The Progressive Era

1. Financial Influence on Political Parties

Before 1896, the Democratic Party was roughly a party devoted to free trade and the gold standard, while the Republican Party stood squarely for a protective tariff and was more amenable to inflationist experimentation. Put very simply, the Democrats were particularly congenial to and influenced by Wall Street investment bankers, notably the Morgan interests and by the European Rothschilds, acting through their New York agent, August Belmont, who was for many years national treasurer of the Democratic Party. The Republicans, on the other hand, were more susceptible to the influence of manufacturers seeking a protective tariff, in particular Pennsylvania iron and steel men, who had been in the forefront of the struggle for high tariffs ever since 1820. One of the main leaders of the Republican Party during the Civil War and the immediate post-war years was Representative Thaddeus Stevens, Pennsylvania iron manufacturer, and a leading proponent of the protective tariff as well as irredeemable Greenback money.1

The two Democratic administrations of Grover Cleveland were heavily influenced by the Morgans and allied Wall Street interests. Cleveland himself got his start as a railroad lawyer in Buffalo, including for Morgan-affiliated railroads such as the New York Central. In between terms Cleveland became associated with the powerful New York City law firm Bangs, Stetson, Tracy, and MacVeagh. The original senior partner of the firm was Charles E. Tracy, J.P. Morgan’s brother in law. After Tracy died in 1887, Francis Lynde Stetson became the main partner. Stetson was Cleveland’s close friend, political advisor, and Wall Street law associate at the firm, and was also the counsel to J.P. Morgan & Co. Cleveland’s major political organizer and Secretary of the Navy in his first cabinet was the brilliant Wall Street financier William C. Whitney, who was affiliated with various railroad interests and later served as the director of several Morgan companies. Whitney’s daughter was later to marry Morgan partner Willard D. Straight. But Whitney was doubly blessed by being also closely associated with Standard Oil and the Rockefellers, a mainly Republican family, as his brother in law Oliver H. Payne was a close associate with Rockefeller in the ownership of Standard Oil. His first Secretary of War was the Boston Brahmin William C. Endicott, who had married into the wealthy Peabody family. George Peabody had established a banking firm which included J.P. Morgan’s father as a senior partner; and a Peabody had been best man at J.P.’s wedding.

Another leading Cleveland associate was the prominent Boston attorney Richard Olney, Attorney-General and then Secretary of State in the second Cleveland administration. His first Secretary of State was Thomas F. Bayard, who had strong ties to August Belmont, allied to the Morgans and Rothschilds, and August’s son Perry worked for Bayard in Congress. Before assuming office, Olney was the counsel to the Morgan affiliated Boston & Maine Railroad, as well as to the Burlington Railroad. Other Cleveland advisers included Morgan himself, Stetson, and August Belmont Jr., himself a Rothschild agent.

After he left the presidency, Grover Cleveland was, at the suggestion of J.P. Morgan, made a trustee of the Equitable Life Assurance Society, and participated in stock speculation with Whitney and Oliver Payne.2

If the Cleveland administration was heavily Morgan-tinged, the Republican Party and the McKinley administration was even more under the domination of John D. Rockefeller and Standard Oil. In the House, the powerful Speaker Thomas B. Reed of Maine was an old and close friend of Henry H. Rogers, an early associate of Rockefeller and one of the major owners of Standard Oil. The unquestioned boss of the New York Republican Party was Thomas C. Platt, an old friend and schoolmate of John D. Rockefeller’s at Owego High School in upstate New York. Dominating the Senate from his post as head of the Finance Committee was Nelson W. Aldrich of Rhode Island, arch-protectionist and father-in-law of John D. Rockefeller, Jr. Aldrich entered the Senate in 1881 as a moderately prosperous wholesale grocer, and then, after 30 years of devotion to the public service, he died a multimillionaire.

Throughout his career in Congress, William McKinley of Ohio was associated with the cause of protectionism. Devoted in particular to Ohio iron manufacturing, McKinley was born into an iron-mongering and therefore protectionist family. McKinley’s political and financial mentor, who engineered his political career and his presidential nomination and saved him from bankruptcy while Governor of Ohio, was Marcus Alonzo Hanna, coal operator and iron manufacturer. A business associate as well as an old friend and classmate of Rockefeller at Central High in Cleveland, Hanna was John D.’s conduit to influence over the Ohio and the national Republican Parties. As soon as McKinley became president, he had the Ohio legislature make Mark Hanna Senator from Ohio; other Senators from that state were once Henry B. Payne, father of the Standard Oil partner, and the newly elected Joseph B. Foraker, who as a Senator was a recipient of Standard Oil stipends.

McKinley’s cabinet reflected a strong Rockefeller Standard Oil influence. His Secretary of State was the veteran Ohio Republican John Sherman, whom Hanna had backed for the presidential nomination a decade earlier and who currently took his Senate position. Sherman’s son-in-law was a former financial advisor to Rockefeller. Secretary of Treasury was Lyman J. Gage, close to the Rockefeller-controlled National City Bank and previous president of the First National Bank of Chicago, who, after leaving the Cabinet, became president of the Rockefeller-controlled United States Trust Co. Gage’s hand-picked assistant at the Treasury, Frank A. Vanderlip, later moved to the Rockefeller-controlled National City Bank, eventually becoming its president. His second Ambassador to the Court of St. James was Joseph H. Choate, distinguished attorney for Standard Oil. Secretary of the Navy was John Davis Long, who was later appointed to be a director of the United States Trust Co. while still in office.

Driven from their Democratic home by the victory of the Bryanites, the Morgan interests backed the prominent Wall St. banker Levi P. Morton, governor of New York and former vice president, for the Republican presidential nomination in 1896. Defeating Morton and refusing him another turn at the vice presidency, McKinley made amends to the Morgans by picking as his running-mate Garret A. Hobart. Hobart had the bad taste to continue in his posts as director of a Morgan dominated bank, an insurance company, and a railroad even while vice president. In addition, William McKinley eventually granted the War Department cabinet post to Elihu Root, a brilliant attorney for Ryan and then for J.P. Morgan. Moreover, McKinley’s Secretary of the Interior was Cornelius N. Bliss, close associate of Morgan and Ryan, and a director of the Equitable Life Assurance Society. In McKinley’s second term, the Attorney-Generalship was granted to Philander C. Knox of Pittsburgh, who served as counsel for the nation’s leading steel manufacturer Carnegie Steel which was to help form U.S. Steel, which was in turn also dominated by Morgan. Knox was a close friend and associate of Andrew Carnegie’s partner and right-hand man, Henry Clay Frick, and a director of the great Pittsburgh banks of the House of Mellon. It was Frick who personally urged McKinley to name Knox to the Attorney-General post.

In September, 1901, early in President McKinley’s second term, a fateful event occurred which changed the face of American politics. One of the several “lone nuts” who have suddenly appeared in American history to assassinate an American president gunned down William McKinley, and the brilliantly crafted McKinley-Hanna-Rockefeller regime crumbled into dust. For, as fate would have it, his successor was the colorful young New Yorker Vice President Theodore Roosevelt, beholden to a very different and clashing set of financial interests. The first — and the quintessential — “progressive” American president had been catapulted into power.3

2.  T.R.: The Making of a Progressive

Teddy Roosevelt was America’s first progressive president and it was during his administration that progressivism began to take shape as a political force, on the urban and state, as well as federal, levels.

An aristocratic New Yorker, Roosevelt went to Harvard, and there married into the top Brahmin families of the Boston financial oligarchy. His first wife, Alice Lee, was the daughter of George Cabot Lee, and was related to the Cabots, Lees, and Higginsons (the latter of the Boston investment banking firm of Lee, Higginson & Co.). The Boston financial group was generally allied to the Morgan interests. In Boston, he gained a lifelong friend and close political mentor, the rising young politician Henry Cabot Lodge, also a member of the Cabot family.

After a stint as New York Assemblyman, the death of his first wife and a bitter break with his reform friends on his supporting the Republican ticket in 1884, Roosevelt moved west to his South Dakota ranch. Returning to New York, he was badly beaten for the mayoralty of New York City in 1886, and he retired to writing historical works. It seemed that, at the age of 28, Teddy Roosevelt’s political career was already at an end.

But in 1889, the new President Benjamin Harrison was induced by the powerful Congressman Henry Cabot Lodge to appoint Teddy Roosevelt head of the Civil Service Commission. So ardent was Roosevelt in this post that he was reappointed by the Democratic president Grover Cleveland.4

In addition to a strong nationalist policy, devotion to militarism and a large navy, and to a Republican protective tariff, Roosevelt had long called for an ever-greater strengthening of the civil service system. Here, he joined the principal “reform” cause in the decades after the Civil War, a cause that prefigured the later progressive call for taking “politics” out of government. Civil service reform was the first proto-progressive cause to blend moralistic attacks on “corruption” with a supposedly scientific plea for “efficiency” and non-partisanship in government. The idea was to end or limit the “spoils system” by taking ever more government jobs out of politics, freeing bureaucrats in their posts, and making hiring and promotion subject to “objective” written tests of “merit” rather than political party or ideology.

The civil service system, however, which began in force with the Pendleton Act of 1883, had vitally important but unacknowledged effects. For the consequence was to build and preserve a continuing ruling oligarchy that was not subject to the democratic check of the voting public. “Non-partisanship” and civil service “protection” meant the fastening of a permanent bureaucratic elite upon the hapless public. It paved the way for rule by the expert rather than by political representatives. And there was another built-in consequence of civil service. If Party A appoints its members and then freezes them in place via civil service, this meant that, when Party B came into power, it could no longer find jobs for the party faithful in the good old way of ousting the members of Party A. Instead, Party B could only reward its followers by creating new jobs which it, in turn, could freeze into civil service. In short, the advent of civil service brought a powerful incentive for either party to multiply the number of government officials and bureaucrats.5

In 1895, Roosevelt was made president of the Police Board of New York City. The blustering Roosevelt immediately began to make his mark in a way that was becoming standard for “reform” politicians: a pietistic crackdown on liquor and Sunday business. Specifically, T.R. began a ferocious enforcement of the Republican-sponsored Raines Law, which mandated Sunday closing for liquor stores and saloons. The crackdown was particularly effective against neighborhood saloons and beer gardens, the latter the habitual Sunday entertainment of German-Americans. As a not unintended consequence, the result was a crippling of the political power of the saloonkeepers, the major political influence in liturgical-ethnic neighborhoods, and also habitually the bulwark of the urban Democratic Party.

