The United States Since The Civil War by Charles Ramsdell Lingley

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Although it was upon the Standard Oil Company that people turned when
they denounced the trusts and feared or condemned their practices, the
principles to which the Standard adhered when under the strain of
competition were the practices which were followed by their
contemporaries, both big and little. When the Diamond Match Company, for
example, was before the Courts of Michigan in 1889, it appeared that the
organization was built up for the purpose of controlling the manufacture
and trade in matches in the United States and Canada. Its policy was to
buy up and "remove" competition, so that it might monopolize the
manufacture and sale of matches. It could then fix the price of its
commodity at such a point that it could recoup itself for the expense of
eliminating competitors and also make larger profits than were possible
when its rivals were active.

Still more dangerous was the combination of the hard coal operators. By
1873, six corporations owned both the hard coal deposits of Pennsylvania
and the railroads which made it possible to haul the coal out to the
markets. In the same year and later these companies made agreements
which determined the amounts of coal that they would mine, the price
which they would charge, and the proportion of the whole output that
each company would be allowed to handle. Independent operators--that is,
operators not in the combination--found their existence precarious in
the extreme, for their means of transportation was in the hands of the
six coal-carrying railroads, who could raise rates almost at will and
find reasons even for refusing service. The states were powerless to
remedy the situation because their authority did not extend to
interstate commerce, yet it was intolerable for a small group of
interested parties to have power to fix the output of so necessary a
commodity as coal, on no other basis than that provided by their own
desires.

Other abuses appeared which showed that industrial combinations were
open to many of the complaints which, in connection with the railroads,
had led to the Interstate Commerce Act. Industrial pools resembled
railroad pools and were objected to for similar reasons. Bankers and
others who organized combinations were given returns that seemed as
extravagant as the prices paid to railroad construction companies; the
issues of the stock of corporations were bought and sold by their own
officers for speculative purposes; and stock-watering was as common as
in railroading. The industrial combinations also had somewhat the same
effect on politics that the railroads had. Lloyd declared that the
Standard Oil Company had done everything with the Pennsylvania
legislature except refine it.

One of the most noted cases of corporation influence in politics was
that of the election of Senator Henry B. Payne of Ohio. In 1886 the
legislature of the state requested the United States Senate to
investigate the election of Payne because of charges of Standard Oil
influence. The debate over the case showed clearly the belief on the
part of many that the Standard, which controlled "business, railroads,
men and things" was also choosing United States senators. Senator Hoar
raised the question whether the Standard was represented in the Senate
and even in the Cabinet. In denying any connection with the Oil Company,
Payne himself declared that no institution or association had been "to
so large an expense in money" to accomplish his defeat when he was a
candidate for election to the lower house. Popular suspicion seemed
confirmed, therefore, that the Company was taking an active share in
government. Whether the trust was for or against Payne made little
difference.

A complaint that brought the trust problem to the attention of many who
were not interested in its other aspects was the treatment accorded
independent producers. The rough-shod methods employed by the Standard
Oil Company, the Diamond Match Company and the coal operators were
concretely illustrated in many a city and town by such incidents as that
of a Pennsylvania butcher mentioned by Lloyd. An agent of the great meat
slaughtering firms ordered the butcher to cease slaughtering cattle, and
when he refused the agent informed him that his business would be
destroyed. He then found himself unable to buy any meat whatever from
Chicago, the meat-packing center, and discovered that the railroad would
not furnish cars to transport his supplies. Faced by such overwhelming
force, the independent producer was generally compelled to give way to
the demands of the big concerns or be driven to the wall. The
helplessness of the individual under such conditions was strikingly
expressed by Mr. Justice Harlan of the Supreme Court in a decision in a
suit against the Standard Oil Company:

All who recall the condition of the country in 1890 will remember
that there was everywhere, among the people generally, a deep
feeling of unrest. The Nation had been rid of human slavery ...
but the conviction was universal that the country was in real danger
from another kind of slavery sought to be fastened on the American
people, namely, the slavery that would result from aggregations of
capital in the hands of a few ... controlling, for their own ...
advantage exclusively, the entire business of the country, including
the production and sale of the necessaries of life.

