BIG BUSINESS

The panic of 1893 ended the first period of the trust problem. The preceding years had been years of formation and experiment. They had been accompanied by an increasing popular distaste for combinations of capital and a growing activity in the organization of labor. The Sherman Law of 1890 had temporarily quieted the anti-trust movement, while economic depression had checked the extravagance of speculation that had been prevalent everywhere. During the years of depression attention was shifted to tariff and currency, but a new era began with the recurrence of prosperity about 1897.

The industrial revival was marked by an extension of the scope of industry, as every similar period had been. After the panic of 1837 the railroad had appeared among the important new activities of American society. Improvements in manufacturing technique followed the panic of 1857. After 1873 the varied applications of electricity to industry and communication gave a new direction to investment. After 1893, with every preceding activity stimulated and extended, there came the first successful construction of a trackless engine—the motor-car—and the rebuilding of the physical plants of cities, railways, and suburban residences. The recovery of confidence came after 1896, and before the end of the century speculation was at full blast.

The drift toward monopoly was marked. The trusts had already shown their profitable character. Concentration had been made possible by the development of communication in the eighties, and grew now on a larger scale than the eighties had imagined. Within the field of transportation the promoters reorganized the railroads after the panic, reduced their number, and gathered their control into the hands of a few men.

The railway system by 1900, with 198,000 miles of track, was directed by a few powerful groups of roads. In the East the New York Central and Pennsylvania systems were dominant. In the West the continental railways formed the basis of new organizations. The keenest interest gathered round the reconstruction of the Union Pacific by Edward H. Harriman, who reorganized its finances after 1897. The Union Pacific had been forced into combination by its location and its neighbors. Running from Omaha to Ogden it was dependent for through traffic upon the Central Pacific that ran from Ogden to San Francisco. When the latter came under the control of the California capitalists who owned the Southern Pacific lines, the Union Pacific was driven to build or buy outlets of its own, and extended into Oregon and Texas as the result. Jay Gould had begun the consolidation in the eighties and Harriman continued it after the panic of 1893. He rebuilt the main line and improved the value and credit of his property. In 1901 his road borrowed money with which to buy a controlling interest in the Central Pacific and Southern Pacific—the Huntington lines,—and thereafter the Harriman system, with two complete railroads from the Mississippi to the Pacific, was beyond the reach of hostile competition.

The Interstate Commerce Law of 1887 stimulated combination among the railroads, since it made pools and rate agreements illegal. The alternative to such agreements was destructive competition, since no two lines were of exactly equal strength. To avoid this, the stronger lines bought or leased the weaker, with which they might not coÖperate, but which they might buy outright. Harriman, successful with his Southwestern system, tried in 1901 to buy the Northern Pacific, too, and came into direct conflict with another group of railway owners.

The Northern Pacific had been supplemented after 1893 by the Great Northern, which James J. Hill had built without a subsidy. These two roads, and the Chicago, Burlington & Quincy, covered the Northwest as Harriman's lines covered the Southwest. They were so placed that with common management they could be more effective than with rivalry. The owners of the Great Northern and the Burlington, James J. Hill and J. Pierpont Morgan, were on the verge of a general consolidation when Harriman tried to buy a control of the Northern Pacific. They struggled to retain it and succeeded, but their competition raised its stock to one thousand per share, causing a stock exchange panic on May 9, 1901. Only the speculators suffered by the panic, but public attention was drawn by it to the gigantic size of the combinations which held arbitrary control over nearly half the United States.

Minor consolidations followed these in 1902 and 1903, but none aroused so much fear as the Northern Securities Company of New Jersey, the holding company in whose hands Hill and Morgan determined to put the control of their lines. The fate of any single company could be determined by the ownership of not over fifty-one per cent of its stock. If this was owned by another corporation, a similar proportion of the stock of the latter would control the whole. The holding company was a machine whereby capital could control property several times its bulk. The Governors of the Northwest States, alarmed at the monopolization of their railways, protested and started suits. It was claimed that this sort of merging of railroads was, after all, a conspiracy in restraint of trade. In March, 1902, President Roosevelt instructed his Attorney-General, Philander C. Knox, to test the Sherman Act of 1890, and bring suit under it for the dissolution of the Northern Securities Company. For several years after 1897 foreign affairs and big business had been dominant in the American mind, which had admired their bigness and activity, but now the social consequences of big business aroused the fears of the nation. In 1903 Congress passed the Elkins Law, forbidding railroads to give rebates to favored customers, and an Expedition Law, to make the wheels of justice move more rapidly when prosecutions under the Sherman and Interstate Commerce Laws were under way.

