Theodore Roosevelt: an Autobiography — Ch 12-The Big Stick and the Square Deal, pt 1

THE BIG STICK AND THE SQUARE DEAL

One of the vital questions with which as President I had to deal was the attitude of the Nation toward the great corporations.

Men who understand and practice the deep underlying philosophy of the Lincoln school of American political thought are necessarily Hamiltonian in their belief in a strong and efficient National Government and Jeffersonian in their belief in the people as the ultimate authority, and in the welfare of the people as the end of Government.

The men who first applied the extreme Democratic theory in American life were, like Jefferson, ultra individualists, for at that time what was demanded by our people was the largest liberty for the individual.

During the century that had elapsed since Jefferson became President the need had been exactly reversed.

There had been in our country a riot of individualistic materialism, under which complete freedom for the individual--that ancient license which President Wilson a century after the term was excusable has called the "New" Freedom--turned out in practice to mean perfect freedom for the strong to wrong the weak.

The total absence of governmental control had led to a portentous growth in the financial and industrial world both of natural individuals and of artificial individuals--that is, corporations.

In no other country in the world had such enormous fortunes been gained.

In no other country in the world was such power held by the men who had gained these fortunes; and these men almost always worked through, and by means of, the giant corporations which they controlled.

The power of the mighty industrial overlords of the country had increased with giant strides, while the methods of controlling them, or checking abuses by them, on the part of the people, through the Government, remained archaic and therefore practically impotent.

The courts, not unnaturally, but most regrettably, and to the grave detriment of the people and of their own standing, had for a quarter of a century been on the whole the agents of reaction, and by conflicting decisions which, however, in their sum were hostile to the interests of the people, had left both the nation and the several States well-nigh impotent to deal with the great business combinations.

Sometimes they forbade the Nation to interfere, because such interference trespassed on the rights of the States; sometimes they forbade the States to interfere (and often they were wise in this), because to do so would trespass on the rights of the Nation; but always, or well-nigh always, their action was negative action against the interests of the people, ingeniously devised to limit their power against wrong, instead of affirmative action giving to the people power to right wrong.

They had rendered these decisions sometimes as upholders of property rights against human rights, being especially zealous in securing the rights of the very men who were most competent to take care of themselves; and sometimes in the name of liberty, in the name of the so-called "new freedom," in reality the old, old "freedom," which secured to the powerful the freedom to prey on the poor and the helpless.

One of the main troubles was the fact that the men who saw the evils and who tried to remedy them attempted to work in two wholly different ways, and the great majority of them in a way that offered little promise of real betterment.

They tried (by the Sherman law method) to bolster up an individualism already proved to be both futile and mischievous; to remedy by more individualism the concentration that was the inevitable result of the already existing individualism.

They saw the evil done by the big combinations, and sought to remedy it by destroying them and restoring the country to the economic conditions of the middle of the nineteenth century.

This was a hopeless effort, and those who went into it, although they regarded themselves as radical progressives, really represented a form of sincere rural toryism.

They confounded monopolies with big business combinations, and in the effort to prohibit both alike, instead of where possible prohibiting one and drastically controlling the other, they succeeded merely in preventing any effective control of either.

On the other hand, a few men recognized that corporations and combinations had become indispensable in the business world, that it was folly to try to prohibit them, but that it was also folly to leave them without thoroughgoing control.

These men realized that the doctrines of the old laissez faire economists, of the believers in unlimited competition, unlimited individualism, were in the actual state of affairs false and mischievous.

They realized that the Government must now interfere to protect labor, to subordinate the big corporation to the public welfare, and to shackle cunning and fraud exactly as centuries before it had interfered to shackle the physical force which does wrong by violence.

The big reactionaries of the business world and their allies and instruments among politicians and newspaper editors took advantage of this division of opinion, and especially of the fact that most of their opponents were on the wrong path; and fought to keep matters absolutely unchanged.

These men demanded for themselves an immunity from governmental control which, if granted, would have been as wicked and as foolish as immunity to the barons of the twelfth century.

Many of them were evil men.

Many others were just as good men as were some of these same barons; but they were as utterly unable as any medieval castle-owner to understand what the public interest really was.

