During the times of Roosevelt, the American people were profoundly
concerned with the trust problem. So was Roosevelt himself. In this
important field of the relations between "big business" and the people
he had a perfectly definite point of view, though he did not have a cut
and dried programme. He was always more interested in a point of view
than in a programme, for he realized that the one is lasting, the other
shifting. He knew that if you stand on sound footing and look at a
subject from the true angle, you may safely modify your plan of action
as often and as rapidly as may be necessary to fit changing conditions.
But if your footing is insecure or your angle of vision distorted, the
most attractive programme in the world may come to ignominious disaster.
There were, broadly speaking, three attitudes toward the trust problem
which were strongly held by different groups in the United States. At
one extreme was the threatening growl of big business, "Let us alone!"
At the other pole was the shrill outcry of William Jennings Bryan and
his fellow exhorters, "Smash the trusts!" In the golden middle ground
was the vigorous demand of Roosevelt for a "square deal."
In his first message to Congress, the President set forth his point of
view with frankness and clarity. His comprehensive discussion of
the matter may be summarized thus: The tremendous and highly complex
industrial development which went on with great rapidity during the
latter half of the nineteenth century produced serious social problems.
The old laws and the old customs which had almost the binding force
of law were once quite sufficient to regulate the accumulation and
distribution of wealth. Since the industrial changes which have so
enormously increased the productive power of mankind, these regulations
are no longer sufficient. The process of the creation of great corporate
fortunes has aroused much antagonism; but much of this antagonism has
been without warrant. There have been, it is true, abuses connected
with the accumulation of wealth; yet no fortune can be accumulated in
legitimate business except by conferring immense incidental benefits
upon others. The men who have driven the great railways across the
continent, who have built up commerce and developed manufactures, have
on the whole done great good to the people at large. Without such men
the material development of which Americans are so justly proud never
could have taken place. They should therefore recognize the immense
importance of this material development by leaving as unhampered as is
compatible with the public good the strong men upon whom the success of
business inevitably rests. It cannot too often be pointed out that to
strike with ignorant violence at the interests of one set of men almost
inevitably endangers the interests of all. The fundamental rule in
American national life is that, on the whole and in the long run, we
shall all go up or down together. Many of those who have made it their
vocation to denounce the great industrial combinations appeal especially
to the primitive instincts of hatred and fear. These are precisely the
two emotions which unfit men for cool and steady judgment. The whole
history of the world shows that legislation, in facing new industrial
conditions, will generally be both unwise and ineffective unless it is
undertaken only after calm inquiry and with sober self-restraint.
This is one side of the picture as it was presented by the President in
his message to Congress. It was characteristic that this aspect should
be put first, for Roosevelt always insisted upon doing justice to the
other side before he demanded justice for his own. But he then proceeded
to set forth the other side with equal vigor: There is a widespread
conviction in the minds of the American people that the great
corporations are in certain of their features and tendencies hurtful to
the general welfare. It is true that real and grave evils have arisen,
one of the chief of them being overcapitalization, with its many
baleful consequences. This state of affairs demands that combination and
concentration in business should be, not prohibited, but supervised
and controlled. Corporations engaged in interstate commerce should be
regulated if they are found to exercise a license working to the public
injury. The first essential in determining how to deal with the great
industrial combinations is knowledge of the facts. This is to be
obtained only through publicity, which is the one sure remedy we can
now invoke before it can be determined what further remedies are needed.
Corporations should be subject to proper governmental supervision, and
full and accurate information as to their operations should be made
public at regular intervals. The nation should assume powers of
supervision and regulation over all corporations doing an interstate
business. This is especially true where the corporation derives a
portion of its wealth from the existence of some monopolistic element
or tendency in its business. The Federal Government should regulate
the activities of corporations doing an interstate business, just as it
regulates the activities of national banks, and, through the Interstate
Commerce Commission, the operations of the railroads.