Industrial consolidation, like that of the railways, began again in 1897, and many of the new corporations assumed a type that marked an evolution for the trust. In the earlier period the aim of the trust had been to eliminate competition by gathering under a single control the whole of a given business. Oil, sugar, steel, whiskey, and tobacco were notable instances in which extreme consolidation had been reached. Competition changed its character as consolidation increased. It ceased to mean a struggle between rivals in the same trade, and came to mean a struggle between successive processes of manufacture. The mine-owner struggled for his profits with the smelter who used his ore. The smelter struggled with the steel manufacturer in the same way. Control of single industries left untouched this newer competition, but an integration of great groups of related processes promised to avoid it.

In 1901 the greatest of the integrated trusts, the United States Steel Corporation, was created. The iron and steel industry had been expanding since the Bessemer and other commercial processes for the manufacture of steel had made it available for railway, bridge, and architectural construction. Andrew Carnegie, with his Pittsburg mills, was the most successful producer. His partnership controlled by 1901 about twenty-five per cent of the output of finished steel. He already included many related and successive processes, but now he allowed his works to be merged with those of his rivals into a large company. The resulting United States Steel Corporation owned and operated the ore deposits and the mines, the necessary coal fields, the local railways and freight steamers, the smelters and the blast furnaces, the rolling mills and the factories in which iron and steel were manufactured into a multitude of shapes for sale. With a New Jersey charter it was capitalized at $1,100,000,000, and drew attention to the industrial phase of the trust problem much as Harriman, Hill, and Morgan had drawn it to the railroads.

Promotion of new trusts, with billions of aggregated capital, was the order of the day from 1897 to 1902. The fear of monopoly was speedily aroused, and in 1898 Congress created an Industrial Commission, whose nineteen volumes of reports contain the facts upon which the history of the trusts must be based. In the fall of 1899 there met in Chicago a great conference on the trusts, where business men, economists, and politicians discussed the economic and social possibilities of the movement. A willingness to hear and perhaps to rely on the judgment of experts was shown in the discussions over the trusts. It marked a change in the American attitude toward government. By 1902 the demand for a solution of the trust problem was heard repeatedly, but there was little agreement as to whether the trusts were good or bad, or whether they should be abolished, regulated, or owned outright by the Government. It was not even certain what powers the United States possessed to regulate general industry, but a group of Supreme Court cases suggested that the power could be found. In the Trans-Missouri Freight Case (1897), the Supreme Court declared that the Sherman Law applied to railway conspiracies, and in the Addystone Pipe Case (1898), a decision against an industrial combination, written by Circuit Judge William H. Taft, was upheld by the court of last appeal. The Northern Securities Case, started in 1902, was pushed to a successful end in 1904, when it became apparent that legal control could be exercised if Congress so desired.

Labor followed the course of industry and transportation, becoming stronger and better united, and showing a keen jealousy of centralized control. The years of trust promotion were years of notable strikes and of episodes which drew attention to the social results of industrial concentration. Sometimes the trust had labor at a disadvantage, as was shown in the strike against the Steel Corporation by the Amalgamated Association in 1901. In 1892 this union had conducted a great strike against the Carnegie Works and had lost public sympathy and the strike. Its men had committed open violence, and an anarchistic sympathizer had tried to murder Carnegie's representative at Homestead, Henry C. Frick. In 1901 the strike affected the unionized mills of the Steel Corporation, but that trust had only to close down the mills involved and transfer pending contracts to other mills, remote and non-unionized. The strike collapsed because of the superior organization of the trust.

More important than the steel strike in its effect upon the public was the strike of the miners in the anthracite coal fields of Pennsylvania. In 1900 these workers were organized by the United Mine Workers of America, under the leadership of John Mitchell. They gained concessions in a strike in this year, partly because the strike threatened to disturb political conditions and embarrass the Republican national ticket. The mine-owners, most of whom were Republicans, were persuaded by Hanna and others to end the quarrel.

In the spring of 1902 the strike broke out again, turning largely upon the question of the formal recognition of the union. All through the summer John Mitchell held his followers together, gaining an unusual degree of public sympathy for his cause. In the autumn, with both sides obstinate, a third party, the public, took an interest in the strike. The prospect of a coalless winter alarmed political leaders and citizens in general. It was felt that public interest was superior to the claims of either contestant, but there was neither law nor recognized machinery through which the public could protect itself. At this stage, in October, 1902, President Roosevelt secretly reached the intention "to send in the United States Army to take possession of the coal fields" if necessary. He called the operators and Mitchell to a conference at the White House, spoke to them as a citizen upon their duty to serve the public, and with rising public opinion behind him and supporting him, forced the owners to consent to an arbitration of the points at issue. The men returned to work, pleased with the President, to whose interference they and the public owed industrial peace.

