Part three of my diary series on the history of supra-national corporations, a draft book I am working on that I am posting piece by piece as it is written. This diary covers chapter four of the manuscript, The Progressive Era, from the Grange movement to the end of World War One.
Part one of this series, if you missed it, can be seen here:
http://www.dailykos.com/...
Part two can be seen here:
http://www.dailykos.com/...
Part four will cover the Depression and the Second World War. It should be ready in a few days.
As usual, I welcome any helpful comments or criticisms.
(c) copyright 2010 by Lenny Flank, all rights reserved, blah blah blah.
Four: The Progressive Era
While the “captains of industry” lived in luxuriant wealth, at levels not seen since the Roman Emperors, the majority of Americans lived in grinding poverty.
The rise of the trust, therefore, was matched by a rise in popular discontent and opposition, eventually leading to a period of social reform that became known to history as the Progressive Era. Although the Progressive Era spawned a large number of grassroots political groups and alliances, the most important ones were the Grange, the Labor Unions, the Populist Party, and the Socialist Party.
The Grange
Until the Civil War, the United States had been an economy primarily based on subsistence farming, where small family farms raised enough food for themselves and a small surplus to trade for the manufactured items they could not make on their own.
The war changed all that. Many farms were abandoned as people moved to the cities. The farms that remained became more mechanized, as industrial growth produced farm machinery that allowed a single farmer to produce far more than he could before. Farm incomes grew steadily.
This improved standard of living had costs, though. Where before the farmer had been independent and virtually self-sufficient, now he became beset on all sides by the Robber Barons. In order to purchase the machinery that made his life better, the farmer had to obtain credit from the banks, and the bankers were no longer the neighborhood bankers of the past—now they were impersonal financial corporations that did their best to fleece the farmer for every dime of profit. Farmers also found themselves dealing with food marketers or food processing companies that were no longer small local operations, but big national corporations. They, too, squeezed every dime they could out of the farmers.
The farmer’s biggest grievance, however, was with the railroads. The increased output that mechanized farmers were now capable of producing required access to a larger market to absorb it, and it was the railroad networks that provided the only means for farmers to transport their produce to that market. The farmers were utterly dependent on them, and the railroads took full advantage. Most farming communities were served by short “spur lines” that connected them to the larger railroad arteries, and nearly all of these spur lines were built and run by single companies who therefore had total monopoly. Freight charges on these spur lines were often several times as high as on the longer lines. The farmers, who had no alternative way of getting their produce to market, had no choice but to pay whatever the railroads charged.
And to make matters worse, the rapid increase in output that mechanization made possible soon outran the purchasing power of the population. Large stocks of food went unsold, prices on agricultural products declined steadily, and those farmers whose living was already being squeezed by the railroads, the food processors and the banks, now also found their incomes dropping. For many, the pressure was too much; they either sold their farms and moved to the city, or they found themselves unable to pay their bank loans and were foreclosed. In one four-year span, over 11,000 farms were foreclosed in the state of Kansas alone.
In desperation, the farmers turned to political organization to fight back.
The Patrons of Husbandry, popularly known as the National Grange, was a society of farmers that was formed in 1867 by an employee of the US Department of Agriculture, Oliver H Kelly. Organized as a benevolent fraternity, its focus was on setting up local halls, or Granges, where farmers could gather for social events like dances, and educational programs like lectures, libraries and tutorial classes.
As discontent spread among the farming communities, however, the Granges began to serve as meeting places where farmers could discuss their mutual problems, and soon began to plan political action to do something about them. The Panic of 1873, which caused credit to crash and prices to plummet, swelled the ranks of the Grangers. In Iowa, Kansas, Wisconsin, Illinois and other parts of the Farm Belt, the Grange became a local political power. Nationwide, it swelled to over 750,000 members.
To the Robber Barons, the solution to the farming problems was simple: there were too many farmers producing too much food, and the resulting market glut was driving down prices; the only solution was fewer farms and less production.
The Grangers, though, reached a much more radical conclusion. To the rural farmers and their urban factory worker relatives, who lived in crushing poverty and hunger, the very idea of “overproduction” was absurd. How, the Grangers asked, could there possibly be “too much food” if people everywhere were still going hungry? As the Grangers saw it, the basic problem was not that there was more food than people needed; there was instead more food than people could buy, and that was solely the fault of the monopolist corporations who paid all their workers starvation wages. The corporations, after all, did not trade in food so starving people could eat—they traded in food so they could sell it and make profits, and if people could not afford to pay for it, they got no food, even if they were hungry and starving. The same situation, the Grangers realized, was also true of clothing, housing, and all the other necessities of life.
