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 CyclopÆdia, the tariff histories, and D.R. Dewey, National Problems, 1885-1897 (in The American Nation, vol. 24, 1907).