There have been aristocracies which have played a great and beneficent part at stages in the growth of mankind; but we had come to the stage where for our people what was needed was a real democracy; and of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy.

When I became President, the question as to the method by which the United States Government was to control the corporations was not yet important.

The absolutely vital question was whether the Government had power to control them at all.

This question had not yet been decided in favor of the United States Government.

It was useless to discuss methods of controlling big business by the National Government until it was definitely settled that the National Government had the power to control it.

A decision of the Supreme Court had, with seeming definiteness, settled that the National Government had not the power.

This decision I caused to be annulled by the court that had rendered it; and the present power of the National Government to deal effectively with the trusts is due solely to the success of the Administration in securing this reversal of its former decision by the Supreme Court.

The Constitution was formed very largely because it had become imperative to give to some central authority the power to regulate and control interstate commerce.

At that time when corporations were in their infancy and big combinations unknown, there was no difficulty in exercising the power granted.

In theory, the right of the Nation to exercise this power continued unquestioned.

But changing conditions obscured the matter in the sight of the people as a whole; and the conscious and the unconscious advocates of an unlimited and uncontrollable capitalism gradually secured the whittling away of the National power to exercise this theoretical right of control until it practically vanished.

After the Civil War, with the portentous growth of industrial combinations in this country, came a period of reactionary decisions by the courts which, as regards corporations, culminated in what is known as the Knight case.

The Sherman Anti-Trust Law was enacted in 1890 because the formation of the Tobacco Trust and the Sugar Trust, the only two great trusts then in the country (aside from the Standard Oil Trust, which was a gradual growth), had awakened a popular demand for legislation to destroy monopoly and curb industrial combinations.

This demand the Anti-Trust Law was intended to satisfy.

The Administrations of Mr. Harrison and Mr. Cleveland evidently construed this law as prohibiting such combinations in the future, not as condemning those which had been formed prior to its enactment.

In 1895, however, the Sugar Trust, whose output originally was about fifty-five per cent of all sugar produced in the United States, obtained control of three other companies in Philadelphia by exchanging its stock for theirs, and thus increased its business until it controlled ninety-eight per cent of the entire product.

Under Cleveland, the Government brought proceedings against the Sugar Trust, invoking the Anti-Trust Law, to set aside the acquisition of these corporations.

The test case was on the absorption of the Knight Company.

The Supreme Court of the United States, with but one dissenting vote, held adversely to the Government.

They took the ground that the power conferred by the Constitution to regulate and control interstate commerce did not extend to the production or manufacture of commodities within a State, and that nothing in the Sherman Anti-Trust Law prohibited a corporation from acquiring all the stock of other corporations through exchange of its stock for theirs, such exchange not being "commerce" in the opinion of the Court, even though by such acquisition the corporation was enabled to control the entire production of a commodity that was a necessary of life.

The effect of this decision was not merely the absolute nullification of the Anti-Trust Law, so far as industrial corporations were concerned, but was also in effect a declaration that, under the Constitution, the National Government could pass no law really effective for the destruction or control of such combinations.

This decision left the National Government, that is, the people of the Nation, practically helpless to deal with the large combinations of modern business.

The courts in other cases asserted the power of the Federal Government to enforce the Anti-Trust Law so far as transportation rates by railways engaged in interstate commerce were concerned.

But so long as the trusts were free to control the production of commodities without interference from the General Government, they were well content to let the transportation of commodities take care of itself--especially as the law against rebates was at that time a dead letter; and the Court by its decision in the Knight case had interdicted any interference by the President or by Congress with the production of commodities.

It was on the authority of this case that practically all the big trusts in the United States, excepting those already mentioned, were formed.

Usually they were organized as "holding" companies, each one acquiring control of its constituent corporations by exchanging its stock for theirs, an operation which the Supreme Court had thus decided could not be prohibited, controlled, regulated, or even questioned by the Federal Government.

Such was the condition of our laws when I acceded to the Presidency.