Soon Germans protested against the Raines Law in New York City, and the Liquor Dealers’ Association claimed that 90% of the saloonkeepers had been driven into bankruptcy by Roosevelt’s rigorous prosecution of the law. Even the reform-fusion Mayor, William L. Strong, who had appointed the unpopular police commissioner, stated at a public dinner: “I found that the Dutchman [Roosevelt] whom I had appointed meant to turn all New Yorkers into Puritans.”6 The Mayor urged T.R. — in vain — to relax his enforcement of the law, while Roosevelt was denounced and threatened, and a bomb was sent to him in the mail. The Chairman of the Republican County Committee in Manhattan went so far as to read T.R. out of the party in a desperate attempt to hold the German-American vote. But, with Roosevelt holding fast, the Republican Party went down to a crushing defeat in the ensuing election, with 30,000 German-Americans bolting to the Democratic Party. The state legislature then managed to revive saloons by authorizing the sale of liquor in hotels serving meals, an act which spawned a host of new pseudo-hotels and saloons, institutions which Roosevelt found he could not effectively stamp out.7

In 1896, Roosevelt and his friend Senator Lodge backed the pro-gold standard Speaker of the House Thomas B. Reed of Maine for president, and we have seen the role that Lodge played in forcing the Morgan-Wall Street pro-gold standard plank upon William McKinley. After McKinley’s election, Roosevelt returned to the federal arena. At the insistence of Lodge and of T.R.’s good friends, Cincinnati millionaires Mr. and Mrs. Bellamy Storer, who had helped to bail McKinley out of bankruptcy four years earlier, Roosevelt was made Assistant Secretary of the Navy.

All his life Theodore Roosevelt had thirsted for war — any war — and military glory. In 1886, hearing of possible conflict with Mexico, Roosevelt offered to organize his South Dakota ranch hands into a cavalry battalion to lead against that country. In 1892, Roosevelt hailed U.S. demands for Chilean indemnity for injuries to U.S. sailors at Valparaiso, and he dreamt of leading a cavalry charge. Two years later, he demanded annexation of the Hawaiian Islands and the construction of a Nicaraguan canal. In 1895, T.R. lauded President Cleveland’s hawkish anti-British position in the Venezuela boundary dispute, and he looked forward to war with Britain as a means of conquering Canada. That year, he wrote to Lodge that “... This country needs a war,” which incited reformer and President Charles W. Eliot of Harvard to denounce Roosevelt’s “doctrine of jingoism, this chip-on-the-shoulder attitude ... of a ruffian and a bully,” and claimed that Roosevelt and Lodge were “degenerated sons of Harvard.” Roosevelt in turn grouped together Eliot and reformer Carl Schurz with “the futile sentimentalists of the international arbitration type,” who would lead to “a flabby, timid type of character, which eats away at the great fighting qualities of our race.”

Now, as Assistant Secretary, Roosevelt called for the building of more battleships and dreamt of war with Japan and the annexation of Hawaii. Representative Thomas S. Butler of Pennsylvania, a member of the House Naval Affairs Committee in 1897, wrote that “Roosevelt came down here [to Washington] looking for war. He did not care whom we fought as long as there was a scrap.”8 Also yearning for war per se were the scholars, theoreticians, and politicos of T.R.’s circle: Senator Lodge, the Brahmin historian Brooks Adams, Ambassador to Great Britain John Hay, and T.R.’s naval mentor, Captain Alfred T. Mahan. Roosevelt’s friend Justice Oliver Wendell Holmes, Jr. held war to be “divine” and held that the United States needed war to substitute danger for comfort.

After the U.S. battleship Maine exploded in the Havana harbor on February 15, 1898, Secretary of the Navy John D. Long, leaving the office for the day on February 25, warned the impetuous jingo Roosevelt not to take “any step affecting the policy of the administration without consulting the President or me.” Instead, T.R. seized the opportunity to violate these instructions and to change American policy by sending a fateful telegram to Commodore George Dewey, ordering Dewey’s squadron out of Hong Kong and, in the event of war with Spain, to blockade the Spanish fleet on the Asian coast and then to proceed to offensive operations in the Philippines. While Secretary Long was furious, he failed to countermand T.R.’s telegram, so when the U.S. went to war in April, Dewey sailed to Manila Bay and eventually the U.S. conquered the Philippines.9

When war came, Teddy Roosevelt at last found the military action he had lusted for all his life. With his equally pro-war friend Colonel Leonard Wood, T.R. formed the First Volunteer Cavalry, the “Rough Riders.” T.R.’s and the Rough Riders’ military prowess in Cuba was less than overwhelming; indeed, Roosevelt displayed a penchant for charging his men into ambush and absorbing extremely heavy losses. But although getting ambushed or surrounded twice and losing over a quarter of his men, Teddy Roosevelt managed to emerge elated and to parlay his military exploits into public legend.10

Back from the war, Roosevelt was urged upon the Republican Party as a gubernatorial candidate by the powerful Chauncey M. Depew, president of the Morgan-controlled New York Central Railroad. T.R.’s campaign was heavily financed by the Morgan-controlled Mutual Life Insurance company, along with other insurance companies, while J.P. Morgan apparently gave the campaign $10,000.11 T.R. ran his successful campaign strictly upon the issue of the war and his Rough Riders, denouncing the Democrats as being unpatriotic for giving reluctant support to the war and demanding that the United States must help its new conquests because “our flag has gone” to these lands.12

Teddy Roosevelt’s term as governor has, until recent years, been neglected by historians, but now it is realized that his policies as governor prefigured his immediately succeeding years in the presidency.13 Roosevelt moved quickly on his long-time favorite front, the extension of civil service. Working closely with George McAneny, secretary of the Civil Service Reform Association, Roosevelt drove through a civil service expansion greater than any other previously obtained in the United States.

In collaboration with labor union leaders, social workers, and wealthy Midwest Baptists, Roosevelt urged putting more teeth in labor laws, centralizing and expanding the enforcement. In addition, the maximum 10-hour-per-day labor law was expanded to all women workers. Industrial establishments in residential homes were cracked down on by imposing licensing laws and by permitting factory inspectors to enter all shops without restriction. Such laws were designed to restrict labor competition, and — in the name of repressing “sweatshops” — suppress efficient competition to the larger and more politically powerful enterprises.

Roosevelt also urged a larger governmental role in tenement housing. The drive for repressing and regulating tenement housing was largely an upper- and middle-class, as well as pietist, concern for the morals — for the “vice” and the “corruption” amidst the ethnic poor of the tenements. The upper-class guardian of the morals of the poor, Mrs. Josephine Shaw Lowell, successfully urged Governor Roosevelt to expand the vagrancy law, a meat-axe available to coerce people without visible means of support, and to round up and punish pimps. Then, at the behest of Methodist Bishop Henry Codman Potter and reform Republican F. Norton Goddard, Roosevelt put through further legal restrictions on the numbers “racket” and on any prize fighting for a fee. The new anti-numbers law went so far as to make it a misdemeanor even to possess a policy slip, while the ban on prize fighting was bitterly opposed by Tammany Hall, the leader of the New York City Democracy. Both repressive measures passed the legislature. Furthermore, Roosevelt put through a bill for a state tenement house regulatory commission, which in turn put through a new housing code in 1901 that soon became a model for all the states in the nation. The code, which restricted the supply of new housing, and thereby raised costs in the name of higher quality, was put through by a commission of such wealthy reformers and social workers as I.N. Phelps Stokes, James B. Reynolds, Robert W. DeForest, and corporate lawyer Paul D. Cravath.14

Theodore Roosevelt was to be the first president dedicated to government conservation of public land, timber, and other natural resources. The conservation movement has always enjoyed an uncritical “press,” it being almost always assumed that conservationists can only be motivated by disinterested love of nature. In fact, the conservation movement, as we shall see further below, has been an alliance of elitist groups, one part of that coalition upper-class people who wish to repress further growth and thereby preserving both their own enclaves of wealth and the natural scene around them, while others have been private real estate, timber, and other interests, such as railroads, who wish to keep potentially competing public land and natural resources off the market, thereby maintaining and raising the value of their own assets and income. A final and crucial part of the coalition are the experts and technocrats, the professional bureaucrats and managers of the natural resources.15

The aristocratic hunter and sportsman Teddy Roosevelt had organized the Boone and Crockett Club, the premier advocates of forest conservation, at his home in 1887. The Boone-and-Crocketters were devotees of the “scientific forestry” schemes of wealthy young New York forester Gifford Pinchot, a member of the Club and, after 1898, Chief of the U.S. Division of Forestry.16 Governor Roosevelt’s two leading advisers on conservation were disciples of Pinchot: C. Grant La Farge, who persuaded Roosevelt to turn to Pinchot for advice on the forestry section of his message to the legislature, and James MacNaughton, representative of the McIntyre Iron Association, owner of 90,000 acres of Adirondack forest land. Pinchot’s cozy relations with private timber interests were typified by his offer to use the services of his Forestry Bureau to aid private timber owners in managing their forests.

At the behest of Pinchot and of the Boone and Crockett Club, Governor Roosevelt urged the legislature to centralize the five–man state forest, fish, and game commission into a one-man agency. The plan was to succeed after Roosevelt left office; in the meanwhile, he appointed as head of the board the president of the Boone and Crockett Club, W. Austin Wadsworth, wealthy landowner and sportsman.17

A particularly important pre-figuring of progressivism on a federal level was Governor Roosevelt’s attitude toward the “trust problem.” A major part of T.R’s annual message of 1900 was devoted to this question. As we have seen, 1898 and 1899 saw a tidal wave of mergers and consolidations, generally known as “trusts” — in an attempt to achieve monopolies in each of the various industries. The Sherman Antitrust Act of 1890 was considered a dead letter, and certainly none of the merger promoters considered it a problem.

The McKinley administration pursued a laissez-faire attitude toward the trusts, with Mark Hanna affirming that antitrust laws were a “war on corporations pure and simple” and a “war on business success.” In the fall of 1899, Hanna lauded the writings of ex-labor leader and economist George Gunton, who had denounced antitrust proposals as a “Crusade Against Prosperity.” Hanna’s reflection of Rockefeller’s laissez-faire views on trusts at the time is not surprising, and neither is the fact that Gunton was receiving subsidies from Standard Oil.18

But Teddy Roosevelt and his financial allies were in the process of taking a very different line on the trusts. Roosevelt turned for advice to three distinguished economists, each of whom were taking in various ways a pro-government cartelist, rather than a laissez-faire position. One was the Columbia University professor, Edwin R.A. Seligman, of the distinguished investment banking family of J. & W. Seligman; another was President Arthur Twining Hadley of Yale. A third was Jeremiah W. Jenks, Cornell University professor and chief advisor to the U.S. Industrial Commission, a federal blue ribbon panel investigating the trusts. A key adviser was Secretary of War Elihu Root, once and future Ryan and Morgan lawyer.