The program advocated by the Grange, therefore, was to use the government to break the power of the corporate monopolies (especially the railroads), and to cooperate with the labor union movement to raise wages and thus allow people to buy the food they needed and which the farmers could produce. Among the things advocated by the Grange movement were: anti-trust laws which would outlaw the monopolies; the legal regulation of railroad freight rates and eventually the nationalization of industries such as railroads, shipping, meatpacking, oil and telegraph; the right of workers to organize unions; state-run programs of unemployment insurance and old-age pensions; an end to child labor; and a heavily graduated income tax which would place the tax burden on the rich.
In 1875, due to political pressure from the grassroots farmer-worker alliance, Illinois passed the “Grange Laws”, which gave the state authority to regulate the rates that railroads charged for freight shipping. It was the height of the Grange movement’s power.
By 1875, the Grange political message had been taken up by larger groups like the Greenback Party and Populist Party, and the Grange movement faded back into its original role as a farmer’s fraternal society.
Labor Unions
By most measures, the industrial workers who flooded into American factories in the last years of the 19th century were even worse off than the farmers. They worked long hours; in 1865 the average workday was 12 hours. After much fighting and some bloodshed, this was reduced to an average of ten hours a day by 1880, and within a few years, workers were already organizing and fighting for an eight-hour workday. They worked in dangerous conditions; the corporations didn’t pay any attention to worker safety—to them it was an unnecessary expense since if a worker was injured or killed, they could just hire another cheap laborer as a replacement. By 1900, workplace injuries averaged over a million per year, and some 30,000 workers were killed on the job each year. And they were paid pitifully low wages; in 1890, the Census Bureau estimated that a subsistence income for a family of four was $530 a year—the average income for a working class family of four was just $380 a year.
Most states still had property requirements for voting, and, since few workers could meet the requirements, they found themselves disenfranchised. Even when property requirements were removed and the right to vote was granted to them, they found that the two major political parties, corrupted by the Robber Barons, paid little attention to them. The workers therefore had no choice but to turn to the only weapon they had available to them—the labor union.
The Knights of Labor
The first important labor union in the US was the Noble and Holy Order of the Knights of Labor. Formed in 1869 as a secret society akin to the Freemasons, the Knights’ goal was a cooperative society in which labor and the employers would work together as equal partners. Both workers and small business owners who supported its cooperative program were admitted as members. But the Knights also supported the fight of workers against owners who were not members of the Order, leading to conflict with the state, and vilification as “socialists” in the press. In 1881, the Knights of Labor emerged from underground and began to function more as a labor union, helping workers organize for higher wages, better work conditions, and more control by employees over their workplace. In 1884, the Knights won a strike against the Union Pacific Railroad. A year later, they took on Jay Gould’s Wabash Railroad, and Gould himself met with Knights leader Terence Powderly to negotiate a settlement. With these two victories, the Knights of Labor grew to 700,000 members by 1886.
After the Haymarket Riot, the labor movement experienced fierce repression. Unions themselves were outlawed as “conspiracies in restraint of free trade”. After the Knights lost a strike on the Missouri Pacific Railroad in 1886, internal dissensions added to its problems. The Knights of Labor practiced “industrial unionism”, in which all the workers in the factory, regardless of their trade or craft, were organized in the same union. The skilled craftsmen, however, often argued that they could do better on their own, if they negotiated with the boss separately from the larger mass of unskilled. After the loss at the Missouri Pacific, most of the skilled workers left the Knights for the newly-formed American Federation of Labor, which was organized around “craft unionism”, in which all the separate job descriptions in a workplace had their own union. By 1900, the Knights of Labor had fallen to just a handful of members, and most of those joined the Industrial Workers of the World when it formed in 1905.
The American Federation of Labor
The American Federation of Labor was formed in 1886. From the beginning, under the leadership of Samuel Gompers, its goal was “pure and simple unionism”, focused entirely on higher wages and better working conditions. When asked what organized labor wanted, Gompers replied simply, “More.”
The AFL was organized on craft lines, rather than on the Knights of Labor’s industrial organization. Craft unions would include, for instance, all the electricians in a factory, but not the assembly line workers or the machinists. In general, the AFL ignored the great mass of unskilled workers entirely, and focused on the educated and skilled workers—earning for itself the denigrating nickname “The Aristocracy of Labor”. Although the AFL waged a number of bitter unionization fights, they were essentially deeply conservative and saw labor and capital as partners who shared common interests, viewing the purpose of a union as merely the non-threatening role of asserting labor’s place in the partnership.
Industrial Workers of the World
The Industrial Workers of the World, or IWW (best-known by the nickname “The Wobblies”), was formed in 1905 by a merger of several independent industrial unions (including the Western Federation of Miners) and organizers from the Socialist Party.