Just before my accession, a small group of financiers, desiring to profit by the governmental impotence to which we had been reduced by the Knight decision, had arranged to take control of practically the entire railway system in the Northwest--possibly as the first step toward controlling the entire railway system of the country.

This control of the Northwestern railway systems was to be effected by organizing a new "holding" company, and exchanging its stock against the stock of the various corporations engaged in railway transportation throughout that vast territory, exactly as the Sugar Trust had acquired control of the Knight company and other concerns.

This company was called the Northern Securities Company.

Not long after I became President, on the advice of the Attorney-General, Mr. Knox, and through him, I ordered proceedings to be instituted for the dissolution of the company.

As far as could be told by their utterances at the time, among all the great lawyers in the United States Mr. Knox was the only one who believed that this action could be sustained.

The defense was based expressly on the ground that the Supreme Court in the Knight case had explicitly sanctioned the formation of such a company as the Northern Securities Company.

The representatives of privilege intimated, and sometimes asserted outright, that in directing the action to be brought I had shown a lack of respect for the Supreme Court, which had already decided the question at issue by a vote of eight to one.

Mr. Justice White, then on the Court and now Chief Justice, set forth the position that the two cases were in principle identical with incontrovertible logic.

In giving the views of the dissenting minority on the action I had brought, he said: "The parallel between the two cases [the Knight case and the Northern Securities case] is complete.

The one corporation acquired the stock of other and competing corporations in exchange for its own.

It was conceded for the purposes of the case, that in doing so monopoly had been brought about in the refining of sugar, that the sugar to be produced was likely to become the subject of interstate commerce, and indeed that part of it would certainly become so.

But the power of Congress was decided not to extend to the subject, because the ownership of the stock in the corporations was not itself commerce."

Mr. Justice White was entirely correct in this statement.

The cases were parallel.

It was necessary to reverse the Knight case in the interests of the people against monopoly and privilege just as it had been necessary to reverse the Dred Scott case in the interest of the people against slavery and privilege; just as later it became necessary to reverse the New York Bakeshop case in the interest of the people against that form of monopolistic privilege which put human rights below property rights where wage workers were concerned.

By a vote of five to four the Supreme Court reversed its decision in the Knight case, and in the Northern Securities case sustained the Government.

The power to deal with industrial monopoly and suppress it and to control and regulate combinations, of which the Knight case had deprived the Federal Government, was thus restored to it by the Northern Securities case.

After this later decision was rendered, suits were brought by my direction against the American Tobacco Company and the Standard Oil Company.

Both were adjudged criminal conspiracies, and their dissolution ordered.

The Knight case was finally overthrown.

The vicious doctrine it embodied no longer remains as an obstacle to obstruct the pathway of justice when it assails monopoly.

Messrs. Knox, Moody, and Bonaparte, who successively occupied the position of Attorney-General under me, were profound lawyers and fearless and able men; and they completely established the newer and more wholesome doctrine under which the Federal Government may now deal with monopolistic combinations and conspiracies.

The decisions rendered in these various cases brought under my direction constitute the entire authority upon which any action must rest that seeks through the exercise of national power to curb monopolistic control.

The men who organized and directed the Northern Securities Company were also the controlling forces in the Steel Corporation, which has since been prosecuted under the act.

The proceedings against the Sugar Trust for corruption in connection with the New York Custom House are sufficiently interesting to be considered separately.

From the standpoint of giving complete control to the National Government over big corporations engaged in inter-State business, it would be impossible to over-estimate the importance of the Northern Securities decision and of the decisions afterwards rendered in line with it in connection with the other trusts whose dissolution was ordered.

The success of the Northern Securities case definitely established the power of the Government to deal with all great corporations.

Without this success the National Government must have remained in the impotence to which it had been reduced by the Knight decision as regards the most important of its internal functions.

But our success in establishing the power of the National Government to curb monopolies did not establish the right method of exercising that power.

We had gained the power.

We had not devised the proper method of exercising it.

Monopolies can, although in rather cumbrous fashion, be broken up by law suits.

Great business combinations, however, cannot possibly be made useful instead of noxious industrial agencies merely by law suits, and especially by law suits supposed to be carried on for their destruction and not for their control and regulation.