Roosevelt was destined, however, not to achieve the full measure of
national control of corporations that he desired. The elements opposed
to his view were too powerful. There was a fortuitous involuntary
partnership though it was not admitted and was even violently denied
between the advocates of "Let us alone!" and of "Smash the trusts!"
against the champion of the middle way. In his "Autobiography" Roosevelt
has described this situation:
"One of the main troubles was the fact that the men who saw the evils
and who tried to remedy them attempted to work in two wholly different
ways, and the great majority of them in a way that offered little
promise of real betterment. They tried (by the Sherman law method)
to bolster up an individualism already proved to be both futile and
mischievous; to remedy by more individualism the concentration that was
the inevitable result of the already existing individualism. They
saw the evil done by the big combinations, and sought to remedy it by
destroying them and restoring the country to the economic conditions of
the middle of the nineteenth century. This was a hopeless effort, and
those who went into it, although they regarded themselves as radical
progressives, really represented a form of sincere rural toryism. They
confounded monopolies with big business combinations, and in the effort
to prohibit both alike, instead of where possible prohibiting one and
drastically controlling the other, they succeeded merely in preventing
any effective control of either.
"On the other hand, a few men recognized that corporations and
combinations had become indispensable in the business world, that it was
folly to try to prohibit them, but that it was also folly to leave them
without thoroughgoing control. These men realized that the doctrine
of the old laissez faire economists, of the believers in unlimited
competition, unlimited individualism, were, in the actual state of
affairs, false and mischievous. They realized that the Government must
now interfere to protect labor, to subordinate the big corporation
to the public welfare, and to shackle cunning and fraud exactly as
centuries before it had interfered to shackle the physical force which
does wrong by violence. The big reactionaries of the business world and
their allies and instruments among politicians and newspaper editors
took advantage of this division of opinion, and especially of the fact
that most of their opponents were on the wrong path; and fought to
keep matters absolutely unchanged. These men demanded for themselves an
immunity from government control which, if granted, would have been as
wicked and as foolish as immunity to the barons of the twelfth century.
Many of them were evil men. Many others were just as good men as were
some of these same barons; but they were as utterly unable as any
medieval castle-owner to understand what the public interest really was.
There have been aristocracies which have played a great and beneficent
part at stages in the growth of mankind; but we had come to a stage
where for our people what was needed was a real democracy; and of all
forms of tyranny the least attractive and the most vulgar is the tyranny
of mere wealth, the tyranny of a plutocracy." *
* Autobiography (Scribner), pp. 424-25.
When Roosevelt became President, there were three directions in which
energy needed to be applied to the solution of the trust problem: in the
more vigorous enforcement of the laws already on the statute books; in
the enactment of necessary new laws on various phases of the subject;
and in the arousing of an intelligent and militant public opinion
in relation to the whole question. To each of these purposes the new
President applied himself with characteristic vigor.
The Sherman Anti-Trust law, which had already been on the Federal
statute books for eleven years, forbade "combinations in restraint
of trade" in the field of interstate commerce. During three
administrations, eighteen actions had been brought by the Government for
its enforcement. At the opening of the twentieth century it was a grave
question whether the Sherman law was of any real efficacy in preventing
the evils that arose from unregulated combination in business. A
decision of the United States Supreme Court, rendered in 1895 in the
so-called Knight case, against the American Sugar Refining Company, had,
in the general belief, taken the teeth out of the Sherman law. In the
words of Mr. Taft, "The effect of the decision in the Knight case upon
the popular mind, and indeed upon Congress as well, was to discourage
hope that the statute could be used to accomplish its manifest purpose
and curb the great industrial trusts which, by the acquisition of all
or a large percentage of the plants engaged in the manufacture of a
commodity, by the dismantling of some and regulating the output of
others, were making every effort to restrict production, control prices,
and monopolize the business." It was obviously necessary that the
Sherman act, unless it were to pass into innocuous desuetude, should
have the original vigor intended by Congress restored to it by a new
interpretation of the law on the part of the Supreme Court. Fortunately
an opportunity for such a change presented itself with promptness.
A small group of powerful financiers had arranged to take control of
practically the entire system of railways in the Northwest, "possibly,"
Roosevelt has said, "as the first step toward controlling the entire
railway system of the country." They had brought this about by
organizing the Northern Securities Company to hold the majority of the
stock of two competing railways, the Great Northern and the Northern
Pacific. At the direction of President Roosevelt, suit was brought
by the Government to prevent the merger. The defendants relied for
protection upon the immunity afforded by the decision in the Knight
case. But the Supreme Court now took more advanced ground, decreed that
the Northern Securities Company was an illegal combination, and ordered
its dissolution.
