Chapter 19
The Corporate Economy and Progressive Politics,
1901-1916
I. Inaugurating an Era of Economic
Growth
A. Great merger movement ushered in a period of
sustained economic growth.
1. Gross national product and personal income rose substantially.
2. Major growth industries were steel, oil, and electricity.
-in 1901, a
group of industrial and financial magnates headed by Elbert Henry Gary 18461927,
American lawyer and industrialist, b. near Wheaton, Ill., grad. Union College
of Law, Chicago, 1868. Rising rapidly as a corporation lawyer, he became mayor
of Wheaton and served two terms as county judgeafterward
he was always known as Judge Gary,
-group also included J.P. Morgan (and Charles Schwab) together
they bought Andrew Carnegie's steel company and combined it with their holdings
in the Federal Steel Company. These two companies became the nucleus of U. S.
Steel, which also included American Steel & Wire Co., National Tube
Company, American Tin Plate Co., American Steel Hoop Co., and American Sheet
Steel Co. Capitalized at 1.4 billion, it was the first billion dollar business.
-Garys
organization of the American Steel and Wire Company prepared the way for J.
Pierpont Morgan to entrust him with the organization of the Federal Steel
Company in 1898 and in 1901 with the organization of the U.S. Steel Corp. As
chairman of the board of directors, Gary was the dominant personality in the
corporation until his death. He closely directed its physical expansion and
aided in founding the steel town, Gary, Ind. (named for him). He adopted a
policy of management cooperation in the industry, and out of his noted Gary dinners, where policy was discussed and informal
agreements were reached, grew the American Iron and Steel Institute. In 1919
the Supreme Court ended the efforts of the U.S. government to dissolve the
corporation as a monopoly. Gary believed in high wages, promoted welfare and
safety measures for employees, and introduced a scheme of employee stock ownership.
He was, however, adamantly opposed to recognizing labor unions and insisted on
the open shop. This policy and the notoriously long hours in the steel industry
helped to bring on the bitter steel strike of 1919. It failed, but Gary later,
under pressure of public opinion, shortened the working hours.
-In the decades that followed, the corporation consolidated its various
steelmaking and raw material subsidiaries through a series of reorganizations.
In 1982 it acquired Marathon Oil Company; in 1986 it acquired Texas Oil &
Gas Corp and later that year changed its name to USX Corporation.
- in the wave of business mergers that followed the
reconstruction, rise of national markets, and 1890s depression, over 3000
manufacturing companies consolidated into a few hundred corporations such as General Electric, US Rubber, American Can
Company, and dominated entire
industries.
- General Electric and US Rubber Company were in fact slightly earlier
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IN
1876 Thomas Alva Edison opened a laboratory in Menlo Park, New Jersey, where
he could explore the possibilities of the dynamo and other electrical devices
that he had seen in the Philadelphia Centennial Exposition. Out of the
laboratory experiments arrived the incandescent electric lamp. By 1890,
Edison had organized his various businesses into the Edison General Electric
Company. Another firm, the Thomson-Houston Company led by Charles A. Coffin,
a former shoe manufacturer from Lynn, Massachusetts competed with Edison in
the electrical business. Successive mergers and cumulative patent rights
owned by each company put them into a dominant position in the electrical
industry. However, as both businesses expanded, it had become increasingly
difficult for either company to produce complete electrical installations
relying solely on their own technology. In 1892, these two major companies
combined to form the General Electric Company. Corporations that survived expanded and
contracted, usually went through waves of mergers and then returned to core
competencies. Several of Edison's early business offerings are in fact still
part of GE today, including lighting, transportation, industrial products,
power transmission and medical equipment. Appliances' first electric fans
were produced at the Ft. Wayne electric Works as early as the 1890s; while, a
full line of heating and cooking devices were developed in 1907. GE Aircraft
Engines, began in 1917 when the U.S. government began its search for a
company to develop the first airplane engine "booster" for the
fledgling U.S. aviation industry. Thomas Edison's experiments with plastics
filaments for light bulbs in 1893 led to GE's first Plastics department,
created in 1930. GE Capital also traces its beginnings to the 1930s
organized to help consumers purchase GE appliances during the Depression. |
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U.S.
Rubber [Colt Family Papers Business Records,
held at University of Rhode Island. U.S. Rubber Company] (now UNIROYAL)
emerged from the small bankrupt National Rubber Company in Bristol, Rhode
Island to become a major industrial power in less than fifteen years under
the leadership of Samuel P. Colt. In 1887,
Colt was appointed receiver for the bankrupt National Rubber Company of
Bristol which manufactured a variety of rubber goods, including rubber boots and
shoes. Within a year he had succeeded in getting the company out of debt and
reorganizing it as the National India Rubber Company. The newly organized
company concentrated on the manufacture of rubber boots and shoes, then a
highly competitive industry. Colt gradually acquired a controlling interest
in a number of smaller companies and in 1892 merged his holdings with the
then fledgling U.S. Rubber Company. This conglomerate became the largest
manufacturer of rubber goods in the world. By the
turn of the century, U.S. Rubber had over forty subsidiaries. Colt served as
president from1901 until 1918, when he was bumped upstairs as Chairman of the
Board of Trustees. During Colt's tenure as president, the company continued
to expand its markets and sought to
gain control of the crude rubber supplies as well by acquiring rubber
plantations in the Amazon and in Mexico. American
Can Company
Incorporated on March 19, 1901,
under the laws of New Jersey as a consolidation of sixty-five companies
located throughout the United States, engaged in the manufacture of tin cans
and boxes, used for packing vegetables and other food commodities. In March,
1908, the company acquired an interest in the Sanitary Can Company. In
December 1908, the company, in conjunction with the Goldschmidt of Essen,
Germany, incorporated the Goldschmidt Detinning Company and erected a plant
for de-tinning scrap. By 1920 ACC operated plants in 38 cities throughout the
United States. common
to all these corporations was the belief that economies of scale would enable
businesses to reduce production and marketing costs -centralized management in these
conglomerates would make capital investment more efficient. |
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3. First multinational manufacturing corporations appeared.
