000,000 does not include common stock issued as bonus with
preferred for property or for cash, but simply what may be termed the
promotion and organization commissions in the strict sense. In other
words, nearly one seventh of the total capital stock of the Steel
Corporation appears to have been issued, either directly or indirectly,
to promoters for their services." How much more of the $440,000,000
additional capital represented something other than physical values is
partially a matter of guesswork. The Bureau of Corporations valued the
tangible property of the corporation at $682,000,000 in 1901, as against
$1,400,000,000 issued securities; and computed the rate of profit from
1901 to 1910 on the actual investment at 12 per cent. It should be
noted, also, that shortly after the formation of the concern the common
stock which had been issued fell with a crash, and the outsiders who
risked their fortunes in the concern were ruined.[47]
All of the leading trusts and railways were, even at their inception,
intimately connected through cross investments and interlocking
directorates. Writing in 1904, Mr. Moody, an eminent financial
authority, said: "Around these two groups [the Morgan-Rockefeller
interests], or what must ultimately become one greater group, all other
smaller groups of capitalists congregate. They are all allied and
intertwined by their various mutual interests. For instance, the
Pennsylvania Railroad interests are on the one hand allied with the
Vanderbilts and on the other with the Rockefellers. The Vanderbilts are
closely allied with the Morgan group, and both the Pennsylvania and
Vanderbilt interests have recently become the dominating factors in the
Reading system, a former Morgan road and the most important part of the
anthracite coal combine which has always been dominated by the Morgan
people.... Viewed as a whole, we find the dominating influences in the
trusts to be made up of an intricate network of large and small
capitalists, many allied to another by ties of more or less importance,
but all being appendages to or parts of the greater groups which are
themselves dependent on and allied with the two mammoth, or Rockefeller
and Morgan, groups. These two mammoth groups jointly ... constitute the
heart of the business and commercial life of the nation."[48]
How tremendous is this corporate control over business, output, and wage
earners is indicated by the census of 1909. Of the total number of
establishments reported as engaged in manufacturing in 1904, 23.6 per
cent were under corporate ownership, while in 1909 the percentage had
increased to 25.9. Although they controlled only about one fourth of the
total number of establishments, corporations employed 70.6 per cent of
all the wage earners reported in 1904 and 75.6 per cent in 1909. Still
more significant are the figures relative to the output of corporations.
Of the total value of the product of all establishments, 73.7 per cent
was turned out by corporations in 1904 and 79 per cent in 1909. "In most
of the states," runs the Census Report, "between three fifths and nine
tenths of the total value of manufactured products in 1909 was reported
by establishments under corporate ownership." Of the 268,491
establishments reported in 1909, there were 3061 which produced 43.8 per
cent of the total value of all products and employed 30.5 per cent of
the wage earners. It is, in fact, this absorption of business by a small
number of concerns which marks the great concentration of modern
industry. The mere number of corporations is not of much significance,
for most of them are petty.
In addition to gaining control of the leading manufacturing concerns and
the chief natural resources of the country, the great capitalist
interests seized upon social values to the amount of billions of dollars
through stock watering and manipulations of one kind or another.
"Between 1868 and 1872, for example, the share capital of the Erie was
increased from $17,000,000 to $78,000,000, largely for the purpose of
stock-market manipulation.... The original Central Pacific Railroad, for
instance, actually cost only $58,000,000; it is a matter of record that
$120,000,000 was paid a construction company for the work. The syndicate
which financed the road received $62,500,000 par value in securities as
profits, a sum greater than it actually cost to build the property. The
80 per cent stock dividend of the New York Central in 1868; scrip
dividends on the Reading in the seventies; the 50 per cent dividend of
the Atchison in 1881; the 100 per cent stock dividends of the Louisville
and Nashville in 1880, by a pen stroke adding $20,000,000 to 'cost of
road' upon the balance sheet; the notorious 100 per cent dividend of the
Boston and Albany in 1882 [are further examples].... Recent inflations
of capitalization in connection with railroad consolidation are headed
by the case of the Rock Island Company. In 1902 this purely financial
corporation bought up the old Chicago, Rock Island, and Pacific Railway,
capitalized at $75,000,000 and substituted therefor its own stock to the
amount of $117,000,000, together with $75,000,000 of collateral trust
bonds, secured by the stock of the property acquired. The entire history
of the New York traction companies is studded with similar occurrences.
One instance may suffice. In 1906 the Interborough-Metropolitan Company
purchased $105,540,000 in securities of the merged lines, and issued in
place thereof $138,309,000 of its own stock and $70,000,000 in bonds....
