Theodore Roosevelt - Cooking up the square deal





Roosevelt's primary task was to gain popular support for federal restraint of private power and, in this sense, to establish the legitimacy of federal power. The president's huge talent for publicity served him especially well in this. He chose his issues, and his enemies, carefully. The American business community was far from unified in its view of the tide of giant corporate mergers it had been witnessing since 1897. For many conservatives, the private enterprise system itself seemed at stake. When, in 1901, J. P. Morgan concluded the reorganization of the steel industry by buying out Carnegie and consolidating several other major steel producers into the new billion-dollar United States Steel Corporation, even the staunchly conservative Boston Herald was moved to remark, "If a limited financial group shall come to represent the capitalistic end of industry, the perils of socialism, even if brought about by some rude, because forcible, taking of the instruments of industry, may be looked upon by even intelligent people as possibly the lesser of two evils." In 1902, Morgan, J. J. Hill, and some other titans of finance and the railroad industry followed up the awesome steel consolidation by forming the Northern Securities Company, a merger of the Northern Pacific, the Great Northern, and the Chicago, Burlington and Quincy railroads. Roosevelt seized the opportunity, instructing his attorney general to prosecute the company for violation of the Sherman Antitrust Act.

The issue and the timing were perfect. The country was newly sensitized to the trusts issue, and not even a pettifogging judiciary could deny that the railroad industry quintessentially concerned interstate commerce. By a 5-4 vote in 1904, the United States Supreme Court did indeed uphold the government's prosecution. (The minority held out on the issue of whether the merger amounted to an illegal restraint of trade.) From this and from the president's attacks on Standard Oil and the "meat trust," long-standing industrial pariahs, T. R. earned his reputation as a trustbuster. Roosevelt himself viewed the Northern Securities prosecution as the most important achievement of his first administration. But this was not because he generally opposed the business consolidations of the day. It was rather because the president of the United States had successfully called down several of the country's leading business tycoons—an achievement no president in several generations could boast of.

Roosevelt argued during his 1904 presidential campaign that the Northern Securities case was "one of the great achievements of my administration," because "through it we emphasized . . . that the most powerful men in the country were held to accountability before the law." It was a popularly held view. "If Roosevelt had never done anything else," the publisher Joseph Pulitzer wrote to his editor Frank Cobb (a steady Roosevelt critic), "and if he had committed a hundred times more mistakes . . . he would be entitled to the greatest credit for the greatest service to the nation" for his prosecution of the Northern Securities Company. In his autobiography, Roosevelt told the story of how the great J. P. Morgan had come to him after news of the suit broke and in avuncular fashion suggested that the whole scandal could have been avoided if the president's man (the attorney general) had met with Morgan's man to arrange matters. It had become habit for the country's business elite to view the federal government as merely a rival power, even as a lesser power that should consult with its betters before acting. T. R. implied that he had put Morgan in his proper place.

Roosevelt's presidency did much to restore public confidence in the government's ability to hold "the most powerful men in the country" accountable to the law, but there was still the question of what the law should be—or, perhaps more to the point, who should determine what the law should be. In this, Roosevelt was far more accommodating to the men of new corporate power than the bravado about his encounter with Morgan might suggest. In the first place, Roosevelt believed in free-market competition little more than did Morgan and his financier friends. The president acted against Northern Securities less from his concern about monopoly than from his concern about how the public might react to uncontrolled corporate arrogance. He frequently chided conservative critics that revolutionary upheaval was as likely to be inspired from "an attitude of arrogance on the part of the owners of property and of unwillingness to recognize their duty to the public" as by socialist or anarchist revolutionaries. It was more the manner than the substance of the Northern Securities merger that goaded him. Roosevelt himself had small regard for the successful antitrust suits of the McKinley administration, which aimed to break up major railroad traffic associations for fixing rates and routing among the members. "It is difficult to see," he told Congress, quoting the ICC on the subject, "how our interstate railways could be operated . . . without concerted action of the kind afforded through these associations." In his second administration, Roosevelt would urge Congress to amend the Sherman Act to permit cartel-like agreements within the railroad industry.