In 1903 another miners' union, the Western Federation of Miners, conducted a great strike in the mines of Cripple Creek. Public opinion in Colorado knew no middle class. The miners and the operators represented the two chief interests of the section. Hard feeling and violence accompanied the strike. The malicious murder of non-union men added to the bitterness, which the presence of the militia and a series of arbitrary arrests could not allay. The strike was complicated by the presence among the workers of a strong element of Socialists, whose ends were political as well as economic. The leaders of the Federation, Moyer and Haywood, were Socialists, and for them the strike was only a beginning of political revolution. The strike lasted until the outraged citizens of Cripple Creek formed a vigilance committee and deported the chief agitators to Kansas.

Socialism played an increasing part in labor discussions after 1897. A Socialist Labor party had presented a ticket and received a few votes in 1892 and 1896, but socialism had not taken a strong hold on the American imagination. The swelling immigration that followed the new prosperity brought new life to socialism. In 1900 a Social Democratic party polled 94,000 votes for Eugene V. Debs for President. In 1904, with the same candidate, it received 402,000 votes. Society was reorganizing amid the industrial changes, while the discontented classes were growing more coherent and constructive.

President Roosevelt met the changes in transportation, industry, and labor with vigor. He invoked the Sherman Law against the Northern Securities Company. He brought suits against certain of the trusts which he stigmatized as the "bad trusts." Not all concentration, he urged, was undesirable. Capital, like labor, had its rights, but it must obey the law. Partly through his efforts Congress created in 1903 a new administrative department of Commerce and Labor. George B. Cortelyou became the first Secretary of this department. Through its Bureaus of Corporations and of Labor there was new activity in the investigation of the facts of the industrial movement.

The vigor with which the President directed foreign relations, interfered in big business, and espoused the cause of labor produced a breach between him and many of the regular leaders of the party. Through two campaigns Marcus A. Hanna had worked on the theory that the Republican party was the party of business, and had attracted to its support all who believed this or had something to make out of it. Many of these Republicans could not understand what Roosevelt was trying to do, and maintained an opposition, silent or open, to his policies.

The popularity of Hanna was used by many Republicans to offset the popularity of Roosevelt. Before 1896 Hanna had taken little part in public politics. Entering the Senate in 1897, he developed great influence. By 1900 he began to speak in public with directness and effect, and to undo the work of the cartoonists who had misrepresented his character. He interfered to bring peace in the anthracite regions in 1900, became interested in the labor problem on its own account, and discovered that he was popular. He was essentially a direct and honest man, who had had no reason to doubt that it was the chief end of government to conserve business. As he came into touch with public affairs he broadened, saw new responsibilities for capital, and had a new understanding of the wants of labor. The only personality that even threatened to rival that of Roosevelt in 1904 was that of "Uncle Mark" Hanna.

Roosevelt had been made Vice-President to get rid of him in New York. The single life that stood between him and the White House was removed by an assassin, and as a President by accident he desired to establish himself and secure a nomination on his own account in 1904. By the summer of 1902 he appreciated the growing interest in the problems of capital and labor. A speaking tour in 1902 gave him a chance to demand a "square deal" for all, and the control of the trusts. From some sections of the West came the suggestion that the way to approach the trusts was through the tariff.

The Dingley Tariff was unpopular with the Republican farmers of the Northwest, and for some years they tolerated it in silence as a test of party loyalty. In 1902 a liberal faction, controlled by Governor Albert B. Cummins, captured the Iowa convention and demanded a revision of the more extreme schedules. The belief that the tariff was the "mother of trusts" was spreading, and the Iowa idea gained wide acceptance. In Congress, in the session of 1902, the Republican organization had shown the stubbornness with which any opening in the tariff wall would be opposed.

Cuba was set free in the spring of 1902, her government having been formed under the guidance of the United States. The duty to aid the young Republic, and in particular to mitigate the severities of the Dingley Tariff impressed the President, who used all his influence to get such legislation from Congress. He failed signally, raising only a new issue by his attempt to coerce Congress. His speeches in the summer showed a willingness to revise the tariff, while his interference in the coal strike in the autumn showed his willingness to oppose the ends of capital. How far he would go in breaking with the leaders of his party was unknown, but their disposition to "stand pat" and do nothing with the tariff was marked before the end of 1902.

In 1902 it became a habit of Republican state conventions to demand the renomination of Roosevelt in 1904. Whatever his effect upon the party leaders, the rank and file liked him and believed in him, while his personal popularity among Democrats led many to think his strength greater than it was. His candidacy was formal and authorized, but his opponents hoped that Hanna might be induced to try to defeat him. In 1903 the Ohio convention, with the consent of Hanna, approved the candidacy of Roosevelt, and early in 1904 the death of Hanna removed the last hope of Roosevelt's Republican opponents. The delegates went to a national convention in Chicago, for which the procedure had all been arranged at the White House, where it had been determined that Elihu Root should be temporary chairman, and that Joseph G. Cannon, the Speaker, should be permanent chairman. Through these the convention registered the renomination of Roosevelt and selected Charles W. Fairbanks, of Indiana, as Vice-President.