Like the Knights of Labor, the IWW organized along industrial lines, where everyone in the factory was in the same union. Organizing industrially, the IWW argued, was the best way to prevent “union scabbing”, in which one craft union in a plant would go on strike only to have all the other craft unions cross the picket line for work, helping to break the strike. “An injury to one”, the IWW declared, “is an injury to all”. Unlike the AFL, which focused only on skilled trade workers (and therefore had only unionized 5% of the American work force in the previous 20 years), the IWW focused its efforts precisely on the huge number of unskilled workers that the “Aristocracy of Labor” wasn’t interested in.
In its goals, the IWW was fiercely, defiantly, radical. The Preamble to the IWW’s Constitution was an anthem of revolutionary fire: “The working class and the employing class have nothing in common. There can be no peace so long as hunger and want are found among the millions of workers while the employing class has all the good things of life. Between these two classes a struggle must go on, until the workers of the world organize as a class, take possession of the earth and the means of production, and abolish the wage system.”
The Wobblies matched their revolutionary words with revolutionary methods. They openly preached the tactic of sabotage—a word which meant to them not the destruction of machinery, but the deliberate planned use of organized actions that reduced and sabotaged the boss’s profits until he gave in to workers demands. In its ideology, the IWW was “syndicalist”—they advocated that the workers themselves should build organizations within the workplace that would be capable of eventually seizing the industries from the owners, allowing the workers to run the economy themselves for everyone’s benefit rather than for the profit of the capitalists. The IWW also preached the general strike, in which all the wage workers of a country would simply stop work, shutting down the entire economy until the bosses surrendered control to the syndicalist workers.
The IWW scared the hell out of everyone. The American Federation of Labor, which the Wobblies viewed as being their enemy just as the owners were, cooperated with the companies and the police to try to stamp out the IWW. The Robber Barons and the Federal Government, with the recent examples of the Paris Commune, the Great Railroad Uprising and the Bolshevik Revolution impressed on their minds, feared a similar radical upheaval in the US, and viewed the IWW as their deadliest enemy. When the US entered World War One, the Wobblies spoke out vehemently against the war, and the Federal Government promptly arrested the entire leadership for sedition. With the IWW crushed, the conservative and tame AFL remained as the only major union organization left in the US.
But the widespread undercurrent of anti-corporate unrest that had produced the militant labor movement still remained, and was still active in the political sphere. And soon, it was gaining success.
The Populist Party
By 1875, the Grange movement had produced a seething level of discontent at the grassroots level. The Grangers, however, never sought to organize themselves into a viable political party, and neither of the two major political parties, the Republicans and the Democrats, were willing to cross the Robber Baron corporations. The opportunity existed, therefore, for a third party to step into the gap, and one of the first of these was the Greenback Party.
One of the issues that the Grangers had rallied around was that of currency. US currency was based on precious metals, and all dollars could, in theory, be exchanged at any time for the equivalent of silver or gold. Legally, the proportion had been fixed at 16 ounces of silver for every ounce of gold. But in 1873, the government removed the coining of silver, and all currency was now redeemable only in gold. The Grangers advocated the resumption of coining silver, which would increase the money supply, deflate the value of each dollar, and allow the indebted farmers a way out by paying off their crippling debts with the devalued money.
The Greenback Party took this part of the Grange demands, modified it, and made it the centerpiece of their platform. Instead of demanding an increased money supply by coining more silver, the Greenbackers advocated removing the gold standard entirely, and issuing purely paper money backed only by government fiat, the greenback, the supply of which would be regulated by the government according to population and economic production levels, to keep its value stable. Such greenbacks had already been used during the Civil War to finance the government, but were withdrawn in 1865.
The Greenback Party also championed the Granger program of egalitarian redistribution of wealth, and in 1878 they merged with the National Labor Reform Party to form the Greenback-Labor Party. In the 1878 elections, the Greenback-Labor Party polled over a million votes and sent 15 members to Congress.
Within ten years, however, the Greenback-Labor Party was eclipsed by an even larger party that championed the cause of social egalitarianism—the People’s Party, more commonly known as the Populists.
The Populist Party grew out of the various progressivist groups that had formed in the Midwest among the farmers, and the labor movements in the East. These included the Grange movement, the Farmer’s Alliance, and the Knights of Labor. Although groups like the Grange had achieved some successes at the local level, neither the Republican or Democratic Parties paid any attention to the progressive agenda, leading the scattered local groups to combine, first as the Farmers and Laborers Union of America, and then, in 1892, as the People’s Party. Their program called for nationalization of the railroads (“the time has come when the railroad corporations will either own the people or the people must own the railroads”); a graduated income tax; a government-run banking system; full universal voting rights; the eight hour working day; the use of ballot initiatives and referendums; the direct popular election of Senators; the outlawing of any government subsidy to corporations; and the free minting of silver currency.