I at once began to urge upon Congress the need of laws supplementing the Anti-Trust Law--for this law struck at all big business, good and bad, alike, and as the event proved was very inefficient in checking bad big business, and yet was a constant threat against decent business men.

I strongly urged the inauguration of a system of thoroughgoing and drastic Governmental regulation and control over all big business combinations engaged in inter-State industry.

Here I was able to accomplish only a small part of what I desired to accomplish.

I was opposed both by the foolish radicals who desired to break up all big business, with the impossible ideal of returning to mid-nineteenth century industrial conditions; and also by the great privileged interests themselves, who used these ordinarily--but sometimes not entirely--well-meaning "stool pigeon progressives" to further their own cause.

The worst representatives of big business encouraged the outcry for the total abolition of big business, because they knew that they could not be hurt in this way, and that such an outcry distracted the attention of the public from the really efficient method of controlling and supervising them, in just but masterly fashion, which was advocated by the sane representatives of reform.

However, we succeeded in making a good beginning by securing the passage of a law creating the Department of Commerce and Labor, and with it the erection of the Bureau of Corporations.

The first head of the Department of Commerce and Labor was Mr. Cortelyou, later Secretary of the Treasury.

He was succeeded by Mr. Oscar Straus.

The first head of the Bureau of Corporations was Mr. Garfield, who was succeeded by Mr. Herbert Knox Smith.

No four better public servants from the standpoint of the people as a whole could have been found.

The Standard Oil Company took the lead in opposing all this legislation.

This was natural, for it had been the worst offender in the amassing of enormous fortunes by improper methods of all kinds, at the expense of business rivals and of the public, including the corruption of public servants.

If any man thinks this condemnation extreme, I refer him to the language officially used by the Supreme Court of the nation in its decision against the Standard Oil Company.

Through their counsel, and by direct telegrams and letters to Senators and Congressmen from various heads of the Standard Oil organization, they did their best to kill the bill providing for the Bureau of Corporations.

I got hold of one or two of these telegrams and letters, however, and promptly published them;

and, as generally happens in such a case, the men who were all-powerful as long as they could work in secret and behind closed doors became powerless as soon as they were forced into the open.

The bill went through without further difficulty.

The true way of dealing with monopoly is to prevent it by administrative action before it grows so powerful that even when courts condemn it they shrink from destroying it.

The Supreme Court in the Tobacco and Standard Oil cases, for instance, used very vigorous language in condemning these trusts; but the net result of the decision was of positive advantage to the wrongdoers, and this has tended to bring the whole body of our law into disrepute in quarters where it is of the very highest importance that the law be held in respect and even in reverence.

My effort was to secure the creation of a Federal Commission which should neither excuse nor tolerate monopoly, but prevent it when possible and uproot it when discovered; and which should in addition effectively control and regulate all big combinations, and should give honest business certainty as to what the law was and security as long as the law was obeyed.

Such a Commission would furnish a steady expert control, a control adapted to the problem; and dissolution is neither control nor regulation, but is purely negative; and negative remedies are of little permanent avail.

Such a Commission would have complete power to examine into every big corporation engaged or proposing to engage in business between the States.

It would have the power to discriminate sharply between corporations that are doing well and those that are doing ill; and the distinction between those who do well and those who do ill would be defined in terms so clear and unmistakable that no one could misapprehend them.

Where a company is found seeking its profits through serving the community by stimulating production, lowering prices, or improving service, while scrupulously respecting the rights of others (including its rivals, its employees, its customers, and the general public), and strictly obeying the law, then no matter how large its capital, or how great the volume of its business it would be encouraged to still more abundant production, or better service, by the fullest protection that the Government could afford it.

On the other hand, if a corporation were found seeking profit through injury or oppression of the community, by restricting production through trick or device, by plot or conspiracy against competitors, or by oppression of wage-workers, and then extorting high prices for the commodity it had made artificially scarce, it would be prevented from organizing if its nefarious purpose could be discovered in time, or pursued and suppressed by all the power of Government whenever found in actual operation.

