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Theodore Roosevelt and His Times
Chapter VII. The Square Deal for Business
by Howland, Harold
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During the times of Roosevelt, the American people were
profoundly concerned with the trust problem. So was Roosevelt
himself. In this important field of the relations between "big
business" and the people he had a perfectly definite point of
view, though he did not have a cut and dried programme. He was
always more interested in a point of view than in a programme,
for he realized that the one is lasting, the other shifting. He
knew that if you stand on sound footing and look at a subject
from the true angle, you may safely modify your plan of action as
often and as rapidly as may be necessary to fit changing
conditions. But if your footing is insecure or your angle of
vision distorted, the most attractive programme in the world may
come to ignominious disaster.
There were, broadly speaking, three attitudes toward the trust
problem which were strongly held by different groups in the
United States. At one extreme was the threatening growl of big
business, "Let us alone!" At the other pole was the shrill outcry
of William Jennings Bryan and his fellow exhorters, "Smash the
trusts!" In the golden middle ground was the vigorous demand of
Roosevelt for a "square deal."
In his first message to Congress, the President set forth his
point of view with frankness and clarity. His comprehensive
discussion of the matter may be summarized thus: The tremendous
and highly complex industrial development which went on with
great rapidity during the latter half of the nineteenth century
produced serious social problems. The old laws and the old
customs which had almost the binding force of law were once quite
sufficient to regulate the accumulation and distribution of
wealth. Since the industrial changes which have so enormously
increased the productive power of mankind, these regulations are
no longer sufficient. The process of the creation of great
corporate fortunes has aroused much antagonism; but much of this,
antagonism has been without warrant. There have been, it is true,
abuses connected with the accumulation of wealth; yet no fortune
can be accumulated in legitimate business except by conferring
immense incidental benefits upon others. The men who have driven
the great railways across the continent, who have built up
commerce and developed manufactures, have on the whole done great
good to the people at large. Without such men the material
development of which Americans are so justly proud never could
have taken place. They should therefore recognize the immense
importance of this material development by leaving as unhampered
as is compatible with the public good the strong men upon whom
the success of business inevitably rests. It cannot too often be
pointed out that to strike with ignorant violence at the
interests of one set of men almost inevitably endangers the
interests of all. The fundamental rule in American national life
is that, on the whole and in the long run, we shall all go up or
down together. Many of those who have made it their vocation to
denounce the great industrial combinations appeal especially to
the primitive instincts of hatred and fear. These are precisely
the two emotions which unfit men for cool and steady judgment.
The whole history of the world shows that legislation, in facing
new industrial conditions, will generally be both unwise and
ineffective unless it is undertaken only after calm inquiry and
with sober self-restraint.
This is one side of the picture as it was presented by the
President in his message to Congress. It was characteristic that
this aspect should be put first, for Roosevelt always insisted
upon doing justice to the other side before he demanded justice
for his own. But he then proceeded to set forth the other side
with equal vigor: There is a widespread conviction in the minds
of the American people that the great corporations are in certain
of their features and tendencies hurtful to the general welfare.
It is true that real and grave evils have arisen, one of the
chief of them being overcapitalization, with its many baleful
consequences. This state of affairs demands that combination and
concentration in business should be, not prohibited, but
supervised and controlled. Corporations engaged in interstate
commerce should be regulated if they are found to exercise a
license working to the public injury. The first essential in
determining how to deal with the great industrial combinations is
knowledge of the facts. This is to be obtained only through
publicity, which is the one sure remedy we can now invoke before
it can be determined what further remedies are needed.
Corporations should be subject to proper governmental
supervision, and full and accurate information as to their
operations should be made public at regular intervals. The nation
should assume powers of supervision and regulation over all
corporations doing an interstate business. This is especially
true where the corporation derives a portion of its wealth from
the existence of some monopolistic element or tendency in its
business. The Federal Government should regulate the activities
of corporations doing an interstate business, just as it
regulates the activities of national banks, and, through the
Interstate Commerce Commission, the operations of the railroads.
Roosevelt was destined, however, not to achieve the full measure
of national control of corporations that he desired. The elements
opposed to his view were too powerful. There was a fortuitous
involuntary partnership though it was not admitted and was even
violently denied between the advocates of "Let us alone!" and of
"Smash the trusts!" against the champion of the middle way. In
his "Autobiography" Roosevelt has described this situation:
"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 doctrine 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 government 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 a 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."*
[Autobiography (Scribner), pp. 424-25.]