Observers noted that fortunes which outstripped the possessions of
princes were being amassed for the few by combinations which sometimes,
if not frequently, resorted to illegal and unfair practices, and they
compared these conditions with the labor unrest, the discontent and the
poverty which was the lot of the many.

In the meanwhile there had arisen a growing demand for action which
would give relief from the conditions just described. As early as 1879
the Hepburn committee appointed by the New York Assembly had
investigated the railroads and had made public a mass of information
concerning the relation of the transportation system to the industrial
combinations. In 1880 Henry George had published _Progress and Poverty_
in which he had contended that the entire burden of taxation should be
laid upon land values, in order to overcome the advantage which the
ownership of land gave to monopoly. In 1881 Henry D. Lloyd had fired
his first volley, "The Story of a Great Monopoly," an attack on the
Standard Oil Company which was published in the _Atlantic Monthly_ and
which caused that number of the periodical to go through seven
editions.[2] In 1888 Edward Bellamy's _Looking Backward_ had pictured
a socialized Utopian state in which the luxuries as well as the
necessities of life were produced for the common benefit of all the
people. Societies had been formed for the propagation of Bellamy's
ideas, and the parlor study of socialism had become popular.

The platforms of the political parties had given evidence of a
continuing unrest without presenting any definite proposals for relief.
As far back as 1872 the Labor Reformers had condemned the "capitalists"
for importing Chinese laborers; in the same year the Republicans and
Democrats had opposed further grants of public land to corporations and
monopolies--referring in the main to the railroads; in 1880 the
Greenbackers and in 1884 the Anti-Monopolists, the Prohibitionists and
the Democrats had denounced the corporations and called for government
action to prevent or control them; and in 1888 the Union Labor party,
the Prohibitionists and the Republicans had urged legislation for doing
away with or regulating trusts and monopolies. By 1890 eight states had
already passed anti-trust laws. Among unorganized forces, possibly the
independent producers were as effective as any. Although usually
overcome by the superior strength of their big opponents, they
frequently conducted vigorous contests and sometimes carried the issue
to the courts where damaging evidence was made public.

The solution of the problem of trust control was not easy to discover.
The amount of property involved was so great that forceful legislation
would be fought to the last ditch; while legislation that was obviously
weak, on the other hand, would not satisfy public opinion. Public
officials were hopelessly divergent in their views. Cleveland had
called attention to the evils of the trusts in his tariff message of
1887, but had laid his emphasis on the need of reduced taxation rather
than upon control of the great combinations. Blaine was opposed to
federal action. Thomas B. Reed had characteristically ridiculed the
idea that monopolies existed:

And yet, outside the Patent Office there are no monopolies in this
country, and there never can be. Ah, but what is that I see on the
far horizon's edge, with tongue of lambent flame and eye of forked
fire, serpent-headed and griffin-clawed?

Surely it must be the great new chimera "Trust." Quick, cries every
masked member of the Ways and Means. Quick, let us lower the tariff.
Let us call in the British. Let them save our devastated homes.

More serious was the almost universal lack of knowledge of the elements
involved in the situation. Industrial leaders were unenlightened and
wrapped up in the attempt to outdo rivals who were equally
unenlightened and absorbed; the nation needed instruction and
leadership, and neither was to be found. Instead, the poorer classes
became more and more hostile to big business interests; the capitalist
class set itself stolidly to the preservation of its interests. The one
saw only the abuses, the other only the benefits of combinations.
Thoughtful men felt that industrialism was afflicted with a malady
which would kill the nation unless a remedy were found.

The legal and constitutional position of the trusts was almost
impregnable. Ever since the decision of the Supreme Court in the
Dartmouth College case, handed down in 1819, franchises and charters
granted by states to corporations had been regarded as contracts which
could not be altered by subsequent legislation. Moreover, the Court had
so interpreted the Fourteenth Amendment, as has been seen, that the
states had found great difficulty in framing regulatory legislation
that would pass muster before the judiciary.[3] It was doubtful
whether federal attempts at regulation would be more fortunate. More
fundamental still, for public opinion underlies even constitutional
interpretation, American industrial and commercial expansion had run
ahead of our conception of the possible and proper functions of
government. Government as the protector of property was an ancient
concept and commonly held in the United States; government as the
guardian of the individual against the powerful holder of a great deal
of property was a new idea and not generally looked upon with favor.