E. H. Harriman and three associates ... expanded the total
capitalization of the [Alton] road from $33,950,000 to $114,600,000, an
increase of over $80,000,000. In improvements and additions to the
property out of this augmented capitalization, their own accounts showed
only about $18,000,000 expended. It thus appears that securities
aggregating $62,600,000 were put forth during this time [seven years,
beginning in 1898], without one dollar of consideration. This sum is
equal to about $66,000 per mile of line owned--a figure considerably in
excess of the average net capitalization of the railroads of the
country."[49]
It is not necessary to cite further evidence to show that billions of
dollars of fictitious values were saddled upon the country between the
end of the Civil War and the close of the century. A considerable
portion of the amount of stocks and bonds issued was doubtless based on
the dividend-paying power of the concerns in question. In many instances
the stock was not purchased in large quantities by the investing public,
but was simply issued to promoters, and when values collapsed they only
lost so much worthless paper. It is apparent, therefore, that all the
stock watering is not of the same character or effect; but nevertheless
it remains a fact that the buying public and the working class are
paying millions in annual tribute to the holders of paper which
represents no economic service whatever. If the water were all squeezed
out of railway, franchise, and industrial stocks and bonds and the
mineral and other resources which have been actually secured at a
nominal value, or fraudulently were returned to the government, there
would be a shrinkage in the necessary dividends paid out that would
startle the world.
* * * * *
Those who followed the literature of political economy during this
period of gigantic consolidation and high finance could not help
discovering a decided change in the views of leading men about the
nature of industrial evolution. The old practice of indiscriminate abuse
of all trusts began to undergo a decided modification; only persons from
the backward industrial regions of the West and South continued the
inordinate clamor for the immediate and unconditional dissolution of all
of them, on the theory that they were "artificial" products, brought
forth and nourished by malicious men bent solely upon enhancing their
personal fortunes. The socialist contention (set forth by Marx and
Engels in 1848) that competition destroyed itself, and that the whole
movement of industry was inevitably toward consolidation, began to
receive attention, although the socialist solution of the problem was
not accepted.
This change in attitude was the result partly of the testimony of
practical business men before the Industrial Commission in 1900, which
was summarized in the following manner by the Commission: "Among the
causes which have led to the formation of industrial combinations, most
of the witnesses were of the opinion that competition, so vigorous that
profits of nearly all competing establishments were destroyed, is to be
given the first place. Even Mr. Havemeyer said this, though, as he
believed that in many cases competition was brought about by the fact
that the too high protective tariff had tempted too many rivals into
the field, he named the customs tariff law as the primal cause. Many of
the witnesses say that their organization was formed to make economies,
to lessen competition, and to get higher profits--another way of saying
that competition is the cause without conceding that the separate plants
were forced to combine."
In a careful and thoughtful analysis of the problem, published in 1900
by Professor J. W. Jenks, then of Cornell University, the wastes of
competition and the economies of combination (within limits) were
pointed out with clarity and precision. The Industrial Commission had
reported that rebates and discriminations by railways had been declared
to be a leading cause of combination by several witnesses appearing
before it; but Professor Jenks at the close of his survey came to the
positive conclusion "that, whenever the nature of the industry is one
which is peculiarly adapted for organization on a large scale, these
peculiarities will so strengthen the tendency toward a virtual monopoly
that, without legal aid and special discriminations or advantages being
granted by either the State or any other influence, a combination will
be made, and if shrewdly managed can and, after more experience in this
line has been gained, probably will practically control permanently the
market, unless special legal efforts better directed than any so far
attempted shall prevent."[50] The logical result of this conclusion is
at least government supervision, and this Mr. Jenks advocated.
Whether some special privileges beyond the ownership of basic natural
resources was necessary to bring about combinations on a large scale,
the leaders in such combinations seem to have engaged extensively in
politics, contributing to the campaign funds of both parties, helping to
select their candidates, and maintaining expensive lobbies at Washington
and at the capitals of the several states. Mr. Havemeyer admitted before
a Senate committee in 1893 that the Sugar Trust was "a Democrat in a
Democratic state and a Republican in a Republican state"; and added that
in his opinion all other large corporations made contributions to the
two leading parties as a matter of course, for "protection." The
testimony taken by the New York insurance investigating committee in
1905 and by the Clapp committee of the United States Senate in 1912
revealed the fact that during the period between 1896 and 1912 millions
of dollars had been contributed to the Republican party by the men who
had been most active in organizing the great industrial combinations,
and that representatives of the same group had also given aid and
comfort to the Democratic party,[51] although the latter, being out of
power at Washington, could not levy tribute with the same effectiveness.
