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26 June, 2013
Theodore Roosevelt and His Times
Chapter VII. The Square Deal for Business
by Howland, Harold

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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