Drawing most of its support from the agricultural farming areas, the Populist Party grew quickly in the West, Midwest and South. In Kansas, they won control of the state legislature, which then elected the first Populist Senator. A coalition of Populists and Republicans won most of the seats in North Carolina and the election for Governor, and sent another Populist to the Senate.
By 1896, the Populist Party had become enough of a political force that the Democratic Party began to adopt some of its platform—which led to a split among the Populists, with one faction, the “fusionists”, wanting to merge with the Democrats to gain more influence with a major national party, and the other faction refusing to compromise the more militant parts of the Populist program and preferring to remain as a separate Party. The matter was brought to a head when the Democratic Party nominated William Jennings Bryan as its candidate. Bryan adopted the Populist program of freely-coined silver as his primary election issue; at his nominating convention, he gave an electrifying speech that climaxed with, “You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold.”
Although Bryan lost the 1896 election to William McKinley, the Democratic Party adopted most of the Populist program, and the People’s Party soon faded into obscurity.
The Socialist Party
The Socialist Party was the more radical rival of the Populist Party. While the Populists drew most of their support from rural farmers, the Socialist Party had its stronghold among industrial workers in the urban factories.
The first major socialist group in the US was the Socialist Labor Party, founded in 1877. In 1900, the SLP merged with the newer Social Democracy of America, founded by railroad union organizer Eugene V Debs, to form the Socialist Party of America.
The Socialist Party shared the anti-corporate and anti-capitalist program of the IWW—indeed, Debs himself was one of the co-founders of the IWW. Unlike the Wobblies, though, who focused on direct action in the workplace through radical trade unionism, the Socialist Party worked from within the electoral process, advocating a program of capturing the government to turn it towards socialism.
The Socialists were one of the most successful third parties in American politics. In many urban areas, Socialists dominated the local elections. Milwaukee, a strong union center, repeatedly elected a Socialist mayor. Many states had Socialists in their state legislatures, and two Socialists, from New York and Wisconsin, were elected to the US Congress. Eugene Debs ran for President on the Socialist ticket four times, polling as high as 6% of the popular vote. In 1920, Debs won almost a million votes despite the fact that he was in jail at the time.
After the US entered the First World War, Debs made a speech opposing the war, and the entire Party leadership was arrested for sedition.
The Labor Wars
It was not only the seething grassroots political discontent revealed by the rapid growth of the progressivist movement that began to alarm the corporate elite. They genuinely feared a massive social revolution that would overthrow the existing social order and take away their fortunes, their power, their privilege, and, perhaps, even their lives. It was this lingering fear that drove the schizophrenic government and corporate response to the progressivist movements—on the one hand trying to suppress it, and on the other hand trying to co-opt it.
The focus of all their fear had happened in 1871 in France, during the Franco-Prussian War. As the Prussian Army approached Paris and the French government had already capitulated, the people of Paris, most of them workers, took over the city government and declared the Paris Commune. They took over workplaces, confiscated property, and built a tiny socialist republic even as the city was under siege by the Prussians. In the end, the defeated French Army joined with the victorious Prussian Army to invade Paris and crush the Commune. Thousands of Communards were executed.
Six years later, it appeared that the Commune might happen again, in the United States. On July 14, 1877, the Baltimore and Ohio Railroad station in Martinsburg, West Virginia, cut its workers’ wages for the second time that year. This time, though, the workers exploded in revolt. They went on strike and refused to move any trains until the wage cut was revoked. At the railroad’s request, the Governor sent in state militia to force the strikers back to work. Instead, the militia refused to act, and the now-panicked railroads called for Federal troops. The strike, meanwhile traveled along the railroad lines from station to station, and quickly spread to Maryland. When the Governor there called out National Guard troops, they were attacked by workers from Baltimore as they marched out. In several days of combat, the strikers and their sympathizers burned part of the station, while troops shot and killed 10 strikers—leading railroad baron Thomas Scott to declare that all the strikers should given a “rifle diet for a few days”. On July 21, US Marines arrived to quell the revolt.
That same day, Thomas Scott got a taste of his own advice; when the strike reached Pittsburgh, the local law officers refused to fire on them. Scott frantically called for state militia, and in the pitched battle that followed, 20 strikers were shot or bayoneted to death. The strikers responded by barricading the troops in a guardhouse, then burning over 100 locomotives and over 1,000 rail cars. When the besieged troops fought their way out, another 20 strikers were killed. Street fighting went on for over a month until US Army troops arrived.