The statesman of the new capitalism was Mr. Marcus A. Hanna. Mr. Hanna
was born in 1837 of pioneer stock of the second or third generation,
after the roughness of the earlier days was somewhat smoothed away
without injury to the virility of the fiber. He entered business in
Cleveland in 1858 at a time when a remarkable group of business men,
including Mr. John D. Rockefeller, were laying the foundation of their
fortunes. Endowed with hard, practical, economic sense, he refused to be
carried away by the enthusiasm that was sweeping thousands of young men
of his age into the Union army, and he accordingly remained at his post
of business.[52] It was fortunate for his career that he did not lose
those four years, for it was then that he made the beginnings of his
great estate in coal, iron, oil, and merchandising.
Mr. Hanna, like most of the new generation of northern business men, was
an ardent Republican. "He went into politics as a citizen," remarks his
biographer. "The motive, in so far as it was conscious, was undoubtedly
patriotic. That he should wish to serve his country as well as himself
and his family was rooted in his make-up. If he proposed to serve his
country, a man of his disposition and training could only do so by
active work in party politics. Patriotism meant to him Republicanism.
Good government meant chiefly Republican government. Hence the extreme
necessity of getting good Republicans elected and the absolute identity
in his mind and in the minds of most of his generation between public
and party service."[53] In his early days, therefore, he participated in
politics in a small way, but it was not until 1891, during the candidacy
of Mr. McKinley for governor of Ohio and Mr. Sherman for the Senate,
that he began to serve his party in a large way by raising campaign
funds.[54]
In 1895 Mr. Hanna retired from active business and set about the task
of elevating Mr. McKinley to the Presidency. He spent a great deal of
time at first in the South securing Republican delegates from the states
where the Republican party was a shadow, and other than party
considerations entered largely into selection of delegates to the
Republican convention. While laying a solid foundation in the South, Mr.
Hanna bent every effort in capturing the delegates in northern states.
According to Mr. Croly, "Almost the whole cost of the campaign for Mr.
McKinley's nomination was paid by Mr. Hanna.... He did receive some help
from Mr. McKinley's personal friends in Ohio and elsewhere, but its
amount was small compared to the total expenses. First and last Mr.
Hanna contributed something over $100,000 toward the expense of the
canvass."[55]
Mr. Hanna firmly believed, and quite naturally too, that the large
business concerns which had prospered under the policies of the
Republican party should contribute generously to its support. As early
as 1888, when the tariff scare seized certain sections of the country,
he was selected as financial auxiliary to the Republican national
committee, and raised about $100,000 in Cleveland, Toledo, Mahoning
Valley, and adjacent territory.[56]
But Mr. Hanna's greatest exploits in financing politics were in
connection with Mr. McKinley's campaigns. In 1896 he at first
encountered some difficulties because of his middle western connections
and the predilection of Wall Street for Mr. Levi P. Morton in preference
to Mr. McKinley. "Mr. James J. Hill states that on August 15, just when
the strenuous work of the campaign was beginning, he met Mr. Hanna by
accident in New York and found the chairman very much discouraged. Mr.
Hanna described the kind of work which was planned by the Committee and
its necessarily heavy expense. He had been trying to raise the needed
money, but with only small success. The financiers of New York would not
contribute. It looked as if he might have to curtail his plan of
campaign, and he was so disheartened that he talked about quitting. Mr.
Hill immediately offered to accompany Mr. Hanna on a tour through the
high places of Wall Street, and during the next five days they succeeded
in collecting as much money as was immediately necessary. Thereafter Mr.