It has already been seen that the prevailing economic theory, _laissez
faire_, was diametrically opposed to government regulation of the
economic activities of the individual. According to this view,
unrestricted industrial liberty would result in adjustment by business
itself on honorable lines. Men whose integrity was such that they were
in control of great enterprises, asserted an attorney for the Standard
Oil Company, would be the first to realize that a fair policy toward
competitors and the public was the most successful policy. Combination
was declared to be inevitable in modern life and reductions in the
price of many commodities were pointed to as a justification for
leaving the trusts unhampered.

Public opinion, however, was reaching the point where it was prepared
to brush aside theoretical difficulties. President Harrison, Senator
Sherman and others urged action. Large numbers of anti-monopoly bills
were presented in Congress. The indifference of some members and the
opposition of others was somewhat neutralized by the fiery zeal of such
men as Senator Jones of Arkansas, who declared that the fortunes made
by the Standard Oil Company did not represent a single dollar of honest
toil or one trace of benefit to mankind. "The sugar trust," declared
the senator, "has its 'long, felonious fingers' at this moment in every
man's pocket in the United States, deftly extracting with the same
audacity the pennies from the pockets of the poor and the dollars from
the pockets of the rich."

After much study of the mass of suggested legislation, Congress relied
upon its constitutional power to regulate commerce among the several
states and passed the Sherman Anti-trust Act, which received President
Harrison's signature on July 2, 1890. Its most significant portions are
the following:

Sec. 1. Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among
the several States, or with foreign nations, is ... illegal.

Sec. 2. Every person who shall monopolize, or attempt to monopolize,
or combine or conspire with any other such person ... to monopolize
any part of the trade or commerce among the several States, or with
foreign nations, shall be deemed guilty of misdemeanor.

The purpose of the framers of the Act seems clearly to have been to
draw up a general measure whose terms should be those usual in the
English common law and then rest on the assurance that the courts would
interpret its meaning in the light of former practice. For some
centuries restraint of trade had been considered illegal in England,
but no contract was held to be contrary to law if it provided only a
_reasonable_ restraint--that is, if the restraint was merely minor and
subsidiary. The Sherman act was a Senate measure, was presented from
the Judiciary Committee and was passed precisely as drawn up by it. In
speaking from the Committee, both Edmunds and Hoar took the attitude
which the latter expressed as follows: "The great thing that this bill
does ... is to extend the common-law principles, which protected fair
competition ... in England, to international and interstate commerce in
the United States." Just how far the members of Congress who were not
on the Judiciary Committee of the Senate shared in this view or really
understood the bill can not be said. Indeed, many members of both
chambers absented themselves when the bill came to a vote.[4]

For a long time the Sherman Act like the Interstate Commerce Act was
singularly ineffective and futile. Trusts were nominally dissolved, but
the separate parts were conducted under a common and uniform policy by
the same board of managers. The Standard Oil Company changed its form
by selecting the Standard Oil Company of New Jersey as a "holding
corporation." Stock of the members of the combination was exchanged for
stock in the New Jersey organization, leaving control in the same hands
as before. The "same business was carried on in the same way but 'under
a new sign.'" The wide variety of conditions tolerated under the
corporation laws of the several states made confusion worse confounded.
In its early attempts to convict corporations of violation of the law,
the government was uniformly defeated.

In 1893 came the climax of futility. The American Sugar Refining
Company had purchased refineries in Philadelphia which enabled it to
control, with its other plants, ninety-eight per cent. of the refining
business in the country. The government asked the courts to cancel the
purchase on the ground that it was contrary to the Sherman law, and to
order the return of the properties to their former owners. The Supreme
Court declared that the mere purchase of sugar refineries was not an
act of interstate commerce and that it could not be said to restrain
such trade, and it refused to grant the request of the government.
Unhappily the prosecuting officers of the Attorney-General's office had
drawn up their case badly, making their complaint the purchase, not the
resulting restraint. No direct evidence was presented to show that
interstate commerce in sugar and the control of the sugar business and
of prices were the chief objects of the combination. To the public it
seemed that the corporations were impregnable, for even the United
States government could not control them.