Army troops were also sent to Philadelphia, where striking workers had burned dozens of buildings and fought with state militia. In Reading, Pennsylvania, home of the Reading Railroad, strikers burned rail cars and bridges before the railroad brought in state militia troops; 16 people died when the troops, pelted by rocks and bottles, opened fire.
Still following the rail lines, the strike, now virtually an open insurrection, spread to Illinois. In East St Louis, Illinois, a strike committee took control of the town for almost a week. Striking workers seized and shut down railroad centers in Chicago, Urbana, Decatur, Bloomington and other cities; National Guard troops were called to restore order. Street fighting in Chicago between troops and strikers killed 18 people. That same day, Pennsylvania flared up again, when strikers in the town of Shamokin attacked the Reading Railroad depot there. Fourteen were killed.
The Great Railroad Uprising of 1877 lasted almost 45 days, ending only when President Rutherford B Hayes (after pleading “Can’t somebody do something for these workers?”) sent large numbers of Army troops all over the Northeast and Midwest. Terrified railroad barons and government officials blamed the uprising on socialists and Paris Commune supporters. Frantic steps were taken to fight the still-lingering threat of social revolution. National Guard units were quickly expanded; military armories were hastily built in every large town; state and local governments fell all over themselves to pass laws against socialists and labor unions.
On May 1, 1876, fears were re-ignited when 340,000 workers across the country walked off the job in a demonstration strike in support of the eight hour day. As part of this action, a group of anarchists called for a rally at Haymarket Square in Chicago on May 4. During the rally, the police showed up in force, and someone threw a bomb into their midst. The police responded by firing into the crowd. Dozens on both sides were killed and wounded. After Haymarket, repression of anarchists, socialists and union organizers reached fever pitch.
In 1892, a strike broke out at the Homestead Steel Mill in Pennsylvania, part of the Carnegie Steel corporation. When manager Henry Frick brought in a private army of armed Pinkerton guards, a firefight broke out, killing ten people.
While the Homestead Strike, violent as it was, was a specific action that was targeted against a particular plant for a limited purpose, the fear of a new Paris Commune or 1877 Uprising was never far from the minds of the social elite. And in 1894, a movement appeared that, for a time, brought terror to their hearts. In March 1894, a Populist in Ohio, Jacob Coxey, conceived the idea of an “Army of the Unemployed”, made up of people who had lost their jobs in the Financial Panic of 1873, that would march on Washington to demand jobs through Federal public-works projects. Coxey himself set out from Ohio with 100 unemployed men, gathering more on the way; other sections of “Coxey’s Army” were organized as far away as Butte and Spokane. One enterprising group of 500 unemployed railroad workers in Montana, led by William Hogan, stole an entire train from the Northern Pacific Railroad and tried to take it all the way to DC; they were finally stopped by Federal marshals. Of all the groups that set out, only Coxey’s 500 men actually reached Washington, and camped on the Mall in front of the Capitol. For a time, people in high places trembled; 1500 Federal troops had been assembled to deal with any “trouble”. Nothing happened, however, and Coxey’s “army” melted away when the leaders were arrested for “walking on the grass”.
A more serious threat than the “Army of the Unemployed” appeared later that year, when the Pullman Palace Railcar Company cut its employees’ wages. The plant was located in Pullman, Illinois, a “company town” in which the corporation owned the worker’s housing and collected rent from them, and also owned all the stores and supplies, where they charged inflated prices. Employees were particularly angered when Pullman Company not only cut the wages, but refused to reduce the rent they charged for company housing. A wildcat strike broke out. Many of the workers were members of the American Railway Union, headed by Eugene V Debs, and Debs immediately swung into action, calling for a boycott of Pullman cars by all the other workers. Within days, union workers everywhere were refusing to couple Pullman cars to their trains, and 125,000 workers had been fired for respecting the boycott. On June 29, a group of strikers in Blue Island, Illinois, set fire to some buildings and disabled a locomotive. As the boycott spread and the number of sympathy strikers grew, the railroad corporations, with memories of 1877 still fresh in their minds, panicked and called the government for help. The Federal government then named railroad lawyer Richard Olney as a Special US Attorney, and instructed him to obtain an injunction from a Federal judge to end the strike. Debs, in turn, ignored the injunction, and President Grover Cleveland, on the flimsy legal excuse that the strike was “interfering with the mail”, sent in 12,000 US Army troops. In the battles that followed, 13 strikers were killed. Debs was arrested and jailed for defying the injunction; while in jail, he became a socialist, and upon his release he became a leader of the Socialist Party and later a founder of the IWW.