When Roosevelt became President, there were three directions in
which energy needed to be applied to the solution of the trust
problem: in the more vigorous enforcement of the laws already on
the statute books; in the enactment of necessary new laws on
various phases of the subject; and in the arousing of an
intelligent and militant public opinion in relation to the whole
question. To each of these purposes the new President applied
himself with characteristic vigor.
The Sherman Anti-Trust law, which had already been on the Federal
statute books for eleven years, forbade "combinations in
restraint of trade" in the field of interstate commerce. During
three administrations, eighteen actions had been brought by the
Government for its enforcement. At the opening of the twentieth
century it was a grave question whether the Sherman law was of
any real efficacy in preventing the evils that arose from
unregulated combination in business. A decision of the United
States Supreme Court, rendered in 1895 in the so-called Knight
case, against the American Sugar Refining Company, had, in the
general belief, taken the teeth out of the Sherman law. In the
words of Mr. Taft, "The effect of the decision in the Knight case
upon the popular mind, and indeed upon Congress as well, was to
discourage hope that the statute could be used to accomplish its
manifest purpose and curb the great industrial trusts which, by
the acquisition of all or a large percentage of the plants
engaged in the manufacture of a commodity, by the dismantling of
some and regulating the output of others, were making every
effort to restrict production, control prices, and monopolize the
business." It was obviously necessary that the Sherman act,
unless it were to pass into innocuous desuetude, should have the
original vigor intended by Congress restored to it by a new
interpretation of the law on the part of the Supreme Court.
Fortunately an opportunity for such a change presented itself
with promptness. A small group of powerful financiers had
arranged to take control of practically the entire system of
railways in the Northwest, "possibly," Roosevelt has said, "as
the first step toward controlling the entire railway system of
the country." They had brought this about by organizing the
Northern Securities Company to hold the majority of the stock of
two competing railways, the Great Northern and the Northern
Pacific. At the direction of President Roosevelt, suit was
brought by the Government to prevent the merger. The defendants
relied for protection upon the immunity afforded by the decision
in the Knight case. But the Supreme Court now took more advanced
ground, decreed that the Northern Securities Company was an
illegal combination, and ordered its dissolution.
By the successful prosecution of this case the Sherman act was
made once more a potentially valuable instrument for the
prevention of the more flagrant evils that flow from
"combinations in restraint of trade." During the remaining years
of the Roosevelt Administrations, this legal instrument was used
with aggressive force for the purpose for which it was intended.
In seven years and a half, forty-four prosecutions were brought
under it by the Government, as compared with eighteen in the
preceding eleven years. The two most famous trust cases, next to
the Northern Securities case and even surpassing it in popular
interest, because of the stupendous size of the corporations
involved, were those against the Standard Oil Company and the
American Tobacco Company. These companion cases were not finally
decided in the Supreme Court until the Administration of
President Taft; but their prosecution was begun while Roosevelt
was in office and by his direction. They were therefore a
definite part of his campaign for the solution of the vexed
trust problem. Both cases were decided, by every court through
which they passed, in favor of the Government. The Supreme
Court finally in 1911 decreed that both the Standard Oil and the
Tobacco trusts were in violation of the Sherman act and ordered
their dissolution. There could now no longer be any question that
the Government could in fact exercise its sovereign will over
even the greatest and the most powerful of modern business
organizations.
The two cases had one other deep significance which at first
blush looked like a weakening of the force of the anti-trust law
but which was in reality a strengthening of it. There had been
long and ardent debate whether the Sherman act should be held to
apply to all restraints of trade or only to such as were
unreasonable. It was held by some that it applied to ALL
restraints and therefore should be amended to cover only
unreasonable restraints. It was held by others that it applied to
all restraints and properly so. It was held by still others that
it applied only to unreasonable restraints. But the matter had
never been decided by competent authority. The decision of the
Supreme Court in these two outstanding cases, however, put an end
to the previous uncertainty. Chief Justice White, in his two
opinions, laid it down with definiteness that in construing and
applying the law recourse must be had to the "rule of reason." He
made clear the conviction of the court that it was "undue"
restraints of trade which the law forbade and not incidental or
inconsiderable ones. This definitive interpretation of the law,
while it caused considerable criticism at the moment, in ultimate
effect so cleared the air about the Sherman act as effectually to
dispose of the demands for its amendment in the direction of
greater leniency or severity.
But the proving of the anti-trust law as an effective weapon
against the flagrantly offending trusts, according to Roosevelt's
conviction, was only a part of the battle. As he said,
"monopolies can, although in rather cumbrous fashion, be broken
up by lawsuits. Great business combinations, however, cannot
possibly be made useful instead of noxious industrial agencies
merely by lawsuits, and especially by lawsuits supposed to be
carried on for their destruction and not for their control and
regulation." He took, as usual, the constructive point of view.