-investments in manufacturing jumped from $8 billion in 1899 to nearly
21 billion at the beginning of WWI.
-GDP rose six percent per year in this period and national income surged
by over 30 percent
4. Concentration of banking industries controlled large segment of the economy.
-They were led by Morgan and Rockefeller interests But where had these
fellows made their money?
John Pierpont Morgan, the son of a successful financier,
was born on 17th April, 1837. Educated in Boston and Germany, he trained as an
accountant at the New York banking firm of Duncan, Sherman and Company. In
1867, Morgan transferred to his father's banking company and ten years later
became a partner in Drexel, Morgan and Company, reorganized as J. P. Morgan and
Company in 1895, making it one of the most important banking houses in the
world. In 1891 Morgan arranged the merger of Edison General Electric and
Thompson-Houson Electric Company to form General Electric, which then became
the country's main electrical-equipment manufacturing company. After financing
the creation of the Federal Steel Company he joined with Henry Frick to merge it withCarnegie Steel
Company to form the United States Steel Corporation. Morgan had good links with
the London financial world and was able to arrange the capital for growing
industrial corporations in the United States with money from British bankers.
This enabled Morgan to become a member of the board of directors in several of
these companies including most of the major railroad companies. By 1902 Morgan
controlled over 5,000 miles (8,000 km) of American railroads. In his final
years before his 1913 death Morgan concentrated on gaining control of various
banks and insurance companies. This in turn gave him influence over most of the
nation's main corporations.
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John
Davison Rockefeller
(July 8, 1839 - May 23, 1937) was the guiding force behind the creation and
development of the Standard Oil Company, which grew to dominate the oil
industry and became one of the first big trusts in the United States, thus
engendering much controversy and opposition regarding its business practices
and form of organization. Rockefeller also was one of the first major
philanthropists in the U.S., establishing several important foundations and
donating a total of $540 million to charitable purposes.
Born on farm at Richford, in Tioga
County, New York, on July 8, 1839, the second of the six children of William A.
and Eliza (Davison) Rockefeller. The family lived in modest circumstances. When
he was a boy, the family moved to Moravia and later to Owego, New York, before
going west to Ohio in 1853. The Rockefellers moved to Strongsville, near
Cleveland and Rockefeller left high school in 1855 to take a business course at
Folsom Mercantile College. He completed the six-month course in three months
and, after looking for a job for six weeks, was employed as assistant
bookkeeper by Hewitt & Tuttle, a small firm of commission merchants and
produce shippers. Rockefeller was not paid until after he had worked there
three months, when Hewitt gave him $50 ($3.57 a week) and told him that his
salary was being increased to $25 a month. A few months later he became the
cashier and bookkeeper.
In 1859, with $1,000 he had saved
and another $1,000 borrowed from his father, Rockefeller formed a partnership
in the commission business with another young man, Maurice B. Clark. In that
same year the first oil well was drilled at Titusville in western Pennsylvania,
giving rise to the petroleum industry. Cleveland soon became a major refining
center of the booming new industry, and in 1863 Rockefeller and Clark entered
the oil business as refiners. Together with a new partner, Samuel Andrews, who
had some refining experience, they built and operated an oil refinery under the
company name of Andrews, Clark & Co. The firm also continued in the
commission business but in 1865 the partners, now five in number, disagreed
about the management of their business affairs and decided to sell the refinery
to whoever amongst them bid the highest. Rockefeller bought it for $72,500,
sold out his other interests and, with Andrews, formed Rockefeller &
Andrews.
THE STANDARD OIL COMPANY
Rockefellers stake
in the oil industry increased as the industry itself expanded, spurred by the
rapidly spreading use of kerosene for lighting. In 1870 he organized The
Standard Oil Company along with his brother William, Andrews, Henry M. Flagler,
S.V. Harkness, and others. It had a capital of $1 million.
By 1872 Standard Oil had purchased
and thus controlled nearly all the refining firms in Cleveland, plus two
refineries in the New York City area. Before long the company was refining
29,000 barrels of crude oil a day and had its own cooper shop manufacturing
wooden barrels. The company also had storage tanks with a capacity of several
hundred thousand barrels of oil, warehouses for refined oil, and plants for the
manufacture of paints and glue.
Standard prospered and, in 1882, all
its properties were merged in the Standard Oil Trust, which was in effect one
great company. It had an initial capital of $70 million. There were originally
forty-two certificate holders, or owners, in the trust.