In the Democratic party the forces that had dominated in 1896 and 1900 had lost control. William Jennings Bryan, after two defeats, was not a candidate in 1904. He had become a lay preacher on political subjects, lecturing and speaking constantly in all parts of the United States, and reinforcing his political views in the columns of his weekly Commoner, which he founded after his defeat in 1900. Roosevelt had adopted many of his fundamental themes, but Bryan retained an increasing popularity as did the President, and, like the latter, had relations of doubtful cordiality with the leaders of his own party. The Cleveland wing of the Democrats still believed Bryan to be dangerous and unsound upon financial matters, and some of them made overtures to Cleveland to be a candidate for a third term himself. His emphatic refusal to reËnter politics compelled the conservatives to find a new candidate. Judge Alton B. Parker, of New York, was their choice. The owner of the most notorious of the sensational newspapers, William Randolph Hearst, offered himself. Several other candidates were presented to the Democratic Convention at Chicago, but Parker received the nomination, over the bitter opposition of Bryan. When a doubt arose as to his status on the silver issue, Judge Parker telegraphed to the convention that he regarded "the gold standard as firmly and irrevocably established." Bryan supported the ticket, Parker and Henry G. Davis of West Virginia, but without enthusiasm.

There was no issue that clearly divided the parties in the campaign of 1904. Roosevelt asked for an indorsement of his Administration and for approval of his general theory of a "square deal," but it was obvious that his party associates were less enthusiastic for reform than he, and that only his great personal popularity prevented some of them from withdrawing their support. The Bryan Democrats were drawn more toward Roosevelt than toward their own party candidate. It was clear that Parker represented, on the whole, the weight of conservatism, while Roosevelt embodied the spirit of progress, and that neither was typical of his party. Parker was driven by the progressive Democrats to insist upon a regulation of the trusts; Roosevelt acquiesced in the desire of the "stand-pat" Republicans and refrained from advocating a lowering of the tariff.

The result of the election was proof of the public confidence in Roosevelt. He carried every State outside the South, and Missouri and Maryland besides. His popular vote was over 7,500,000, while his plurality over Parker was more than 2,500,000. In the last week of the canvass Parker charged that the trusts were supporting Roosevelt, and that the reform demands were only a pose. He pointed out that the Chairman of the Republican National Committee, who had succeeded Hanna, George B. Cortelyou, had been Secretary of Commerce and Labor, and thus in a position to examine the books of corporations. He hinted at a political blackmail of the trusts, and many of the papers that supported him were outspoken in their charges. An indignant denial of blackmail appeared over the President's signature the Saturday before election. Later investigation proved that many of the great corporations had, as usual, contributed to the campaign fund, and that Roosevelt had urged the railroad magnate, Harriman, to contribute toward the campaign in New York.

As soon as the results of the election were known, Roosevelt answered a question that was on the lips of many. His three and a half years constituted his first term. He was now elected for a second term, and he characterized as a "wise custom" the limiting of a President to two terms. "Under no circumstances will I be a candidate for or accept another nomination," he declared.

BIBLIOGRAPHICAL NOTE

The history of the recent trust movement may be followed in the writings upon the United States Steel Corporation by E.S. Meade and H.L. Wilgus. There is a detailed and gossipy Inside History of the Carnegie Steel Company (1903), by J.H. Bridge. W.F. Willoughby has made searching analyses of Concentration and Integration, which may be found in the Yale Review, vol. VII, and the Quarterly Journal of Economics, vol. XVI. The prosecution of the Northern Securities Company brought out many typical facts of railroad consolidation, and is best described in B.H. Meyer, A History of the Northern Securities Case (in University of Wisconsin Bulletin, no. 142). More general material upon these topics may be found in E.R. Johnson, American Railway Transportation (1903, etc.); F.A. Cleveland and F.W. Powell, Railway Promotion and Capitalization in the United States (1909, with an admirable bibliography); Poore's Railroad Manual; and the files of the Commercial and Financial Chronicle. The voluminous Report of the Industrial Commission (19 vols., Washington, 1900-02) is a storehouse of facts upon industry; labor conditions are illustrated in the Annual Reports of the United States Commissioner of Labor, who has also special reports upon individual strikes, including that at Cripple Creek in 1903. The history of the campaign fund in 1904 was partially revealed in an investigation in 1912. H. Croly, Marcus A. Hanna, is invaluable for these years.