NATIONAL BUSINESS
Transportation was a fundamental factor in the two greatest problems of
the eighties. In the case of the disappearance of free land and the
frontier, it produced phenomena that were most clearly visible in the
West, although affecting the whole United States. In the case of
concentration of capital and the growth of trusts, its phenomena were
mostly in the East, where were to be found the accumulations of capital,
the great markets, and the supply of labor.
Through the improvements in communication it became possible to conduct
an efficient business in every State and direct it from a single head
office. Not only railroad and telegraph helped in this, but telephone,
typewriter, the improved processes in photography and printing, and the
organization of express service were of importance and touched every
aspect of life. Journalism both broadened and concentrated. The
effective range of the weeklies and monthlies and even of the city
dailies was widened, while the resulting competition tended to weed out
the weaker and more local. Illustrations improved and changed the
physical appearance of periodical literature.
Social organizations of national scope or ambition took advantage of the
new communication. Trade unions, benevolent associations, and
professional societies multiplied their annual congresses and
conventions, and increased the proportion of the population that knew
something of the whole Union. A few periodicals and pattern-makers began
to circulate styles, which clothing manufacturers imitated and local
shopkeepers sold at retail. Mail-order business was aided by the same
conditions. A new uniformity in appearance began to enter American life,
weakening the old localisms in dress, speech, and conduct. Until within
a few years it had been possible here and there to sit down to dinner
"with a gentleman in the dress of the early century--ruffles, even
_bag-wig_ complete"; but the new standards were the standards of the
mass, and it became increasingly more difficult to keep up an
aristocratic seclusion or a style of life much different from that of
the community.
With the growth of national uniformity went also the concentration of
control. As the field of competition widened, the number of possible
winners declined. Men measured strength, not only in their town or
State, but across the continent, and the handful of leaders used the
facilities of communication as the basis for the further expansion of
their industries. Business was extended because it was possible and
because it was thought to pay.
Many of the economies of consolidation were so obvious as to need no
argument. If a single firm could do the business of five,--or fifty--it
increased its profit through larger and better plants, greater division
of labor, and a more careful use of its by-products. It could cut down
expenses by reducing the army of competing salesmen and by lessening the
duplication of administrative offices. The same economics in management
which had driven the Old South to the large plantation as a type drove
American industrial society toward economic consolidation and the
trusts.
The technical form of organization of the trust was unimportant.
Strictly speaking, it was a combination of competing concerns, in which
the control of all was vested in a group of trustees for the purpose of
uniformity. The name was thus derived, but it spread in popular usage
until it was regarded as generally descriptive of any business so large
that it affected the course of the whole trade of which it was a part.
The logical outcome of the trust was monopoly, and trusts appeared first
in those industries in which there existed a predisposition to monopoly,
an excessive loss through competition, or a controlling patent or trade
secret.
The first trust to arouse public notice was concerned in the
transportation and manufacture of petroleum and its products. Commercial
processes for refining petroleum became available in the sixties,
enabling improvements in domestic illumination that insured an
increasing market for the product. The industry was speculative by
nature because of the low cost of crude petroleum at the well and the
high cost of delivering it to the consumer. Slight rises in price caused
the market to be swamped by overproduction, and threw the control of the
industry into the hands of those who controlled its transportation.
Once above ground, the cheap and bulky oil had to be hauled first to the
refiner and then to the consumer. The receptacles were expensive, and
the methods of transportation that were cheapest in operation had the
greatest initial cost. Barrels were relatively cheap to buy, but were
costly to handle. Tank-cars were more expensive, but repaid those who
could afford them. Pipe-lines were beyond the means of the individual,
but brought in greater returns to the corporations that owned them.
It was inevitable that some of the dealers who competed in the
oil-fields of Ohio, Pennsylvania, and West Virginia in the sixties
should realize the strategic value of the control of transportation and
profit by it. John D. Rockefeller happened to be more successful than
others in manipulating transportation. His refineries grew in size, as
they bought out or crushed their rivals, until by 1882 most of the
traffic in petroleum was under his control. Economy and sagacity had
much to do with the success, but were less significant than
transportation. Railway rates were yet unfixed by law and every road
sold transportation as best it could. Rockefeller learned to bargain in
freight rates, and through a system of special rates and rebates gained
advantages over every competitor. His lobby made it difficult to weaken
him through legislative measures, while his attorneys were generally
more skillful than his prosecutors before the courts. The recognition of
the existence of rebates did much to hasten the passage of the
Interstate Commerce Law. The group of corporations that flourished
because of them became the greatest of the trusts. By 1882 the
affiliated Rockefeller companies were so numerous and complicated that
they were given into the hands of a group of trustees to be managed as a
single business.