Even the conservative AFL’s unions, however, were not immune to gunfire. On August 14, 1897, the anthracite coal mine operators on Luzerne County, Pennsylvania, cut wages and increased rents in their company housing. A few dozen young mule drivers struck, and group after group of workers followed them until 2000 workers were out, and all the mining operations had shut down. Most of the strikers joined the United Mine Workers, which not only called for a repeal of the wage cut, but demanded a 15% wage increase. On August 23, an agreement was reached, in which the company promised to raise wages to match the area average, to no longer require employees to live in company housing, and allow injured miners to see their own physicians rather than company doctors.
Two days later, workers at a nearby company also walked out. When the strikebreakers brought in by the company joined the strikers instead, and the strike then spread to two other mines, a wage agreement was reached, and that strike also ended. When a new wage structure was announced later that week, however, the companies had all reneged on the agreement, and 3,000 workers walked out en masse, shutting down four mines. Four days later, the strike had grown to 10,000 miners.
The coal companies went to the local authorities for help, and the Luzerne County Sheriff responded by posting notices banning “unlawful assemblies” and commissioning a force of 150 armed men. On September 10, a group of 400 unarmed strikers marched on a mine at nearby Lattimer, Pennsylvania, to support United Mine Workers members there. They were confronted by Sheriff Martin’s force of armed men, who opened fire, killing 19 miners. Local residents exploded in anger, at one point burning the house of a company superintendent. The Governor sent 2500 troops of the National Guard, including artillery, to pacify what had become a war zone. The troops remained for almost three weeks before withdrawing.
The worst nightmares of the super-rich, however, came to life in November 1917, when Vladimir Lenin’s Bolsheviks took power in Russia, confiscating property, removing owners, and turning factories over to elected workers councils. For the corporations, the Russian Revolution was the ultimate scare—and the ultimate scare story. For the next 100 years, the hated words “socialist” or “communist” became the worst epithet that any corporate apologist could hurl at an opponent.
The Trust-Busters
By the time of the 1896 election, figures in both the Democratic and Republican parties were advocating the same sort of reforms that the Grangers and the Populists were putting forth. For some, it was because they genuinely accepted that these reforms were needed to bring justice to people who had none. For others, it was pure political opportunism, to jump on the latest popular wave. But for many, it was the realization that, if meaningful reforms were not carried out, the grassroots movement would become increasingly more radical as it continued to become stronger. As jurist Louis Brandeis told an associate of JP Morgan, if the Robber Barons did not make peace with the populist reform program, the populists would be replaced by real anarchists and socialists—who were not at all interested in reform.
William Jennings Bryan, as the Democratic nominee, was the first major candidate to embrace the populist reforms. But Bryan lost to the Republican William McKinley. McKinley advocated a conservative program of increased trade tariffs to protect American corporations from any competition from British corporations, and passed two tariff increases in a short time. In September 1901, however, McKinley was assassinated by an anarchist, and Teddy Roosevelt took over as President.
Although Roosevelt had more sympathy for the populist reforms than McKinley had—conceding to Congress that the Robber Barons had produced “real and grave evils”—he had no plans to become an anti-corporate crusader. It was purely as a response to public pressure (fanned by the “muckrakers”—journalists who broke story after story about the abuses of power by the corporations and trusts) that Roosevelt agreed to file an anti-trust lawsuit, under the Sherman Anti-Trust Act, against JP Morgan’s Northern Securities Company, a railroad trust. Morgan arrogantly sent word to Roosevelt to “send your man to meet my man and they can fix it up”. Roosevelt was furious, declaring that “no private citizen is an equal to the United States Government”, and determined to teach the Robber Barons who really had the legal authority. Morgan appealed the case all the way to the Supreme Court, which, in a stunning reversal of its own earlier coddling of the corporations, now ruled against Morgan, bluntly accusing him of trying to “deprive the public of the advantages that flow from free competition” and ordering the trust to be broken up. The progressive and populist movements had won their point. The political winds had reversed direction.
After winning the 1904 election, Roosevelt set out to show the corporations who was boss. Preferring to impose tight Federal regulations onto the corporations rather than breaking them up, he passed a law giving the Interstate Commerce Commission authority to regulate the railroad’s shipping and freight charges. But he did continue to file antitrust lawsuits against the most blatant offenders, such as the Standard Oil Company and the American Tobacco Company. In all, Roosevelt broke up 44 different corporate trusts during his term in office, earning him the nickname “The Trust-Buster”.
When Roosevelt decided not to run for re-election, his protégé William Howard Taft won the 1908 election. Taft, a former prosecutor and judge, wasn’t all that devoted to the progressivist agenda, but he did have a deep belief in the inviolability of the law, and the law said that trusts were illegal. In the space of just four years, Taft filed twice as many antitrust lawsuits as Roosevelt had, including the biggest one of all—the one that broke up the US Steel Corporation.