He saw both sides of the trust question--the inevitability and
the beneficence of combination in modern business, and the danger
to the public good that lay in the unregulated and uncontrolled
wielding of great power by private individuals. He believed that
the thing to do with great power was not to destroy it but to use
it, not to forbid its acquisition but to direct its application.
So he set himself to the task of securing fresh legislation
regarding the regulation of corporate activities.
Such legislation was not easy to get; for the forces of reaction
were strong in Congress. But several significant steps in this
direction were taken before Roosevelt went out of office. The new
Federal Department of Commerce and Labor was created, and its
head became a member of the Cabinet. The Bureau of Corporations
was established in the same department. These new executive
agencies were given no regulatory powers, but they did perform
excellent service in that field of publicity on the value of
which Roosevelt laid so much stress.
In the year 1906 the passing of the Hepburn railway rate bill for
the first time gave the Interstate Commerce Commission a measure
of real control over the railways, by granting to the Commission
the power to fix maximum rates for the transportation of freight
in interstate commerce. The Commission had in previous years,
under the authority of the act which created it and which
permitted the Commission to decide in particular cases whether
rates were just and reasonable, attempted to exercise this power
to fix in these specific cases maximum rates. But the courts had
decided that the Commission did not possess this right. The
Hepburn act also extended the authority of the Commission over
express companies, sleeping-car companies, pipe lines, private
car lines, and private terminal and connecting lines. It
prohibited railways from transporting in interstate commerce any
commodities produced or owned by themselves. It abolished free
passes and transportation except for railway employees and
certain other small classes of persons, including the poor and
unfortunate classes and those engaged in religious and charitable
work. Under the old law, the Commission was compelled to apply to
a Federal court on its own initiative for the enforcement of any
order which it might issue. Under the Hepburn act the order went
into effect at once; the railroad must begin to obey the order
within thirty days; it must itself appeal to the court for the
suspension and revocation of the order, or it must suffer a
penalty of $5000 a day during the time that the order was
disobeyed. The act further gave the Commission the power to
prescribe accounting methods which must be followed by the
railways, in order to make more difficult the concealment of
illegal rates and improper favors to individual shippers. This
extension and strengthening of the authority of the Interstate
Commerce Commission was an extremely valuable forward step, not
only as concerned the relations of the public and the railways,
but in connection with the development of predatory corporations
of the Standard Oil type. Miss Ida Tarbell, in her frankly
revealing "History of the Standard Oil Company", which had been
published in 1904, had shown in striking fashion how secret
concessions from the railways had helped to build up that great
structure of business monopoly. In Miss Tarbell's words, "Mr.
Rockefeller's great purpose had been made possible by his
remarkable manipulation of the railroads. It was the rebate which
had made the Standard Oil trust, the rebate, amplified,
systematized, glorified into a power never equalled before or
since by any business of the country." The rebate was the device
by which favored shippers--favored by the railways either
voluntarily or under the compulsion of the threats of retaliation
which the powerful shippers were able to make--paid openly the
established freight rates on their products and then received
back from the railways a substantial proportion of the charges.
The advantage to the favored shipper is obvious. There were other
more adroit ways in which the favoritism could be accomplished;
but the general principle was the same. It was one important
purpose--and effect--of the Hepburn act to close the door to this
form of discrimination.
One more step was necessary in order to eradicate completely this
mischievous condition and to "keep the highway of commerce open
to all on equal terms." It was imperative that the law relative
to these abuses should be enforced. On this point Roosevelt's own
words are significant: "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."
Roosevelt did not propose that this condition should continue to
be the fault of the Government while he was at its head, and he
inaugurated a vigorous campaign against railways that had given
rebates and against corporations that had accepted--or
extorted-them. The campaign reached a spectacular peak in a
prosecution of the Standard Oil Company, in which fines
aggregating over $29,000,000 were imposed by Judge Kenesaw M.
Landis of the United States District Court at Chicago for the
offense of accepting rebates. The Circuit Court of Appeals
ultimately determined that the fine was improperly large, since
it had been based on the untenable theory that each shipment on
which a rebate was paid constituted a separate offense. At the
second trial the presiding judge ordered an acquittal. In spite,
however, of the failure of this particular case, with its
spectacular features, the net result of the rebate prosecutions
was that the rebate evil was eliminated for good and all from
American railway and commercial life.