By the successful prosecution of this case the Sherman act was made once
more a potentially valuable instrument for the prevention of the more
flagrant evils that flow from "combinations in restraint of trade."
During the remaining years of the Roosevelt Administrations, this legal
instrument was used with aggressive force for the purpose for which it
was intended. In seven years and a half, forty-four prosecutions were
brought under it by the Government, as compared with eighteen in the
preceding eleven years. The two most famous trust cases, next to the
Northern Securities case and even surpassing it in popular interest,
because of the stupendous size of the corporations involved, were those
against the Standard Oil Company and the American Tobacco Company. These
companion cases were not finally decided in the Supreme Court until the
Administration of President Taft; but their prosecution was begun while
Roosevelt was in office and by his direction. They were therefore
a definite part of his campaign for the solution of the vexed trust
problem. Both cases were decided, by every court through which they
passed, in favor of the Government. The Supreme Court finally in 1911
decreed that both the Standard Oil and the Tobacco trusts were in
violation of the Sherman act and ordered their dissolution. There could
now no longer be any question that the Government could in fact exercise
its sovereign will over even the greatest and the most powerful of
modern business organizations.
The two cases had one other deep significance which at first blush
looked like a weakening of the force of the anti-trust law but which was
in reality a strengthening of it. There had been long and ardent debate
whether the Sherman act should be held to apply to all restraints of
trade or only to such as were unreasonable. It was held by some that it
applied to ALL restraints and therefore should be amended to cover only
unreasonable restraints. It was held by others that it applied to all
restraints and properly so. It was held by still others that it applied
only to unreasonable restraints. But the matter had never been decided
by competent authority. The decision of the Supreme Court in these two
outstanding cases, however, put an end to the previous uncertainty.
Chief Justice White, in his two opinions, laid it down with definiteness
that in construing and applying the law recourse must be had to the
"rule of reason." He made clear the conviction of the court that it was
"undue" restraints of trade which the law forbade and not incidental or
inconsiderable ones. This definitive interpretation of the law, while
it caused considerable criticism at the moment, in ultimate effect so
cleared the air about the Sherman act as effectually to dispose of
the demands for its amendment in the direction of greater leniency or
severity.
But the proving of the anti-trust law as an effective weapon against the
flagrantly offending trusts, according to Roosevelt's conviction, was
only a part of the battle. As he said, "monopolies can, although in
rather cumbrous fashion, be broken up by lawsuits. Great business
combinations, however, cannot possibly be made useful instead of noxious
industrial agencies merely by lawsuits, and especially by lawsuits
supposed to be carried on for their destruction and not for their
control and regulation." He took, as usual, the constructive point of
view. He saw both sides of the trust question--the inevitability and
the beneficence of combination in modern business, and the danger to
the public good that lay in the unregulated and uncontrolled wielding
of great power by private individuals. He believed that the thing to do
with great power was not to destroy it but to use it, not to forbid its
acquisition but to direct its application. So he set himself to the
task of securing fresh legislation regarding the regulation of corporate
activities.
Such legislation was not easy to get; for the forces of reaction were
strong in Congress. But several significant steps in this direction were
taken before Roosevelt went out of office. The new Federal Department
of Commerce and Labor was created, and its head became a member of
the Cabinet. The Bureau of Corporations was established in the same
department. These new executive agencies were given no regulatory
powers, but they did perform excellent service in that field of
publicity on the value of which Roosevelt laid so much stress.
In the year 1906 the passing of the Hepburn railway rate bill for the
first time gave the Interstate Commerce Commission a measure of real
control over the railways, by granting to the Commission the power
to fix maximum rates for the transportation of freight in interstate
commerce. The Commission had in previous years, under the authority of
the act which created it and which permitted the Commission to decide
in particular cases whether rates were just and reasonable, attempted
to exercise this power to fix in these specific cases maximum rates. But
the courts had decided that the Commission did not possess this right.