Hanna did not need any further personal introduction to the leading
American financiers."[57]
Many grave charges were brought against Mr. Hanna to the effect that he
had no scruples in the use of money for corrupt purposes, but such
charges have never been substantiated to the satisfaction of his
friends. That in earlier days he employed the methods which were common
among public service corporations, is admitted by his biographer, but
condoned on the ground that practically every other street railway
company in the country was confronted with the alternative of buying
votes or influence. Mr. Hanna's Cleveland company "the West Side Street
Railway Company and its successors were no exception to this rule. It
was confronted by its competitors, who had no scruples about employing
customary methods, and if it had been more scrupulous than they, its
competitors would have carried off all the prizes. Mr. Hanna had, as I
have said, a way of making straight for his goal.... He and his company
did what was necessary to obtain the additional franchises needed for
the development of the system. The railroad contributed to local
campaign committees and the election expenses of particular councilmen;
and it did so for the purpose of exercising an effective influence over
the action of the council in street railway matters."[58]
Grave charges were also made at the time of Mr. Hanna's candidacy for
the United States Senate that he employed the methods which he had found
so advantageous in public-service-corporation politics, but his
biographer, Mr. Croly, indignantly denies the allegation, showing very
conclusively that Mr. Hanna won his nomination squarely on the issue put
before the Republican voters and was under the rules of politics
entitled to the election by the legislature. Mr. Hanna's career, says
Mr. Croly, "demanded an honorable victory. Like every honest man he had
conscientious scruples about buying votes for his own political benefit,
and his conscience when aroused was dictatorial.... It does not follow
that no money was corruptly used for Mr. Hanna's benefit. Columbus
[Ohio] was full of rich friends less scrupulous than he.... They may
have been willing to spend money in Mr. Hanna's interest and without his
knowledge. Whether as a matter of fact any such money was spent I do not
know, but under the circumstances the possibility thereof should be
frankly admitted."[59]
In his political science as well as his business of politics, Mr. Hanna
looked to the instant need of things. He does not seem to have been a
student of history or of the experience of his own or other countries in
the field of social legislation. As United States Senator he made
practically no speeches, if we except his remarks in favor of ship
subsidies and liberal treatment of armor plate manufacturers. On the
stump, for in later years he developed some facility in popular
addresses, he confined his reflections to the customary generalizations
about prosperity and his chief contribution to political phraseology was
the slogan, "Stand pat."[60] When not engaged in actual labor of
partisan contests, Mr. Hanna seems to have enjoyed the pleasure of the
table and good company rather than the arduous researches of the student
of politics. He had an immense amount of shrewd practical sense, and he
divined a good deal more by his native powers of quick perception than
many a statesman of the old school, celebrated for his profundity as a
"constitutional lawyer and jurist."
The complete clew to Mr. Hanna's philosophy of politics is thus summed
up by his penetrating and sympathetic biographer, Mr. Croly: "We must
bear in mind that (1) he was an industrial pioneer and instinctively
took to politics as well as to business; (2) that in politics as in
business he wanted to accomplish results; (3) that politics meant to him
active party service; (4) that successful party service meant to him the
acceptance of prevailing political methods and abuses; and (5) finally
that he was bound by the instinctive consistency of his nature to
represent in politics, not merely his other dominant interest, but the
essential harmony between the interests of business and that of the
whole community." In other words, Mr. Hanna believed consistently and
honestly in the superior fitness of business men to conduct the politics
of a country which was predominantly commercial in character. He was not
unaware of the existence of a working class; in fact he was said to be a
generous and sympathetic employer of labor; but he could not conceive
the use of government instrumentalities frankly in behalf of that class.
Indeed, he thought that the chief function of the government was to help
business and not to inquire into its methods or interfere with its
processes.
An illustration of Mr. Hanna's theory of governmental impotence in the
presence of the dominant private interests was afforded in the debate in
the Senate over the price to be paid for armor plate, in the summer of
1900. The Senate proposed that not more than a stipulated price should
be paid to the two steel companies, Carnegie and Bethlehem, which were
not competing with each other; and that, in case they failed to accept,
a government manufacturing plant should be erected. Mr. Hanna's
proposition was that the price of steel should be left, as the House had
proposed, with the Secretary of the Navy, and he warmly resisted all
government interference. When it was brought out in debate that the
steel companies had refused the government officers the data upon which
to determine whether the price charged was too high, Mr. Hanna
declared: "They did perfectly right in not disclosing those facts. That
is their business; and if they chose not to give the information to the
public, that was their business also." In short, he took the position
that the government should provide ample protection to the steel
interests against foreign competition, and pay substantially whatever
the steel companies might charge for armor plate (for without proper
data the Secretary of the Navy could not know when prices were
reasonable), and then ask them no questions whatever. Here we have both
_laissez faire_ and capitalism in their simplest form.