Roosevelt emerged from these consultations determined to move toward government regulation and cartelization of the trusts and of corporations generally. In a speech in late September, 1899, Roosevelt urged the regulation of trusts first through compulsory publicity, then, if necessary, through taxation, and finally through licensing. Trusts and the accumulation of wealth were perfectly legitimate, Roosevelt was soon to hold, but regulation was needed when fortunes were acquired in a predatory manner.19

Jenks and Seligman had long been members of the “new school” of economics which, over a decade earlier, had frankly repudiated the idea of laissez-faire in favor of increasing state control of the economy. In the course of favoring the establishment of the Interstate Commerce Commission in 1887, Seligman had written:

We must recognize the monopolies as existing facts, but hold them under control. ... Competition has had its day and has proved ineffective. Let us be bold enough to look the facts straight in the face and not shrink from the logical conclusions of our premises. Recognize the combinations but regulate them.20

Arthur Hadley has been wrongly classified by historians as an advocate of laissez-faire. But while not as eager to regulate railroads and industrial combinations as some of his statist conferees, Hadley pioneered in the Rooseveltian idea of compulsory publicity. In the mid-1880s, Hadley advocated a federal regulatory commission for the railroads, but one whose powers would be essentially confined to forced publicity. Similarly, coerced publicity was his proposed remedy for industrial combinations.21

Compulsory publicity has a twofold cartelizing effect not generally understood by the public. In the first place, as we have seen with the vigorous competitive effect of secret rebates by the railroads, secrecy is a great spur to competitive rivalry. If business firms can somehow engineer the coercing of publicity about their rivals, they will be able to know much more about their competitors’ affairs, their pricing and production policies, and hence cartel agreements, formal or informal, become far more enforceable and active competition may be crippled. Secondly, the cost of making reports and obeying government regulations puts an extra burden on small, new, and innovative competitors and hampers their chances of competing with existing and more staid large firms.

After Governor Roosevelt’s speech in the fall of 1899, Jeremiah Jenks drew up a bill for Roosevelt to submit to the legislature. Newly incorporated firms were to be offered a lower tax in exchange for provisions for compulsory publicity.22 Roosevelt then got Jenks to write a magazine article defending the bill, and induced leading state legislators to confer privately on the bill with Jenks, with Francis Lynde Stetson, attorney for J.P. Morgan and Co., and with Victor Morawetz, an attorney for Morgan railroads.

Due to the opposition of the Republican machine in New York State, the Roosevelt-Jenks bill failed to passage, but the stage was set for Roosevelt’s trust policies as president of the United States.23

The death of relatively unimportant Vice President Garrett Hobart in November, 1899 left a vacancy in this No. 2 and previously Morgan post. Teddy Roosevelt had deliberately cultivated good relations with the press, and this blustering and colorful figure was now boosted around the country for the vice presidential spot. McKinley was opposed, however, and Mark Hanna was vehemently hostile to T.R., referring to him as “erratic,” “unsafe,” and “a madman.” After the veteran Iowa Senator William Allison turned down a McKinley offer for the nomination, McKinley and Hanna offered the vice presidential spot to Secretary of the Interior Cornelius Bliss, a New York banker and Morgan-Ryan associate. This offer was in the venerable tradition of the dominant faction in the party offering the second spot as a consolation prize to the subordinate faction. Bliss, too, refused, however, and then the president offered the post to his Secretary of War Elihu Root, another powerful figure in the Morgan ambit. But when Root too refused, McKinley was subject to the powerful pressures for Roosevelt from New York boss Tom Platt, close to the Mellon interests, and Senator Henry Cabot Lodge. Particularly powerful was the lobbying for Roosevelt by Morgan partner George W. Perkins, a close friend of both Hobart and Roosevelt. At last, McKinley and Hanna succumbed, and Teddy Roosevelt was nominated as vice president.24

It is not surprising that as soon as the election of 1900 was over, Teddy Roosevelt gave a lavish dinner in honor of J.P. Morgan.25 No such gift was ever more deserved. It was clear to everyone that the battle between Roosevelt and Hanna for the presidential prize in 1904 had already begun. But all bets were off when a “lone nut” gunman assassinated William McKinley and Teddy Roosevelt fortuitously became president of the United States.

3.  T.R. as President: The “Good” Trusts

Theodore Roosevelt’s first — and one of his most important — moves toward regulation in the presidency was presaged in his first message to Congress upon assuming the presidency in December 1901. Reviving an old proposal for a new Cabinet Department of Commerce and Labor, to serve as a means of subsidizing commerce and industry, Roosevelt spoke of the department having the power to investigate corporations and to publicize their findings. Roosevelt also eyed a federal board, like the ICC, to supervise industrial combination. His address was cleared with two good friends who were also Morgan partners, George W. Perkins and Robert Bacon.

Throughout the summer of 1902, Roosevelt peppered his speeches with calls for compulsory publicity in order to curb business “evils.” He found a strong ally in Attorney-General Philander Knox, an attorney close to the Mellon interests and Henry C. Frick, now a major shareholder in Morgan’s U.S. Steel. Knox urged T.R. to establish a commission with compulsory powers to obtain information from interstate corporations, and to report to the president, who, in turn could or could not publicize the information as he saw fit. This provision appealed to Roosevelt’s strong penchant for personal power, as well as to his commitment to compulsory publicity.

In early 1903, Roosevelt submitted a proposal to Congress to add to a previously proposed new Department of Commerce and Labor a Bureau of Corporations, the Bureau to have full compulsory powers to “investigate the operations and conduct of interstate corporations” and to convey that information to the president.26

Prefiguring the Bureau of Corporations proposal was the U.S. Industrial Commission, an investigatory body created by act of Congress in June 1898 to inquire into the economy, collect information, and recommend legislation to Congress. The Commission consisted of five Senators appointed by the vice president (the president of the Senate), five Congressmen appointed by the Speaker of the House, and nine men appointed by the president with the consent of the Senate. The Commission issued 19 volumes of reports from 1900 until its demise in February 1902.

The first chairman of the Industrial Commission, Senator James H. Kyle of North Dakota, was a Populist Senator from North Dakota and one of the most left-wing members of the Senate. But more significant than the official members of the Commission was the expert staff that did the actual investigating and guided its deliberations. All of them were of the new school of interventionist economists. Professor William Z. Ripley of Harvard, the Commission’s expert on transportation, was to exult a decade later that the “foremost railroad presidents of the United States [were] approving a policy of federal government regulation, which, when I approved it on paper ten years ago, was characterized [by] ... a leading railroad man ... as ‘pernicious.’”27

Roswell C. McCrea, highly paced in the academic world as Dean of the Wharton School of Finance, was the Industrial Commission’s expert on taxes and transportation. McCrea looked forward eagerly to a welfare state. The Commission’s expert on labor and immigration was Dr. John R. Commons, perhaps America’s leading progressive economist and hence its outstanding champion of the emerging corporate state. His role in the progressive movement will be detailed more extensively below.28 Above all, the Commission’s authority on trusts and combinations was none other than Jeremiah W. Jenks, who therefore shaped the Commission’s recommendations in this vital area.

The Preliminary Report of the Industrial Commission, submitted in 1900, was a thoroughly Jenksian document. The object of its recommendations was to prevent corporations or industrial combinations from deceiving investors or the public. Therefore, the Commission recommended compulsory reporting and data of all sorts to the stockholders, and to the government, and making the corporations subject to government inspection. The Preliminary Report had the effrontery to claim that “the purpose of such publicity is to encourage competition” when, as we have seen, the point was precisely the opposite. Indeed, the Commission went on to cite what it considered the horrors of secret railroad rebates to shippers before the advent of the ICC as an example of monopolization. Hence, its determination to do for general industry what the outlawry of secret rebates was supposed to be doing for the railroads.29

The Final Report of the Industrial Commission in 1902, continued the previous recommendations, and added a good deal more. It was recommended that federal and state anti-trust laws be strengthened and enforced, with a particular crackdown on the “vicious practice of discrimination between customers” — that is, secret or open price-cutting to one or more customers at a time. State legislation was advocated, such as Massachusetts’ new law regulating the floating of new stock issues, and a federal franchise tax, progressive in relation to earnings, was recommended on all interstate corporations. And, finally, as the kickoff to the official proposal for the Bureau of Corporations, the Commission recommended such a Bureau for investigation, reports, and publicity, perhaps as a preparation for a compulsory federal incorporation law.30

Angry that so many of the industrial mergers of the late 1890s had failed, the Final Report of the Industrial Commission also demanded that the accounting profession develop methods to “protect” investors from the alleged “watering” of stock capital in the formation of the “trusts.” In reality, the watering was not a swindle, but a legitimate aspect of entrepreneurial activity. If the promoters of a particular trust or corporation are overoptimistic about its profits and estimate its future earning power — and therefore the current value of its stock — too highly, well then, each investor is free to disagree with these estimates. No one held a gun to the head of the investors in the failed trust combinations of the 1890s. The paternalistic idea that government exists to protect everyone from their own folly also meant, in this case, regulation to keep out some usually new marginal promoters for the benefit of older and stronger competitors. The cause of regulation and cartelization was thereby furthered.31

The nascent accounting profession leaped to the support of the Industrial Commission’s strictures, as well as to its call for compulsory publicity and periodic accounting audits, of all the trusts and corporations, for two reasons: the Industrial Commission proposals meant a great deal more work for the accounting profession, and accountants were annoyed because “going concern” capitalization, such as what the trust promoters had engaged in, was necessarily a subjective procedure. The accountants’ penchant for “objective,” “scientific” measurement was offended by the fact that all estimates of future earning power are necessarily subjective estimates. As Previts and Merino state, the accountants “objected to ‘going concern’ capitalization procedures because earning power could not be objectively measured.”32 Perhaps so, but the capital values of any business firm happen to be the discounted sum of expected future earnings of that firm, and those expected earnings, in the nature of reality and of the market, are necessarily speculative and subjective. This might be unfortunate for the “scientific” pretensions of some members of the accounting profession, but that is the way things are.33