But on most issues, Taft was actually more conservative and pro-business than Roosevelt had been. Taft first introduced a bill to lower the McKinley tariffs, then cut a deal with Congress that kept them high anyway, which angered the progressives enough that the Populist Senator Robert LaFollette began calling for someone to run against Taft at the Republican Convention. When Department of the Interior employee Gifford Pinchot, a prominent environmentalist, revealed that his boss Richard Ballinger was making secret deals with the timber companies, Taft responded by firing Pinchot, which angered the growing environmental movement (the Sierra Club had only recently been founded).
At the 1912 Republican Convention, Roosevelt, an ardent conservationist himself, challenged Taft for the nomination. When Taft won, Roosevelt bolted the party and declared his own candidacy under the newly-organized Progressive Party, popularly referred to as the Bull Moose Party. Roosevelt’s candidacy split the Republican vote, allowing Democrat Woodrow Wilson to win the election.
At this time in American history, the Republican Party was the liberal pro-change party, which had been formed on an anti-slavery platform; the Democratic Party, which dominated the South and had set up the Jim Crow segregation laws, was the conservative anti-reform party.
Wilson, however, was an oddity in the Democratic Party, a visionary with far-reaching views on freedom and equality, particularly in foreign relations. Although he had no particular interest in economic reforms, Wilson did recognize that, with war in Europe all but inevitable, the US Government needed to establish a system of control over the economic and financial system, to prevent problems from either labor unions or the corporations if the US found itself dragged into a European war. “I am for Big Business,” he remarked, “and I am against the trusts.” The stage was set for a major expansion of Federal control over the corporations.
Wilson’s first step was the most important. In 1913, he signed the Federal Reserve Act. At the time, the American banking system was a hodgepodge of over 12,000 independent banks, each setting its own interest rates even on loans made to each other. There was no established mechanism to do what JP Morgan had done by himself to avert the Panic of 1907—use other banks to bail out the ones that were in trouble, thereby preventing the collapse of one large bank from quickly dragging down the whole system. Noting that just two people—JP Morgan and Jay Gould—had controlled as much as 10% of America’s finances, Wilson declared “The control of this system of banking must be public, not private. It must belong to the government itself.” To stabilize the banking system, the Act set up 12 Federal Reserve Banks, through which all the other banks would receive and transfer money to each other. This flow of money would be directed by the Federal Reserve Board, appointed by the President, which had the authority to set the interest rates at which banks transferred money between themselves, and also had the ability to regulate the money supply, increasing or expanding it as needed. It was, in effect, the program of the Greenback Party.
Wilson’s next step was to check the power of the corporations and to impose a measure of Federal control over them, and this was accomplished by the 1914 Clayton Anti-Trust Act. In addition to restricting or eliminating some of the favorite monopoly tactics of the corporations, including interlocking directorates, using holding companies to control other corporations, requiring retailers to not handle a competing product, and eliminating competitors by selling below cost, the Act created the Federal Trade Commission to regulate companies that carried out interstate commerce. It also gave some protection to labor unions from injunctions, and specified that labor unions were not illegal restraints on free trade (the Sherman Anti-Trust Act had been used by judges to make labor unions illegal).
Wilson’s final step was to buy peace from the farm and labor movements, to prevent strikes or stoppages that might affect the upcoming war effort. The Federal Farm Loan Act set up 12 regional banks to make loans to farmer cooperatives. The Keating-Owen Act outlawed child labor (this act was shortly after declared unconstitutional by the Supreme Court). And the Adamson Act established the eight-hour workday for railway workers, pre-empting the unions who were already preparing for a crippling strike to reduce their working hours. By granting the eight hour day by law, Wilson wanted to avoid a stoppage on the rail system which would soon be needed for the military.
In addition, the Wilson Administration acted to lower the tariff rates, and made up for the lost revenue by imposing a Federal income tax.
World War
One of the effects of Wilson’s lowering of trade tariffs was to take the American economy, which had up till then had been focused largely inwards on the American domestic market and attempted to keep outsiders out, and to turn that economy outwards instead. Wilson hoped to engage the American economy with the rest of the world, and to strengthen economic ties with other nations. By economic as well as diplomatic methods, Wilson hoped that the world would be brought closer together.
His foreign policy echoed that visionary dream. Like a missionary, Wilson wanted to spread the gospel of democracy. And he wanted America’s economic interests abroad to reflect that democratic vision. He opposed a plan by American bankers to loan money to the Chinese government to build railroads, saying that it would inevitably lead to “forcible interference” by the US government if the Chinese defaulted. On the other hand, Wilson backed the American corporations who had financed the building of the Panama Canal and who were now investing in Central America; the Bryan-Chamorro Treaty of 1914, for instance, turned Nicaragua into a virtual American protectorate.