The Whiskey and Sugar Trusts, formed in 1887, had to do with commodities
in which transportation was not the controlling element. These
industries suffered from overproduction and ruinous competition, to
eliminate which the distilleries and sugar refineries entered into trust
agreements like that of the Standard Oil companies. Other lines of
manufacture followed as best they could. Before Cleveland was
inaugurated the trend was noticed and attacked.
Most of the agitation against the trusts came from individuals whose
lives were touched by them. Competition was ruthless and often
unscrupulous. Every man who was crushed by it hated his destroyer. There
was much changing of occupations as firms merged and reorganized and as
plants grew in size and ingenuity. Perhaps more workers changed the
character of their occupation in the eighties than in any other decade.
As each individual readjusted himself to his new environment, he added
to the mass of public opinion that believed the trusts to be a menace to
society.
As early as 1881 there was a market for anti-trust literature, for in
March of that year the _Atlantic Monthly_ printed the "Story of a Great
Monopoly," by Henry Demarest Lloyd, who became one of the leaders in the
attack. It had been fashionable to regard success as a vindication of
Yankee cleverness and worthy of emulation, without much examination of
the methods by which it was attained. The Standard Oil Company,
attracting attention to itself, raised the question of the effect of
industry upon society.
The evils ascribed to the trusts were social or political. In a social
way they were believed to check individualism and to create too large a
proportion of subordinates to independent producers. As monopolies, they
were believed to threaten extortion through high price. It was strongly
suspected of the largest trusts that having destroyed all competition
they could fix prices at pleasure. Economists pointed out that such
price could hardly be high and yet remunerative to the trusts, because
the latter did not dare to check consumption. But fear of oppression
could not be dispelled by any economic law.
The trust was believed to have an evil influence in politics, and to
obtain special favors through bribery or pressure. The United States was
used to the influence of money in politics, and distrusted public
officials. The state constitutions framed in this period were being
expanded into codes of specific law in the hope of safeguarding public
interests. There was little belief that corrupt overtures, if made by
the trusts, would be resisted.
Lloyd, and men of his type, believed in regulation and control. Some of
them became socialists. Others hoped to restore a competitive basis by
law. The greatest impression on the public was made by one of their
literary allies, Edward Bellamy.
Early in 1888 Edward Bellamy published a romance entitled _Looking
Backward_, in which his hero, Mr. Julian West, went to sleep in 1887,
with labor controversy and trust denunciation sounding in his ears, to
awake in the year 2000 A.D. The socialized state into which the hero was
reborn was a picture of an end to which industry was perhaps drifting.
It caught public attention. Clubs of enthusiasts tried to hasten the day
of nationalization by forming Bellamistic societies. Those who were
repelled by a future in which the trusts and the State were merged
became more active in their demand for regulation.
The legislative side of trust regulation, like that of railway
regulation, was made more difficult because of the division of powers
between Congress and the States. It was an interesting question whether
one State could control a monopoly as large as the nation. But the
States passed anti-trust laws by the score, as they had passed the
railway laws. As in the earlier case they found their model in the
common law, which had long prohibited conspiracies in restraint of
trade. One of the States, Ohio, with only the common law to go upon,
brought suit against the Standard Oil Trust and secured a prohibition
against it in 1892. It was relatively easy to attack the formal
organization of the trust, but in spite of such attacks concentration
continued to produce ever greater combinations, as though it were
fulfilling some fundamental economic law.
Those of the anti-monopolists who were also tariff reformers had a
weapon to urge besides that of regulation. They maintained that part of
the power of the corporations was due to the needless favors of
protection, which deprived the United States of the aid that competition
from European manufacturers might have given. They insisted that a
revision of the tariff would do much to remove the burden of the trusts.
The House ordered an investigation of the trusts while it was engaged on
the futile Mills Bill in 1888, but it was the latter that furnished the
text for the ensuing presidential campaign.
So far as the parties were concerned the Republicans took the aggressive
in 1888. Cleveland's emphasis upon tariff reduction was personal and
never had the cheerful support of the whole party. The manufacturers,
however, were thoroughly scared by the continued threats of revision. As
they had come, by supporting the party in power, to support the
Republicans, so they now organized within that party to save themselves.
Their leaders sang a new note in 1888, no longer apologizing for the
tariff or urging reduction, but defending it on principle,--on Clay's
old principle of an American system,--and asking that it be made more
comprehensive. From Florence, and then from Paris, Blaine replied to
Cleveland's Message of 1887, and his friends continued to urge his
nomination for the Presidency. Only after his positive refusal to be a
candidate did the Republican Convention at Chicago make its choice from
a list of candidates including Sherman, Gresham, Depew, Alger, Harrison,
and Allison. The ticket finally nominated consisted of Benjamin
Harrison, a Senator from Indiana, and Levi P. Morton, a New York banker.