Mr. Hanna, however, had none of the arts of the demagogue, not even the
minor and least objectional arts. His bluntness and directness in labor
conflicts won for him the respect of large numbers of his employees. His
frank and open advocacy of ship subsidies and similar devices commanded
the regard, if not the esteem, of his political enemies. His chief
faults, as viewed by his colleagues as well as his enemies, were in many
instances his leading virtues. If some of the policies and tactics which
he resorted to are now discredited in politics, it must be admitted that
he did not invent them, and that it was his open and clean-cut advocacy
of them that first made them clearly intelligible to the public. When
all the minor and incidental details and personalities of the conflicts
in which he was engaged are forgotten, Mr. Hanna will stand out in
history as the most resourceful and typical representative of the new
capitalism which closed the nineteenth century and opened the new.
_The Development of the Urban Population_
The rapid advance of business enterprise which followed the Spanish War
made more striking than ever the social results of the industrial
revolution.[61] In the first place, there was a notable growth in the
urban as contrasted with the rural population. At the close of the
century more than one third of the population had become city dwellers.
The census of 1910 classified as urban all thickly populated areas of
more than 2500 inhabitants, including New England towns which are in
part rural in character, and on this basis reported 46.3 per cent of the
population of the United States as urban and 53.7 rural. On this basis,
92.8 per cent of the population of Massachusetts was reported as urban,
78.8 per cent in New York, and 60.4 per cent in Pennsylvania. That
census also reported that "the rate of increase for the population of
urban areas was over three times that for the population living in rural
territory."
The industrial section of this urban population was largely composed of
non-home owners. The census of 1900 reported "that the largest
proportion of hired homes, 87.9 per cent, is found in New York City. In
Manhattan and Bronx boroughs the proportion is even higher, 94.1 per
cent, as compared with 82 per cent for Brooklyn.... There is also a very
large proportion of hired homes in Boston, Fall River, Jersey City, and
Memphis, constituting in each of them four fifths of all the homes in
1900." Of the great cities having a large proportion of home owners,
Detroit stood at the head, with 22.5 per cent of the population owning
homes free of mortgage.
Another feature of the evolution of the working class was the influx of
foreign labor, and the change in its racial character. The total alien
immigration between 1880 and 1900 amounted to about 9,000,000; and in
1905 the immigration for the fiscal year reached 1,026,449. For the
fiscal year 1910 it reached 1,198,037. During this period the racial
composition of the immigration changed decidedly. Before 1880 Celtic and
Teutonic nations furnished three fourths of the immigrants; but in 1905
the proportions were reversed and Slavic and Iberian nations, Italy
leading, sent three fourths of the immigrants.
This alien population drifted naturally to the industrial cities, and
the census of 1910 reported that of the 229 cities having 25,000
inhabitants and more, the native whites of native parentage furnished
only 35.6 per cent, and that the foreign-born whites constituted 44.5
per cent in Perth Amboy, New Jersey, 40.4 per cent in New York City, and
35.7 per cent in Chicago. From the standpoint of politics, a significant
feature of this development is the manning of American industries
largely by foreign laborers who as aliens possess no share in the
government.
A third important aspect of this transformation in the mass of the
population is the extensive employment of women in industries. The
census of 1910 reported that 19.5 per cent of the industrial wage
earners were women, and that the proportion of women breadwinners was
steadily increasing. The proportion of females who were engaged in
gainful pursuits was 14.7 per cent in 1870, 16 per cent in 1880, 19 per
cent in 1890, and 20.6 per cent in 1900. At the last date, about one
third of the females over ten years of age in Philadelphia were engaged
in gainful pursuits, and one eighth were employed in industries. At the
same time about 15,000 out of 42,000 women at Fall River, Massachusetts,
were in industries.
_The Labor Movement_
The centralization of capital and the development of the new statesmen
of Mr. Hanna's school were accompanied by a consolidation of the
laboring classes and the evolution of a more definite political program
for labor. As has been pointed out above, the economic revolution which
followed the Civil War was attended by the formation of unions in
certain trades and by the establishment of the Knights of Labor. This
national organization was based on the principle that all of the working
class could be brought together in a great society, equipped for waging
strikes in the field of industry and advancing a program of labor
legislation at the same time. This society, like a similar one promoted
by Robert Owen in England half a century before, fell to pieces on
account of its inherent weaknesses, particularly the inability of the
leaders to overcome the indifference of the workingmen in prosperous
trades to the struggles of their less fortunate brethren.