By this time, though, it was apparent that there would be war in Europe, and though Wilson hoped to keep the US neutral so it could play the role of peacemaker, he also laid plans to be ready if American involvement became inevitable.
Under American neutrality, trade with both Germany and Britain was allowed, and a particular concern of Wilson’s was the maintenance of free shipping rights for neutrals like the US. Both sides in the war had targeted civilian merchant shipping; the Germans were using submarines to torpedo cargo ships arriving at England, even those belonging to neutral countries. The British Navy, meanwhile, had imposed a total blockade on shipping to Germany, and was confiscating “war contraband”—which included even such things as food and cloth. Both sides were thereby violating international maritime law, and Wilson protested to both sides.
Legal or not, however, the British tactics were far more effective. It became virtually impossible for American companies to ship merchandise to Germany, and in any case, Britain had more American sympathy in the war (and closer commercial ties) than Germany did. As a result, American shipping to Germany fell to almost nothing, while trade with Britain skyrocketed from $825 million in 1914 to $3.2 billion in 1916. Britain became utterly dependent on shipments of American food and grain for its very survival. At the same time, the British “starvation blockade” was beginning to severely cripple the German war effort.
After Germany agreed in 1916 to stop torpedoing neutral ships, Wilson began to pressure the British to lift their blockade, and also began secret efforts, using shuttle diplomacy, to end the war. The effort failed, as both sides continued to believe that military victory was still possible.
By 1917, however, the Germans realized that they were in trouble. Their only hope of winning, they concluded, was an all-out effort to cut off all the shipping to England, thereby quickly starving the British into submission. The German admiralty therefore began once again practicing unrestricted submarine warfare in British waters. This action would, they knew, provoke the US into entering the war, but the Germans calculated that they could force the English to surrender before any large number of American forces could begin reaching the battlefields. They were wrong. As the Germans had expected, Wilson reluctantly declared war. Unexpectedly, the British countered the submarines and blocked the land offensive that the Germans hoped would win them the war.
The Americans mobilized for war. The entire American economy, including the corporations, was now managed by the government for war purposes. In July 1917, Wilson established the War Industries Board to coordinate all the economic planning that would be needed for the war effort. The WIB was given near-dictatorial powers over American corporations. Antitrust laws were temporarily suspended, and many corporations were ordered to work together to produce much-needed war supplies. Industrial output increased by 20 percent. Farmers also benefited greatly—the British were desperate for food supplies, and the WIB set prices on grain, beef, and sugar at very high levels to encourage American farms to produce as much as possible. Food exports increased from 12.3 million tons to 18.6 million tons, and farm income shot up by over 30 percent.
By 1918, the War Labor Policies Board was set up to regulate wages and prices. These were kept at levels that gave the corporations high profits and also kept wages high, to prevent unrest. Wilson worked closely with Gompers and the AFL, and established a National War Labor Board to mediate labor disputes and keep labor peace, preventing strikes that would have interrupted war production. Union membership increased sharply—the AFL grew by 2.3 million members as Wilson strong-armed companies into recognizing unions in order to avoid unrest and lost production.
To pay for the war, Wilson organized “Liberty Bonds” to be sold to the public. The income tax rate was adjusted to 75% on the wealthiest Americans; in addition, a 65% tax on “excess profits” was imposed on the corporations, and a 25% inheritance tax was passed. In all, the US spent about $35 billion on the war.
Wilson’s most controversial action during the war, however, was the passage of the Espionage and Sedition Acts, which made it a crime to criticize the war or to say or print anything that was, in the words of the law, “disloyal”. Written specifically to target the radical socialist movement, the laws had the intended effect. Thousands of IWWs, Socialists, Anarchists, and, after the 1917 Russian Revolution, Communists, were rounded up and arrested on the flimsiest of pretexts, and were jailed after unfair show trials. The IWW and Socialist Party were destroyed as organizations, and the militant labor movement no longer existed.
By 1918, then, thanks to Roosevelt, Taft and Wilson, much of the progressivist agenda advocated by the Grange and Populist third-party movement had at last gone into effect. The government’s laissez faire attitude had been reversed, reforms had been made, and the corporations, once given near-absolute license, were now subject to the control of the Federal government, which was now taking active steps to use the corporations for its own purposes. A grassroots anti-corporate campaign had, after long years, gained much of what it had set out to do—largely because the government and the corporations themselves feared the consequences if that agenda were ignored.