After ten years the trust was
dissolved by a court decision in Ohio. The companies that had made up the trust
later joined in the formation of the Standard Oil Company (New Jersey), since
New Jersey had adopted a law that permitted a parent company to own the stock
of other companies. It is estimated that Standard Oil owned three-fourths of
the petroleum business in the U.S. in the 1890s.
In addition to being the head of
Standard, Rockefeller owned iron mines and timberland and invested in numerous
companies in manufacturing, transportation, and other industries. Although he
held the title of president of Standard Oil until 1911, Rockefeller retired
from active leadership of the company in 1896. In 1911 the U.S. Supreme Court
found the Standard Oil trust to be in violation of the anti-trust laws and ordered
the dissolution of the parent New Jersey corporation. The thirty-eight
companies which it then controlled were separated into individual firms. In his
biography, Study in Power, John D. Rockefeller, Industrialist and
Philanthropist, the historian Allan Nevins reports that Rockefeller at that
time owned 244,500 of the companys total of 983,383 outstanding
shares.
-He
died in 1937, age 97, and was buried in Cleveland.
PHILANTHROPY
Rockefeller was 57 years old in 1896
when he decided that others should take over the day-to-day leadership of
Standard Oil. He now focused his efforts on philanthropy with the help of
expert advisers. Support of religious institutions and African-American
education remained among his foremost philanthropic interests throughout his
life and he participated in the founding of the University of Chicago giving
$600,000 of the first $1 million for endowment, provided the remaining $400,000
was pledged by others within 90 days. Thus begun, the University of Chicago was
incorporated in 1890, and over the next twenty years Rockefeller contributed to
help build up the institution, always on condition that others should join in
its support. In 1910 he made a farewell gift of $10 million, which brought his
total contributions to the university to about $35 million.Rockefeller
recognized the difficulties of wisely applying great funds to human welfare,
and he helped to define the method of scientific, efficient, corporate
philanthropy.
In 1901 he founded the Rockefeller
Institute for Medical Research (now The Rockefeller University) for the
purpose of discovering the causes, manner of prevention, and the cure of
disease. From its laboratories have come cures for diseases, and new knowledge
and scientific techniques which have helped to revolutionize medicine, biology,
biochemistry, biophysics and other scientific disciplines. A few of the noted
achievements of its scientists are the serum treatment of spinal meningitis and
of pneumonia; knowledge of the cause and manner of infection in infantile
paralysis; the nature of the virus causing epidemic influenza; blood vessel
surgery; a treatment for African sleeping sickness; the first demonstration of
the preservation of whole blood for subsequent transfusion; the first
demonstration of how nerve cells flow from the brain to other areas of the
body; the discovery that a virus can cause cancer in fowl; peptide synthesis;
and identification of DNA as the crucial genetic material.
In 1913 Rockefeller established The
Rockefeller Foundation (RF) to "promote the well-being of mankind
throughout the world." In keeping with this broad commitment, the
Foundation through the years has given important assistance to public health,
medical education, increasing food production, scientific advancement, social
research, the arts, and other fields all over the world.
The Foundations International Health Division expanded the work of
the Sanitary Commission worldwide, working against various diseases in fifty-two
countries on six continents and twenty-nine islands, bringing international
recognition of the need for public health and environmental sanitation. Its
early field research on hookworm, malaria and yellow fever provided the basic
techniques to control these diseases and established the pattern of modern
public health services. Th RF built and endowed the world's first School of
Hygiene and Public Health, at The Johns Hopkins University, and then spent over
$25 million in developing public health schools in the U.S. and in twenty-one
foreign countries. Its agricultural development program in Mexico led to what
has been called the Green Revolution in the advancement of food production
around the world; and the RF provided significant funding for the International
Rice Research Institute in the Philippines. Thousands of scientists and
scholars from all over the world have received RF fellowships and scholarships
for advanced study. The foundation helped to found the Social Science Research
Council and has provided significant support for such organizations as the
National Bureau of Economic Research, the Brookings Institution, the Council on
Foreign Relations, and Russian Institute at Columbia University. In the arts
the RF has helped establish or support the Stratford Shakespearean Festival in
Ontario, Canada, and the American Shakespeare Festival in Stratford,
Connecticut; Arena Stage in Washington, D.C.; Karamu House in Cleveland; and
Lincoln Center for the Performing Arts in New York.
Other Philanthropic SupportIn addition to establishing corporate structures Rockefeller continued to make personal donations.
Among others whose activities received his financial support were various
colleges and universities, including Yale, Harvard, Columbia, Brown, Spelman,
Bryn Mawr, Wellesley, and Vassar; theological schools; the Palisades Interstate
Park Commission; San Francisco Earthquake victims; the Anti-Saloon League;
Rockefeller Park and other parks in Cleveland; Baptist missionary organizations;
and various YMCAs and YWCAs.
Criticism of the New Industrialism.
-a congressional committee in 1913
reported that four financial groups dominated over 100 railroads, banks and
insurance companies and utilities valued at over 22 billion. (Zinns peoples
history notes six)
- 70 individuals held fortunes worth
at least $35 million or over 6 percent of the nations wealth.