The platform was "uncompromisingly in favor of the American system of
protection." It denounced Cleveland and the revisionists as serving "the
interests of Europe," and condemned "the Mills Bill as destructive to
the general business, the labor, and the farming interests of the
country."
The Democrats, as is usual for the party in power, had already held
their convention before the Republicans met. They had renominated Grover
Cleveland by acclamation, and Allen G. Thurman, of Ohio, as
Vice-President, and had indorsed, not the Mills Bill by name, but the
views of Cleveland and the efforts of the President and Representatives
in Congress to secure a reduction. For many of the Democrats the need to
defend tariff reform was so distasteful that they left the party,
blaming Cleveland as the cause of their defection.
The canvass of 1888 was not marred by the personalities of 1884. The
issue of protection was discussed earnestly by both parties, Blaine, who
returned from Europe, leading the Republican attack. The only exciting
incidents of the campaign had to do with the "Murchison Letter" and the
campaign fund.
Matthew S. Quay, whose career as Treasurer of Pennsylvania had not been
above reproach, was chairman of the Republican campaign committee.
During the contest it was asserted that he was assessing the protected
manufacturers and guaranteeing them immunity in case of a Republican
victory. He was at least able to play upon their fears and bring a
vigorous support to the protective promises of his party. His committee
circulated stories of the un-Americanism of Cleveland, charging that
free-trade was pro-British, and making capital out of the pension
vetoes. Toward the end of the canvass Sir Lionel Sackville-West, the
British Minister, fell into a Republican trap and wrote to a pretended
naturalized Englishman, who called himself Murchison, that a vote for
Cleveland would best serve Great Britain. His tactless blunder caused
his summary dismissal from Washington and aided the Republican cause
much as the Burchard affair had injured it four years before.
Harrison was elected in November as a minority President, Cleveland
actually receiving more popular though fewer electoral votes. He came
into office with a Republican Senate and a Republican House, able to
carry out party intentions for the first time since 1883.
Benjamin Harrison was never a leader of his party. He had a good war
record and had been Senator for a single term. His nomination was not
due to his strength, but to his availability. Coming from the doubtful
State of Indiana, he was likely to carry it, particularly since the
Republican candidate for governor was a leader of the Grand Army of the
Republic. Harrison's personal character and piety were valuable assets
in a time when party leaders were under fire. Once in office he had a
cold abruptness that made it easy to lose the support of associates who
felt that their own importance was greater than his.
Blaine, the greatest of these associates, became Secretary of State,
and soon had the satisfaction of meeting the Pan-American Congress that
he had called eight years before. In his interest in larger American
affairs he lost some of his keenness as a protectionist and acquired a
zeal for foreign trade. With England he had another unsuccessful tilt,
this time over the seals of Bering Sea.
In some of the appointments Harrison paid the party debts. Windom came
back to the Treasury, although ex-Senator Platt, of New York, claimed
that he had been promised it. John Wanamaker, who had raised large sums
in Philadelphia to aid Quay in the campaign, became Postmaster-General.
The Pension Bureau, important through the alliance with the soldiers,
went to a leader of the Grand Army of the Republic, one "Corporal"
Tanner, whose most famous utterance related to his intentions: "God save
the surplus!"
The Fifty-first Congress, convening in December, 1889, took up with
enthusiasm the mandate of the election, as the Republicans saw it, to
revise the tariff in the interest of protection. It chose as Speaker
Thomas B. Reed, of Maine, and revised its rules so as to expedite
legislation. William McKinley prepared a revision of the tariff in the
House, while another Ohioan, John Sherman, took up the matter of the
trusts in the Senate.
The Sherman Anti-Trust Law was enacted in July, 1890, after nearly
ten years of general discussion. Although formulated by
Republicans--Sherman, Edmunds, and Hoar--it was not more distinctly
a party measure than the Interstate Commerce Act had been. It relied
upon the interstate commerce clause of the Constitution as its
authority to declare illegal "every contract, combination in the form
of trust or otherwise, or conspiracy, in restraint of commerce among
the several States, or with foreign nations," and it provided suitable
penalties for violation. The most significant debate in connection
with it occurred upon an amendment offered by Representative Richard
P. Bland, of Missouri, who desired to extend the scope of the
prohibition, specifically, to railroads. The Senate excluded the
amendment on the ground that the law was general, covering the railroads
without special enumeration. The full meaning of the law remained in doubt
for nearly fifteen years, for few private suitors invoked it and the
Attorneys-General were not hostile to the ordinary practices of business.
A great financial depression which appeared in 1893 acted well as a
temporary deterrent of trusts. There was a suspicion that the law had
been intended not to be enforced, but to act as a popular antidote to
the McKinley Tariff Bill which was pending while it passed.