The Hepburn act also extended the authority of the Commission over
express companies, sleeping-car companies, pipe lines, private car
lines, and private terminal and connecting lines. It prohibited railways
from transporting in interstate commerce any commodities produced or
owned by themselves. It abolished free passes and transportation except
for railway employees and certain other small classes of persons,
including the poor and unfortunate classes and those engaged in
religious and charitable work. Under the old law, the Commission was
compelled to apply to a Federal court on its own initiative for the
enforcement of any order which it might issue. Under the Hepburn act
the order went into effect at once; the railroad must begin to obey the
order within thirty days; it must itself appeal to the court for the
suspension and revocation of the order, or it must suffer a penalty
of $5000 a day during the time that the order was disobeyed. The act
further gave the Commission the power to prescribe accounting methods
which must be followed by the railways, in order to make more difficult
the concealment of illegal rates and improper favors to individual
shippers. This extension and strengthening of the authority of the
Interstate Commerce Commission was an extremely valuable forward step,
not only as concerned the relations of the public and the railways,
but in connection with the development of predatory corporations of the
Standard Oil type. Miss Ida Tarbell, in her frankly revealing "History
of the Standard Oil Company", which had been published in 1904, had
shown in striking fashion how secret concessions from the railways had
helped to build up that great structure of business monopoly. In Miss
Tarbell's words, "Mr. Rockefeller's great purpose had been made possible
by his remarkable manipulation of the railroads. It was the rebate which
had made the Standard Oil trust, the rebate, amplified, systematized,
glorified into a power never equalled before or since by any business
of the country." The rebate was the device by which favored
shippers--favored by the railways either voluntarily or under the
compulsion of the threats of retaliation which the powerful shippers
were able to make--paid openly the established freight rates on
their products and then received back from the railways a substantial
proportion of the charges. The advantage to the favored shipper is
obvious. There were other more adroit ways in which the favoritism could
be accomplished; but the general principle was the same. It was one
important purpose--and effect--of the Hepburn act to close the door to
this form of discrimination.
One more step was necessary in order to eradicate completely this
mischievous condition and to "keep the highway of commerce open to all
on equal terms." It was imperative that the law relative to these abuses
should be enforced. On this point Roosevelt's own words are significant:
"Although under the decision of the courts the National Government had
power over the railways, I found, when I became President, that
this power was either not exercised at all or exercised with utter
inefficiency. The law against rebates was a dead letter. All the
unscrupulous railway men had been allowed to violate it with impunity;
and because of this, as was inevitable, the scrupulous and decent
railway men had been forced to violate it themselves, under penalty of
being beaten by their less scrupulous rivals. It was not the fault of
these decent railway men. It was the fault of the Government."
Roosevelt did not propose that this condition should continue to be the
fault of the Government while he was at its head, and he inaugurated a
vigorous campaign against railways that had given rebates and against
corporations that had accepted--or extorted-them. The campaign reached a
spectacular peak in a prosecution of the Standard Oil Company, in which
fines aggregating over $29,000,000 were imposed by Judge Kenesaw M.
Landis of the United States District Court at Chicago for the offense
of accepting rebates. The Circuit Court of Appeals ultimately determined
that the fine was improperly large, since it had been based on
the untenable theory that each shipment on which a rebate was paid
constituted a separate offense. At the second trial the presiding
judge ordered an acquittal. In spite, however, of the failure of this
particular case, with its spectacular features, the net result of the
rebate prosecutions was that the rebate evil was eliminated for good and
all from American railway and commercial life.
When Roosevelt demanded the "square deal" between business and the
people, he meant precisely what he said. He had no intention of
permitting justice to be required from the great corporations without
insisting that justice be done to them in turn. The most interesting
case in point was that of the Tennessee Coal and Iron Company. To this
day the action which Roosevelt took in the matter is looked upon, by
many of those extremists who can see nothing good in "big business," as
a proof of his undue sympathy with the capitalist. But thirteen years
later the United States Supreme Court in deciding the case against the
United States Steel Corporation in favor of the Corporation, added an
obiter dictum which completely justified Roosevelt's action.
In the fall of 1907 the United States was in the grip of a financial
panic. Much damage was done, and much more was threatened. One great New
York trust company was compelled to close its doors, and others were
on the verge of disaster. One evening in the midst of this most trying
time, the President was informed that two representatives of the United
States Steel Corporation wished to call upon him the next morning. As he
was at breakfast the next day word came to him that Judge Gary and Mr.