5. The emphasis on efficient
investment and management stimulated a demand for educated, executives, who had
broader skills then engineering. First business courses appeared at colleges to
train managers and executives.
-Harvard Universitys School of
Business offered first MBA in 1908 with a new science of business courses
in corporate finance, account, marketing...
B. Boom for farmers began at the
turn of the century.
-growing populations and expanding
markets foreign and domestic
1.
Prices rose dramatically, as did the value of farm land and farm income for the
first time in two decades:
-wheat jumped from 63 cents in 1901
to nearly a dollar in 1909
-cotton from 7 to 10 cents a pound
-exports from 10 to 16 million bales
between 1900 and 1914
-farm property values doubled
2.
Because of rapid urban growth, though, farmers could not meet demand.
-although 2 of every 5 workers in US
earned a living on the land, economists worried about declining rural
populations and drops in productivity.
3.
U.S. began importing dietary staples for very first time.
-meat and grain
4.
Quest for greater efficiency and rationality in farming.
-to off-set rural depopulation and
declining productivity, Roosevelt appointed a Commission on Country Life, which
recommended rural public health programs, road building, and parcel post service.
5.
Smith-Lever Act (1914) provided county agents to instruct farmers on
newest methods.
-President Woodrow Wilson declared
it one of the most important and far-reaching measures for the education of
adults ever adopted by Government.
-Also referred to as Cooperative
Extension Act, it was designed as a partnership of the U.S. Department of
Agriculture and the land-grant universities, which were authorized by the
Federal Morrill Acts of 1862 and 1890.
-The Act was Census Driven it
granted allotments under the act annually to reflect the rural population
within the state as a percentage of the nations total.
-The goals of the act were clearly
articulated in Section 1 and 2 the dispersing of funds dealt with in latter
sections.
SEC.1. Was to provide necessary
appropriations In order to aid in diffusing among
the people of the United States useful and practical information on subjects
relating to agriculture, home economics, and rural energy, and to encourage the
application same... and the Mechanic arts. A. SEC.2. Cooperative agricultural extension
work shall consist of the development of practical applications of research
knowledge and giving of instruction and practical demonstrations of existing or
improved practices or technologies in agriculture, home economics, and rural
energy, and subjects relating thereto to persons not attending or resident in
said colleges in the several communities, and imparting information on said
subjects through demonstrations, publications, and otherwise and for the
necessary printing and distribution of information in connection with the
foregoing; and this work shall be carried on in such manner as may be mutually
agreed upon by the Secretary of Agriculture and the State agricultural college
or colleges or Territory or possession receiving the benefits of this Act.
-project aroused criticism and
failed to improve farm productivity. But they have proceeded on with it
although with major modifications
C. A Third way in which 1900s Inaugurated
an era of Economic Growth Widespread availability of the
automobile changed all aspects of U.S. society.
1.
Linked farms with cities; ended farm isolation.
2.
Michigan farm boy Henry Ford made autos available to the masses.
-1908, 20 million horses, 200,000
cars
-1912 same number horses, nearly a
million cars
1915 2.33 million; 1920, 8.1; 1925,
17.4; 1930, 23.1
3.
Basic machine; no frills; low cost to reach widest possible market.
- model N sold for $600 in 1906;
Model T by 1909 had over 10,00 cars at 850 a piece.
4.
Widespread auto ownership forced government regulations to ensure order. deaths
-New York introduced the first speed
law in 1901 limits varied from 6 to 20 mph
-New York also pioneered auto
registration
-Chicago established first driver
testing 18 question hurdle focussed on auto mechanics and
driver responsibility
5.
Federal Highway Act in 1916 committed funding for road construction. (75
million road building program).
D. Ford innovations in production
transformed industrial manufacturing.
Ford Plant Detroit
Principles of Mass Production.
1.
Standardization, interchangeable parts, moving assembly line facilitated
production.
-complicated
machine tools with low tolerance of error, reduced the need for skilled labour
to make last minute adjustments to individual parts.
-by 1906 could
deliver 100 cars per day.
2.
Time and motion studies eliminated wasted time and speeded up the job.
Frederick
Taylor transferred scientific management from steel industry and applied it at
Ford.
-1910 Highland
Park, Michigan continuous assembly line pulled
and lifted parts
-one man employed
a single part, old system 28 men laboured 9 hours a day to assemble 175
pistons; now 7 men worked 8 hours a day to produce 2,600
3.
High absentee and turnover rates posed problems for factory efficiency.
-after the
introduction of the model T the
company went in five years from 450 to 14 000 workers.
- to keep
14,000 force working they had hire an extra 1,400 a day 56,000 a year
-turnovers
cost nearly 2 million a year on top.
Principles of Mass Management
4.
Ford instituted $5 per day pay rate for selected employees in 1914 as solution.
a.
Employees' private lives carefully scrutinized before they could participate.
b.
No women were allowed, because they didn't head households.
c.
Male immigrants had to prove they were married; native-born men didn't.
d.
Immigrants also had to agree to work toward becoming "Americanized."
5.
Dramatic effect: turnover declined from 400 percent in 1913 to 16 percent in
1915.
E. Factory supervision required
elaborate clerical labor force on numerous levels.
1.
Rapid rise in number of office workers.
