Saturday, January 5, 2013

The Progressive(ly) Corporate Era 1900-1916


“As the business of the country has learned the secret of combination, it is gradually subverting the power of the politician and rendering him subservient to its purposes.”

—------Bankers’ Magazine, 1901

During the 1900-1916 period,” writes political scientist Michael Parenti, “federal price and market regulations in meat packing, food and drugs, banking, timber, and mining were initiated at the insistence of the strongest companies within these industries. The overall effect was to raise profits for the larger producers, tighten their control over markets, and weed out smaller competitors.”

This era came to be called Progressive because of the much celebrated but largely ineffective legislation enacted to control these corporate monopolies: the Sixteenth Amendment, allowing for a progressive income tax; the Seventeenth Amendment, providing for the direct popular election of Senators; and electoral reforms like the long ballot and the nonpartisan election. By 1915, many states had also passed laws limiting the length of the workday and establishing worker’s compensation for industrial accidents. A handful of states had established minimum wage laws and 38 had implemented child labor restrictions. In a few industries workers won the 8-hour day and time-and-a-half pay for overtime.

Though ordinary Americans benefited to some degree from the reforms, historian Gabriel Kolko, a careful student of the period, characterizes these years as “consistently conservative.” Large corporations, not a reformist public, were the dominant force. Observes Kolko: “The pervasive reality of the period is big business’ control of politics set in the context of the political regulation of the economy.”

What did big business want? An absolute priority was the Open Shop (no unions), which would guarantee that conditions for labor remained poor and workers subordinate. Employers’ associations were not shy about asserting their authoritarian vision, perfecting the Open Shop by boycotting union goods, providing financial and other help to businesses trying to ban unions, furnishing strikebreakers, boycotting unfriendly newspapers, bribing union officials, blacklisting union workers, hiring labor spies, forcing workers to sign oaths renouncing union associations, spreading anti-union propaganda, using police, militia, and private goon squads to break strikes, petitioning the courts to cripple unions, and organizing business lobbies to strangle labor legislation.

All this proved to be quite effective in subduing workers. In 1914, labor’s purchasing power was less than it had been in the 1890s, and according to government statistics, two million children were in the marketplace simply to help their families survive. Millions of workers toiled 12 to 14 hours a day for six or seven days a week, without being able to keep their families fed. At the same time, 35,000 a year were killed on the job and another 700,000 were victims of injury, illness, blindness or other work-related afflictions. Such is the price of "personal liberty" under capitalism.

Helping place such conditions virtually beyond remedy was a redefinition of the corporation making it not merely an artificial creation of the state but a voluntary contract among private persons. Some were bold enough to designate it an “organic entity,” part of nature, and therefore not subject to control even by its owners. “Over and over again,” notes Harvard legal historian Morton Horwitz, “legal theorists attempted to find a vocabulary that would enable them to describe the corporation as a real or natural entity whose existence is prior to and separate from the state.” A series of dubious court decisions by radical judicial activists institutionalized this view, allowing corporations to evolve extraordinary powers under the guise of "individual" Constitutional rights - as immortal persons.

With their harrowing cycles of boom, bust, panic, and collapse, largely unregulated markets had produced such a string of catastrophes that even big business had become convinced a completely free market would doom profits and perhaps even society itself. Therefore, the captains of industry pushed to have corporations invested with the rights of flesh and blood persons, allowing them to transfer public power into private hands and administer markets along highly authoritarian lines. The corporate right of free speech was a bonanza, allowing corporations to bombard the public with commercial propaganda, to buy elections, and to relentlessly promote the glories of an acquisitive life. Convinced that control of production rightfully belonged in their hands, workers bitterly condemned these developments, but were unable to wrest control from the corporations.

The "progressive" regulation movement arose from the corporations’ “natural” need to have the government do for them what they were unable to do for themselves. “National regulation,” argues Kolko, reflected corporate efforts “to find political means to resolve the economic problems which economic decentralization, competition, and a whole panoply of new challenges made endemic to American capitalism.” A longstanding problem was price war, which an aggressive series of corporate mergers had been unable to stop. In fact, quite the contrary. In 1900, The Iron Age commented that “the great industrial aggregations, instead of discouraging competition, have rather encouraged it,” while the New York Financier opined that, “The most serious problem that confronts trust combinations today is competition from independent sources...the sources of production are being multiplied, with a resultant decrease in profits . . .” The private sector therefore demanded government intervention to limit competition and bring harmony to the chaos of conflicting regulations passed by dozens of state governments. With business yearning for stable competition and a predictable national market, even the likes of J. P. Morgan partner Henry P. Davison repudiated laissez-faire in no uncertain terms: “I would rather have regulation and control than free competition.”

In short, observes Kolko, “Progressivism was not the triumph of small business over the trusts, but the victory of big businesses in achieving the rationalization of the economy that only the federal government could provide.” Had a business-friendly apparatus not been established, a rising socialist movement stood prepared to shift the goals of production from profit to social utility. With the stakes so high utilities magnate Samuel Insull observed that it was in business’s interest to “help shape the right kind of regulation than to have the wrong kind forced upon [us].” The “right” kind limited competition while placing capital accumulation beyond discussion.