When Roosevelt demanded the "square deal" between business and
the people, he meant precisely what he said. He had no intention
of permitting justice to be required from the great corporations
without insisting that justice be done to them in turn. The most
interesting case in point was that of the Tennessee Coal and Iron
Company. To this day the action which Roosevelt took in the
matter is looked upon, by many of those extremists who can see
nothing good in "big business," as a proof of his undue sympathy
with the capitalist. But thirteen years later the United States
Supreme Court in deciding the case against the United States
Steel Corporation in favor of the Corporation, added an obiter
dictum which completely justified Roosevelt's action.
In the fall of 1907 the United States was in the grip of a
financial panic. Much damage was done, and much more was
threatened. One great New York trust company was compelled to
close its doors, and others were on the verge of disaster. One
evening in the midst of this most trying time, the President was
informed that two representatives of the United States Steel
Corporation wished to call upon him the next morning. As he was
at breakfast the next day word came to him that Judge Gary and
Mr. Frick were waiting in the Executive Office. The President
went over at once, sending word to Elihu Root, then Secretary of
State, to join him. Judge Gary and Mr. Frick informed the
President that a certain great firm in the New York financial
district was upon the point of failure. This firm held a large
quantity of the stock of the Tennessee Coal and Iron Company. The
Steel Corporation had been urged to purchase this stock in order
to avert the failure. The heads of the Steel Corporation asserted
that they did not wish to purchase this stock from the point of
view of a business transaction, as the value which the property
might be to the Corporation would be more than offset by the
criticism to which they would be subjected. They said that they
were sure to be charged with trying to secure a monopoly and to
stifle competition. They told the President that it had been the
consistent policy of the Steel Corporation to have in its control
no more than sixty per cent of the steel properties of the
country; that their proportion of those properties was in fact
somewhat less than sixty per cent; and that the acquisition of
the holdings of the Tennessee Company would raise it only a
little above that point. They felt, however, that it would be
extremely desirable for them to make the suggested purchase in
order to prevent the damage which would result from the failure
of the firm in question. They were willing to buy the stocks
offered because in the best judgment of many of the strongest
bankers in New York the transaction would be an influential
factor in preventing a further extension of the panic. Judge Gary
and Mr. Frick declared that they were ready to make the purchase
with this end in view but that they would not act without the
President's approval of their action.
Immediate action was imperative. It was important that the
purchase, if it were to be made, should be announced at the
opening of the New York Stock Exchange at ten o'clock that
morning. Fortunately Roosevelt never shilly-shallied when a
crisis confronted him. His decision was instantaneous. He assured
his callers that while, of course, he could not advise them to
take the action, proposed, he felt that he had no public duty to
interpose any objection.
This assurance was quite sufficient. The pure chase was made and
announced, the firm in question did not fail, and the panic was
arrested. The immediate reaction of practically the whole country
was one of relief. It was only later, when the danger was past,
that critics began to make themselves heard. Any one who had
taken the trouble to ascertain the facts would have known beyond
question that the acquisition of the Tennessee properties was not
sufficient to change the status of the Steel Corporation under
the anti-trust law. But the critics did not want to know the
facts. They wanted--most of them, at least--to have a stick with
which to beat Roosevelt. Besides, many of them did not hold
Roosevelt's views about the square deal. Their belief was that
whatever big business did was ipso facto evil and that it was the
duty of public officials to find out what big business wanted to
do and then prevent its accomplishment.
Under a later Administration, Roosevelt was invited to come
before a Congressional investigating committee to explain what he
did in this famous case. There he told the complete story of the
occurrence simply, frankly, and emphatically, and ended with this
statement: "If I were on a sailboat, I should not ordinarily
meddle with any of the gear; but if a sudden squall struck us,
and the main sheet jammed, so that the boat threatened to
capsize, I would unhesitatingly cut the main sheet, even though I
were sure that the owner, no matter how grateful to me at the
moment for having saved his life, would a few weeks later, when
he had forgotten his danger and his fear, decide to sue me for
the value of the cut rope. But I would feel a hearty contempt
for the owner who so acted."
Two laws passed during the second Roosevelt Administration had an
important bearing on the conduct of American business, though in
a different way from those which have already been considered.
They were the Pure Food law, and the Meat Inspection act. Both
were measures for the protection of the public health; but both
were at the same time measures for the control of private
business. The Pure Food law did three things: it prohibited the
sale of foods or drugs which were not pure and unadulterated; it
prohibited the sale of drugs which contained opium, cocaine,
alcohol, and other narcotics unless the exact proportion of them
in the preparation were stated on the package; and it prohibited
the sale of foods and drugs as anything else than what they
actually were. The Meat Inspection law required rigid inspection
by Government officials of all slaughterhouses and packing
concerns preparing meat food products for distribution in
interstate commerce. The imperative need for the passage of this
law was brought forcibly and vividly to the popular attention
through a novel, "The Jungle", written by Upton Sinclair, in
which the disgraceful conditions of uncleanliness and revolting
carelessness in the Chicago packing houses were described with
vitriolic intensity. An official investigation ordered by the
President confirmed the truth of these timely revelations.