-in this way
US clerical force shot up from 708,00 in 1900 to 1.524 in 1910 to 2.838 million
in 1920.
2.
Women increasingly supervised by male managers.
3.
Marriage usually meant end of a woman's work life.
4.
Single women workers increasingly clustered in typing pools and low-ranking
jobs.
-technology did not make lives
necessarily easier for women, for domestic workers, the introduction of
electric vacuum cleaners and other appliances raised standards of cleanliness
yet made no reduction in the work day.
F. Workers faced all sorts of problems
in the modern market place.
The Grievances of Labour
1.
Study in 1906 set $600 as minimum annual income for subsistence.
2.
Non-farm income at $508 per year for a 59 hour work week; farm income at $255;
teachers (mostly women) at $337.
3.
Cost of living increased 20 percent between 1900 and 1910.
4.
Dangerous working conditions; no compensation for injuries, illness, or death.
-Triangle Shirtwaist Company in
March 1911 nearly 150 perished in fire
go to source:
(www.ilr.cornell.edu/trianglefire/)
-job related deaths approached
20,000 in per year.
5.
Child labour was real problem, though Progressives pushed for restrictions.
-average age of children 13,
although 2 million between 10-15 were employed and 1/5 th of nations young
earned their own living in 1913.
6. Muller v. Oregon (1908)
Background.
-One main goal of the Progressive movement was to
ameliorate the worst aspects of industrialization -- fouling of the
environment, abuse of workers, exploitation of consumers and corruption of the
political process. Starting in the state legislatures, reformers passed a
variety of statutes, including factory safety laws, workmen's compensation,
minimum wages and maximum hours.
- A 1905 case of Lochner v. New
York, a bare majority of the Supreme Court had ruled that a law limiting
bakery workers to a ten-hour day was unconstitutional, because such a measure
bore no relation to the workers' health or safety. The Court conceded, however,
that such measures might be permissible if it could be shown that the law did
in fact serve to protect health or safety.
-When the state of Oregon
established a ten-hour workday for women in laundries and factories, business
owners attacked it on the grounds that, like the New York law, it bore no
relation to the women's health or safety. To defend the law, Oregon turned to
the noted Boston attorney Louis D. Brandeis, who had already won a reputation
for defending the public interest. Brandeis seized upon the opening in Lochner,
namely, that if he could show how the Oregon law related to worker health and
safety, then the Court would have to sustain it. He devised a highly unusual
brief. He covered the traditional legal precedents in just two pages, and then filled
over 100 pages with sociological, economic and physiological data on the effect
of long working hours on the health of women.
-Justice Brewer's opinion not only
acknowledged the brief, a highly unusual step, but conceded that women were in
fact different from men, and thus needed this type of factory protection.
Brandeis's strategy had worked, but it was a strategy for the times; he himself
did not consider women inferior or subservient to men.
The most important result of the
Brandeis brief and of the decision in this case is that it set the model for
all future reformers attempting to use the law to affect social and political
conditions. Muller democratized the law, in that it made it more open to the
everyday facts of life; it called upon justices to take into account the effect
of their decisions on the real world and on the lives of real people.
For further reading: Philippa Strum,
Louis D. Brandeis: Justice for the People (1984); Alpheus T. Mason, "The
Case of the Overworked Laundress," in Quarrels That Have Shaped the
Constitution (1975).
MULLER V. OREGON (1908)
Justice Brewer delivered the opinion of the
Court.
We held in Lochner v. New York (1905) that a
law providing that no laborer shall be required or permitted to work in a
bakery more than sixty hours in a week or ten hours in a day was not as to men
a legitimate exercise of the police power of the State, but an unreasonable,
unnecessary and arbitrary interference with the right and liberty of the
individual to contract in relation to his labor, and as such was in conflict
with, and void under, the Federal Constitution. That decision is invoked by
plaintiff in error as decisive of the question before us. But this assumes that
the difference between the sexes does not justify a different rule respecting a
restriction of the hours of labor.
In patent cases counsel are apt to open the
argument with a discussion of the state of the art. It may not be amiss, in the
present case, before examining the constitutional question, to notice the
course of legislation as well as expressions of opinion from other than
judicial sources. In the brief filed by Mr. Louis D. Brandeis, for the
defendant in error, is a very copious collection of all these matters...
The legislation and opinions referred to... may
not be, technically speaking, authorities, and in them is little or no
discussion of the constitutional question presented to us for determination,
yet they are significant of a widespread belief that woman's physical structure,
and the functions she performs in consequence thereof, justify special
legislation restricting or qualifying the conditions under which she should be
permitted to toil. Constitutional questions, it is true, are not settled by
even a consensus of present public opinion, for it is the peculiar value of a
written constitution that it places in unchanging form limitations upon
legislative action, and thus gives a permanence and stability to popular
government which otherwise would be lacking. At the same time, when a question
of fact is debated and debatable, and the extent to which a special
constitutional limitation goes is affected by the truth in respect to that
fact, a widespread and long continued belief concerning it is worthy of
consideration. We take judicial cognizance of all matters of general knowledge.