President Roosevelt’s chief business ally in driving the Bureau of Corporations bill through Congress was George W. Perkins, a Morgan partner and in the process of being Morgan’s right-hand man in forming the two giant “trusts,” United States Steel and International Harvester. Perkins agreed totally with Roosevelt’s conception of federal regulation of trusts. Like Roosevelt, Perkins believed that there were “good trusts” and “bad trusts,” and, like T.R., he believed that his own U.S. Steel and International Harvester were conspicuous examples of the good. So influential was Perkins in establishing the Bureau that when the president signed the bill into law, he gave one of the two pens he used to George Perkins.34

Only one important financial group stood opposed to the Bureau of Corporations bill. In a way, it was strange, since three leading representatives of the Standard Oil trust, John D. Archbold, Henry H. Rogers, and John D. Rockefeller himself, had all testified strongly in favor of a federal incorporation law and federal regulation of corporate publicity before the U.S. Industrial Commission. John D. Rockefeller advocated that there be

First, Federal legislation under which corporations may be created and regulated, if that be possible. Second, in lieu thereof, State legislation as nearly uniform as possible encouraging combinations of persons and capital for the purpose of carrying on industries, but permitting State supervision ...35

But now, with Morgan ally Theodore Roosevelt at the helm, Standard Oil took a very different tack. Archbold lobbied heavily against the Bureau of Corporations bill, and John D. Rockefeller, Jr. sent telegrams to several key Senators against the bill. President Roosevelt demagogically seized the opportunity to hold a press conference deceitfully charging that the widely hated John D. Senior sent the telegram. It was to be the first shot in a savage war against Standard Oil. Given T.R.’s ability to manipulate the press for his ends, Congress rushed to pass the bill in February 1903. T.R. promptly made his private secretary, George B. Cortelyou, Secretary of the new Department of Commerce and Labor and appointed as first Commissioner of Corporations young James R. Garfield, son of the late president and former staff attorney for the Civil Service Commission when Roosevelt served as its head. Before Garfield was selected, his appointment was cleared with and approved by Francis Lynde Stetson, attorney for the House of Morgan, and fellow alumnus with Garfield from Williams College.

After a year or more of operation, business was quite content with Garfield’s administration of the Bureau. In his annual December 1904 message to Congress, T.R. declared that the Bureau had “been able to gain not only the confidence, but, better still, the co-operation of men engaged in legitimate business.” Garfield himself, in the Bureau’s first report in the same month, declared that “In brief, the policy of the Bureau in the accomplishment of the purposes of its creation is to cooperate with, not antagonize the business world; the immediate object of its inquiries is the suggestion of constructive legislation, not the institution of criminal prosecutions.” Garfield also pleased most big businessmen by coming out in favor of federal licensing of corporations, a recommendation that caused George W. Perkins to call up Garfield and congratulate him warmly. Even John D. Rockefeller, Sr., so soon to feel the wrath of T.R., praised Garfield’s proposal, because “the Federal government would scarcely issue its license to a corporation without at the same time guaranteeing to its beneficiaries an adequate degree of protection.” But Rockefeller was soon to find out that, as far as Roosevelt was concerned, Standard Oil would not be a firm that he would be interested in “protecting.”36

In the same month, February 1903, as it passed the Bureau of Corporations bill, Congress also passed the Elkins Anti-Rebating Act of 1903 at the behest of the Morgan railroads trying to outlaw railroad rebates to shippers.37 The satisfaction with which big business greeted Roosevelt’s policies on federal control of corporations and railroad rates was embodied in an editorial of late December 1904 by the influential Wall Street Journal:

Nothing is more noteworthy than the fact that President Roosevelt’s recommendation in favor of government regulation of railroad rates and Commissioner Garfield’s recommendation in favor of federal control of interstate companies have met with so much favor among managers of railroad and industrial companies. It is not meant by this that much opposition has not developed, for it has ...

     The fact is that many of the railroad men and corporation managers are known to be in favor of these measures, and this is of vast significance. In the end it is probable that all of the corporations will find that a reasonable system of federal regulation is to their interest.38

In 1904 and 1905, the Roosevelt administration entered into a cozy arrangement with the two major Morgan-controlled trusts, International Harvester and United States Steel, both of them organized and supervised by T.R.’s close friend George W. Perkins. In 1904, Garfield and Attorney-General William H. Moody agreed to Harvester’s proposal that they would not prosecute any violations of the law provided that the company would conform in the future. In return, Harvester cooperated by giving any desired information to the Bureau; after all, as Harvester financier Cyrus H. McCormick told Garfield, “International Harvester was in entire sympathy with some program of this sort.”39

There matters lay until, in December 1906, Congress passed a resolution ordering the Bureau of Corporations to investigate International Harvester. Harvester was delighted to comply. Meeting with Garfield and his deputy and eventual successor Herbert Knox Smith in January were Perkins, McCormick, and Harvester’s chief spokesmen, Judge Elbert H. Gary, chairman of the board of U.S. Steel. Gary and Roosevelt had formed a close working relationship since 1902. Gary, seconded by Perkins and McCormick, told Garfield and Smith that “he believed in the work of the Bureau and the necessity of Governmental supervision of large corporations, and that he felt that the president and the Bureau, representing his policy, was a strong safeguard both to the removal of abuses and to the prevention of violent attacks on private rights in general that might otherwise come.” Furthermore, they informed Garfield that a Bureau report would show that they were operating in America at a loss, and “then they would have just ground for raising American prices.”40

Lo and behold, however, a threat appeared to this friendly arrangement. Attorney-General Charles Joseph Bonaparte, a patrician Baltimorean who had met Roosevelt as a young civil service reformer, insisted on bringing suit against Harvester for some of its overseas activities. When Bonaparte failed to take even the hint of President Roosevelt to deter action until the Bureau investigation was complete, Herbert Knox Smith, former assistant head and now the head of the Bureau, wrote an impassioned letter to Roosevelt. The letter detailed all the arrangements and understandings the Bureau had worked out with the Morgan interests. Smith pointed out that “The attitude of the Morgan interests generally, which control this company, has been one of active cooperation,” and any prosecution would abandon the crucial policy of distinguishing sharply between “good” and “bad” trusts. Attacking the “economic absurdity” and unenforceability of the Sherman Act, Smith pointed out the beneficent alternative of federal regulation through compulsory publicity. Smith then warned that “it is a very practical question whether it is well to throw away now the great influence of the so-called Morgan interests, which up to this time have supported the advanced policy of the administration, both in the general principles and in the application thereof to their specific interests, and to place them generally in opposition.” A few days later, Roosevelt ordered Bonaparte to drop the suit.41

U.S. Steel’s arrangement with the Roosevelt administration occurred a bit later than Harvester’s, but it was activated considerably earlier. In late 1904, in one of his frequent meetings with T.R., Judge Gary proposed to the president, that “If at any time you feel that the Steel Corporation should be investigated, you shall have an opportunity to examine the books and records of all our companies, and if you find anything in them that you think is wrong, we will convince you that we are right or we will correct the wrong.”  To which the president replied, “Well, that seems to me to be about the fair thing.” Shortly thereafter, in January 1905, the House of Representatives ordered the Bureau of Corporations to investigate U.S. Steel. In November, Gary, Henry Clay Frick, Garfield, and Roosevelt met at the White House and formalized the arrangement. U.S. Steel would cooperate with the government and supply information, while, if the president found a violation of law, publicity would be the only punishment wielded against the company. Explaining to Garfield why he was willing to be so cooperative, Judge Gary wrote that “the public utterances of the president, and your statements to me from time to time, have been such as to show conclusively to my mind that there was no intention of doing or saying anything that would injure our Corporation or disturb business conditions.” Garfield was delighted; here was “a long step ahead in fixing the work of the Bureau on the lines I wish.”42

T.R.’s closeness to the Morgan interests may also be seen in several of his key appointments. As Secretary of War, T.R. reappointed Elihu Root, an old and valued friend and adviser, who had been a lawyer for the New York financier and Morgan ally Thomas Fortune Ryan and later for the House of Morgan itself, and also served at various times as director of the Morgan-controlled National Bank of Commerce and Mutual Life Insurance Co. In 1904, Root left the Cabinet to aid J.P. Morgan in reorganizing Equitable Life Assurance Company to direct Morgan’s investments in China and defend Morgan against T.R. in the Northern Securities case described below. The following year, Root was rewarded for his efforts by being appointed T.R.’s Secretary of State, the most powerful post in the Cabinet. Root, indeed, was T.R.’s original choice as his successor, an offer which Root, perhaps because of the burden of his “Wall Street” image, refused.

Root promptly appointed Robert Bacon, Morgan partner and old Harvard friend of Roosevelt, as Assistant Secretary of State. When Root left office toward the end of T.R.’s term to become a New York Senator, the president made Bacon his Secretary of State. In the last two years of his administration T.R. appointed George von L. Meyer of Boston as his Postmaster-General. Meyer was an agent of the House of Morgan and a director of the Old Colony Trust Company of Boston. Secretary of the Navy during 1904 was Paul Morton, president of Equitable (Ryan-Morgan), and former vice president of the Morgan-dominated Atchison, Topeka, and Santa Fe Railroad, from which post he had advocated federal regulation and cartelization of railroads five years earlier. Serving for a while as T.R.’s Assistant Secretary of the Navy was none other than Herbert L. Satterlee, J.P. Morgan’s son-in-law. Furthermore, Roosevelt made Elihu Root’s law partner, Henry L. Stimson, Federal District Attorney of New York, and later obtained for Stimson the Republican nomination for the governorship. Shortly after assuming office, Roosevelt appointed Henry C. Payne of Wisconsin to be Postmaster General. Payne was president of the Wisconsin Telephone Company and a director of the North American Company, both Morgan concerns. Roosevelt appointed Payne to Postmaster General as an apparent way of weakening Hanna’s grip on the national Republican Party.43

The one case that some historians raise as a counter-example to the close affinity between Roosevelt and Morgan was the Northern Securities case. After battling fiercely for control of the Northern Pacific and other competing Western railroads, the Morgan and the Edward H. Harriman-Kuhn-Loeb interests effected a détente, forming the Northern Securities Company in 1901 as a holding company for the merged railroads with an agreed-upon allocation of the stock. Without consulting Root or other advisers, and consulting only Attorney-General Philander Knox, in one of the first acts of his administration Roosevelt decided to revive the virtually moribund Sherman Act and to launch an anti-trust suit against Northern Securities in February 1902.