Such a commission, with the power I advocate, would put a stop to abuses of big corporations and small corporations alike; it would draw the line on conduct and not on size; it would destroy monopoly, and make the biggest business man in the country conform squarely to the principles laid down by the American people, while at the same time giving fair play to the little man and certainty of knowledge as to what was wrong and what was right both to big man and little man.

Although under the decision of the courts the National Government had power over the railways, I found, when I became President, that this power was either not exercised at all or exercised with utter inefficiency.

The law against rebates was a dead letter.

All the unscrupulous railway men had been allowed to violate it with impunity;

and because of this, as was inevitable, the scrupulous and decent railway men had been forced to violate it themselves, under penalty of being beaten by their less scrupulous rivals.

It was not the fault of these decent railway men.

It was the fault of the Government.

Thanks to a first-class railway man, Paul Morton of the Santa Fe, son of Mr. Cleveland's Secretary of Agriculture, I was able completely to stop the practice.

Mr. Morton volunteered to aid the Government in abolishing rebates.

He frankly stated that he, like every one else, had been guilty in the matter; but he insisted that he uttered the sentiments of the decent railway men of the country when he said that he hoped the practice would be stopped, and that if I would really stop it, and not merely make believe to stop it, he would give the testimony which would put into the hands of the Government the power to put a complete check to the practice.

Accordingly he testified, and on the information which he gave us we were able to take such action through the Inter-State Commerce Commission and the Department of Justice, supplemented by the necessary additional legislation, that the evil was absolutely eradicated.

He thus rendered, of his own accord, at his own personal risk, and from purely disinterested motives, an invaluable service to the people, a service which no other man who was able to render was willing to render.

As an immediate sequel, the world-old alliance between Blifil and Black George was immediately revived against Paul Morton.

In giving rebates he had done only what every honest railway man in the country had been obliged to do because of the failure of the Government to enforce the prohibition as regards dishonest railway men.

But unlike his fellows he had then shown the courage and sense of obligation to the public which made him come forward and without evasion or concealment state what he had done, in order that we might successfully put an end to the practice; and put an end to the practice we did, and we did it because of the courage and patriotism he had shown.

The unscrupulous railway men, whose dishonest practices were thereby put a stop to, and the unscrupulous demagogues who were either under the influence of these men or desirous of gaining credit with thoughtless and ignorant people no matter who was hurt, joined in vindictive clamor against Mr. Morton.

They actually wished me to prosecute him, although such prosecution would have been a piece of unpardonable ingratitude and treachery on the part of the public toward him--for I was merely acting as the steward of the public in this matter.

I need hardly say that I stood by him; and later he served under me as Secretary of the Navy, and a capital Secretary he made too.

We not only secured the stopping of rebates, but in the Hepburn Rate Bill we were able to put through a measure which gave the Inter-State Commerce Commission for the first time real control over the railways.

There were two or three amusing features in the contest over this bill.

All of the great business interests which objected to Governmental control banded to fight it, and they were helped by the honest men of ultra-conservative type who always dread change, whether good or bad.

We finally forced it through the House.

In the Senate it was referred to a committee in which the Republican majority was under the control of Senator Aldrich, who took the lead in opposing the bill.

There was one Republican on the committee, however, whom Senator Aldrich could not control--Senator Dolliver, of Iowa.

The leading Democrat on the committee was Senator Tillman, of South Carolina, with whom I was not on good terms, because I had been obliged to cancel an invitation to him to dine at the White House on account of his having made a personal assault in the Senate Chamber on his colleague from South Carolina; and later I had to take action against him on account of his conduct in connection with certain land matters.

Senator Tillman favored the bill.

The Republican majority in the committee under Senator Aldrich, when they acted adversely on the bill, turned it over to Senator Tillman, thereby making him its sponsor.

The object was to create what it was hoped would be an impossible situation in view of the relations between Senator Tillman and myself.

I regarded the action as simply childish.

It was a curious instance of how able and astute men sometimes commit blunders because of sheer inability to understand intensity of disinterested motive in others.

I did not care a rap about Mr. Tillman's getting credit for the bill, or having charge of it.

I was delighted to go with him or with any one else just so long as he was traveling in my way--and no longer.