In 1903 public unhappiness with corporate arrogance permitted the president to push through Congress, against bitter conservative hostility, legislation establishing the Department of Commerce and Labor and, within it, the Bureau of Corporations. The bureau was authorized to investigate and publicize suspect corporate activities. Roosevelt acted from premises about the public's right to know and about the government's need to know in order to hold private economic power accountable. The emphasis on publicity proceeded also from a faith that a common sense of decency would force corporations to be good—not only to be honest but to avoid unscrupulous, even though strictly legal, practices. In other words, in large measure the policy arose from a conviction, not seriously tested by anyone at the time, that the country understood a common definition of such a concept as decency. In practice, of course, men like Roosevelt tended to assume the universality of their own definition.

In any case, Roosevelt had no intention of waging open warfare on big business. In the first place, the big corporations played too important a role in his vision of America's place in international rivalry. Small businesses could scarcely compete successfully for international resources and markets with the European cartels and Japanese zaibatsu . But more than that, Roosevelt did not view government and business as adversaries. In the spirit of the "New Nationalism," which he would develop more explicitly in his campaign to recapture the presidency in 1912, Roosevelt pictured the government as a coordinating agency for harmonizing the nation's varied interests and as a referee for interpreting and declaring the rules of the game. In keeping with this view, Roosevelt was prepared to assure corporations of immunity from antitrust prosecutions if he or the appropriate government agencies could be satisfied that their activities were honestly conceived and would benefit the community. When he was not so convinced, he proceeded, with his usual flare for the dramatic, to "bust the trusts," as when he attacked Standard Oil, the tobacco trust, the meat trust (with antitrust suits and with the Meat Inspection Act of 1906), and the Northern Securities Company.

But through the bureau, the president did enter into a series of gentlemen's agreements with Morgan interests. Companies such as United States Steel and International Harvester (organized in 1903) agreed to open records to the bureau's investigators, on the condition—which Roosevelt accepted—that the president would use such information only as backgrounding for his recommendations of policy to Congress and that nothing would be made public except with the consent of the corporations themselves. To make these arrangements, Roosevelt permitted Commerce and Justice department officials to confer with representatives of Morgan interests such as George W. Perkins, E. H. Gary, and Henry Clay Frick. The meetings gave the Morgan men a chance to debate the legality of their actions and to avoid prosecution by agreeing to correct any "technical" violations of the law in cases where they could not persuade the government otherwise. In spite of Roosevelt's autobiographical boasting, then, Morgan's men were meeting with the president's men to arrange matters.

In 1907, Morgan's men would meet with the president himself to arrange a steel merger that virtually handed the United States Steel Corporation nearly complete domination of the industry. The bankers' panic that year occasioned the conference. Among the feared casualties of the panic was the Trust Company of America (TCA), a major New York City financial institution whose collapse might have deepened the crisis. As it happened, the principal owners of the Tennessee Coal and Iron Company (TCIC) owed the TCA a lot of money. Morgan men Frick and Gary went to the president with a proposition. If they could be assured that there would be no antitrust prosecutions, the Morgan people would buy out the TCIC, thereby allowing its owners to pay off their debt to the TCA and keep the TCA solvent. Roosevelt may or may not have known the degree to which United States Steel's acquisition of the TCIC's steel plants, as well as its resources of coal and iron in Alabama, would substantially reduce competition in the industry. But he did see the virtue of averting a prolonged economic collapse (especially since the financial community was already whining loudly about how the crisis was all the fault of Roosevelt's "radical" attacks on the trusts). Roosevelt gave the green light to the merger. Whether he did so by explicitly approving Morgan's proposal or merely by leaving the matter as a tacit understanding, Roosevelt vigorously defended his role in the merger when he testified about it in 1911—after the Taft administration sued United States Steel for violation of the antitrust laws.