There is no question about the fact that Morgan was upset at the suit, especially about not being consulted or advised in advance. But this in itself is no indication of a fundamental break between Morgan and the president. Morgan’s personal visit to Roosevelt over the suit has become famous, but its significance has been misconstrued. Morgan is supposed to have told T.R.: “If we have done anything wrong, send your man [i.e., the Attorney-General] to my man [Morgan’s lawyer] and they can fix it up.” T.R. is supposed to have rejected this offer of détente, but to have gone on to assure Morgan that he was planning no further foray against U.S. Steel or any of the other Morgan trusts. After Morgan left, T.R. was supposed to have turned to Knox to observe that Morgan “could not help regarding me as a big rival operator, who either intended to ruin all his interests or else could be induced to come to an agreement to ruin none.”44

The main point, however, is that Roosevelt clearly agreed to Morgan’s deal. Or, at least, all of his subsequent actions, in and out of the presidency, supports this conclusion. For although the U.S. government won a technical victory against Northern Securities in the Supreme Court’s decision of March, 1904, the upshot of the suit was not to injure either Northern Securities or the Morgan interests. Suffice it to say that only the formal device of the holding company in this situation was banned. Overall,

The Northern Securities Case was a politically popular act, and it has strongly colored subsequent historical interpretations of Roosevelt as a trustbuster. It did not change the railroad situation in the Northwest, the ownership of the railroads in that region, nor did it end cooperation among the Hill-Morgan and Harriman lines. Roosevelt never asked for a dissolution of the company, or a restoration of competition.45

Indeed, according to one historian, “by the terms of the [court’s] decree the Morgan-Hill ownership in the railroads was increased at the expense of Harriman.”46 Perhaps that was, after all, the ultimate point of the whole affair. The House of Morgan, in fact, was enough satisfied with Teddy Roosevelt’s performance in office to donate $150,000 to T.R.’s reelection in 1904.47

4.  T.R. as President: The “Bad” Trusts

Considering later events, the Northern Securities case may have been, not a break with Morgan at all, but the opening shot in Theodore Roosevelt’s war with Morgan’s great financial rival, E.H. Harriman. After the Roosevelt administration leaked dark hints during the fall of 1906 about breaking up the Harriman railroad lines of Union Pacific and Southern Pacific, Harriman understandably linked this threatened persecution to his refusal to donate a large sum of money to the Republican campaign that year. When one of Harriman’s attorneys, Maxwell Evarts, tried to intercede with the president, Roosevelt burst out: “Well, you don’t know what Morgan and some of these other people say about Harriman.”48 The following spring, one of Harriman’s employees stole a letter sent by Harriman to his chief counsel in late 1905, expressing his disillusion with Roosevelt, with the sums of money that Harriman had contributed to Roosevelt and the broken promises that T.R. had made to him in return. The letter was published in the press, to which Roosevelt retorted by vilifying Harriman at a press conference, attacking him as a dangerous “wealthy corruptionist.”

An important clash of the Morgan and Harriman interests involving the Roosevelt administration occurred in 1907. Morgan was intent on consolidating his control of the entire New England railroad system under the aegis of his New Haven Railroad. In the spring of 1907, he accomplished the most important step in this process: purchase by New Haven of the Boston & Maine Railroad. Before assuming final control, Morgan, Charles S. Mellen, president of the New Haven, and other Morgan executives had an audience with Roosevelt where they won his approval of the merger, thus fending off any anti-trust suit. In addition to his general affinities with Morgan, one of Morgan’s key allies in this merger, was Lee, Higginson & Co., whose partner, George Cabot Lee, Jr., was a former brother-in-law of T.R.’s. The major opponent of the merger on the other hand, was E.H. Harriman, who himself was trying to acquire the Boston & Maine.

But keeping up a hysterical drumfire of public criticism of the merger was the wealthy progressive Boston corporate lawyer, Louis D. Brandeis, who somehow managed to gain for himself, both in the press at the time and among historians afterward, the reputation of being a “people’s advocate” removed from the sordid economic interests of the day. In reality, as was fully known to his enemies at the time, Brandeis was an attorney for Morgan’s great investment banking rival, Kuhn-Loeb, which in turn was the investment bank for the Harriman interests. When T.R., under public pressure, finally filed an anti-trust suit against the New Haven-Boston & Maine merger in May 1908, Roosevelt’s old friend and major political mentor, Henry Cabot Lodge, long allied to the Morgan interests, wrote to T.R. informing him of the facts of life: namely, that Louis Brandeis was really a tool of Harriman and Kuhn-Loeb. In response, Roosevelt in effect dropped the suit.49

But the outstanding example of a “bad” trust, from T.R.’s point of view, was Standard Oil. Roosevelt had never forgiven McKinley and Hanna — of the Rockefeller wing of the Republican Party — for stubbornly resisting his nomination for vice president in 1900. Then, the Rockefellers angered T.R., as we have seen, by lobbying against his Bureau of Corporations Bill. The Standard Oil people tried to induce Mark Hanna to run for the Republican nomination in 1904 against the upstart Roosevelt; but the Hanna boom, which much worried the president, was cut short by Hanna’s death in the early part of the year. There is evidence that the Rockefeller forces then swung their support to Judge Alton B. Parker, the colorless Democratic nominee, who got roundly clobbered by Roosevelt in the 1904 election.50

In Roosevelt’s second term, his first full term elected on his own, he concentrated an assault on Standard Oil. From 1905 on, Roosevelt directed the Bureau of Corporations to focus its attentions upon, i.e., to persecute, Standard Oil. In explanation, Roosevelt vindictively admitted many years later: “It [Standard Oil] antagonized me before my election, when I was getting through the Bureau of Corporations bill, and I then promptly threw down the gauntlet to it.”51 Another important consideration is that Morgan’s hated foe, Harriman, was financially allied with the Rockefellers.52

In 1906, President Roosevelt launched what can only be considered a savage prosecution of Standard Oil. It was the first really serious and major use of the Sherman Anti-trust Act as a weapon against industrial corporations. First, the Bureau of Corporations reported, in the spring of 1906, that Standard Oil, by accepting railroad rebates, had violated the cartelizing Elkins Anti-Rebating Act. In September 1907, the Roosevelt administration filed a far more important — and ultimately successful — suit to dissolve Standard Oil under the Sherman Act. When Standard Oil, alarmed, offered a détente, Roosevelt turned the idea down, for to T.R., both Standard Oil and Harriman were “setting the pace in the race for wealth under illegal and improper conditions,” and were the embodiments of the “bad,” as contrasted to the “good” Morgan trusts.53

Teddy Roosevelt’s motive for launching his brutal assault on Standard Oil have not been fully explained by historians. His alleged hostility to trusts is belied by his sharp distinction between “good” and “bad” ones, and the aligning of the Morgan trusts as good and Morgan’s opponents as bad.54 Personal slights can hardly account for the persistence of the hostility. Nor does the alignment of Roosevelt with Morgan and the Morgan-Rockefeller division provide a satisfactory explanation per se. For these divisions had persisted for decades. The point is that previously, the Rockefeller-Morgan contests were far more gentlemanly, and centered on such issues as higher or lower tariffs. The sudden bringing of the anti-trust weapon out of a disused closet, and the use of it to go for the Rockefeller jugular, can only be explained by some new conditions — something new that might have entered the Morgan vs. Rockefeller conflict and intensified it greatly.

The origins of the Sherman Antitrust Act of 1890 has, unfortunately, not been subjected to the kind of withering revisionist analysis that Gabriel Kolko and others have employed on the later regulatory measures of the Progressive Era.55 One thing is clear: conservative old Republican Senator John Sherman of Ohio can in no way be considered an opponent of big business. We do know that the Republican Party was increasingly under attack by the Democrats for their protectionist policies and that one of the cogent Democratic charges is that it was a high protective shield behind which trusts and cartels could form, free of at least external competition. Committed as they were to the protective tariff, the Republicans demagogically countered the argument by passing a measure supposedly designed to combat trusts. The fact that it was illogical to create a governmental shield for trusts and then use government force to try to dissolve them, is not something that would long stop any politician who felt he could get away with the illogic.

Furthermore, we know that the Sherman Act was rarely used by any of the administrations, and that it sunk into innocuous desuetude by the time of the McKinley administration. That it was designed as a sop to public opinion and to take the heat off the tariff therefore seems likely.

But there was another motivation prompting Senator Sherman personally. Sherman had been a candidate for the presidential nomination since 1880, and with the backing of Mark Hanna, seemed to be winning his lifelong desire at the convention in 1888. The frontrunner in the balloting until unexpectedly beaten by Benjamin Harrison of Indiana, the embittered Sherman blamed his defeat on Michigan Governor Russell Alger, one of his rivals for the presidential nomination. Sherman publicly accused the wealthy Alger of bribing pledged Southern delegates away from Sherman at $50 a head, and there is considerable evidence that Sherman’s charge was not unfounded.

It was only after his defeat that Sherman evinced a sudden interest in antitrust legislation, particularly with regard to the hated Russell Alger’s monopoly Diamond Match Company, of which Alger “the Diamond Match King” was a principal financier. We know that Sherman read with great glee to the Senate, as an example of a harmful monopoly, the full text of the Michigan Supreme Court decision in the case of Richardson v. Buhl and Alger (1889), in which the court declared a specific contract between the organizers of the Diamond Match Company to be unenforceable because it aimed at a monopoly in the match industry. And, significantly, it has been reported that when President Harrison signed the Sherman Antitrust Act, he remarked to his aide, “John Sherman has fixed General Alger.”56

To return to our central problem: was there any change in objective economic conditions that might account for a desire by the Morgan interests to trot out the formerly innocuous Sherman antitrust weapon and launch a savage assault upon Standard Oil? The answer is yes: the eruption of the International Oil War.

5.  The International Oil War

For decades, American petroleum was the oil used by other countries in Europe and Asia, and by the early 1880s, Standard Oil had a virtual monopoly of refined petroleum exports, with kerosene for oil lamps as the major product. Then, in the mid-1890s, the refinery financed by the Nobel brothers Robert and Ludvig, in Baku, Russia, began to challenge the exclusive Standard dominance of foreign oil markets. The Swedish Nobel brothers had by then built pipelines and steam-run oil tankers in Russia, and its Baku refinery in the Caucuses pioneered the continuous distillation process two decades before it would be adopted in Standard Oil refineries. By the mid-1880s, the powerful Rothschild Bank in Paris began to collaborate with the Nobels in production and refining, and also in delivering oil by railroad tank car from the Black Sea to the lucrative markets in Western Europe.