BIBLIOGRAPHICAL NOTE

The early history of anti-trust agitation centers about Henry D. Lloyd.
His earliest article, "The Story of a Great Monopoly," is in _The
Atlantic Monthly_ (Mar., 1881); his classic account of trust abuses is
_Wealth against Commonwealth_ (1894); consult also C.A. Lloyd, _Henry
D. Lloyd_ (2 vols., 1912). Early and valuable articles in periodicals
are in _Political Science Quarterly_, 1888, pp. 78-98; 1889, pp.
296-319; W.Z. Ripley, _Trusts, Pools, and Corporations_ (rev. ed.,
1916), is useful; B.J. Hendrick, _Age of Big Business_ (1919), is
interesting and contains a bibliography. Ida M. Tarbell, _History of
the Standard Oil Company_ (2 vols., 1904), is carefully done and a
pioneer work. Other valuable accounts are: S.C.T. Dodd, _Trusts_
(1900), by a former Standard Oil attorney; Eliot Jones, _The Anthracite
Coal Combination in the United States_ (1914); J.W. Jenks, _Trust
Problem_ (1900), contains a summary of the economies of large scale
production; J.W. Jenks and W.E. Clark, _The Trust Problem_ (4th ed.,
1917), is scholarly and complete; J.D. Rockefeller, _Random
Reminiscences of Men and Events_ (1916), is a brief defence of the
Standard Oil Company; W.H. Taft, _Anti-Trust Act and the Supreme Court_
(1914), summarizes a few important decisions on the Sherman law. Edward
Bellamy, _Looking Backward_ (1888), describes an economic Utopia. Early
proposed anti-trust laws, together with the Congressional debates on
the subject are in _Senate Documents_, 57th Congress, 2nd session, vol.
14, No. 147 (Serial Number 4428). No complete historical study has yet
been made of the effects of industrial development, immediately after
the Civil War, on politics and the structure of American society.

* * * * *

[1] Charles M. Schwab mentions an unusual example. Under the direction
of Andrew Carnegie, the wealthy steel magnate, he had a new mill
erected, which seemed likely to meet all the demands which would be
placed upon it. But in the process of building it Schwab had seen a
single way in which it could be improved. Carnegie at once gave orders
to have the mill taken down before being used at all, and rebuilt on
the improved plan.

[2] It was not until 1894 that Lloyd published _Wealth Against
Commonwealth_, but his pen had been busy constantly between 1881 and
1894.

[3] Cf. above, pp. 89-93, on Fourteenth Amendment.

[4] The authorship of the Sherman law has often been a source of
controversy. Senator John Sherman, as well as other members, introduced
anti-trust bills in the Senate in 1888. Senator Sherman's proposal was
later referred to the Judiciary Committee, of which he was not a
member. The Committee thoroughly revised it. Senator Hoar, who was on
the Committee, thought he remembered having written it word for word as
it was adopted. Recent investigation seems to prove that the senator's
recollection was faulty and that Edmunds wrote most of it, while Hoar,
Ingalls and George wrote a section each and Evarts part of a sentence.
If this is the fact, it seems most nearly accurate to say that Sherman
started the enterprise and that almost every member of the Judiciary
committee, especially Edmunds, shared in its completion.

CHAPTER XII

DEMOCRATIC DEMORALIZATION

In view of the fact that Harrison had been successful in 1888 and that
Cleveland had been the most able Democratic leader since the Civil War,
it seemed natural that their parties should renominate them in 1892.
Yet the men at the oars in the Republican organization were far from
enthusiastic over their leader. It is probable that Harrison did not
like the role of dispenser of patronage and that he indicated the fact
in dealing with his party associates; at any rate, he estranged such
powerful leaders as Platt, Quay and Reed by his neglect of them in
disposing of appointments. The reformers were no better satisfied; much
had been expected of him because his party had taken so definite a
stand in 1888, and when his choice of subordinates failed to meet
expectations, the scorn of the Independents found forceful vent. Among
the rank and file of his party, Harrison had aroused respect but no
great enthusiasm.