Roosevelt did not have to be apologetic about the steel merger, because he had not concealed his skepticism about the antitrust laws. Addressing Congress in 1907, he argued that the Sherman Act "should be . . . so amended as to forbid only the kind of combination which does harm to the general public." How should it be determined what kinds do harm? "Reasonable agreements between, or combinations of, corporations should be permitted provided they are submitted to and approved by some appropriate Government body." Instead of corporations testing legal limits in the courts by acting and then awaiting retaliatory action from the government or by private litigants, the new order would require the large interstate corporations to consult first with federal agencies established to pass on the acceptability of proposed moves. In the United States Steel case, Morgan had consulted with the president.

More than most of his contemporaries, Roosevelt understood that the corporation revolution had erased the main features of the rationale underlying the American liberal credo on the private uses of property for profit. A big, publicly financed corporation was not a private enterprise; it did not endow an individual entrepreneur with the qualities of independence and self-reliance on which the democratic polity counted; its size negated the competitive rivalry on which the democratic polity and the market economy depended to sharpen efficiency and to prevent arbitrary uses of power; its bureaucratic structure even denied the protection against a permanent preemption of power that mere human mortality afforded in an economy of individual proprietary enterprise. Finally, its managers were employees no less than were factory and mine operatives; the modern business corporation had indeed transformed Americans from a nation of self-employed enterprisers into a nation of hired hands.

Roosevelt's program called for establishment of a number of regulatory agencies modeled after, but with powers that considerably exceeded, those of the ICC and the Bureau of Corporations. His aim, as he later explained, was "to help legitimate business" by making the big corporations answerable to government regulation "as an incident to thoroughly and completely safeguarding the interests of the people as a whole." Roosevelt held such views from the start of his first administration, but it was not until his second that he could feel free to express them publicly. Meanwhile, with the ample rope that they had appropriated, America's corporate leaders prepared to hang themselves and open the way for increased federal intervention.

Their egregious effort to crush the anthracite coal miners in 1902 was a case in point. This was not merely a fight between miners and some coal operators. Seventy percent of the anthracite mines in the country were owned by six railroad companies—which themselves were controlled by financial interests associated with, or directed by, the houses of Morgan, Rockefeller, and closely associated financiers. Moreover, anthracite was the fuel on which millions of voters depended for heat in winter. McKinley's political mentor, Mark Hanna, had averted a strike in 1900 by quietly warning the corporations that an anthracite shortage and high prices in the fall might give Willam Jennings Bryan the edge to defeat McKinley. But in 1902, the companies were ready for a strike, at least in part to crush the United Mine Workers (UMW).

Wages were not the chief issue. Corporate spokesmen refused to countenance the legitimation of collective bargaining, even though collective capital had characterized the industry for decades. Although the public in 1902 cannot be said to have accepted collective bargaining in any substantial sense, neither was it as yet willing to accept fully the legitimacy of corporate collectivism, especially when it controlled one of the necessities of life. When the strike erupted, the national press generally supported the miners. In May, the Springfield Republican expressed an increasingly widespread sentiment: "It would be difficult to conceive of a monopoly more perfectly established or operated than this monopoly which holds complete possession of a great store of nature most necessary to the life of the day. There is but one way to deal with [it] . . . public control or ownership." George F. Baer, president of the Reading Railroad and spokesman for the mine. owners, gave point to their arrogance by declaring, in a private letter that was revealed to the press, that God had given the care of the country to the propertied people to protect against labor agitators and their like.

President Roosevelt meanwhile squirmed frantically. On the one hand, he yearned for the power to take control of the industry in the public interest. The mineowners, he wrote to Murray Crane, conservative governor of Massachusetts, "were backed by a great number of businessmen whose views were limited by the narrow business horizon, and who knew nothing either of the great principles of government or of the feelings of the great mass of our people." The "gross blindness" of the corporations, he complained to a Morgan partner, was "putting a heavy burden on us who stand against socialism; against anarchic disorder." To Lodge, he fretted, "That it would be a good thing to have national control, or at least supervision, over these big coal corporations, I am sure; but that would simply have to come as an incident of the general movement to exercise control of such corporations." Understanding that nothing of the sort would come from Senator Nelson Aldrich's and Speaker Joe Cannon's Congress for some time, perhaps generations, Roosevelt shied from even a verbal intervention. Conservatives such as Hanna and Crane took the lead, the latter even urging the president to meet jointly with the operators and the miners. The two party leaders, like Roosevelt, feared what a coal famine might do to Republican prospects that November.