Contrary to popular belief, the presidents of the Progressive Era were faithful servants of the large corporation. Teddy Roosevelt, whose reputation as a “trust buster” stemmed from his sporadic rhetorical eruptions against the “malefactors of great wealth,” actually governed by looking out for their interests. He condemned reformers as “muckrakers,” as though there were something underhanded in exposing injustice, and consistently criticized “sinister demagogs and foolish visionaries” for “seek[ing] to incite a violent class hatred against all men of wealth.” The idea that the economic structure itself might be generating legitimate class resentments was quite beyond TR’s grasp. According to historian Richard Hofstadter, he was “generally hostile” to labor and dismissed the Populists as “crude and ignorant.” In 1895, he had recommended that progressive criminologist John Altgeld and socialist Eugene Debs be “placed before a stone wall and shot.”

Speaking loudly and carrying a small stick, TR displayed a consistently cooperative attitude towards Wall Street, enjoying warm relations with industrial magnates and inviting them to serve in his government. He posed no great challenge to capital during his two terms, which was not surprising since his principal advisors were key figures in the world of industrial and finance capital: Mark Hanna, Robert Bacon, and George W. Perkins of the House of Morgan, and Elihu Root, Senator Nelson Aldrich, and James Stillman of the Rockefeller interests. TR actually prosecuted fewer anti-trust cases, substantially fewer, than did the Harding or Taft Administrations and negotiated a “gentleman’s agreement” with two J. P. Morgan men—Elbert Gary and George Perkins—which guaranteed the legality of their companies in return for their cooperation in any investigation carried out by the Bureau of Corporations. His prosecution of the Morgan railroad monopoly in the Northern Securities case changed nothing, since the key figures in planning the monopoly (Morgan, Harriman, and Hill) suffered no prosecution. The motive for this famous anti-trust action was not to cure the injustices of capitalism, but to head off calls for government ownership of the railroads.

Like most reformers, TR did not oppose the structural evils inherent in a predatory economy, but rather, the occasions of “mismanagement” that bred disrespect for business and thereby undermined its credibility. Thus, he restricted himself to blaming individual corporate leaders, not monopoly capitalism: “The line of demarcation we must draw must always be on conduct, not on wealth; our objection to any given corporation must be, not that it is big, but that it behaves badly.” In a Message to Congress on December 6, 1904, TR summed up his favorable view of autocratic business power: “Great corporations are necessary, and only men of great and singular mental power can manage such corporations successfully, and such men must have great rewards.”

William Howard Taft and Woodrow Wilson offered no better approach, with neither perceiving any “fundamental conflict between their political goals and those of business.” Like TR, Wilson focused on individual, not social abuses, assailing corrupt political machines and big trusts. But his campaign funds came from a handful of wealthy backers, and he worked cooperatively with associates of the Rockefeller and Morgan empires, showing himself as faithful to advancing the interests of big business as his counterparts in the GOP. In January 1912, Wilson said: “I am not afraid of any corporation, no matter how big. I am afraid of any corporation, however small, that is bad, that is rotten at the core, whose practices and actions are in restraint of trade.” When told that this sounded almost identical to Teddy Roosevelt’s sentiments, Wilson responded: “When I sit down and compare my views with those of a Progressive Republican I can’t see what the difference is, except that he has a sort of pious feeling about the doctrine of protection, which I have never felt.”

The focus of Wilson’s “New Freedom” was therefore not the distribution and control of class power but the ease of market entry for small business. Wilson was interested in equalizing exploitation rights, not questioning their validity. He assumed, as Roosevelt had before him, that businessmen were well-intentioned and desired the public good, and therefore he sought merely to strengthen their allegedly altruistic tendencies. He suspected no causal connection between the concentration of wealth in private hands and the widespread lack of political democracy.

A century later, neither do Barack Obama and Mitt Romney.

Sources:

Boyer, Richard O. and Herbert M. Morais, "Labor's Untold Story," (Cameron Associates, 1955)

Derber, Charles, "Corporation Nation - How Corporations Are Taking Over Our Lives and What We Can Do About It," (St. Martin's, 1998)

Foner, Philip. S., "The Policies and Practices of the American Federation of Labor 1900-1909," (International Publishers, 1964)

Horwitz, Morton J., "The Transformation of American Law 1870-1960 - The Crisis of Legal Orthodoxy," (Oxford, 1994)

Kolko, Gabriel, "The Triumph of Conservatism - A Reinterpretation of American History, 1900-1916," (Free Press, 1963)

Link, Arthur S., "Woodrow Wilson and the Progressive Era, 1910-1917," (Harper & Brothers, 1954)

Parenti, Michael, "Democracy For The Few - Sixth Edition" (St. Martin's, 1995)

Zinn, Howard, "A People's History of the United States," (Harper, 1980)








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