By the late 1880s, it was clear that Standard Oil was in for a fight; the Nobel-Rothschild alliance was matching Standard markets in Western Europe with the help of kerosene that was cheaper and of higher quality than the American product. Due to the growth of Russian and other foreign crude, the American proportion of the world’s crude oil output had fallen rapidly from 85% in 1882 to 53% in 1888. Of the kerosene sold for export, about 90% of the American product was marketed by Standard Oil. Meanwhile, Russian crude production at Baku rose from 13% of the world’s output in 1882 to 38% nine years later.

J.C. Chambers, American Consul in Batum, in the Caucuses, waxed livid in assessing the growth of Russian oil. Perhaps his anger was connected to his doubling as the eyes and ears of Standard Oil in the region. In his consular reports, in the late 1880s, Chambers charged the Russians with having a “quixotic ambition to drive the American oil from the markets of the world.” And William Herbert Libby, Standard Oil’s roving ambassador to the world, pinpointed the “support of the Russian government” and of key European bankers in accounting the meteoric rise of Baku oil.57

To counter the Nobel-Rothschild alliance, Standard set up its own aggressive marketing affiliates and subsidiaries abroad. As a result, Standard’s Anglo-American Oil had captured 71% of the British oil import market by 1891. By the 1890s, the Nobel-Rothschild Russian interests had gained only a third of the British kerosene market and a fifth of Western Europe’s. Asia and Latin America, as well as the rest of the European market, were Standard Oil’s. Standard seemed secure in its world dominance.

In the early 1890s, Baron Alphonse de Rothschild offered a cartel arrangement to John D. Archbold of Standard Oil, with Rothschild being willing to guarantee Standard 80% of the world oil market. What happened then is unclear. The offer was surely tempting, especially since Standard’s proportion had by then fallen to 70%. But nothing was achieved beyond a series of limited agreements from time to time. The U.S. Consul General in St. Petersburg reported that the negotiations broke down because the Russian Finance Minister, supporting the Nobel-Rothschilds, refused to give his backing to such concessions to Standard Oil. Or perhaps Harvey O’Connor is right that

The world was still Standard’s oyster; and while it was obliged reluctantly to witness cheaper Russian markets, it was by no means willing to formalize any such seizure through written agreement.58

But then there came into this idyll for the Rockefellers a cloud no bigger than a man’s hand. Aeilko Jans Zijlker, a Dutch tobacco planter, had discovered a remarkably productive oil well in northern Sumatra in 1885. In 1890, Zijlker, aided by Dutch financial interests, formed the Royal Dutch Company in Amsterdam to exploit the Sumatran oil. During the 1890s, Royal Dutch, managed by J.B. August Kessler, grew rapidly and began to compete sturdily with Standard in East Asian markets. At the same time, Russian Baku oil began to compete in Asian markets. The problem had been transportation. In 1892, the Rothschild interests granted to the transport firm of Marcus Samuel & Company a commitment of ten years supply of Russian kerosene to be shipped to the Far East. The Samuel brothers and the London Rothschilds jointly managed to persuade the British-run Suez Canal board to allow oil tankers (previously considered too dangerously explosive) to pass through the Canal.

Samuel & Co. prospered, and in early 1898, it expanded to include a large number of oil merchants in the great Shell Transport & Trading Company. Shell grew apace, snapping up highly productive Indonesian oil wells that had been unwisely scorned by both Standard and Royal Dutch. Shell also invaded American crude oil markets, being considerably more farsighted than Standard in seeing the importance of newly-discovered Texas crude, and contracted with Gulf Oil for its products. Shell was aggressive, detested Standard Oil, and was ready for bear. As one outraged Standard exporter agent in Java reported back in 1899 about Shell: “They advertise everywhere, loudly, broadly, and boldly about how they are going to run the Standard Oil Co. out of Netherlands India, and have been doing that steadily for the last four years until my ears are tired and sick of such trashy rubbish.”59

But the growth of Royal Dutch was even more striking. Two Standard Oil experts, sent to survey the East Indies situation in 1897, were deeply impressed, writing back that “In the whole history of the oil business, there has never been anything more phenomenal than the success and rapid growth of the R.D. Co.”60 Accordingly, William H. Libby, during the years 1895 to 1897, offered to buy out Royal Dutch and make it a marketing subsidiary of Standard Oil. Unfortunately for Standard, it shortsightedly offered the Royal Dutch stockholders less than 94% of the current market value of their shares; and so Standard’s chance to recoup its dominance of the Asian market was lost.61

By 1901, the three world giants were eyeing each other hungrily but warily. In that year, Standard offered to buy out a majority of Shell stock, after which it proposed to take over Royal Dutch. The Rothschilds, however, were aiming at a Shell merger with Royal Dutch in order to challenge Standard Oil throughout the world. After the Dutch, too, rejected Standard’s offers, Royal Dutch’s new manager, the young Hendrik August Wilhelm Deterding predicted that “before long it would have to defend its independence in a life-and-death struggle.” The dynamic Deterding, who was eventually to become known as “the Napoleon of petroleum” was intensely hostile toward Standard, which he referred to in florid terms as “the abhorred ogre of the industry, pitilessly devouring all that is newly-born.”62

A full merger between Shell and Royal Dutch was still not possible because of personality conflicts between Deterding and Shell’s dominant owner Sir Marcus Samuel, the Lord Mayor of London. In 1902, the Asian sales of the two companies were merged by setting up the new Asian Petroleum Company, with one-third ownership each by Shell, Royal Dutch, and Baron de Rothschild. Deterding was to be the manager, with Sir Marcus holding veto power over him as chairman of the board. The result was a great upsurge in the fortunes of Royal Dutch in the Far East. Finally, in 1907, Royal Dutch and Shell merged outright to form the powerful Royal Dutch Shell group, run by Deterding, who now moved to London and was dubbed Sir Henri by the British.

It should be noted that a fierce international oil war between the two giants began in 1902 and continued for many years thereafter, and that Shell had early formed an alliance with Mellon-run Gulf Oil in supplying it with Texas crude. Indeed, since the early 1890s, Mellon oil companies had competed with Standard Oil for petroleum markets in Europe.63 And since the Morgans were long-time allies of the Rothschilds, could we not interpret T.R.’s ferocious assault on Standard Oil as an integral part of the world-wide oil war — a war assisted by former Morgan-and-Mellon lawyer, Attorney General Philander Knox?64