Frick were waiting in the Executive Office. The President went over at
once, sending word to Elihu Root, then Secretary of State, to join him.
Judge Gary and Mr. Frick informed the President that a certain great
firm in the New York financial district was upon the point of failure.
This firm held a large quantity of the stock of the Tennessee Coal and
Iron Company. The Steel Corporation had been urged to purchase this
stock in order to avert the failure. The heads of the Steel Corporation
asserted that they did not wish to purchase this stock from the point of
view of a business transaction, as the value which the property might be
to the Corporation would be more than offset by the criticism to which
they would be subjected. They said that they were sure to be charged
with trying to secure a monopoly and to stifle competition. They told
the President that it had been the consistent policy of the Steel
Corporation to have in its control no more than sixty per cent of
the steel properties of the country; that their proportion of those
properties was in fact somewhat less than sixty per cent; and that the
acquisition of the holdings of the Tennessee Company would raise it
only a little above that point. They felt, however, that it would be
extremely desirable for them to make the suggested purchase in order to
prevent the damage which would result from the failure of the firm in
question. They were willing to buy the stocks offered because in
the best judgment of many of the strongest bankers in New York the
transaction would be an influential factor in preventing a further
extension of the panic. Judge Gary and Mr. Frick declared that they were
ready to make the purchase with this end in view but that they would not
act without the President's approval of their action.
Immediate action was imperative. It was important that the purchase, if
it were to be made, should be announced at the opening of the New York
Stock Exchange at ten o'clock that morning. Fortunately Roosevelt
never shilly-shallied when a crisis confronted him. His decision was
instantaneous. He assured his callers that while, of course, he could
not advise them to take the action, proposed, he felt that he had no
public duty to interpose any objection.
This assurance was quite sufficient. The pure chase was made and
announced, the firm in question did not fail, and the panic was
arrested. The immediate reaction of practically the whole country was
one of relief. It was only later, when the danger was past, that critics
began to make themselves heard. Any one who had taken the trouble
to ascertain the facts would have known beyond question that the
acquisition of the Tennessee properties was not sufficient to change
the status of the Steel Corporation under the anti-trust law. But the
critics did not want to know the facts. They wanted--most of them, at
least--to have a stick with which to beat Roosevelt. Besides, many of
them did not hold Roosevelt's views about the square deal. Their belief
was that whatever big business did was ipso facto evil and that it was
the duty of public officials to find out what big business wanted to do
and then prevent its accomplishment.
Under a later Administration, Roosevelt was invited to come before a
Congressional investigating committee to explain what he did in this
famous case. There he told the complete story of the occurrence simply,
frankly, and emphatically, and ended with this statement: "If I were on
a sailboat, I should not ordinarily meddle with any of the gear; but if
a sudden squall struck us, and the main sheet jammed, so that the boat
threatened to capsize, I would unhesitatingly cut the main sheet, even
though I were sure that the owner, no matter how grateful to me at the
moment for having saved his life, would a few weeks later, when he had
forgotten his danger and his fear, decide to sue me for the value of
the cut rope. But I would feel a hearty contempt for the owner who so
acted."
Two laws passed during the second Roosevelt Administration had an
important bearing on the conduct of American business, though in a
different way from those which have already been considered. They were
the Pure Food law, and the Meat Inspection act. Both were measures for
the protection of the public health; but both were at the same time
measures for the control of private business. The Pure Food law did
three things: it prohibited the sale of foods or drugs which were not
pure and unadulterated; it prohibited the sale of drugs which contained
opium, cocaine, alcohol, and other narcotics unless the exact proportion
of them in the preparation were stated on the package; and it prohibited
the sale of foods and drugs as anything else than what they actually
were. The Meat Inspection law required rigid inspection by Government
officials of all slaughterhouses and packing concerns preparing meat
food products for distribution in interstate commerce. The imperative
need for the passage of this law was brought forcibly and vividly to
the popular attention through a novel, "The Jungle", written by Upton
Sinclair, in which the disgraceful conditions of uncleanliness and
revolting carelessness in the Chicago packing houses were described with
vitriolic intensity. An official investigation ordered by the President
confirmed the truth of these timely revelations.