Following the experience of England also, the labor leaders began to
build on a more secure foundation; namely, the organization of the
members of specific trades into local unions followed by their
amalgamation into larger societies. Having failed to stir a class
consciousness, they fell back upon the trade or group consciousness of
identical interests. In 1881, ninety-five trade-unions were federated on
a national scale, and in 1886 this society was reorganized as the
American Federation of Labor. The more radical labor men went on with
the Knights, but the foundations of that society were sapped by the more
solidly organized rival, which, in spite of many defeats and reverses,
steadily increased in its membership and strength. In 1910 the
Federation reported that its affiliations included 120 international
unions, 39 state federations, 632 city central bodies, 431 local
trade-unions, and 216 Federal labor unions, with a membership totaling
1,744,444 persons.
Unlike German and English trade-unionists, the American Federation of
Labor steadily refused to go into politics as a separate party
contesting at the polls for the election of "labor" representatives.
This abstention from direct political action was a matter of expediency,
it seems, rather than of set principle. Mr. John Mitchell, the eminent
former leader of the miners, declared that "wage earners should in
proportion to their strength secure the nomination and election of a
number of representatives to the governing bodies of city, state, and
nation"; but he added that "a third Labor Party is not for the present
desirable, because it could not obtain a majority and could not
therefore force its will upon the community at large." This view, Mr.
Mitchell admitted, was merely temporary and due to circumstances, for
he frankly said: "Should it come to pass that the two great American
political parties oppose labor legislation as they now favor it, it
would be the imperative duty of unionists to form a third party to
secure some measure of reform." This was also substantially the position
taken by the President of the American Federation, Mr. Gompers.
But it is not to be supposed that the American Federation of Labor
refused to consider the question of labor in politics. Its prominent
leaders were affiliated with the American Civic Federation, composed
largely of employers of labor, professional men, and philanthropists,
and known as one of the most powerful anti-socialist organizations in
the United States. Not only were Mr. Gompers and other labor leaders
associated with this society which strongly opposed the formation of a
class party in the United States, but they steadily waged war on the
socialists who were attempting to organize the working class
politically. The leaders in the American Federation, with a few
exceptions, were thus definitely anti-socialist and were on record on
this political issue. Moreover, while warning workingmen against
political action, Mr. Gompers and Mr. Mitchell openly identified
themselves with the Democratic party and endeavored to swing the working
class vote to that party. Mr. Gompers was especially active in the
support of Mr. Bryan in 1908, and boasted that 80 per cent of the voting
members of the Federation cast their ballots for the Democratic
candidate.
In fact, a study of the writings and speeches of the leaders in the
American Federation of Labor shows that they had a fairly definite
politico-economic program, although they did not admit it. They favored
in general municipal and government ownership of what are called
"natural" monopolies, and they sympathized with the smaller business men
in their attempt to break up the great industrial corporations against
which organized labor had been able to make little headway. They
supported all kinds of labor legislation, such as a minimum wage,
workmen's compensation, sanitary laws for factories, the shortening of
hours, prohibition of child labor, insurance against accidents, sickness
and old age pensions, and industrial education. They were also on record
in favor of such political reforms as the initiative, referendum, and
recall, and they were especially vigorous in their efforts to curtail
the power of the courts to issue injunctions against strikers. In other
words, they leaned decidedly toward "state socialism" and expected to
secure their ends by supporting the Democratic party, historically the
party of individualism, and _laissez faire_. This apparent anomaly is
explained by the fact that state socialism does not imply the political
triumph of the working class, but rather the strengthening of the petty
bourgeoisie against great capitalists.
It would be a mistake, however, to conclude that the American Federation
of Labor was solidly in support of Mr. Gompers' program. On the
contrary, at each national convention of the Federation the socialist
members attempted to carry the organization over into direct political
action. These attempts were defeated each year, but close observers of
the labor movement discovered that the socialists were electing a large
number of local and state trade-union officials, and those who hope to
keep the organization in the old paths are anxious about the outcome at
the end of Mr. Gompers' long service.
FOOTNOTES:
[47] _Report of the Commissioner of Corporations on the Steel
Industry_, July 1, 1911.
[48] Moody, _The Truth about the Trusts_, p. 493.
[49] Professor W. Z. Ripley, _Political Science Quarterly_,
March, 1911.
[50] _The Trust Problem_ (1900 ed.), p. 210.
[51] See the Parker episode, below, p. 268.
[52] Mr. Hanna was drafted in 1864, but saw no actual
service. Croly, _Marcus A. Hanna_, p. 44.
[53] Croly, p. 113.
[54] _Ibid._, p. 160.
[55] Croly, p. 183.
[56] _Ibid._, p. 149.
[57] Croly, p. 219.
[58] Croly, p. 81.
[59] _Ibid._, p. 264.
[60] Croly, p. 417.
[61] See above, Chap. II.