• 1[Editor’s footnote] On the relationship between protectionist iron manufacturers and greenbackism, see Rothbard, “A History of Money and Banking,” pp. 147–48. The protectionists shrewdly realized that when off a gold standard, currency inflation, in addition to providing cheap credit, also acts as a surrogate tariff since the foreign exchange market quickly anticipates the future rise in prices, which means that the exchange rate depreciates more than the current rise in prices and so net exports increase.
• 2[Editor’s footnote] Burch, Elites in American History, pp. 72, 88–89, 97–98, 118–19, 123, 150; Lundberg, America’s 60 Families, pp. 56–57;  Ron Chernow, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance (New York: Touchstone, 1990), pp. 74–75.
• 3[Editor’s footnote] Burch, Elites in American History, pp. 134–44, 183–85; Lundberg, America’s 60 Families, pp. 57–65; John Flynn, God’s Gold: The Story of Rockefeller and His Times (New York: Harcourt, Brace and Company, 1932), p. 353. See also Chapter 14 below, pp. 469–70.
• 4[Editor’s footnote] William Henry Harbaugh, Power and Responsibility: The Life and Times of Theodore Roosevelt (New York: Farrar, Straus and Cudahy, 1961), passim; Lundberg, America’s 60 Families, p. 238. See also Burch, Elites in American History, pp. 146–47 for evidence of the familial ties of the Oyster Bay Roosevelts to Morgan and Vanderbilt interests.
• 5[Editor’s Footnote] For a history of civil service reform leading up to the Pendleton Act, see Rothbard, “Bureaucracy and the Civil Service in the United States.”
• 6Harbaugh, Power and Responsibility, p. 85.
• 7[Editor’s footnote] Harbaugh, Power and Responsibility, pp. 81–86; Matthew Josephson, The President Makers: The Culture of Politics and Leadership in an Age of Enlightenment, 1896–1919 (New York: Harcourt, Brace and Company, 1940), pp. 50–64.
• 8Henry F. Pringle, Theodore Roosevelt, A Biography (New York: Harcourt, Brace and Co., 1931), p. 171. [Editor’s remarks] Ibid., pp. 165–71.
• 9For more on Roosevelt’s foreign policy, see below. [Editor’s remarks] Rothbard planned on devoting significantly more space to the evolution of foreign policy during the Progressive Era before World War I, but unfortunately did not write it. In general, during this time there was a transformation from the laissez-faire “isolationist” foreign policy of the United States to a bellicose, interventionist, and paternalistic approach that created an imperial empire in parts of South America and Asia to subjugate the “inferior” races. It is essential to understand that these ideas were not antithetical, but complementary to the entire progressive ideology. The president’s powers were correspondingly strengthened, and the new empire was supported by progressive economists and planners who were eager to get new jobs in planning and administering the new system. This included the “Dollar Diplomacy” system, which was a gold exchange standard where dollars were the reserve currency used by the other subjugated countries.
       The transformation of foreign policy began in the second Cleveland administration in South America, at the behest of bankers eager to subsidize export growth, prod open foreign markets, and diminish Great Britain’s influence. McKinley enormously accelerated this trend through the 1898 Spanish American War, in which the United States took control of the Philippines, Hawaii, Cuba, and Puerto Rico. Roosevelt continued the expansion of militarism by cracking down on Philippine guerillas, instituting the Roosevelt Corollary, which expanded the more defensive Monroe Doctrine and declared that the U.S. had the right to directly intervene in Latin American countries, creating the machismo Great White Fleet, and the Morgan backed seizure of Panama from Columbia by inciting a revolution. Taft, although less expansionist, maintained the new foreign policy by intervening in Cuba, Nicaragua, and the Dominican Republic. Wilson embodied the fulfillment of the new imperialist executive state by invading Mexico and other South American countries and enlarged U.S. imperialism to a world-wide level by getting involved in World War I.
       See Murray Rothbard, Wall Street, Banks, and American Foreign Policy (Auburn, AL:  Mises Institute, 2011 [1984]), pp. 3–23 and “The Origins of the Federal Reserve,” pp. 208–34. See also, among others, Joseph Stromberg, “William McKinley: Architect of the American Empire,” in Reassessing the Presidency: The Rise of the Executive State and the Decline of Freedom, John Denson, ed. (Auburn, AL: Mises Institute, 1999), pp. 319–39; Thomas Woods, Jr., “Theodore Roosevelt and the Modern Presidency,” in idem, pp. 352–61; William Marina, “From Opponent of Empire to Career Opportunist: William Howard Taft as Conservative Bureaucrat in the Evolution of the American Imperial System,” in idem, pp. 385–411; Joseph Stromberg, “The Spanish-American War as Trial Run, or Empire as its Own Justification” in The Costs of War: America’s Pyrrhic Victories, John Denson, ed. (Auburn, AL: Mises Institute, 1999), pp. 169–201.
• 10[Editor’s footnote] Harbaugh, Power and Responsibility, pp. 96–98, 101–07; Josephson, The President Makers, pp. 66–89.
• 11[Editor’s footnote] Pringle, Theodore Roosevelt, p. 208; Burch, Elites in American History, pp. 131–33; Lundberg, America’s 60 Families, p. 67. 
• 12[Editor’s footnote] Pringle, Theodore Roosevelt, pp. 205–07; Harbaugh, Power and Responsibility, pp. 111–12; G. Wallace Chessman, Governor Theodore Roosevelt: The Albany Apprenticeship, 1898–1900 (Cambridge, MA: Harvard University Press, 1965), p. 84.
• 13Thus, see Chessman, Governor Theodore Roosevelt. 
• 14[Editor’s footnote] The New York State Tenement Act of 1901 raised building costs and limited construction of low income housing, thereby reducing availability. Through nighttime inspections, urban city reformers also tried to clamp down on the “lodger evil,” where poor ethnic immigrants would sublet their apartments in order to accumulate enough savings to later purchase a home. Zoning laws later came about with a similar purpose to limit apartments to only families. Due to the regulations, by the 1920s real estate developers shied away from low income housing, which then led to calls for subsidies to construction companies or outright public provision. See David T. Beito and Linda Royster Beito, “The ‘Lodger Evil’ and the Transformation of Progressive Housing Reform, 1890–1930,” Independent Review 20, no. 4 (Spring 2016): 485–508.
• 15[Editor’s footnote] For more on the conservation movement, see Chapter 8 below, pp. 252–72.
• 16For Pinochet’s influence on Roosevelt, see Muriel Olivi Fisher, “The Evolution of the Conservation Cartel and its Effect on Forest Resource Policy” (unpublished M.A. essay in history, University of San Diego, 1979), pp. 86–87.
• 17[Editor’s footnote] Chessman, Governor Theodore Roosevelt, pp. 77–91, 200–33, 242–52.
• 18For the regular subsidization of Gunton by Standard Oil, see Hidy and Hidy, Pioneering in Big Business, pp. 600, 660. That these subsidies were fairly widely known at the time can be seen in Joseph Dorfman, The Economic Mind in American Civilization, 1865–1918 (New York: Viking Press, 1949), vol. 3, p. xxx. Gunton’s article was in Gunton’s Magazine (September 1899).
• 19By this time, even McKinley was moving toward the idea of compulsory publicity for corporations. This can be seen in his establishment of the U.S. Industrial Commission, for which see pp. 214–17.
• 20Edwin R.A. Seligman, “Railway Tariffs and the Interstate Commerce Law, II,” Political Science Quarterly (September, 1887): 374; quoted in Sidney Fine, Laissez Faire and the General-Welfare State: A Study of Conflict in American Thought, 1865–1901 (Ann Arbor: University of Michigan Press, 1956), p. 338. Also see Jeremiah W. Jenks, “Capitalistic Monopolies and Their Relation to the State,” Political Science Quarterly (September 1894): 486–505. 
• 21See Arthur Twining Hadley, Railroad Transportation (New York, 1885); Hadley, “American Railroad Legislation,” Harper’s Monthly Magazine (June, 1887): 141–50; Hadley, “Private Monopolies and Public Rights,” Quarterly Journal of Economics (October, 1886): 28–44; Hadley, “The Formation and Control of Trusts,” Scribner’s (November, 1889): 604–10; Hadley, Economics (New York, 1896); Hadley, “The Good and Evil of Industrial Combination,” Atlantic Monthly (March, 1897): 377–385; cited in Fine, Laissez Faire, pp. 71–73.
• 22The full text of the proposed law is to be found in Jeremiah W. Jenks and Walter E. Clark, The Trust Problem, 5th ed. (Garden City, N.Y.: Doubleday, Doran and Co., 1929), Appendix C, pp. 323–43.
• 23[Editor’s footnote] Chessman, Governor Theodore Roosevelt, pp. 158–76.
• 24[Editor’s footnote] John A. Garraty, Right-Hand Man: The Life of George W. Perkins (New York: Harper & Bros., 1960), pp. 221–22; Josephson, The President Makers, pp. 106–10; Pringle, Theodore Roosevelt, pp. 216–223; Herbert D. Croly, Marcus Alonzo Hanna (New York: MacMillan Company, 1912), pp. 310–18.
• 25Lundberg, America’s 60 Families, p. 68.
• 26[Editor’s footnote] Kolko, The Triumph of Conservatism, pp. 66–67, 69–71; Lundberg, America’s 60 Families, p. 69; John A. Garraty, Right-Hand Man, p. 223; Pringle, Theodore Roosevelt, pp. 340–42; Arthur M. Johnson, “Theodore Roosevelt and the Bureau of Corporations,” Mississippi Valley Historical Review 45 (March, 1959): 573–74. 
• 27William Z. Ripley, “Are Our Railroads Fairly Treated?” In Year Book of the Economic Club of New York (1916), vol. 3, p. 209; quoted in Joseph Dorfman, The Economic Mind in American Civilization, vol. 3, p. 319.
• 28[Editor’s footnote] See Chapters 9, 11, and 13 below, pp. 291–94, 333–40, 359–60, 430–32.
• 29The full text of the Preliminary Report is in Jeremiah W. Jenks, The Trust Problem, 3rd ed. (New York: McClure, Phillips & Co., 1903), pp. 261–66.
• 30Jenks and Clark, The Trust Problem, pp. 317–22. The Commission also urged federal subsidies to agriculture, including cartelizing agriculture through federal inspection of export products, especially meat, and the fixing of standard grades for cereals. It also recommended the establishment of a Pure Food and Drug section of the Department of Agriculture, with the power to outlaw the interstate shipment of “impure” food and drugs. It urged continuing the setting aside of the public domain for forest reserves, the conservationist taking of land out of use. The ICC was to be strengthened and given the power to regulate railroad rates. The states were urged to enact uniform laws prohibiting child labor, thereby raising wages for competing adult workers, and to pass anti-“sweatshop” laws and anti-truck laws crippling small business competition. An eight-hour day for miners was urged, thereby helping to restrict entry of workers into the field and raising wage rates for the miners remaining. As a further subsidy to labor unions and aid to restrictionism of labor, Congress was urged to regulate the interstate movement of private detectives for strike-breaking, to repress the movement of convict-made products between states, and to draft codes for railway labor. U.S. Industrial Commission, vol. 19, Final Report (Washington, D.C.: General Printing Office, 1902). Also see Fine, Laissez Faire, pp. 367–69.
• 31[Editor’s footnote] A common criticism of the free market is that it provides products or working standards that are “poor quality” and is rife with “imperfect” and “asymmetric” information, so even if regulation has a cartelizing effect, it can still be beneficial. Against this, it is important to note that only the market can provide the optimal — ascertainable only by demonstrated consumer preferences — level of regulation, and it has institutional features to ensure that bad products are driven from the market. Entrepreneurs are incentivized to provide reliable goods in order to maximize long term profits, and consumers and investors learn the particular attributes they care about through competitive advertising among firms. Product quality and working standards rise over time as entrepreneurs increase their savings and embark upon more roundabout processes of production and engage in technological innovation. Regulation that raises quality artificially stymies this crucial progressing process of the market, slows down the rate of growth, and defies the preferences of consumers. See Rothbard, Man, Economy, and State with Power and Market, pp. 1069–74, 1096–1101; Mises, Human Action, pp. 613–19.
• 32Gary John Previts and Barbara Dubis Merino, A History of Accounting in America (New York: Ronald Press, 1979), p. 170. The Final Report of the Industrial Commission urged compulsory annual audited reports by large corporations, the audit to be subject to government regulation. The minority of the Industrial Commission went further to advocate a bureau in the Treasury Department, which would register all corporations and obtain a financial report, make examinations, and publish information. Ibid., pp. 133–35.