It is undoubtedly true, as more than once
declared by this court, that the general right to contract in relation to one's
business is part of the liberty of the individual, protected by the Fourteenth
Amendment to the Federal Constitution; yet it is equally well settled that this
liberty is not absolute and extending to all contracts, and that a State may,
without conflicting with the provisions of the Fourteenth Amendment, restrict
in many respects the individual's power of contract...
That woman's physical structure and the
performance of maternal functions place her at a disadvantage in the struggle
for subsistence is obvious. This is especially true when the burdens of
motherhood are upon her. Even when they are not, by abundant testimony of the
medical fraternity continuance for a long time on her feet at work, repeating
this from day to day, tends to injurious effects upon the body, and as healthy
mothers are essential to vigorous offspring, the physical well-being of woman
becomes an object of public interest and care in order to preserve the strength
and vigor of the race...
The two sexes differ in structure of body, in
the functions to be performed by each, in the amount of physical strength, in
the capacity for long-continued labor, particularly when done standing, the
influence of vigorous health upon the future well-being of the race, the
self-reliance which enables one to assert full rights, and in the capacity to
maintain the struggle for subsistence. This difference justifies a difference
in legislation and upholds that which is designed to compensate for some of the
burdens which rest upon her...
For these reasons, and without questioning in
any respect the decision in Lochner v. New York, we are of the opinion that it
cannot be adjudged that the act in question is in conflict with the Federal
Constitution, so far as it respects the work of a female in a laundry.
Source: 208 U.S. 412 (1908).
G. Workers increasingly joined unions to protect
their economic position.
-went from 800,000 in 1900 to over 2
million in 1910, comprised over 12 percent of labour force
1. American Federation of Labour focussed
on wages, hours, working conditions.
-Samuel Gompers only accepted labour
involvement in politics (somewhat) in 1906 when he began endorsing pro-labour
candidates, still rebuffed socialists, opposed foreign immigration, rejected
Asian American union membership Japanese-Mexican Labor Ass (1903) was a
case in point.
2.
Ignored unskilled workers, who had to form their own organizations.
3.
Industrial Workers of the World took radical approach, including
violence. direct action tactics, sabotage,
seizing company property.
-1912 Lawrence Massachusetts strike, muti-ethnic
textile strike,
-18,000 silkworkers strike at
Patterson, New Jersey. radical theatre supported, but the
workers lost the strike.
Ludlow Massacre 1913-1914, Rockefeller
interests at a Coal Mine challenged in southern Colorado, strike for shorter
hours and safer working conditions, turned ugly and evicted from company
housing, built tents, National Guard sent in by Governor of Colorado, troops
attacked the tent settlements and killed numerous residents including 11
children company won the strike.
4.
National Association of Manufacturers launched open shop campaign
against unions.
5.
Court injunctions often declared strikes to be violations of Sherman Anti-Trust
Act (1890) - restraint of trade
-courts accepted this argument,
ended over 700 strikes by injunctions in the first two decades of the century.
-by 1911, 25 states had adopted
mediation agencies although their powers remained limited. Paul Craven in
Canada W.L.M. King.
6. Employers resorted to blacklists,
yellow dog contracts, and spies to break unions.
-forced workers to disavow unions.
II. The Rise of
Progressive Politics
A. Rise of great business trusts generated
public dismay and opposition.
-A KC paper noted that Trusts and
the monopolies ... find their opportunities in the necessities of the people
1. Some embraced socialism as
solution.
- Eugene V. Debs, formed the Socialist
Party of America in 1901
-Debs attracted diverse support,
German American municipal reformers in Milwaukee, Jewish Garment workers on the
Lower East Side, Ex-Populists in Texas and Oklahoma, miners, loggers, immigrant
workers, intellectuals like Jack London.
-Debs, 100,000 votes for president
in 1900; 400,000 in 1904.
2. Others called on government to
take action to regulate huge businesses.
-Wisconsin gov. Robert La Follette
tapped UW professors to regulate rail rates.
3. Strikes throughout the nation
called attention to worker grievances.
4. Muckraking revelations about
business abuses fueled calls for reform.
B.
Theodore Roosevelt took activist approach to the presidency.
1.
Assumed office upon death of William McKinley in 1901 (six months after his
second inauguration).
-Roosevelt was born into wealth and
privilege in NY, was at 42 youngest man to hold office.
2.
Immediately established a national agenda to address the public interest.
3.
Distinguished between good and bad corporations.
-not out to destroy big business,
simply regulate.
4.
Helped settle 1902 anthracite coal strike; improved workers' position.
-activist president, called White
House the bully pulpit and
forced both miners and company owners to negotiate with the union under the
threat of federal seizure and confiscation of the mines.
- he was the first political leader to identify the national principle with the ideal of
reform.
5.
Anti-trust work strengthened federal government's powers to regulate economy.
-in Northern Securities vs.
United States Roosevelt pushed case to the Supreme Court which ordered the
companies break up in 1904.
Citation: 193 U.S. 197 (1904)
Concepts: Restraints of Trade/Federal Anti-Trust/Commerce Clause
A.
Facts
The major stockholders (read
Rockefellers, Morgans, etc) of two competing western railroad companies set up a holding company to buy the
controlling interest of the two railroads. The Sherman Anti-Trust Act of 1890
forbade unreasonable restraints on trade. The constitutionality of the holding
company was brought into question by the United States government during
President Theodore Roosevelts trust
busting campaign.