These achievements on the part of the Roosevelt Administrations
were of high value. But, after all Roosevelt performed an even
greater service in arousing the public mind to a realization of
facts of national significance and stimulating the public
conscience to a desire to deal with them vigorously and justly.
From the very beginning of his Presidential career he realized
the gravity of the problems created by the rise of big business;
and he began forthwith to impress upon the people with hammer
blows the conditions as he saw them, the need for definite
corrective action, and the absolute necessity for such treatment
of the case as would constitute the "square deal." An interesting
example of his method and of the response which it received is to
be found in the report of an address which he made in 1907. It
runs thus:
"From the standpoint of our material prosperity there is only one
other thing as important as the discouragement of a spirit of
envy and hostility toward business men, toward honest men of
means; this is the discouragement of dishonest business men.
[Great applause.]
"Wait a moment; I don't want you to applaud this part unless you
are willing to applaud also the part I read first, to which you
listened in silence. [Laughter and applause.] I want you to
understand that I will stand just as straight for the rights of
the honest man who wins his fortune by honest methods as I will
stand against the dishonest man who wins a fortune by dishonest
methods. And I challenge the right to your support in one
attitude just as much as in the other. I am glad you applauded
when you did, but I want you to go back now and applaud the other
statement. I will read a little of it over again. 'Every
manifestation of ignorant envy and hostility toward honest men
who acquire wealth by honest means should be crushed at the
outset by the weight of a sensible public opinion.' [Tremendous
applause.] Thank you. Now I'll go on."
Roosevelt's incessant emphasis was placed upon conduct as the
proper standard by which to judge the actions of men. "We are,"
he once said, "no respecters of persons. If a labor union does
wrong, we oppose it as firmly as we oppose a corporation which
does wrong; and we stand equally stoutly for the rights of the
man of wealth and for the rights of the wage-worker. We seek to
protect the property of every man who acts honestly, of every
corporation that represents wealth honestly accumulated and
honestly used. We seek to stop wrongdoing, and we desire to
punish the wrongdoer only so far as is necessary to achieve this
end."
At another time he sounded the same note--sounded it indeed with
a "damnable iteration" that only proved how deeply it was
imbedded in his conviction
"Let us strive steadily to secure justice as between man and man
without regard to the man's position, social or otherwise. Let us
remember that justice can never be justice unless it is equal. Do
justice to the rich man and exact justice from him; do justice to
the poor man and exact justice from him--justice to the
capitalist and justice to the wage-worker . . . . I have an
equally hearty aversion for the reactionary and the demagogue;
but I am not going to be driven out of fealty to my principles
because certain of them are championed by the reactionary and
certain others by the demagogue. The reactionary is always
strongly for the rights of property; so am I . . . . I will not
be driven away from championship of the rights of property upon
which all our civilization rests because they happen to be
championed by people who champion furthermore the abuses of
wealth . . . . Most demagogues advocate some excellent popular
principles, and nothing could be more foolish than for decent men
to permit themselves to be put into an attitude of ignorant and
perverse opposition to all reforms demanded in the name of the
people because it happens that some of them are demanded by
demagogues".
Such an attitude on the part of a man like Roosevelt could not
fail to be misunderstood, misinterpreted, and assailed. Toward
the end of his Presidential career, when he was attacking with
peculiar vigor the "malefactors of great wealth" whom the
Government had found it necessary to punish for their predatory
acts in corporate guise, it was gently intimated by certain
defenders of privilege that he was insane. At other times, when
he was insisting upon justice even to men who had achieved
material success, he was placed by the more rabid of the radical
opponents of privilege in the hierarchy of the worshipers of the
golden calf. His course along the middle of the onward way
exposed him peculiarly to the missiles of invective and scorn
from the partisans on either side. But neither could drive him
into the arms of the other.
The best evidence of the soundness of the strategy with which he
assailed the enemies of the common good, with whirling war-club
but with scrupulous observance of the demands of justice and fair
play, is to be found in the measure of what he actually achieved.
He did arouse the popular mind and sting the popular conscience
broad awake. He did enforce the law without fear or favor. He did
leave upon the statute-book and in the machinery of government
new means and methods for the control of business and for the
protection of the general welfare against predatory wealth.
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