• 33George Stigler points out that the advent of new issue regulations by the Securities and Exchange Commission does not seem to have appreciably protected the investor. As Stigler states, for security as well as for all other protective regulation, “Public regulation weakens the defenses the consumer has in the market and often imposes new burdens upon him, without conferring corresponding protections. The doctrine of caveat emptor has not lost its force: the only change is that now the consumer must beware of different threats, and threats which he is less well equipped to defend against.” George J. Stigler, “Can Government Protect the Consumer?” in The Citizen and the State (Chicago: University of Chicago Press, 1975 [1971]), p. 181. [Editor’s remarks] For a similar analysis behind the origins of the Securities Act of 1933 and the Securities Exchange Act of 1934 that stresses government enforced cartelization, see Murray Rothbard, “From Hoover to Roosevelt: The Federal Reserve and the Financial Elites,” in A History of Money and Banking in the United States: The Colonial Era to World War II, Joseph T. Salerno ed. (Auburn, AL: Mises Institute, 2005), pp. 320–30.
• 34John A. Garraty, Right-Hand Man, p. 223. [Editor’s remarks] George Perkins was heavily affiliated with J.P. Morgan and has been called one of Roosevelt’s “most important informal advisors” and “J.P. Morgan’s chief governmental emissary.” Burch, Elites in American History, pp. 158–59. See also Chernow, House of Morgan, pp. 105–12.
• 35Quoted in Kolko, The Triumph of Conservatism, p. 64.
• 36Ibid., pp. 77–78. [Editor’s remarks] Ibid., pp. 71–72; Josephson, The President Makers, p. 147. 
• 37See Chapter 2 above, pp. 80–81.
• 38Wall Street Journal, December 28 1904. Quoted in Kolko, Triumph of Conservatism, p. 78.
• 39Ibid., p. 74.
• 40Ibid., pp. 119–20.
• 41Smith to Roosevelt, September 21, 1907. Quoted in Johnson, “Theodore Roosevelt and the Bureau of Corporations,” pp. 588–89. Also see Kolko, The Triumph of Conservatism, pp. 121–22. Bonaparte was something of an anomaly; in 1899, he had unequivocally denounced any attempt at governmental regulation or restraint of industrial combinations. He was also, as H.L. Mencken later pointed out, “that strangest of hybrids, a Catholic Puritan,” being one of the leading backers of the Baltimore Anti-Vice Society. One of Bonaparte’s great attractions for T.R. was that he was of royal blood, being the grand-nephew of Napoleon I. H.L. Mencken, “An American Bonaparte,” A Mencken Chrestomathy (New York: Knopf, 1949), p. 287.
• 42Kolko, The Triumph of Conservatism, pp. 79–81.
• 43[Editor’s footnote] Burch, Elites in American History, pp. 150, 155, 189, 191; Lundberg, America’s 60 Families, pp. 64, 70, 72; Kolko, The Triumph of Conservatism, p. 84; Josephson, The President Makers, pp. 118, 407; Pringle, Theodore Roosevelt, pp. 501, 538. 
• 44In Joseph B. Bishop, Theodore Roosevelt and His Time (New York, 1920), vol. 1, p. 184–85.
• 45Kolko, The Triumph of Conservatism, p. 67.
• 46Lundberg, America’s 60 Families, p. 71. Also see Josephson, The President Makers, p. 130. [Editor’s remarks] For evidence that the Northern Securities Company did not restrain competition between the railroads, see Armentano, Antitrust and Monopoly, pp. 51–55.
• 47[Editor’s footnote] Josephson, The President Makers, p. 167; Lundberg, America’s 60 Families, p. 83.
• 48George Kennan, E.H. Harriman (Boston: Houghton and Mifflin, 1922), vol. 2, p. 224. Also see Josephson, The President Makers, pp. 240–42. J.P. Morgan’s hatred of Harriman was legendary. “Punk” was just one of the habitual epithets that Morgan would use to refer to Harriman. See Birmingham, “Our Crowd,” pp. 189, 222.
• 49[Editor’s footnote] Kolko, Railroads and Regulation, pp. 156–61. For more on Brandeis, see Rothbard, “From Hoover to Roosevelt,” pp. 322–23.
• 50Thomas W. Lawson, Boston financier and former associate of John D. Archbold and Henry H. Rogers of Standard Oil, testified before a U.S. Senate subcommittee on campaign contributions that Rogers “practically gave their agents at the [Democratic] convention carte blanche to nominate Mr. Parker.” See Lundberg, America’s 60 Families, pp. 85–86. Also see Clarence W. Barron, More They Told Barron (New York: Harper & Bros., 1931), p. 51.
• 51Johnson, “Theodore Roosevelt,” p. 584.
• 52[Editor’s footnote] For this and the Rockefeller ambit’s foray into banking and other investments, see Josephson, The Robber Barons, pp. 394–403.
• 53Kolko, The Triumph of Conservatism, pp. 123–25.
• 54[Editor’s footnote] Roosevelt’s characterization as a trustbuster has been greatly exaggerated. In the entire seven-and-a-half years of his presidency, only 44 antitrust cases were initiated, with at most 10 against actually large companies. Although he initiated more than his predecessor McKinley, under the four-year presidency of his successor Taft 80 suits were initiated. In addition,
  Roosevelt’s “bad trusts” were basically “non-Morgan trusts,” such as the Rockefeller-controlled Standard Oil Co. [or] the Harriman-dominated Union Pacific Railroad. ... Conversely, Roosevelt’s “good trusts” usually turned out to be big Morgan-controlled companies, such as U.S. Steel Corp. and International Harvester Co., ... no action was taken against either of these giant concerns (although some federal officials were so inclined), partly because of Roosevelt’s implicit trust in Morgan-backed firms and the quiet, though highly effective pressure applied by such influential Morgan men as George W. Perkins and Elbert H. Gary, board chairman of the U.S. Steel Corp. [Burch, Elites in American History, pp. 164–165. Also see Josephson, The President Makers, p. 242.]It should be noted that Roosevelt was not a complete tool to the Morgan interests; his erratic personality and certain actions during his political career did cause some headaches and annoyances, such as the Northern Securities Case. However, he allowed himself to be surrounded and influenced by Morgan and his affiliates, and overall his actions were beneficial to the ambit.
• 55The only major work on the origins of the Sherman Act is an old one, hopelessly mired in the outmoded world-view of the masses rising up to curb big business. See Hans B. Thorelli, The Federal Antitrust Policy: The Origination of an American Tradition (Baltimore: Johns Hopkins Press, 1955). For an excellent critique of Thorelli’s anti-business bias from an economic historian who supports antitrust and is outside the revisionist tradition, see William L. Letwin, “The Origins of Antitrust Policy,” Journal of Political Economy (April, 1956): 156–59. Also see Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (New York: Random House, 1965).
• 56The reported statement is in Matilda Gresham, Life of Walter Quintin Gresham (1919), vol. 2, p. 632. The Michigan law case is David M. Richardson v. Christian H. Buhl and Russell A. Alger, 77, Mich. 632 (1889). See Letwin, Law and Economic Policy, pp. 87–92, especially p. 92n. Thorelli dismisses the problem in a prissy and naïve note: “The present writer is unable to believe that such a personal matter would play a part of significance as a factor motivating Sherman with regard to the antitrust bill or, in fact, any other major legislative measure.” Thorelli, The Federal Antitrust Policy, p. 168n. [Editor’s remarks] Ibid., pp. 49–50, 402. See Robert L. Bradley, Jr., “On the Origins of the Sherman Antitrust Act,” Cato Journal 9, no. 3 (Winter 1990): 737–42, which presents an account of Sherman’s motives very similar to Rothbard’s. Alger actually only had a limited relationship with the company, and Sherman intentionally exaggerated it in order to hurt Alger’s future political career. In addition, for other similar studies that Rothbard’s analysis foreshadowed, which argue that Sherman Antitrust was not passed to protect the consumer but instead for other motives (such as to protect inefficient businesses at the expense of more efficient competitors or to divert attention away from the 1890 McKinley Tariff), see Thomas J. DiLorenzo, “The Origins of Antitrust: An Interest-Group Perspective,” International Review of Law and Economics 5 (1985): 73–90; Thomas W. Hazlett, “The Legislative History of the Sherman Act Re-examined,” Economic Inquiry 30 (April, 1992): 263–76. For a study behind the motivations of antitrust at the state level, see Donald J. Boudreaux and Thomas J. DiLorenzo, “The Protectionist Roots of Antitrust,” Review of Austrian Economics 6, no. 2 (1993): 81–96.
• 57Hidy and Hidy, Pioneering in Big Business, p. 135. By the early 1880s, the U.S. State Department acted as a foreign arm of Standard Oil by instructing its representatives abroad to study and oppose any foreign laws or ordinances that would hamper Standard’s operations. Ibid., p. 137. [Editor’s remarks] Ibid., pp. 130–31.
• 58Harvey O’Connor, World Crisis in Oil (New York: Monthly Review Press, 1962), p. 34. [Editor’s remarks] Ibid., pp. 29–34; Hidy and Hidy, Pioneering in Big Business, pp. 236–37.
• 59Hidy and Hidy, Pioneering in Big Business, p. 260. [Editor’s remarks] O’Connor, World Crisis in Oil, pp. 38–43.
• 60Hidy and Hidy, Pioneering in Big Business, p. 264.
• 61In 1898, Royal Dutch shrewdly managed to insulate itself against any possible Standard takeover of its stock. A special class of stockholders was newly created, which had the sole right to choose directors and to change the capitalization of the company. Instead of the stock shares being made out to the bearer, as before, the new stock could only be sold if so authorized by a general meeting of the special shareholders. One could become such a stockholder only by invitation, and the only ones eligible for such invitation were those eligible to gain a mining concession in the Dutch East Indies. Ibid., pp. 266–67.
• 62O’Connor, World Crisis in Oil, p. 43.
• 63[Editor’s remarks] O’Connor, World Crisis in Oil, pp. 43–46.
• 64On Morgan-Rothschild ties, see Birmingham, “Our” Crowd, pp. 152, 156. [Editor’s remarks] See also G. Edward Griffin, The Creature from Jekyll Island: A Second Look at the Federal Reserve (Westlake Village, CA: American Media, 1994), pp. 413–19.
       Knox left the attorney general position to become a senator in mid-1904, so he couldn’t have been that crucial in the government’s antitrust suit against Standard Oil. Regardless, Rothbard’s international motivation for explaining Roosevelt’s harsh attack on Rockefeller, which he at another time described as one which “there are no hard facts to prove it,” provides an intriguing global dimension to the clash between the Morgan and Rockefeller financial groups during the Progressive Era and beyond. In a later unwritten chapter, Rothbard planned to describe how Roosevelt’s successor in 1908, William Howard Taft, although put in by the Morgan ambit, was actually closer to the Rockefeller forces. As a result, in the middle of his presidency the Taft administration started to initiate antitrust suits against Morgan companies, in particular U.S. Steel and International Harvester, as retaliation for the Roosevelt assault on Rockefeller interests. Therefore, in order to deny Taft reelection in 1912 the Morgan interests formed the Progressive Party and put Roosevelt on the ticket. This heavily pietist, intellectual, and Morgan-laden party was able to deny Taft reelection and allow for the Democratic candidate, Woodrow Wilson, to win the White House. See Chapters 10, 11, and 13 below, pp. 316–18, 350–51, 402–43; Rothbard, Wall Street, Banks, and American Foreign Policy, pp. 13–23; Lundberg, America’s 60 Families, pp. 98–11; Josephson, The President Makers, pp. 405, 426–48; Kolko, The Triumph of Conservatism, pp. 164–72, 190–216; Burch, Elites in American History, pp. 173–74.
       Wilson was linked to the Morgan ambit, and the Morgans’ strong political power continued during World War I, including the drive for war and, aside from a brief Rockefeller-Harding regime cut short, was maintained throughout the 1920s in the Coolidge and Hoover administrations. Then, during the Great Depression, the banking reform and other measures under Franklin Roosevelt’s New Deal were a savage attack on the Morgan Empire by opposing Rockefeller affiliated financial groups. By the time of World War II, the Morgans were now the subsidiary financial elite. See Chapters 11 and 14 below pp. 356, 478–90; Rothbard, “From Hoover to Roosevelt,” pp. 297–347; Alexander Tabarrok, “The Separation of Commercial and Investment Banking: The Morgans vs. The Rockefellers,” Quarterly Journal of Austrian Economics 1, no. 1 (1998): 1–18.