With such encouragement, Roosevelt did force a joint conference. But it failed. For ten hours on 3 October, the president absorbed a barrage of vituperation from the mineowners, led by Baer. John Mitchell, president of the UMW, denied that recognition of the union was an issue in the strike, probably sensing that this was not a matter on which he could expect the public's or the president's support. The operators responded by showing (in Roosevelt's words) "extraordinary stupidity and bad temper," berating Mitchell and accusing the president of encouraging anarchy by suggesting that union leaders should have standing in a dispute between workers and their employers. They would not, they said, "deal with a set of outlaws."

As winter and the congressional elections approached, Roosevelt, enjoying public support, finally decided to act. Characteristically, he planned to act dramatically and not necessarily within the bounds of his acknowledged constitutional power. He would seize the coal mines. "The position of the operators," he later wrote to Crane, "that the public had no rights in the case, was not tenable for a moment." (Actually, Roosevelt himself had earlier accepted his attorney general's advice that the president did not properly have "any concern with the affair" and could not intervene.) Rumors were flying that trade unions across the country were considering joining the miners in a sympathy strike; that, Roosevelt told Crane, would mean "a crisis only less serious than the civil war." Roosevelt then explained to his conservative New England adviser the obligation he felt to the higher imperatives of government, which moved him beyond the apparent limits of the letter of the law:

I did not intend to sit supinely when such a state of things was impending.. . . I had to take charge of the matter, as President, on behalf of the Federal Government.. . . I knew that this action would form an evil precedent, and that it was one which I should take most reluctantly, but . . . it would have been imperative to act, precedent or no precedent—and I was in readiness.

Actually, a sudden stirring among "the most powerful men in the country" headed off the crisis. Roosevelt may have been bluffing; we cannot know. But he was too much of a puzzle for his conservative and well-connected advisers to want to test him. Elihu Root, Roosevelt's secretary of war, went to Morgan "as a private citizen," found him irritated with the way Baer and his crew had "botched things," and got him to twist some arms to force the operators to accept arbitration. A coal commission was agreed upon, but not before the operators won on their refusal to accept a labor man on the board. Later, citing the operators' petty obstructionism, Roosevelt chortled in derision that he overcame their objections to a labor man by filling the position designated for a "sociologist" on the commission with the individual whom the UMW had nominated. But the joke was on Roosevelt: the companies won in their insistence that unions per se had no legitimate place in employer-employee negotiations.

The anthracite coal strike is worth detailing because it illustrates several important points about Roosevelt as president. First, T. R. was most comfortable with crisis management, partly (it is at least reasonable to surmise) because crisis laid a gloss on his affinity for direct action beyond the fine points of legal limitation. He was, moreover, not averse to some hyperbole in depicting the troubles (although one must never underestimate the fear of revolution generated among the comfortable classes by contemporary agitation). At the same time, Roosevelt did not accept the view of labor and capital as adversaries. Although he tended to favor collective bargaining, he envisioned unionism as a way of institutionalizing the wage-earner interest vis-à-vis that of the corporate employers, between which interests the government could mediate on a basis of a public interest that was defined by the president and transcended the particular interests of the unions and the corporations. Finally, although Roosevelt did indeed possess a long-term vision of reform, he was above all a practical party man. He rarely challenged the commitments of the party leaders on fundamentals, and consequently much of what he accomplished had more symbolic than substantive value and did more to accommodate prevailing threats to the social order than it did to challenge that order itself.

The symbolism, of course, was not unimportant. Every change in the symbols by which we live fore-shadows substantive change. Roosevelt's mediating role in the anthracite strike altered no symbols for employer-employee relations, but there was symbolic force in the federal government intervening in industrial strife without special regard for the longstanding conventions of employer prerogatives. To paraphrase George E. Mowry, American business valued few things more highly than the right to keep its records in secrecy and the right to deal with employees without interference from government. Before the end of his first administration, Roosevelt had challenged both those assumed rights.





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