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“We Want To Stop It”

June 2024
3min read

The sudden rise of these vast, and vastly wealthy, industrial empires and Wall Street banks produced a sea change in American politics. At the dawn of the Republic, the country had been overwhelmingly agrarian. But as industry developed, more and more people began migrating to the cities to seek jobs in the cash economy. The flood of immigrants from Europe tended to gravitate to the cities as well. At the end of the eighteenth century, New York had had a population about equal to present-day Altoona, Pennsylvania. A hundred years later, it was one of the great cities of the world.

Corporations also swelled in size and power. Before the Industrial Revolution there had been no large corporations at all. In the early days of the new economy, only the railroads had had work forces of more than a few hundred employees. As late as the end of the Civil War, there was not a single industrial corporation listed on the New York Stock Exchange. By 1900 there were dozens, many of them employing tens of thousands of people.


This growing army of industrial workers was at a great disadvantage relative to the managers of the corporation in deciding how to divide between labor and capital the wealth that was created by both of them together. The managers of a corporation spoke in one voice, but the workers spoke in their thousands. This made it easy for management to impose its own ideas as to wages, hours, and working conditions. When the workers tried to organize, in order to bargain more effectively, management, naturally, resisted furiously.

As early as 1677, 12 New York cartmen became the first strikers to be prosecuted in the colonies. But it was only after the Civil War era that the union movement really got under way. In 1886 the American Federation of Labor was formed, and an increasing number of strikes roiled the nation’s industry. Some of these strikes, such as the one at Andrew Carnegie’s Homestead Steel Works, are remembered for their violence even today.

But government at this time was firmly on the side of capital (the governor of Pennsylvania sent in about 8,000 state militia to protect replacement workers at the Homestead works, and broke the strike). Not until the 1930s would labor become a major force in the American economy.

Curiously, the American labor movement never adopted the socialism that European labor unions so wholeheartedly embraced. Even in the depths of the Great Depression, in 1932, the Socialist candidate for President, Norman Thomas, received only about 2 percent of the popular vote. This antipathy to socialism would prove to be a great advantage to the economic vitality of the United States in the late twentieth century.

In 1901 J. P. Morgan assembled the United States Steel Corporation out of Andrew Carnegie’s holdings and numerous other steel companies. The new corporation, capitalized at $1.4 billion (almost three times the federal government’s annual budget), controlled about 40 percent of the domestic steel market. A joke went around about the schoolboy who was asked when the world began. “God created the world in 4004 B.C. ,” he replied, “and it was reorganized by J. P. Morgan in 1901.” Even The Wall Street Journal confessed to “uneasiness over the magnitude of the affair.”

But the public anxiety regarding large corporations had begun long before U.S. Steel was created. Although the railroads competed fiercely on the trunk lines for freight business, on the branch lines where they had monopolies, they often engaged in shameless price gouging. Several states tried regulating these rates, but in 1886 the U.S. Supreme Court ruled that this violated the interstate commerce clause of the Constitution. The political fight to rein in the railroads moved to Washington. In 1887 Congress created the Interstate Commerce Commission, the first federal regulatory agency. The bill doing so required that “all charges … shall be reasonable and just” but did not define that vague language.


Three years later, Congress passed the Sherman Antitrust Act to control the proliferating combinations among industrial companies. The trust form of organization had been invented by Standard Oil to get around archaic state incorporation laws, which often forbade corporations to own the stock of other companies or to own property beyond state borders. As a single national market emerged, these restrictions made less and less sense, but they were politically difficult to change.

Corporations increasingly resorted to subterfuge to evade them, and in 1882 Standard Oil reorganized itself so that the stock of subsidiary corporations was held by a nine-man board of trustees. But in 1889 the state of New Jersey rewrote its incorporation laws to allow holding companies and out-of-state property ownership. Corporations rushed to be incorporated there, and the trust form of organization quickly disappeared—although the “trusts” have remained as a bogeyman of American politics ever since.

The Sherman Antitrust Act was as vague in its language as the Interstate Commerce Act, and several unfriendly court decisions in the 189Os rendered it nearly moot. But when Theodore Roosevelt became President in 1901, the situation began to change.

In 1901 J. P. Morgan organized the Northern Securities Corporation, which combined several railroads into a new company that dominated transportation in the upper Midwest. The Roosevelt administration announced the next year that it was suing the corporation under the Sherman Antitrust Act to break it up.

Morgan was stunned by the news and hastened to Washington to try to settle the matter quietly, as had been the practice in the past. “If we have done anything wrong,” Morgan said to Roosevelt, “send your man to my man and they can fix it up.”

“That can’t be done,” Roosevelt said.

“We don’t want to fix it up,” the Attorney General, Philander Knox, explained, “we want to stop it.”

From that point on, the government would play an ever-larger regulatory role in the American economy. This involvement is, perhaps, the largest single difference between the nineteenth-century American economy and the twentieth-century one.

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