Issue
Whether the United States Congress
had the authority under the Commerce Clause in the Constitution of the United
States to regulate the holding companys effort
to eliminate competition.
Opinion
The Supreme Court of the United
States in a 5-4 decision found that a holding company formed solely to
eliminate competition between the two railroads was in violation of the Federal
Anti-Trust Act because it unreasonably restrained interstate and international
commerce. The Court ruled that the Federal Anti-Trust Act could apply to any
conspiracy which sought to eliminate competition between otherwise competitive
railroads.
6. As an activist presidency
Roosevelt also Established Department of Commerce and Labor. (1903)
-included a Bureau of Corporations to recommend responsible
business practice
-again not to destroy big business but to regulate its
actions
7. In 1903 he also supported passage
of the Elkins Act which outlawed
railroad rebates to favoured
customers and he revived Interstate Commerce
Commission (ICC) to regulate policy
8. To strengthen the ICC the Hepburn
Act of 1906 empowered ICC to set railroad rates and regulate pipelines.
9. Supported Pure Food and Drug
Act and Meat Inspection Act.
-protected consumers and established standards for big
business.
-In sum, he wanted to prevent price gouging and bring
corporate stability.
C. William Howard Taft was Roosevelt's chosen
successor, but things didn't work out.
-during the 1908 election William Jennings Bryan, campaigned
for the third time with the slogan Shall the
people rule? Taft
carried the polls
-Roosevelt had chosen conservative Taft as a compromise
within the party (Repub).
1. Taft clashed with party on
numerous occasions, notably anti-trust.
- Although a conservative he brought 150 suits and
indictments against large corporations and infuriated republican leaders in the
business community.
- his anti-trust busting policies came to a virtual end in
1911 when the Supreme Court modified its interpretation of the Sherman Act
(1890). In a major case against tobacco and steel industries, court enunciated rule of reason certain types of restraint of trade were reasonable and
consequently legal.
-Tafts
presidency was weak: he not only failed to stiffen his anti-trust policy but
also failed in his attempt to secure Tariff reform.
2. Payne-Aldrich Tariff actually
increased rates on manufacturing goods and imperiled agricultural prosperity.
- a special session of Congress was held in 1909 to debate
high import duties, Taft called for a modest reduction, but was forced to
abandon the fight by Republican Conservatives.
3. He also clashed with Gifford
Pinchot over forest conservation, a Roosevelt pet project and dismissed
Pinchot, Roosevelts chosen director of National Forests
in 1910 and Roosevelt broke with the administration as a consequence.
-Tafts
policies in general reflected his own outlook which was there were simply
limits as to what government could do.
D. Progressive foreign policy reflected an international
outlook.
1. Roosevelts dictum Speak
softly and carry a big stick, his
outlook on world affairs, paved way for construction of Panama Canal.
2. Roosevelt Corollary to Monroe
Doctrine justified U.S. control of Western Hemisphere.
-must take care of order ourselves.
- Panama Canal was a centrepiece of this initiative.
-Columbians claimed sovereignty over Panama, opposed
Roosevelts plans. They signed a treaty to build
the canal, rejected it in their Senate. Roosevelt encouraged Panamas leaders to rise up and demand independence and then sent a
US warship to support the uprising.
-Panama won its independence and the US sent the Hay-Buneau-Varilla treaty
of 1903 which permitted construction of a US canal, established a 10 mile wide
Canal Zone.
-In 1914 the fifty-mile ditch with giant locks to adjust
water levels opened for business.
3. Roosevelts strategic vision clashed with Taft's dollar
diplomacy which relied on private investment, not government force.
-By 1912 nearly half of US foreign investment was in Latin
America.
-to protect these investments US government intervened
militarily in Honduras, Guatemala, Haiti, and remained in Nicaragua almost
continuously from 1912-1933.
E. Election of 1912 was referendum on Progressive reform.
1. Roosevelt tried to win Republican
nomination from Taft.
a.
Won state primaries, but couldn't defeat Taft at national level.
b.
Established Progressive party as means of winning anyway.
c.
Platform: women's suffrage, worker protection, business regulation.
d.
Labeled his plan the "New Nationalism."
2. Socialist party ran Debs.
-campaigned from the back of a train called the Red Special lacked funds and party organization, still captured over
900,000 votes, over 6 percent of the population.
3. Democrats chose Woodrow Wilson.
a.
Background as educator, Ph.D. in government, southerner, governor of New Jersey
President of Princeton University, achieved national
attention in 1910 by defying national bosses who supported his political
campaign.
b.
Moderate Progressive; platform the "New Freedom."
-banking reform, tariff reductions, dismantling trusts
4. Wilson
won with 42 percent of vote.
-Roosevelt and Progressives came
second, Taft came third, (only time in US history that a third-Party
Candidate out-polled a major party presidential nominee).
5. Election was mandate for activist
government.
-a journalist critic charged that Between the New Nationalism and the New Freedom was that
fantastic imaginary gulf that has always existed between Tweedle-dum and
Tweedle-Dee.
F. Wilson immediately assumed bold leadership in
implementing his party's agenda.
-first president since John Adams to
address Congress personally
- he installed a direct telephone line to link the White
House with Capitol Hill.