These achievements on the part of the Roosevelt Administrations were of
high value. But, after all Roosevelt performed an even greater service
in arousing the public mind to a realization of facts of national
significance and stimulating the public conscience to a desire to
deal with them vigorously and justly. From the very beginning of his
Presidential career he realized the gravity of the problems created by
the rise of big business; and he began forthwith to impress upon the
people with hammer blows the conditions as he saw them, the need
for definite corrective action, and the absolute necessity for such
treatment of the case as would constitute the "square deal." An
interesting example of his method and of the response which it received
is to be found in the report of an address which he made in 1907. It
runs thus:
"From the standpoint of our material prosperity there is only one
other thing as important as the discouragement of a spirit of envy and
hostility toward business men, toward honest men of means; this is the
discouragement of dishonest business men. [Great applause.]
"Wait a moment; I don't want you to applaud this part unless you are
willing to applaud also the part I read first, to which you listened in
silence. [Laughter and applause.] I want you to understand that I will
stand just as straight for the rights of the honest man who wins his
fortune by honest methods as I will stand against the dishonest man who
wins a fortune by dishonest methods. And I challenge the right to your
support in one attitude just as much as in the other. I am glad you
applauded when you did, but I want you to go back now and applaud
the other statement. I will read a little of it over again. 'Every
manifestation of ignorant envy and hostility toward honest men who
acquire wealth by honest means should be crushed at the outset by the
weight of a sensible public opinion.' [Tremendous applause.] Thank you.
Now I'll go on."
Roosevelt's incessant emphasis was placed upon conduct as the proper
standard by which to judge the actions of men. "We are," he once said,
"no respecters of persons. If a labor union does wrong, we oppose it as
firmly as we oppose a corporation which does wrong; and we stand equally
stoutly for the rights of the man of wealth and for the rights of the
wage-worker. We seek to protect the property of every man who acts
honestly, of every corporation that represents wealth honestly
accumulated and honestly used. We seek to stop wrongdoing, and we desire
to punish the wrongdoer only so far as is necessary to achieve this
end."
At another time he sounded the same note--sounded it indeed with a
"damnable iteration" that only proved how deeply it was imbedded in his
conviction.
"Let us strive steadily to secure justice as between man and man without
regard to the man's position, social or otherwise. Let us remember that
justice can never be justice unless it is equal. Do justice to the rich
man and exact justice from him; do justice to the poor man and
exact justice from him--justice to the capitalist and justice to the
wage-worker.... I have an equally hearty aversion for the reactionary
and the demagogue; but I am not going to be driven out of fealty to my
principles because certain of them are championed by the reactionary and
certain others by the demagogue. The reactionary is always strongly
for the rights of property; so am I.... I will not be driven away from
championship of the rights of property upon which all our civilization
rests because they happen to be championed by people who champion
furthermore the abuses of wealth.... Most demagogues advocate some
excellent popular principles, and nothing could be more foolish than for
decent men to permit themselves to be put into an attitude of ignorant
and perverse opposition to all reforms demanded in the name of the
people because it happens that some of them are demanded by demagogues."
Such an attitude on the part of a man like Roosevelt could not fail to
be misunderstood, misinterpreted, and assailed. Toward the end of his
Presidential career, when he was attacking with peculiar vigor the
"malefactors of great wealth" whom the Government had found it necessary
to punish for their predatory acts in corporate guise, it was gently
intimated by certain defenders of privilege that he was insane. At other
times, when he was insisting upon justice even to men who had achieved
material success, he was placed by the more rabid of the radical
opponents of privilege in the hierarchy of the worshipers of the
golden calf. His course along the middle of the onward way exposed him
peculiarly to the missiles of invective and scorn from the partisans on
either side. But neither could drive him into the arms of the other.
The best evidence of the soundness of the strategy with which he
assailed the enemies of the common good, with whirling war-club but with
scrupulous observance of the demands of justice and fair play, is to
be found in the measure of what he actually achieved. He did arouse
the popular mind and sting the popular conscience broad awake. He
did enforce the law without fear or favor. He did leave upon the
statute-book and in the machinery of government new means and methods
for the control of business and for the protection of the general
welfare against predatory wealth.