The friends of Blaine were still numerous and active, and they wished
to see their favorite in the executive chair. Perhaps Blaine felt that
there would be some impropriety in his becoming an active candidate
against his chief, while remaining at his post as Secretary of State;
at any rate he notified the chairman of the National Republican
Committee, early in 1892, that he was not a candidate for the
nomination. The demand for him, nevertheless, continued and relations
between him and Harrison seem to have become strained. Senator Cullom,
writing nearly twenty years afterward, related a conversation which he
had had with Harrison at the time. In substance, according to the
senator, the President declared that he had been doing the work of the
Department of State himself for a year or more, and that Blaine had
given out reports of what was being done and had taken the credit
himself. Cullom's recollection seems to have been accurate, at least as
far as relations between the two men were concerned, for three days
before the meeting of the Republican nominating convention Blaine sent
a curt note to the President resigning his office without giving any
reason, and asking that his withdrawal take effect immediately. The
President's reply accepting the resignation was equally cool and
uninforming. If Blaine expected to take any steps to gain the
nomination, the available time was far too short. That the act would be
interpreted as hostile to the interests of Harrison, however, admitted
of no doubt, and it therefore seems probable that Blaine had changed
his mind at a late day and really hoped that the party might choose
him.[1]

Despite Blaine's apparent change of purpose, it seemed necessary to
renominate Harrison in order to avoid the appearance of discrediting
his administration, and on the first ballot Harrison received 535 votes
to Blaine's 183 and was nominated. The only approach to excitement was
over the currency plank in the platform. Western delegates demanded the
free coinage of silver, which the East opposed. The plank adopted
declared that

The Republican party demands the use of both gold and silver as
standard money, with such restrictions and under such provisions,
to be determined by legislation, as will secure the maintenance of
the parity of values of the two metals.

It was a meaningless compromise, but it seems to have satisfied both
sides.

Cleveland, during the Harrison administration, had been an object of
much interest and not a little speculation. After seeing President
Harrison safely installed in office, he went to New York city where he
engaged in the practice of law. He himself thought that he was retiring
permanently and not a few enemies were quite willing that this should
be the case. The eminent Democratic editor, Henry Watterson, remarked
that Cleveland in New York was like a stone thrown into a river, "There
is a 'plunk,' a splash, and then silence.". He was constantly invited,
nevertheless, to address public assemblies, which provided ample
opportunity for him to express his thoughts to the country. Moreover,
the McKinley Act of 1890 and the political reversal which followed
brought renewed attention to the tariff message of 1887 and to its
author. In February, 1891, Cleveland was asked to address a meeting of
New York business men which had been called by the Reform Club to
express opposition to the free coinage of silver. The question of the
increased use of silver as a circulating medium, as has been seen, was
a controverted one; neither party was prepared to take a definite
stand, and, indeed, division of opinion had taken place on sectional
rather than partisan lines. While the subject was in this unsettled
condition Cleveland received his invitation to the Reform Club, and was
urged by some of his advisors not to endanger his chances of
renomination by taking sides on the issue. The counsel had no more
effect than similar advice had produced in 1887 when the tariff was in
the same unsettled condition. Although unable to attend, Cleveland
wrote a letter in which he characterized the experiment of free coinage
as "dangerous and reckless." Whether right or wrong, he was definite;
people who could not understand the intricacies of currency standards
and the arguments of the experts understood exactly what Cleveland
meant. Little doubt now existed but that the name of the ex-president
would be a powerful one before the nominating convention, for he would
have the populous East with him on the currency issue--unless David B.
Hill should upset expectations.

Hill was an example of the shrewd politician. Like Platt, whom he
resembled in many ways, he was absorbed in the machinery and
organization of politics, rather than in issues and policies. Beginning
in 1870, when he was but twenty-seven years of age, he had held public
office almost continuously. In the state assembly, as Mayor of Elmira,
as Lieutenant-Governor with Cleveland and later as Governor, he
developed an unrivalled knowledge of New York as a political arena. In
1892 he was at the height of his power and the presidency seemed to be
within his grasp. The methods which he used were typical of the
man--the manipulation of the machinery of nomination.