-he enforced strict party discipline
1. Underwood Tariff of 1913
reduced rates for first time since Civil War.
-lowered import duties on hundreds of items that could be
produced more cheaply in the United States than abroad. Sponsored by
Representative Oscar W. Underwood of Alabama (1862-29), the tariff reduced the
rates of the Payne-Aldrich Tariff (1909) by about 10 percent.
2.
Implemented income tax as provided for in Sixteenth Amendment.
-graduated, to compensate for Underwood Tariff 1 percent against corporations, exempted first 4,000 of
family income so only 2 percent of workforce affected.
-highest rates for wealthiest was 7 percent
-only 9 percent of federal budget came from income tax but
grew in years afterwards.
3. Federal
Reserve Act (1913) rationalized banking system.
-helped Wilson continue to regulate national economy.
-established 12 regional banks all controlled by bankers
(latter move to appease the banking community)
-all banks operating nationally had to deposit part of their
capital into the regional banks. These reserves backed the issue of paper
money, to expand currency, Federal Reserves could lower interest rates and to
tighten money supply they would raise them.
-These decisions remained with the Federal Reserve Board,
appointed by the President.
-in this way Government, not banks regulated financial
policy.
4. Federal Trade Commission Act
(1913) eliminated business uncertainty.
-regulation and protection of banks brought Wilson closer to
Roosevelts vision of corporate progressivism.
-The FTC was created as a regulatory agency, again appointed
by the president to monitor commercial activities.
-rather than issue anti-trust proceedings, it issued
restraining orders and negotiated with companies to win voluntary consent to
stop unfair practices.
5. Clayton Anti-Trust Act (1914)
enumerated/outlawed unfair business practice such as price discrimination and
overlapping of corporate directors among competing businesses
-measure also exempted labour unions and agricultural groups
from anti-trust action.
6. Also worked to limit child labor,
set working conditions, and limit working hours.
-Louis
Brandeis was also appointed to Supreme Court.
III. The Limits of Progressivism
A. Election of 1916 vindicated Wilson's
domestic program.
1. Defeated Charles Evans Hughes
(Republican Challenger) by slim margin.
Charles Evans Hughes, b. Glens Falls, N.Y.,
Apr. 11, 1862, d. Aug. 27, 1948, was a U.S. secretary of state (1921-25), an
associate justice of the U.S. Supreme Court (1910-16), a chief justice of the
United States, and the presidential nominee of the Republican party in 1916.
A.
Hughes was educated at Madison
(now Colgate) and Brown universities and at the Columbia University Law School.
He practised law in New York City and also taught at the Columbia (1884-93),
Cornell (1891-93), and New York (1893-1900) law schools. He came to prominence
when he served as chief counsel for two joint committees of the New York State
Legislature investigating gas utilities (1905) and insurance companies (1906).
His sensational exposure of malpractices in these industries brought him the
Republican nomination for governor of New York in 1906. He won the election
over William Randolph Hearst and was elected to a second term in 1908.
In
1910, President William Howard Taft appointed Hughes an associate justice of
the U.S. Supreme Court, where he gained a reputation as a liberal. In 1916 he
reluctantly accepted a draft for the Republican presidential nomination but
lost a close election to the incumbent, Woodrow Wilson. According to legend, he
went to bed on election night thinking he had won and awoke the next morning to
find that he had lost. Hughes returned to the practice of law but remained
active in public affairs. In 1921 he was named secretary of state by President
Warren Harding. In this post he organized the Washington Conference (1921-22),
pursued the Open Door Policy in China, and sought to guarantee Japan security
in the western Pacific.
In
1930, President Herbert Hoover appointed Hughes chief justice of the United
States, and he led the philosophically divided Court through the judicial
storms of the New Deal era. In his opinions he was a "swing" justice,
sometimes siding with the conservatives and sometimes with the liberals. After
the Court found unconstitutional some of the basic New Deal legislation,
including the National Industrial Recovery Act and the Agricultural Adjustment
Act, President Franklin D. Roosevelt proposed increasing the size of the Court.
This would have enabled the president to choose a number of new justices.
Hughes fought the "court-packing" plan, which was defeated, but at
the same time led the court in upholding the constitutionality of the National
Labor Relations Act and the Social Security Act, both New Deal measures. He
retired in 1941.
For Further Reading
Danelski,
David J., and Tulchin, Joseph S., eds., The Autobiographical Notes of Charles
Evans Hughes (1973)Hendel, Samuel, Charles Evans Hughes and the Supreme Court
(1951; repr. 1968)Pusey, Merlo J., Charles Evans Hughes, 2 vols. (1951).
2. Wilson won even though public
unhappy with his foreign policy.
B.
Despite public support for reform, there were limits on Progressive thought.
1. Wilson's record on racial issues
not good
a.
Endorsed the blatantly racist film The Birth of a Nation in 1915.
b.
Allowed federal agencies to begin segregating their workers.
c.
Also allowed federal offices throughout the country to dismiss black workers.
2. Wilson also lukewarm at best in
supporting women's and immigrants' rights.
a.
Denounced suffrage demonstrations on eve of first inaugural.
b.
Supported end to immigration by those of African descent.
C. Progressive leadership remained a
white male preserve.
