- Historic Sites
The Businessman And The Government
Corruption, Yesterday and Today
June 1977 | Volume 28, Issue 4
The new century, however one may rate businessmen’s ethical performance in it, brought a huge increase in public and government concern on the subject. Federal regulation and control of business had begun formally, though not at first effectively, with the Interstate Commerce Act of 1887 and the Sherman Antitrust Act of 1890. Now two great reform waves, the Progressive movement of roughly 1902-12 and the New Deal of 1933-40, brought to Washington hordes of reformers burning to set businessmen and legislators alike on the path of righteousness. It was encouraging news for them when Henry Clay Frick, after he had helped finance Theodore Roosevelt’s 1904 presidential campaign, complained with evident chagrin, “We got nothing for our money.” Still, there was plenty of reforming to be done. David Graham Phillips’ The Treason of the Senate , the appearance of which in 1907 in Hearst’s Cosmopolitan magazine gave rise to Roosevelt’s popularization of the term “muckraker,” depicted the Senate as little more than a paid department of the trusts, and named specific senators as “perjurers” and “thieves"—charges that gave rise to no libel suits and were never effectively refuted. In 1907 Congress at last passed a law making illegal all political contributions by corporations (as distinguished from individuals) to candidates for federal office.
Like so many other pieces of early reform legislation—including notably the Sherman Act—this one was for years honored chiefly in the breach. Nevertheless, the Progressive era certainly left business bribers and federal bribe-takers somewhat chastened. The people had shown that they cared; what had been conceived as comedy became moral drama, and the concept of public office as a public trust subject to sanctions other than the trustees’ own consciences was at last formally written down. But both sides needed only wait for the next turn of the cycle. The Teapot Dome affair during the inept Harding administration after the First World War, in which Secretary of the Interior Albert B. Fall accepted bribes from oilmen in exchange for secretly granted leases to government oil reserves in Wyoming and California, gave rise to a great public outcry, and Fall went to jail. Essentially, it was Crédit Mobilier replayed. During the middle igao’s, business-government relations looked back even further. With Calvin Coolidge in the White House and the Pittsburgh multimillionaire Andrew W. Mellon as head of the Treasury, government’s attitude toward business was like that of a believer more Catholic than the Pope. Mellon represented the concept, later widely extended, of the public servant thought to be free of temptation because he was so rich. In fact, bribes were unnecessary anyhow; Mellon out of conviction not only met but tried to anticipate every need of business. The country was back to the prebribery alliance of business and government in the state-capitalism days of Hamilton.
The flood of reform legislation passed during the New Deal years was directed chiefly at establishing more fairness in business relations with labor and the consumer, rather than in fighting business-government corruption or collusion. Indeed, those years mark a major turning point in the financial relations between those two entities, and not necessarily a healthy one. For the first time in history, the federal government in peacetime became a financial giant with vast sums to dispense. Total federal government expenditures came to $4.66 billion in 1932; by 1940 they had climbed to $9 billion and by 1941 to $13 billion. During World War n, military production needs sent the figure soaring to about $100 billion per year; and in the postwar years, to the surprise of most economists, federal spending remained at previously unheard-of peacetime figures: in the first five postwar years it averaged $42 billion, almost ten times the 1932 figure. One result of the creation of this enormous pork barrel was that the direction of flow of corrupt money was largely reversed; the post World War n era was the first peacetime period when government had more financial favors to confer on business than vice versa. (Crédit Mobilier and Teapot Dome had both been made possible by government acts under war conditions.)