There were two reasons for a revision of the tariff in 1890. The
surplus, still a reason, added $105,000,000 in 1889, and continued to
embarrass the Treasury with a wealth of riches. Secondly, the election
of 1888 had gone Republican, and party leaders chose to regard this as a
popular condemnation of Cleveland and tariff reform, and a popular
mandate for higher protection, in spite of the fact that more Americans
voted for Cleveland than for Harrison. A third reason, alleged by the
opposition, was the necessity of fulfilling the pledges given by Quay
and the campaign managers to the manufacturers who contributed to the
campaign fund,--manufacturers who were parodied as "Mary":--
"Our Mary had a little lamb,
Her heart was most intent
To make its wool, beyond its worth,
Bring 56 per cent."
In April, 1890, McKinley presented his act "to equalize the duties upon
imports and to reduce the revenues." For five months Congress wrestled
with the details of the bill and the issues connected with it. In June
it rewarded the soldier allies of the Administration with a Dependent
Pension Act which granted pensions to those who could show ninety days
of service and present dependence, and which, aided by the previous
laws, relieved the surplus of $1,350,000,000 in the next ten years.
Early in July the Anti-Trust Act was passed. Two weeks later Congress
paused in its tariff deliberations to pass the Sherman Silver Purchase
Bill at the demand of Republican Senators from the Rocky Mountain
States, who wanted their share of protection in this form and were so
numerous as to be able to produce a deadlock.
The tariff that became a law October 1, 1890, was the first success in
tariff legislation since the Civil War. It enlarged protection and
reduced the revenue. The latter was done by repealing the duty on raw
sugar, which had been the most remunerative item of the old tariff, and
by substituting a bounty of two cents per pound to the American
sugar-grower, which further relieved the surplus. The sugar clause was
one of the notable features of the McKinley Bill, and was closely
related to a group of duties upon agricultural imports. There had been
complaint among the farmers that protection did nothing for them. The
agricultural schedule was designed to silence this complaint.
Another novelty in the bill was the extension of protection to unborn
industries. In the case of tin plate, the President was empowered to
impose a duty whenever he should learn that American mills were ready to
manufacture it. This was an application of the principle that went
beyond the demands of most advocates of protection.
A final novelty, reciprocity, was the favorite scheme of the Secretary
of State. Blaine, in his foreign policy, saw in the tariff wall an
obstacle to friendly trade relations, and induced Congress to permit the
duties on the chief imports from South America to be admitted on a
special basis in return for reciprocal favors. McKinley, as his
experience widened, accepted this principle in full, and died with an
expression of it upon his lips. But in 1890 most protectionists inclined
toward absolute exclusion, regardless of foreign relations, and were
ready to raise the rate whenever the imports were large.
In the passage of the McKinley Tariff Bill it was noticed that a third
body was sharing largely in such legislation. After each house had
passed the bill and disagreements on amendments had been reached, it was
sent to a Joint Committee of Conference whose report was, by rule,
unamendable. In the Conference Committee the bill was finally shaped,
and so shaped that the Republican majority was forced to accept it or
none. The party leaders who sat on the Committee of Conference were a
third house with almost despotic power, and were, as well, men whose
association with manufacturing districts or protected interests raised a
fair question as to the impartiality of their decisions. The Republican
reply, in their hands, to the assertion that the tariff was the mother
of trusts was to raise the tariff still higher and to forbid the trusts
to engage in interstate commerce.
BIBLIOGRAPHICAL NOTE
The _Life of Henry Demarest Lloyd_, by C. Lloyd (2 vols., 1912) contains
an admirable and sympathetic survey of the growth of anti-trust feeling,
and should be supplemented by the writings of H.D. Lloyd, more
particularly, "The Story of a Great Monopoly" (in _Atlantic Monthly_,
March, 1881), and _Wealth against Commonwealth_ (1894). The philosophy
of Henry George is best stated in his _Progress and Poverty_ (1879), and
is presented biographically by H. George, Jr., in his _Life of Henry
George_ (1900). The most popular romance of the decade is based upon an
economic hypothesis: E. Bellamy, _Looking Backward_ (1887). J.W. Jenks,
_The Trust Problem_ (1900, etc.), has become a classic sketch of the
economics of industrial concentration. The histories of the Standard Oil
Company, by I.M. Tarbell (2 vols., 1904) and G.H. Montague (1903), are
based largely upon judicial and congressional investigations. The
Sherman Law is discussed in the writings and biographies of Sherman,
Hoar, and Edmunds, and in A. H. Walker, _History of the Sherman Law_
(1910). For the election of 1888, consult Stanwood, Andrews, Peck, the
_Annual Cyclopaedia_, the tariff histories, and D.R. Dewey, _National
Problems, 1885-1897_ (in _The American Nation_, vol. 24, 1907).